<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 September 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.

<TABLE>
<CAPTION>
<S>     <C>
Large accelerated Accelerated filer |_| Non-accelerated filer |X| Smaller reporting
filer |_|                               (Do not check if a        company |_|
                                         smaller reporting
                                         company)

</TABLE>

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 September 30, 2008)

<PAGE>

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

<TABLE>
<CAPTION>
<S>     <C>


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-30

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>

<TABLE>
<CAPTION>
<S>     <C>
                             AMARU, INC. AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS
                                      (Unaudited)

                                                            SEPTEMBER 30,    DECEMBER 31,
                                                                     2008            2007
                                                              -----------     -----------
Current assets

Cash and cash equivalents                                       1,750,947     $ 2,322,541
Accounts receivable, net of allowance of
$107,720 and $54,154 at September 30, 2008 and
December 31, 2007 respectively                                    814,905         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                              1,099,000       2,924,000
Other current assets                                            1,874,041         513,614
Inventories                                                     1,145,896       1,157,248
Investments available for sale                                  2,402,613       2,402,613
                                                              -----------     -----------
Total current assets                                           22,320,735      23,297,938
                                                              -----------     -----------

Non-current assets

Property and equipment, net                                     1,292,133       1,797,146

Intangible assets, net                                         24,894,157      25,693,066

Equity Method Investment                                        4,924,110       4,942,283
Investments available for sale                                    959,290       4,911,345
                                                              -----------     -----------

Total non-current assets                                       32,069,690      37,343,840
                                                              -----------     -----------
Total assets                                                  $54,390,425     $60,641,778
                                                              ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued expenses                         $ 1,848,855     $ 3,068,613

Other payables                                                         --         100,005

Advances from related parties                                      78,376         155,313

Capital lease payable - short term                                 11,012          10,746

Income taxes payable                                                5,428           5,428
                                                              -----------     -----------

Total current liabilities                                       1,943,671       3,340,105
                                                              -----------     -----------
Deferred tax liabilities                                           14,333       1,672,801

Convertible term loan                                           2,276,546              --

Capital lease payable - long termm                                 50,467          57,306
                                                              -----------     -----------

Total non-current liabilities                                   2,341,346       1,730,107
                                                              -----------     -----------
Total liabilities                                               4,285,017       5,070,212

Commitments                                                            --              --
Stockholders' equity

Preferred stock (par value $0.001) 5,000,000
 shares authorized;
 0 shares issued and outstanding at September
 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 September 30,
 2008 and December 31, 2007, respectively                         159,431         159,431

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

Retained earnings                                               2,081,093       5,650,447

Accumulated other comprehensive income                            954,073       2,223,641

Minority interest                                               3,992,145       4,619,381
                                                              -----------     -----------
Total stockholders' equity                                     50,105,408      55,571,566
                                                              -----------     -----------

Total liabilities and shareholders' equity                    $54,390,425     $60,641,778
                                                              ===========     ===========


                            See accompanying notes to consolidated financial statements

                                                        F-2
<PAGE>



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


                                              FOR THE NINE MONTHS ENDED          FOR THE THREE MONTHS ENDED
                                          ---------------------------------    ---------------------------------
                                           SEPTEMBER 30,      SEPTEMBER 30,     SEPTEMBER 30,      SEPTEMBER 30,
                                                   2008               2007               2008               2007
                                          -------------      -------------      -------------      -------------

Revenue:

Entertainmnet

  Advertising/Subscription                $      55,568      $      36,991      $       7,399      $       2,302
  Syndication/e-services                             --         15,000,000                 --                 --
                                          -------------      -------------      -------------      -------------
Total entertainment                              55,568         15,036,991              7,399              2,302

Digit gaming                                 18,067,143         16,481,642          6,609,450          6,021,851
                                          -------------      -------------      -------------      -------------
Total revenue                                18,122,711         31,518,633          6,616,849          6,024,153

Cost of services                            (17,752,420)       (17,553,771)        (6,406,871)        (6,261,636)
                                          -------------      -------------      -------------      -------------

Gross profit(loss)                              370,291         13,964,862            209,978           (237,483)

Distribution costs                             (320,332)          (677,357)          (114,432)          (171,704)

Administrative expenses                      (2,882,627)        (5,152,899)          (941,481)        (1,631,683)
                                          -------------      -------------      -------------      -------------
Total expenses                               (3,202,959)        (5,830,256)        (1,055,913)        (1,803,388)
                                          -------------      -------------      -------------      -------------

Income (loss) from operations                (2,832,668)         8,134,606           (845,935)        (2,040,871)

Other (expenses) income:

 Interest expenses                              (28,218)              (678)           (27,107)              (507)

 Interest income                                 12,368             36,489              3,398             10,388

 Gain (loss) on disposal of equipment             2,939               (152)             1,051               (152)

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

Loss on sale of investment securities          (465,888)                --            (23,837)                --

Net change in fair value of financial
 assets at fair value securities
 for trading                                 (1,825,000)        (4,002,000)          (440,000)        (8,322,000)

Share of income/(loss) of associate             (18,173)            (8,827)            (5,627)             6,397
                                           -------------      -------------      -------------      -------------

Income (Loss) before income taxes            (5,154,640)         6,643,309         (1,338,057)       (10,346,745)

(Provision) benefit for Income taxes            958,050           (902,464)            10,951            683,968
                                          -------------      -------------      -------------      -------------
Net income (loss)                         $  (4,196,590)     $   5,740,845      $  (1,327,106)     $  (9,662,777)
                                          =============      =============      =============      =============
Attribute to:
Equity holders of the company             $  (3,569,354)     $   4,662,124      $  (1,106,535)     $  (7,966,020)
Minority interests                             (627,236)         1,078,721           (220,571)        (1,696,757)
                                          -------------      -------------      -------------      -------------
Net income (loss)                         $  (4,196,590)     $   5,740,845      $  (1,327,106)     $  (9,662,277)
                                          =============      =============      =============      =============
Net income per share
- Basic and diluted                       $       (0.03)     $        0.04      $       (0.01)     $       (0.06)
                                          =============      =============      =============      =============
Weighted average number of common
shares outstanding
- Basic and diluted                         159,431,861        155,577,356        159,431,861        158,794,180
                                          =============      =============      =============      =============


                            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)

                                   See accompanying notes to consolidated financial statements
                                                               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               --               --                --         3,733,333
  of investment


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                   --          --              --             --            --          --      (3,569,354)

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

Comprehensive
  income                   --          --              --             --            --          --              --
                     --------      ------     -----------    -----------   -----------     -------     -----------
Balance at
September 30, 2008         --          --     159,431,861    $   159,431   $42,918,666          --     $ 2,081,093
                    =========      ======     ===========    ===========   ===========     =======     ===========

                                                                                          (CONTINUED ON NEXT PAGE)

                                   See accompanying notes to consolidated financial statements

                                                                  F-5

<PAGE>


 (CONTINUED FROM PREVIOUS PAGE)


                     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                   --           --      (627,236)    (4,196,590)

Change in
  fair value
  of available
  for-sale- equity
  securities,
  net of tax              --    (1,269,568)           --     (1,269,568)
                                                            -----------
Comprehensive
 loss                     --          --              --     (5,466,158)
                  -----------   -----------    ---------    -----------

Balance at
 September 30,
 2008             $   12,927    $  941,146   $ 3,992,145    $50,105,408
                  ===========   ==========    ==========    ===========


           See accompanying notes to consolidated financial statements

                                       F-5A

<PAGE>

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



                                                                           FOR THE NINE MONTHS ENDED
                                                                         -----------------------------
                                                                    SEPTEMBER 30, 2008  SEPTEMBER 30, 2007
                                                                    ------------------  ------------------

CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                   $ (4,196,590)     $  5,740,845
    Adjustments for:
    Amortization                                                             872,105         2,308,179
    Depreciation                                                             504,813           406,141
    (Gain) loss on disposal of equipment                                      (2,939)              152
    Acquisition of investment in exchange for account receivable                  --       (11,636,000)
    Gain on dilution of interest in subsidiary                                    --        (2,483,871)
    Net change in fair value of financial assets at fair value
     through Profit or Loss-held for trading                               1,825,000         4,002,000
    Common stock issued for services                                              --            60,000
    Common stock issued in exchange for prepayment of investment                  --         3,733,333
    Deferred taxes                                                          (947,099)          902,464
    Share of loss of associate                                                18,173             8,827
    Loss on disposal of investment available for sale                        465,888                --

 Changes in operation assets and liabilities
    Accounts receivables                                                     (70,316)       (2,509,706)
    Inventories                                                               11,352           534,780
    Others current assets                                                 (1,360,427)       (3,711,360)
    Accounts payable and accrued expenses                                 (1,219,758)          265,146
    Other payables                                                          (100,005)          157,100
    Income taxes payable                                                          --           (53,045)
                                                                        ------------      ------------
Net cash used in operating activities                                     (4,199,803)       (2,275,015)
                                                                        ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from disposal of equipment                                       18,696               691
    Acquisition of equipment                                                 (15,557)         (761,440)
    Acquisition of associate                                                      --           (66,115)
    Acquisition of investments                                                    --                --
    Acquisition of intangible assets                                         (73,196)       (2,340,395)
    Proceeds from disposal of investment available for sale                1,505,230                --
                                                                        ------------      ------------
Net cash provided by (used in) investing activities                        1,435,173        (3,167,259)

CASH FLOW FROM FINANCING ACTIVITIES
   Repayments of balances due to related party                               (76,937)               --
   Proceeds from related party                                                    --           100,695
   Proceeds from hire purchase creditor                                           --            68,975
   Repayment of obligation under capital lease                                (6,573)               --
   Capital contributed by minority shareholders                                   --         5,580,000
   Receipts from convertible term loan                                     2,276,546                --
                                                                        ------------      ------------
Net cash provided by financing activities                                  2,193,036         5,749,670

Effect of exchange rate changes on cash and cash equivalents                      --                --
                                                                        ------------      ------------

Cash flows from all activities                                              (571,594)          307,396

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

Cash and cash equivalents at end of period                              $  1,750,947      $  2,602,380
                                                                        ============      ============


SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES:
Acquisition of investments (1)                                          $         --      $ 11,636,000
                                                                        ============      ============
Common stock in exchange for prepayment of investment (2)                         --         3,733,333
                                                                        ============      ============
</TABLE>


(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.


(2)      On July 11, 2007, Tremax International Limited, a wholly owned
         subsidiary of Amaru Inc, issued 5,333,333 shares of common stock in
         exchange for an investment in a company, as part of the sales and
         purchase agreement with the company.

           See accompanying notes to consolidated financial statements

                                                 F-6
<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 nation wide lottery in
         Cambodia. The Company through its subsidiary, M2B Commerce Limited,
         signed an agreement with Allsports International Ltd, a British Virgin
         Islands company to operate and conduct digit games in Cambodia and to
         manage the digit games activities in Cambodia.

         The 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. At this time the Company's
         revenues are not derived from all of the above sources - see the
         Company's financial statements.

   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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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  Accounts Receivable

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

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


                                      F-10

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 NINE MONTHS ENDED       FOR THE THREE MONTHS ENDED
                                          -----------------------------   ------------------------------
                                          SEPTEMBER 30,    SEPTEMBER 30,  SEPTEMBER 30,    SEPTEMBER 30,
                                              2008            2007            2008           2007
                                           -----------     -----------     -----------     -----------

Sales outside of the U.S.                  $18,122,711     $31,518,290     $ 6,616,849     $ 6,024,096

Services purchased outside of the U.S.     $17,719,384     $17,449,405     $ 6,396,831     $ 6,189,248

</TABLE>


   2.5   Inventories

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

   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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



   2.7   Intangible Assets

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

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

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

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

         Where a group entity transacts with an 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 September 30, 2008 totaled
         $1,099,000 and December 31, 2007 totaled $2,924,000. The changes relate
         to fair value adjustment of $1,825,000 for the 9 months ended September
         30, 2008 and $476,000 for the year ended December 31, 2007.

         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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 September 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.

 Fair Value Measurement at September 30, 2008 using:
 --------------------------------------------------

<TABLE>
<CAPTION>
<S>     <C>

                                               Prices or Fair Value    Quoted Prices in         Valuation
                                                  Measurements at       Active Markets          Techniques
                                                 September 30, 2008       (Level 1)              (Level 3)
Description                                              ($)                  ($)                   ($)
-----------------------------------------------------------------------------------------------------------
   Equity Securities Held for Trading                 1,099,000             1,099,000                   --

   Investments Available for Sale - Current           2,482,239                    --             2,402,613

   Investments Available for Sale - Non Current              --                    --               959,290
</TABLE>


                                         F-14

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 nine months ended September 30, 2008.

                                                  Nine Months Ended
                                                  September 30, 2008
                                                  ------------------

          Balance at the beginning of the period     $ 7,313,958
          Change in fair value of Investments
             Available for Sale - unrealized          (1,980,937)
          Loss on disposal of Investments
             Available for Sale - realized              (465,888)
          Proceeds from sale of Investments
            Available for Sale                        (1,505,230)
                                                     -----------
          Balance at the end of the period           $ 3,361,903
                                                     ===========

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


   2.12  Advances from Related Party

         Advances from director and related party of $78,376 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 September 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.



                                      F-15
<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007


   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.

   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 its 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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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
         $XXXXX. 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 nine months
         ended September 30, 2008 and 2007, the Company incurred advertising
         expenses of $67,863 and $408,857 respectively. For the three months
         ended September 30, 2008 and 2007, the Company incurred advertising
         expenses of $24,751 and $91,420 respectively.


                                      F-17

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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 INVESTMENT

                                                  September 30,    December 31,
                                                       2008           2007
                                                    ----------     ----------

          Quoted equity security, at fair value     $1,099,000     $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
         $1,825,000 for the 9 months ended September 30, 2008 and $476,000 for
         the year ended December 31, 2007.

         The investments in quoted equity securities comprised of 34,000,000
         common shares of PT Agis at the market value of approximately US$0.032
         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:

                               SEPTEMBER 30,   DECEMBER 31,
                                   2008            2007
                                ----------     ----------
          Prepayments           $  108,133     $  169,641
          Deposits               1,658,279        171,095
          Other receivables        107,629        172,878
                                ----------     ----------
                                $1,874,041     $  513,614
                                ==========     ==========
   5. PROPERTY AND EQUIPMENT

 Property and equipment consist of the following:

                                              SEPTEMBER 30,     DECEMBER 31,
                                                 2008              2007
                                              -----------      -----------
          Office equipment                    $ 1,155,395      $ 1,148,013
          Motor vehicle                            91,190          112,563
          Furniture, fixture and fittings         602,655          596,790
          Set-top boxes                           843,946          842,494
                                              -----------      -----------
                                                2,693,186        2,699,860
          Accumulated depreciation             (1,401,053)        (902,714)
                                              -----------      -----------
                                              $ 1,292,133      $ 1,797,146
                                              ===========      ===========

Depreciation expense was $504,813 for the nine months ended September 30, 2008
and $406,141 for the nine months ended September 30, 2007.

                                      F-18

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



6. INTANGIBLE ASSETS

      Intangible assets consist of the following:

                                               SEPTEMBER 30,     DECEMBER 31,
                                                   2008              2007
                                               ------------      ------------
          INDEFINITE LIVES
          Film library                         $ 17,762,337      $ 17,759,080
                                               ------------      ------------
                                                 17,762,337        17,759,080
                                               ------------      ------------
          DEFINITE USEFUL LIVES
          Film library                            5,400,410         5,331,930
          Gaming license                          7,090,000         7,090,000
          Product development expenditures          719,220           719,220
          Software license                           12,649            12,649
                                               ------------      ------------
                                                 13,222,279        13,153,799
          Accumulated amortization               (6,090,459)       (5,219,813)
                                               ------------      ------------
                                                  7,131,820         7,933,986
                                               ------------      ------------
                                               $ 24,894,157      $ 25,693,066
                                               ============      ============

Amortization expense was $872,105 for the nine months ended September 30, 2008
and $2,308,179 for the nine months ended September 30, 2007

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

FILM LIBRARY WITH INDEFINITE LIVES

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

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

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

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


                                      F-19


<PAGE>



                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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.

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

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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



7. EQUITY METHOD INVESTMENT

                                              SEPTEMBER 30,     DECEMBER 31,
                                                  2008              2007
                                               -----------      -----------

     Fair value of investment in associate     $ 3,693,650      $ 3,693,650
     Goodwill                                    1,272,465        1,272,465
     Share of post-acquisition loss                (42,005)         (23,832)
                                               -----------      -----------
                                               $ 4,924,110      $ 4,942,283
                                               ===========      ===========

Details of the Company's Equity Method Investment as at September 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
  Ownership Interest:       SEPTEMBER 30, 2008           DECEMBER 31, 2007
                            ------------------            ----------------

                                  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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



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


                                                  SEPTEMBER 30,     DECEMBER 31,
                                                      2008              2007
                                                   -----------      -----------

 Total assets                                      $ 9,334,802      $ 9,353,100
 Total liabilities                                     (53,739)         (23,562)
                                                   -----------      -----------
 Net assets                                        $ 9,281,063      $ 9,329,538
                                                   ===========      ===========

 Company's share of Equity Method
Investment's net assets                            $ 2,793,600      $ 2,808,191
                                                   ===========      ===========

 Revenue                                           $        --      $   163,574
                                                   ===========      ===========

 Loss for the period                               $   (60,375)     $   (77,735)
                                                   ===========      ===========

 Company's share of Equity Method Investment's
 loss for the period                               $   (18,173)     $   (23,832)
                                                   ===========      ===========



                                      F-22

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



8. INVESTMENTS AVAILABLE-FOR-SALE

      Investments available-for-sale consist of the following:

                                      SEPTEMBER 30,  DECEMBER 31,
                                          2008          2007
                                       ----------     ----------
      Non Current:
        Quoted equity securities       $   79,626     $4,031,681
        Unquoted equity securities        879,664        879,664
                                       ----------     ----------

                                          959,290      4,911,345
      Current:
        Unquoted equity securities      2,402,613      2,402,613
                                       ----------     ----------
                                       $3,361,903     $7,313,958
                                       ==========     ==========

The investments in quoted equity securities comprised of 5,705,571 common shares
of Auston International Group Ltd (Auston). As of September 30, 2008, the market
value of the Auston shares was S$0.02 (2007: S$0.24) per share.

The Company had incurred losses of $465,888 during the nine months ended
September 30, 2008 after the disposal of 30,723,000 common shares of Auston
International Group Ltd (Auston).

The unquoted equity securities classified as available-for-sale, with a carrying
value of $879,664 as of September 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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



9. COMMITMENTS

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

                                         SEPTEMBER 30,  DECEMBER 31,
                                              2008           2007
                                           ----------     ----------
       CAPITAL COMMITMENTS:
       Contracted but not provided for
              Film library                 $  111,687     $  118,073
              Set-top boxes                $2,074,825     $2,074,825
                                           ----------     ----------
                                           $2,186,512     $2,192,898
                                           ==========     ==========


      Capital Leases

      The following summarizes the Company's capital lease obligations at
      September 30, 2008:

                                                         2008          2007
                                                       --------      --------
       Future minimum lease payments                   $ 73,744      $ 81,628

       Less: amounts representing interest              (12,265)      (13,576)
                                                       --------      --------
       Present value of net minimum lease payments       61,479        68,052

       Less: current portion                            (11,012)      (10,746)
                                                       --------      --------
                                                       $ 50,467      $ 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 THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007


Operating Leases

The Company leases facilities and equipment under operating leases expiring
through 2012. Total rental expense on operating leases for the nine months ended
September 30, 2008 and 2007 was $196,412 and $252,585, respectively. As of
September 30, 2008, the future minimum lease payments are as follows:

          For the Quarter Ended
          September 30,           Operating      Capital
          ---------------------   ---------     --------
          2008                     $ 85,650     $  2,753
          2009                      222,879       11,012
          2010                       19,205       11,012
          2011                           --       11,012
          2012                           --       25,690
                                   --------     --------
                                   $327,734     $ 61,479
                                   ========     ========

10. INCOME TAXES

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

The Company had available approximately $XXXX 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 $4,786,937 of unused Singapore tax
losses and capital allowance carry-forwards at September 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>

<TABLE>
<CAPTION>
<S>     <C>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007



For the three and nine
months ended September 30, 2008       ENTERTAINMENT    DIGIT GAMING        OTHER        TOTAL
                                      -------------    ------------     ---------    ------------

Revenues from external customers     $     55,568      $ 18,067,143     $     --     $ 18,122,711
Interest                             $     12,368      $         --     $     --     $     12,368
revenue
Interest                             $     28,218      $         --     $     --     $     28,218
expenses
Depreciation and amortization
                                     $  1,153,001      $    223,917     $     --     $  1,376,918
Segment profit (loss)                  (3,002,843)     $    418,577     $     --       (2,584,266)
Segment assets                       $ 46,585,909      $  7,802,186     $  2,330     $ 54,390,425
Expenditures for segment
assets                               $     88,753      $         --     $     --     $     88,753
                                           88,753                --           --           88,753
</TABLE>


Reconcilliation: -

      REVENUES
      Total revenues for reportable segments                $ 18,122,711
      Other revenue                                         $         --
                                                            ------------
      Total consolidated revenues                           $ 18,122,711
                                                            ============
      INTEREST REVENUE
      Total interest revenue for reportable segments        $     12,368
      Corporate interest revenue                            $         --
                                                            ------------
      Total consolidated interest revenue                   $     12,368
                                                            ============

      INTEREST EXPENSES
      Total interest revenue for reportable segments        $     28,218
      Corporate interest revenue                            $         --
                                                            ------------
      Total consolidated interest expenses                  $     28,218
                                                            ============

      PROFIT OR LOSS
      Total (loss) for reportable segments                  $ (2,584,266)
      Corporate loss                                        $   (261,313)
      Loss on disposal of investment available for sale     $   (465,888)
      Loss on valuation of held for trading investment      $ (1,825,000)
      Share of loss of associate                            $    (18,173)
                                                            ------------
      Loss before income tax                                $ (5,154,640)
                                                            ============
      ASSETS
      Total assets for reportable segments                  $ 54,388,095
      Other assets                                          $      2,330
                                                            ------------
      Total consolidated assets                             $ 54,390,425
                                                            ============

     EXPENDITURES FOR SEGMENT ASSETS
      Total expenditures for assets for
      reportable segments                                   $     88,753
                                                            ============

                                      F-26

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007


<TABLE>
<CAPTION>
<S>     <C>


     For the three and nine months
        ended September 30, 2007                               ENTERTAINMENT     DIGIT GAMING          OTHER           TOTAL
                                                               ------------      ------------     ------------     ------------
     Revenues from external customers                          $ 15,036,991      $ 16,481,642     $         --     $ 31,518,633
     Interest revenue                                          $     36,489      $         --               --     $     36,489
     Interest expenses                                         $        678      $         --     $         --     $        678
     Depreciation and amortization                             $  2,490,403      $    223,917     $         --     $  2,714,320
     Segment profit                                            $  8,135,309      $    320,323     $         --     $  8,455,632
     Segment assets                                            $ 53,361,216      $  7,325,817     $  2,423,518     $ 63,110,551
     Expenditures for segment assets                           $  3,101,835      $         --     $         --     $  3,101,835


     Reconciliation:

     REVENUES
     Total revenues for reportable segments                    $ 31,518,633
     Other revenue                                             $         --
                                                               ------------
              Total consolidated revenues                      $ 31,518,633
     INTEREST REVENUE
     Total interest revenue for reportable segments            $     36,459
     Corporate interest revenue                                $         30
                                                               ------------
              Total consolidated interest revenue              $     36,489
                                                               ------------
     INTEREST EXPENSES
     Total interest expenses for reportable segments           $        678
     Corporate interest expenses                               $         --
                                                               ------------
              Total consolidated interest revenue              $        678
                                                               ------------
     PROFIT OR LOSS
     Total loss for reportable segments                        $  8,455,632
     Corporate expenses                                        $   (285,367)
     Gain on dilution of interest in subsidiary                $  2,483,871
     Loss on valuation for held for trade investment           $ (4,002,000)
     Share of loss of associate                                $     (8,827)
                                                               ------------
              Income before income tax                         $  6,643,309
                                                               ------------
     ASSETS
     Total assets for reportable segments                      $ 60,687,033
     Other assets                                              $  2,423,518
                                                               ------------
              Total consolidated assets                        $ 63,110,551
                                                               ------------
     EXPENDITURES FOR SEGMENT ASSETS
     Total expenditures for assets for reportable segments     $  3,101,835
                                                               ============
</TABLE>


                                      F-27

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 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>
<CAPTION>
<S>     <C>

      For the three and nine months
      ended September 30, 2008            ASIA PACIFIC    UNITED STATES     OTHER           TOTAL
                                          -----------     -----------     -----------     -----------

     Revenues from external customers     $18,122,711     $        --     $        --     $18,122,711
     Property and equipment, net          $ 1,063,383     $   133,350     $    95,400     $ 1,292,133

     For the three and nine months
     ended September 30, 2007             ASIA PACIFIC    UNITED STATES     OTHER           TOTAL
                                         -----------     -----------     -----------     -----------


     Revenues from external customers     $31,518,290     $       343     $        --     $31,518,633
     Property and equipment, net          $ 1,244,145     $   230,655     $    95,400     $ 1,570,200

</TABLE>

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
associate:

                For the nine months ended       For the three months ended
               -----------------------------  -----------------------------
               SEPTEMBER 30,   SEPTEMBER 30,  SEPTEMBER 30,   SEPTEMBER 30,
                   2008            2007           2008            2007
               --------------    --------     ------------     ----------

  Associate:
   Marketing   $           --    $110,537     $         --     $   28,088
               ==============    ========     ============     ==========



                                      F-28

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE AND NINE MONTHS ENDED
                           SEPTEMBER 30, 2008 AND 2007


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 entity.
The Company has received $5,000,000 in cash and publicly-traded securities. The
balance outstanding receivable of $9,500,000 is included as "Receivable from
sale of IPTV platform" at June 30, 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 agreement had expired and was not extended. The Management
of the Company had decided not to proceed with this agreement.


15. LOAN AND BORROWINGS

                                        SEPTEMBER 30,      DECEMBER 31,
                                           2008              2007

     Non-current

     Convertible loan                  $ 2,500,000              --
     Less: Future interest charges     $  (223,454)             --
                                       ----------
                                       $2,276,546

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

(a)      $2,500,000 represents a 2-year convertible loan drawn down by a
         subsidiary company. It bears interest at a fixed rate of 5.0% per
         annum. The loan allows the borrower the option to convert the loan into
         shares of the subsidiary company at the issue price of $0.942 per share
         at the end of the 2-year period. The loan commenced in July 2008 and
         will mature in June 2010.



                                      F-29

<PAGE>



16. SUBSEQUENT EVENTS

As of October 24, 2008, the Company disposed of a further 1,000,000 Common
shares of Auston International Group Ltd at S$0.015 per share for a total of
Purchase price $15,000.

As of October 28, 2008, the Company disposed of a further 2,085,000 Common
shares of Auston International Group Ltd at S$0.015 per share for a total of
Purchase price $31,275.

As of October 29, 2008, the Company disposed of a further 1,990,000 Common
shares of Auston International Group Ltd at S$0.015 per share for a total of
Purchase price $29,850.

As of October 30, 2008, the Company disposed of a further 630,000 Common shares
of Auston International Group Ltd at S$0.015 per share for a total of Purchase
price $9,450.

As of November 5, 2008, the Company disposed of a further 571 Common shares of
Auston International Group Ltd at S$0.015 per share for a total of Purchase
price $8.56.


                                      F-30


<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 Entertainment-on-Demand, and E-Commerce
Channels on Broadband, and 3G (Third Generation) devices.

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

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

The Company's business model in the area of broadband entertainment includes
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 1.63 %.

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, which offices are currently being subleased (see
below). In October 2007, M2B World Inc reduced its staffing and in November 2007
sub-leased its premise as part of the Company's cost reduction measures.

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. The agreement had
expired and was not extended and the Management of the Company had decided not
to proceed with this agreement.

RESULTS OF OPERATIONS

REVENUE

Financial Statement

-        Revenue for the quarter ended September 30, 2008 was $6,616,849
         compared with $6,024,153 for the same period in 2007.

-        The Company's cash balance was $1,750,947 at September 30, 2008
         compared with $2,322,541 at 31 December, 2007.

REVENUE

Revenue for the nine months ended September 30, 2008 at $18,122,711 was lower
than revenue of $31,518,633 for the nine months ended September 30, 2007 by
$13,395,922 (43%). The revenue for the three months ended September 30, 2008
increased by $592,696 (10%), from $6,616,849 to $6,024,153 for the three months
ended September 30, 2007 and 2008 respectively.

Digit gaming revenue for the nine months ended September 30, 2008 at $18,067,143
was higher than $16,481,642 at September 30, 2007 by $1,585,501 (10%). Digit
gaming revenue for the three months ended September 30, 2008 at $6,609,450 was
higher than $6,021,851 at September 30, 2007 by $587,599 (10%). This was mainly
due to increase in lottery sales.

Entertainment revenue for the nine months ended September 30, 2008 at $55,568
was lower than entertainment revenue of $15,036,991 for the nine months ended
September 30, 2007 by $14,981,423 (99%). Entertainment revenue for the three
months ended September 30, 2008 at $7,399 was higher than entertainment revenue
of $2,302 for the three months ended September 30, 2007 by $5,097 (221%). The
decrease in entertainment for the nine months ended September was significant
and is further explained below.

                                        4

<PAGE>


For the nine months ended September 30, 2007, the entertainment revenue was
attributed to the completion and delivery of the IPTV platform in Indonesia. The
completion and delivery of the IPTV platform comprised of the hardware, software
and middleware, and supply and programming of content. Since the IPTV platform
was sold, the Company did not derive nor earn any further revenues from that
source. The Management is in the process of entering into a joint venture with
the buyer for the IPTV business in Indonesia.

For the nine months ended September 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, were 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 was 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 new
advertising or content syndication contracts for its broadband entertainment
service in the first nine months ended September 30, 2008.

Cost of Services

Cost of services for the nine months ended September 30, 2008 was $17,752,420
which increased by $198,649 (1%) from $17,553,771 for the nine months ended
September 30, 2007. Cost of services for three months ended September 30, 2008
was $6,406,871 which increased by $145,235 (2%) from $6,261,636 for the three
months ended September 30, 2007.

As a proportion of revenue, the cost of services for the nine months ended
September 30, 2008 was 98% (cost of services at $17,752,420 and revenue of
$18,122,711) as compared to 56% (cost of services at $17,553,771 and revenue of
$31,518,633) for the nine months ended September 30, 2007. It was 97% (cost of
services at $6,406,871 and revenue $6,616,849) as compared to 104% (cost of
services at $6,261,636 and revenue $6,024153) for the three months ended
September 30, 2008 and 2007 respectively.

The increase in the cost of services was attributed to the higher operation
costs in managing and operating the digit games, resulting from the higher digit
games revenue.

DISTRIBUTION EXPENSES

Distribution expenses for the nine months ended September 30, 2008 at $320,332
were lower by $357,025 (53%) as compared to the amount of $677,357 incurred for
the nine months ended September 30, 2007. Distribution expenses for the three
months ended September 30, 2008 was $114,432 which decreased by $57,272 (33%)
from $171,704 for the three months ended September 30, 2007.

The lower distribution expenses were attributed to decreased spending for
marketing and promotions which decreased by $340,994 (83%), from $408,857 for
the nine months ended September 30, 2007 to $67,863 for the nine months ended
September 30, 2008. Marketing and promotion expenses decreased by $66,669 (73%)
from $91,420 for the three months ended September 30, 2007 to $24,751 for the
three months ended September 30, 2008 due to the same reason.

GENERAL AND ADMINISTRATIVE EXPENSES

Administration expenses for the nine months ended September 30, 2008 at
$2,882,627 were lower by $2,270,272 (44%) as compared to the amount of
$5,152,899 incurred for the nine months ended September 30, 2007.

Administration expenses for the three months ended September 30, 2008 at
$941,481 were lower by $690,203 (42%) as compared to the amount of $1,631,684
incurred for the three months ended September 30, 2007.

                                        5

<PAGE>


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

         o        Amortization. License amortization had decreased by $1,436,074
                  (62%), from $2,308,179 for the nine months ended September 30,
                  2007 to $872,105 for the nine months ended September 30, 2008.
                  It decreased by $395,622 (58%) from $682,685 for the three
                  months ended September 30, 2007 to $287,063 for the three
                  months ended September 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 $502,409 (42%), from
                  $1,183,596 for the nine months ended September 30, 2007 to
                  $681,187 for the nine months ended September 30, 2008. It
                  decreased by $239,209 (61%) from $395,150 for the three months
                  ended September 30, 2007 to $155,941 for the three months
                  ended September 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 $2,832,668 for the nine months
ended September 30, 2008 as compared to the income from operations of $8,134,606
for the nine months ended September 30, 2007. This was due to the significant
decrease in the entertainment revenue for the nine months ended September 30,
2008.

For the three months ended September 30, 2008, the Company incurred a loss from
operations of $845,935 as compared to the loss from operations of $2,040,871 for
the three months ended September 30, 2007. The lower loss from operations for
the three months ended September 30, 2008 was due to higher digit games revenue
and lower administrative expenses. This is further explained under the revenue
and administrative expenses segments in the results of operations.

NET (LOSS) INCOME

Net loss for the nine months ended September 30, 2008, was $4,196,590 which
decreased by $9,937,435 (173%) from net income of $5,740,845 for the nine months
ended September 30, 2007.

The significant decrease in net income for the nine months ended September 30,
2008 was mainly attributed to the decrease in the entertainment business. The
decrease was partly attributed to the net loss of $1,825,000 as of September 30,
2008 in the fair value of an investment (equity securities) held for trading,
offset by the net loss of $4,002,000 as of September 30, 2007 in the same
investment.

The decrease was also partly 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 $465,888 as of September 30, 2008 on the
disposal of investments available for sale.

Net loss for the three months ended September 30, 2008, was $1,327,106 which
decreased by $8,662,777 (86%) from net loss of $9,662,777 for the three months
ended September 30, 2007.

The decrease in the net loss for the three months ended September 30, 2008 was
due to the increase in the digit games revenue and lower administrative
expenses. The decrease was also due to the net loss of $8,322,000 for the three
months ended September 30, 2007 in the fair value of an investment (equity
securities) held for trading, offset by the net loss of $440,000 for the three
months ended September 30, 2008 in the same investment.


                                        6

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

The Company had cash at $1,750,947 at September 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 September 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.

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 $4,460,903 and $10,237,958
in marketable securities as of September 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 $1,750,947 and $2,322,541 at
September 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.

                                        7

<PAGE>


ABILITY TO ACQUIRE NEW MEDIA CONTENTS

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

AVAILABILITY OF TECHNOLOGICALLY RELIABLE NEW GENERATION OF BROADBAND DEVICES

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

CAPITAL INVESTMENT IN BROADBAND INFRASTRUCTURE BY GOVERNMENT AND TELCOS

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

COMPETITION FROM BROADBAND CABLE AND TV NETWORKS OPERATORS

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

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

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

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


                                        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 September 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 September 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.

         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.

         The Company's registered public accountant has not conducted an audit
         of the Company's controls and procedures regarding internal control
         over financial reporting during the reporting period when the Company
         was an accelerated filer. Consequently, the registered public
         accounting firm expressed no opinion with regards to the effectiveness
         or implementation of the Company's controls and procedures with regards
         to internal control over financial reporting during that period of
         time. The Company's registered public accountant has not conducted an
         audit of the Company's controls and procedures regarding internal
         control over financial reporting at this time since it is not yet
         required pursuant to the timetable set up by the SEC for
         non-accelerated filers and smaller reporting company filers.

         Our Chief Executive Officer and Chief Financial Officer (our principal
         executive officer and principal financial officer, respectively) has
         concluded, based on their evaluation as of September, 2008, that the
         design and operation of our "disclosure controls and procedures" (as
         defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
         amended ("Exchange Act")) are effective to ensure that information
         required to be disclosed by us in the reports filed or submitted by us
         under the Exchange Act is accumulated, recorded, processed, summarized
         and reported to our management, including our Chief Executive Officer
         and Chief Financial Officer, as appropriate to allow timely decisions
         regarding whether or not disclosure is required.

         CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         During the quarter ended September 30,2008, 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 Septmber 15, 2008, M2B Commerce Limited filed a lawsuit in the
         Kingdom of Cambodia for breach of the Performance and Maintenance
         Agreement dated May 20, 2005 between M2B Commerce Limited and Allsports
         International Ltd, by Allsports International Ltd seeking damages in
         the total amount of $794,189.

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.

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<PAGE>


         THE COMPANY DEPENDS ON KEY PERSONNEL.

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

         THE COMPANY RELIES ON THIRD PARTIES.

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

         THE COMPANY COULD BE AFFECTED BY GOVERNMENT REGULATION.

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



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<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, which is its current report
on Form 10-Q for the period ended September 30, 2008.


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




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<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)


November 13, 2008                         /s/ Colin Binny
----------------                         ---------------------------------------
Date                                     President, Chief Executive Officer and
                                         Chief Financial Officer






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