UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended September 30, 2010





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





For the
transition period from ____________ to_________________





Commission
file number 000-51108





Net Element,
Inc.


(Exact
name of registrant as specified in its charter)





Delaware


(State or other jurisdiction of incorporation or organization)





20-0715816


(IRS Employer Identification
No.)





1450 S.
Miami Avenue


Miami, FL
33130


(Address
of principal executive offices)





(305)
358-7877


(Registrant’s
telephone number, including area code)






12100 NE
16th Avenue


Suite
210


North Miami, FL
33161


(Former
name, former address and former fiscal year, if changed since last
report)





(Registrant’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. Yes x No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes (not required) x No  ̈





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





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





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





The
number of outstanding shares of common stock, $.001 par value, of the registrant
as of November12, 2010 was 333,056,277.





Defined
Terms





Net
Element, Inc. (formerly TOT Energy, Inc.) is a corporation organized under the
laws of the State of Delaware. As used in this Quarterly Report on Form 10-Q
(this “Report”), unless the context otherwise requires, the terms “Net Element,”
“Company,” “we,” “us,” “our” and “group” refer to Net Element, Inc. and, as
applicable, its majority-owned and consolidated subsidiaries.





Forward-Looking
Statements




This
Report contains forward-looking statements that reflect the current views of our
management with respect to future events. Forward-looking statements generally
are identified by the words “expects,” “anticipates,” “believes,” “intends,”
“estimates,” “aims,” “plans,” “will,” “will continue,” “seeks” and similar
expressions. Forward-looking statements are based on current plans, estimates
and projections, and therefore you should not place too much reliance on them.
Forward-looking statements speak only as of the date they are made, and we
undertake no obligation to update any forward-looking statement in light of new
information or future events, although we intend to continue to meet our ongoing
disclosure obligations under the U.S. securities laws and under other applicable
laws. Forward-looking statements involve inherent risks and uncertainties, most
of which are difficult to predict and are generally beyond our control. We
caution you that a number of important factors could cause actual results or
outcomes to differ materially from those expressed in, or implied by, the
forward-looking statements. These factors include, among other factors: the
development or acquisition of an operating business, attracting and retaining
competent management and other personnel, successful implementation of our
business strategy, and successful integration and promotion of any business
developed or acquired.  If these or other risks and uncertainties
(including those described in our most recent Annual Report on Form 10-K
for the fiscal year ended March 31, 2010 filed with the U.S. Securities and
Exchange Commission) materialize, or if the assumptions underlying any of these
statements prove incorrect, our actual results may be materially different from
those expressed or implied by such statements.




World
Wide Web addresses contained in this registration statement are for explanatory
purposes only and they (and the content contained therein) do not form a part of
and are not incorporated by reference into this registration
statement.







Net
Element, Inc.


Form
10-Q


For
the Quarter Ended September 30, 2010


INDEX




PageNo.PART
      I — FINANCIAL INFORMATIONItem
      1.
                
                Financial
      Statements
                
                3UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS – AS OF SEPTEMBER 30, 2010 AND
      MARCH 31, 2010
                
                3UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – FOR THE THREE AND
      SIX MONTHS ENDED SEPTEMBER 30, 2010 and 2009
                
                4UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – FOR THE SIX MONTHS
      ENDED SEPTEMBER 30, 2010 and 2009
                
                5Notes
      to Unaudited Condensed Consolidated Financial Statements
                
                6Item
      2.
                
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                
                14Item 4T.
                
                Controls
      and Procedures
                
                20PART
      II — OTHER INFORMATIONItem
      1.
                
                Legal
      Proceedings
                
                21Item
      2.
                
                Unregistered
      Sales of Equity Securities
                
                21Item
      6.
                
                Exhibits
                
                23Signatures
                
                26




2





PART I —
FINANCIAL INFORMATION





Item 1.
Financial Statements.





NET
ELEMENT, INC.


UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS




September 30, 2010
                                          
                                          
                                          March 31, 2010ASSETSCurrent
      assetsCash
                                          
                                          $
                                          98,364
                                          
                                          
                                          $
                                          277,830Deposits
                                          
                                          
                                          8,000
                                          
                                          
                                          
                                          8,000Prepaid
      expenses and other assets
                                          
                                          
                                          -
                                          
                                          
                                          
                                          20,152Total
      current assets
                                          
                                          
                                          106,364
                                          
                                          
                                          
                                          305,982Fixed
      assetsMachinery
      and equipment
                                          
                                          
                                          12,319
                                          
                                          
                                          
                                          12,319Less:
      accumulated depreciation
                                          
                                          
                                          (6,040
                                          )
                                          
                                          
                                          (5,530
                                          )Total
      fixed assets (net)
                                          
                                          
                                          6,279
                                          
                                          
                                          
                                          6,789Total
      assets
                                          
                                          $
                                          112,643
                                          
                                          
                                          $
                                          312,771LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilitiesAccounts
      payable
                                          
                                          $
                                          26,867
                                          
                                          
                                          $
                                          23,702Accrued
      expenses
                                          
                                          
                                          1,170,879
                                          
                                          
                                          
                                          920,559Total
      current liabilities
                                          
                                          
                                          1,197,746
                                          
                                          
                                          
                                          944,261COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICITPreferred
      stock ($.001 par value, 100,000,000 shares authorized and no shares issued
      and outstanding)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Common
      stock ($.001 par value, 800,000,000 shares authorized and 333,056,277 and
      320,778,512 shares issued and outstanding)
                                          
                                          
                                          333,055
                                          
                                          
                                          
                                          320,778Treasury
      stock, at cost; 6,250,000 and 3,250,000 shares
                                          
                                          
                                          (2,641,640
                                          )
                                          
                                          
                                          (2,341,640
                                          )Paid
      in capital
                                          
                                          
                                          26,098,149
                                          
                                          
                                          
                                          24,671,186Accumulated
      other comprehensive income
                                          
                                          
                                          13,930
                                          
                                          
                                          
                                          9,972Accumulated
      deficit
                                          
                                          
                                          (24,916,539
                                          )
                                          
                                          
                                          (23,319,787
                                          )Noncontrolling
      interest
                                          
                                          
                                          27,942
                                          
                                          
                                          
                                          28,001Total
      stockholders' deficit
                                          
                                          
                                          (1,085,103
                                          )
                                          
                                          
                                          (631,490
                                          )Total
      liabilities and stockholders' deficit
                                          
                                          $
                                          112,643
                                          
                                          
                                          $
                                          312,771




See
accompanying notes.


3




NET
ELEMENT, INC.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS




Three
      Months Ended
                                                              September
      30, 2010
                                                            
                                                            
                                                            Three
      Months Ended
                                                              September
      30, 2009
                                                            
                                                            
                                                            Six
      Months Ended
                                                              September
      30, 2010
                                                            
                                                            
                                                            Six
      Months Ended
                                                              September
      30, 2009Sales
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -Cost
      of sales
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Gross
      Profit
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Operating
      ExpensesGeneral
      and administrative
                                                            
                                                            
                                                            208,482
                                                            
                                                            
                                                            
                                                            2,313,588
                                                            
                                                            
                                                            
                                                            1,596,815
                                                            
                                                            
                                                            
                                                            3,902,167Loss
      from operations
                                                            
                                                            
                                                            (208,482
                                                            )
                                                            
                                                            
                                                            (2,313,588
                                                            )
                                                            
                                                            
                                                            (1,596,815
                                                            )
                                                            
                                                            
                                                            (3,902,167
                                                            )Non-operating
      expenseOther
      income (expense)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Loss
      before income tax provision
                                                            
                                                            
                                                            (208,482
                                                            )
                                                            
                                                            
                                                            (2,313,588
                                                            )
                                                            
                                                            
                                                            (1,596,815
                                                            )
                                                            
                                                            
                                                            (3,902,167
                                                            )Income
      tax provision
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Net
      Loss from continuing operations
                                                            
                                                            
                                                            (208,482
                                                            )
                                                            
                                                            
                                                            (2,313,588
                                                            )
                                                            
                                                            
                                                            (1,596,815
                                                            )
                                                            
                                                            
                                                            (3,902,167
                                                            )Net
      loss attributable to the noncontrolling interest
                                                            
                                                            
                                                            30
                                                            
                                                            
                                                            
                                                            25
                                                            
                                                            
                                                            
                                                            59
                                                            
                                                            
                                                            
                                                            39Net
      loss from discontinued operations
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (159,025
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (196,299
                                                            )Net
      loss
                                                            
                                                            
                                                            (208,452
                                                            )
                                                            
                                                            
                                                            (2,472,588
                                                            )
                                                            
                                                            
                                                            (1,596,756
                                                            )
                                                            
                                                            
                                                            (4,098,427
                                                            )Other
      comprehensive incomeForeign
      currency translation loss
                                                            
                                                            
                                                            12,700
                                                            
                                                            
                                                            
                                                            6,119
                                                            
                                                            
                                                            
                                                            3,958
                                                            
                                                            
                                                            
                                                            (1,292
                                                            )Comprehensive
      loss
                                                            
                                                            $
                                                            (195,752
                                                            )
                                                            
                                                            $
                                                            (2,466,469
                                                            )
                                                            
                                                            $
                                                            (1,592,798
                                                            )
                                                            
                                                            $
                                                            (4,099,719
                                                            )Net
      loss per share from continuing operations - basic and
    diluted
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.01
                                                            )
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.01
                                                            )Net
      loss per share from discontinued operations - basic and
      diluted
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.00
                                                            )Net
      loss per share - basic and diluted
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.01
                                                            )
                                                            
                                                            $
                                                            (0.00
                                                            )
                                                            
                                                            $
                                                            (0.01
                                                            )Weighted
      average number of common shares outstanding - basic and
      diluted
                                                            
                                                            
                                                            330,840,721
                                                            
                                                            
                                                            
                                                            305,370,458
                                                            
                                                            
                                                            
                                                            325,865,379
                                                            
                                                            
                                                            
                                                            303,323,673





See
accompanying notes.


4




NET
ELEMENT, INC.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS




Six
      Months
                                                                        Ended
                                                                        September
      30, 2010
                                                                      
                                                                      
                                                                      Six
      Months
                                                                        Ended
                                                                        September
      30, 2009Cash
      flows from operating activities:Net
      loss
                                                                      
                                                                      $
                                                                      (1,596,756
                                                                      )
                                                                      
                                                                      $
                                                                      (4,098,427
                                                                      )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
                                                                      
                                                                      
                                                                      510
                                                                      
                                                                      
                                                                      
                                                                      510Decrease
      in noncontrolling interests
                                                                      
                                                                      
                                                                      (59
                                                                      )
                                                                      
                                                                      
                                                                      (39
                                                                      )Share
      based compensation
                                                                      
                                                                      
                                                                      1,193,685
                                                                      
                                                                      
                                                                      
                                                                      3,434,223Loss
      from discontinued operations
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      196,299Changes
      in assets and liabilities, net of acquistions and the effect of
      consolidation of equity affiliates:Prepaid
      expenses
                                                                      
                                                                      
                                                                      20,152
                                                                      
                                                                      
                                                                      
                                                                      (9,718
                                                                      )Deposits
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      (2,000
                                                                      )Accounts
      payable
                                                                      
                                                                      
                                                                      3,169
                                                                      
                                                                      
                                                                      
                                                                      (2,182
                                                                      )Accrued
      expenses
                                                                      
                                                                      
                                                                      250,320
                                                                      
                                                                      
                                                                      
                                                                      289,139Total
      adjustments
                                                                      
                                                                      
                                                                      1,467,777
                                                                      
                                                                      
                                                                      
                                                                      3,906,232Net
      cash used in operating activities of continuing operations
                                                                      
                                                                      
                                                                      (128,979
                                                                      )
                                                                      
                                                                      
                                                                      (192,195
                                                                      )Net
      cash from investing activities of continuing operations
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -Cash
      flows from financing activities:Repurchase
      of common stock
                                                                      
                                                                      
                                                                      (300,000
                                                                      )
                                                                      
                                                                      
                                                                      -Contributed
      capital from equity investors
                                                                      
                                                                      
                                                                      245,555
                                                                      
                                                                      
                                                                      
                                                                      189,466Net
      cash (used in) provided by financing activities of continuing
      operations
                                                                      
                                                                      
                                                                      (54,445
                                                                      )
                                                                      
                                                                      
                                                                      189,466Cash
      Flows from discontinued operationsNet
      cash used in discontinued operations
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -Effect
      of exchange rate changes on cash
                                                                      
                                                                      
                                                                      3,958
                                                                      
                                                                      
                                                                      
                                                                      (1,292
                                                                      )Net
      decrease in cash
                                                                      
                                                                      
                                                                      (179,466
                                                                      )
                                                                      
                                                                      
                                                                      (4,021
                                                                      )Cash
      at beginning of period
                                                                      
                                                                      
                                                                      277,830
                                                                      
                                                                      
                                                                      
                                                                      99,971Cash
      at end of period
                                                                      
                                                                      $
                                                                      98,364
                                                                      
                                                                      
                                                                      $
                                                                      95,950Supplemental
      Disclosure of Cash Flow InformationCash
      paid during the year for:Interest
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      -Income
      taxes
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      -Non-cash
      investing and financing activities:Common
      stock issued pursuant to subscription agreement
                                                                      
                                                                      $
                                                                      1,176,741
                                                                      
                                                                      
                                                                      $
                                                                      3,341,393





See
accompanying notes.


5




NET
ELEMENT, INC.





NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization
and Basis of Presentation





Net
Element, Inc. (the “Company”), formerly TOT Energy, Inc., was organized on
February 6, 2004 under the laws of the State of Delaware under the name Splinex
Technology, Inc., which was a wholly-owned subsidiary of Splinex, LLC, a Florida
limited liability company, and was the surviving entity pursuant to a merger
with Ener1 Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of Ener1, Inc., a Florida corporation. The Company initially intended to develop
advanced technologies in the three-dimensional or 3D computer graphics industry.
Under an agreement effective April 1, 2004 (the “Contribution Agreement”),
Splinex, LLC contributed substantially all of its assets, liabilities and
operations to the Company.





On
December 17, 2007, (1) certain holders, who had received shares in the Company
as distributions from Splinex LLC, transferred their ownership of 35,162,334
shares of common stock of the Company to Splinex LLC for nominal consideration,
and (2) Bzinfin, S.A., a British Virgin Islands limited corporation (indirectly
owned by an affiliate of Ener1 Group, Inc., a Florida company of which Mike Zoi
(our current Chairman and Chief Executive Officer) is a shareholder and director
and which is the majority shareholder of Ener1, Inc.) and Ener1 Group assigned
debt obligations of the Company to Splinex LLC in the amount of $2,805,207 and
$845,864, respectively. Under a Purchase Agreement dated December 17, 2007, TGR
Capital, LLC (which changed its name to Enerfund, LLC in September 2008), a
Florida limited liability company (“Enerfund”), which is wholly-owned by Mike
Zoi, acquired all of the membership interests in Splinex LLC, thereby giving
Enerfund control of Splinex LLC.




Under an
Exchange Agreement dated December 18, 2007, the Company agreed to issue
113,500,000 newly issued shares of the Company to Splinex LLC of which 8,500,000
shares were issued to Bzinfin and 2,125,000 were issued to a former affiliate of
Splinex, LLC. Splinex LLC owned 98,157,334 shares of the Company as of December
17, 2007 and an aggregate of 201,032,334 shares after the completion of the
Exchange Agreement on December 18, 2007. The Company had 100,757,769 shares
outstanding at December 17, 2007 and 214,257,769 shares outstanding after the
completion of the Exchange Agreement. In June 2008, Splinex, LLC changed its
name to TGR Energy, LLC (“TGR”).




On July
16, 2008, we entered into a Joint Venture Agreement (the “JV Agreement”) with
Evgeny Bogorad (“Bogorad”), owner of Sibburnefteservis, Ltd. of Novosibirsk,
Russia, an oil services company (“SIBBNS”). Pursuant to the JV Agreement,
Bogorad contributed certain of SIBBNS’ assets and personnel to a joint venture
company named TOT-SIBBNS, Ltd., a Russian corporation (“TOT-SIBBNS”). An
independent appraisal company appraised the contributed assets at
USD$6,221,881.We ended development stage activity on July 16, 2008 when we
acquired a 75% interest in the TOT-SIBBNS joint venture and began operations in
the oil and gas service industry, including the exploration, development,
production, and marketing of crude oil and natural gas in Russia and
Kazakhstan.  At the closing on July 16, 2008, we issued to Bogorad
3,000,000 shares of our common stock in exchange for a 75% interest in
TOT-SIBBNS.





TOT-SIBBNS
obtained its first contract and began drilling operations in the Fall 2008.
However, financial constraints and the declining price of oil resulted in a
suspension of drilling operation in January 2009. Drilling operations did not
recommence during the Winter 2009 and most employees were furloughed in April
2009.





TOT-SIBBNS
had expectations of continuing exploratory drilling (both through its existing
customer and new customers) for the 2009/2010 drilling season as the price of
oil had risen significantly and TOT-SIBBNS was able to secure an additional
drilling contract in November 2009. However, in January 2010, it became
questionable whether activities with TOT-SIBBNS’ initial customer would
recommence in the short term, and there remained uneasiness in the market over
the continued improvement in crude oil prices, which had a negative impact on
the exploratory drilling market in Russia at that time.  Accordingly,
on January 27, 2010, after several weeks of exploring other business
opportunities, the Company altered its business focus and decided to exercise
its option to unwind the joint venture and pursue other development
opportunities.


6




The
Company and TOT-SIBBNS executed an unwind agreement whereby the Company
exchanged its 75% interest in TOT-SIBBNS for the 3,000,000 shares given to
Evgeny Bogorad in 2008. The unwind of the joint venture was consummated as
of March 31, 2010. The unwind of the TOT-SIBBNS joint venture has been
accounted for using the guidance provided in ASC 845 (previously APB 29), as a
disposal “other than by sale” similar to a spin-off transaction, with the shares
received reflected as treasury stock and recorded on the Company’s balance sheet
at its carrying basis in the net assets of the joint venture as of March 31,
2010. Operations of TOT-SIBBNS are included in the Company’s consolidated
financial statements until March 31, 2010 as discontinued operations, but are
not included in the consolidated financial statements subsequent to March 31,
2010.  For more information relating to the unwind of the TOT-SIBBNS
joint venture, see Note 8.





From
April 1, 2010 through the date hereof, we have engaged in the development of an
alternative energy services business and we have concurrently pursued a strategy
to develop and/or acquire technology and applications for use in the online
media industry. During September 2010, we changed our name to Net Element, Inc.
in furtherance of our shift in business focus.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission for reporting on Form 10-Q. Accordingly,
certain information and footnotes required for complete financial statements are
not included herein. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of
the results for the interim periods presented have been included. These results
have been determined on the basis of generally accepted accounting principles
and practices applied consistently with those used in the preparation of the
Company's Annual Financial Statements for the year ended March 31, 2010.
Operating results for the six months ended September 30, 2010 are not
necessarily indicative of the results that may be expected for any particular
quarterly period or the year ending March 31, 2011. It is recommended that the
accompanying condensed consolidated financial statements be read in conjunction
with the financial statements and notes for the year ended March 31, 2010
included in the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission.





Basis of
Consolidation





The
interim financial statements include the accounts of Net Element, Inc. and the
accounts of our 51% joint venture, Korlea-TOT, a limited liability company
formed under the laws of the Czech Republic. All material intercompany accounts
and transactions have been eliminated in this consolidation.





Business
Activity





In
pursuing our strategy to further develop an online media company, from time to
time, we may be engaged in various discussions to acquire businesses or
formulate joint venture or other arrangements. Our policy is not to disclose
discussions or potential transactions until definitive agreements have been
executed. Where appropriate, acquisitions will be financed with equity shares
and this may result in substantial dilution to existing
stockholders.  In addition, we continue to develop an alternative
energy solar business concentrating on commercial solar installations and other
energy offerings.





KORLEA-TOT is our 51% joint venture
with Korlea Invest Holding AG of Switzerland (“Korlea”) who is a provider and
trader of electricity in the Czech Republic. Korlea-TOT, established in July
2008, was expected to assist in the marketing of oil assets sourced by the
Company and its contacts and affiliates. There has been no activity to date with
this joint venture and the Company is currently negotiating to unwind the joint
venture. For more information, see Note 4.


7





Use of
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 disclosures of contingent assets and liabilities as of the
balance sheet date and the reported amounts of expenses for the period
presented. Actual results could differ from those estimates.





Cash and
Cash Equivalents





Cash and
cash equivalents include highly liquid money market investments purchased with
an original maturity of three months or less. At September 30, 2010 and March
31, 2010, the Company had no cash equivalents. The Company maintains its U.S.
Dollar-denominated cash in a bank deposit account, the balance of which, at
times, may exceed federally insured limits. Bank accounts in the United States
are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to a
limit of $250,000.  At September 30, 2010 and March 31, 2010, our balances
did not exceed the FDIC limit.





The
Company also maintains a bank account in Czech Republic and at September 30,
2010 and March 31, 2010, the balances were $87,846 and $84,009,
respectively.  The Czech Republic bank balances are not insured and there
is risk of loss in the event the bank should fail.





Foreign
Currency Transactions





The
Company’s primary operations were formerly conducted outside the United States
and we used foreign currencies to operate our consolidated foreign subsidiaries.
Quarterly income and expense items are translated into U.S. dollars using the
average interbank rate for the three-month period. Assets and liabilities are
translated into U.S. dollars using the interbank rate as of the balance sheet
date. Equity items are translated at their historical rate. The Company does not
engage in any currency hedging activities.





Net Loss
Per Share





Basic net
loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted-average number of common shares outstanding during
the period. Diluted net loss per common share is determined using the
weighted-average number of common shares outstanding during the period, adjusted
for the dilutive effect of common stock equivalents, consisting of shares
issuable upon exercise of common stock options or warrants. In periods when
losses are reported, the weighted-average number of common shares outstanding
excludes common stock equivalents because their inclusion would be
anti-dilutive.





The
Company did not issue any new options for the three and six months ended
September 30, 2010, but recorded a compensation expense of $8,519 and $16,945,
respectively, for previously granted options that vested during the three and
six month periods ended September 30, 2010.  During the quarter ended
September 30, 2010, the Company issued 2,240,450 shares of common stock and
warrants to purchase 1,120,225 shares of common stock in exchange for $44,809
pursuant to the terms of its Subscription Agreement with TGR Energy, LLC (see
Notes 6 and 7).





At
September 30, 2010, the Company had outstanding vested stock options to purchase
920,370 shares of common stock and warrants to purchase 55,595,307 shares of
common stock.  For the three months ended September 30, 2010, these
securities are excluded from the earnings per share calculation because their
inclusion would be anti-dilutive.





Fair
Value of Financial Instruments





The
Company’s financial instruments consist mainly of cash deposits, short-term
payables and related party payables. The Company believes that the carrying
amounts of third-party financial instruments approximate fair value, due to
their short-term maturities and the related party payables are interest bearing
and payable on demand.


8





NOTE 2.
GOING CONCERN CONSIDERATIONS





The
Company’s financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company was in the
development stage until the second quarter of 2008 and has had minimal revenues
since Inception. Since the unwind of the TOT-SIBBNS joint venture effective
March 31, 2010, the Company has had no significant operations and may again be
considered a development stage company. The Company intends to focus on
developing or acquiring technology and applications for use in the on-line media
industry and continues to develop an alternative energy solar business
concentrating on commercial solar installations.  Management recognizes
that the Company must raise capital sufficient to fund business activities until
such time as it can generate sufficient revenues and net cash flows in amounts
necessary to enable it to continue in existence, of which there can be no
assurance.





The
Company is dependent upon TGR Energy, LLC or Mike Zoi (as a result of his
controlling interest in TGR and the Company’s dependence on the Subscription
Agreement with TGR) to fund its operations. The Company entered into a
Subscription Agreement dated August 7, 2008 (the “Subscription Agreement”) with
TGR, wherein TGR committed to invest up to $2,000,000 in exchange for up to
100,000,000 shares of the Company's common stock for $0.02 per share. In
addition, the Company granted TGR warrants to purchase up to 50,000,000 shares
of common stock for $0.05 per share. These warrants may be exercised within five
years from the date of grant. The shares and warrants are issuable under the
Subscription Agreement upon the funding from time to time by TGR. The valuation
date to determine the appropriate compensation charge is the last day of the
quarter then ended. Pursuant to the Subscription Agreement, TGR will fund the
Investment Amount as required in the Company’s operational budget. TGR’s
obligation to fund the Investment Amount will be reduced by any future third
party funding or investments in the Company on terms no less favorable than
those contained in the Subscription Agreement.  In January 2009, the
Company and TGR amended the Subscription Agreement to increase the Investment
Amount to $4,000,000.





The
Company’s independent auditors’ report on the Company’s financial statements for
the year ended March 31, 2010 contains an explanatory paragraph about our
ability to continue as a going concern. Management believes that its current
operating strategy, as described herein, provides the opportunity for the
Company to continue as a going concern; however, there is no assurance this will
occur.





NOTE 3.
SEGMENT INFORMATION





The
Company’s sole reportable business segment was the oil and gas service sector
until the Company decided to unwind the TOT-SIBBNS joint venture effective March
31, 2010. The Company’s accounting policies for segments are the same as those
described in the summary of significant accounting policies.





NOTE
4.  JOINT VENTURES





On July
18, 2008, the Company executed an agreement to acquire a 75% controlling
interest in TOT-SIBBNS, a limited liability company organized under the laws of
the Russian Federation. Pursuant to the Joint Venture Agreement, the owner (the
“JV Partner”) of Sibburnefteservis, Ltd. of Novosibirsk, Russia (“SIBBNS”)
contributed certain assets of SIBBNS to TOT SIBBNS in exchange for 3,000,000
shares of the Company’s common stock. The assets were appraised at more than
USD$6 million at the time of contribution and the Company was obligated to issue
an additional 2,000,000 shares to the JV Partner if TOT SIBBNS achieved
$10,000,000 in cumulative revenues. If on the third anniversary of the joint
venture agreement, the Company’s stock price is not at least $1.00 per share,
the Company had the option of making an additional payment to the JV Partner
or returning the Company’s interest in the joint venture to the JV
Partner.





On or
about January 27, 2010, the Company determined to unwind the TOT-SIBBNS joint
venture.  The Company and TOT-SIBBNS executed an unwind agreement whereby
the Company exchanged its 75% interest in TOT-SIBBNS for the 3,000,000 shares
given to Evgeny Borograd in 2008. The unwind of the joint venture was
consummated as of March 31, 2010. The unwind of the TOT-SIBBNS joint
venture has been accounted for using the guidance provided in ASC 845
(previously APB 29), as a disposal “other than by sale” similar to a spin-off
transaction, with the shares received reflected as treasury stock and recorded
on the Company’s balance sheet at its carrying basis in the net assets of the
joint venture as of March 31, 2010.


9




The
Company formed a joint venture, Korlea-TOT Energy s.r.o., in July 2008 with its
Czech Republic partner Korlea Invest. The Company invested $56,000 to provide
the 51% of share capital that the Company owns for this limited liability
company in the Czech Republic. The Company financed this investment through a
related party note with Kazo, LLC. Korlea-TOT Energy s.r.o. was expected to
engage in marketing and trading of oil and natural gas in Eastern Europe. The
Company issued Alexander Kaplan 350,000 newly issued shares of Company stock for
his assistance in completing this transaction.  To date, the joint venture
has no activity.  The Company is currently in negotiations to unwind
this joint venture . Accordingly, in November 2010, we sent Korlea notice of our
request to unwind this arrangement.





NOTE 5.
ACCRUED EXPENSES





Accrued
expenses represent expenses that are owed at the end of the period and have not
been billed by the provider or are estimates of services provided.





At
September 30, 2010 and March 31, 2010, accrued expenses consisted of the
following:




September
                    30, 2010
                  
                  
                  March 31,
                    2010Accrued
      professional fees
                  
                  $
                  38,068
                  
                  
                  $
                  31,468Accrued
      payroll
                  
                  
                  940,650
                  
                  
                  
                  723,428Other
      accrued expenses
                  
                  
                  192,161
                  
                  
                  
                  165,663$
                  1,170,879
                  
                  
                  $
                  920,559


10





NOTE 6.
STOCKHOLDERS’ EQUITY





The
Company is authorized to issue 800,000,000 shares of common stock, par value of
$0.001 per share. Each holder of common stock is entitled to one vote for each
share held. The Company is authorized to issue 100,000,000 shares of preferred
stock, par value $0.001 per share, which may be divided into series with the
designations, powers, preferences, and relative rights and any qualifications,
limitations or restrictions as determined by the Company’s board of
directors.





Under an
Exchange Agreement dated December 18, 2007, the Company agreed to issue
113,500,000 newly issued shares of common stock of the Company to TGR Energy,
LLC, of which 8,500,000 shares were issued to Bzinfin, S.A., a British Virgin
Islands limited corporation that is indirectly owned by an affiliate of the
Ener1 Group, and 2,125,000 shares were issued to Alexander Malovik, a principal
of Splinex, LLC, in exchange for the Bzinfin and Ener1 Group notes totaling
$3,688,132.  TGR Energy, LLC owned 98,157,334 shares of common stock of the
Company as of December 17, 2007, and after the completion of the Exchange
Agreement transactions owned an aggregate of 201,032,334 shares of common stock
of the Company as of December 18, 2007. The Company had a total of 100,757,773
shares of common stock outstanding at December 17, 2007 and 214,507,773 shares
of common stock outstanding at December 18, 2007.





On August
7, 2008, the Company entered into the Subscription Agreement with TGR, which was
amended in January 2009.





For the
fiscal year ended March 31, 2010, TGR was issued an aggregate of 16,186,515
shares of common stock of the Company and fully vested warrants to purchase
8,093,757 shares of common stock of the Company at an exercise price of $0.05
per share pursuant to the terms of the Subscription Agreement.  These
issuances were in exchange for financings under the Subscription Agreement in
the aggregate amount of $323,730.  A compensation charge of $4,717,677 was
recorded for the fiscal year ended March 31, 2010. This amount is calculated as
the difference between the market price of our common stock at the end of each
quarter in which shares were issued and the subscription price of the common
shares ($0.02) multiplied by the number of shares issued, plus the Black-Scholes
valuation of the warrants issued as calculated at the end of each
quarter.





For the
quarter ended June 30, 2010, TGR was issued 10,037,315 shares of common stock of
the Company and fully vested warrants to purchase 5,019,157 shares of common
stock of the Company for $0.05 per share in exchange for funding of $200,746
provided during the quarter under the terms of the Subscription Agreement. A
compensation charge of $1,154,336 was recorded for the quarter ended June 30,
2010 as an officer of the Company is also a principal of TGR and the securities
issued were below market value as of the issue date.





For the
quarter ended September 30, 2010, TGR was issued 2,240,450 shares of common
stock of the Company and fully vested warrants to purchase 1,120,225 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$44,809 provided during the quarter under the terms of the Subscription
Agreement. No compensation charge was required in connection with the issuance
of common stock as the market value on the date of issuance and the subscription
price were the same. However, a compensation charge of $22,404 was recorded in
connection with the warrants issued for the quarter ended September 30, 2010 as
an officer of the Company is also a principal of TGR and these securities issued
were below market value as of the issue date.





For the
quarter ended June 30, 2010, the Company recorded compensation expense of $0.10
per share or $8,426 for options of Mr. New issued on August 13, 2008 that vested
during the quarter ended June 30, 2010.  For the quarter ended
September 30, 2010, the Company recorded compensation expense of $0.10 per share
or $8,519 for options of Mr. New issued on August 13, 2008 that vested during
the quarter ended September 30, 2010.


11


Up until
May 15, 2009, Mr. New’s base salary was $140,000 with an annual $30,000 bonus
payable quarterly for meeting agreed upon objectives.  On May 15, 2009, Mr.
New’s base salary was reduced from $140,000 to $91,000 and his bonus was reduced
from $30,000 to $19,500 annually. To partially offset the reduction in salary,
the Company provided Mr. New with 25,000 shares of fully vested common stock in
lieu of his March 31, 2009 cash bonus and 200,000 shares of common stock which
vest monthly from April 1, 2009 to September 30, 2009.  A compensation
charge of $12,500 was recorded for the quarter ended June 30, 2009 and a
compensation charge of $10,000 was recorded for the quarter ended September 30,
2009, which reflects the market value per share ($0.10) on the first trading day
after the date of grant.  At March 31, 2010, the Company provided Mr. New
with 250,000 shares of fully vested common stock for services provided to the
Company under a salary reduction.  A compensation charge of $37,500 was
recorded for the quarter ended March 31, 2010, which reflects the market value
per share ($0.15) on the first trading day after the date of grant.





Other
employees (other than officers and directors) receiving salary reductions were
granted a total of 50,000 shares of common stock vesting monthly between April
1, 2009 and September 30, 2009.  The Company recorded a compensation charge
of $2,347 for the quarter ended June 30, 2009 and a compensation expense of
$1,042 for the quarter ended September 30, 2009, to reflect the market value of
stock provided in lieu of cash compensation.  Both of these charges were
calculated using the price per share of common stock ($0.10) on the first
trading date after the date of grant.





On
November 1, 2008, the Company entered into a Letter Agreement with Olympus
Securities LLC (the “Agreement”). Under the Agreement, Olympus was appointed TOT
Energy’s exclusive financial advisor and investment banker (collectively, the
“Services”) for a period of seven (7) months. After expiration of this
initial term, the Agreement is to automatically continue on a month-to-month
basis, with each party having the right to terminate on thirty (30) days notice.
The Agreement included a fee of one thousand dollars ($1,000) per month in
return for the Services, except for the first month, where, instead of the
monthly fee, the Company granted five (5) year warrants to Olympus to purchase
one million (1,000,000) shares of the Company's common stock at
ten cents ($0.10) per share. The warrants were valued at $149,998 and were to be
amortized over the seven-month term of the Agreement. The Agreement
contains other provisions relating to payments of cash, stock and warrants in
connection with any future financing or investment transaction completed through
Olympus. The Company has not yet paid a cash fee or provided the abovementioned
warrants to Olympus due to the failure by Olympus to provide meaningful
investment banking services until world financial markets stabilized and, more
recently, due to the unwind of the TOT-SIBBNS joint venture. The Company has
amortized the warrant charge of $149,999 during fiscal 2010 and accrued this
amount in the financial statements.





The
Company entered into a Sponsorship Agreement with American Speed Factory dated
April 22, 2009, whereby the Company receives certain promotional services and
sponsorship rights to display the Company’s logo in connection with the 2009
Ferrari Challenge racing season in exchange for the issuance of 500,000 shares
of restricted stock of the Company.  This arrangement was valued at
$50,000, which amount was recorded as an advertising expense for the quarter
ended June 30, 2009.





Pursuant
to a Stock Purchase Agreement dated November 23, 2009, TGR agreed to sell to
Dune Capital Group ("Dune") an aggregate of 5,000,000 shares of common stock of
TOT Energy, Inc. held by TGR for a purchase price of $0.10 per share or an
aggregate of $500,000. The purchase price is required to be paid on or
before April 1, 2010. Dune paid $300,000 on November 23, 2009. In order to
ensure compliance with obligations under Section 16 of the Securities Exchange
Act of 1934, prior to the issuance of shares to Dune by TGR, TGR assigned this
Purchase Agreement to the Company. Accordingly, the Company received $300,000
pursuant to this agreement and issued an aggregate of 3,000,000 shares of common
stock of the Company to Dune on January 12, 2010.  On April 28,
2010, the Company agreed to terminate the Stock Purchase Agreement with
Dune and rescind the prior issuance of common stock. The Company repurchased the
3,000,000 shares of common stock previously issued to Dune for $300,000. 
The redeemed shares were accounted for as treasury stock.





At
September 30, 2010, the Company had options to purchase 1,200,000 shares of
common stock outstanding under its stock option plan, of which options to
purchase 920,370 shares of common stock are vested, with an exercise price of
$0.25 per share and with a remaining weighted average contractual term of 4.51
years. The Company also had warrants to purchase 55,595,307 shares of common
stock outstanding at September 30, 2010 with a strike price of $0.05 per share
and a remaining average contractual term of 3.53 years.


12





NOTE 7.
RELATED PARTY TRANSACTIONS





On August
7, 2008, the Company and TGR, which held 97% of the Company’s outstanding common
stock, entered into the Subscription Agreement described above pursuant to which
TGR has agreed to provide funding of up to $4,000,000 (the “Investment Amount”)
in exchange for up to 200,000,000 shares of the Company’s common stock and
warrants to purchase up to 100,000,000 shares of the Company’s common stock at
an exercise price of $0.05 per share. Pursuant to the Subscription Agreement,
TGR will fund the Investment Amount as required in the Company’s operational
budget. TGR’s obligation to fund the Investment Amount will be reduced by any
future third party funding or investment in the company on terms no less
favorable than those contained in the Subscription Agreement.  See Note
6 – Stockholders ’ Equity, for more information relating to
equity securities issued to TGR Energy, LLC under the terms of the Subscription
Agreement.





NOTE
8. DISCONTINUED OPERATIONS





Effective
March 31, 2010, the Company dissolved the TOT-SIBBNS joint venture.  The
Company received the 3,000,000 shares of common stock issued in 2008 in
connection with the establishment of the joint venture and the assets of the
joint venture were returned to the non-controlling interest holder (JV
Partner).  For comparative purposes, the results of the joint venture are
reflected as discontinued operation in the Consolidated Condensed Balance Sheets
and Income Statements as of March 31, 2010.  The following table provides
additional details on the results from discontinued operations for the three and
six months ended September 30, 2009. There was no effect on results for the
quarter ended September 30, 2010 as the unwind was consummated as of March 31,
2010.


13




Three
                                  months ended
                                
                                
                                Six months
                                  endedSeptember 30,
                                  2009
                                
                                
                                September 30,
                                  2009Revenues
                                
                                $
                                -
                                
                                
                                $
                                -Cost
      of Sales
                                
                                
                                -
                                
                                
                                
                                -Operating
      Expenses
                                
                                
                                (244,179
                                )
                                
                                
                                (497,645
                                )Foreign
      currency gain
                                
                                
                                85,154
                                
                                
                                
                                301,346Net
      loss from discontinued operations
                                
                                $
                                (159,025
                                )
                                
                                $
                                (196,299
                                )




NOTE 9.
SUBSEQUENT EVENTS





On
November 11, 2010, our Board of Directors adopted a resolution changing the
Company’s
fiscal year end from March 31 to December 31. Management  believes that
this change will allow better alignment of the Company’s annual planning and
budget processes with its new business strategy as we are no longer engaged in
the seasonal oil and gas business.




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





This Quarterly Report on Form 10-Q contains forward
-looking statements. These statements relate to our expectations, hopes,
beliefs, intentions or strategies regarding future events or future financial
performance.  Any statements contained in this report that are not
statements of historical fact may be deemed forward-looking statements. In some
cases, forward-looking statements can be identified by terminology such as
“may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “predict,” “potential” or “continue,” or the negative of such terms
or other comparable terminology. Forward-looking statements include but are not
limited to statements regarding: our future business plans; future sales of our
products and services; introduction of new products and services; expected
hiring levels; marketing plans; increases of selling, general and administrative
costs; financing requirements and capital raising plans; successful integration
and development of acquired businesses; regulatory and economic factors
affecting our businesses and proposed businesses and other factors that may
impact our acquisition and development strategy, some of which are beyond our
control and difficult to predict.  These statements are only predictions
and are subject to a number of assumptions, risks and uncertainties that could
cause actual results to differ materially from those expressed or implied in the
forward-looking statements. The following important factors, in addition to
those discussed in our other filings with the Securities and Exchange Commission
(the “Commission”) from time to time, and other unforeseen events or
circumstances, could affect our future results and could cause those results or
other outcomes to differ materially from those expressed or implied in our
forward-looking statements: general economic conditions; competition; our
ability to raise capital; our ability to control costs; changes within our
industries; new and upgraded products and services by us or our competitors;
employee retention; sovereign risk; legal and regulatory issues; changes in
accounting policies or practices; currency translation and exchange risks; and
the market acceptance of our products and services.


14





All forward-looking
statements are based on
information available to us on the date of this filing, and we assume no obligation to update such statements, although we will
continue to comply with our obligations under the securities
laws.





The following discussion should be
read in conjunction with our audited financial statements and
notes contained in our Annual Report on Form 10-K for the fiscal year ended
March 31, 2010 filed with the Commission and the consolidated interim financial statements and related
notes included in this Report.





General





We are
currently engaged in the development of an alternative energy services business
and we are concurrently pursuing a strategy to develop and/or acquire technology
and applications for use in the online media industry. To this end, from time to
time, we may be engaged in various discussions to acquire businesses or
formulate joint venture or other arrangements. Our policy is not to disclose
discussions or potential transactions until definitive agreements have been
executed. Where appropriate, acquisitions will be financed with equity shares
and this may result in substantial dilution to existing
stockholders.





Since the
unwind of the TOT-SIBBNS joint venture effective March 31, 2010, the Company has
had no significant operations. Management recognizes that the Company must raise
capital sufficient to fund business activities until such time as it can
generate sufficient revenues and net cash flows in amounts necessary to enable
it to continue in existence, of which there can be no assurance.





Short
term financing is provided by TGR Energy, LLC (“TGR”), an entity controlled by
our president, as we require additional working capital, pursuant to a
Subscription Agreement dated August 7, 2008 (the “Subscription Agreement”). TGR
has agreed to provide up to $2,000,000 (the “Investment Amount”) in exchange for
up to 100,000,000 shares of common stock and warrants to purchase up to
50,000,000 shares of common stock at an exercise price of $0.05 per share.
Pursuant to the Subscription Agreement, TGR will fund the Investment Amount as
required in our operational budget. TGR’s obligation to fund the Investment
Amount will be reduced by any future third party funding or investment on terms
no less favorable than those contained in the Subscription Agreement.  On
January 12, 2010, TGR agreed to increase its funding commitment from $2,000,000
to $4,000,000 in exchange for up to an additional 100,000,000 shares of the
Company’s common stock and warrants to purchase up to 50,000,000 shares of the
Company’s common stock at an exercise price of $0.05 per share for a period of
five years from date of issuance.





On July
16, 2008, we entered into a Joint Venture Agreement (the “JV Agreement”) with
Evgeny Bogorad (“Bogorad”), owner of Sibburnefteservis, Ltd. of Novosibirsk,
Russia, an oil services company (“SIBBNS”). Pursuant to the JV Agreement,
Bogorad contributed certain of SIBBNS’ assets and personnel to a joint venture
company named TOT-SIBBNS, Ltd., a Russian corporation (“TOT-SIBBNS”). An
independent appraisal company appraised the contributed assets at
USD$6,221,881.We ended development stage activity on July 16, 2008 when we
acquired a 75% interest in the TOT-SIBBNS joint venture and began operations in
the oil and gas service industry, including the exploration, development,
production, and marketing of crude oil and natural gas in Russia and
Kazakhstan.  At the closing on July 16, 2008, we issued to Bogorad
3,000,000 shares of our common stock in exchange for a 75% interest in
TOT-SIBBNS.





TOT-SIBBNS
obtained its first contract and began drilling operations in the Fall 2008.
However, financial constraints and the declining price of oil resulted in a
suspension of drilling operation in January 2009. Drilling operations did not
recommence during the Winter 2009 and most employees were furloughed in April
2009.





TOT-SIBBNS
had expectations of continuing exploratory drilling (both through its existing
customer and new customers) for the 2009/2010 drilling season as the price of
oil had risen significantly and TOT-SIBBNS was able to secure an additional
drilling contract in November 2009. However, in January 2010, it became
questionable whether activities with TOT-SIBBNS’ initial customer would
recommence in the short term, and there remained uneasiness in the market over
the continued improvement in crude oil prices, which had a negative impact on
the exploratory drilling market in Russia at that time.  Accordingly,
on January 27, 2010, after several weeks of exploring other business
opportunities, the Company altered its business focus and decided to exercise
its option to unwind the joint venture and pursue other development
opportunities.


15




The
Company and TOT-SIBBNS executed an unwind agreement whereby the Company
exchanged its 75% interest in TOT-SIBBNS for the 3,000,000 shares given to
Evgeny Bogorad in 2008. The unwind of the joint venture was consummated as
of March 31, 2010. The unwind of the TOT-SIBBNS joint venture has been
accounted for using the guidance provided in ASC 845 (previously APB 29), as a
disposal “other than by sale” similar to a spin-off transaction, with the shares
received reflected as treasury stock and recorded on the Company’s balance sheet
at its carrying basis in the net assets of the joint venture as of March 31,
2010.  For more information relating to the unwind of the TOT-SIBBNS
joint venture, see Note 4 – Joint Ventures and Note 8 – Discontinued Operations,
of the Notes to Condensed Financial Statements, which information is
incorporated herein by reference.





KORLEA-TOT
is our 51% joint venture with Korlea Invest Holding AG of Switzerland (“Korlea”)
who is a provider and trader of energy assets in the Czech Republic. The joint
venture, Korlea-TOT, established as of July 17, 2008, was expected to assist in
the marketing of oil assets sourced by the Company and its contacts and
affiliates. There has been no activity to date with this joint venture.
Accordingly, in November 2010, we sent Korlea notice of our request to unwind
this arrangement.





For the
fiscal year ended March 31, 2009, TGR was issued an aggregate of 82,725,335
shares of common stock of the Company and fully vested warrants to purchase
41,362,168 shares of common stock of the Company at an exercise price of $0.05
per share pursuant to the terms of the Subscription Agreement.  These
issuances were in exchange for financings under the Subscription Agreement in
the aggregate amount of $1,654,507 of which $1,017,097 was cash and $637,410
related to refinancing of previously outstanding notes payable.  A
compensation charge of $8,827,218 was recorded for the fiscal year ended March
31, 2009.  This amount is calculated as the difference between the market
price of our common stock at the end of each quarter in which shares were issued
and the subscription price of the common shares ($0.02) multiplied by the number
of shares issued, plus the Black-Scholes valuation of the warrants issued as
calculated at the end of each quarter.





For the
fiscal year ended March 31, 2010, TGR was issued an aggregate of 16,186,515
shares of common stock of the Company and fully vested warrants to purchase
8,093,757 shares of common stock of the Company at an exercise price of $0.05
per share pursuant to the terms of the Subscription Agreement.  These
issuances were in exchange for financings under the Subscription Agreement in
the aggregate amount of $323,730.  A compensation charge of $4,717,677 was
recorded for the fiscal year ended March 31, 2010. This amount is calculated as
the difference between the market price of our common stock at the end of each
quarter in which shares were issued and the subscription price of the common
shares ($0.02) multiplied by the number of shares issued, plus the Black-Scholes
valuation of the warrants issued as calculated at the end of each
quarter.





For the
quarter ended June 30, 2010, TGR was issued 10,037,315 shares of common stock of
the Company and fully vested warrants to purchase 5,019,157 shares of common
stock of the Company for $0.05 per share in exchange for funding of $200,746
provided during the quarter under the terms of the Subscription Agreement. A
compensation charge of $1,154,336 was recorded for the quarter ended June 30,
2010 as an officer of the Company is also a principal of TGR and the securities
issued were below market value as of the issue date.





For the
quarter ended September 30, 2010, TGR was issued 2,240,450 shares of common
stock of the Company and fully vested warrants to purchase 1,120,225 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$44,809 provided during the quarter under the terms of the Subscription
Agreement. A compensation charge of $22,404 was recorded for the quarter ended
September 30, 2010 as an officer of the Company is also a principal of TGR and
the securities issued were below market value as of the issue date.





The
Company entered into a Sponsorship Agreement with American Speed Factory dated
April 22, 2009, whereby the Company would receive certain promotional services
and sponsorship rights to display the Company’s logo in connection with the 2009
Ferrari Challenge racing season in exchange for the issuance of 500,000 shares
of restricted stock of the Company.  This arrangement was valued at
$50,000, which amount was recorded as an advertising expense for the quarter
ended June 30, 2009.


16





Up until
May 15, 2009, Mr. New’s base salary was $140,000 with a $30,000 bonus payable
quarterly for meeting agreed upon objectives.  On May 15, 2009, Mr. New’s
base salary was reduced from $140,000 to 91,000 and his bonus was reduced from
$30,000 to $19,500 annually. To partially offset the reduction in salary, the
Company provided Mr. New with 25,000 shares of fully vested common stock in lieu
of his March 31, 2009 cash bonus and 200,000 shares of common stock which vest
monthly from April 1, 2009 to September 30, 2009.  A compensation charge of
$12,500 was recorded for the quarter ended June 30, 2009 and a compensation
charge of $10,000 was recorded for the quarter ended September 30, 2009, which
reflects the market value per share ($0.10) on the first trading day after the
date of grant.  At March 31, 2010, the Company provided Mr. New with
250,000 shares of fully vested common stock for services provided to the company
under a salary reduction.  A compensation charge of $37,500 was recorded
for the quarter ended March 31, 2010, which reflects the market value per share
($0.15) on the first trading day after the date of grant.





Other
employees (other than officers and directors) receiving salary reductions were
granted a total of 50,000 shares of common stock vesting monthly between April
1, 2009 and September 30, 2009.  The Company recorded a compensation
expense of $2,347 for the quarter ended June 30, 2009 and a compensation expense
of $1,042 for the quarter ended September 30, 2009, to reflect the market
value of stock provided in lieu of cash compensation.  Both of these
charges were calculated using the price per share of common stock ($0.10) on the
first trading date after the date of grant.





Pursuant
to a Stock Purchase Agreement dated November 23, 2009, TGR agreed to sell to
Dune Capital Group ("Dune") an aggregate of 5,000,000 shares of common stock of
TOT Energy, Inc. held by TGR for a purchase price of $0.10 per share or an
aggregate of $500,000. The purchase price is required to be paid on or
before April 1, 2010. Dune paid $300,000 on November 23, 2009. In order to
ensure compliance with obligations under Section 16 of the Securities Exchange
Act of 1934, prior to the issuance of shares to Dune by TGR, TGR assigned this
Purchase Agreement to the Company. Accordingly, the Company received $300,000
pursuant to this agreement and issued an aggregate of 3,000,000 shares of common
stock of the Company to Dune on January 12, 2010.  On April 28,
2010, the Company agreed to terminate the Stock Purchase Agreement with
Dune and rescind the prior issuance of common stock. The Company repurchased the
3,000,000 shares of common stock previously issued to Dune for $300,000. 
The redeemed shares were accounted for as treasury stock.





At
September 30, 2010, the Company had options to purchase 1,200,000 shares of
common stock outstanding under its stock option plan, of which options to
purchase 920,370 shares of common stock are vested, with an exercise price of
$0.25 per share and with a remaining weighted average contractual term of 4.51
years. The Company also had warrants to purchase 55,595,307 shares of common
stock outstanding at December 31, 2009 with a strike price of $0.05 per share
and a remaining average contractual term of 3.53 years.





Several
factors raise significant doubt as to our ability to continue operating as a
going concern.  These factors include our history of net losses and
that as of March 31, 2010, due to the unwind of the TOT-SIBBNS joint venture, we
had no operations and a working capital deficit. Management recognizes that the
Company must raise capital sufficient to fund business activities until such
time as it can generate sufficient revenues and net cash flows in amounts
necessary to enable it to continue in existence, of which there can be no
assurance. We are dependent upon TGR or Mike Zoi (as a result of his controlling
interest in TGR and our dependence on the Subscription Agreement with TGR) to
fund our operations. Our independent auditors’ report on our financial
statements for the year ended March 31, 2010 contains an explanatory paragraph
about our ability to continue as a going concern. Management believes that our
current operating strategy, as described in the preceding paragraphs, provides
the opportunity for us to continue as a going concern; however, there is no
assurance this will occur.





On
November 11, 2010, our Board of Directors adopted a resolution changing our
fiscal year end from March 31 to December 31 effective immediately. Accordingly,
the first 12-month fiscal year will run from January 1, 2011 through December
31, 2011. The nine-month period from April 1, 2010 through December 31, 2010
will be presented in our annual report on Form 10-K to be filed within 90 days
of December 31, 2010. We will provide comparative financial information to
assist in period-to-period comparisons. Our Board believes that this change will
allow better alignment of our annual planning and budget processes with our new
business strategy as we are no longer engaged in the seasonal oil and gas
business.


17





Development
Of An Alternative Energy Services Business





The
Company intends to develop or acquire a downstream solar business that will
provide complete solar solutions (design, installation, maintenance and
finance) to commercial customers.  This is intended to be accomplished
through acquisitions and hiring of key personnel.  We expect to utilize
existing commercial real estate industry relationships of our management to
generate opportunities for solar installation proposals in the United
States.




From
April 1, 2010 through the date hereof, we have engaged in the development of an
alternative energy services business and we have concurrently pursued a strategy
to develop and/or acquire technology and applications for use in the online
media industry. Management believes that our current operating plans provides
the opportunity for us to continue as a going concern; however, there is no
assurance this will occur.





Results
of Operations for the Three-Month Periods Ended September 30, 2010 and
2009





We
reported a net loss of  $208,452 or $(0.00) per share for the three months
ended September 30, 2010, compared to a net loss of $2,557,742 or $(0.01) per
share for the three months ended September 30, 2009. Weighted average shares
outstanding were 330,840,721 and 305,370,458 for the quarters ended September
30, 2010 and 2009, respectively.





The net
loss for the three month period ended September 30, 2010 was favorably impacted
by the reduced non-cash compensation expense of $30,923 related primarily to
warrants issued pursuant to the Subscription Agreement with TGR as compared with
the quarter ended September 20, 2009. The non-cash compensation expense for the
three months ended September 30, 2009 was $2,077,306.





General
and administrative expenses for the three months ended September 30, 2010 were
$208,482, of which $30,923 was attributable to non-cash compensation expenses as
compared to general and administrative expenses for the three months ended
September 30, 2009 of $2,313,588, which includes non-cash compensation expenses
of $2,096,863. The remaining general and administrative expense of $177,919
for the three months ended September 30, 2010 were slightly lower than the
remaining general and administrative expense (excluding non-cash compensation)
of $216,725 for the three months ended September 30, 2009 primarily due to a
reduction in travel expenses of $15,453.  In addition to the reduction in
travel expense, investor relations costs were lower by $12,250 and accounting
and auditing fees were lower by $9,550 during the quarter ended September 30,
2010 as compared with the quarter ended September 30, 2009.





During
the three months ended September 30, 2010, we obtained funding of an aggregate
of $44,809 under the Subscription Agreement with TGR and issued 2,240,450 shares
of common stock. On September 30, 2010, the market value and subscription price
were the same resulting in no compensation charge for the shares purchased at
current market value under the Subscription Agreement.  Additionally,
warrants to purchase 1,120,225 shares of common stock were issued in connection
with these fundings and a corresponding compensation expense of $22,404 was
recorded based on a Black-Scholes valuation model,





The
non-controlling interest relating to the Korlea-TOT joint venture decreased by
$30 for the three months ended September 30, 2010 as compared with a decrease of
$25 for the three months ended September 30, 2009. The joint venture
non-controlling interest reflects the joint venture partner’s ownership of the
joint venture.





Results
of Operations for the Six-Month Periods Ended September 30, 2010 and
2009





We
reported a net loss of  $1,596,756 or $(0.01) per share for the six months
ended September 30, 2010, compared to a net loss of $4,098,427 or $(0.01) per
share for the six months ended September 30, 2009. Weighted average shares
outstanding were 325,865,379 and 303,323,673 for the six months ended September
30, 2010 and 2009, respectively.


18





The net
loss for the six month period ended September 30, 2010 was favorably impacted by
a reduction in the non-cash compensation expense to $1,193,685 related primarily
to common stock and warrants issued pursuant to the Subscription Agreement with
TGR as compared with the non-cash compensation expense of $3,434,223 for the six
months ended September 30, 2009.





General
and administrative expenses for the six months ended September 30, 2010 were
$1,596,815 of which $1,193,685 was attributable to non-cash compensation
expenses as compared to general and administrative expenses for the six months
ended September 30, 2009 of $3,902,167 which includes non-cash compensation
expenses of $3,434,223. The remaining general and administrative expenses of
$403,130 for the six months ended September 30, 2010 were less than the
remaining general and administrative expenses (excluding non-cash compensation)
of $467,944 for the six months ended September 30, 2009 primarily due to a
reduction in investor relations expenses of $83,535.  In addition to a
reduction in investor relations costs, travel expenses for the six months ended
September 30, 2010 were reduced by $19,373, offset in part by increases in
accounting and auditing fees ($24,312) and legal fees ($8,595) as compared with
the six months ended September 30, 2009.





During
the six months ended September 30, 2010, we obtained funding of an aggregate of
$245,555 under the Subscription Agreement with TGR and recognized a non-cash
compensation expense totaling $1,176,741 which includes $702,612 for the
issuance of 12,277,765 shares of common stock. This charge is the result of an
intrinsic value calculation that measures the difference between fair value on
date of issuance of the shares and the purchase price per share under the
Subscription Agreement.  Additionally, the warrants to purchase
6,139,382 shares of common stock issued in connection with these fundings
resulted in compensation expense of $474,129 based on a Black-Scholes valuation
model.





The
non-controlling interest relating to the Korlea-TOT joint venture decreased by
$59 for the six months ended September 30, 2010 as compared with a decrease $39
for the six months ended September 30, 2009. The joint venture non-controlling
interest reflects the joint venture partner’s ownership of the joint
venture.





Liquidity
and capital resources





At
September 30, 2010, we had an accumulated deficit of $24,916,539 and cash of
$98,364. We are dependent upon receiving funds from our controlling stockholder,
TGR Energy, LLC, which is controlled by our president, Mike Zoi. Pursuant to the
Subscription Agreement, TGR is obligated to invest up to $4,000,000 to fund
short term working capital requirements in exchange for up to 200,000,000 shares
of our common stock and warrants to purchase up to 100,000,000 shares of common
stock with an exercise price of $0.05. The shares and warrants will be issued
quarterly and we will record an appropriate compensation expense as necessary
based on the fair value of the securities on the last day of each fiscal quarter
(the date of issuance). At September 30, 2010, the remaining investment
obligation was $1,776,208.





Pursuant
to a Stock Purchase Agreement dated November 23, 2009, TGR agreed to sell to
Dune Capital Group ("Dune") an aggregate of 5,000,000 shares of common stock of
TOT Energy, Inc. held by TGR for a purchase price of $0.10 per share or an
aggregate of $500,000. The purchase price is required to be paid on or
before April 1, 2010. Dune paid $300,000 on November 23, 2009. In order to
ensure compliance with obligations under Section 16 of the Securities Exchange
Act of 1934, prior to the issuance of shares to Dune by TGR, TGR assigned this
Purchase Agreement to the Company. Accordingly, the Company received $300,000
pursuant to this agreement and issued an aggregate of 3,000,000 shares of common
stock of the Company to Dune on January 12, 2010.  On April 28,
2010, the Company agreed to terminate the Stock Purchase Agreement with
Dune and rescind the prior issuance of common stock. The Company repurchased the
3,000,000 shares of common stock previously issued to Dune for $300,000. 
The redeemed shares were accounted for as treasury stock.





Off-balance
sheet arrangements





At
September 30, 2010, we did not have any off-balance sheet arrangements as
defined in item 303(a)(4) of Regulation S-K.


19





Recently
Issued Accounting Pronouncements





In June
2009, the FASB issued an amendment to ASC 810-10. This amendment requires an
enterprise to qualitatively assess the determination of the primary beneficiary
of a Variable Interest Entity (VIE) based on whether the enterprise: (1) has the
power to direct the activities of a VIE that most significantly effect the
entity’s economic performance; and (2) has the obligation to absorb losses of
the entity or the right to receive benefits from the entity that could
potentially be significant to the VIE. ASC 810-10, as amended, requires an
ongoing reconsideration of the primary beneficiary, and amends the events that
trigger a reassessment of whether an entity is a VIE. This statement is
effective as of the beginning of a reporting entity’s first annual reporting
period that begins after November 15, 2009. Earlier application is prohibited.
Retrospective application is optional. Adoption of this standard has not had a
significant impact on our financial condition and results of
operations.




In
September 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue
Arrangements.” ASU 2009-13 addresses the unit of accounting for multiple-element
arrangements. In addition, ASU 2009-13 revises the method by which consideration
is allocated among the units of accounting. Specifically, the overall
consideration is allocated to each deliverable by establishing a selling price
for individual deliverables based on a hierarchy of evidence, involving
vendor-specific objective evidence, other third party evidence of the selling
price, or the reporting entity’s best estimate of the selling price of
individual deliverables in the arrangement. ASU 2009-13 will be effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. Adoption of this standard is
not expected to have a significant impact on our financial condition and results
of operations.





Item
4. Controls and Procedures.





Our
disclosure controls and procedures are designed to provide reasonable assurance
that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate, to allow for timely decisions regarding required disclosure . In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.





As of
March 31, 2010, we have discontinued operations and unwound the TOT-SIBBINS
joint venture. Accordingly, during the quarter ended September 30, 2010, we have
not engaged in an operating business, but continue to focus our resources on the
development or acquisition of an alternative energy solar business concentrating
on commercial solar installations and the development or acquisition of
technology and applications for the online media industry. Our disclosure
controls and procedures are currently not effective because there are a limited
number of personnel employed and we cannot have an adequate segregation of
duties, and due to material weaknesses in internal control over financial
reporting as discussed in our annual report on Form 10-K previously filed with
the SEC. Accordingly, management cannot provide reasonable assurance of
achieving the desired control objective. Management works to mitigate these
risks by being personally involved in all substantive transactions and attempts
to obtain verification of transactions and accounting policies and treatments
involving our operations. We are in the process of reviewing and, where
necessary, modifying controls and procedures throughout the Company as resources
permit. We expect this process to continue through at least calendar year
2011.





During
the quarter ended September 30, 2010, there were no changes in internal controls
over financial reporting that have materially affected, or are reasonably likely
to materially affect our internal control over financial reporting, except that
we have unwound the TOT-SIBBINS joint venture and therefore certain significant
deficiencies and material weaknesses in our internal control over financial
reporting previously reported primarily affecting overseas operations are no
longer relevant.


20





PART
II — OTHER INFORMATION





Item
1. Legal proceedings





We are
not currently a party to any such proceedings the outcome of which would have a
material effect on our financial condition or results of
operations.





Item
2. Unregistered Sales of Equity Securities





For the
quarter ended September 30, 2010, TGR was issued 2,240,450 shares of common
stock of the Company and fully vested warrants to purchase 1,120,225 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$44,809 provided during the quarter under the terms of the Subscription
Agreement.





We
believe that each of the foregoing securities transactions were exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, by virtue of Section 4(2) of the Securities Act which exempts
transactions by an issuer not involving any public offering.


22




Item 6.
Exhibits


Exhibit
                    Number
                  
                  Description2.1
                  
                  Agreement
      and Plan of Merger among Ener1 Acquisition Corp., Registrant and Ener1,
      Inc., dated as of June 9, 2004, incorporated herein by reference to
      Exhibit 2.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)2.2
                  
                  First
      Amendment to Agreement and Plan of Merger among Ener1 Acquisition Corp.,
      Registrant and Ener1, Inc., dated as of October 13, 2004,
      incorporated herein by reference to Exhibit 2.2 to Amendment No, 1 to
      Splinex’s Registration Statement on Form S-1 filed with the Commission on
      October 15, 2004 (Registration No. 333-116817)2.3
                  
                  Second
      Amendment to Agreement and Plan of Merger among Ener1 Acquisition Corp.,
      Splinex and Ener1, Inc., dated as of December 23, 2004, incorporated
      herein by reference to Exhibit 2.3 to Amendment No. 3 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on December
      27, 2004 (Registration No. 333-116817)3.1
                  
                  Certificate
      of Incorporation of Splinex, incorporated herein by reference to Exhibit
      3.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)3.2
                  
                  Certificate
      of Merger of Splinex, incorporated herein by reference to Exhibit 3.2 to
      Amendment No. 3 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on December 27, 2004 (Registration No.
      333-116817)3.3
                  
                  Bylaws
      of Splinex, incorporated herein by reference to Exhibit 3.3 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)3.4
                  
                  Certificate
      of Amendment of Articles of Incorporation, incorporated herein by
      reference to Appendix A to Schedule 14C filed with the Commission on
      February 11, 2009.3.5
                  
                  Amendment
      to Certificate of Incorporation reflecting name change, incorporated
      herein by reference to Exhibit 3.1 to Form 8-K filed with the Commission
      on October 15, 2010.10.1
                  
                  Bridge
      Loan Agreement between Registrant and Ener1 Group, Inc. dated November 2,
      2004 incorporated herein by reference to Exhibit 10.13 to Amendment No. 2
      to Splinex’s Registration Statement on Form S-1 filed with the Commission
      on December 3, 2004 (Registration No. 333-116817)10.2
                  
                  Amendment
      to Bridge Loan Agreement between Registrant and Ener1 Group, Inc. dated
      November 17, 2004 incorporated herein by reference to Exhibit 10.14 to
      Amendment No. 2 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on December 3, 2004 (Registration No.
      333-116817)10.3
                  
                  Employment
      Agreement between Christian Schormann and Splinex dated January 12, 2005,
      incorporated herein by reference to Exhibit 10.15 of the Current Report on
      Form 8-K filed with the Commission on January 25, 2005.10.4
                  
                  Revolving
      Debt Funding Commitment Agreement between Bzinfin, S.A. and Registrant,
      dated as of June 9, 2004, incorporated herein by reference to Exhibit
      10.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)10.5
                  
                  2004
      Stock Option Plan of Registrant, incorporated herein by reference to
      Exhibit 10.2 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on June 24, 2004 (Registration No.
    333-116817)10.6
                  
                  Form of
      Stock Option Agreement of Registrant, incorporated herein by reference to
      Exhibit 10.3 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on June 24, 2004 (Registration No.
    333-116817)10.7
                  
                  Sublease
      Agreement between Ener1 Group, Inc. and Splinex, LLC, dated as of
      November 1, 2003, assigned to Registrant as of April 1, 2004,
      incorporated herein by reference to Exhibit 10.4 to Splinex’s Registration
      Statement on Form S-1 filed with the Commission on June 24, 2004
      (Registration No.
333-116817)


23





10.8
                
                Contribution
      Agreement between Splinex, LLC and Registrant, dated as of April 1,
      2004, incorporated herein by reference to Exhibit 10.5 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)10.9
                
                Assignment
      and Assumption of Employment Agreements between Splinex, LLC and
      Registrant, dated as of April 1, 2004, incorporated herein by
      reference to Exhibit 10.6 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on June 24, 2004 (Registration No.
      333-116817)10.10
                
                Global
      Bill of Sale and Assignment and Assumption Agreement between Splinex, LLC
      and Registrant, dated as of April 1, 2004, incorporated herein by
      reference to Exhibit 10.7 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on June 24, 2004 (Registration No.
      333-116817)10.11
                
                Employment
      letter between Gerard Herlihy and Registrant, dated May 20, 2004,
      incorporated herein by reference to Exhibit 10.8 to Splinex’s Registration
      Statement on Form S-1 filed with the Commission on June 24, 2004
      (Registration No. 333-116817)10.12
                
                Consulting
      Agreement between Dr. Peter Novak and Registrant, dated
      January 1, 2004, incorporated herein by reference to Exhibit 10.9 to
      Splinex’s Registration Statement on Form S-1 filed with the Commission on
      June 24, 2004 (Registration No. 333-116817)10.13
                
                Form
      of Employee Innovations and Proprietary Rights Assignment Agreement,
      incorporated herein by reference to Exhibit 10.10 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)10.14
                
                Form
      of Indemnification Agreement, incorporated herein by reference to Exhibit
      10.11 to Amendment No. 3 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on December 27, 2004 (Registration No.
      333-116817)10.15
                
                Employment
      Agreement between Michael Stojda and Registrant, dated September 1,
      2004, incorporated herein by reference to Exhibit 10.12 to Amendment No. 1
      to Splinex’s Registration Statement on Form S-1 filed with the Commission
      on October 15, 2004 (Registration No. 333-116817)10.16
                
                Reseller
      Agreement between Waterloo Maple Inc. and TOT Energy, Inc. dated May 27,
      2005., incorporated herein by reference to Exhibit 10.1 to Splinex’s
      Current Report on Form 8-K, filed with the Commission on June 3,
      200510.17
                
                Severance
      Agreement dated November 21, 2005 by and between Splinex and Michael
      Stojda, incorporated by reference to Exhibit 10.1 to Splinex’s Current
      Report on Form 8-K, filed with the Commission on November 21,
      200510.18
                
                Termination
      Agreement dated October 17, 2005 by and between Splinex and Christian
      Schormann, incorporated by reference to Exhibit 10.2 to Splinex’s Current
      Report on Form 8-K, filed with the Commission on November 21,
      200510.19
                
                First
      Amendment to Splinex Technology, Inc. 2004 Stock Option Plan incorporated
      by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on June 30, 200910.20
                
                Joint
      Venture Agreement dated July 16, 2008 by and between the Company and
      Evgeni Bogarad, incorporated by reference to Exhibit 10.1 to the Current
      Report on Form 8-K, filed with the Commission on July 23,
    200810.21
                
                Notarial
      Deed dated July 17, 2008 by and between the Company and Korlea Invest
      Holding AG, incorporated by reference to Exhibit 10.20 to the Quarterly
      Report on Form 10-Q, filed with the Commission on November18,
      200810.22
                
                Subscription
      Agreement dated August 7, 2008 by and between the Company and TGR Energy,
      LLC, incorporated by reference to Exhibit 10.20 to the Quarterly Report on
      Form 10-Q, filed with the Commission on November 18,
  200810.23
                
                Amendment
      to the Subscription Agreement between TGR Energy, LLC and TOT Energy, Inc.
      dated January 12, 2010, incorporated by reference to Exhibit 10.20 to the
      Quarterly Report on Form 10-Q filed with the Commission on February 16,
      2010


10.24
              
              Assignment
      between TGR Energy, LLC and TOT Energy, Inc. dated January 12, 2010,
      incorporated by reference to Exhibit 10.21 to the Quarterly Report on Form
      10-Q filed with the Commission on February 16, 2010, incorporated by
      reference to Exhibit 10.24 to the Annual Report on Form 10-K, filed with
      the Commission on July 13, 2010.10.25
              
              Joint
      Venture Dissolution Agreement dated March 31, 2010 between TOT Energy, Inc
      and Sibburnefteservis, LTD., TOT-SIBBNS, LTD and Evgeni Bogorad,
      incorporated by reference to Exhibit 10.25 to the Annual Report on Form
      10-K, filed with the Commission on July 13,
  2010.




24




10.26
              
              Stock
      Repurchase Agreement dated April 28, 2010 between TOT Energy, Inc., TGR
      Energy, LLC and Dune Capital Group LLC, incorporated by reference to
      Exhibit 10.26 to the Annual Report on Form 10-K, filed with the Commission
      on July 13, 2010.14
              
              Code
      of Ethics incorporated by reference to Exhibit 10.2 to Splinex’s Annual
      Report on Form 10-K for the year ended March 31, 2005, filed with the
      Commission on June 30, 200531.1*
              
              Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2*
              
              Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1*
              
              Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002





* Filed
herewith.


25




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.





Net
      Element, Inc.RegistrantDate: November
      15, 2010
              By:
              /s/
      Jonathan NewName:
      Jonathan NewTitle:
      Chief Financial
Officer


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