UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549








FORM 10-Q














(Mark One)


x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended December 31, 2010





OR





r           TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from _____ to ______





Commission File Number 000-30675





EnXnet, Inc.


(Name of issuer in its charter)











Oklahoma
73-1561191(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)





11333 E. Pine Street, Suite 92 - Tulsa, Ok 74116(Address of principal executive offices & zip code)





(918) 592 - 0015Registrant's telephone number, including area code:





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. Yesx   Noo





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





Large accelerated filer
o
Accelerated fileroNon-accelerated filer
o
Smaller reporting companyx(Do not check if a smaller reporting company)





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





As of February 10, 2011, there were outstanding 42,985,018 shares of the registrant’s common stock, $.0005 par value.





Table of Contents





Tableof Contents





PagePART I. FINANCIAL INFORMATIONItem 1.
Financial Statements
3Balance Sheets December 31, 2010 and March 31, 2010
3Statements of Loss For the nine months ended December 31, 2010 and 2009 and three months ended December 31, 2010 and 2009
4Statements of Cash Flows For the nine months ended December 31, 2010 and 2009
5Summary of Accounting Policies
6Notes to Financial Statements
8Item 2.
Management’s Discussion and Analysis
15Item 3.
Quantitative and Qualitative Disclosures About Market Risk
21Item 4.
Controls and Procedures
21PART II. OTHER INFORMATIONItem 1.
Legal Proceedings
22Item 1A.
Risk Factors
22Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
22Item 3.
Defaults Upon Senior Securities
22Item 4.
Submission of Matters to a Vote to Security Holders
22Item 5.
Other Information
22Item 6.
Exhibits and Reports on Form 8-K
22SIGNATURES
23Exhibit Index
24





2
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PART I.    FINANCIAL INFORMATION





ITEM1.     FINANCIAL STATEMENTS


ENXNET, INC


BALANCE SHEET





December 31, 2010


March 31, 2010ASSETS

(Unaudited)


(Audited)CURRENT ASSETSCash

$
11,471


$
24,289Accounts receivable


-



-Prepaid expenses


52,543



63,545TOTAL CURRENT ASSETS


64,014



87,834FIXED ASSETSFurniture & fixtures


6,160



6,160Machinery & equipment


74,516



74,516Less accumulated depreciation


(75,389
)


(70,967
)TOTAL FIXED ASSETS


5,287



9,709OTHER ASSETSLicenses, net


-



-Investment, net


-



-Deposits


1,137



1,137TOTAL OTHER ASSETS


1,137



1,137TOTAL ASSETS

$
70,438


$
98,680LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESAccounts payable and accrued expenses

$
477,364


$
518,075Advances from officer - related party


47,980



46,580Advances from stockholder


31,000



31,000Notes payable - stockholder


181,413



226,413Notes payable - related party


641,875



761,525TOTAL CURRENT LIABILITIES


1,379,632



1,583,593COMMITMENTS AND CONTINGENCIES


-



-STOCKHOLDERS' EQUITY (DEFICIT)Common stock, $0.00005 par value; 200,000,000 shares authorized, 42,985,018 and 36,108,429  shares issued and outstanding


2,149



1,805Additional paid-in capital


5,052,340



4,680,380Accumulated deficit


(6,263,683
)


(6,067,098
)Deferred consideration


-



-Other comprehensive income


(100,000
)


(100,000
)TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

(1,309,194
)


(1,484,913
)TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$
70,438


$
98,680





See accompanying summary of accounting policies and notes to condensed financial statement





3
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ENXNET, INC


CONSOLIDATED STATEMENTS OF OPERATIONS





Three Months Ended


Nine Months EndedDecember 31,


December 31,2010


2009



2010



2009REVENUES

$
-


$
-


$
-


$
12,540COST OF SALES


-



-



-



7,150Gross Profit


-



-



-



5,390EXPENSESConsulting fees


9,830



27,960



51,230



136,860Depreciation & amortization


1,474



198



4,422



593Advertising


-



-



-



2,350Payroll


8,352



16,977



28,684



79,857Professional services


15,848



7,908



76,124



27,985Occupancy


4,116



3,640



11,376



12,326Office


1,094



1,991



4,041



6,357Travel


87



189



576



986Other


772



1,475



1,176



1,925Total Expenses


41,573



60,338



177,629



269,239LOSS FROM OPERATIONS


(41,573
)


( 60,338
)


(177,629
)


(263,849
)OTHER INCOME (EXPENSE)Interest expense


(5,351
)


(12,194
)


(18,956
)


(36,185
)Other income


-



-



-



8,768Interest income


-



-



-



-Total Other Income (Expense)


(5,351
)


(12,194
)


(18,956
)


(27,417
)COMPREHENSIVE LOSS

$
(46,924
)

$
( 72,532
)

$
(196,585
)

$
(291,266
)BASIC AND DILUTED NET LOSS PER SHARE

$
(0.001
)

$
(0.002
)

$
(0.005
)

$
(0.009
)WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED


42,765,295



33,764,129



42,985,018



33,764,129





See accompanying summary of accounting policies and notes to condensed financial statement





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ENXNET, INC


CONSOLIDATED STATEMENTS OF CASH FLOWS





For the Nine Months EndedDecember 31,2010


2009CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(196,585
)

$
(291,266
)Depreciation and amortization


4,422



4,568Common stock issued for services


12,600



107,109Stock options issued


32,700



118,826Adjustments to reconcile net loss to net cash used by operations:Decrease (increase) in accounts receivable


-



7,729Decrease (increase) in prepaid expenses


11,002



(51,167
)Increase (decrease) in accounts payable & accrued expenses


35,893



18,302Net cash provided (used) by operating activities


(99,968
)


(85,899
)CASH FLOWS FROM INVESTING ACTIVITIESNet cash provided (used) in investing activities


-



-CASH FLOWS FROM FINANCING ACTIVITIESProceeds from stock sales


41,400



24,500Proceeds from note payable


14,350



5,000Proceeds from advances from officer and stockholder


37,800



60,693Repayment of advances


(6,400
)


(3,200
)Net cash provided (used) by financing activities


87,150



86,993NET INCREASE (DECREASE) IN CASH


(12,818
)


1,094CASH - Beginning of period


24,289



10,630CASH - End of period

$
11,471


$
11,724SUPPLEMENTAL CASH FLOW DISCLOSURES:Interest expense

$
-


$
-Income taxes

$
-


$
-NON-CASH FINANCING AND INVESTING TRANSACTIONS:Common stock issued for services

$
12,600


$
107,109Common stock issued for payment of debt

$
179,000


$
-Common stock issued for payment of accrued expenses

$
76,604


$
-





See accompanying summary of accounting policies and notes to condensed financial statement





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ENXNET, INC


SUMMARY OF ACCOUNTING POLICIES





The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Items 303 and 310(b) of Regulation S-B.





Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the nine months ended December 31, 2010, are not necessarily indicative of the results that may be expected for the year ended March 31, 2011. For further information, refer to the financial statements and footnotes thereto included in the EnXnet, Inc. or the "Company" audited financial statements for the year ended March 31, 2010 included in the Company Form 10-K.





THE BUSINESS





Overview


EnXnet, Inc. (the "Company") was formed under the laws of the State of Oklahoma on March 30, 1999. It is a business and technology development enterprise engaged in the development, marketing, and licensing of emerging technologies and innovative business strategies and practices.  EnXnet is primarily focusing on products, solutions and services that support and enhance multimedia management.





Products and Services





ThinDisc


The Thin Disc is our Optical Disc Having a Reduced Planar Thickness.  Thin Disc’s primary function is to make any size optical disc thinner with reading capability in players that play optical disc media. The Company has filed for a United States and an international patent covering the technology included in the Thin Disc.  On March 31, 2010 the Company announced receiving the official Patent for the Optical Disc Having A Reduced Planar Thickness.





Tap ‘n Go II


We received a patent for our Optical Disc Having Remote Reading Capabilities on May 27, 2010.





DVDplus


The Company entered into a license on September 2, 2003 with DVDplus International, Inc. to manufacture and market DVDplus in the United States, Canada, and Mexico. DVDplus is a dual sided, hybrid optical disc media that uniquely combines two distinct content storage formats for distribution on a single disc, a DVD (digital versatile disc) on one side and a CD (compact disc) on the other. DVDplus allows content publishers to integrate their visual and audio assets into a single distribution. Utilizing the latest in manufacturing technology, the CD and DVD layers are bonded together to provide a multi-format hybrid disc, which is compatible with all CD, CD-ROM, DVD ROM formats, and is readable and capable of playback in conventional CD and DVD players and including players that are found in personal computers alike. DVDplus allows content publishers to integrate their visual and audio assets into a single distribution, such as releasing a DVD movie and its soundtrack together.





6
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Disc Security Tag


Disc Security Tag, (DSTag), is an invention which utilizes proprietary Electronic Article Surveillance (EAS) tags embedded or adhered to a DVD or CD during the injection mold phase of the manufacturing process. Products, to which this process is applied, provide unique item identification for its customers and clients. Manufacturers that use this product are given the opportunity to enhance the integrity of their product while providing added value to their customers (retailers). This will help reduce or stop the enormous losses attributed to employee and retail theft. Additionally, it can give content developers, manufacturers, and distributors the ability to protect their investment by providing an efficient means to authenticate legitimate products over counterfeit products produced by unauthorized manufacturers. On May 23, 2003, the Company filed a patent for DSTag and on May 21, 2004, the Company filed an international patent for DSTag. On September 29, 2009 the Company announced receiving the official Patent for the Passive Resonant Reflector.





EnXcase


EnXcase combines two distinct features for the DVDplus (OneDisc - two-sided DVD-CD) optical disc media market. The outer styling of the case has the unique feature of a semi-rounded top. The second feature is a theft deterrent ring found within the inner structure of the EnXcase. The Company developed this unique case primarily for use with the DVDplus (OneDisc) two-sided disc format. The Company filed for a United States patent on EnXcase on October 10, 2003 and was awarded the patent on September 19, 2006.





ClearVideo License


The Company acquired exclusive licensing rights in March 2000 from Iterated Systems, Inc., to compile, use, copy and modify ClearVideo Source Code and to create and manufacture products and services.  Ryan Corley acquired the rights for using the ClearVideo Source Code for video/audio streaming over the internet of TV type programming and content. Additionally, the license agreement provides that the Company may sublicense any products and services that it creates using the technology under the licensing agreement. The license was acquired for a $250,000 note payable and the issuance of 297,500 shares of common stock, valued at $2,975.





The Company entered into an agreement with Ryan Corley, the President on January 2, 2002 and majority stockholder of the Company, whereby the Company acquired his license agreement for video/audio streaming over the internet of TV type programming and content using the ClearVideo Source Code. The Company issued 1,000,000 shares of restricted common stock valued at $100,000 for the license. The licenses are being amortized over 10 years which is the estimated useful life of the patent covering the technology.





ClearVideo Technology


ClearVideo utilizes fractal digitization creating the smallest file possible while virtually duplicating the quality of the original. ClearVideo can reduce video file sizes by approximately 95-99% and virtually duplicates the quality of the original files. ClearVideo enhances how video with synchronized audio files are transmitted over both narrow and broadband lines. ClearVideo works equally well with NTSC, PAL, or SECAM (the three different TV formats used around the world) television as well as the Internet. It can be effectively used worldwide for the compression and transmission of video files for the broadcast industry.





Medical D-Tect-OR


We are partners with BAHF, LLC in a joint effort called Medical D-Tect-ORTM. Medical D-Tect-ORTM has developed a Retained Foreign Object Detection System. This D-Tect-ORTM detection technology uses a hand held wand that is capable of detecting surgical instruments and surgical products such as gauze, laparoscopy sponges, and operating room towels that may have been left in the body during a surgical procedure. Medical D-Tect-OR has filed for patent protection.





7
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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





NOTE 1 - SUMMARY OF ACCOUNTING POLICIES





Cash Equivalents


For financial reporting purposes, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be a cash equivalent.  Financial instruments, which potentially subject the Company to a concentration of credit risk, consist of cash and cash equivalents.  Cash and cash equivalents consist of funds deposited with various high credit quality financial institutions.





Equipment


Equipment is recorded at cost. Depreciation and amortization are provided using the straight-line method over the useful lives of the respective assets, typically 3-10 years. Major additions and betterments are capitalized. Upon retirement or disposal, the cost and related accumulated depreciation or amortization is removed from the accounts and any gain or loss is reflected in operations.





Depreciation expenses for the nine months ended December 31, 2010 and 2009 was $4,422 and $4,568, respectively.





Advertising


Advertising costs are expensed as incurred.





Licenses


The costs associated with acquiring exclusive licensing rights to patented technology have been capitalized and have been expensed using the straight line method of amortization over ten years, the estimated remaining useful lives of the patents.





Revenue Recognition


Revenue is generally recognized and earned when all of the following criteria are satisfied: a) persuasive evidence of sales arrangements exists; b) delivery has occurred; c) the sales price is fixed or determinable, and d) collectability is reasonably assured.





Persuasive evidence of an arrangement is demonstrated via a purchase order from our customers. Delivery occurs when title and all risks of ownership are transferred to the purchaser which generally occurs when the products are shipped to the customer. No right of return exists on sales of products except for defective or damaged products. The sales price to the customer is fixed upon acceptance of purchase order. To assure that collectability is reasonably assured we perform ongoing credit evaluations of all of our customers.





Income Taxes


Income taxes are provided based on the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end.  A valuation allowance is recorded against deferred tax assets as management does not believe the Company has met the "more likely than not" standard to allow recognition of such an asset.





Accounts Receivable


Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within thirty days from the invoice date or as specified by the invoice and are stated at the amount billed to the customer.  Customer account balances with invoices dated over thirty days or thirty days past the due date are considered delinquent.





8
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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management's best estimate of the amount that will not be collected. Management individually reviews all accounts receivable balances that are considered delinquent and based on an assessment of current credit worthiness, estimates the portion, if any, of the balance that will not be collected.  In addition, management periodically evaluates the adequacy of the allowance based on the Company's past experience.





Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.





Fair Value of Financial Assets and Liabilities


Under FASB ASC 825 the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.





The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and debt.  The Company believes that the carrying amounts approximate fair value for all such instruments.





FASB ASC 820 defines fair value, establishes a framework for measurement, and expands disclosure about fair value measurements.  Topic No. 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  Topic No. 820 classifies the inputs used to measure fair value into the following hierarchy:





Level 1:
Quoted prices for identical assets or liabilities in active markets.Level 2:
Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.Level 3:
Pricing inputs are unobservable for the assets and liabilities, including situations in which there is little to no market activity.





Fair values assigned to the Company’s acquired fixed assets were determined using Level 2, and the fair value associated with the Company’s intangible asset was based on Level 3 inputs.  The inputs used to determine fair value require significant management judgment and estimation.





Compensated Absences


Employees of the Company do not earn annual leave or sick leave. There is no compensated absences accrued liability on December 31, 2010 and March 31, 2010.





Research and Development Costs


Research and development costs are charged to expense as incurred.





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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





Stock-Based Compensation


FASB ASC 718 requires that measurement of the cost of employee services received in exchange for an award of equity instruments be based on the grant-date fair value of the award. Such costs are recorded over the periods employees are required to render services in exchange for the awards.





Income Tax/Deferred Tax Policy


FASB ASC 740  requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differing treatment of certain items between the Company’s financial records and tax returns.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred balances reflect tax rates by tax jurisdiction that are scheduled to be in effect, based on currently enacted tax laws, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset that is not expected to be realized.





FASB ASC 740 also prescribes a comprehensive model for how a company should measure, recognize, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  The Company recognizes the tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.  Interest and penalties, if incurred, are included in interest and financing expense.  The Company’s income tax filings are subject to audit by various taxing authorities.  The Company’s open audit periods are 2008 – 2010.  The Company does not believe it has any material uncertain tax positions.





Net Loss Per Share


Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities.





Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from management’s estimates.





Unaudited Financial Statements


The accompanying unaudited financial statements for the nine months ended December 31, 2010 have been prepared in accordance with generally accepted accounting principles for interim financia1 information.  In the opinion of management all adjustments considered necessary for a fair presentation, which consist of normal recurring adjustments, have been included.  The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's March 31, 2010 Annual Report on Form 10-K.





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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





NOTE 2 – GOING CONCERN





The Company has a working capital deficit and has incurred losses since inception.  These factors raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.





Management of the Company has undertaken certain actions to address these conditions.  Management is currently in negotiations with potential customers and with marketing representatives to establish a more developed product channel.  Funds required to carry out management's plans are expected to be derived from future stock sales and borrowings from outside parties.  There can be no assurances that the Company will be successful in executing its plans.





NOTE 3 – INCOME TAXES





At December 31, 2010 and March 31, 2010, the Company had net deferred tax assets of approximately $2,130,000 and $2,063,000 principally arising from net operating loss carryforward for income tax purposes.  As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at December 31, 2010 and March 31, 2010. At December 31, 2010, the Company has net operating loss carry forwards totaling approximately $6,263,000 which will begin to expire in the year 2015.





NOTE 4 – NOTES PAYABLE





Notes payable-related party consists of the following:December 31, 2010


March 31, 20108% convertible note payable to Ryan Corley, President of the Company, due on demand, Convertible into a maximum of 1,100,000 common shares

$
-


$
110,0003% convertible note payable to Ryan Corley, President of the Company, due on demand,  convertible into a maximum of 271,311 common shares


21,705



21,7052% convertible note payable to Ryan Corley, President of the Company, due on demand,  convertible into a maximum of 9,198,410 common shares


459,920



479,9202% convertible note payable to an entity controlled by Ryan Corley the President of the Company,  due on demand, convertible into a maximum of 978,000 common shares


48,900



48,9003% convertible note payable to an entity controlled by Ryan Corley the President of the Company,  due on demand, convertible into a maximum of 1,412,500 common shares


101,000



101,0003% convertible note payable to an entity controlled by Ryan Corley the President of the Company,  due on demand, convertible into a maximum of 207,000 common shares


10,350



-Total notes payable-related party

$
641,875


$
761,525





Notes payable-stockholder consist of the following:March 31,2010


20094% convertible notes payable to a stockholder, due on demand, convertible into a maximum of 350,000 common shares

$
175,000


$
175,0002% convertible notes payable to 2 stockholders, due on demand, convertible into a maximum of 728,267 common shares


6,413



51,413Total notes payable

$
181,413


$
226,413





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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





NOTE 5 – ADVANCES FROM OFFICER AND STOCKHOLDER





Advances from a stockholder at December 31, 2010 and March 31, 2010 were $31,000 and $31,000, respectively.





Our CEO, Ryan Corley, has made advances to the Company in prior years. During the nine months ended December 31, 2010, the CEO made additional unsecured advances totaling $24,900. During the nine months ended December 31, 2010 the Company made payments on these advances of $4,000. During the nine months ended December 31, 2010 the CEO requested that $30,000 of advances be converted to notes payable for trusts held for the benefit of his children. These notes were subsequently converted into 600,000 shares of the Company’s common stock. At December 31, 2010 and March 31, 2010, advances from the CEO were $37,480 and $46,580, respectively.





The Company has notes payable to the CEO in the aggregate amount of $481,625 and $611,625 as of December 31, 2010 and March 31, 2010. During the nine months ended December 31, 2010, the CEO transferred $20,000 of these notes to unrelated entities. These notes with accrued interest were then converted into 401,070 shares of the Company’s common stock. Also, during the nine months ended December 31, 2010, the CEO transferred $25,000 of notes payable to the CFO, Secretary and an outside member of the Board of Directors. These notes were then converted into 500,000 shares of the Company’s common stock. Additionally, during the nine months ended December 31, 2010, the CEO requested conversion of $85,000 in notes payable and $76,396 of accrued interest. The CEO assigned 1,563,940 of the conversion shares to trusts held for the benefit of his children, a relative and an unrelated individual. The CEO received 1,663,979 of the converted shares. Accrued interest owed on these notes at December 31, 2010 and March 31, 2010 is $108,161 and $174,390. These notes and accrued interest are convertible into 9,813,795 and 11,759,189 shares of Rule 144 restricted common stock of the company.





An entity controlled by the CEO has made unsecured advances and notes payables to the Company. At December 31, 2010 and March 31, 2010, advances from the entity controlled by the CEO were $10,500 and $-0- with notes payable totaled $160,250 and $149,900. Accrued interest owed on these notes at December 31, 2010 and March 31, 2010 is $6,619 and $3,547. These notes and accrued interest are convertible into 2,485,173 and 2,438,509 shares of Rule 144 restricted common stock of the company.





NOTE 6 - COMMON STOCK TRANSACTIONS





The Company issued 832,500 shares of restricted common stock in exchange for cash in the amount of $41,400 during the nine months ended December 31, 2010.





The Company issued 5,712,089 shares of restricted common stock in exchange of notes payable in the amount of $179,000 and accrued interest in the amount of $76,604 during the nine months ended December 31, 2010.





The Company issued 332,000 shares of restricted common stock in exchange for services in the amount of $12,600 for the nine months ended December 31, 2010.





NOTE 7 – STOCK OPTIONS





On July 24, 2001, the Company filed with the SEC Form S-8, for its 2002 Stock Option Plan, (the Plan). An aggregate amount of common stock that may be awarded and purchased under the Plan is 3,000,000 shares of the Company's common stock. Under the Plan during the nine months ended December 31, 2010, the Company did not grant any options under the plan. At December 31, 2010 there were 985,000 options issued under the Plan and 365,000 options available to issue under the Plan.





The Company also issues stock options to purchase Rule 144 restricted common stock which is not issued under the Plan. During the nine months ended December 31, 2010, the Company granted 300,000 options to purchase the Company’s common stock for a period of 24 months at an exercise price of $.05 per share to an unrelated entity who had purchased 300,000 shares of common stock for $15,000. At December 31, 2010, there were 300,000 options issued not under the Plan





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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





The Company estimated the fair value of each stock option for employees and consultants at the grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants as follows:





Dividends yield


0
%Expected volatility

2.04
%Risk-free interest rate


.43 to .33
%Expected life

2 years





For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period.





A summary of the status of the Company's stock options as of December 31, 2010 and March 31, 2010 is presented below:





December 31,


March 31,2010


2010Options outstanding at beginning of year


3,880,800



2,880,800Options granted


300,000



1,250,000Options exercised


-



-Options canceled


(2,895,800
)


(250,000
)Options outstanding at end of year


1,285,000



3,880,800





The following table summarizes the information about the stock options as of December 31, 2010:





Range of Exercise Price


Number Outstanding at December 31


Weighted Average Remaining Contractual Life Years


Weighted Average Exercise Price (Total shares)


Number Exercisable at December 31


Weighted Average Exercise Price (Exercisable shares)$
.40 - .66



330,000



.50


$
.56



330,000


$
.56.43



200,000



.50



.43



200,000



.43.38



135,000



.51



.38



135,000



.38.06 - 51



320,000



.50



.38



320,000



.38.05



300,000



1.44



.05



300,000



.05$
.05 – .66



1,285,000



.74


$
.36



1,285,000


$
.36





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ENXNET, INC


NOTES TO FINANCIAL STATEMENTS





The following table summarizes the information about the stock options as of March 31, 2010:





Range of Exercise Price


Number Outstanding at March 31


Weighted Average Remaining Contractual Life Years


Weighted Average Exercise Price (Total shares)


Number Exercisable at March 31


Weighted Average Exercise Price (Exercisable shares)$
.10 - .50



555,800



.65


$
.39



555,800


$
.39.50



795,000



.64



.50



795,000



.50.40 - .50



45,000



.64



.43



45,000



.43.40 - .66



330,000



1.25



.56



330,000



.56.43



200,000



1.25



.43



200,000



.43.38



135,000



1.26



.38



135,000



.38.06 - 51



1,820,000



.32



.18



1,820,000



.18$
.06 – .66



3,880,800



.74


$
.33



3,880,800


$
.33





NOTE 8 – COMMITMENTS AND CONTINGENCIES





The Company is not involved in litigation at this time.  We may from time to time be a party to various legal actions in the ordinary course of business.  There can be no assurance that the Company will not be a party to litigation in the future that could have an adverse effect on the Company.





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ITEM2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.





This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Exchange Act which represent the expectations or beliefs concerning future events that involve risks and uncertainties, including but not limited to the demand for Company products and services and the costs associated with such goods and services. All other statements other than statements of historical fact included in this Quarterly Report including, without limitation, the statements under "Management’s Discussion and Analysis or Plan of Operations" and elsewhere in the Quarterly Report, are forward-looking statements.  While the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.





The following discussion of the results of operations and financial conditions should be read in conjunction with the financial statements and related notes appearing in this report.





EnXnet, Inc. was formed under the laws of the State of Oklahoma on March 30, 1999 as Southern Wireless, Inc. It is a business and technology development enterprise engaged in the development, marketing, and licensing of emerging technologies and innovative business strategies and practices, focusing primarily on products, solutions, and services which support and enhance multimedia management.





The Company currently can satisfy its current cash requirements for approximately 30 days and has a plan to raise additional working capital by the sale of shares of the Company common stock to select perspective individuals and from additional borrowings. Additionally, holders of outstanding stock options have been exercising those options which have provided additional working capital for the Company. This plan should provide the additional necessary funds required to enable the Company to continue marketing and developing its products until the Company can generate enough cash flow from sales to sustain its operations.





The Company does not anticipate any significant cash requirements for the purchase of any facilities.





The Company currently has one full-time employee on the payroll. It is anticipated that the Company will need to hire additional employees in order to expand the marketing and developing of its products. The Company currently has arrangements with marketing affiliate Duplium for our DVDplus product and with iACTIVECARD LLC, One28 Marketing Group and Interactive Affinities for our ThinDisc product. Currently our employee and other outside consultants are used for the further development of our products.





Results of Operations – Three months ended December 31, 2010 and 2009.





Revenues have not been substantial as we refocused our efforts on developing technologies and developing marketing affiliates.





The Company incurred operating expenses of $41,573 and $60,338 for the three months ended December 31, 2010 and 2009, a decrease of $18,765 or 31.10%. The decrease in operating expenses of $18,765 for the three months ended December 31, 2010 when compared to the three month period ended December 31, 2009 is attributed to:





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Increases in:





·
Professional fees of $7,940·
All other increasing expense categories $1,752





Decreases in:





·
Consulting expenses of $18,130·
Payroll expenses of $8,625·
All other decreasing expense categories $1,702





The increase in professional fees $7,230 for the three months ended December 31, 2010 compared to the three month period ended December 31, 2009 is attributed to the legal fees for patent filings in the United States and internationally as well as audit fees for the prior year end and the previous quarter.





The decrease in consulting expenses of $18,130 for the three months ended December 31, 2010 compared to the three month period ended December 31, 2009 is related to valuation of common stock options and common stock issued to compensate our consultants. In the current quarter we did not issue options for consulting services.





The decrease in payroll expenses of $8,625 or 50.80% for the three months ended December 31, 2010 compared to the three month period ended December 31, 2009 is attributed to the following:





·
Reduction in an employee resulted in a decrease of $5,816





·
Decrease in valuation of compensation cost of options and common stock issued to employees of $2,218·
Decrease in medical insurance for employees of $591





Other classifications of expenses did not fluctuate substantially for the three month period ended December 31, 2010 to December 31, 2009.





During the three months ended December 31, 2010 and 2009 we incurred net losses of $46,924 and $72,532 or $(0.001) and $(0.002) per share.





Results of Operations – Nine months ended December 31, 2010 and 2009.





Revenues have not been substantial as we refocused our efforts on developing technologies and developing marketing affiliates. For the nine months ended December 31, 2010 and 2009, the Company had revenues of $-0- and $12,540.





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The Company incurred operating expenses of $177,629 and $269,239 for the nine months ended December 31, 2010 and 2009, a decrease of $91,610 or 34.03%. The decrease in operating expenses of $91,610 for the nine months ended December 31, 2010 when compared to the nine month period ended December 31, 2009 is attributed to:





Increases in:





·
Professional services $48,139·
Other increasing expenses categories $3,829





Decreases in:





·
Consulting expenses of $85,630·
Payroll expenses of $51,173·
Other decreasing expense categories $6,775





The increase in professional fees $48,139 for the nine months ended December 31, 2010 compared to the nine month period ended December 31, 2009 is attributed to the legal fees for patent filings in the United States and internationally as well as auditing fees for the prior year end and previous quarter.





The decrease in consulting expenses of $85,630 for the nine months ended December 31, 2010 compared to the nine month period ended December 31, 2009 is related to valuation of common stock options and common stock issued to compensate our consultants.





The decrease in payroll expenses of $51,173 or 64.08% for the nine months ended December 31, 2010 compared to the nine month period ended December 31, 2009 is attributed to the following:





·
Reduction in two employees resulted in a decrease of $25,968·
Decrease in valuation of compensation cost of options and common stock issued to employees of $20,897·
Decrease in medical insurance for employees of $4,308





Other classifications of expenses did not fluctuate substantially for the nine month period ended December 31, 2010 to December 31, 2009.





During the nine months ended December 31, 2010 and 2009 we incurred net losses of $196,585 and $291,266 or $(0.005) and $(0.009) per share.





Liquidity and Capital Resources.





From inception through December 31, 2010, the Company has issued 42,985,018 shares of its Common Stock to officers, directors and outside shareholders.  The Company has little operating history and no material assets other than the license agreement for ClearVideo and DVDplus, the patents for ThinDisc, Passive Resonant Reflector, and an Antenna for an optical storage disk, EnXcase, and Disc Security Tag.  The Company has $11,471 in cash as of December 31, 2010.





The Company has incurred operating losses each year since its inception and has had a working capital deficit at December 31, 2010. At December 31, 2010 and March 31, 2010 the working capital deficit was $1,315,618 and $1,495,759, respectively. The working capital deficit and cash balance raise substantial doubt about the Company's ability to continue as a going concern.  As a result of these factors, the Company's independent certified public accountants have included an explanatory paragraph in their reports on the Company's March 31, 2010 financial statements which expressed substantial doubt about the Company's ability to continue as a going concern.





Contractual Obligations.





At the present time, the Company has no material commitments for capital expenditures.  If capital expenditures are required after operations commence, the Company will pay for the same through the sale of common stock, or through loans from third parties.  There is no assurance, however, that such financing will be available and in the event such financing is not available, the Company may have to cease operations.





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CRITICAL ACCOUNTING POLICIES AND ESTIMATES.





Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America.





Use of estimates in preparation of financial statements





The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of our consolidated financial statements:





Cash Equivalents


For financial reporting purposes, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be a cash equivalent.  Financial instruments, which potentially subject the Company to a concentration of credit risk, consist of cash and cash equivalents.  Cash and cash equivalents consist of funds deposited with various high credit quality financial institutions.





Equipment


Equipment is recorded at cost. Depreciation and amortization are provided using the straight-line method over the useful lives of the respective assets, typically 3-10 years. Major additions and betterments are capitalized. Upon retirement or disposal, the cost and related accumulated depreciation or amortization is removed from the accounts and any gain or loss is reflected in operations.





Advertising


Advertising costs are expensed as incurred.





Licenses


The costs associated with acquiring exclusive licensing rights to patented technology have been capitalized and have been expensed using the straight line method of amortization over ten years, the estimated remaining useful lives of the patents.





Revenue Recognition


Revenue is generally recognized and earned when all of the following criteria are satisfied: a) persuasive evidence of sales arrangements exists; b) delivery has occurred; c) the sales price is fixed or determinable, and d) collectability is reasonably assured.





Persuasive evidence of an arrangement is demonstrated via a purchase order from our customers. Delivery occurs when title and all risks of ownership are transferred to the purchaser which generally occurs when the products are shipped to the customer. No right of return exists on sales of products except for defective or damaged products. The sales price to the customer is fixed upon acceptance of purchase order. To assure that collectability is reasonably assured we perform ongoing credit evaluations of all of our customers.





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 Table of Contents





Income Taxes


Income taxes are provided based on the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end.  A valuation allowance is recorded against deferred tax assets as management does not believe the Company has met the "more likely than not" standard to allow recognition of such an asset.





Accounts Receivable


Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within thirty days from the invoice date or as specified by the invoice and are stated at the amount billed to the customer.  Customer account balances with invoices dated over thirty days or thirty days past the due date are considered delinquent.





The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management's best estimate of the amount that will not be collected. Management individually reviews all accounts receivable balances that are considered delinquent and based on an assessment of current credit worthiness, estimates the portion, if any, of the balance that will not be collected.  In addition, management periodically evaluates the adequacy of the allowance based on the Company's past experience.





Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.





Fair Value of Financial Assets and Liabilities


Under FASB ASC 825 the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.





The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and debt.  The Company believes that the carrying amounts approximate fair value for all such instruments.





FASB ASC 820  defines fair value, establishes a framework for measurement, and expands disclosure about fair value measurements.  Topic No. 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  Topic No. 820 classifies the inputs used to measure fair value into the following hierarchy:





Level 1:
Quoted prices for identical assets or liabilities in active markets.Level 2:
Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.Level 3:
Pricing inputs are unobservable for the assets and liabilities, including situations in which there is little to no market activity.





Fair values assigned to the Company’s acquired fixed assets were determined using Level 2, and the fair value associated with the Company’s intangible asset was based on Level 3 inputs.  The inputs used to determine fair value require significant management judgment and estimation.





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Compensated Absences


Employees of the Company do not earn annual leave or sick leave. There is no compensated absences accrued liability on December 31, 2010 and March 31, 2010.





Research and Development Costs


Research and development costs are charged to expense as incurred.





Stock-Based Compensation


FASB ASC 718, requires that measurement of the cost of employee services received in exchange for an award of equity instruments be based on the grant-date fair value of the award. Such costs are recorded over the periods employees are required to render services in exchange for the awards.





Income Tax/Deferred Tax Policy


FASB ASC 740  requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differing treatment of certain items between the Company’s financial records and tax returns.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred balances reflect tax rates by tax jurisdiction that are scheduled to be in effect, based on currently enacted tax laws, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset that is not expected to be realized.





FASB ASC 740 also prescribes a comprehensive model for how a company should measure, recognize, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  The Company recognizes the tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.  Interest and penalties, if incurred, are included in interest and financing expense.  The Company’s income tax filings are subject to audit by various taxing authorities.  The Company’s open audit periods are 2008 – 2010.  The Company does not believe it has any material uncertain tax positions.





Net Loss Per Share


Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities.





Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from management’s estimates.





Unaudited Financial Statements


The accompanying unaudited financial statements for the nine months ended December 31, 2010 have been prepared in accordance with generally accepted accounting principles for interim financia1 information.  In the opinion of management all adjustments considered necessary for a fair presentation, which consist of normal recurring adjustments, have been included.  The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's March 31, 2010 Annual Report on Form 10-K.





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Off Balance Sheet Arrangements





We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.





CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES.





Currently the Company's stock is traded under the symbol "EXNT" on the NASD OTC Bulletin Board, and the symbol “AOHMDW” on the Frankfurt, Berlin and Stuttgart Stock Exchanges in Germany. There can be no assurance that an active or regular trading market for the common stock will develop or that, if developed, will be sustained. Various factors, such as operating results, changes in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors may have a significant impact on the market of the Company securities. The market price for the securities of public companies often experience wide fluctuations that are not necessarily related to the operating performance of such public companies such as high interest rates or impact of overseas markets.





ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Not Applicable





ITEM4. CONTROL AND PROCEDURES.





Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rules 13(a)-15(e) under the Securities Act of 1934, as amended) are effective to ensure that all information required to be disclosed by us in the reports filed or submitted by us under the Securities and Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to the  management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate and allow timely decisions regarding required disclosure.





Changes in Internal Controls.In connection with the above-referenced evaluation, no change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





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PART II. OTHER INFORMATION





ITEM1.      LEGAL PROCEEDINGS





The Company is not involved in litigation at this time.  We may from time to time be a party to various legal actions in the ordinary course of business.  There can be no assurance that the Company will not be a party to litigation in the future that could have an adverse effect on the Company.





ITEM1A.   RISK FACTORS





There have been no material changes with regard to the risk factors previously disclosed in our most recent Annual Report on Form 10-K.





ITEM2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None





ITEM3.      DEFAULTS UPON SENIOR SECURITIES





None





ITEM4.      SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS





None





ITEM5.      OTHER INFORMATION





None





ITEM6.      EXHIBITS AND REPORTS ON FORM 8-K





The following are included herein:





31.1
Rule 15d-14(a) Certification of CEO31.2
Rule 15d-14(a) Certification of CFO32.1
Rule 1350 Certification of CEO




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SIGNATURES





In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.








EnXnetDated: February 15, 2011
By:
/s/ Ryan CorleyRyan Corley, President. Chief Executive Officer(Principal Executive Officer)





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EXHIBITINDEX




31.1
Rule 15d-14(a) Certification of CEO31.2
Rule 15d-14(a) Certification of CFO32.1
Rule 1350 Certification of CEO
 
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