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 June 30, 2010
 
  ̈
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT
 
 For the
transition period from ______________to _______________.
 
 Commission
File Number 0-49801
 
 MEDIANET
GROUP TECHNOLOGIES, INC.
 (Exact
name of small business issuer as specified in its charter)
 
 Nevada
              13-4067623(State
      or other jurisdiction of incorporation or
                organization)
              (I.R.S.
      Employer Identification No.)
 
 5200
Town Center Circle, Suite 601
 Boca
Raton, FL33486
 (Address
of principal executive offices)
  561-417-1500
 (Issuer’s
telephone number)
 
 (Former
name, former address and former fiscal year if changed since last
report)
  Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for the 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 Website, 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  ̈ 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 definitions of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” as defined in Rule 12b-2 of the Exchange
Act.
  Large
      accelerated filer
                 ̈Non-accelerated
      filer
                 ̈Accelerated
      filer
                 ̈Smaller
      reporting company
                x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈   No
x
 Number
      of shares of preferred stock outstanding as of August 23,
      2010:
                  3,858,067Number
      of shares common stock outstanding as of August 23, 2010:
                  28,621,680
  
  FORM
10-Q
 INDEX
 
 PART
      I: FINANCIAL INFORMATION
                  3Item
      1.
                  Financial
      Statements
                  3§
                  Consolidated
      Balance Sheets as of June 30, 2010 and September 30, 2009
                  3§
                  Consolidated
      Statements of Operations for the Three and Nine Months Ended June 30, 2010
      and 2009
                  4§
                  Consolidated
      Statements of Cash Flows for the Nine Months Ended June 30, 2010 and
      2009
                  5§
                  Condensed
      Notes to Consolidated Financial Statements
                  7Item
      2.
                  Management
      s Discussion and Analysis of Financial Condition and Results of
      Operations
                  25Item
      4T.
                  Controls
      and Procedures
                  32PART
      II: OTHER INFORMATION
                  33Item
      1.
                  Legal
      Proceedings
                  33Item
      1A.
                  Risk
      Factors
                  33Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  34Item
      5.
                  Other
      Information
                  34Item
      6.
                  Exhibits
                  35SIGNATURES
                  35INDEX
      TO EXHIBITS
                  36
  2
  PART I: FINANCIAL
INFORMATION
 ITEM 1.FINANCIAL
STATEMENTS
 
 MediaNet
Group Technologies, Inc. and Subsidiaries
 Consolidated
Balance Sheets
  June
      30, 2010
                      
                      
                      September
      30,
                        2009(Unaudited)
                      
                      
                      AuditedAssetsCurrent
      AssetsCash
      and cash equivalents
                      
                      $
                      1,024,426
                      
                      
                      $
                      2,499,237Restricted
      cash
                      
                      
                      1,860,447
                      
                      
                      
                      722,230Accounts
      receivable, net
                      
                      
                      205,155
                      
                      
                      
                      72,998Inventory
                      
                      
                      687,775
                      
                      
                      
                      401,141Prepaid
      expenses and other current assets
                      
                      
                      49,365
                      
                      
                      
                      127,209Deposits
                      
                      
                      -
                      
                      
                      
                      94,070Total
      current assets
                      
                      
                      3,827,168
                      
                      
                      
                      3,916,885Property
      and equipment, net
                      
                      
                      1,801,859
                      
                      
                      
                      94,139Other
      AssetsDeposits
                      
                      
                      80,641
                      
                      
                      
                      32,222Option
      agreement
                      
                      
                      250,000
                      
                      
                      
                      -Real
      estate contract
                      
                      
                      2,219,138
                      
                      
                      
                      -2,549,778
                      
                      
                      
                      32,222Total
      Assets
                      
                      $
                      8,178,806
                      
                      
                      $
                      4,043,246Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesAccounts
      payable
                      
                      $
                      248,882
                      
                      
                      $
                      121,461Accrued
      liabilities
                      
                      
                      19,183
                      
                      
                      
                      585,715Accrued
      incentives
                      
                      
                      -
                      
                      
                      
                      644,292Loyalty
      points payable
                      
                      
                      287,222
                      
                      
                      
                      209,025Commissions
      payable
                      
                      
                      751,190
                      
                      
                      
                      1,876,605Deferred
      rent
                      
                      
                      116,456
                      
                      
                      
                      -Income
      taxes payable
                      
                      
                      550,000
                      
                      
                      
                      287,838Customer
      deposits
                      
                      
                      9,766
                      
                      
                      
                      18,348Deferred
      revenue
                      
                      
                      3,137,905
                      
                      
                      
                      2,626,835Note
      Payable-related party
                      
                      
                      399,356
                      
                      
                      
                      191,355Total
      current liabilities
                      
                      
                      5,519,960
                      
                      
                      
                      6,561,475Stockholders'
      Equity (Deficit)Preferred
      stock - $.01 par value, 5 million shares authorized, 3,858,067 issued and
      outstanding
                      
                      
                      38,581
                      
                      
                      
                      -Common
      stock - $.001 par value, 50,000,000 shares authorized, 28,621,680
      outstanding (See Notes 11 and 13)
                      
                      
                      28,621
                      
                      
                      
                      27,304Additional
      paid-in capital
                      
                      
                      2,042,440
                      
                      
                      
                      (768,528
                      )Accumulated
      other comprehensive income (loss)
                      
                      
                      (519,450
                      )
                      
                      
                      (14,177
                      )Retained
      earnings (Deficit)
                      
                      
                      1,068,654
                      
                      
                      
                      (1,762,828
                      )Total
      stockholders' equity
                      
                      
                      2,658,846
                      
                      
                      
                      (2,518,229
                      )Total
      liabilities and stockholders' equity
                      
                      $
                      8,178,806
                      
                      
                      $
                      4,043,246
 
 See
accompanying notes to condensed consolidated financial
statements
  3
  MediaNet
Group Technologies, Inc. and Subsidiaries
 Consolidated
Statements of Operations
 (Unaudited)
  For
      the three months
                              
                              
                              For
      the nine monthsended
      June 30,
                              
                              
                              ended June
      30,2010
                              
                              
                              2009
                              
                              
                              2010
                              
                              
                              2009Revenues
                              
                              $
                              6,990,388
                              
                              
                              $
                              4,801,895
                              
                              
                              $
                              21,510,789
                              
                              
                              $
                              12,989,305Direct
      cost of revenues
                              
                              
                              2,533,736
                              
                              
                              
                              824,143
                              
                              
                              
                              11,955,932
                              
                              
                              
                              6,081,237Gross
      Profit
                              
                              
                              4,456,652
                              
                              
                              
                              3,977,752
                              
                              
                              
                              9,554,857
                              
                              
                              
                              6,908,069Operating
      ExpensesAdvertising
      and marketing
                              
                              
                              555,068
                              
                              
                              
                              2,315,178
                              
                              
                              
                              826,244
                              
                              
                              
                              2,488,068General
      and administrative
                              
                              
                              3,491,573
                              
                              
                              
                              1,059,688
                              
                              
                              
                              6,078,155
                              
                              
                              
                              3,326,381Total
      operating expenses
                              
                              
                              4,046,641
                              
                              
                              
                              3,374,866
                              
                              
                              
                              6,904,399
                              
                              
                              
                              5,814,450Income
      (loss) from operations
                              
                              
                              410,011
                              
                              
                              
                              602,886
                              
                              
                              
                              2,650,458
                              
                              
                              
                              1,093,619Interest income (expense) -net
                              
                              
                              (271
                              )
                              
                              
                              -
                              
                              
                              
                              (7,273
                              )
                              
                              
                              (3,437
                              )Income
      ( loss) from continuing operations before income taxes
                              
                              
                              409,740
                              
                              
                              
                              602,886
                              
                              
                              
                              2,643,185
                              
                              
                              
                              1,090,182Income
      taxes -benefit, (expense)
                              
                              
                              389,976
                              
                              
                              
                              -
                              
                              
                              
                              (550,000
                              )
                              
                              
                              -Income
      (loss) from continuing operations
                              
                              
                              799,716
                              
                              
                              
                              602,886
                              
                              
                              
                              2,093,185
                              
                              
                              
                              1,090,182Discontinued
      operationsLoss
      from discontinued segment
                              
                              
                              (568,380
                              )
                              
                              
                              (399,511
                              )
                              
                              
                              (568,380
                              )
                              
                              
                              (1,718,763
                              )Gain
      from sale of subsidiary
                              
                              
                              -
                              
                              
                              
                              74,990
                              
                              
                              
                              -
                              
                              
                              
                              74,990Net
      income (loss)
                              
                              
                              231,336
                              
                              
                              
                              278,365
                              
                              
                              
                              1,524,805
                              
                              
                              
                              (553,591
                              )Foreign
      currency translation adjustment
                              
                              
                              (417,970
                              )
                              
                              
                              (4,333
                              )
                              
                              
                              (505,273
                              )
                              
                              
                              -Comprehensive
      Income (Loss)
                              
                              $
                              (186,634
                              )
                              
                              $
                              274,032
                              
                              
                              $
                              1,019,532
                              
                              
                              $
                              (553,591
                              )Earnings
      (loss) per share:Continuing
      operationsBasic
                              
                              $
                              (0.03
                              )
                              
                              $
                              0.03
                              
                              
                              $
                              0.07
                              
                              
                              $
                              0.05Fully
      Diluted
                              
                              $
                              (0.00
                              )
                              
                              $
                              0.03
                              
                              
                              $
                              0.01
                              
                              
                              $
                              0.05Discontinued
      operationsBasic
                              
                              $
                              (0.01
                              )
                              
                              $
                              0.01
                              
                              
                              $
                              0.04
                              
                              
                              $
                              0.03Fully
      Diluted
                              
                              $
                              (0.00
                              )
                              
                              $
                              0.01
                              
                              
                              $
                              0.00
                              
                              
                              $
                              0.03Weighted
      average number of shares outstanding during the periodBasic
                              
                              
                              28,621,680
                              
                              
                              
                              20,674,802
                              
                              
                              
                              28,100,031
                              
                              
                              
                              20,674,802Fully
      Diluted
                              
                              
                              337,450,905
                              
                              
                              
                              20,674,802
                              
                              
                              
                              318,399,072
                              
                              
                              
                              20,674,802
  See
accompanying notes to condensed consolidated financial
statements.
  4
  MediaNet
Group Technologies, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 (Unaudited)
  For
      the nine monthsended June
      30,2010
                                            
                                            
                                            2009Cash
      flows from operating activitiesNet
      Income from continuing operations
                                            
                                            $
                                            2,093,185
                                            
                                            
                                            $
                                            1,090,182Reconcile
      net income (loss) to net cash used in operating
activities:Depreciation
      and amortization
                                            
                                            
                                            523,022
                                            
                                            
                                            
                                            17,583Discontinued
      operations
                                            
                                            
                                            (568,380
                                            )
                                            
                                            
                                            (1,718,763
                                            )(Increase)
      decrease in assets:Restricted
      cash
                                            
                                            
                                            (1,138,217
                                            )
                                            
                                            
                                            (1,248,451
                                            )Accounts
      receivable
                                            
                                            
                                            (132,157
                                            )
                                            
                                            
                                            (676,931
                                            )Inventory
                                            
                                            
                                            (286,634
                                            )
                                            
                                            
                                            33,693Prepaid
      expenses
                                            
                                            
                                            77,844
                                            
                                            
                                            
                                            225Deposits
                                            
                                            
                                            94,070
                                            
                                            
                                            
                                            -Increase
      (decrease) in liabilities:Accounts
      payable
                                            
                                            
                                            127,421
                                            
                                            
                                            
                                            406,336Accrued
      liabilities
                                            
                                            
                                            (566,534
                                            )
                                            
                                            
                                            19,414Accrued
      incentives
                                            
                                            
                                            (644,292
                                            )
                                            
                                            
                                            -Loyalty
      points payable
                                            
                                            
                                            78,197
                                            
                                            
                                            
                                            47,339Commission
      payable
                                            
                                            
                                            (1,125,415
                                            )
                                            
                                            
                                            1,152,168Deferred
      rent
                                            
                                            
                                            116,456
                                            
                                            
                                            
                                            -Income
      tax payable
                                            
                                            
                                            262,162
                                            
                                            
                                            
                                            -Customer
      deposits
                                            
                                            
                                            (8,582
                                            )
                                            
                                            
                                            (71,649
                                            )Deferred
      revenue
                                            
                                            
                                            511,070
                                            
                                            
                                            
                                            1,183,831Net
      cash provided (used) in operating activities
                                            
                                            
                                            (586,784
                                            )
                                            
                                            
                                            234,977Cash
      flows from investing activities:Deposits
                                            
                                            
                                            (48,419
                                            )
                                            
                                            
                                            -Option
      agreement
                                            
                                            
                                            (250,000
                                            )
                                            
                                            
                                            -Purchase
      of software license
                                            
                                            
                                            (743,750
                                            )
                                            
                                            
                                            -Purchase
      equipment
                                            
                                            
                                            (149,319
                                            )
                                            
                                            
                                            (78,750
                                            )Net
      cash provided (used) in investing activities
                                            
                                            
                                            (1,191,488
                                            )
                                            
                                            
                                            (78,750
                                            )Cash
      flows from financing activitiesBorrowings
      under Note Payable rletaed party
                                            
                                            
                                            824,297
                                            
                                            
                                            
                                            56,500Repayments
      of Note Payable related party
                                            
                                            
                                            (654,021
                                            )
                                            
                                            
                                            -Proceeds
      from issuance of common shares
                                            
                                            
                                            133,185
                                            
                                            
                                            
                                            608,744Net
      cash provided (used) by financing activities
                                            
                                            
                                            303,461
                                            
                                            
                                            
                                            665,244Net
      increase (decrease) in cash and equivalents
                                            
                                            
                                            (1,474,811
                                            )
                                            
                                            
                                            821,471Cash
      at beginning of period
                                            
                                            
                                            2,499,237
                                            
                                            
                                            
                                            80,037Cash
      at end of period
                                            
                                            $
                                            1,024,426
                                            
                                            
                                            $
                                            901,508
 
 See
accompanying notes to condensed consolidated financial statements.
  5
  MediaNet
Group Technologies, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows (Continued)
 (Unaudited)
  Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                  
                  $
                  7,273
                  
                  
                  $
                  1,989Cash
      paid for income taxes
                  
                  
                  -
                  
                  
                  
                  -Supplemental
      disclosures of non-cash transactions:Foreign
      translation adjustment - comprehensive loss
                  
                  $
                  (505,273
                  )
                  
                  
                  -Stock
      issued for Software
                  
                  $
                  1,337,673
                  
                  
                  
                  -Shareholder
      contribution for real estate contract
                  
                  $
                  1,440,708
                  
                  
                  
                  -Recapitalization
                  
                  $
                  6,874,886
                  
                  
                  
                  -Cashless
      warrant
                  
                  $
                  482
                  
                  
                  
                  -Preferred
      stock issued
                  
                  $
                  523,866
                  
                  
                  
                  -
 
 See
accompanying notes to condensed consolidated financial
statements.
  6
  MediaNet
Group Technologies, Inc. and Subsidiaries
 Condensed
Notes to Consolidated Financial Statements
 (Unaudited)
 
 Note
1 - Description of Business
 
 MediaNet
Group Technologies, Inc. (“MediaNet Group” or the “Company”), through its wholly
owned subsidiaries, is a global marketing company that sells high end branded
merchandise to consumers through Internet-based auctions conducted under the
trade name “DubLi.com.”  As of June 30, 2010, our online auctions were
conducted in Europe, North America, Australia and New Zealand and a global
auction portal serving the balance of the world.  We have a large
network of independent business associates that sold “credits”, or the right to
make a bid in one of our auctions (referred to herein as “Credit” or “DubLi
Credits”).  These auctions are designed to offer consumers real
savings on these high end goods.  The Company, through its BSP Rewards
subsidiary, also offers private branded loyalty and reward web malls where
members receive rebates (rewards) on products and services from participating
merchants.
 
 The
Company is organized in Nevada and has its principal executive offices in Boca
Raton, Florida.  The Company’s wholly owned subsidiaries are domiciled
in Delaware, Florida and Nevada in the United States and in the, British Virgin
Islands, Cyprus and Berlin, Germany.
 
 As of
August 23, 2010, our President and Chief Executive Officer, through his
beneficial ownership of the Company’s outstanding Series A Preferred Stock, has
the indirect shared power to cast approximately 88% of the combined votes that
can be cast by the holders of the Common Stock and the Series A Preferred Stock,
which generally vote together as a single class on all matters submitted to the
vote of shareholders. Accordingly, he, along with another person who is not an
officer or director of the Company, has the power to influence or control the
outcome of important corporate decisions or matters submitted to a vote of our
shareholders, including, but not limited to, increasing the authorized capital
stock of the Company, the dissolution, merger or sale of the Company’s assets
and the size and membership of the Board of Directors and all other corporate
actions.
  Note
2 - Summary of Significant Accounting Policies
  Basis of
Presentation
  The
accompanying unaudited condensed consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information, the instructions to Form 10-Q and
Article 10 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not contain all the information and notes required by
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
which are necessary for the fair presentation of the condensed consolidated
financial statements have been included and all such adjustments are of a normal
and recurring nature. The operating results for the three months ended June 30,
2010 are not necessarily representative of the results of future quarterly or
annual periods. The following information should be read in conjunction with the
audited consolidated financial statements and accompanying notes thereto
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2009.
  The
unaudited condensed consolidated financial statements include the accounts of
MediaNet Group Technologies, Inc. and its subsidiaries which are wholly owned or
otherwise under common control. All intercompany accounts and transactions have
been eliminated in consolidation. The following subsidiaries are included in the
consolidation at June 30, 2010 and 2009.
 
 BSP
      Rewards, Inc.
                  Wholly
      owned
                  Actively
      engaged in businessCG
      Holdings, Ltd.
                  Wholly
      owned
                  Actively
      engaged in businessDUBLICOM
      Limited
                  Wholly
      owned
                  Actively
      engaged in businessDubLi
      Network Limited
                  Wholly
      owned
                  Actively
      engaged in businessLenox
      Logistik und Service GmbH
                  Wholly
      owned
                  Actively
      engaged in businessLenox
      Resources, LLC
                  Wholly
      owned
                  Actively
      engaged in businessDubLi
      Logistics LLC
                  Wholly
      owned *
                  Actively
      engaged in businessDubLi
      Properties, LLC
                  Wholly
      owned *
                  Actively
      engaged in businessDubLi.com,
      LLC
                  Under
      Common Control
                  Discontinued
      operationsDubLi.com
      GmbH
                  Under
      Common Control
                  Discontinued
      operationsDubLi
      Network, LLC
                  Under
      Common Control
                  Discontinued
      operations
 *
Acquired May 24, 2010
  7
  As is
more fully described in Note 12 to the Financial Statements, DubLi Logistics was
identified as one of the consolidated subsidiaries of the Company in Amendment
No. 1 to the Company’s Form 8-K filed with the SEC on February 4, 2010 (the
“Form 8-K”) and the Company’s Form 10-Q for the quarter ended December 31, 2009
(the “Form 10-Q”) based upon DubLi Logistic’s historical and current operation
as an affiliated, profitless, product purchasing agent of
DUBLICOM.  DubLi Logistics is operated exclusively by employees of
Lenox Logistik.
  The results of operations and assets
and liabilities of DubLi.com, LLC’s subsidiaries were also included in the
Company’s consolidated results of operations as reported in the Form 8-K and
Form 10-Q based upon their common ownership and historical relationship to CG
and its other consolidated subsidiaries. DubLi.com, LLC, which is a holding
company, has never directly operated a business and its subsidiaries were sold
or their businesses were discontinued in the second quarter of
2009.
 
 The
condensed balance sheet as of September 30, 2009 has been derived from financial
statements audited by Lake & Associates LLC, independent public accountants,
as indicated in their report included in the Company’s 10-K for September 30,
2009.
  The
Company has evaluated subsequent events and determined no adjustment or
additional disclosure other than that already made to these financial statements
, specifically in Note 12, is considered necessary based on this
evaluation.
  Accounting
Principles
  The
consolidated financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the United States of
America.
   Recent Authoritative
Accounting Pronouncements
  In
September 2009, the Financial Accounting Standards Board (“FASB”) issued ASC
605-25,Revenue Recognition -
Multiple-Deliverable Revenue Arrangements. This guidance addresses how to
separate deliverables and how to measure and allocate consideration to one or
more units of accounting. Specifically, the guidance requires that consideration
be allocated among multiple deliverables based on relative selling prices. The
guidance establishes a selling price hierarchy of (1) vendor-specific
objective evidence, (2) third-party evidence and (3) estimated selling
price. This guidance is effective for annual periods beginning after
December 15, 2009 but may be early adopted as of the beginning of an annual
period. The Company is currently evaluating the effect that this guidance will
have on its consolidated financial position and results of operations, if
any.
  Foreign
Currency
  Financial
statements of foreign subsidiaries operating in other than highly inflationary
economies are translated at year-end exchange rates for assets and liabilities
and historical exchange rates during the year for income and expense accounts.
The resulting translation adjustments are recorded within accumulated other
comprehensive income or loss. Financial statements of subsidiaries operating in
highly inflationary economies are translated using a combination of current and
historical exchange rates and any translation adjustments are included in
current earnings. Gains or losses resulting from foreign currency transactions
are recorded in other expense.
  8
  Reclassifications
 
 Certain
amounts reported in previous periods have been reclassified to conform to the
Company’s current period presentation.
  Management’s Use of
Estimates and Assumptions
  The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates, judgments and assumptions that affect the
reported amounts of the assets and liabilities, disclosure of contingent assets
and liabilities, deferred income, accruals for incentive awards and unearned
auction Credits at the date of the consolidated financial statements, and the
reported amounts of revenue and expense during the reporting periods. Examples,
though not exclusive, include estimates and assumptions of: loss contingencies;
depreciation or amortization of the economic useful life of an asset;
stock-based compensation forfeiture rates; estimating the fair value and
impairment of assets; potential outcome of future tax consequences of events
that have been recognized in our financial statements or tax returns; estimates
of incentive awards and unearned auction Credits and determining when investment
impairments are other-than temporary. The Company bases its estimates on
historical experience and on various assumptions that the Company believes to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may materially differ
from these estimates under different assumptions and conditions.
  Cash, Cash Equivalents and
Financial Instruments
  The
Company considers all highly liquid instruments with original maturities of
three months or less at the date of purchase to be cash equivalents. In general,
investments with original maturities of greater than three months and remaining
maturities of less than one year are classified as short term
investments.
  Concentrations
  The
Company maintains its cash in bank deposit accounts in the United States,
Germany and Cyprus, which at times may exceed the federally insured limits in
those counties. The Company has not experienced any losses in such account and
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
  Fair Value of Financial
Instruments
  The
Company has adopted and follows ASC 820-10,“Fair Value Measurements and
Disclosures” for measurement and disclosures about the fair value of its
financial instruments. ASC 820-10 establishes a framework for measuring fair
value in accordance with generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, ASC 820-10
establishes a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three (3) broad levels. The fair
value hierarchy gives the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The three (3) levels of fair value hierarchy defined by ASC
820-10 are:
  Level 1
—         Inputs are unadjusted, quoted
prices in active markets for identical assets or liabilities at the measurement
date.
 
 Level 2
—         Inputs (other than quoted
market prices included in Level 1) are either directly or indirectly observable
for the asset or liability through correlation with market data at the
measurement date and for the duration of the instrument’s anticipated
life.
 
 Level 3
—         Inputs reflect management’s
best estimate of what market participants would use in pricing the asset or
liability at the measurement date. Consideration is given to the risk inherent
in the valuation technique and the risk inherent in the inputs to the model.
Valuation of instruments includes unobservable inputs to the valuation
methodology that are significant to the measurement of fair value of assets or
liabilities.
  9
 
 As
defined by ASC 820-10, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale, which was further clarified
as the price that would be received to sell an asset or paid to transfer a
liability (“an exit price”) in an orderly transaction between market
participants at the measurement date. The carrying amounts of the Company’s
financial assets and liabilities, such as cash and cash equivalents, prepaid and
other current assets,  and other assets, accounts payable, accrued
expenses, accrued interest, taxes payable, and other current liabilities,
approximate their fair values because of the short maturity of these
instruments. The Company’s notes payable to shareholders approximates the fair
value of such instrument based upon management’s best estimate of interest rates
that would be available to the Company for similar financial arrangements at
June 30, 2010.
  The
Company does not have any assets or liabilities measured at fair value on a
recurring or a non-recurring basis and, consequently, the Company did not have
any fair value adjustments for assets and liabilities measured at fair value at
June 30, 2010, nor any gains or losses reported in the statement of operations
that are attributable to the change in unrealized gains or losses relating to
those assets and liabilities still held at the reporting date.
 
 Inventory
  The
inventory represents merchandise purchased at cost. Inventories are stated at
lower of cost or market. Cost is determined on the first-in, first-out basis.
Shipping and handling costs are included in purchases for all periods
presented.
  Property, Software and
Leasehold Improvements
  Property
is recorded at cost. The cost of maintenance and repairs of equipment is charged
to operating expense when incurred. Depreciation and amortization is determined
based upon the assets’ estimated useful lives, and is calculated on a
straight-line basis when the asset is placed in service. When the Company sells,
disposes or retires equipment or replaces a leasehold improvement, the related
gains or losses are included in operating results. Property is depreciated over
five or seven years and begins when it is placed in service.
  Depreciation
and amortization are provided for financial reporting primarily on the
accelerated and the straight-line methods over the estimated useful lives of the
respective assets as follows:
  Estimated
                  Useful LifeOffice
      furniture, computer equipment and software
                3-5
      years
  Leasehold
improvements are recorded at cost and are amortized over the remaining lease
term.
  Impairment of Long-Lived
Assets
  In
accordance with Statement of ASC 360-10-35,Property, Plant and Equipment –
Subsequent Measurement, the Company reviews the carrying value of its
long-lived assets, which includes property and equipment, and intangible assets
(other than goodwill) annually or whenever events or changes in
circumstances indicate that the historical cost-carrying value of an asset may
no longer be appropriate. The Company assesses recoverability of the carrying
value of the asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition. The estimate of cash flows is
based upon, among other things, certain assumptions about expected future
operating performance, growth rates and other factors. Estimates of undiscounted
cash flows may differ from actual cash flows due to, among other things,
technological changes, economic conditions, changes to the business model or
changes in operating performance. If the sum of the undiscounted cash flows
(excluding interest) is less than the carrying value, an impairment loss will be
recognized, measured as the amount by which the carrying value exceeds the fair
value of the asset. Fair value is determined using available market data,
comparable asset quotes and/or discounted cash flow models.  Management
conducted an evaluation of long-lived assets and determined no impairments
currently exist.
  10
  Revenue
Recognition
 
 Product
Sales and Services - The Company recognizes revenue in accordance with
Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC
605-10”).  ASC 605-10 requires that four basic criteria be met before
revenue can be recognized: (i) persuasive evidence of an arrangement exists;
(ii) delivery has occurred or services have been rendered; (iii) the selling
price is fixed and determinable; and (iv) collectability is reasonably
assured.  Determination of criteria (iii) and (iv) are based on
management's judgments regarding the fixed nature of the selling prices of the
products delivered and the collectability of those
amounts.  Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded.  The Company defers any revenue
for which the product has not been delivered or is subject to refund until such
time that the Company and the customer jointly determine that the product has
been delivered or no refund will be required.
 
 Sales of
“DubLi Credits” - Consumers bid on the Company’s online auctions by purchasing
“DubLi Credits”either directly on DubLi.com or from DubLi’s independent business
associates who are members of the DubLi Marketing Network. All proceeds from the
sales of “DubLi Credits” are recorded as deferred revenue until used by the
consumer in the bidding process and the related revenue is earned.  
Purchases of DubLi Credits are non-refundable after six
months.  Unused Credits remaining in deferred revenue after 12 months
are recorded as revenue as if earned.  Management makes this estimated
adjustment to reduce the deferred revenue liability and to increase revenue
recognized based upon historical statistical utilization rates.
  BSP
Rewards revenue is earned principally from revenue rebates (commissions) earned
from merchants participating in its online shopping malls, gift card sales from
each rewards mall program and, web design/maintenance/hosting it earns for
building and hosting its private-branded online mall platform for outside
organizations. The Company receives rebates from participating merchants on all
transactions processed by BSP through its online mall platform. The percentage
rebate paid by merchants varies between 1% and 30% and BSP normally shares 50%
of the rebate with the member who made the purchase.
  Direct Cost of
Revenues
  Included
in Direct Cost of Revenues are the costs of goods sold and commissions and
incentive bonuses earned by business associates on the sales of DubLi Credits.
Commissions are based upon each business associate’s volume of Credit sales and
that of other business associates who are sponsored by the subject business
associate. Commissions are paid to business associates at the time of the
sale of the Credits and are recognized as a deferred expense until the Credits
are used and then are charged to expense. Incentive bonuses are paid either
monthly or quarterly and the related expense is recorded when the business
associate meets the stated sales goal for each particular promotional
event.
 
 Advertising and Marketing
Expenses
 
 Advertising
and marketing costs are expensed as incurred and include the costs associated
with internally developed websites and other marketing programs and
materials.
   Selling, General and
Administrative Expenses
  Selling,
general and administrative expenses include costs associated with distribution
activities, research and development, information technology, and other
administrative costs, including finance, legal and human resource functions.
Research and development is performed by in-house staff and outside consultants
and those costs are expensed as incurred.
 
 Comprehensive
Income
  Comprehensive
income consists of net earnings, unrealized gains or losses on investments,
foreign currency translation adjustments and the effective portion of the
unrealized gains or losses on derivatives. Comprehensive income is presented in
the consolidated statements of shareholders’ equity and comprehensive
income.
  11
  Income
Taxes
  The
Company accounts for income taxes under ASC 740-10,Income Taxes. Deferred
income tax assets and liabilities are recognized based on differences between
the financial statement and tax basis of assets and liabilities using presently
enacted tax rates. At each balance sheet date, the Company evaluates the
available evidence about future taxable income and other possible sources of
realization of deferred tax assets, and records a valuation allowance that
reduces the deferred tax assets to an amount that represents management’s best
estimate of the amount of such deferred tax assets that more likely than not
will be realized. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the statements of operations in the period that includes the enactment
date.
  Computation of Income and
Loss per Share
  The
Company computes income and loss per share in accordance with ASC 260,
previously SFAS No. 128, Earnings per Share.ASC 260
requires presentation of both basic and diluted earnings per share (“EPS”) on
the face of the statement of operations. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential Common Stock outstanding during the
period using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti-dilutive. In periods in which a net
loss has been incurred, all potentially dilutive shares of Common Stock are
considered anti-dilutive and thus are excluded from the calculation. As of June
30, 2010, the Company had two classes of potentially dilutive derivatives of
Common Stock as a result of warrants granted and convertible preferred stock
issued.
 
 Dividends
  The
Company’s policy is to retain earnings to provide funds for the operation and
expansion of our business and not to pay dividends.
  Share-Based
Payments
  The
Company accounts for stock-based compensation in accordance with the provisions
of ASC 718,Stock
Compensation, which establishes the accounting for share-based awards and
the inclusion of their fair value in net earnings in the respective periods the
awards, were earned. Consistent with the provisions of ASC 718, the Company
estimates the fair value of stock options and shares issued under its employee
stock purchase plan using the Black-Scholes option-pricing model. Fair value is
estimated on the date of grant and is then recognized (net of estimated
forfeitures) as expense in the Consolidated Statement of Operations over the
requisite service period (generally the vesting period).
  ASC 718
requires companies to estimate the fair value of stock-based compensation on the
date of grant using an option-pricing model. The Company uses the Black-Scholes
model to value stock-based compensation. The Black-Scholes model determines the
fair value of stock-based payment awards based on the stock price on the date of
grant and is affected by assumptions regarding a number of highly complex and
subjective variables. These variables include, but are not limited to the
Company’s expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise behaviors. Option-pricing
models were developed for use in estimating the value of traded options that
have no vesting or hedging restrictions and are fully transferable. Although the
fair value of stock options granted by the Company is determined in accordance
with ASC 718 and Staff Accounting Bulletin (“SAB”) No. 107,Share-Based Payment,
(“SAB 107”) as amended by SAB No. 110, using an option-pricing
model, that value may not be indicative of the fair value observed in a willing
buyer/willing seller market transaction.
  12
  Subsequent Events
 
 (Included
in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously
SFAS No. 165 “Subsequent Events”)
 
 SFAS
No. 165 established general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before the financial
statements are issued or available to be issued (“subsequent events”). An entity
is required to disclose the date through which subsequent events have been
evaluated and the basis for that date. For public entities, this is the date the
financial statements are issued. SFAS No. 165 does not apply to subsequent
events or transactions that are within the scope of other GAAP and did not
result in significant changes in the subsequent events reported by the Company.
SFAS No. 165 became effective for interim or annual periods ending after
June 15, 2009 and did not impact the Company’s financial statements. The
Company evaluated for subsequent events through the issuance date of the
Company’s financial statements. No recognized or non-recognized subsequent
events were noted except as described below in Note 11.
  Note
3 – Restricted Cash
  The
Company has agreements with organizations that process credit card transactions
arising from purchases of products by customers of the Company. Credit card
processors have financial risk associated with the products and services
purchased because the processor generally forwards the cash related to the
purchase to the Company soon after the purchase is completed. The organization
that processes MasterCard/Visa transactions allows the credit card processor to
create and maintain a reserve account that is funded by retaining cash that it
otherwise would deliver to the Company (i.e., “restricted cash”). Our credit
card processor requires a  20% reserve on each sale for a period of
six months.  The reserve requirements have ranged from a low of 5% to
a high of 50%.  The restricted cash is on deposit with two such
merchant account providers, one in Europe and one in the United States. Both
companies are large established organizations with whom the company had on
deposit $293,533 and $1,566,894, respectively at June 30, 2010.
 Note
4 – Foreign Currency
  All of
the Company’s foreign subsidiaries designate the Euro as their functional
currency. As of June 30, 2010, the total amount of cash held by foreign
subsidiaries was $.8 million unrestricted and $1.8 restricted for credit card
holdback and, of that amount, $.6 million was maintained or invested in
Euros.
  Note
5 – Inventory
  Inventory
consists of the following at the dates indicated:
  June
      30,
                    
                    
                    September
      30,2010
                    
                    
                    2009Merchandise
                    
                    $
                    279,584
                    
                    
                    $
                    321,095Gift
      Cards
                    
                    
                    408,191
                    
                    
                    
                    80,046Total
                    
                    $
                    687,775
                    
                    
                    $
                    401,141
 
 Note
6 – Property and Equipment
  Equipment
at cost consists of office furniture, computer equipment and software.
Depreciation expense for the three months and nine months ended June 30, 2010
was $174,341 and $523,022, respectively.
  June
      30,
                    
                    
                    September
      30,2010
                    
                    
                    2009Cost
                    
                    $
                    2,311,440
                    
                    
                    $
                    140,514Accumulated
      Depreciation
                    
                    
                    (509,581
                    )
                    
                    
                    (46,375
                    )Net
                    
                    $
                    1,801,859
                    
                    
                    $
                    94,139
  13
  Note
7 – Real Estate Contract
  DubLi
Properties, LLC was contributed to the Company by Mr. Hansen on May 24, 2010 in
satisfaction of Mr. Hansen’s oral pledge to contribute the Cayman Property
Rights (described below) to the Company.  The Cayman Property Rights,
which had a book value of $2,219,138 as of June 30, 2010, were acquired by DubLi
Properties, LLC in December 2009 in exchange for 34 parcels of real property
valued at $2,132,375, $43,381 of cash and an agreement by DubLi Properties LLC
to make an additional $824,244 of payments for a total contract price of
$3,000,000.  The Company will receive title to the land upon payment
of the remaining installments due under the agreement at June 30, 2010, as
follows:
  July
      2010
                    
                    $
                    200,000August
      2010
                    
                    
                    290,431September,
      2010
                    
                    
                    290,431Total
                    
                    $
                    780,862
  The
primary purpose of the Cayman Property Rights, which consists of a purchase deed
with respect to 15 lots in the Cayman Islands, is to reward DubLi business
associates upon completion of certain performance objectives. See also Note 13
Merger for a description of the May 24, 2010 acquisition of DubLi Properties,
LLC and its land purchase agreement. Subsequent to end of the quarter, the
Company has made both the July and August payments leaving only the September
payment due at the date of this report. To aid the Company in making the August
payment, Mr. Hansen lent the Company $190,431 under a short-term note payable
with the same terms and conditions of his prior loan as described in Note
9.
  Note
8 – Commitments and Contingencies
  The
Company has non-cancellable operating leases for office space in Berlin, Germany
and Boca Raton, Florida that expire in 2014 and 2020, respectively. Under the
lease agreement in Berlin, the Company leases 589.9 square meters of office
space and is obligated to pay property taxes, insurance and maintenance costs.
The lease agreement in Boca Raton is for 10,476 square feet of office space and
the Company is obligated to pay common area maintenance and sales
tax.  Total rental expense for the three and nine months ended June
30, 2010 was $91,112 and $173,093, respectively.
  Future
minimum rental commitments for non-cancellable operating leases at June 30,
2010, were as follows:
  2010
                    
                    $
                    250,1202011
                    
                    
                    343,5352012
                    
                    
                    346,1272013
                    
                    
                    348,7202014
                    
                    
                    351,312Thereafter
                    
                    
                    1,605,830Total
                    
                    $
                    3,245,644
  Note
9 – Loans from Shareholders
  During
2009, Michael Hansen, the President and Chief Executive Officer of the Company,
loaned the Company $99,855.  That loan together with a $116,500 loan
from the Company’s former CEO Martin Berns were repaid in the second
quarter.
  14
  During
the Quarter ended June 30, 2010, Michael Hansen advanced the Company $399,356
(290,244€) for working capital purposes. The loan is evidenced by an unsecured
note dated August 23, 2010, payable by the Company to Mr. Hansen in the
amount referenced above.  The note is interest free and due and
payable 364 days from the date of the initial advance and thereafter it
will be payable upon demand of Michael Hansen.
  Note
10 – Income Taxes
  MediaNet
Group Technologies Inc. and its subsidiaries file income tax returns in the
U.S.,Cyprus and Germany. The Company and each of its subsidiaries file separate
income tax returns.
 
 The
United States of America
  MediaNet
Group Technologies Inc., organized in Nevada and headquartered in Florida, is
subject to a gradual U.S. federal corporate income tax of 15% to 35%. The state
of Florida imposes a 5.5% corporate income tax.  The Company has
unused tax loss carryovers totaling $2,168,141 that expire beginning in the
years 2020 through 2028. The losses are subject to additional limitations due to
the more than 50% change in ownership of the Company.
  BSP
Rewards Inc. is organized and headquartered in Florida and is subject to a
gradual U.S. federal corporate income tax of 15% to 35%. The state of Florida
imposes a 5.5% corporate income tax.The Company has unused tax loss carryovers
totaling $1,287,546 that expire beginning in the years 2025 through 2028. The
losses are subject to additional limitations due to the more than 50% change in
ownership of the Company.
  DubLi
Logistics LLC and Lenox Resources, LLC are organized in Delaware and are treated
as partnerships for US federal and state income tax purposes passing all tax
liabilities and benefits to their owners.
  Cyprus
  DUBLICOM
Limited is organized under the current laws of the Cyprus and is subject to
tax on income or capital gains under the laws of therepublicofCyprus. In addition, upon
payment of dividends by the Company, no Cyprus withholding tax will be
imposed.
  British
Virgin Islands
  DubLi
Network Limited is organized under the current laws of the British Virgin
Islands, and is not subject to tax on income or capital gains. In addition, upon
payment of dividends by the Company, no British Virgin Islands withholding tax
will be imposed.
  Germany
  Lenox
Logistik und Service GmbH is subject to tax on income or capital gains under the
laws of Germany.
  Income
tax expense (benefit) attributable to earnings before income taxes in the
quarter ended June 30, 2010, consists of:
 
 For
      the three months
                      
                      
                      For
      the nine monthsended June
      30,
                      
                      
                      ended June
      30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009United
      States:Current
      taxesFederal
                      
                      $
                      (410,799
                      )
                      
                      
                      -
                      
                      
                      $
                      380,000
                      
                      
                      
                      -State
                      
                      
                      (21,621
                      )
                      
                      
                      
                      
                      
                      
                      20,000Total
      U.S. Tax Expense
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      400,000
                      
                      
                      
                      -GermanyCurrent
      Taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
      income Tax expense
                      
                      $
                      (432,420
                      )
                      
                      
                      -
                      
                      
                      $
                      400,000
                      
                      
                      
                      -
  15
  In fiscal
year 2009, the Company adopted amendments under ASC 740-10-50,Accounting for Uncertain Tax
Positions, formerly Financial Accounting Standards Board Interpretation
No. 48 (“FIN 48”), which clarify the accounting for uncertainty in tax positions
recognized in the financial statements. Under these provisions, the Company may
recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position would be
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement. The related amendments also provide
guidance on measurement, classification, interest and penalties associated with
tax positions, and income tax disclosures.
  The
Company is subject to taxation in the U.S., Germany, and various state
jurisdictions. The Company’s calculation of its tax liabilities involves dealing
with uncertainties in the application of complex tax laws and regulations in
various taxing jurisdictions. If, based on new facts that arise within a period,
management ultimately determines that the payment of these liabilities will be
unnecessary, the liability will be reversed and the Company will recognize a tax
benefit during the period in which it is determined the liability no longer
applies. Conversely, the Company records additional tax charges in a period in
which it is determined that a recorded tax liability is less than the ultimate
assessment is expected to be.
  The
application of tax laws and regulations is subject to legal and factual
interpretation, judgment and uncertainty. Tax laws and regulations themselves
are subject to change as a result of changes in fiscal policy, changes in
legislation, the evolution of regulations and court rulings. Therefore, the
actual liability for U.S., Germany taxes, or the various state jurisdictions,
may be materially different from management’s estimates, which could result in
the need to record additional tax liabilities or potentially reverse previously
recorded tax liabilities. Interest and penalties are included in tax
expense.
  Value
Added Tax
  In
accordance with the relevant taxation laws in the Germany, the normal VAT rate
for domestic sales is levied on the invoiced value of sales and is payable by
the purchaser. The Company is required to remit the VAT it collects to the tax
authority.The Company is also potentially subject to VAT tax in other European
Union jurisdictions.
  The value
added tax refundable presents the VAT that the Company paid for the purchasing
products and can be used to deduct the VAT related to the sale of
products.
  Note
11 – Stock and Equity
  Common
Stock
  The
Company had authorized 50,000,000 shares of Common Stock, par value $.001 per
share, at June 30, 2010 and September 30, 2009, respectively. At September 30,
2009, the Company had 27,843,552 shares of Common stock outstanding. At June 30,
2010 the Company had 28,621,680 shares of Common Stock
outstanding.
  Preferred
Stock
  The
Company had authorized 5,000,000 shares of Preferred Stock, par value $0.01 per
share, at June 30, 2010 and September 30, 2009, respectively. As of September
30, 2009, there were -0- shares of Preferred Stock outstanding.  As of
June 30, 2010, there were 3,858,067 shares of Preferred Stock outstanding, all
of which were designated as “Series A Convertible Preferred Stock” (the “Series
A Preferred Stock”).
  On
October 16, 2009, the Company filed a Certificate of Designation for the Series
A Preferred Stock pursuant to which the Company, at the direction of its Board
of Directors, designated the rights and preferences of all 5,000,000 authorized
shares of Preferred Stock. The Certificate of Designation was subsequently
amended on December 24, 2009 and May 24, 2010 to adjust the Conversion Ratio
(defined below).
  16
  Under the
Certificate of Designation in effect at June 30, 2010, the Series A Preferred
Stock is automatically convertible into shares of the Common Stock at the
conversion ratio of 55.514574 shares of Common Stock for each share of the
Series A Preferred Stock (the “Conversion Ratio”) in the event the shareholders
approve an increase in the number of authorized shares of Common Stock to not
less than five hundred million.  The holders of the Series A Preferred
Stock are not entitled to any dividend preference but are entitled to
participate pari passu in dividends declared with respect to the Common Stock as
if the Series A Preferred Stock was converted in Common Stock at the Conversion
Ratio.  Similarly, the holders of the Series A Preferred Stock are not
entitled to any liquidation preference but, in the event of any liquidation,
dissolution or winding up of the Company, the outstanding shares of Series A
Preferred Stock shall be deemed converted into shares of Common Stock at the
Conversion Ratio and shall participate pari passu in the distribution of
liquidation proceeds.  Holders of the Series A Preferred Stock are
entitled to vote on matters presented to the holders of Common Stock as if the
Series A Preferred Stock was converted into the Common Stock at the Conversion
Ratio.  Except as provided by Nevada law, holders of Series A
Preferred Stock vote together with the holders of Common Stock as a single
class.
  The
Company does not have reserved and available out of its authorized but unissued
shares of Common Stock the number of shares of common stock that shall be
sufficient to effect the conversion of all outstanding shares of Series A
Preferred Stock. The Company’s shareholders have not yet effectively approved an
increase in the Company’s authorized shares of Common Stock to five hundred
million (500,000,000) shares. These financial statements for the three
and nine month periods ended June 30, 2010 have been prepared using the
Conversion Ratio in effect as of June 30, 2010 (55.514574 shares of Common Stock
for each share of Series A Preferred Stock).
  Change in
control
  On
October 19, 2009, there was a change in the effective control of the Company. On
that date, pursuant to the Merger Agreement (the “Merger Agreement”), dated as
of August 10, 2009, and subsequently amended on September 25, 2009, among the
Company, the Company’s then subsidiary MediaNet Merger Sub, Inc., a Nevada
corporation, and CG Holdings Limited, the Company acquired all of the issued and
outstanding shares of CG for 5,000,000 shares of the Company’s Series A
Preferred Stock (the “Merger”). Holders of the Series A Preferred Stock are
entitled to vote on matters presented to the holders of Common Stock as if the
Series A Preferred Stock was converted into the Common Stock at the Conversion
Ratio.  In addition, the Series A Preferred Stock will automatically
convert into shares of the Common Stock at the Conversion Ratio in the event the
shareholders approve an increase in the number of authorized shares of Common
Stock to not less than five hundred million.  Accordingly, Zen Holding
Group Limited, the sole record holder of CG owns approximately 90% of the voting
power of the Company.  Michael Hansen and Michel Saouma, who is
neither a director nor executive officer of the Company, indirectly share the
right to vote and make investment decisions with respect to the shares held by
Zen.
  In
addition, as a condition to the Merger, the Company agreed to
appoint:
  ·
              Michael
      Hansen as a director and as President and Chief Executive Officer of the
      Company;
  ·
              Kent
      Holmstoel as Chairman of the Board and Chief Operating Officer of the
      Company; and
  ·
              Andreas
      Kusche as a director and as General Counsel of the
  Company.
  In
connection with the Merger, all of the persons serving as directors of the
Company as of October 19, 2009, other than Mr. Martin Berns, resigned as of such
date. On October 29, 2009, the Company appointed Mr. Hansen as President and
Chief Executive Officer, Mr. Holmstoel as Chief Operating Officer and Mr. Kusche
as General Counsel of the Company.  Also on such date, Steven
Adelstein was appointed to the Board by Mr. Berns, who was then the sole
remaining Board member. On February 23, 2010, Mr. Adelstein resigned and was
replaced by Andreas Kusche. The appointment of Messrs. Hansen and Holmstoel
is expected to be effective in early September 2010, upon our compliance with
Securities and Exchange Commission Rule 14f-1. The Company intends to file a
Schedule 14f-1 with Securities and Exchange Commission in September 2010
and make a distribution of such schedule to its shareholders.  The
Company will file a Form 8-K announcing the effectiveness of the appointment of
Messrs Hansen and Holmstoel.
  17
  Note
12 – Warrants and Options
  As of
September 30, 2009 and June 30, 2010, the Company had outstanding warrants to
purchase up to 3,058,000 and 2,219,750 shares of Common Stock, respectively.
These securities give the holder the right to purchase shares of the Common
Stock in accordance with the terms of the instrument.
  WarrantsBalance,
      September 30, 2009
                    
                    
                    3,098,000Exercised
                    
                    
                    (878,250
                    )Expired
                    
                    
                    (56,000
                    )Balance,
      June 30, 2010
                    
                    
                    2,163,750
  The
following table summarizes information with respect to the above referenced
warrants outstanding at June 30, 2010 which have expiration dates ranging from
June 2010 to February 2011:
  Exercise Price
                                        
                                        Number
                                          Outstanding
                                        
                                        Weighted
                                          Average
                                          Exercise Price
                                        
                                        Weighted
                                          Average
                                          Life YearsWarrants
                                        
                                        $
                                        0.25—
      $0.50
                                        
                                        2,163,750
                                        
                                        $
                                        0.43
                                        
                                        1.0
  Note
13 – Merger
  The Merger and Merger
Related Transactions
  Pursuant
to the Merger Agreement, the Company acquired on October 19, 2009 all of the
outstanding shares of CG in exchange for the issuance to CG’s shareholders of
5,000,000 shares of the Series A Preferred Stock.  The Agreement
provides that the Series A Preferred Stock will be automatically converted into
Common Stock of at such time as the Company’s Articles of Incorporation are
amended to increase the number of authorized shares of Common Stock to
500,000,000 shares.  Assuming all of the shares of Series A Preferred
Stock were converted into Common Stock as of October 19, 2009, the former record
holder of CG, Zen Holding Group Limited (“Zen”), would have become the record
holder of 90% of the then issued and outstanding Common Stock, on a fully
diluted basis.
   The
Company and CG originally contemplated that Zen would receive Common Stock upon
consummation of the Merger and the Merger would be completed in the first
quarter of 2010 in order to:
  -          
provide the Company sufficient time to prepare a complex proxy statement and
hold a shareholder meeting to consider approval of the Merger Agreement and an
amendment to the Company’s articles of incorporation to increase the number of
authorized shares of common stock from 50 million to 500 million shares;
and
  -           provide
the beneficial owners of CG adequate time to contribute and/or transfer a number
of entities or properties to CG.
  For
instance, upon completion of the merger the Company expected that CG would own
directly or indirectly all of the following subsidiaries or
assets:
  18
  -           DUBLICOM
LIMITED (“DUBLICOM”), a Cyprus limited company, which runs DubLi’s auction
websites;
 
 -           Lenox
Resources, LLC, a Delaware limited liability company, that holds DubLi’s
intellectual property;
 
 -           DUBLI
NETWORK LIMITED (“DUBLI NETWORK”), a British Virgin Islands limited company,
that operates DubLi’s global network with its business associates;
 
 -           Lenox
Logistik und Service GmbH (“Lenox Logistik”), a German corporation, serves as
the product purchasing agent of DUBLICOM for products sold to customers outside
of North America, Australia and New Zealand. Lenox Logistik also serves as an
outsourced service provider that employs persons who are collectively
responsible for DubLi’s administrative, accounting, marketing and purchasing
activities.
 
 -           DubLi
Logistics, LLC, a Delaware limited liability company (“DubLi Logistics”), serves
exclusively as the product purchasing agent of DUBLICOM for products sold to
customers in North America (United States, Mexico, Puerto Rico, Canada),
Australia and New Zealand;
 -           certain
rights to real estate in the Cayman Islands (the “Cayman Property Rights”) now
held by DubLi Properties, LLC, a Delaware limited liability
corporation.
 
 In compliance with Generally Accepted
Accounting Principles, the Company also expected to include in its consolidated
financial statements DubLi.com, LLC, a Delaware limited liability company that
was the holding company for two subsidiaries that have since discontinued
operations: DubLi.com GmbH, a German corporation, and DubLi Network, LLC, a
Delaware limited liability company.
 
 In early
September 2009, the Company and CG were advised by legal counsel that the merger
could be effected sooner than previously anticipated if, in lieu of Common
Stock, Zen received the Series A Preferred Stock, which was later converted into
Common Stock and distributed to the beneficial holders of Zen. Accordingly, on
October 19, 2009, the Merger was consummated and Zen was issued the Series A
Preferred Stock.
 
 Completed Post-Merger
Adjustments
 
 After
completing the Merger, the Company determined that certain of its expectations
with respect to the Merger had not been met.  In particular, upon
completion of the Merger on or about the targeted completion date of June 30,
2010, the Company expected that: it would (i) directly or indirectly hold 100%
of the equity interests of DubLi Logistics; (ii) directly or indirectly hold
certain real estate rights now held by DubLi Properties LLC; and (iii) certain
investors in DubLi.com, LLC would become shareholders in the
Company.
 
 As a
result of the acceleration of the Merger closing and the substantial amount of
work required to complete the Merger and the related SEC disclosure documents,
Mr. Hansen’s oral pledge to, prior to the Merger, transfer his 100% ownership
interest in DubLi Logistics to CG was not evidenced by definitive transfer
documents until May 24, 2010. Similarly, Mr. Hansen’s oral pledge to contribute
his 100% indirect ownership interest in the Cayman Property Rights (now owned by
DubLi Properties, LLC) to the Company in support of DubLi’s marketing programs
was not evidenced by definitive transfer documents until May 24,
2010.
 
 As of May 24, 2010, the Company has
acquired all of the equity interests in DubLi Logistics and DubLi Properties LLC
that the Company expected it would own.
  19
 
 DubLi Logistics - Purchasing Agent of
DUBLICOM
 
 DubLi Logistics was identified as one
of the consolidated subsidiaries of the Company in Amendment No. 1 to the
Company’s Form 8-K filed with the SEC on February 4, 2010 (the “Form 8-K”) and
the Company’s Form 10-Q for the quarter ended December 31, 2009 (the “Form
10-Q”) based upon DubLi Logistics historical and current operation as an
affiliated, profitless, product purchasing agent of DUBLICOM.  DubLi
Logistics is operated exclusively by employees of Lenox Logistik.
 
 DubLi Properties - Property Orally
Pledged to DubLi
  DubLi
Properties, LLC was contributed to the Company by Mr. Hansen on May 24, 2010 in
satisfaction of Mr. Hansen’s oral pledge to contribute the Cayman Property
Rights to the Company.  The  value of the contract at the
date of contribution was $1,440,708. The Cayman Property Rights, which had a
book value of $2,219,138 as of June 30, 2010, were acquired by DubLi Properties,
LLC in December 2009 in exchange for 34 parcels of real property, $43,381 of
cash and an agreement by DubLi Properties LLC to make an additional $824,244 of
payments.  The primary purpose of the Cayman Property Rights, which
consists of a purchase deed with respect to 15 lots in the Cayman Islands, is to
reward DubLi business associates upon completion of certain performance
objectives.
 DubLi.com, LLC - Discontinued
Businesses
 
 The
results of operations and assets and liabilities of DubLi.com, LLC’s
subsidiaries were also included in the Company’s consolidated results of
operations as reported in the Form 8-K and Form 10-Q based upon their common
ownership and historical relationship to CG and its other consolidated
subsidiaries. DubLi.com, LLC, which is a holding company, has never directly
operated a business and its subsidiaries were sold or their businesses were
discontinued in the second quarter of 2009.
 
 The
Company and Mr. Hansen had previously expected that the investors in DubLi.com,
LLC (the “DubLi.com Investors”) would receive from Zen certain shares of
“restricted” Common Stock.  With the acceleration of the Merger
closing and Merger restructuring, the DubLi.com Investors were expected to
receive from Zen 62,679,116 shares of restricted Common Stock upon the
conversion of the Series A Preferred Stock to Common
Stock.   Since Zen has not transferred and does not intend to
transfer Common Stock to the DubLi.com Investors as previously anticipated, the
Company and Zen entered into an agreement, dated May 24, 2010 (the “Post-Merger
Agreement”), pursuant to which Zen has returned to the Company 1,129,057 shares
of Preferred Stock, which were otherwise convertible into 62,679,116 shares of
Common Stock.
 
 Pursuant
to the Post-Merger Agreement, Zen has also returned to the Company 12,876 shares
of Series A Preferred Stock which were convertible into 714,817 shares of Common
Stock (the “Lenox Shares”).  Since Zen had not distributed the Lenox
Shares to various employees of Lenox, Zen returned the shares to the Company for
future use in the Company’s employee benefit plans.
 
 Accordingly, as of August 23, 2010, the
Company had 3,858,067 and 28,621,680 issued and outstanding shares of Series A
Preferred Stock and Common Stock, respectively.
  The
following table sets forth the beneficial ownership of the Common Stock and the
Preferred Stock as of August 23, 2010 for each of the Company’s greater than 5%
shareholders, directors, named executive officers and by all of the Company’s
directors and executive officers as a group.  For purposes of this
table, beneficial ownership is determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, which rule focuses on the power to vote
shares or make investment decisions with respect to such shares, potentially
irrespective of any pecuniary interest in such shares.  The
information as to the securities beneficially owned by Zen, Mr. Hansen and Mr.
Saouma are based upon a Schedule 13D filing by Mr. Hansen and Mr. Saouma on June
24, 2010.
  20
  Title of Class
                                  
                                  Name of Beneficial Owner
                                  
                                  
                                  Amount and
                                    Nature of
                                    Beneficial
                                    Ownership (1)
                                  
                                  
                                  Percentage
                                    of Class
                                    Owned (2)Series
      A Convertible Preferred Stock
                                  
                                  Zen
      Holding Group Limited
                                  (3)
                                  
                                  
                                  3,858,067
                                  (4)
                                  
                                  
                                  100
                                  %Michael
      B. Hansen
                                  (5)
                                  
                                  
                                  3,858,067
                                  (4)
                                  
                                  
                                  100
                                  %Michel
      Saouma
                                  (6)
                                  
                                  
                                  3,858,067
                                  (4)
                                  
                                  
                                  100
                                  %Common
      Stock
                                  
                                  Zen
      Holding Group Limited
                                  
                                  
                                  
                                  214,178,946
                                  (4),
      (7)
                                  
                                  
                                  88.2
                                  %Michael
      B. Hansen**
                                  
                                  
                                  
                                  214,178,946
                                  (4),
      (7)
                                  
                                  
                                  88.2
                                  %Michel
      Saouma
                                  
                                  
                                  
                                  214,178,946
                                  (4),
      (7)
                                  
                                  
                                  88.2
                                  %Joseph
      Saouma
                                  (8)
                                  
                                  
                                  —
                                  (9)
                                  
                                  
                                  *Martin
      A. Berns
                                  (10)
                                  
                                  
                                  5,907,511
                                  (11)
                                  
                                  
                                  20.6
                                  %Kent
      L. Holmstoel**
                                  (12)
                                  
                                  
                                  —
                                  
                                  
                                  
                                  *Andreas
      Kusche**
                                  (13)
                                  
                                  
                                  —
                                  
                                  
                                  
                                  *Betina
      Dupont Sorensen**
                                  (5)
                                  
                                  
                                  —
                                  (14)
                                  
                                  
                                  *Directors
      and Executive
                                    Officers
      as a Group
                                  (4),
                                    (7)
                                  
                                  
                                  214,588,946
                                  
                                  
                                  
                                  88.4
                                  %
  *
              Indicates
      less than 1% of outstanding shares beneficially
  owned.
 **
              Serves
      as an executive officer or director of the Company as of August 23,
      2010.
  (1)           A
person is deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days from August 23, 2010 upon exercise of options and
warrants and upon conversion of convertible securities.  The Series A
Preferred Stock is automatically convertible into shares of Common Stock upon
our amendment of our Articles of Incorporation to increase the authorized number
of shares of Common Stock to 500,000,000 (the “Articles
Amendment”).  For purposes of this table, we have assumed that the
Articles Amendment will be approved by our shareholders and filed with the
Nevada Secretary of State within 60 days of August 23, 2010 and, accordingly,
that the holders of the Series A Preferred Stock beneficially own the shares of
Common Stock into which the shares of Series A Preferred Stock are convertible.
Each beneficial owner's percentage ownership is determined by assuming that
options, warrants and convertible securities that are held by such person (but
not those held by any other person) and that are exercisable or convertible
within 60 days from August 23, 2010 have been exercised or
converted.
 
 (2)           Applicable
percentage ownership is based on 3,858,067 shares of Series A Preferred Stock
and 28,621,680 shares of Common Stock outstanding as of August 23,
2010.
 
 (3)           Zen
Holding Group Limited’s (“Zen”) address is 197 Main Street, Road Town, Tortola,
British Virgin Islands.
 
 (4)           All
of the outstanding shares of Preferred Stock are held of record by
Zen.  Mr. Hansen and Mr. Saouma have the indirect shared right to vote
and make investment decisions with respect to these shares held by Zen pursuant
to an oral agreement.  Mr. Hansen and Mr. Souma have a 24% and 2%
pecuniary interest, respectively, in Zen’s assets as of August 23, 2010 and,
accordingly, claim a 21.6% and 1.8% pecuniary interest, respectively, in the
outstanding shares of our Common Stock as of August 23, 2010 (assuming
conversion of the Series A Preferred Stock).  Each of Mr. Hansen and
Mr. Saouma disclaim a pecuniary interest in any other shares of Common
Stock.  The figures provided do not include the 1,141,933 shares of
Series A Preferred Stock returned by Zen to the Company and otherwise
representing a 20.70 % beneficial interest in the Company.
  21
  (5)           Mr.
Hansen’s and Ms. Dupont Sorensen’s address is The Palm Jumeirah, P.O. Box
283612, Dubai, U.A.E.
 
 (6)           Mr.
Michel Saouma’s address is Amine Gemayelstreet 226, Beirut, Achrafieh,
Lebanon.
 
 (7)           Includes
214,178,946 shares issuable upon the conversion of the Series A Preferred Stock
at the conversion ratio of 55.514574 shares of Common Stock for each share of
Series A Preferred Stock.
 
 (8)           Mr.
Joseph Saouma’s address is Amine Gemayelstreet 226, Beirut, Achrafieh,
Lebanon.  Mr. Joseph Saouma is the father of Mr. Michel
Saouma.
 
 (9)           Although
Mr. Joseph Saouma does not beneficially own any shares of Series A Preferred
Stock or Common Stock of the Company, he has a 21.39% pecuniary interest in
Zen’s assets as of August 23, 2010 and, accordingly, claims a 19.39% pecuniary
interest in the outstanding shares of our Common Stock as of August 23, 2010
(assuming conversion of the Preferred Stock).  Mr. Joseph Saouma
disclaims a pecuniary interest in any other shares of Common Stock.
 
 (10)         Mr.
Martin A. Bern’s address is 2936 Via Napoli, Deerlield Beach, FL
33442.
 
 (11)         Assuming
that the Series A Preferred Stock was converted to Common Stock as of August 23,
2010, Mr. Berns’ percentage beneficial ownership would decrease to
2.4%.
 
 (12)         Mr.
Kent L. Holmstoel’s address is Urbanización Haza del Algarrobo 32, Carretera de
Mijas, 2,2 km, 29639 Mijas Costa, Malaga, Spain.
 
 (13)         Mr.
Kusche’s address is Wisbyer Stasse 10B, 10439 Berlin, Germany.
 
 (14)         Ms.
Dupont Sorensen lives with Mr. Michael Hansen; however, she disclaims beneficial
ownership of any shares of Series A Preferred Stock or Common Stock of which Mr.
Hansen is the beneficial owner.  As a member of Mr. Hansen’s
household, Ms. Dupont Sorensen may be deemed to have a pecuniary interest in any
shares in which Mr. Hansen has a pecuniary interest. See footnote 4
above.  Ms. Dupont Sorensen disclaims a pecuniary interest in any
other shares of Common Stock.
 
 See the
section below entitled “Beneficial Ownership” for more information regarding the
beneficial ownership of the Company’s equity securities.
 
 Outstanding Post-Merger
Adjustments
 
 Amendment of Certificate of
Designation
 
 In
connection with the preparation of this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010 and a review of the transfer agent records, it came
to the Company’s attention that the number of shares of the Company’s Common
Stock outstanding prior to the Merger was understated by a total of 439,878 (the
“Additional Common Stock”), comprised of 500,000 shares purchased by a
shareholder in July 2007 (although the certificate was not issued until January
2010) offset by an accounting error in connection with the net exercise of
warrants involving approximately 60,000 shares.  In light of this
understatement, as of May 24, 2010 the Company amended the Certificate of
Designation setting forth the terms of the Preferred Stock (the “Adjustment
Amendment”).  In the Adjustment Amendment, the Conversion Ratio was
increased from 54.7229736 to 55.514574 to permit the holders of the Preferred
Stock to maintain their expected percentage ownership after taking into account
the Additional Common Stock.
  22
  Tender Offer for Outstanding DubLi
Interests
 
 As soon
as reasonably practicable the Company intends to commence a tender offer (the
“Tender Offer”) to purchase from the DubLi.com Investors all of their right,
title and interest in DubLi.com, LLC.  The Company anticipates seeking
to offer an aggregate of 62,679,116 shares of the Company’s Common Stock for the
Outstanding DubLi Interest (the “Tender Rate”), in a transaction registered with
the Securities and Exchange Commission or a transaction exempt from
registration. The Tender Offer is expected to be contingent upon at least 80% of
the Outstanding DubLi Interests being tendered.
 
 The Company would like to acquire the
Outstanding DubLi Interest in order to provide the DubLi.com, LLC Investors a
significant ownership interest in the Company.  Virtually all of the
DubLi.com, LLC Investors are former business associates of DubLi.com, LLC and
current business associates of DubLi Network, Ltd.  Notwithstanding
the financial failure of DubLi.com, LLC’s discontinued, standard online auction
business, the Company believes that the DubLi.com, LLC business associates
assisted the Company build brand awareness for the DubLi.com trade name and,
consistent with many of their expectations, would like them to have a
significant ownership interest in the entity which owns and is further
developing the DubLi.com brand.  See “Part II, Item 1A - Risk Factors
- The DubLi.com investors may not agree to participate in the “Tender Offer” for
a description of certain risks related to the proposed Tender
Offer.
 
 Registration of Zen’s Proposed
Distribution of Common Stock
 
 Pursuant
to the Post-Merger Agreement, the Company has agreed with Zen to register Zen’s
proposed distribution of the Company’s Common Stock to Zen’s beneficial holders
with the SEC. The Company and Zen have agreed to seek to have the subject
registration statement declared effective at such time as the Company is seeking
to complete the Tender Offer described above so that the DubLi.com, LLC
Investors and the current beneficial owners of Zen all receive registered Common
Stock at about the same time.
 
 Beneficial
Ownership
 
 As of
October 19, 2009 (the "Merger Date”), the Company had 5,000,000 shares of
Preferred Stock issued and outstanding, all of which were held of record by
Zen.  Mr. Michael Hansen and Mr. Michel Saouma indirectly control Zen
pursuant to an oral agreement.  As of the Merger Date, Zen was held of
record by two shareholders: MBD Investment Limited, a British Virgin Islands
company ("MBD"), which held 50% of the stock of Zen, and Sara Alpha Limited, a
British Virgin Islands Company ("Saouma Nominee"), which held 50% of
the stock of Zen as a trustee for Michel Saouma.  Sara Alpha
shall also serve as the sole record holder of MBD pursuant to the terms of a
trust agreement with Mr. Hansen.
 
 Notwithstanding
Zen's record ownership as of the Merger Date and each of Mr. Hansen’s and Mr.
Michel Saouma’s power to direct the voting and investment of the Company’s
equity securities held by Zen, each of MBD and the Saouma Nominee had previously
transferred certain pecuniary interests in Zen to various third parties (the
“Pre-Merger Zen Shareholders”).
  23
 
 In
connection with the Company’s acquisition of MSC, Inc. on October 29, 2009, each
of MBD and the Saouma Nominee agreed to transfer to MSC, Inc. a pecuniary
interest in Zen that was equivalent to a 2.0% pecuniary interest in the Company
as of October 29, 2009.
 
 As
previously described, on May 24, 2010 Zen returned to the Company an aggregate
of 1,141,933 shares of Preferred Stock pursuant to the Adjustment
Agreement.
 
 Note
14 – Subsequent Events
 
 Currency Translation
Effects
 
 Subsequent
to the balance sheet date the exchange rate between the EURO and the US dollar
decreased by approximately 4%.  These recent changes would increase the
currency translation adjustment and decrease comprehensive income and current
assets by approximately $69,000.
 
 On August
19, 2010 the Company’s CEO Michael Hansen lent the Company $190,431 as more
fully described in Notes 7 and 9 above.
  24
  ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 FORWARD
LOOKING STATEMENTS
 
 Introductory
Note
 Caution
Concerning Forward-Looking Statements
 
 The
discussion contained in this 10-Q under the Securities Exchange Act of 1934,
contains forward-looking statements that involve risks and
uncertainties.  The issuer’s actual results could differ significantly
from those discussed herein.  These include statements about our
expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,”
“will,” “we believe,” “the Company believes,” “management believes” and similar
language, including those set forth in the discussions under “Notes to Financial
Statements” and “Management’s Discussion and Analysis or Plan of Operation” as
well as those discussed elsewhere in this Form 10-Q.  The
forward-looking statements reflect our current view about future events and are
subject to risks, uncertainties and assumptions.  We wish to caution
readers that certain important factors may have affected and could in the future
affect our actual results and could cause actual results to differ significantly
from those expressed in any forward-looking statement.  The following
important factors could prevent us from achieving our goals and cause the
assumptions underlying the forward-looking statements and the actual results to
differ materially from those expressed in or implied by those forward-looking
statements:
 
 ·
              our
      inability to establish a maintain a large growing base of business
      associates;
  ·
              our
      inability to develop brand awareness for our online
    auctions;
  ·
              our
      failure to maintain the competitive bidding environment for our online
      auctions;
  ·
              our
      failure to adapt to technological
change;
  ·
              an
      assertion by a regulatory agency that one ore more of our auctions
      constitute some form of “gaming” or a
“lottery”;
  ·
              increased
      competition;
  ·
              increased
      operating costs;
  ·
              changes
      in legislation applicable to our
business;
  ·
              our
      failure to improve our internal
controls.
  See also
the risks discussed in under the heading “Risk Factors” in Part II, Item 1A
and those discussed in other documents we file with the Securities and Exchange
Commission.
 
 However,
other factors besides those referenced could adversely affect our results, and
you should not consider any such list of factors to be a complete set of all
potential risks or uncertainties. Any forward-looking statements made by us
herein speak as of the date of this 10-Q. We do not undertake to update any
forward-looking statement, except as required by law. Given these risks and
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements.
 
 INTRODUCTION
  The
following discussion and analysis summarizes the significant factors affecting:
(i) our consolidated results of operations for the Three Months and Nine Months
Ended June 30, 2010 compared to the Three months and Nine Months Ended June 30,
2009; and (ii) our financial liquidity and capital resources.  This
discussion and analysis should be read in conjunction with our consolidated
financial statements and notes included in this Form
10-Q.
  25
  MediaNet
Group Technologies, Inc. (“MediaNet Group” or the “Company”) through its wholly
owned subsidiaries, is a global marketing company that sells high end branded
merchandise to consumers through Internet-based auctions conducted under the
trade name “DubLi.com.”  As of June 30, 2010, our online auctions were
conducted in Europe, North America, Australia and New Zealand and a global
auction portal serving the balance of the world.We have a large network of
independent business associates that sold “credits”, or the right to make a bid
in one of our auctions (referred to herein as “Credit” or “DubLi
Credits”).  These auctions are designed to offer consumers real
savings on these high end goods.  The Company, through its BSP Rewards
subsidiary, also offers private branded loyalty and reward web malls where
members receive rebates (rewards) on products and services from participating
merchants.
 
 Online
Auctions
 
 The
DubLi.com auctions are designed to provide consumers with the ability to obtain
high quality goods at discounts to retail prices through a fun and convenient
shopping portal.  These auctions offer only high quality inventory
(brand new, newest model, full warranty) from the world’s leading
manufacturers.
 
 In order
to participate in and make bids in any the DubLi.com online auctions, consumers
must purchase Credits.  Each Credit costs US$0.80 (EUR 0.50) and
entitles the consumer to one bid in one auction.  Discounts are
available on the purchase of a substantial volume of Credits at one
time.  Credits can be purchased directly from DubLi or from one of
DubLi’s business associates.  Accordingly, we generate revenue from
the DubLi.com auctions both on the sale of Credits and on the sale of products
to the ultimate auction winners.
 
 DubLi has
two types of auctions which it operates on separate platforms for Europe, North
America (United States, Mexico, Puerto Rico, Canada), Australia and New Zealand
and a global portal serving the balance of world: Xpress and Unique
Bid.
  In an
Xpress auctions, the product up for auction is displayed with a starting price,
which is the lowest available retail price (the “Starting Price”). Each time a
person makes a bid (which costs him or her one Credit), the Starting Price is
decreased by US$0.25 (EUR 0.20) and the reduced price becomes visible to the
person making a bid and to no other person.  The bidder can choose to
purchase the item at the reduced price so shown or can opt to wait in the hopes
that others will make bids and drive down the price.  The actual
purchase price is always less than the Starting Price and is often a substantial
discount to the Starting Price.
  In an
Unique Bid auction, the auction is scheduled with a definitive start and end
time.  At any time prior to the auction end time, persons can make
bids (one bid for one Credit) on the price at which it would purchase the
product. Bids must be made in US$0.20 increments. The person who has placed the
lowest unique bid (i.e. no other person has bid the same US$0.20 incremental
amount) is entitled to purchase the product at such bid price.
  In both
styles of auctions, there are generally a high number of bidders and most
bidders place more than one bid.  Accordingly, between the sale of the
product and Credits, DubLi often realizes more than the price which it paid for
an item. Substantially all items sold by DubLi in the online auctions are
purchased by DubLi on the open market at market price without any discount,
although in the future DubLi may seek to work with wholesalers or retailers to
purchase items for less than they can be purchased by the average
customer.
 
 Credits
are sold to consumers directly by DubLi, through our network of business
associates, or through the Partner Program (described below).  As of
June 30, 2010, approximately 94% of our Credit sales are made through our
network of business associates and, accordingly, we are dependent on our
business associates for a significant portion of our sales.  As of
June 30, 2010, we had business associates located in over 126
countries.  Business associates are incentivized to locate and sponsor
new business associates (“Downstream Associates”) and establish their own sales
organization.
 
 Business
associates earn commissions on:
 
 ·
              the
      sale of Credits by the subject business associate directly to retail
      consumers (“Affiliated Consumers”) who are signed up by such business
      associate (“Retail Commissions”);
  ·
              the
      sale of Credits by Downstream Associates sponsored by the subject business
      associate or such business associate’s Downstream Associates
      (“Organizational Commission”).
  26
 
 To earn
Retail Commissions, a business associate must purchase Credits from DubLi and
resell such Credits to its Affiliated Consumers.  Credits are sold to
business associates by DubLi at the same price offered to retail
consumers.  When an Affiliated Consumer places an order for Credits,
the Credits are automatically deducted from the subject Business Associate’s
account and transferred to the Affiliated Consumer’s account, and the Business
Associate is eligible to earn Retail Commission.  If a Business
Associate does not have sufficient Credits in his account to cover an order by
an Affiliated Consumer, DubLi will supply the balance of Credits to fill the
order, but the business associate will not be eligible to earn commissions on
the Credits supplied by DubLi. The amount of the Retail Commissions earned by a
business associate varies from 5-25% based on the total Credits purchased by the
business associate over a consecutive twelve-month period.
 
 To become
a business associate, an applicant must register with DubLi by filling out an
online Business Associate Application and Agreement and purchase an e-Biz kit
for US $175.00. The e-Biz kit is the only purchase required to become a business
associate.
 
 DubLi
also offers a partner package and program (the “Partner Program”) to companies,
associations, affinity groups and non-profit organizations (which it refers to
as a “white label solution”). Using the Partner Program, these groups can,
through DubLi, open and utilize an auction portal open to their members. Each
partner earns a thirty percent (30%) commission on all Credits sold to such
Partner’s members through their portal. Using the Partner Program gives
participating organizations a professional web presence, access to products
offered on the auction portal through DubLi, and the use of DubLi to complete
all customer purchase processes. DubLi provides a variety of ready-made
templates that can be customized to the individual requirements of any
organization, including the use of the organization’s URL. The Company receives
the remaining 70% of the of the sales proceeds from which it pays all related
costs and expenses.
 
 Demand
for our products and services will be dependent on, among other things, market
acceptance of our products, traffic to our websites, growth in our Business
Associate Network, and general economic conditions. Inasmuch as a major portion
of our activities is the receipt of revenues from the sales of Credits and
continued demand at our auction portals.
  Our
success will be dependent upon implementing our plan of operations, which is
subject to various risks including those contained in our various public reports
filed with the Securities and Exchange Commission. We plan to strengthen our
position in existing and new markets by continuing to aggressively marketing our
products and services.
 
 BSP
Rewards
 
 BSP
Rewards provides private branded loyalty and rewards programs designed as a
shopping service through which members receive rebates (rewards points) on
purchases of products and services from participating merchants in our Internet
mall platform.  These rewards act as a common currency that may be
accumulated and used to make purchases of gift cards or donations to a
charity.  The rewards can additional be loaded onto a debit MasterCard
and usedtowards additional purchases from any participating merchant in the
program. Additionally, once the loyalty points are loaded on the MasterCard, the
consumer can utilize this debit card at any merchant where the debit MasterCard
is accepted.
  The BSP
Rewards program is a web based retail mall concept. Retail sellers of goods and
services who join in the program as participating merchants agree to pay rebates
to us for our members who purchase goods and services through the program at
their individual web stores. We collect all rebates paid by participating
merchants and retain a portion as our fee for operating the program. Another
portion of the rebate (generally one-half), is designated as a “reward” earned
by the member who made the purchase. A portion of the Company’s rebate is paid
to the organization or company which enrolled the member in the
program.
 
 DubLi
uses the BSP Shopping Mall in combination with its auction sites.
 
 We are
also developing a new platform of websites to better provide DubLi.com shoppers
with an enjoyable experience. The new platform is expected to provide DubLi.com
shoppers’ website displays that, among other things:facilitate a shoppers’
monitoring and participation in Xpress Auctions and Unique Bid Auctions
simultaneously;provide shoppers with expanded merchandise search capabilities;
and provides shoppers with expanded capabilities to monitor
auctions.
  27
 
 We are
also contemporaneously seeking to expand our service offering to a wide range of
entertainment products and services via streaming content downloads (i.e. music,
movies, television and radio).
 
 Working
from the “Cinch” technology we acquired from MSC, Inc. doing business as Lariat,
in October 2009, we intend to offer users a fast and convenient method of
locating and enjoying entertainment content readily available on the Internet,
free of charge.  We hope that Cinch will expand DubLi.com's relationship
with its shoppers and thereby assist us to better identify our shopper’s needs
and shopping habits.
  MediaNet
is targeting to launch its new websites in the fourth quarter of
2010.  See “Risk Factors.”
 
 Our
Industry
  The
Company provides a variety of shopping alternatives for which the industry is
segmented and diverse.  MediaNet Group’s service offering emphasize
bringing pricing value to consumers in a format that is unusual within the
current ecommerce environment. While the industry consists of many companies and
organizations that provide shopping, loyalty and rewards in various means and
fashions, few offer a complete package. There are many other similar businesses;
however, most others do not include many of the features and benefits that
MediaNet Group does. It requires significant time and resources to develop a
mature, flexible, broad-based platform and to attract and market the program to
a wide variety of business segments. We believe our various businesses have and
will generally continue to benefit from the growing popularity ofonline shopping
versus traditional brick and mortar shopping.
  Competition
  MediaNet
Group believes that there are a number of companies engaging in reverse
auctions. However, it does not believe that any of these companies present
significant competition to DubLi.The Company believes that its DubLi online
auction business has been able to distinguish itself from other competitors
based upon its advanced, customer friendly technology, multi-level marketing
strategy, local marketing knowledge through the DubLi Network sales
force,  and its exclusive focus on high quality inventory (brand new,
newest model, full warranty) from the world’s leading
manufacturers.
  The BSP
Rewards services offer private branded web mall program for companies,
organizations and associations with features that include, but is not limited
to, their logo and corporate image, cross links between the mall and their own
corporate websites where the end user associates the mall with the host brand.
Our competition includes other established loyalty/rewards companies, service
providers that aggregate affiliate network merchants and existing web portals.
While some competitors offer a private branded rewards program, most do not
offer all of the features as BSP, including our redemption option through a
stored value MasterCard, cross marketing applications and customer
communications. BSP intends to compete on the basis of pricing and speed to
market, ease of use, our platform and the number of features available in our
proprietary BSP Rewards application.
  Our
customers
  DubLi’s
customers are derived primarily from three sources, consumers from the general
public who are interested in the DubLi auction formats, consumers signed up by
business associates and consumers introduced to the DubLi auctions through our
Partner Program. Sometimes there is overlap among the three categories. Our
customers are based all over the world including Europe and North America. We
believe that our ability to attract potential buyers to our website is based
upon the quality of our merchandise and our focus on word-of-mouth advertising.
Our business strategy was designed based on the concept that by rewarding people
for their recommendation through referral based commissions, we could
potentially attract a large numbers of customers from around the world to our
auction portal.
  28
 
 BSP’s
business to business model enables customers from each of its private branded
malls to participate in the rewards malls.  These customer members are
either employees from the sponsor of the private branded mall, debit card
customers, representatives of network marketing programs and a variety of other
membership bases.
 
 Results
of Operations
 
 The following table sets forth certain
of our results of operations for the periods indicated.
 
 For the three months
                                  
                                  
                                  Percent
                                  
                                  
                                  For the nine months
                                  
                                  
                                  Percentended June 30,
                                  
                                  
                                  Change
                                  
                                  
                                  ended June 30,
                                  
                                  
                                  Change2010
                                  
                                  
                                  2009
                                  
                                  
                                  
                                  
                                  
                                  2010
                                  
                                  
                                  2009Revenues
                                  
                                  $
                                  6,990,388
                                  
                                  
                                  $
                                  4,801,895
                                  
                                  
                                  
                                  46
                                  %
                                  
                                  $
                                  21,510,789
                                  
                                  
                                  $
                                  12,989,305
                                  
                                  
                                  
                                  66
                                  %Direct
      cost of revenues
                                  
                                  
                                  2,533,736
                                  
                                  
                                  
                                  824,143
                                  
                                  
                                  
                                  207
                                  %
                                  
                                  
                                  11,955,932
                                  
                                  
                                  
                                  6,081,237
                                  
                                  
                                  
                                  97
                                  %Gross
      Profit
                                  
                                  
                                  4,456,652
                                  
                                  
                                  
                                  3,977,752
                                  
                                  
                                  
                                  12
                                  %
                                  
                                  
                                  9,554,857
                                  
                                  
                                  
                                  6,908,069
                                  
                                  
                                  
                                  38
                                  %Operating
      Expenses
                                  
                                  
                                  4,046,641
                                  
                                  
                                  
                                  3,374,866
                                  
                                  
                                  
                                  20
                                  %
                                  
                                  
                                  6,904,399
                                  
                                  
                                  
                                  5,814,450
                                  
                                  
                                  
                                  19
                                  %Income
      (loss) from operations
                                  
                                  
                                  410,011
                                  
                                  
                                  
                                  602,886
                                  
                                  
                                  
                                  -32
                                  %
                                  
                                  
                                  2,650,458
                                  
                                  
                                  
                                  1,093,619
                                  
                                  
                                  
                                  142
                                  %Interest
      income (expense) -net
                                  
                                  
                                  (271
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (7,273
                                  )
                                  
                                  
                                  (3,437
                                  )
                                  
                                  
                                  112
                                  %Provision
      for income taxes
                                  
                                  
                                  389,976
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (550,000
                                  )
                                  
                                  
                                  -Discontinued
      operations
                                  
                                  
                                  (568,380
                                  )
                                  
                                  
                                  (399,511
                                  )
                                  
                                  
                                  42
                                  %
                                  
                                  
                                  (568,380
                                  )
                                  
                                  
                                  (1,718,763
                                  )
                                  
                                  
                                  -67
                                  %Gain
      from sale of subsidiary
                                  
                                  
                                  -
                                  
                                  
                                  
                                  74,990
                                  
                                  
                                  
                                  -100
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  74,990
                                  
                                  
                                  
                                  -100
                                  %Foreign
      currency translation
                                  
                                  
                                  (417,970
                                  )
                                  
                                  
                                  (4,333
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (505,273
                                  )
                                  
                                  
                                  -Comprehensive
      Income
                                  
                                  $
                                  (186,634
                                  )
                                  
                                  $
                                  274,032
                                  
                                  
                                  
                                  -168
                                  %
                                  
                                  $
                                  1,019,532
                                  
                                  
                                  $
                                  (553,591
                                  )
                                  
                                  
                                  -284
                                  %
  Revenues
  We had
revenues of $6,990,388 for the three months ended June 30, 2010, an increase of
$2,188,493, or 46%, as compared to $4,801,895 in the same period ended June 30,
2009. In the nine months ended June 30, 2010, we had revenues of $21,510,789, an
increase of $8,521,484, or 66%, as compared to $12,989,305 the same period ended
June 30, 2009.  Revenue decreased $39,825 from $7,030,213 in the
second quarter of this year due primarily to the seasonal nature of online
retailing partly offset by an increase in the utilization rate of the DubLi
credits used for bidding in the online auctions.
  Revenue
increases occurred in both the sales of products and sales of Credits. The
increase in Credits sold was due to our overall domestic and foreign business
expansion resulting from our addition of new business associates and increased
productivity from existing associates between June 30, 2009 and June 30, 2010 as
well as certain new promotions.
  Direct
Cost of Revenues
  Direct
Cost of Revenues primarily includes the cost of acquiring products to sell in
our online auctions, website operation costs and business associate commission
expenses. During the three months ended June 30, 2010, we had direct cost of
revenues of $2,533,736, or 36% of revenues, versus direct cost of revenues of
$824,143, or 17% of revenues, in the same period in 2009.  During the
nine months ended June 30, 2010, we had direct cost of revenues of $11,955,932,
or 56% of revenues, compared to direct cost of revenues of $6,081,237, or 47%,
of revenues in the same period in 2009. This 207% and 97% respective increase is
primarily attributable to our increase in revenues. In addition, increased
incentives earned by our business associates contributed to the increase in
direct cost of revenues. Variability in the direct costs as a percentage of
revenues is a function of the reverse auction bidding process wherein the mix of
products offered at auction directly affects the amount of bidding revenue
earned from the redemption of DubLi Credits.
 29
 
 Gross
profit
  We had
gross profit of $4,456,652 and $3,977,752 for the three months ended June 30,
2010 and June 30, 2009, respectively.  Gross profit margin was 64% and
83% for the three months ended June 30, 2010 and June 30, 2009,
respectively.
 
 We had
gross profit of $9,554,857 and $6,908,069 for the nine months ended June 30,
2010 and June 30, 2009, respectively.  Gross profit margin was 44% and
53% for the nine months ended June 30, 2010 and June 30, 2009,
respectively.
  Operating
Expenses
  Operating
expenses for the three months ended June 30, 2010 were $4,046,641, or 58% of
revenues, compared to operating expenses of $3,374,866, or 70% of revenues, for
the same period ended June 30, 2009. Operating expenses for the nine months
ended June 30, 2010 were $6,904,399, or 32% of revenues, compared to operating
expenses of $5,814,450, or 45% of revenues, for the same period ended June 30,
2009. The increase in operating expenses during the three and nine months ended
June 30, 2010 was attributable to increases in our advertising and marketing
expenses and increases in administrative expenses resulting from planned
improvements to our operations including enhancements to our auction websites
and backend software.  Operating expenses also increased during the
period for travel and marketing as we worked to expand our Business Associate
Network. We also incurred significant legal expenses in connection with our SEC
filings.
 Provision
for Income Taxes
 
 The
Company is subject to taxation in the U.S., Germany, and various other
jurisdictions. We provide a quarterly income tax estimate which results in a
provision that is approximately 35% of net income, or $(550,000) for the nine
months ended June 30, 2010 after making a $389,976 reduction in the estimate for
the three months ended June 30, 2010.
 
 Discontinued
Operations
 
 In May
2009, the Company determined it was in the best long-term interest of the
Company to discontinue the operations of Dublicom GMBH., a wholly-owned
subsidiary. The Company recognized a net loss of $568,380 and $399,511 for the
three months ended June 30, 2010 and 2009, respectively, and $568,380 and
$1,718,763 for the nine months ended June 30, 2010 and 2009, respectively, on
the disposal of the subsidiary and reported in the Consolidated Statements of
Operations and Cash Flows within the caption, “discontinued
operations”.  The Company has completed the winding up of this
business.
 Foreign
Currency Translation
 
 We had a
foreign currency translation adjustment of $(417,970) in the three month period
ended June 30, 2010 and a foreign currency translation adjustment of $(4,333) in
the three month period ended June 30, 2009. We had a foreign currency
translation adjustment of $(505,273) in the nine month period ended June 30,
2010 and a $0 foreign currency translation adjustment in the nine month period
ended June 30, 2009.  These non-cash adjustments are the result of
translating the European subsidiaries’ financial statements from their
functional currency, the Euro into US Dollars for financial reporting
purposes.  The amounts are reflected as other comprehensive income
(loss) and do not affect net income or earnings per share.
 Comprehensive
Income
  We had a
comprehensive income (loss) of $(186,634), or (3)% of revenues, for the three
month period ended June 30, 2010 compared to comprehensive income of $ 274,032,
or 6% of revenues, for the same period ended June 30, 2009. Our comprehensive
income is a function of revenues, cost of sales and other expenses, loss from
discontinued operations and foreign currency translation adjustment as described
above. Earnings per share in the three month period ended June 30, 2010 were
$(0.01) per basic and $0.00 per fully diluted share based on basic weighted
average number of shares outstanding during the period of 28,621,680 and fully
diluted weighted average number of shares of 337,450,905 compared to earnings
per basic share of $0.01 and $0.01 per fully diluted share in the three months
ended June 30, 2009 on the basic and fully diluted weighted average number of
shares outstanding of 20,674,802.
 
 We had a
comprehensive income of $1,019,532, or 5% of revenues, for the nine month period
ended June 30, 2010 compared to a $(553,591), or (4)% of revenues, for the same
period ended June 30, 2009. Earnings per share for continuing operations in the
nine month period ended June 30, 2010 were $0.04 per basic and $0.00 per diluted
share based on the basic weighted average number of shares outstanding during
the period of 28,100,031 and fully diluted shares of 318,399,072 compared to
earnings per basic share of $(0.03) and $(0.03) per fully diluted shares in the
nine months ended June 30, 2009 on the basic and fully diluted weighted average
number of shares outstanding of 20,674,802
  30
 
 Liquidity
and Capital Resources
 
 General
  As of
June 30, 2010 and September 30, 2009, we had working capital of approximately
$(1,692,792) and $(2,644,590), respectively.  Our working capital has
decreased in the nine month period ended June 30, 2010 as we have utilized some
of our available capital to fund operations
(including various discontinued
operations) and purchase non-current assets such as real estate and
software.
 As of
June 30, 2010, we had cash and cash equivalents of $1,024,426.  We
also had $1,860,447 of restricted cash.  Restricted cash is a cash
reserve maintained by our credit card processors on sales processed by
them.  Our credit card processors are currently maintaining a
20%reserve for six months on each sale processed by them.
 Our
principal use of cash in our operating activities has historically been for
restricted cash, inventory and for selling and general and administrative
expenses.
 Operating
Activities
 Cash
flows provided by operating activities during the nine months ended June 30,
2010 were $(586,783), compared to cash flows provided by operating activities of
$234977 during the nine months ended June 30, 2009. Significant items reducing
cash flows from operations for the nine months ended June 30, 2010 include: an
increase in restricted cash of $1,138,217; a decrease in commissions payable of
$1,125,415; a decrease of accrued incentives $644,292; a decrease of accrued
liabilities $566,534; an increase in inventory of $286,634. Items increasing
cash flows from operations include significant increases in deferred revenue of
$511,070 and increase in accounts payable of $127,421.
  Investing
and Financing Activities
 Cash
flows (used) in investing activities were $(1,229,214) and $(78,750) for the
nine months ended June 30, 2010 and 2009, respectively. Our primary uses ofcash for investing activities were thesoftware license, deposits and
options, and real estate and office equipment.
  Cash
flows provided by financing activities were $133,185 and $608,744 for the nine
months ended June 30, 2010, and 2009, respectively, from proceeds of warrant
exercises and sales of common stock and
proceeds of $824,297 net of repayments of $654,021 from the Note Payable related
party.
  In the
nine months ended June 30, 2010, we utilized approximately $600,000of cash from
operations and $1.2 millionof cash for
investment activities.  We financed this $1.8 million use of cash with
our pre-existing cash resources and approximately $200,000 of net
cash advances from our Chief Executive Officer, Mr. Michael Hansen. 
For the quarter ending September 30, 2010, we anticipate our capital needs for
investing activities will be approximately $1 million.  Unless we can
generate significantly more capital from operations then we currently project
may be generated, in the quarter ending September 30, 2010 we will need to
secure additional capital to meet our projected cash needs for investment
purposes and to otherwise continue to grow our business as planned.  
Mr. Michael Hansen has provided us considerable financial support in the past,
and he has verbally committed to provide us the capital we currently project we
will need for investment purposes in the quarter ending September 30, 2010, if
and when needed. Mr. Hansen has not yet reduced his commitment to writing. On
August 19, 2010, Mr. Hansen lent the Company $190,431so that it could make the
scheduled payment on a real estate contract it acquired as an
investment.  If we are unable to generate or secure capital as
planned, we may not be able to develop our business as planned and/or may be
compelled to seek alternative sources of capital in order to pursue our current
business plan.
  31
  ITEM
4T. CONTROLS AND PROCEDURES
  Disclosure
controls and procedures are the controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms.
  Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Exchange Act as of June 30, 2010.  Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that as of such date, our disclosure controls and procedures were (1) not
sufficiently designed to ensure that material information relating to Company,
including our consolidated subsidiaries, was made known to them by others within
those entities, particularly in the period in which this report was being
prepared and (2) not effective, in that they did not provide reasonable
assurance that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms. The
Chief Executive Officer and Chief Financial Officer further concluded that the
disclosure controls and procedures were not effective as of the following prior
periods:nine months ended September 30, 2009; three months ended December 31,
2009; six months ended March 31, 2010 and; nine months ended June 30,
2010.
  More
specifically, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were not effective due
to:
 
 (i)           inadequate
accounting personnel;
 
 (ii)         delays
in the post-Merger integration of the Company’s and CG’s administrative,
accounting and reporting systems and procedures;
 
 (iii)        delays
in the post-Merger integration and implementation of an effective system of
internal control that governs the combined entities.
 
 (iv)        delays
in the adoption of board charters and policies and procedures that specify the
policies and procedures to be utilized by the Company when considering and/or
engaging in related party transactions.
 
 Remediation
Steps to Address Material Weakness:
  To
address the identified material weakness discussed above, we are in the process
of enhancing our internal control processes.  To date, we
have:
  (i) engaged a
law firm to assist us in improving our securities law compliance and disclosure
and our corporate governance systems
 
 (ii)         engaged
a firm of ERP system consultants to assist with the integration of the
Companies’ subsidiaries accounting and reporting systems into a single automated
system;
 
 (iii)         hired
a new Chief Technical Officer;
 
 (iv)        terminated
our former Chief Financial Officer and commenced a process to engage a new Chief
Financial Officer, for which we have identified one highly qualified candidate,
who is currently assisting the Company with these remediation steps in a
consultant capacity;
  32
  (v)         commenced
a reorganization of our accounting and administrative staff designed to improve
workflow and enhance internal controls;
 
 (vi)        hired
a new Controller, and
 
 (vii)       commenced
the process of evaluating whether or not the Company should engage a new
independent auditor
 
 We will
soon begin the documentation and testing of a revised system of internal
controls over financial reporting as defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Exchange Act and in preparation for an attestation report
by our registered public accounting firm regarding internal control over
financial reporting for the year ending September 30, 2010.
 
 Other
than as set forth above, there were no changes in our internal control over
financial reporting identified in connection with the evaluation required by
paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our
last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
 
 PART II: OTHER
INFORMATION
  ITEM
1.       LEGAL PROCEEDINGS
  As of the
date of this report, we are not a party to any pending legal proceeding and are
not aware of any threatened legal proceeding. From time to time, we may be
involved in a variety of claims, suits, investigations, and proceedings arising
from the ordinary course of our business. Regardless of the outcome, litigation
can have an adverse impact on us because of defense costs, diversion of
management resources, and other factors. In addition, it is possible that an
unfavorable resolution of one or more such proceedings could in the future
materially and adversely affect our financial position, results of operations,
or cash flows in a particular period.
  ITEM
1A.    RISK FACTORS
  RISK
FACTORS
  Risks
Related to Our Operations
  The
Company has identified no additional risk factors other than those described
below or previously disclosed in its periodic reportsfiled with the Securities
and Exchange Commission.
 We
may need additional capital to grow our operations as planned
  In the
nine months ended June 30, 2010, we utilized approximately $600,000 of cash
from operations and $1.2 million of cash for investment
activities.  We financed this $1.8 million use of cash with our
pre-existing cash resources and approximately $200,000 of net cash advances
from our Chief Executive Officer, Mr. Michael Hansen.  For the quarter
ending September 30, 2010, we anticipate our capital needs for investing
activities will be approximately $1 million.  Unless we can generate
significantly more capital from operations then we currently project may be
generated, in the quarter ending September 30, 2010 we will need to secure
additional capital to meet our projected cash needs for investment purposes and
to otherwise grow our business as planned.  Mr. Michael Hansen has provided
us considerable financial support in the past, and he has verbally committed to
provide us the capital we currently project we will need for investment purposes
in the quarter ending September 30, 2010, if and when needed. Although Mr.
Hansen has not reduced his commitment to writing,  on August 19, 2010 Mr.
Hansen lent the Company $190,431 so that it could make the scheduled payment on
a real estate contract it acquired as an investment.  If we are unable to
generate or secure capital as planned, we may not be able to develop our
business as planned and/or may be compelled to seek alternative sources of
capital in order to pursue our current business plan.
  Our
search for acquisitions and joint ventures could result in the diversion or loss
of resources and litigation risk.
  We expect
to continue to evaluate and consider a wide array of potential strategic
transactions, including business combinations, acquisitions and dispositions of
businesses, technologies, services, products and other assets. At any given time
we may be engaged in discussions or negotiations with respect to one or more of
these types of transactions. Any of these transactions could be material to our
financial condition and results of operations. The process of locating and
evaluating potential acquisitions and joint ventures can be time consuming,
difficult and expensive. In addition, the Company may be subject to various
risks and business restrictions as it agrees to enter into non-disclosure
agreements, letters of intent or memorandums of understanding in an effort to
further explore potential transactions. Even if the Company enters into more
definitive agreements with respect to a prospective transaction, the Company and
any counter-parties to the transaction may, under certain circumstances, elect
or determine not to proceed. Accordingly, there is also no assurance that the
Company will ever recoup any of its investments or expenditures with respect to
any targeted transaction.
  In
connection with any proposed transaction, the Company also faces the risk that
it may need to expend resources in order to protect its rights, recoup its
investment and/or defend itself against claims of third parties. For instance,
the Company previously entered into a memorandum with a third party that
purported to own a vast library of the recording works of a world famous
performer and recording artist, various feature movie rights and certain
technology. Pursuant to the memorandum, the Company intended to acquire all of
the foregoing intellectual property rights in exchange for a significant amount
of the Company’s common stock and various capital commitments. After signing the
memorandum, the third party failed to demonstrate ownership of the intellectual
property rights it claimed it owned and breached other obligations under the
memorandum. The Company expects it will need to expend some amount of money in
order to seek to demonstrate the memorandum is now unenforceable and recoup the
capital it expended on the perceived business opportunity.
 33
  ITEM
2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  None
  ITEM
5.       OTHER INFORMATION
 
 Loans
from Chief Executive Officer
 
 During
the Quarter ended June 30, 2010, Michael Hansen advanced the Company $399,356
(290,244€) for working capital purposes.  The loan is evidenced
by an unsecured note, dated August 23, 2010, payable by the Company to Mr.
Hansen in the amount referenced above.  The note is interest free and
due and payable 364 days from the date of the initial advance, May 24,
2010, and thereafter it is payable upon demand of Michael
Hansen.
 
 Termination
of Former Chief Financial Officer
 
 Since the
Company filed its Form 8-K of July 16, 2010 announcing the termination of Mr.
Fernandez, Mr. Fernandez has alleged certain disputes with the Company and
threatened legal action.  More specifically, Mr. Fernandez has alleged
that the Company was aware of Mr. Fernandez’s “many disputes” with the Company
and “These disputes include but are not limited to accounting issues,
disclosures of material items to shareholders including pending litigations,
impairment to assets, revenue recognition, employment discrimination, my
benefits and severance pay as well as you prohibiting me from answering
shareholder inquiries.”Notwithstanding the Company's efforts to communicate with
Mr. Fernandez, the Company has been unable to understand the factual basis of
Mr. Fernandez's vague and non-specific allegations.
 The
Company believes Mr. Fernandez’s allegations are without merit.
  34
  ITEM 6.
EXHIBITS
 No.
                  Description
 
  10.1
                  Promissory
      Note, dated August 22, 2010, of the Company to Mr. Michael
      Hansen*
 31.1
                  Certification
      of Chief Executive Officer*
 31.2
                  Certification
      of Chief Financial Officer*
 32.1
                  Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.**
 32.2
                  Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of
2002**
 *
              Filed
      Herewith
 **
              Furnished
      Herewith
  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, there
unto duly authorized.
  MEDIANET GROUP TECHNOLOGIES,
      INC.Date:
      September3, 2010
                By:
                /s/ Michael B. HansenMichael
      B. Hansen
                  President
  35
  INDEX
TO EXHIBITS
 
 No.
              Description
 
 
  10.1
              Promissory
      Note, dated August 23, 2010, of the Company to Mr. Michael
      Hansen*
 31.1
              Certification
      of Chief Executive Officer*
 31.2
              Certification
      of Chief Financial Officer*
 32.1
              Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.**
 32.2
              Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002**
  *
              Filed
      Herewith
 **
              Furnished
      Herewith
  36