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

                                    FORM 10-Q

[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

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from ________________to _________________

Commission File No. 0-8693
                    ----------------------

                              TRANSNET CORPORATION
                              --------------------
             (Exact name of registrant as specified in its charter)

        DELAWARE                                         22-1892295
-------------------------------------       ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

45 Columbia Road, Somerville, New Jersey                 08876-3576
----------------------------------------                ------------
(Address of principal executive offices)                 (Zip Code)

Registrant's Telephone Number, Including Area Code:     908-253-0500
                                                        ------------

--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last Report

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 (as
                        defined in Rule 12b-2 of the Act)
     Large Accelerated Filer [ ]          Accelerated Filer [ ]
     Non-accelerated Filer [ ]           Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act)
[ ] Yes   [X] No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 11, 2011: 4,823,304.

<PAGE>

                              TRANSNET CORPORATION
                              --------------------

                                    FORM 10-Q
                                    ---------

                                TABLE OF CONTENTS
                                -----------------

                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION
-------  ---------------------

         Consolidated Balance Sheets
                  December 31, 2010 (unaudited) and June 30, 2010           1

         Consolidated Statements of Operations (unaudited)
                  Three Months Ended December 31, 2010 and 2009             2
                  Six Months Ended December 31, 2010 and 2009               3

         Consolidated Statements of Cash Flows (unaudited)
                  Six Months Ended December 31, 2010 and 2009               4

         Notes to Consolidated Financial Statements                         5

     Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations                            8

     Item 4. Controls and Procedures                                       12

PART II.  OTHER INFORMATION
-------   -----------------

     Item 6. Exhibits and Reports on Form 8-K                              13

     Signatures                                                            13
     Certifications                                                        14

                                       i.

<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                       -----------------------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                                                   December 31,      June 30,
                                                       2010            2010
                                                   ------------    ------------
                                                    (unaudited)
ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents                          $     29,818    $    318,377
Restricted Cash                                         880,110         876,147
Accounts Receivable - Net                             2,711,550       3,532,045
Inventories - Net                                        84,096         247,743
Other Current Assets                                     29,934           3,587
                                                   ------------    ------------

TOTAL CURRENT ASSETS                               $  3,735,508    $  4,977,899

PROPERTY AND EQUIPMENT - NET                             49,990          56,309

OTHER ASSETS                                            231,475         229,335
                                                   ------------    ------------

TOTAL ASSETS                                       $  4,016,973    $  5,263,543
                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable                                   $  2,016,645    $  1,998,179
Accrued Expenses                                        339,065         343,838
Unearned Revenue                                        226,790         193,222
Related Party Loans                                     317,000          75,000
Line of Credit                                          824,362       1,777,139
                                                   ------------    ------------

TOTAL CURRENT LIABILITIES                          $  3,723,862    $  4,387,378
                                                   ------------    ------------

STOCKHOLDERS' EQUITY:
Capital Stock - Common, $.01 Par Value,
Authorized 15,000,000 Shares; Issued 7,408,524
at December 31, 2010 and June 30, 2010
[of which 2,585,220 are in Treasury at
December 31, 2010 and June 30, 2010]                     74,085          74,085

Additional Paid-in Capital                           10,574,670      10,574,670

Accumulated Deficit                                  (3,202,809)     (2,619,755)
                                                   ------------    ------------

Total                                                 7,445,946       8,029,000
Less: Treasury Stock - At Cost                       (7,152,835)     (7,152,835)
                                                   ------------    ------------

TOTAL STOCKHOLDERS' EQUITY                              293,111         876,165
                                                   ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $  4,016,973    $  5,263,543
                                                   ============    ============

See Notes to Consolidated Financial Statements.

                                                                               1

<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                       -----------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                                   (UNAUDITED)
                                   -----------

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED DECEMBER 31,
                                                     -------------------------------
                                                          2010             2009
                                                     -------------    -------------
<S>                                                  <C>              <C>
REVENUE

Equipment                                            $   1,844,920    $   3,097,615
Services                                                 1,815,712        2,677,471
                                                     -------------    -------------

Total Revenue:                                           3,660,632        5,775,086
                                                     -------------    -------------

COST OF REVENUE

Equipment                                                1,545,696        2,450,697

Services                                                 1,485,545        1,961,717

Total Cost of Revenue                                    3,031,241        4,412,414
                                                     -------------    -------------

Gross Profit                                               629,391        1,362,672

Selling, General and Administrative Expenses             1,233,314        1,345,425
                                                     -------------    -------------

Operating (Loss) Income                                   (603,923)          17,247
                                                     -------------    -------------

OTHER INCOME (EXPENSE)
Interest Income                                              1,973            3,132
Interest Expense                                           (21,351)         (19,243)
                                                     -------------    -------------
Total Other (Expense)                                      (19,378)         (16,111)
                                                     -------------    -------------

Net (Loss) Income                                    $    (623,301)   $       1,136
                                                     =============    =============

Net (Loss) Income Per Common Share - Basic
     and Diluted                                     $       (0.13)   $        0.00
                                                     =============    =============

Weighted Average Common Shares Outstanding - Basic
     And Diluted                                         4,823,304        4,823,304
                                                     =============    =============
</TABLE>

See Notes to Consolidated Financial Statements.

                                                                               2

<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                       -----------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                                   (UNAUDITED)
                                   -----------

                                                SIX MONTHS ENDED DECEMBER 31,
                                               ------------------------------
                                                    2010             2009
                                               -------------    -------------

REVENUE
Equipment                                      $   5,585,002    $   6,500,176
Services                                           4,100,878        5,139,860
                                               -------------    -------------

Total Revenue:                                     9,685,880       11,640,036
                                               -------------    -------------

COST OF REVENUE
Equipment                                          4,681,044        5,212,504
Services                                           3,079,105        3,668,521

Total Cost of Revenue                              7,760,149        8,881,025
                                               -------------    -------------

Gross Profit                                       1,925,731        2,759,011

Selling, General and Administrative Expenses       2,472,552        2,636,971
                                               -------------    -------------

Operating (Loss)  Income                            (546,821)         122,040
                                               -------------    -------------

Interest Income                                        3,966            6,857
Interest Expense                                     (40,198)         (25,697)

Net (Loss) Income                              $    (583,053)         103,200
                                               =============    =============

Net (Loss) Income Per Common Share -
     Basic and Diluted                         $       (0.12)   $        0.02
                                               =============    =============

Weighted Average Common Shares Outstanding -
     Basic and Diluted                             4,823,304        4,823,304
                                               =============    =============

See Notes to Consolidated Financial Statements.

                                                                               3

<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                       -----------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                                   (UNAUDITED)
                                   -----------

                                                SIX MONTHS ENDED DECEMBER 31,
                                               ------------------------------
                                                    2010             2009
                                               -------------    -------------

OPERATING ACTIVITIES:
Net (Loss) Income                              $    (583,053)   $     103,200
                                               -------------    -------------
Adjustments to Reconcile Net Income to Net
   Cash:
Depreciation and Amortization                         28,319           41,389
Provision for Doubtful Accounts                       56,093          (91,128)

Changes in Assets and Liabilities:
(Increase) Decrease in:
Restricted Cash                                       (3,962)          (6,258)
Accounts Receivable                                  764,402          661,076
Inventory                                            163,646          122,440
Other Current Assets                                 (26,347)         (33,696)
Other Assets                                          (2,140)            (980)

Increase (Decrease) in:
Accounts Payable and Accrued Expenses                 13,693       (1,953,851)
Unearned Revenue                                      33,567         (214,591)

                                               -------------    -------------
Total Adjustments                              $   1,027,272    $  (1,475,601)
                                               -------------    -------------

NET CASH - OPERATING ACTIVITIES - FORWARD      $     444,218    $  (1,372,401)
                                               -------------    -------------

INVESTING ACTIVITIES:
Capital Expenditures                           $     (22,000)   $     (18,129)
                                               -------------    -------------

FINANCING ACTIVITIES -
Loans from Related Parties                           242,000               --
Lines of Credit - Net                          $    (952,777)   $     (28,731)
                                               -------------    -------------

NET (DECREASE) INCREASE IN CASH                $    (288,559)   $  (1,419,261)
                                               -------------    -------------

CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIODS                           $     318,377    $   1,654,366
                                               -------------    -------------

CASH AND CASH EQUIVALENTS AT
END OF PERIODS                                 $      29,818    $     235,103
                                               -------------    -------------

Supplemental Disclosures of Cash Flow
Information:

Cash paid during the period for:
Interest                                       $      40,198    $      27,554
Income Taxes                                   $          --    $          --

See Notes to Consolidated Financial Statements.

                                                                               4

<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

(1.)  BASIS OF PRESENTATION

      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 with the
      instructions to Form 10-Q and Article 8 of Regulation S-X. 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 only of normal recurring accruals) considered necessary in
      order to make the interim financials not misleading have been included.
      The operating results for the three months and six months ended December
      31, 2010 are not necessarily indicative of the results that can be
      expected for the year ending June 30, 2011.

      The balance sheet as of June 30, 2010 has been derived from the audited
      financial statements at such date, but does not include all of the
      information and footnotes required by accounting principles generally
      accepted in the United States of America for complete financial
      statements.

      The complete list of significant accounting policies followed by TransNet
      Corporation (the "Corporation") are set forth in Note 2 to the
      Corporation's consolidated financial statements in the Form 10-K for the
      fiscal year ended June 30, 2010.

      For further information, please refer to the consolidated financial
      statements and footnotes thereto included in the Corporation's Annual
      Report on Form 10-K for the year ended June 30, 2010.

      Certain reclassifications have been made to prior period financial
      statements to conform to the current year presentation.

(2.)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (a) Consolidation: The consolidated financial statements include the
      accounts of the Corporation and its wholly owned subsidiary, Century
      American Corporation. Intercompany transactions and accounts have been
      eliminated in consolidation.

      (b) Inventory: Inventory consists of finished goods. The Corporation's
      inventory is valued at the lower of cost (determined on the average cost
      basis) or market.

      (c) Cash and Cash Equivalents: The Corporation considers highly liquid
      debt instruments, purchased with a maturity of three months or less, to be
      cash equivalents.

      (d) Revenue Recognition: The Corporation's revenues are derived from both
      the sale of equipment and services provided to customers. Revenues related
      to equipment sales are recognized when evidence of an arrangement exists,
      delivery has occurred, the sales price is both fixed and determinable, and
      collectability is reasonably assured.

      Revenues related to services provided are recognized ratably over the term
      of the underlying customer contract or when obligations have been
      satisfied. For service performed on a time and materials basis, revenue is
      recognized upon performance.

      (e) Earnings Per Share: Earnings per common share - basic and diluted are
      based on 4,823,304 weighted shares outstanding for the three and six
      months ended December 31, 2010 and 2009. The options to purchase an
      aggregate of 297,500 shares of our common stock at a price of $0.88 per
      share were not included in the computation of diluted earnings per share
      for the periods ended December 31, 2010 and 2009 because the options'
      exercise price was greater than the average market price of the common
      shares.

                                                                               5

<PAGE>

(3.)  NEW ACCOUNTING UPDATES

      In October 2009, the FASB issued ASU No. 2009-13, "Revenue Recognition
      (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the
      FASB Emerging Issues Task Force)," which amends ASC 605-25, "Revenue
      Recognition: Multiple-Element Arrangements." ASU No. 2009-13 addresses how
      to determine whether an arrangement involving multiple deliverables
      contains more than one unit of accounting and how to allocate
      consideration to each unit of accounting in the arrangement. This ASU
      replaces all references to fair value as the measurement criteria with the
      term selling price and establishes a hierarchy for determining the selling
      price of a deliverable. ASU No. 2009-13 also eliminates the use of the
      residual value method for determining the allocation of arrangement
      consideration. Additionally, ASU No. 2009-13 requires expanded
      disclosures. The Corporation adopted this new accounting pronouncement for
      the quarterly period beginning July 1, 2010, as required, and adoption did
      not have a material impact on its financial statements taken as a whole.

      In January 2010, the FASB issued ASU No. 2010-06, "Improving Disclosures
      about Fair Value Measurements". The guidance in ASU 2010-06 provides
      amendments to literature on fair value measurements and disclosures
      currently within the ASC by clarifying certain existing disclosures and
      requiring new disclosures for the various classes of fair value
      measurements. ASU 2010-06 is effective for interim and annual periods
      beginning after December 15, 2009, except for the disclosures about
      purchases, sales, issuances, and settlements in the roll forward of
      activity in Level 3 fair value measurements, which are effective for
      fiscal years beginning after December 15, 2010, and for interim periods
      within those fiscal years. The adoption of this guidance is not expected
      to have a material impact on the Corporation's financial position or
      results of operations.

      In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310):
      "Disclosures about the Credit Quality of Financing Receivables and the
      Allowance for Credit Losses" ("ASU 2010-20"). The amendments in this
      update require additional disclosure about the credit quality of financing
      receivables, such as aging information and credit quality indicators. Both
      new and existing disclosures must be disaggregated by portfolio segment or
      class. The disaggregation of information is based on how allowances for
      credit losses are developed and how credit exposure is managed. ASU
      2010-20 is effective for interim periods and fiscal years ending after
      December 15, 2010. The adoption of this guidance is not expected to have a
      material impact on the Corporation's financial position or results of
      operations.

(4.)  FAIR VALUE MEASUREMENTS

      We adopted ASC Topic 820, "Fair Value Measurements and Disclosures" on
      July 1, 2008 for all financial assets and liabilities and nonfinancial
      assets and liabilities that are recognized or disclosed at fair value in
      the financial statements on a recurring basis (at least annually). Topic
      820 defines fair value, establishes a framework for measuring fair value,
      and expands disclosures about fair value measurements.

      Topic 820 defines fair value as the price that would be received upon sale
      of an asset or paid upon transfer of a liability in an orderly transaction
      between market participants at the measurement date and in the principal
      or most advantageous market for that asset or liability. The fair value
      should be calculated based on assumptions that market participants would
      use in pricing the asset or liability, not on assumptions specific to the
      entity. In addition, the fair value of liabilities should include
      consideration of non-performance risk including our own credit risk.

      In addition to defining fair value, Topic 820 expands the disclosure
      requirements around fair value and establishes a fair value hierarchy for
      valuation inputs. The hierarchy prioritizes the inputs into three levels
      based on the extent to which inputs used in measuring fair value are
      observable in the market. Each fair value measurement is reported in one
      of the three levels which is determined by the lowest level input that is
      significant to the fair value measurement in its entirety. These levels
      are:

            o     Level 1 - inputs are based upon unadjusted quoted prices for
                  identical instruments traded in active markets.

            o     Level 2 - inputs are based upon quoted prices for similar
                  instruments in active markets, quoted prices for identical or
                  similar instruments in markets that are not active, and
                  model-based valuation

                                                                               6

<PAGE>

                  techniques for which all significant assumptions are
                  observable in the market or can be corroborated by observable
                  market data for substantially the full term of the assets or
                  liabilities.

            o     Level 3 - inputs are generally unobservable and typically
                  reflect management's estimates of assumptions that market
                  participants would use in pricing the asset or liability. The
                  fair values are therefore determined using model-based
                  techniques that include option pricing models, discounted cash
                  flow models, and similar techniques.

The following table presents assets that are measured and recognized at fair
value on a recurring basis.

                               DECEMBER 31,
            DESCRIPTION           2010        LEVEL 1      LEVEL 2      LEVEL 3
            -----------        ------------   -------    -----------   ---------
      Certificate of Deposit   $    880,110   $    --    $   880,110   $      --

(5.)  DEBT

The Corporation utilizes credit available from multiple vendors under terms
which provide for interest free periods ranging from 30 to 60 days. A
significant portion of vendor credit is secured by certain of the Corporation's
assets. The vendors may in their sole discretion from time to time determine the
maximum amount of credit which they elect to extend. The Corporation entered
into a line of credit with a third party, which is secured by the Corporation's
certificate of deposit listed as restricted cash.

(6.)  RELATED PARTIES

Certain officers and directors have directly and indirectly loaned the
Corporation an aggregate amount of $292,000, as of December 31, 2010.
Additionally, an employee loan of $25,000 was also outstanding as of that date.
The loans are non-interest bearing and are payable upon demand.

(7.)  INCOME TAXES

      The following reconciles the tax provision with the U.S. statutory tax
      rates:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED DECEMBER 31,
                                                                        2010               2009
<S>                                                                 <C>               <C>
         Income taxes at U.S. statutory rate                              (35.0)%             (35.0)%
         State taxes, net of federal tax benefit                           (6.0)               (6.0)
         Change in valuation allowance on deferred tax assets              41.0                41.0
                                                                    -----------       -------------
         TOTAL EXPENSE (BENEFIT)                                              0%                  0%
                                                                    ===========       =============
</TABLE>

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED DECEMBER 31,
                                                                        2010               2009
<S>                                                                 <C>               <C>
         Income taxes at U.S. statutory rate                              (35.0)%             (35.0)%
         State taxes, net of federal tax benefit                           (6.0)               (6.0)
         Change in valuation allowance on deferred tax assets              41.0                41.0
                                                                    -----------       -------------
         TOTAL EXPENSE (BENEFIT)                                              0%                  0%
                                                                    ===========       =============
</TABLE>

      At June 30, 2010, the Corporation had federal net operating tax loss
      carryforwards of approximately $11.2 million, which will begin to expire
      on June 30, 2024. The Corporation has provided a full valuation allowance
      against its deferred tax asset due to the uncertainty about its
      realization.

                                                                               7

<PAGE>

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

SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS
Certain statements in Management's Discussion and Analysis ("MD&A"), other than
purely historical information, including estimates, projections, statements
relating to our business plans, objectives, and expected operating results, and
the assumptions upon which those statements are based, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements generally are
identified by the words "believe," "project," "expect," "anticipate,"
"estimate," "intend," "strategy," "plan," "may," "should," "will," "would,"
"will be," "will continue," "will likely result," and similar expressions
identify forward-looking statements, but are not the exclusive means of
identifying such statements and their absence does not mean that a statement is
not forward-looking. Forward-looking statements are based on current
expectations and assumptions that are subject to risks and uncertainties, which
may cause actual results to differ materially from the forward-looking
statements. Except as required by law, we undertake no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events, or otherwise.

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

For the quarter ended December 31, 2010, the Corporation reported revenues of
$3,660,632 as compared $5,775,086 for the quarter ended December 31, 2009. For
the quarter ended December 31, 2010, the Corporation reported a net loss of
$623,301 as compared to net income of $1,136 for the quarter ended December 31,
2009. The decrease in equipment revenues was attributable to reduced sales
resulting from delays in projects by certain clients as well as reduced demand
due to the continued economic slowdown. The decrease in service revenues,
discussed below, was primarily attributable to reduction in the Corporation's
legacy services, which were partially related to mergers and/or internal changes
within our clients' organizations. Revenues for the six-months ended December
31, 2010 were $9,685,880 as compared with $11,640,036 for the same period in the
prior year. The decrease of revenues during the December 2010 quarter overrode
the increase in the first quarter of fiscal 2011, and significantly impacted the
Corporation's operating results for fiscal 2011's six month period.

The losses for the quarter and six-month period ended December 31, 2010 were
attributable directly to the reduction in revenues. Although no assurance can be
given, Management notes that clients have indicated that delays of their
projects from the 2011 second quarter should be resolved in the third quarter.
These delays were outside the Corporation's control, and were dependent upon
clients' internal operations. As noted above, Service related revenues
(technical support, repair and maintenance, network integration, staffing, and
training) decreased as a result of termination of certain legacy services and
also as a result of reduction in equipment sales, project delays, and in
correlation to the mix of products sold. Because service revenues yield higher
profit margins than equipment sales, the reduction in service revenues reduced
our overall profit margin and significantly impacted our earnings. Revenues
continue to be affected by the general slowdown resulting from the recession,
including a significant reduction in purchases by state, and local governmental
agencies, and educational customers (K-12 through higher education)
(collectively "Public Sector" clients) and restrictions on capital expenditures
experienced by many clients. Expenses related to underutilized technical staff,
including higher-compensated engineers, were absorbed by the Corporation during
the quarter and this negatively impacted earnings.

During the first half of fiscal 2011, the Corporation's clients continued to be
conservative in their IT budgetary spending and to scrutinize their IT spending
and the related returns on investments before incurring new expenses. As a
result, Management concentrates on sales of higher margin equipment such as
Voice over Internet Protocol ("VoIP") systems and physical security systems,
optimizing the utilization rates of its service technicians, and reducing
selling and administrative expenses. Interest in physical security systems
marketed by TransNet continues to be strong, even in light of budgetary
restrictions of Public Sector clients. While no assurances can be given, we
believe that TransNet is well positioned in the State of New Jersey's purchasing
contracts for growth of our business with Public Sector clients and that sales
under these contracts will have a positive impact on results. TransNet is listed
by State selected manufacturers as an approved vendor for a significant number
of IT, communication, and security products pursuant to these contracts.

Changes in purchasing mechanisms enacted by the State of New Jersey in fiscal
2010 require certain purchases made by State entities be made directly from
manufacturers, which decreases our equipment sales revenue. Under this "agency
model," certain orders are processed directly by our hardware partners, who
receive purchase orders directly, and ship and invoice to our clients directly.
TransNet is paid an agency fee for generating the transaction.

                                                                               8

<PAGE>

Although these transactions lower the amount of revenue realized, they provide
payment of the fee within a shorter period than the typical payment period for
sales invoiced by the Corporation, and free our funding for other transactions.
Sales under this agency model were not a material source of revenues. Revenues
from these transactions are included in Service revenues. Cost of equipment sold
may be impacted by the Corporation's eligibility for temporary incentives, such
as rebates, offered by equipment manufacturers from time to time. The
Corporation's eligibility for the rebates is usually subject to minimum sales
levels and satisfaction of other criteria established by the manufacturers in
their sole discretion.

Service related revenues are a material portion of revenues and, as noted above,
are significant in their contributions to net income because these operations
typically yield a higher profit margin than equipment sales. Service revenues
are generated primarily by services including planning, design, configuration,
installation and implementation, testing, and optimization, often related to the
sale and implementation of VoIP networks. Project work is the major source of
service revenue generation and Management continues its focus on optimizing
utilization rates of its service technicians. Revenues are also generated by a
variety of support contracts for these networks which provide service and
support for the customer's personal computers, peripherals, and networks. These
contracts are short-term, and contain provisions which permit early termination.
Although the contracts generally contain renewal terms, there is no assurance
that such renewals will occur. Under these agreements, TransNet's Support Center
provides troubleshooting, diagnosis, and remedial services performed remotely by
skilled system engineers, who will be dispatched to perform on-site repairs, if
necessary. The agreements are for twelve months or less. In addition, our system
engineers and service technicians provide service and support on an on-call
basis.

Management believes that future spending will be subject to specific criteria,
but also believes that as single source provider, the Corporation is in a better
position to satisfy client demands for cost-effectiveness and a suitable return
on investment. The VoIP systems and solutions marketed by TransNet are designed
with the capacity for "optimization" through the subsequent addition of layers
of solutions, for example, security solutions, paving the way to future business
from existing customers. The Corporation reviews and modifies its service
offerings in response to industry fluctuations, and has recruited experienced
and specially certified systems engineers and project managers to respond to
increased VoIP projects. We are confident that our strategy of being an advanced
solutions provider will result in future revenues from clients' optimization of
already installed networks, providing clients with greater operating
efficiencies.

In addition to these technical services, TransNet provides temporary and
permanent IT staffing and consulting services. Our staffing services are not a
material source of revenues, but these services carry higher profit margins than
equipment sales. Despite the economic slowdown, businesses continue to be faced
with special projects to perform required upgrades, repairs, and replacement of
their networks despite the recession and demand for our services increased.
Because employers are reluctant to expand their own workforce in light of the
recession, TransNet's staffing operations experienced a strong demand for
temporary IT support specialists. Revenues generated by our staffing operations
continue to improve in conjunction with the demand for temporary employees.
Although no assurances can be given, we believe that as the economy recovers and
businesses begin to increase the number of employees, revenues and profits from
our staffing services will be positively affected.

Our clients continued to be conservative in their IT budgetary spending and to
scrutinize budgets and returns on investments. In conjunction with attention on
utilization rates of our service technicians, Management monitors and takes
steps to monitor selling, general and administrative expenses in an effort to
contain expenses as much as possible.

In addition to the challenging economic environment, the IT industry experiences
a continuing trend of decreasing prices of equipment. Management believes that
this trend will continue. Industry-wide, the result of price erosion has been
lower profit margins on sales, which require businesses to sell a greater volume
of equipment to maintain past earning levels. Another result of the price
decreases has been intensified competition within the industry, including the
consolidation of businesses through merger or acquisition, as well as the
increased initiation of sales by certain manufacturers directly to the end-user
and the entrance of manufacturers into technical services business. Management
believes that the adoption of policies by many larger corporate customers, which
limit the number of vendors permitted to provide goods and services for
specified periods of time, has further increased price competition.

To meet these competitive challenges and to maximize the Corporation's profit
margin, Management has modified its marketing strategy and has taken steps to
reduce expenses. We have also developed new service offerings that take into
account clients' cost constraints. We modified our service offerings in response
to industry fluctuations,

                                                                               9

<PAGE>

and employ experienced and specially certified systems engineers and project
managers to respond to VoIP projects. We believe our focus upon higher margin
services related to VoIP/IP Telephony and physical security will lead to growth
and opportunities for the Corporation. Our goal is to increase our profit
margins further as we focus on higher-end products and services flowing from
security, communications, and data center management. The complex products and
services not only are higher-margined items, but are also of pressing importance
to our clients.

Management also utilizes approaches such as manufacturers' direct shipment as a
means to reduce equipment related overhead costs which increases profits. Our
marketing strategy focuses upon provision of technical services and sales of
lower revenue/higher profit margin products related to service and support
operations. We target commercial and public sector customers who provide
marketplaces for a wide range of products and services at one time, a
cost-effective approach to sales. These customers often do not have their own
technical staffs and outsource their computer service requirements to companies
such as TransNet. In light of the above, Management emphasizes and continues the
aggressive pursuit of an increased volume of sales of VoIP systems, and related
technical service and support programs, and has introduced new technical support
programs offering a wide variety of alternatives of remote and on-site network
support and monitoring.

The Corporation's performance is also impacted by other factors, many of which
are not within its control. These factors include: industry and general economic
conditions; availability of credit; the short-term nature of client's
commitments; patterns of capital spending by clients; the timing and size of new
projects; pricing changes in response to competitive factors; the availability
and related costs of qualified technical personnel; timing and customer
acceptance of new product and service offerings; trends in IT outsourcing; and
product constraints.

Management continues its aggressive steps initiated in fiscal 2010 to
significantly reduce selling, general and administrative expenses and to adjust
the allocation of personnel to increase the number of employees providing
billable services. We significantly decreased our actual expenses through a
number of staff reductions, and implementation of salary freezes, salary
reductions, and other cost reduction programs. The results of these cost-saving
measures will be realized more fully going forward. We anticipate that selling,
general, and administrative expenses for fiscal 2011 will be approximately 10%
less than the prior year. Selling, general and administrative expenses for the
quarter ended December 31, 2010, decreased in actual figures, but increased as a
percentage of revenues as a result of the lower revenue figures, moving to 34%
of revenues as compared to 23% of revenues for the comparative quarter in the
prior year, and representing 26% of revenues for the first six months of fiscal
2011 as compared to 23% for the same period last year. Management continues its
efforts to monitor and control expenses, despite increasing personnel related
costs, such as health benefits.

Interest income decreased in the quarter and six-month period ended December 31,
2011 as compared to the same periods in the prior year as a result of lower
amounts invested. Interest expense increased in the periods ended December 31,
2010, due to increased borrowing to fund equipment sales. The Corporation
utilizes vendor credit options, which provide more favorable terms.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

There are no material commitments of the Corporation's capital resources, other
than leases, a third party line of credit, and employment contracts.

Cash and cash equivalents decreased during the six-month period ended December
31, 2010, as cash was used to fund operations. Cash levels continue to be
impacted by the slow payment cycles of Public Sector clients and extended
payment cycles from some commercial clients, many of whom are affected by the
economic recession. The Corporation has entered into vendor credit arrangements
to assist in purchasing inventory and provide more flexibility with respect to
cash. A significant portion of the vendor credit is secured by certain of the
Corporation's assets.

The amount of cash received from or used by operating activities will vary based
on a number of business factors which may vary at different times, including
terms of available financing from vendors, and slowdowns or upturns in our
business or that of our customers. A decline in service revenues and/or a change
in the proportion of service revenues to total revenues may affect operating
cash flow as the bulk of the Corporation's service revenues are derived from
billing of our technical staff's services. The cash outlay for the labor/payroll
underlying these services is incurred on a semi-monthly basis. Billing is
determined by timeframes set by our clients. Additionally, the

                                                                              10

<PAGE>

Corporation at times may absorb costs related to downtime of a portion of our
technical staff which may result from any slowdown of new business or downtime
between projects.

Accounts receivable decreased for the six-month period ended December 31, 2010
as a result of reduced revenues. Accounts receivable continue to be impacted by
the timing of our collection of accounts receivable. The payment cycle is a
significant factor in our cash flow to fund operations. Products and are
typically sold on short-term credit terms, but may also include extended terms
under such projects as E-rate projects. These projects are funded by the Schools
and Libraries Program of the Universal Service Fund, commonly known as "E-Rate,"
which is administered by the Universal Service Administrative Company (USAC)
under the direction of the Federal Communications Commission (FCC). E-Rate
provides discounts to assist most schools and libraries in the United States to
obtain affordable telecommunications and Internet access. Extended payment
cycles of commercial customers and governmental agencies continue to affect our
accounts receivable levels. Accordingly, Management vigorously continues its
efforts to expedite payments from the governmental bodies and is working to
implement more favorable payment schedules where possible. Management notes that
payment terms with governmental clients are usually dictated by the client.

Inventories decreased in fiscal 2011 quarter due to reduced demand for
equipment. The increase in accounts payable during the quarter ended December
31, 2010 is attributable to lower cash levels. Amounts outstanding under the
line of credit decreased as a result of payments made on these lines.

We require access to working capital from a third party line of credit and
vendor credit to fund our day-to-day operations, particularly at the end of our
fiscal quarters when demand for our products and services increase. We have made
a concerted effort to improve our working capital position and implemented
measures to reduce headcount, streamline operations, and manage costs in
response to the impact of the recession. In conjunction with the tightening of
credit in the US economy, which has negatively impacted our access to credit,
management has reviewed the Corporation's line of credit and available vendor
credit and has taken steps to obtain the most favorable credit arrangements
available. Management currently utilizes various vendor credit options, all of
which provide the Corporation with more favorable payment terms than those
available under the prior credit line. Management has assisted the Corporation's
cash flow due to extended payment cycles of certain clients, and believes that
its cash balance and access to credit will be sufficient to fund its operations
going forward. The unavailability of such credit going forward may have an
adverse impact upon the operations of the Corporation.

IMPACT OF INFLATION

The effects of inflation on our operations were not significant during the
periods presented.

CRITICAL ACCOUNTING POLICIES
----------------------------

The Corporation's financial statements are prepared in accordance with
accounting principles that are generally accepted in the United States. The
methods, estimates, and judgments used in applying these most critical
accounting policies have a significant impact on the results reported in the
financial statements. The Securities and Exchange Commission has defined
critical accounting policies as policies that involve critical accounting
estimates that require (a) management to make assumptions that are highly
uncertain at the time the estimate is made and (b) different estimates that
could have been reasonably used for the current period, or changes in the
estimates that are reasonably likely to occur from period to period, which would
have a material impact on the presentation of our financial condition, changes
in financial condition or in result of operations. Based on this definition, the
most critical policies include: revenue recognition, allowance for doubtful
accounts, and valuation of deferred tax assets.

INVESTMENT CONSIDERATIONS AND UNCERTAINTIES
THE MATTERS DISCUSSED IN MANAGEMENT'S DISCUSSION AND ANALYSIS AND THROUGHOUT
THIS REPORT THAT ARE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT MANAGEMENT
EXPECTATIONS THAT INVOLVE RISK AND UNCERTAINTIES. POTENTIAL RISKS AND
UNCERTAINTIES INCLUDE, WITHOUT LIMITATION: THE IMPACT OF ECONOMIC CONDITIONS
GENERALLY AND IN THE INDUSTRY FOR IT PRODUCTS AND SERVICES; DEPENDENCE ON KEY
VENDORS AND CUSTOMERS; CONTINUED COMPETITIVE AND PRICING PRESSURES IN THE
INDUSTRY; PRODUCT SUPPLY SHORTAGES; OPEN-SOURCING OF PRODUCTS OF VENDORS,
INCLUDING DIRECT SALES BY MANUFACTURERS; RAPID PRODUCT IMPROVEMENT AND
TECHNOLOGICAL CHANGE, SHORT PRODUCT LIFE CYCLES AND RESULTING OBSOLESCENCE
RISKS; TECHNOLOGICAL DEVELOPMENTS; CAPITAL AND FINANCING AVAILABILITY; AND OTHER
RISKS SET FORTH HEREIN.

                                                                              11

<PAGE>

ITEM 4.  CONTROL AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of the Corporation have
concluded, based on their evaluation as of December 31, 2010, that the
Corporation's disclosure controls and procedures are not effective to ensure
that information required to be disclosed by the Corporation in the reports
filed or submitted by it under the Securities Exchange Act of 1934, as amended
(the "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 the
Corporation in such reports is accumulated and communicated to the Corporation's
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

In light of this conclusion, the Corporation has initiated documentation of its
policies and procedures, and will institute compensating procedures and
processes as necessary to ensure the reliability of its financial reporting.
Management intends to remediate weaknesses in the control environment through
new resources and processes in its accounting department. Management believes
that its actions will continue to improve the Corporation's internal control
over financial reporting, as well as its disclosure controls and procedures.

There were no significant changes in the Corporation's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation. The Corporation has commenced a review by its internal
staff, including its accounting staff, of new processes to provide an evaluation
of the level of controls and related procedures currently in place for each
process.

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<PAGE>

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

ITEM  6: EXHIBITS AND REPORTS ON FORM 8-K

         A. Exhibits -
            31.1 Certification required by Section 302
            31.2 Certification required by Section 302
            32 Certification required by Section 906

         B. Reports on Form 8-K -
             None.

                                   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.

                              TRANSNET CORPORATION
                              (Registrant)

                              /s/ Steven J. Wilk
                              --------------------------------------
                              Steven J. Wilk, President and
                              Chief Executive Officer

                              /s/ John J. Wilk
                              --------------------------------------
                              John J. Wilk,
                              Principal Financial and Accounting Officer
                              And Chairman of the Board of Directors

DATE:  February 22, 2011

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