OUR COMPANY

Multiband Corporation (the Company), is a Minnesota corporation formed in September 1975. The Company has three operating segments: 1) Multiband Consumer Services (MCS, legally known as Multiband Subscriber Services, Inc.), which encompasses the subsidiary corporations, Multiband USA, Inc., and Rainbow Satellite Group, LLC, 2) Multi-Dwelling Unit (MDU, legally known as Minnesota Digital Universe, Inc.); and 3) Home Service Provider (HSP, legally known as Michigan Microtech, Inc (MMT)).

The Company completed an initial public offering in June 1984. In November 1992, the Company became a non-reporting company under the Securities Exchange Act of 1934. In July 2000, the Company regained its reporting company status. In December 2000, The Company stock began trading on the NASDAQ stock exchange under the symbol VICM. In July 2004, the symbol was changed to MBND concurrent with the Company's name change from Vicom, Incorporated to Multiband Corporation.

The Company's website is located at: www.multibandusa.com.

From its inception until December 31, 1998, the Company operated as a telephone interconnect company only. Effective December 31, 1998, the Company acquired the assets of the Midwest region of Enstar Networking Corporation (ENC), a data cabling and networking company. In late 1999, in the context of a forward triangular merger, the Company, to expand its range of computer products and related services, purchased the stock of Ekman, Inc. d/b/a Corporate Technologies, and merged Ekman, Inc. into the newly formed surviving corporation, Corporate Technologies USA, Inc. (MBS). MBS provided voice, data and video systems and services to business and government. The MBS business segment was sold effective April 1, 2005. The Company's MCS segment began in February 2000. MCS, the Company's continuing operating division, provides voice, data and video services to multiple dwelling units (MDU), including apartment buildings, condominiums and time share resorts. During 2004, the Company purchased video subscribers in a number of separate transactions, the largest one being Rainbow Satellite Group, LLC. During 2004, the Company also purchased the stock of Minnesota Digital Universe, Inc., (MDU segment) which made the Company the largest master service operator in MDU's for DirecTV satellite television in the United States. Effective March 1, 2008, the Company purchased 51% of the outstanding stock of MMT. MMT installs DTV video services in single family homes. At October 25, 2008, the Company had approximately 109,000 owned and managed subscriptions with an additional 24,000 subscriptions supported by the call center.

SELECTED CONSOLIDATED FINANCIAL DATA

                                            DOLLAR AMOUNTS AS A                 DOLLAR AMOUNTS AS A
                                          PERCENTAGE OF REVENUES              PERCENTAGE OF REVENUES
                                            THREE MONTHS ENDED                   NINE MONTHS ENDED
                                      September 30,     September 30,     September 30,     September 30,
                                          2008               2007             2008               2007
                                       (unaudited)       (unaudited)       (unaudited)       (unaudited)
REVENUES                                         100 %             100 %             100 %             100 %

COST OF PRODUCTS & SERVICES
(Exclusive of depreciation and
amortization shown below)                       69.3 %            64.2 %            65.0 %            53.5 %

SELLING, GENERAL & ADMINISTRATIVE               22.3 %            64.6 %            24.9 %            59.0 %
DEPRECIATION & AMORTIZATION                      6.9 %            21.1 %             8.5 %            23.5 %
IMPAIRMENT OF ASSETS                               -                 -               0.2 %               -

INCOME (LOSS) FROM OPERATIONS                    1.5 %           -49.9 %             1.4 %           -36.0 %
INTEREST EXPENSE & OTHER, NET                    9.3 %            -2.6 %             3.5 %            -2.1 %
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST IN
SUBSIDIARY                                      10.8 %           -52.5 %             4.9 %           -38.1 %
PROVISION FOR INCOME TAXES                       2.3 %               -               2.6 %               -
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARY                                       1.1 %               -               1.9 %               -
NET INCOME (LOSS)                                7.4 %           -52.5 %             0.4 %           -38.1 %

RESULTS OF OPERATIONS

Revenues

Total revenues increased 237.8% to $12,340,659 for the quarter ended September 30, 2008 as compared to $3,653,600 for the quarter ended September 30, 2007. Revenues for the nine month period ended September 30, 2008 increased 141.3% to $28,860,595 from $11,960,281 for the same period in 2007. This overall increase in revenues is primarily due to the purchase of MMT in March 2008, with revenues for the three and seven month periods ended September 30, 2008 of $7,392,428 and $15,976,929, respectively, offset by sales of approximately 13,000 owned subscriptions which occurred throughout the first nine months of 2007 in efforts to strategically sell unprofitable owned assets, utilizing the proceeds from those assets into facilitating growth in the Company's managed subscriber services including our support center and our master system operator program.

Revenues in the third quarter of 2008, for the MCS segment, decreased 26.3% to $799,445 as compared to $1,084,114 in the third quarter of 2007. Revenues for the nine month period ended September 30, 2008, for the MCS segment, decreased 42.7% to $2,488,473 from $4,340,592 for the same period in 2007. These decreases were primarily due to the aforementioned sales of owned subscriptions offset by an increase in call center revenue. In 2008, the Company expects MCS revenues to remain relatively consistent throughout the balance of the year.

Revenues in the third quarter of 2008 for the MDU segment increased 61.5% to $4,148,786 as compared to $2,569,486 in the third quarter of 2007. Revenues for the nine month period ended September 30, 2008, for the MDU segment, increased 36.4% to $10,395,193 from $7,619,689 for the same period in 2007. These increases are primarily due to the revenue recognized for coordinating improvements of systems used to deliver enhanced programming services, and increased activity from a large system operator. The Company believes it can ultimately increase revenues by selling its support center services to its network of system operators and by providing ancillary programs for voice and data services to that same network. Due to demand for high definition television services and the aforementioned revenue generated from coordinating system improvements to provide enhanced programming services, MDU revenues are expected to remain above 2007 levels for the balance of 2008.

Revenues for the three month period ended September 30, 2008 for the HSP segment, was $7,392,428 in comparison to $0 for the same period in 2007. Revenues for the seven month period ended September 30, 2008, for the HSP segment (acquired March 1, 2008), were $15,976,929 from $0 for the same period in 2007. This increase is due to the purchase of MMT (see Note 4). The Company expects that revenues in the HSP segment will continue at a rate consistent with the three months ended September 30, 2008 throughout the balance of 2008.

Cost of Products and Services (Exclusive of depreciation and amortization)

The Company's cost of products and services, increased by 264.7% to $8,556,168 for the quarter ended September 30, 2008, as compared to $2,345,895 for the similar quarter last year. For the nine months ended September 30, 2008, cost of products and services were $18,769,937 compared to $6,395,179 in the prior year, a 193.5% increase. Overall cost of products and services as a percentage of revenue did increase due, in part, to the purchase of MMT with costs for the three and seven month periods ended September 30, 2008 of $5,252,332 and $10,989,473, respectively. Other factors affecting costs included specific vendor price increases without a corresponding increase in price to customers, certain commission payments, and allocation of certain support center costs to cost of products and services. These increases were offset by a decrease in costs related to a decrease in programming and circuit charges due to a decreased subscriber number.

Cost of products and services for the MCS segment for the quarter were $571,202 compared to $772,985 in the same quarter last year, a 26.1% decrease. For the nine months ended September 30, 2008, cost of products and services were $1,767,081 for the MCS segment, compared to $2,865,173 in the prior year, a 38.3% decrease. In 2008, the decrease in cost of products and services in the MCS segment is directly related to a decrease in programming and circuit charges between the comparable periods due to sales of approximately 13,000 owned subscriptions which occurred throughout the first nine months of 2007.

Cost of products and services for the MDU segment for the quarter were $2,732,634 compared to $1,572,910 in the same quarter last year, an 73.7% increase. For the nine months ended September 30, 2008, cost of products and services were $6,013,383 for the MDU segment, compared to $3,530,006 in the prior year, a 70.4% increase. The increase in cost of products and services in the MDU segment is primarily related to an increase in revenue generated by the system operators along with a change in revenue mix and certain commission payments. In 2008, the Company expects MDU cost of products and services to increase slightly throughout the balance of the year due to certain commission payments.

Cost of products and services for the HSP segment for the quarter were $5,252,332 compared to $0 in the same quarter last year. For the seven months ended September 30, 2008, cost of products and services were $10,989,473 for the HSP segment (acquired March 1, 2008), compared to the $0 in the prior year. This increase is due to the purchase of MMT (see Note 4). In 2008, the Company expects HSP cost of products and services to remain consistent throughout the remainder of 2008.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 16.8% to $2,757,319 in the quarter ended September 30, 2008, compared to $2,360,254 in the prior year's quarter due primarily to the addition of the HSP segment resulting from the acquisition of MMT in 2008. Selling, general and administrative expenses were, as a percentage of revenues, 22.3% for the quarter ended September 30, 2008 and 64.6% for the similar period a year ago. This percentage decrease is primarily due to decreases in payroll and employee expenses, property maintenance expenses, and outside service expenses between the comparable periods due to the sale of subscribers. The Company revised an accounting estimate for option expense during the quarter. Multiband Corp segment selling, general and administrative expense for the quarter was reduced by approximately $209,000 for this revised estimate. Multiband Corp segment also recorded $330,000 of reimbursed payroll expenses for management consulting to DTHC per its management consulting agreement (see Note 12). The Company anticipates that for the remainder of 2008, selling, general and administrative expenses will remain consistent with third quarter levels.

For the nine months ended September 30, 2008, selling, general and administrative expenses increased 1.6% to $7,173,357 compared to $7,057,936 for the nine months ended September 30, 2007. This increase is due to the additional seven months of the newly acquired HSP segment offset by a reduction in payroll and employee expenses, property maintenance expenses, and outside service expenses. As a percentage of revenue, selling general and administrative expenses were 24.9% for the nine months ended September 30, 2008, compared to 59.0% for the same period in 2007. This percentage decrease is primarily due to the decreases in payroll, employee expenses, property maintenance expenses and outside service expenses between the comparable periods for subscribers sold in the MCS segment. For the nine months ended September 30, 2008, the Multiband Corp. segment has recorded $960,000 of reimbursed payroll expenses for management consulting to DTHC per its management consulting agreement entered into with DTHC in November 2007. (see Note 12).

Depreciation and Amortization

Depreciation and amortization expense increased 9.9% to $846,317 for the quarter ended September 30, 2008 compared to $770,215 in the prior year's quarter, largely due to amortization of intangibles related to the MMT purchase (see Note
4), partly offset by the sale of tangible and intangible assets in various states most of which occurred in 2007 (see Note 3). For the nine months ended September 30, 2008, depreciation and amortization expense decreased 12.5% to $2,463,079 compared to $2,814,981 for the nine months ended September 30, 2007. This decrease in depreciation and amortization through nine months is due to the sale of tangible and intangible assets in various states most of which occurred in 2007 (see Note 3) offset by the increase in amortization of intangible related to the MMT purchase (see Note 4). Depreciation and amortization expense is expected to remain comparable to third quarter through the remainder 2008.

Income (Loss) from Operations

The Company, in the third quarter of 2008, earned income from operations of $180,855 versus a loss of $1,822,764 during the prior year's comparable period. Income from operations was $388,770 during the first nine months of 2008, compared to a loss of $4,307,815 during the first nine months of 2007. The MDU segment showed a profit from operations of $838,401 and $2,701,269 for the three and nine months ended September 30, 2008 compared to profits of $461,068 and $2,508,408 for the three and nine months ended September 30, 2007. For the third quarter of 2008, the MCS segment showed a loss from operations of $674,349 compared to a loss of $1,245,064 for the same quarter last year. For the nine months ended September 30, 2008, the MCS segment showed a loss from operations of $1,875,140 compared to a loss of $3,595,707 for the same period in 2007. The Multiband Corporation segment, which has no revenues, showed a loss from operations of $546,911 for the three months ended September 30, 2008 and $2,290,096 for the nine months ended September 30, 2008 compared to losses of $1,038,768 and $3,220,516 for the same periods last year. For the third quarter of 2008, the HSP segment showed a profit from operations of $563,714, compared to $0 in the same period last year. For the nine months ended September 30, 2008, profit was $1,852,737 for the HSP segment, compared to the $0 in the prior year. The HSP segment did not exist in 2007 so there are no comparable results to report (see Note 4). The Multiband Corporation loss is expected to continue in future periods as corporate overhead is expected to remain consistent with current levels. The Company expects the MDU segment profitability in future periods to stabilize at current levels as the year to date reduction in profits for this segment has been impacted by increased payments to dealers. The Company plans to continue to mitigate its loss in the MCS segment by increasing the subscribers managed by the support center. At the same time, the Company will look to add subscribers in its MDU division since the on-going selling, general and administrative expenses to service those subscribers is more variable than fixed.

Interest Expense

Interest expense was $300,826 for the quarter ended September 30, 2008, versus $108,847 for the similar period a year ago. Amortization of an original issue discount was $0 and $13,157 for the three months ended September 30, 2008 and 2007. Interest expense was $514,485 for the nine months ended September 30, 2008 and $430,264 for the same period last year, primarily reflecting an increase due to interest expense incurred on the debt issued for the purchase of 51% of MMT (see Note 4). Amortization of original issue discount was $0 for the nine months ended September 30, 2008 and $29,746 for the same period last year.

Management consulting income

During the three months ended September 30, 2008, Multiband recorded a performance bonus as part of the management consulting agreement with DTHC of $1,446,938 which was paid via reduction of the debt incurred in the acquisition of MMT (see Note 4 and Note 12). The Company recorded this consulting income as part of other income and expense on the statement of operations because the income does not constitute the entity's ongoing major or central operations. The consulting income was not a reimbursement of direct expenses. No income was earned during the comparable period ended September 30, 2007. This income is part of the Multiband Corp. business segment.

Minority Interest

Effective March 1, 2008, the Company purchased 51% of the stock of MMT. The minority interest on the statement of operations for the three and seven month periods ended September 30, 2008 was $137,755 and $549,758, respectively. The minority interest represents DTHC's 49% ownership of MMT. MMT currently makes up 100% of the HSP segment.

Income taxes

Due to the Company's purchase of 51% of MMT's stock, effective March 1, 2008, MMT will no longer file consolidated tax returns with its former parent DTHC but will file as a single entity as it no longer meets the 80% ownership required for tax consolidation. Therefore, MMT will not be able to utilize the tax loss carryforwards of Multiband Corporation since Multiband owns less than 80% of MMT. As of and for the three and seven month periods ended September 30, 2008, MMT has recorded a provision for income tax of $286,658 and $749,458, respectively. MMT currently makes up 100% of the HSP segment.

Net Income (Loss)

In the third quarter of fiscal 2008, the Company generated net income of $910,663 and incurred a net loss of $1,918,344 for the third fiscal quarter of 2007. For the nine months ended September 30, 2008, the Company generated a net income of $102,706 and incurred a net loss of $4,560,718 for the nine months ended September 30, 2007. The net income for the three and nine months ended September 30, 2008 is largely due to the addition of the HSP segment via the acquisition of MMT, the sale of unprofitable subscribers in the MCS segment, the increase in managed subscribers in the MDU segment, and the management consulting income in Multiband Corp. segment.

Liquidity and Capital Resources

During the nine months ended September 30, 2008 and 2007, the Company generated a net income of $102,706 and incurred a net loss of $4,560,718, respectively. Net cash from operations during the nine months ended September 30, 2008 was $3,891,100 as compared to the net cash used by operations during the nine months ended September 30, 2007 of $1,432,412. Principal payments on current long-term debt over the next 12 months are expected to total $1,644,633. As of September 30, 2008, the Company failed to meet one the compliance covenants of its lender, Convergent Capital, with respect to having minimum net worth of five million dollars as of the quarter ended September 30, 2008. Convergent Capital provided the Company with a waiver for the said covenant as of the quarter ended September 30, 2008. The Company's management believes it is probable that the violation will not be cured at measurement dates that are within the next twelve months. In accordance with EITF 86-30 "Classification of obligations when a violation is waived by the creditor", the Company has classified the debt as current as of September 30, 2008.

Cash and cash equivalents totaled $11,092,373 at September 30, 2008 versus $944,456 at December 31, 2007. Working capital at September 30, 2008 was $2,375,295 as compared to a working capital deficit of $5,018,177 at December 31, 2007, primarily due to the acquisition of MMT. Total debt and capital lease obligations increased by $594,700 in the nine months ended September 30, 2008 due mainly to the addition of notes payable in order to purchase MMT and US Install. The Company had a material increase in accounts receivable, accounts payable and accrued liabilities for the period ended September 30, 2008 verses the period ended December 31, 2007 due to the acquisition of MMT. Net cash from investing activities totaled $6,656,473 for the period ended September 30, 2008, compared to $2,277,400 for the period ended December 31, 2007, due to the acquisition of MMT. MMT is an obligor on loans entered into by DTHC and subsidiaries with MB Financial, N.A. (MB Bank) (see Note 10). In the event that DTHC and its various subsidiaries other than MMT could not retire the loan then MMT's cash or other assets may have to be utilized to retire the loan which would adversely affect MMT's working capital.

The Company experienced a material increase in revenues between the quarter ended September 30, 2008 and the quarter ended September 30, 2007 as a result of the additional revenue obtained from the purchase of MMT offset by the reduction of revenue resulting from the sale of unprofitable assets. For the balance of 2008, the Company intends to focus on facilitating growth of its HSP business segment and its managed subscriber services including its support center and its master system operator program. The Company believes it can increase revenues by selling its support center services to its network of system operators and by providing ancillary programs for voice and data services to that same network.

The Company used $112,253 for capital expenditures during the nine months ended September 30, 2008, as compared to $271,588 in the similar period last year. Capital expenditures consisted of project build-outs and equipment acquired for internal use. This decrease was related to a reduction of company funded video and internet service build outs to MDU properties made during 2008. Capital expenditures in 2008 are expected to be below the 2007 levels.

Management anticipates that the impact of the actions listed below will generate sufficient cash flows to pay current liabilities, long-term debt and capital and operating lease obligations and fund the Company's operations for the next twelve months:

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

2. Sale of video assets on a strategic basis. The Company, based on recent transactions, believes there is an active market for its video subscriber assets. The Company believes it can sell these assets, under certain circumstances, at prices at or above their current carrying value. However, there is no guarantee these sales will ultimately be favorable to the Company.

3. Solicit additional equity investment in the Company by either issuing preferred or common stock.

4. Continue to market Multiband services and acquire additional multi-dwelling unit customers.

5. Control capital expenditures by contracting Multiband services and equipment through a landlord-owned equipment program.

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

7. Expansion of call center support via sales of call center services to both existing and future system operators and to buyers of the Company's video subscribers.

Management of Multiband believes that the cash on hand, positive operating income, combined with capital resources and the potential ability to monetize intangible subscriber assets, will be adequate to meet the anticipated liquidity and capital resource requirements for the next twelve months.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Impairment of Long-Lived Assets

The Company's long-lived assets include property, equipment and leasehold improvements. At September 30, 2008, the Company had net property and equipment of $1,306,054, which represents approximately 5.4% of the Company's total assets. The estimated fair value of these assets is dependent on the Company's future performance. In assessing for potential impairment for these assets, the Company considers future performance. If these forecasts are not met, the Company may have to record an impairment charge, which may be material. During the three and nine months ended September 30, 2008 and 2007, the Company did not record any impairment losses related to long-lived assets.

Impairment of Goodwill

At year end, we test goodwill for impairment. If indicators of impairment are determined to exist, we test goodwill for impairment quarterly. Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of our operating segments. Future events could cause us to conclude that impairment indicators exist and that goodwill associated with our operating segments which amounts to $116,757 as of September 30, 2008, may be impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations. During the three and nine months ended September 30, 2008 and 2007, the Company did not record any impairment losses related to goodwill.

Impairment of Intangible Assets

The intangible assets consist of rights of entry contracts, contracts with DirecTV and customer contracts. These intangibles are being amortized over their estimated useful lives ranging from 12 to 108 months. If significant changes would occur to the estimated future cash flows associated with these intangibles, the Company would determine if there is impairment and reduce the value of intangibles based on the discounted present value of such cash flows. At September 30, 2008, the Company had net intangibles of $5,107,154 which represented approximately 21.2% of the Company's total assets. During the three and nine months ended September 30, 2008, the Company recorded an impairment charge to intangible assets of $0 and $65,452, respectively (see Note 2). The Company did not record any impairment losses related to intangible assets during the three and nine months ended September 30, 2007.

Inventories

We value our inventories at the lower of the actual cost or the current estimated market value of the inventories. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventories. Rapid technological change, frequent new product development, and rapid product obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand characterize our industry.

Share-Based Payments

The Company accounts for its stock options in compliance with the Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment (SFAS . . .