**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 
 **FORM
        10-Q**
 
 (MARK
        ONE)
 **x
        QUARTERLY REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE**
 **ACT
        OF 1934**
 
 For
        the
        quarterly period ended July 31, 2008
 
 OR
 
 **o
        TRANSITION REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**
 **EXCHANGE
        ACT OF 1934**
 
 For
        the
        transition period from _____ to ____
 
 Commission
        File No. 000-53367
 
 **DOT
        VN, INC.** ****
 (Exact
        name of registrant as specified in its charter)
  **Delaware**
              
              **20-3825987**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer
                Identification
                  No.)
 **9449
        Balboa Avenue, Suite 114**
 **San
        Diego, California** 92123
 (Address
        of principal executive offices, zip code)
 
 **(858)
        571-2007**
 (Registrant’s
        telephone number, including area code)
 
 (Former
        name, former address and former fiscal year,
 if
        changed since last report)
 
 Check
        whether the issuer (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
        (or for such shorter period that the registrant was required to file such
        reports), and (2) has been subject to such filing requirements for the past
        90
        days. Yes x No
o
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer, or a smaller reporting company.
        See
        the definitions of “large accelerated filer,” “accelerated filer” and “smaller
        reporting company” in Rule 12b-2 of the Exchange Act. (check one):
   Large accelerated filer o
              Accelerated filer o
              Non-accelerated filer o
              Smaller reporting company x
 (Do
        not
        check if a smaller reporting company)
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Exchange
        Act Rule 12b-2 of the Exchange Act):    Yes o No
x
 
 APPLICABLE
        ONLY TO CORPORATE ISSUERS
 
 As
        of
        September 10, 2008, there were 27,331,437 shares of the issuer’s common stock,
        par value $0.001 per share, outstanding.
  
  **DOT
        VN, INC.**
 **QUARTERLY
        REPORT ON FORM 10-Q**
 **FOR
        THE PERIOD ENDED JULY 31, 2008**
 
 **INDEX**
 
 **Index**
              
              
              **Page****Part
                  I.**
              **Financial
                Information**Item 1.
              Financial
                  Statements
              4Basis
                  of Presentation
              4Report
                  of Independent Registered Public Accounting Firm
              5Condensed
                  Consolidated Balance Sheet as of July 31, 2008 (unaudited) and
                  April 30,
                  2008.
              6Condensed
                  Consolidated Statements of Operations for the Three Months ended
                  July 31,
                  2008 and 2007 (unaudited).
              7Condensed
                  Consolidated Statements of Changes in Stockholders Equity for the
                  Three
                  Months ended July 31, 2008 (unaudited) and Year ended April 30,
                  2008
              8Condensed
                  Consolidated Statements of Cash Flows for the Three Months ended
                  July 31,
                  2008 and 2007 (unaudited).
              9Notes
                  to Condensed Consolidated Financial Statements
                  (unaudited).
              11Item 2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations.
              27Item 3.
              Quantitative
                  and Qualitative Disclosures About Market Risk.
              37Item 4T.
              Controls
                  and Procedures.
              37**Part
                  II.**
              **Other
                  Information**Item 1.
              Legal
                  Proceedings.
              38Item 2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds.
              38Item 3.
              Defaults
                  Upon Senior Securities.
              38Item 4.
              Submission
                  of Matters to a Vote of Security Holders.
              39Item 5.
              Other
                  Information.
              39Item 6.
              Exhibits.
              39**Signatures**
              
              
              40**Certifications**
  2
 CAUTIONARY
        NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 This
        Quarterly Report on Form 10-Q of Dot VN, Inc., a Delaware corporation (the
        “Company”) contains “forward-looking statements.” In some cases, you can
        identify forward-looking statements by terminology such as “may”, “will”,
“should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”,
“estimates”, “predicts”, “potential” or “continue” or the negative of such terms
        and other comparable terminology. These forward-looking statements include,
        without limitation, statements about our market opportunity, our strategies,
        competition, expected activities and expenditures as we pursue our business
        plan, and the adequacy of our available cash resources. Although we believe
        that
        the expectations reflected in the forward-looking statements are reasonable,
        we
        cannot guarantee future results, levels of activity, performance or
        achievements. Actual results may differ materially from the predictions
        discussed in these forward-looking statements. The economic environment within
        which we operate could materially affect our actual results. Additional
        factors that could materially affect these forward-looking statements and/or
        predictions include, among other things: (i) our limited operating history;
        (ii)
        our ability to obtain additional financing to complete our business plan;
        (iii)
        our ability to pay down existing debt; (iv) unforeseen costs and expenses;
        (v)
        potential litigation with our shareholders, creditors and/or former or current
        investors; (vi) the Company’s ability to comply with federal, state and local
        government regulations; (vii) the Company’s ability to maintain current material
        agreements with the government of Vietnam and secure additional agreements
        in
        furtherance of the Company’s business in Vietnam, Laos and Cambodia; and (viii)
        the exercise of the approximately 40.8% control Thomas Johnson, the Company’s
        Chief Executive Officer and Chairman of the Board of Directors, holds of
        the
        Company’s voting securities, (ix) the exercise of the approximately 38.0%
        control Lee Johnson, the Company’s President, Chief Technology Officer, and
        Chief Financial Officer and a Director, holds of the Company’s voting
        securities, (x) other factors over which we have little or no
        control ;
        and
        (xii) other factors discussed in the Company’s filings with the Securities and
        Exchange Commission (“SEC”).
 
 Our
        management has included projections and estimates in this Form 10-Q, which
        are
        based primarily on management’s experience in the industry, assessments of our
        results of operations, discussions and negotiations with third parties and
        a
        review of information filed by our competitors with the Securities and Exchange
        Commission or otherwise publicly available. We caution readers not to place
        undue reliance on any such forward-looking statements, which speak only as
        of
        the date made. We disclaim any obligation subsequently to revise any
        forward-looking statements to reflect events or circumstances after the date
        of
        such statements or to reflect the occurrence of anticipated or unanticipated
        events.
  3
   
 **Dot
                  VN, INC. AND SUBSIDIARIES**
 
 
 **PART
        I. FINANCIAL INFORMATION**
 
 **ITEM
        1. FINANCIAL STATEMENTS.**
 
 *BASIS
        OF PRESENTATION*
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America for interim financial reporting and the instructions
        for Form 10-Q pursuant to the rules and regulations of the Securities and
        Exchange Commission. Accordingly, they do not include all information and
        footnote disclosures necessary for a complete presentation of the financial
        position, results of operations, cash flows, and stockholders equity in
        conformity with generally accepted accounting principles. In the opinion
        of
        management, all adjustments considered necessary for a fair presentation
        of the
        results of operations and financial position have been included and all such
        adjustments are of a normal recurring nature.
 
 The
        unaudited condensed consolidated balance sheet of the Company as of July
        31,
        2008, and the related consolidated balance sheet of the Company as of April
        30,
        2008, which is derived from the Company's audited consolidated financial
        statements, the un-audited condensed consolidated statement of operations
        and
        cash flows for the three months ended July 31, 2008 and July 31, 2007 and
        the
        condensed consolidated statement of stockholders equity for the period of
        April
        30, 2007 to July 31, 2008 are included in this document. These unaudited
        condensed consolidated financial statements should be read in conjunction
        with
        the audited consolidated financial statements and related notes included
        in the
        Company’s most recently filed Form S-1/A.
 
 Operating
        results for the quarter and three months ended July 31, 2008 are not necessarily
        indicative of the results that can be expected for the year ending April
        30,
        2009.
  4
  **Chang
        G. Park, CPA, Ph. D.**
 **t**  **2667
        CAMINO DEL RIO S. SUITE B**  **t**  **SAN
        DIEGO**  **t**  **CALIFORNIA
        92108**  **t**
 **t**  **TELEPHONE
        (858)722-5953**  **t**  **FAX
        (858) 761-0341**  **t**  **FAX
        (858) 764-5480**
 **t**  **E-MAIL**  **changgpark@gmail.com**  ****  **t**
 
 
 **Report
        of Independent Registered Public Accounting Firm**
 
 
 To
        the
        Board of Directors of
 Dot
        VN,
        Inc.
 9449
        Balboa Avenue, Suite 114
 San
        Diego, CA 92123
 
 
 We
        have
        reviewed the accompanying condensed consolidated balance sheet of Dot VN,
        Inc.
        (the “Company”) as of July 31, 2008, and the related condensed consolidated
        statements of operation, condensed consolidated statements of changes in
        stockholders’ equity (deficit) and condensed consolidated cash flows for the
        three months ended July 31, 2008. These financial statements are the
        responsibility of the Company’s management.
 
 We
        conducted our review in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). A review of interim financial
        information consists principally of applying analytical procedures to financial
        data and making inquiries of persons responsible for financial and accounting
        matters. It is substantially less in scope than an audit conducted in accordance
        with the standards of the Public Company Accounting Oversight Board, the
        objective of which is the expression of an opinion regarding the financial
        statements taken as a whole. Accordingly, we do not express such an
        opinion.
 
 Based
        on
        our review, we are not aware of any material modifications that should be
        made
        to the financial statements referred to above for them to be in conformity
        with
        generally accepted accounting principles.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 13 to the condensed
        consolidated financial statements, the Company's losses from operations raise
        substantial doubt about its ability to continue as a going concern. The
        condensed consolidated financial statements do not include any adjustments
        that
        might result from the outcome of this uncertainty.
 
 
 /s/  Chang
        G. Park, CPA
 Chang
        G.
        Park, CPA
 
 September
        10, 2008
 
 San
        Diego, CA 92108
   **Member
        of the California Society of Certified Public Accountants**
 **Registered
        with the Public Company Accounting Oversight Board**
  5
  **Dot
        VN, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Balance Sheets**
 
 **July
                  31,**
              
              **April
                  30,****2008**
              
              **2008****(unaudited)****ASSETS**Current
                  assets:Cash
              
              $
              348,890
              
              $
              480,350Accounts
                  receivable
              
              
              57,390
              
              
              29,845Prepaid
                  warrant expense, current
              
              
              22,943
              
              
              91,771Prepaid
                  expenses and other current assets
              
              
              55,157
              
              
              74,059Notes
                  receivable, net
              
              
              -
              
              
              -Total
                  current assets
              
              
              484,380
              
              
              676,025Equipment,
                  net
              
              
              671,059
              
              
              654,129Intangible
                  assets
              
              
              1,022,336
              
              
              1,022,336Other
                  noncurrent assets
              
              
              196,299
              
              
              328,149Total
                  assets
              
              $
              2,374,074
              
              $
              2,680,639**LIABILITIES
                  AND SHAREHOLDERS' EQUITY (DEFICIT)**Current
                  liabilities:Accounts
                  payable
              
              $
              79,868
              
              $
              52,997Customer
                  deposits
              
              
              26,001
              
              
              5,900Due
                  to related party, net of $37,500 and $444,149 discount
              
              
              6,477,934
              
              
              5,983,630Short-term
                  debt, net of $283,303 and $434,410 discount
              
              
              2,371,078
              
              
              2,076,075Accrued
                  liabilities
              
              
              1,046,499
              
              
              808,683Total
                  current liabilities
              
              
              10,001,380
              
              
              8,927,285Commitments
                  and ContingenciesShareholders'
                  equity (deficit):Preferredstock:
                  50,000,000 shares authorized of $0.001 par value;120,000 sharesdesignated
                  Series A, $10.00 stated value;
                  0
                  issued and outstanding as of
              
              
              -
              
              
              -July
                  31, 2008 and April 30, 2008Common
                  stock: 250,000,000 shares authorized of $0.001 par value; 27,160,224
                  and27,059,423
                  shares issued and outstanding as of July 31, 2008 and April 30,
                  2008
              
              
              27,160
              
              
              27,059Additional
                  paid-in capital
              
              
              29,030,601
              
              
              28,079,334Accumulated
                  deficit
              
              
              (36,685,067
              )
              
              (34,353,039
              )Total
                  shareholders' equity (deficit)
              
              
              (7,627,306
              )
              
              (6,246,646
              )Total
                  liabilities and shareholders' equity (deficit)
              
              $
              2,374,074
              
              $
              2,680,639
 
  The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  6
 
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Operations (Unaudited)**
  **Three
                    Months Ended July 31,****2008**
                
                **2007**Revenues
                
                $
                376,680
                
                $
                290,253Cost
                    of revenues
                
                
                143,406
                
                
                102,585Gross
                    profit
                
                
                233,274
                
                
                187,668General
                    and administrative expenses:Consulting
                    and professional fees
                
                
                125,256
                
                
                99,023Marketing
                    and promotion
                
                
                12,000
                
                
                6,030Option
                    bonus
                
                
                913,715
                
                
                2,485,951Bad
                    debt expense
                
                
                26,000
                
                
                860Other
                    general & administrative expenses
                
                
                594,195
                
                
                486,385Total
                    general and administrative expenses
                
                
                1,671,166
                
                
                3,078,249(Loss)
                    from operations
                
                
                (1,437,892
                )
                
                (2,890,581
                )Other
                    income (expenses)Interest
                    income
                
                
                1,644
                
                
                4,802Finance
                    expense
                
                
                (164,363
                )
                
                (316,366
                )Interest
                    expense
                
                
                (731,417
                )
                
                (333,074
                )Total
                    other income (expenses)
                
                
                (894,136
                )
                
                (644,638
                )Net
                    loss
                
                $
                (2,332,028
                )
                $
                (3,535,219
                )Loss
                    per common share:Basic
                    and diluted
                
                $
                (0.09
                )
                $
                (0.13
                )Weighted
                    average common shares outstanding:Basic
                    and diluted
                
                
                27,105,489
                
                
                26,228,154
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  7
  
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Changes in Stockholders' Equity (Deficit)
        (Unaudited)**
 
 **Common**
              
              **Additional****Common**
              
              **Stock**
              
              **Paid-in**
              
              **Accumulated****Stock**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Total****Balance,
                  April 30, 2007**
              
              
              **26,118,496**
              
              **$**
              **26,118**
              
              **$**
              **17,619,977**
              
              **$**
              **(20,730,728**
              **)**
              **$**
              **(3,084,633**
              **)**Shares
                  issued to employees
              
              
              368,613
              
              
              369
              
              
              656,174
              
              
              -
              
              
              656,543Shares
                  issued for services
              
              
              62,500
              
              
              63
              
              
              103,200
              
              
              -
              
              
              103,263Shares
                  issued for intangible asset
              
              
              285,000
              
              
              285
              
              
              569,715
              
              
              -
              
              
              570,000Shares
                  issued under investor’s registration
                rights
                  agreement
              
              
              6,101
              
              
              6
              
              
              12,196
              
              
              -
              
              
              12,202Shares
                  issued upon conversion of
                debenture
              
              
              7,500
              
              
              7
              
              
              7,493
              
              
              -
              
              
              7,500Shares
                  issued upon conversion of
                Spot-On
                  Networks debenture
              
              
              211,213
              
              
              211
              
              
              211,002
              
              
              -
              
              
              211,213Discount
                  on convertible notes
              
              
              -
              
              
              -
              
              
              1,486,454
              
              
              -
              
              
              1,486,454Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              682,889
              
              
              -
              
              
              682,889Stock
                  options expensed
              
              
              -
              
              
              -
              
              
              6,730,234
              
              
              -
              
              
              6,730,234Net
                  loss, April 30, 2008
              
              
              -
              
              
              -
              
              
              -
              
              
              (13,622,311
              )
              
              (13,622,311
              )**Balance,
                  April 30, 2008**
              
              
              **27,059,423**
              
              
              **27,059**
              
              
              **28,079,334**
              
              
              **(34,353,039**
              **)**
              
              **(6,246,646**
              **)**Shares
                  issued to employees
              
              
              3,000
              
              
              3
              
              
              5,097
              
              
              -
              
              
              5,100Shares
                  issued upon conversion of
                debenture
              
              
              7,500
              
              
              8
              
              
              7,492
              
              
              -
              
              
              7,500Shares
                  issued upon conversion of
                Spot-On
                  Networks debenture
              
              
              25,000
              
              
              25
              
              
              24,975
              
              
              -
              
              
              25,000Shares
                  issued upon exercise of warrants
              
              
              53,250
              
              
              53
              
              
              -
              
              
              -
              
              
              53Shares
                  issued upon cashless exercise of
                warrants
              
              
              12,051
              
              
              12
              
              
              (12
              )
              
              -
              
              
              -Stock
                  options expensed
              
              
              -
              
              
              -
              
              
              913,715
              
              
              -
              
              
              913,715Net
                  loss, three months ended July 31,
                2008
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,332,028
              )
              
              (2,332,028
              )**Balance,
                  July 31, 2008**
              
              
              **27,160,224**
              
              **$**
              **27,160**
              
              **$**
              **29,030,601**
              
              **$**
              **(36,685,067**
              **)**
              **$**
              **(7,627,306**
              **)**
 
  The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  8
  **Dot
        VN, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows (Unaudited)**
 
 **For
                  the Three Months Ended**
                **July
                  31,****2008**
              
              **2007****Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (2,332,028
              )
              $
              (3,535,219
              )*Adjustments
                  to reconcile net loss to net cash (used in) provided by operating
                  activities:*Depreciation
              
              
              2,384
              
              
              1,527(Gain)
                  loss on sale of equipment
              
              
              -
              
              
              -Accrued
                  interest expense
              
              
              178,668
              
              
              173,358Accrued
                  bad debt expense
              
              
              25,000
              
              
              -Amortization
                  of debt issuance costs
              
              
              117,304
              
              
              91,417Amortization
                  of service warrants
              
              
              68,828
              
              
              251,186Amortization
                  of debt discounts
              
              
              557,756
              
              
              191,848Stock
                  options expensed
              
              
              913,715
              
              
              2,485,951Stock
                  issued to employees
              
              
              11,600
              
              
              51,740Stock
                  issued for services
              
              
              19,625
              
              
              22,388*Changes
                  in operating assets and liabilities:*(Increase)
                  decrease in accounts receivable
              
              
              (27,545
              )
              
              60,543(Increase)
                  decrease in prepaid expenses and other current assets
              
              
              (7,223
              )
              
              4,258(Increase)
                  decrease in other noncurrent assets
              
              
              14,546
              
              
              14,353Increase
                  (decrease) in accounts payable
              
              
              26,871
              
              
              (16,229
              )Increase
                  (decrease) in customer deposits
              
              
              20,101
              
              
              (6,318
              )Increase
                  (decrease) in accrued liabilities
              
              
              217,780
              
              
              165,950Net
                  cash (used in) operating activities
              
              
              (192,618
              )
              
              (43,247
              )**Cash
                  flows from investing activities:**Purchase
                  of equipment
              
              
              (6,765
              )
              
              (422,748
              )Proceeds
                  from equipment sale
              
              
              870
              
              
              -Net
                  cash (used in) investing activities
              
              
              (5,895
              )
              
              (422,748
              )**Cash
                  flows from financing activities:**Proceeds
                  from term notes
              
              
              120,000
              
              
              20,000Advances
                  from related parties
              
              
              -
              
              
              607,460Repayments
                  to related parties
              
              
              (53,000
              )
              
              -Proceeds
                  from stock issuances
              
              
              53
              
              
              -Net
                  cash provided by financing activities
              
              
              67,053
              
              
              627,460Net
                  increase (decrease) in cash
              
              
              (131,460
              )
              
              161,465Cash,
                  beginning of the period
              
              
              480,350
              
              
              329,151**Cash,
                  end of the period**
              
              **$**
              **348,890**
              
              **$**
              **490,616**
 
  The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  9
  
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows (Unaudited)
        (continued)**
  **For
                    the Three Months Ended**
                  **July
                    31,****2008**
                
                **2007****Non-cash
                    investing and financing activities:**Common
                    stock issued for intangible asset
                
                $
                -
                
                $
                570,000Convertible
                    note issued for intangible asset
                
                $
                -
                
                $
                92,336Common
                    stock issued in exchange for convertible note
                
                $
                7,500
                
                $
                -Common
                    stock issued to employees
                
                $
                5,100
                
                $
                51,740Common
                    stock issued for services
                
                $
                -
                
                $
                22,388Common
                    stock issued for note receivable
                
                $
                25,000
                
                $
                -**Supplemental
                    cash flow disclosure:**Interest
                    paid
                
                $
                -
                
                $
                -Taxes
                    paid
                
                $
                -
                
                $
                -
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  10
 
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements (Unaudited)**
 **As
        of July 31, 2008**
 
 **1.**  **Condensed
        Consolidated Financial Statements**
 
 The
        accompanying July 31, 2008 condensed consolidated financial statements have
        been
        prepared by the Company without audit. In the opinion of management, all
        adjustments (which include only normal recurring adjustments) necessary to
        present fairly the financial position, results of operations and cash flows
        at
        July 31, 2008 and 2007 and for all periods presented have been made. Certain
        information and footnote disclosures normally included in consolidated financial
        statements prepared in accordance with accounting principles generally accepted
        in the United States of America have been condensed or omitted. It is suggested
        that these condensed consolidated financial statements be read in conjunction
        with the Company's April 30, 2008 audited consolidated financial statements
        and
        related notes included in the Company’s most recent Form S-1/A as filed with the
        Securities and Exchange Commission. The results of operations for periods
        ended
        July 31, 2008 and 2007 are not necessarily indicative of the operating results
        for the full years.
 
 2.Organization
 
 The
        Company
 
 Dot
        VN,
        Inc., its predecessors, and its subsidiaries (the “Company” or “Dot VN”), is an
        Internet and telecommunications company focused on the Vietnamese market.
        The
        Company intends to apply the benefits of best of breed technology through
        strategic partnerships to deploy hardware, software and wireless solutions
        in
        Vietnam. In order to maximize the benefits the Company can derive from the
        technology, the Company also intends:
 
 ·
              to
                  drive growth in registrations of the Vietnamese ccTLD
                  .vn;·
              to
                  build and operate Internet data centers in major city centers in
                  Vietnam;
                  and·
              to
                  identify, deploy and commercialize best of breed technologies in
                  Vietnam.
 
 Dot
        VN
        has signed agreements with the Vietnamese Internet Network Information Center
        (“VNNIC”) to serve as the only domain name registrar empowered to approve domain
        names, in real time, online which provides Dot VN with a competitive advantage
        vis-à-vis other domain name registrars. In addition to its domain registration
        business, Dot VN is currently in the process of designing an Internet data
        center (“IDC” in the singular or “IDCs” in the plural) which will serve as an
        internal data and telecommunications network within the country of Vietnam.
        The
        IDCs will provide hosting, collocation, and disaster recovery services as
        well
        as serve as the basic infrastructure for additional Internet and data
        technologies such as wireless broad brand connectivity, distance e-learning
        and
        e-government projects. The Company has secured an agreement with Quang Trung
        Software City Development Company, a 100% State-owned (Vietnamese government)
        enterprise, (“QTSC”) to develop an IDC in Ho Chi Minh City, Vietnam located in
        the QTSC telecommunications building and intends to execute a material
        definitive agreement based on the current procedural agreement with VNNIC
        to
        build an IDC in Hanoi, Vietnam, located in the VNNIC building, both are
        anticipated to occur in the near term. In addition, the Company intends to
        develop additional IDCs in Danang City, Vietnam and the rest of the Country
        of
        Vietnam in the mid to long term. Dot VN will continue to explore and test,
        and
        analyze, new and best of breed technology for deployment in
        Vietnam.
 
 Reverse
        Merger
 
 Malers,
        Inc. was incorporated in the State of Delaware on May 27, 1998, under the
        name
        Trincomali Ltd. (“Trincomali”). Over the course of its history, Trincomali
        underwent additional name changes until being renamed Malers, Inc. (“Malers”) on
        April 28, 2005. On June 19, 2006, Malers affected a 1 for 2,000 reverse stock
        split of its 278,687,224 outstanding shares with fractional shares rounded
        up
        resulting in 139,690 shares issued and outstanding post split.
 
 Dot
        VN,
        Inc., was incorporated in the State of California on March 27, 2001 under
        the
        name Hi-Tek-Com-VN and was renamed Dot VN, Inc. (“Dot VN CA”) on August 3, 2005.
        Dot VN CA signed its first contract September 18, 2003 with the Vietnamese
        government to register the top level country code domain names
        (“ccTLD”).
 
 On
        July
        17, 2006, Dot VN CA effected an Agreement and Plan of Merger by and among
        (i)
        Dot VN CA, (ii) Malers, and (iii) Malers Acquisition Corp. (“MAC”), a Washington
        corporation and wholly owned subsidiary of Malers, Inc., the completion of
        which
        transaction resulted in (w) MAC merging with and into Dot VN CA there by
        ending
        MAC’s corporate existence; (x) Dot VN CA becoming a wholly owned subsidiary of
        Malers a Delaware corporation; (y) Dot VN CA being renamed “Hi-Tek Multimedia,
        Inc.” a California corporation; and (z) Malers being renamed “Dot VN, Inc.” a
        Delaware corporation (the “Malers Merger”). Final state regulatory approval was
        received on August 17, 2006. In connection with the merger, the 14,232,250
        outstanding shares Dot VN CA Common Stock were exchanged for 11,368,068 shares
        of the Company’s Common Stock. There were no outstanding stock options or
        warrant to purchase a share of Dot VN CA Common Stock.
  11
 
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements (Unaudited)**
 **As
        of July 31, 2008**
 
 2.Organization
        (continued)
 
 Reverse
        Merger (continued)
  Prior
        to
        the merger, Malers was an inactive shell corporation quoted on the Pink Sheets
        and had engaged in no substantive business operations.
 
 For
        accounting purposes, the acquisition has been treated as a recapitalization
        of
        Dot VN CA with Dot VN CA as the acquirer (reverse acquisition). Dot VN CA
        was
        treated as the acquirer for accounting purposes because after the acquisition
        the shareholders of Dot VN CA controlled Malers and the officers and directors
        of Dot VN CA assumed the same positions at Malers; Malers is the surviving
        entity for legal purposes. The historical financial statements prior to July
        17,
        2006 are those of Dot VN CA.
 
 **3.**  **Equipment**
 
 Equipment
        at July 31 and April 30, 2008 consisted of the following:
 
 **July
                  31,**
              
              **April
                  30,****2008**
              
              **2008**Computer
                  equipment
              
              $
              40,608
              
              $
              36,534Other
                  furniture and equipment
              
              
              7,036
              
              
              5,214Internet
                  data center, construction in progress
              
              
              636,713
              
              
              623,295684,357
              
              
              665,043Less
                  accumulated depreciation
              
              
              13,298
              
              
              10,914Equipment,
                  net
              
              $
              671,059
              
              $
              654,129
 
 Depreciation
        expense charged to operations was $2,384 and $6,832 for the three months
        ended
        July 31, 2008 and the year ended April 30, 2008, respectively. Capitalized
        interest on borrowings related to the Internet data center was $13,418 and
        $38,295 for the three months ended July 31, 2008 and the year ended April
        30,
        2008, respectively.
 
 **4.**  **Intangibles
        assets**
 
 On
        October 16, 2006 the Company acquired the rights to the US trademark “Dot VN”
including its logo and certain related domain names for $360,000 in the form
        of
        a two year convertible note (see Note 7) from Hi-Tek, Inc. a privately held
        California corporation (“Hi-Tek Private”), previously a related party (see Note
        6). The trademark was determined to have an indefinite useful life and is
        not
        amortized.
 
 On
        June
        29, 2007, the Company acquired the rights to the Vietnam trademark “Dot VN” from
        Business.com.VN, Co. Ltd. for 285,000 shares of the Company’s Common Stock and a
        convertible note (see Note 7) in the amount of $100,000 due in one year (the
        “Business.com.VN Agreement”). The note, which accrues no interest during its
        term, was recorded at its present value based on an 8% interest rate assumption.
        The aggregate consideration of $662,336 was recorded as an indefinite lived
        intangible asset and is not amortized.
  12
  
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements (Unaudited)**
 **As
        of July 31, 2008**
 
 **4.**  **Intangibles
        assets (continued)**
 
 Indefinite
        lived assets are not amortized, but instead are evaluated for impairment
        annually and if events or changes in circumstances indicate that the carrying
        amount may not be recoverable in accordance with SFAS.142. If the carrying
        amount of an intangible asset exceeds its fair value, an impairment loss
        is
        recognized in an amount equal to that excess. After an impairment loss is
        recognized, the adjusted carrying amount of the intangible asset is its new
        accounting basis. Subsequent reversal of a previously recognized impairment
        loss
        is prohibited. The change in the carrying amount of intangible assets is
        as
        follows:
 
 **July
                  31,**
              
              **April
                  30,****2008**
              
              **2008**Balance,
                  beginning of period
              
              $
              1,022,336
              
              $
              360,000Purchased
                  US trademark
              
              
              -
              
              
              -Purchased
                  Vietnam trademark
              
              
              -
              
              
              662,336Balance,
                  end of period
              
              $
              1,022,336
              
              $
              1,022,336
 
 **5.**  **Notes
        receivable**
 
 During
        the three months ended July 31, 2008 and the year ended April 30, 2008, the
        Company issued an aggregate of 25,000 and 211,213 restricted shares of its
        Common Stock pursuant to the conversion of $25,000 and $211,213 in convertible
        debentures issued by Spot-On Networks, LLC (“Spot-On”) , respectively. On
        January 31 and February 9, 2007 the Company issued a series of convertible
        debentures (see Note 7) for an aggregate of $1,148,212 due January 31, 2009
        (the
“February Financing”) which convert at the option of each individual noteholder
        (the “February Investors”) into restricted shares of the Company’s Common Stock
        at $1.00 per share. The February Financing was funded in conjunction with
        a like
        amount of convertible debentures issued concurrently by Spot-On to the February
        Investors (the “Spot-On Debenture”). The February Financing terms required that
        the convertible debentures issued by Spot-On be convertible into either
        membership units of Spot-On Networks, LLC or common stock of the Company,
        at the
        option of the February Investors. Upon the February Investors’ election to
        convert a Spot-On Debenture into the Company’s common stock the Spot-On
        Debenture is assigned and transferred into the name of the Company (the
“Assigned Spot-On Debentures”) at which time the Company issues the Common Stock
        and records a note receivable. Future monthly interest payments, at 10% per
        annum, are accrued for the benefit of the Company; as of July 31, 2008 $9,531
        of
        interest has accrued. On January 31, 2009, at maturity, the Assigned Spot-On
        Debentures principal and accrued interest will be paid to the Company by
        Spot-On.
 
 Spot-On
        Networks, LLC is a private company and does not furnish the Company with
        financial statements to evaluate their ability to pay the Assigned Spot-On
        Debentures principal and accrued interest at maturity. The Company’s ability to
        collect the Assigned Spot-On Debentures is dependent on the cash reserves
        held
        by Spot-On and/or their ability to raise additional financing. Due to the
        uncertainty of collection the Company has recorded a bad debt expense for
        the
        full amount of the Assigned Spot-On Debentures principal and does not record
        the
        monthly accrual of interest. Interest income will be recognized upon collection
        from Spot-On.
 
 **July
                  31,**
              
              **April
                  30,****2008**
              
              **2008**Notes
                  receivable
              
              $
              236,213
              
              $
              211,213Less
                  allowance
              
              
              (236,213
              )
              
              (211,213
              )Notes
                  receivable, net
              
              $
              -
              
              $
              -
  13
 
 
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements (Unaudited)**
 **As
        of July 31, 2008**
 
 **6.**  **Other
        noncurrent assets**
 
 Other
        noncurrent assets at July 31 and April 30, 2008 consisted of the
        following:
 
 **July
                  31,**
              
              **April
                  30,****2008**
              
              **2008**Deposits
              
              $
              9,071
              
              $
              9,071Deferred
                  debt issuance cost
              
              
              185,654
              
              
              317,310Other
                  noncurrent assets
              
              
              1,574
              
              
              1,768Total
                  other noncurrent assets
              
              $
              196,299
              
              $
              328,149
 
 In
        connection with the issuance of the convertible debentures (see Note 7) the
        Company paid the placement agent a 10% cash fee ($114,821) and issued warrants
        (see Note 12) for the purchase of an aggregate of 298,480 shares of the
        Company’s common stock with a fair value of $731,340. The Company capitalized
        the $846,161 as a deferred charge associated with the issuance of these debt
        instruments. The deferred charge is amortized on a straight-line basis over
        the
        two year term of the debt with $131,656 and $423,081 expensed in the three
        months ended July 31, 2008 and the year ended April 30, 2008, respectively.
        Amortization for the year ending April 30, 2009 will be $317,310.
 
 **7.**  **Convertible
        Notes**
 
 As
        of
        July 31, 2008, convertible notes consist of the following:
 Issued
                  date
              
              Maturity
              
              Conversion
                  price
              
              Amount
              
              Debt
                  discount
              
              Accrued
                  interest
              
              Net
                  amountConvertible
                  Note 1
              
              Oct.
                  16, 2006
              
              Oct.
                  16, 2008
              
              $1.00
              
              $
              360,000
              
              $
              37,500
              
              $
              70,445
              
              $
              392,945Convertible
                  Notes 2
              
              Feb.
                  9, 2007
              
              Jan.
                  31, 2009
              
              $1.00
              
              
              1,133,213
              
              
              283,303
              
              
              17,321
              
              
              867,231Convertible
                  Note 3
              
              June
                  29, 2007
              
              June
                  30, 2009
              
              $1.43
              
              
              92,336
              
              
              -
              
              
              8,388
              
              
              100,724Convertible
                  Notes 4
              
              Aug.
                  1, 2007
              
              Aug.
                  1, 2008
              
              $1.43
              
              
              3,978,132
              
              
              -
              
              
              331,120
              
              
              4,309,2525,563,681
              
              
              320,803
              
              
              427,274
              
              
              5,670,152Less
                  notes 1 and 4 included in due to related parties, current
                (see
                  Note 8)
              
              
              4,338,132
              
              
              37,500
              
              
              401,565
              
              
              4,702,197Less
                  notes 2 and 3 included in short-term debt, current (see Note
                  9)
              
              
              1,225,549
              
              
              283,303
              
              
              25,709
              
              
              967,955Total
              
              
              
              
              
              
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
  Convertible
        note 1 for $360,000 was issued on October 16, 2006, converts at the option
        of
        the holder into restricted shares of the Company’s Common Stock at $1.00 per
        share and bears an interest rate of 10% per annum. The note is payable to
        Hi-Tek
        Private, a former related party (see Note 11) (the “Hi-Tek Trademark Loan”), had
        accrued interest of $70,445 at July 31, 2008 and is due October 16, 2008
        (see
        Note 4). The beneficial conversion feature was calculated to be $360,000
        at the
        time of issuance in accordance with EITF 00-27; the company recorded this
        amount
        as debt discount with a corresponding credit to additional paid in capital.
        As
        of July 31, 2008 the unamortized debt discount was $37,500.
 
 Convertible
        notes 2 are a set of convertible debentures with an aggregate face value
        of
        $1,133,213 issued January 31 and February 9, 2007 (the “February Financing”),
        net of conversions, which are due January 31, 2009. The convertible debentures
        bear no interest until July 2007 at which point they accrue 10 % per annum
        with
        interest payable monthly. The Company accrues interest at an imputed rate
        of
        approximately 8% per annum effective from the date the convertible debentures
        were issued. The debentures convert at the option of each individual noteholder
        (the “February Investors”) into restricted shares of the Company’s Common Stock
        at $1.00 per share; representing a beneficial conversion feature. In addition,
        the February Investor received a detachable warrant exercisable into restricted
        shares of the Company’s Common Stock; the number of shares of each warrant is
        equal to 30% of the note face value for an aggregate of 344,465 shares amount.
        The detachable warrants have an exercise price of $2.00 per share and a term
        of
        five years from the date of issuance. The combine fair value of the beneficial
        conversion feature and detachable warrants calculated, in accordance with
        EITF
        00-27, is limited to the proceeds of the debt and was allocated between the
        beneficial conversion feature and detachable warrants as $888,258 and $259,954,
        respectively. The beneficial conversion feature and detachable warrants are
        recorded as debt discount with a corresponding credit to additional paid
        in
        capital and are amortized over the life of the February Financing. During
        the
        three months ended July 31, 2008, one February Investor exercised the conversion
        option on a $7,500 convertible debenture. Upon conversion, $2,188 of unamortized
        debt discount for the converted debenture was expensed. As of July 31, 2008,
        the
        unamortized debt discount was $283,303.
  14
 
 **Dot
        VN, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements (Unaudited)**
 **As
        of July 31, 2008**
 
 **7.**  **Convertible
        Notes (continued)**
  The
        February Financing was funded in conjunction with a like amount of convertible
        debentures issued concurrently by Spot-On Networks, LLC (“Spot-On”) to the
        February Investors. The February Financing terms required that the convertible
        debentures issued by Spot-On be convertible into either membership units
        of
        Spot-On Networks, LLC or common stock of the Company, at the option of the
        February Investors (see Note 5).
 
 Additionally,
        pursuant to its engagement of Pali Capital, Inc., the Company’s placement agent
        in the February Financing, the Company paid a cash fee equal to 10% of the
        aggregate convertible debentures and issued three series of warrants: (i)
        retainer warrants on January 31, 2007 totaling in the aggregate 250,000 shares
        exercisable at a per share price of $0.001; (ii) placement warrants A on
        February 9, 2007 totaling in the aggregate 229,600 shares exercisable at
        a per
        share price of $1.00; and (iii) placement warrants B on February 9, 2007
        totaling in the aggregate 68,880 shares exercisable at a per share price
        of
        $2.00 (collectively the “Placement Agent Warrants”). The Placement Agent
        Warrants have a term of five years from the date of issuance (see Note 12).
        The
        retainer warrants were expensed over the one year engagement term and the
        two
        placement warrants will be expensed over the two year term of the February
        Financing as deferred debt issuance costs.
 
 On
        February 9, 2007, in connection with the February Financing, the Company
        executed an investor’s registration rights agreement (the “IRRA”) by and between
        the February Investor participating in the February Financing and the Company.
        Pursuant to the terms of the IRRA, in connection with the February Financing,
        the Company is required to file a registration statement on Form S-1 or SB-2
        by
        August 15, 2007 (the “Registration Deadline”) and further required that the
        registration statement be declared effective 120 from the date of the IRRA
        filing. In the event that the Registration Deadline is not met, the February
        Investors shall be entitled to liquidated damages equal to One Percent (1%)
        of
        the outstanding convertible debentures issued in the February Financing paid,
        at
        the option of the February Investors, in cash or shares of the Company’s common
        stock (the “Liquidated Damages”) for every thirty (30) day period that the
        registration statement is not filed, limited to a total of ten such 30-day
        periods. On August 10, 2007, in accordance with the requirements of Section
        9 of
        the IRRA, the Company and certain February Financing Investors representing
        two-thirds (2/3) of the amount invested executed an amendment to the IRRA
        whereby (i) the Registration Deadline was extended to September 15, 2007
        (the
“New Registration Deadline”); (ii) the February Investors received the
        Liquidated Damages for one month; and (iii) the registration statement must
        be
        declared effective within sixty (60) days if there are no comments by the
        SEC or
        within in ninety (90) days if SEC comments are received (the “Effectiveness
        Deadline”). In the event that either the New Registration Deadline or the
        Effectiveness Deadline is not met, then the February Investors shall be entitled
        to the Liquidated Damages for every or every thirty (30) day period that
        the New
        Registration Deadline or the Effectiveness Deadline are not met, limited
        to a
        total of ten such 30-day periods (see Note 10).
 
 Convertible
        note 3 for $100,000 was issued on June 29, 2007 to Business.com.VN, a Vietnamese
        company, converts at the option of the holder into shares of the Company’s
        restricted common stock at $1.43 per share and bears no interest during the
        one
        year term. The note was recorded at the present value of $92,336 based on
        the
        state default interest rate of 8% per annum after the original maturity date
        of
        June 29, 2008 (see Note 4) (the “Business.com.VN Loan”). On July 23, 2008, the
        Business.com.VN loan was amended to extend the due date to June 30, 2009
        and
        accrue interest at the rate of 8% per annum. The Company has accrued interest
        of
        $8,388 at July 31, 2008. The beneficial conversion feature was calculated
        to be
        $39,860 at the time of issuance in accordance with EITF 00-27; the Company
        recorded this amount as debt discount with a corresponding credit to additional
        paid in capital. As of July 31, 2008 the unamortized debt discount was
        zero.
  15







**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**7.**  **Convertible
      Notes (continued)**





Convertible
      notes 4 are a set of two individual notes with an aggregate face value of
      $3,978,132 issued August 1, 2007 to Mr. Thomas Johnson (50%) (the “TJ Note”) and
      Dr. Lee Johnson (50%) (the “LJ Note”). The notes are due August 1, 2008 and
      accrue interest monthly at 8% per annum (see Note 8). At the election of the
      holder, the amount due and owing pursuant to such note may be converted in
      restricted shares of the Company’s Common Stock at a per share price of $1.43
      per share (the “Conversion Price”). The Conversion Price shall be adjusted
      downward in the event Dot VN issues common stock (or securities exercisable
      for
      or convertible into common stock) at a price below the Conversion Price, to
      a
      price equal to such issue price. The beneficial conversion feature was
      calculated to be an aggregate of $1,446,594 at the time of issuance in
      accordance with EITF 00-27; the company recorded this amount as debt discount
      with a corresponding credit to additional paid in capital. As of July 31, 2008
      the unamortized debt discount was zero.





**8.**  **Loans
      from related party**





The
      Company’s historical cash requirements have been funded under a revolving credit
      arrangement with Hi-Tek Private which previously was a related company (the
      “Hi-Tek Revolver”). Dr. Lee Johnson and Mr. Thomas Johnson, the Company’s
      President and Chief Executive Officer were the Chief Executive Officer and
      Chief
      Financial Officer of Hi-Tek Private from October 2003 until their resignation
      August 8, 2007, respectively; neither held nor currently owns an equity position
      in Hi-Tek Private.





Starting
      in April 2002, Hi-Tek Private advanced funds to cover the Company’s operating
      costs and capital requirements under the Hi-Tek Revolver which accrues interest
      monthly at 10% per annum with no fixed repayment terms. Hi-Tek Private is under
      no obligation to advance funds in the future. Changes in the carrying amount
      of
      the Hi-Tek Revolver for the three months ended July 31, 2008 and the year ended
      April 30, 2008 are:





**July
                31,**
            
            **April
                30,****2008**
            
            **2008**Balance
                at beginning of period
            
            $
            1,120,928
            
            $
            1,025,066Funds
                advanced
            
            
            -
            
            
            8,230Repayments
            
            
            (53,000
            )
            
            (19,271
            )Interest
                accrued
            
            
            27,147
            
            
            106,903Balance
                at end of period
            
            $
            1,095,075
            
            $
            1,120,928








Loans
      from relate parties at July 31 and April 30, 2008 consisted of the
      following:





**July
                31,**
            
            **April
                30,****2008**
            
            **2008**Hi-Tek
                Revolver
            
            $
            1,095,075
            
            $
            1,120,928Hi-Tek
                Trademark Loan, net of $37,500 and $82,500discount
                at July 31 and April 30, 2008
            
            
            392,945
            
            
            337,276Hi-Tek
                IDC Loan
            
            
            680,662
            
            
            663,560TJ
                Note, net of zero and $180,824 discount at July 31and
                April 30, 2008
            
            
            2,154,626
            
            
            1,930,933LJ
                Note, net of zero and $180,824 discount at July 31and
                April 30, 2008
            
            
            2,154,626
            
            
            1,930,9336,477,934
            
            
            5,983,630Less
                current portion
            
            
            6,477,934
            
            
            5,
                983,630Balance,
                end of period
            
            $
            -
            
            $
            -




16







**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**8.**  **Loans
      from related party (continued)**





On
      October 16, 2006 the Company acquired the rights to the US trademark “Dot VN”
including its logo from Hi-Tek Private for $360,000 (see Note 4) upon the
      issuance of a two year convertible note due October 16, 2008 (the “Hi-Tek
      Trademark Loan”). The Hi-Tek Trademark Loan converts at the option of the holder
      into shares of the Company’s restricted common stock at $1.00 per share and
      bears an interest rate of 10% per annum (see Note 7).





On
      May 1,
      2007, the Company executed a short-term note with Hi-Tek Private for $600,000
      due November 1, 2007 with interest at 10% per annum (the “Hi-Tek IDC Loan”).
      Proceeds were used to fund general operations and the initial design services
      for the first Internet data center (“IDC”) in Vietnam. On April 30, 2008, the
      Hi-Tek IDC Loan maturity was extended to September 1, 2008 with no other change
      to the terms. On September 2, 2008, the Hi-Tek IDC Loan maturity was extended
      to
      June 30, 2009 with no other change to the terms.





On
      August
      1, 2007, the Company executed a convertible note with Mr. Thomas Johnson, the
      Company’s Chief Executive Officer and Chairman of the Board of Directors, in the
      amount of $1,989,065.78 for unpaid accrued salary, including interest, from
      January, 2003 through June, 2007 (the “TJ Note”). The TJ Note has a term of one
      year and accrues interest at a rate of 8% per annum. At the election of the
      holder, the amount due and owing pursuant to such note may be converted into
      shares of the Company’s common stock at a per share price of $1.43 per share
      (see Note 7). On August 14, 2008, the Company executed a convertible promissory
      note for $2,160,767 due February 15, 2009 plus accrued interest at 8% per annum
      with Mr. Johnson (the “TJ New Note”) in exchange for the unpaid TJ Note. The
      terms and conditions of the TJ New Note are materially the same as the TJ Note
      that expired August 1, 2008 . At
      the
      election of the holder, the amount due and owing pursuant to such note may
      be
      converted into shares of the Company’s common stock at $1.43 per share (the
“Conversion Price”). The Conversion Price shall be adjusted downward in the
      event Dot VN issues common stock (or securities exercisable for or convertible
      into common stock) at a price below the Conversion Price, to a price equal
      to
      such issue price.





On
      August
      1, 2007, the Company executed a convertible note with Dr. Lee Johnson, the
      Company’s President, Chief Technology Officer, and Chief Financial Officer, in
      the amount of $1,989,065.78 for unpaid accrued salary, including interest,
      from
      January, 2003 through June, 2007 (the “LJ Note”). The LJ Note has a term of one
      year and accrues interest at a rate of 8% per annum. At the election of the
      holder, the amount due and owing pursuant to such note may be converted into
      shares of the Company’s common stock at a per share price of $1.43 per share
      (see Note 7). On August 14, 2008, the Company executed a convertible promissory
      note for $2,160,767 due February 15, 2009 plus accrued interest at 8% per annum
      with Dr. Lee Johnson (the “LJ New Note”) in exchange for the unpaid LJ Note. The
      terms and conditions of the LJ New Note are materially the same as the LJ Note
      that expired August 1, 2008 . At
      the
      election of the holder, the amount due and owing pursuant to such note may
      be
      converted into shares of the Company’s common stock at $1.43 per share (the
“Conversion Price”). The Conversion Price shall be adjusted downward in the
      event Dot VN issues common stock (or securities exercisable for or convertible
      into common stock) at a price below the Conversion Price, to a price equal
      to
      such issue price.




17







**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**9.**  **Short-term
      Debt**





As
      of
      July 31 and April 30, 2008, short-term debt consists of the
      following:





**July
                31,**
            
            **April
                30,****2008**
            
            **2008**Vina
                Mex Capital
            
            $
            765,228
            
            $
            746,000Convertible
                Notes 2, net of $283,303 and $427,767discount
                at July 31 and April 30, 2008
            
            
            867,231
            
            
            735,009Convertible
                Note 3, net of zero and $6,643 discountat
                July 31 and April 30, 2008
            
            
            100,724
            
            
            92,076Aussy
                Manuhu
            
            
            259,083
            
            
            252,573Darron
                Raymond Rishwain Living Trust
            
            
            256,871
            
            
            250,417John
                T. Butler, IRA
            
            
            71,132
            
            
            -Tupou
                U. Kaho, IRA
            
            
            50,809
            
            
            -Balance
                at end of period
            
            $
            2,371,078
            
            $
            2,076,075








On
      September 14, 2007, the Company executed a promissory note with Vina Mex
      Capital, a California limited liability company, for $700,000 due November
      14,
      2007. Interest accrues monthly at a rate of 10% per annum (the “Vina Mex Loan”).
      Proceeds were used to fund general operations and the initial design services
      for the first IDC in Vietnam. On April 30, 2008, the Vina Mex Loan maturity
      was
      extended to September 1, 2008 with no other change to the terms. On September
      2,
      2008, the Vina Mex Loan maturity was extended to June 30, 2009 with no other
      change to the terms.





On
      March
      29, 2008, the Company executed a promissory note with Ms. Aussy Manuhu for
      $250,000 due March 30, 2009. Interest accrues monthly at a rate of 10% per
      annum. Proceeds were used to fund general operations.





On
      April
      26, 2008, the Company executed a promissory note with Mr. Darron Raymond
      Rishwain, trustee of the Darron Raymond Rishwain Living Trust for $250,000
      due
      March 30, 2009. Interest accrues monthly at a rate of 10% per annum. Proceeds
      were used to fund general operations.





On
      June
      1, 2008, the Company executed a promissory note with the Equity Trust Company,
      custodian FBO John T. Butler, IRA for $70,000 due June 1, 2009. Interest accrues
      monthly at a rate of 10% per annum. Proceeds were used to fund general
      operations.





On
      June
      1, 2008, the Company executed a promissory note with the Equity Trust Company,
      custodian FBO Tupou U. Kaho, IRA for $50,000 due June 1, 2009. Interest accrues
      monthly at a rate of 10% per annum. Proceeds were used to fund general
      operations.





**10.**  **Accrued
      liabilities**





Accrued
      liabilities at July 31, and April 30, 2008 consisted of the
      following:





**July
                31,**
            
            **April
                30,****2008**
            
            **2008**Officer
                salaries
            
            $
            906,645
            
            $
            703,609Other
                payroll accruals
            
            
            20,219
            
            
            21,929Liquidated
                damages
            
            
            91,958
            
            
            57,509Other
                accrued liabilities
            
            
            27,677
            
            
            25,636Total
                other noncurrent assets
            
            $
            1,046,499
            
            $
            808,683




18








**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**10.**  **Accrued
      liabilities (continued)**





As
      of
      July 31 and April 30, 2008, the Company has unpaid salaries and accrued interest
      owed to officers of $906,645 and $703,609, respectively. The unpaid salaries
      bear interest at a rate of 10 percent per annum. As of July 31 and April 30,
      2008, accrued interest on the salaries was $62,922 and $42,886, respectively.
      On
      August 1, 2007, the Company executed convertible notes with Mr. Thomas Johnson
      and Dr. Lee Johnson each in the amount of $1,989,065.78 for unpaid salary,
      including interest, accrued through June, 2007 (see Notes 7 and 8).





On
      February 9, 2007, in connection with the February Financing, the Company
      executed an investor’s registration rights agreement (the “IRRA”) by and between
      the February Investors participating in the February Financing and the Company
      (see Note 7). Pursuant to the terms of the IRRA as amended on August 10, 2007,
      the February Investors shall be entitled to liquidated damages equal to One
      Percent (1%) of the outstanding convertible debentures issued in the February
      Financing (the “Liquidated Damages”) for every thirty (30) day period that the
      registration statement is not declared effective by December 14, 2007 (the
      “Effectiveness Deadline”), limited to a total of ten such 30-day periods. As of
      July 31, 2008, the February Investors are owed for eight such thirty day
      periods.





**11.**  **Related
      Party Transactions**





On
      August
      2, 2006, the Company issued to Thomas Johnson, 4,000,000 shares of the Company’s
      restricted common stock valued at $40,000 as additional
      compensation.





On
      August
      3, 2006, the Company issued to Lee Johnson, 4,000,000 shares of the Company’s
      restricted common stock valued at $40,000 as additional
      compensation.





On
      October 16, 2006, the Company entered into an agreement whereby it acquired
      certain intellectual property from Hi-Tek Private (see Notes 4, 7 and 8).
      Included within the assets acquired by the Company are the rights to the
      trademark “Dot VN” in the United States including its logo and certain related
      domain names (the “Dot VN US Trademark”). Pursuant to the acquisition of the Dot
      VN US Trademark, the Company executed a convertible promissory note in the
      amount of $360,000 (the “Hi-Tek Trademark Loan”). The Hi-Tek Trademark Loan, at
      the election of the holder, may convert the balance due and owing at the time
      of
      conversion into restricted shares of the Company’s Common Stock at a per share
      price of $1.00 per share. The Hi-Tek Trademark Loan accrues interest at a rate
      of 10% per annum and is due two years from the date of execution (see Note
      8).





Employment
      Agreements





Dr.
      Lee
      Johnson and Mr. Thomas Johnson have entered into employment agreements with
      the
      Company, for which the Company has accrued unpaid Salaries.





On
      July
      18, 2006, at the completion of the Malers Merger, Dr. Lee Johnson and Mr. Thomas
      Johnson were appointed to the Board of Directors of the Company. In addition,
      Mr. Thomas Johnson was elected to serve as Chairman of the Board of
      Directors





On
      October 8, 2006, Dr. Lee Johnson’s employment agreement was approved by the
      Board of Directors., making him the President, Chief Technical Officer, and
      Chief Financial Officer. Pursuant to the terms of the employment agreement,
      Dr.
      Lee Johnson shall receive an annual salary of Three Hundred Sixty Thousand
      Dollars ($360,000) and shall receive stock options totaling in the aggregate
      3,600,000 shares and are exercisable, at a per share price of $0.50, into shares
      of the Company’s common stock (the “LJ Employment Options”). The LJ Employment
      Options shall vest one third at the date of grant and one third at the end
      of
      the first and second year from the date of grant and expire ten years from
      the
      date of vesting. Dr. Johnson is also eligible to receive additional equity
      and
      cash bonuses in connection with the successful performance of his
      duties.





As
      President, CTO, and CFO, Dr. Lee Johnson shall serve as such until the earlier
      of (i) his resignation, (ii) appointment of his successor or (iii) his
      termination. As a director of the Company, he shall serve until the earlier
      of
      (i) his resignation, (ii) election of his successor or (iii) his removal by
      the
      shareholders of the Company.





On
      October 9, 2006, Mr. Thomas Johnson’s employment agreement was approved by the
      Board of Directors, making him the Chief Executive Officer. Pursuant to the
      terms of the employment agreement, Mr. Johnson shall receive an annual salary
      of
      Three Hundred Sixty Thousand Dollars ($360,000) and shall receive stock options
      totaling in the aggregate 3,600,000 shares; such shares are exercisable, at
      a
      per share price of $0.50, into shares of the Company’s common stock (the “TJ
      Employment Options”). The TJ Employment Options shall vest one third at the date
      of grant and one third at the end of the first and second year from the date
      of
      grant and expire ten years from the date of vesting. Mr. Johnson is also
      eligible to receive additional equity and cash bonuses in connection with the
      successful performance of his duties.




19







**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**11.**  **Related
      Party Transactions (continued)**




As
      CEO,
      Mr. Thomas Johnson shall serve as such until the earlier of (i) his resignation,
      (ii) appointment of his successor or (iii) his termination. As a director of
      the
      Company, he shall serve until the earlier of (i) his resignation, (ii) election
      of his successor or (iii) his removal by the shareholders of the
      Company.





As
      stated
      previously, the above referenced employment agreements contained an aggregate
      of
      7,200,000 stock options, of which an aggregate 4,800,000 have vested and none
      are exercised. As the October 2006 employment agreements provided for the
      options to be purchased at below the Company’s market price on the date of
      grant, the Company has recorded Option bonuses relating to these options of
      $779,940 and $5,719,392 for the three months ended July 31, 2008 and year ended
      April 30, 2008, respectively, in accordance with SFAS 123R (see Note
      12).





On
      August
      1, 2007, the Company executed a convertible note with Dr. Lee Johnson in the
      amount of $1,989,065.78 for unpaid accrued salary, including interest, through
      June, 2007 (the “LJ Note”). The LJ Note has a term of one year and accrues
      interest at a rate of 8% per annum. On August 14, 2008, the Company
      executed a convertible promissory note for $2,160,767 due February 15, 2009
      plus
      accrued interest at 8% per annum with Dr. Lee Johnson (the "LJ New Note") in
      exchange for the unpaid LJ Note. The terms and conditions of the new LJ New
      Note are materially the same as the LJ Note that expired August 1, 2008. At
      the election of the holder, the amount due and owing pursuant to such note
      may
      be converted into restricted shares of the Company’s Common Stock at a per share
      price of $1.43 per share (the "Conversion Price"). The Conversion Price shall
      be
      adjusted downward in the event Dot VN issues common stock (or securities
      exercisable or convertable into common stock) at a price below the Conversion
      Price, to a price equal to such issue price.





On
      August
      1, 2007, the Company executed a convertible note with Mr. Thomas Johnson in
      the
      amount of $1,989,065.78 for unpaid accrued salary, including interest, through
      June, 2007 (the “TJ Note”). The TJ Note has a term of one year and accrues
      interest at a rate of 8% per annum. On August 14, 2008, the Company
      executed a convertible promissory note for $2,160,767 due February 15, 2009
      plus
      accrued interest at 8% per annum with Mr. Johnson (the "TJ New Note") in
      exchange for the unpaid TJ Note. The terms and conditions of the new TJ New
      Note are materially the same as the TJ Note that expired August 1,
      2008.  At the election of the holder, the amount due and owing
      pursuant to such note may be converted into restricted shares of the Company’s
      Common Stock at a per share price of $1.43 per share (the "Conversion Price").
      The Conversion Price shall be adjusted downward in the event Dot VN issues
      common stock (or securities exercisable or convertable into common stock) at
      a
      price below the Conversion Price, to a price equal to such issue
      price.





**12.**  **Warrants,
      Options and Stock Based Compensation**





On
      July
      18, 2006, the Company issued two warrants exercisable into an aggregate of
      500,000 restricted shares of the Company’s Common Stock with an estimated fair
      value of $1,366,625 to Sausalito Capital Partners, LLC with such terms as
      follows; (i) one warrant, with a two year term, exercisable into 250,000 shares
      at exercise price of $2.00 per share; and (ii) one warrant, with a two year
      term, exercisable into 250,000 shares at exercise price of $3.00 per share.
      The
      value of the warrants was expensed at the time of issuance; there is no
      unamortized balance at July 31, 2008. On July 18, 2008, the warrants expired
      unexercised.





The
      fair
      value of these warrants was estimated at the date of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 220.3%; risk-free interest rate of 5.19%; contractual life of
      two
      years; and a closing market price of $3.00. The warrant holder received
      piggy-back registration rights if the Company was to file a Form S-1 or SB-2
      during the term of the warrants. Expected volatility is calculated based on
      the
      historic Friday stock market closing price from the first week the Company
      was
      publically traded over the counter on the Pink Sheets to the date of grant,
      a
      sixty-one week period, in accordance with SFAS 123R implementation guidance
      provided in paragraph 32(c) of appendix A.





On
      September 1, 2006, the Company issued two warrants exercisable into an aggregate
      of 5,100,000 restricted shares of the Company’s Common Stock in exchange for and
      cancellation of a like number of five cent warrants that would have expired
      on
      December 31, 2006. The new warrants have a three year term and an exercise
      price
      of $2.00 per share. The fair value of the warrant modification was zero; the
      fair value of the modified warrants at the date of grant ($14,640,318) was
      less
      than the fair value of the cancelled warrants immediately before the terms
      were
      modified ($15,049,512). As of July 31, 2008, no warrants were
      exercised.





The
      fair
      value of these warrants was estimated at the date of the grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 219.7%; risk-free interest rate of 5.02% and 4.70%; contractual
      life of four months (remaining) and three years; and a closing market price
      of
      $3.00, respectively for the cancelled warrants and the new warrants issued.
      Expected volatility is calculated based on the historic Friday stock market
      closing price of the preceding sixty-seven week period (from Pink Sheet
      inception).




20







**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**12.**  **Warrants,
      Options and Stock Based Compensation (continued)**





On
      October 9, 2006, the Company issued options to purchase an aggregate of
      7,650,000 restricted shares of the Company’s Common Stock with an estimated fair
      value of $19,886,786 to three officers (see Note 11) and an employee. The
      options have an exercise price of $0.50 per share, vest one third at the date
      of
      grant and one third at the end of the first and second year from the date of
      grant and expire ten years the date of vesting. As of July 31, 2008, 5,100,000
      options have vested and no options were exercised. Compensation cost, using
      the
      graded vesting attribute method in accordance with SFAS 123R, is recognized
      over
      the requisite service period during which each tranche (one third) of shares
      is
      earned (zero, one, and two years). The value of each tranche is amortized on
      a
      straight-line basis; $828,687 and $6,076,853 were expensed during the three
      months ended July 31, 2008 and the year ended April 30, 2008, respectively.
      Amortization for the year ending April 30, 2009 will be $1,381,145. As of July
      31, 2008, no options were exercised.





The
      fair
      value of these options was estimated at the date of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 212.1%; risk-free interest rate of 4.70%; contractual life of
      ten
      years; and a closing market price of $2.60. Expected volatility is calculated
      based on the historic Friday stock market closing price of the preceding
      seventy-three week period (from Pink Sheet inception).





In
      connection with the February Financing (see Note 7), the Company issued
      detachable warrants to the investors exercisable into an aggregate 344,465
      restricted shares of the Company’s Common Stock at a per share price of $2.00,
      with an estimated fair value of $901,632. The warrants have a term of five
      years
      from the date of issuance. The combined fair value of the warrants and the
      associated beneficial conversation feature of the Convertible Debentures are
      limited to the proceeds of the debt; $259,954 was allocated to the warrants.
      These warrants have been recorded as a discount against the Convertible
      Debentures and will be amortized to interest expense over the term of the debt
      (generally two years) or upon the earlier conversion of the debt; the
      unamortized balance at July 31, 2008 was $64,141. As of July 31, 2008, no
      warrants were exercised.





Additionally,
      pursuant to its engagement of Pali Capital, Inc., the Company’s placement agent
      in the February Financing, the Company issued three series of warrants: (i)
      retainer warrants on January 31, 2007 totaling in the aggregate 250,000
      restricted shares exercisable at a per share price of $0.001, with an estimated
      fair value of $712,404; (ii) placement warrants A on February 9, 2007 totaling
      in the aggregate 229,600 restricted shares exercisable at a per share price
      of
      $1.00, with an estimated fair value of $563,640; and (iii) placement warrants
      B
      on February 9, 2007 totaling in the aggregate 68,880 restricted shares
      exercisable at a per share price of $2.00, with an estimated fair value of
      $167,700 (collectively the “Placement Agent Warrants”). The Placement Agent
      Warrants have a term of five years from the date of issuance. The retainer
      warrants were expensed over the one year engagement term and the two placement
      warrants will be expensed over the two year term of the February Financing
      or
      upon the earlier election to exercise; the unamortized balance of the two
      placement warrants at July 31, 2008 was $156,948. As of July 31, 2008, 42,180
      $1.00 warrants have been exercised. In addition, the Company agreed to register
      the shares associated with the Placement Agent Warrants in the registration
      statement required in connection with the February Financing (see Note
      7).





The
      fair
      value of these options was estimated at January 31 and February 9, 2007 (the
      dates of grant) using the Black-Scholes option-pricing model with dividend
      yield
      of 0%; expected volatility of 192.8% and 190.7%; risk-free interest rate of
      4.82% and 4.78%; contractual life of five years; and a closing market price
      of
      $2.85 and $2.50; respectively. Expected volatility is calculated based on the
      historic Friday stock market closing price of the preceding eighty-nine and
      ninety-one week periods (from Pink Sheet inception).





The
      Company issued a series of six monthly warrants exercisable into 40,000
      restricted shares of the Company’s Common Stock on July 5, August 5, September
      5, October 5, November 5, and December 5, 2007 for an aggregate of 240,000
      restricted shares to Double Barrel, LLC for monthly performance of services,
      with an estimated fair value of $73,086, $58,021, $66,771, $77,954, $67,900,
      and
      $63,845 respectively. Each warrant is exercisable at $1.50 per share and expires
      three years from the date of grant. The warrants are earned in the month of
      grant and the fair value is expensed in the month; there is no unamortized
      balance at July 31, 2008. As of July 31, 2008, no warrants were
      exercised.





The
      fair
      value of these warrants were estimated at the dates of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 188.7%, 184.7%, 181.7%, 179.5%; 176.1%, and 174.9%, risk-free
      interest rate of 5.00%, 4.45%, 4.05%, 4.16%, 3.71%, and 2.91%; contractual
      life
      of three years; and a closing market price of $1.99, $1.61, $1.85, $2.15, $1.90,
      and $1.80; respectively. Expected volatility is calculated based on the historic
      Friday stock market closing price of the preceding 111 week, 116 week, 120
      week,
      125 week, 130 week, 133 week periods (from Pink Sheet inception).




21




**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**12.**  **Warrants,
      Options and Stock Based Compensation (continued)**





On
      August
      7, 2007, the Company issued options to purchase an aggregate of 350,000
      restricted shares of the Company’s Common Stock with an estimated fair value of
      $628,847 to an officer (Louis Huynh) and an employee. The options have an
      exercise price of $1.80 per share, vest one third at the date of grant and
      one
      third at the end of the first and second year from the date of grant and expire
      ten years the date of vesting. As of July 31, 2008, 116,667 options have vested
      and no options were exercised. Compensation cost, using the graded vesting
      attribute method in accordance with SFAS 123R, is recognized over the requisite
      service period during which each tranche (one third) of shares is earned (zero,
      one, and two years). The value of each tranche is amortized on a straight-line
      basis; $78,634 was expensed in the three months ended July 31, 2008.
      Amortization for the years ending April 30, 2009, and 2010 will be $157,302,
      and
      $26,223, respectively.





The
      fair
      value of these options was estimated at the date of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 184.7%; risk-free interest rate of 4.77%; contractual life of
      ten
      years; and a closing market price of $1.80. Expected volatility is calculated
      based on the historic Friday stock market closing price of the preceding 116
      week period (from Pink Sheet inception).





On
      September 7, 2007, the Company issued options to purchase 10,000 restricted
      shares of the Company’s Common Stock with an estimated fair value of $16,400 to
      an employee. The options have an exercise price of $2.00 per share, vest at
      the
      date of grant and expire three years the grant date. As of July 31, 2008, 10,000
      options have vested and no options were exercised. Compensation cost, in
      accordance with SFAS 123R, was recognized over the requisite service period
      (date of grant).





The
      fair
      value of these options was estimated at the date of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 181.2%; risk-free interest rate of 4.38%; contractual life of
      three years; and a closing market price of $1.85. Expected volatility is
      calculated based on the historic Friday stock market closing price of the
      preceding 121 week period (from Pink Sheet inception).





On
      September 18, 2007, the Company issued a 200,000 share warrant pursuant to
      the
      terms of a consulting agreement exercisable into restricted shares of the
      Company’s Common Stock with an estimated fair value of $275,312 to IR.VN LLC
      with a three year term and an exercise price of $2.00 per share. The value
      of
      the warrants will be expensed over the one year term of service; the unamortized
      balance at July 31, 2008 was $22,943. As of July 31, 2008, no warrants were
      exercised.





The
      fair
      value of these warrants was estimated at the date of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 181.5%; risk-free interest rate of 4.04%; contractual life of
      two
      years; and a closing market price of $1.57. Expected volatility is calculated
      based on the historic Friday stock market closing price of the preceding 122
      week period (from Pink Sheet inception).





On
      October 14, 2007, the Company issued options to purchase 150,000 restricted
      shares of the Company’s Common Stock with an estimated fair value of $306,777 to
      Michael Weller, an officer of the Company. The options had an exercise price
      of
      $1.80 per share, vest one third at the end of the first, second, and third
      year
      from the date of grant and expire three years the date of vesting. Compensation
      cost, using the graded vesting attribute method in accordance with SFAS 123R,
      is
      recognized over the requisite service period during which each tranche (one
      third) of shares is earned (one, two, and three years), with the value of each
      tranche amortized on a straight-line basis. On May 15, 2008, the Company’s
      Employment Agreement with Michael Weller was terminated, as a consequence,
      the
      unvested options to purchase 150,000 common shares of the Company’s stock were
      extinguished. $6,394 was expensed in the three months ended July 31,
      2008.





The
      fair
      value of these options was estimated at the date of grant using the
      Black-Scholes option-pricing model with dividend yield of 0%; expected
      volatility of 178.8%; risk-free interest rate of 4.70%; contractual life of
      ten
      years; and a closing market price of $2.05. Expected volatility is calculated
      based on the historic Friday stock market closing price of the preceding 126
      week period (from Pink Sheet inception).




22








**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**12.**  **Warrants,
      Options and Stock Based Compensation (continued)**





A
      summary
      of the Company’s stock options as of July 31 and April 30, 2008 and changes
      during the periods is as follows:




Period
                  endedJuly
                  31, 2008
              
              April
                  30, 2008Options
              
              Weighted
                average
                exercise
                price
              
              Weighted
                average
                intrinsic
                value
                per
                  share
              
              Options
              
              Weighted
                average
                exercise
                price
              
              Weighted
                average
                intrinsic
                value
                per
                  shareOutstanding
                  at the beginning of the period
              
              
              8,160,000
              
              $
              0.581
              
              
              
              
              
              7,650,000
              
              $
              0.500Granted
              
              
              -
              
              $
              -
              
              
              
              
              
              510,000
              
              $
              1,804Exercised
              
              
              -
              
              $
              -
              
              
              
              
              
              -
              
              $
              -Cancelled
              
              
              150,000
              
              $
              1.800
              
              
              
              
              
              -
              
              $
              -Outstanding
                  at the end of the period
              
              
              8,010,000
              
              $
              0.559
              
              $
              2.01
              
              
              8,160,000
              
              $
              0.581
              
              $
              1.97Vested
                  at the end of the period
              
              
              5,226,667
              
              
              
              
              
              
              
              
              5,226,667Exercisable
                  at the end of period
              
              
              5,226,667
              
              
              
              
              $
              2.05
              
              
              5,226,667
              
              
              
              
              $
              2.05Weighted
                  average fair value per option ofoptions
                  granted during the period
              
              
              
              
              $
              -
              
              
              
              
              
              
              
              $
              1.867






The
      following table summarizes information regarding employee stock options
      outstanding at July 31, 2008:





Options
                Outstanding
            
            Options
                ExercisableExercise
                prices
            
            Number
              Outstanding
            
            Weighted
              average
              remaining
              contractual
              life
                (years)
            
            Weighted
              average
              exercise
              price
            
            Number
              exercisable
            
            Weighted
              average
              remaining
              contractual
              life
                (years)
            
            Weighted
              average
              exercise
              price$
            0.500
            
            
            7,650,000
            
            
            8.9
            
            
            0.500
            
            
            5,100,000
            
            
            
            
            $
            0.500$
            1.80
                to 2.00
            
            
            360,000
            
            
            9.8
            
            $
            1.806
            
            
            126,667
            
            
            
            
            $
            1.8168,010,000
            
            
            9.0
            
            $
            0.559
            
            
            5,226,667
            
            
            8.8
            
            $
            0.532




23




**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**12.**  **Warrants,
      Options and Stock Based Compensation (continued)**





A
      summary
      of the Company’s warrants as of July 31 and April 30, 2008 and changes during
      the periods is as follows:







Period
                  endedJuly
                  31, 2008
              
              April
                  30, 2008Warrants
              
              Weighted
                  average
                  exercise
                  price
              
              Warrants
              
              Weighted
                  average
                  exercise
                  priceOutstanding
                  at the beginning of the period
              
              
              6,932,945
              
              $
              1.914
              
              
              6,492,945
              
              $
              1.926Granted
              
              
              -
              
              $
              -
              
              
              440,000
              
              $
              1.727Exercised
              
              
              95,430
              
              $
              0.443
              
              
              -
              
              $
              -Cancelled
              
              
              500,000
              
              $
              2.500
              
              
              -
              
              $
              -Outstanding
                  at the end of the period
              
              
              6,337,515
              
              $
              1.889
              
              
              6,932,945
              
              $
              1.914Vest
                  and exercisable at the end of period
              
              
              6,
                  337,515
              
              
              
              
              
              6,932,945Weighted
                  average fair value per option of warrantsgranted
                  during the period
              
              
              
              
              $
              -
              
              
              
              
              $
              1.552





The
      following table summarizes information regarding stock purchase warrants
      outstanding at July 31, 2008:





Warrants
                Outstanding
            
            Warrants
                ExercisableExercise
                prices
            
            Number
              Outstanding
            
            Weighted
              average
              remaining
              contractual
              life
                (years)
            
            Weighted
              average
              exercise
              price
            
            Number
              exercisable
            
            Weighted
              average
              remaining
              contractual
              life
                (years)
            
            Weighted
              average
              exercise
              price$
            0.001
            
            
            196,750
            
            
            3.5
            
            $
            0.001
            
            
            196,750
            
            
            
            
            $
            0.001$
            1.000
            
            
            187,420
            
            
            3.5
            
            $
            1.000
            
            
            187,420
            
            
            
            
            $
            1.000$
            1.500
            
            
            240,000
            
            
            2.1
            
            $
            1.500
            
            
            240,000
            
            
            
            
            $
            1.500$
            2.000
            
            
            5,713,345
            
            
            1.3
            
            $
            2.000
            
            
            5,713,345
            
            
            
            
            $
            2.0006,337,515
            
            
            1.5
            
            $
            1.889
            
            
            6,
                337,515
            
            
            1.5
            
            $
            1.889





13.Going
      Concern





To
      date
      the Company has had limited revenues due to the early stage of its efforts
      to
      transition into the marketing of its Internet resources. Consequently, the
      Company has incurred recurring losses from operations. These factors, as well
      as
      the risks associated with raising capital through the issuance of equity and/or
      debt securities creates uncertainty as to the Company’s ability to continue as a
      going concern.





The
      Company’s plans to address its going concern issues include:





·
            Increasing
                revenues of its services, specifically its domain names sales, through
                the
                development and deployment of an application program interface which
                the
                Company anticipates will increase its reseller network and international
                distribution channels and through direct marketing to existing customers
                both online, via e-mail and direct
                mailings;





·
            Completion
                and Operation of the IDCs and revenue derived from the IDC
                services;




24







**Dot
      VN, INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements (Unaudited)**


**As
      of July 31, 2008**





**13.**  **Going
      Concern (continued)**





·
            Commercialization
                and Deployment of certain new wireless technology;
                and





·
            Raising
                capital through the sale of debt and/or equity
                securities.





There
      can
      be no assurance that the Company will be successful in its efforts to increase
      revenues, issue debt and/or equity securities for cash or as payment for
      outstanding obligations. Capital raising efforts may be influenced by factors
      outside of the control of the Company, including, but not limited to, capital
      market conditions.





The
      Company is in various stages of finalizing implementation strategies on a number
      of services and is actively attempting to market its services nationally in
      Vietnam. As a result of capital constraints it is uncertain when it will be
      able
      to deploy the application program interface or complete construction of the
      IDCs.





**14.**  **Stock
      Issuances**





On
      June
      6, 2008, the Company issued to one employee, a sophisticated purchaser, in
      consideration for the execution of Non-Disclosure and Invention Assignment
      Agreements 3,000 restricted shares of the Company’s Common Stock valued at the
      market close and recorded as a $5,100 bonus.





Also
      on
      June 6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued
      to
      Scott Clark 7,500 restricted shares of the Company’s Common Stock exempt from
      registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for
      the cancellation of Clark’s $7,500 Dot VN Debenture upon
      conversion.





Additional
      on June 6, 2008, pursuant to the terms of the Spot-On Debenture, the Company
      issued to Gary Blum 25,000 restricted shares of the Company’s Common Stock
      exempt from registration pursuant to Rule 506 of Regulation D, as amended,
      for
      $25,000 recorded as a note receivable due January 31, 2009 plus accrued interest
      at 10% per annum.





On
      June
      26, 2008, pursuant to the terms of a Placement Agent Warrants, the Company
      issued to Scott Clark (i) 53,250 restricted shares of the Company’s Common Stock
      exempt from registration pursuant to Rule 506 of Regulation D, as amended,
      upon
      the exercise of 53,250 $0.001 warrants for $53.25 and (ii) 12,051 net restricted
      shares of the Company’s Common Stock exempt from registration pursuant to Rule
      506 of Regulation D, as amended, upon the cashless exercise of 42,180 $1.00
      warrants with 30,129 warrant shares surrendered to cover the exercise
      price.





15.Subsequent
      Events





On
      August
      1, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued to
      Tara
      Roy 50,000 restricted shares of the Company’s Common Stock exempt from
      registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for
      the cancellation of Roy’s $50,000 Dot VN Debenture upon conversion.





On
      August
      6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued to
      2030617 Ontario Ltd. (“Ontario”) 21,213 restricted shares of the Company’s
      Common Stock exempt from registration pursuant to Rule 506 of Regulation D,
      as
      amended, in exchange for the cancellation of Ontario’s $21,213 Dot VN Debenture
      upon conversion.





Also
      on
      August 6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued
      to Jimmy Sarbh 100,000 restricted shares of the Company’s Common Stock exempt
      from registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for the cancellation of Sarbh’s $100,000 Dot VN Debenture upon
      conversion.





On
      August
      14, 2008, the Company executed a convertible promissory note for $2,160,767
      due
      February 15, 2009 plus accrued interest at 8% per annum with Thomas Johnson
      (the
“TJ New Note”), the Company’s Chief Executive Officer and Chairman of the Board
      of Directors, in exchange for the unpaid TJ Note (see Note 7). The terms and
      conditions of the TJ New Note are materially the same as the TJ Note that
      expired August 1, 2008 which was originally issued for unpaid accrued
      salary, including interest, from January, 2003 through June, 2007 by Mr. Johnson
      under his employment agreement with Dot VN. At
      the
      election of the holder, the amount due and owing pursuant to such note may
      be
      converted into common stock of the Company at $1.43 per share (the “Conversion
      Price”). The Conversion Price shall be adjusted downward in the event Dot VN
      issues common stock (or securities exercisable for or convertible into common
      stock) at a price below the Conversion Price, to a price equal to such issue
      price.




25





**Dot
        VN, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements (Unaudited)**
 **As
        of July 31, 2008**





15.Subsequent
      Events (continued)




Also
      on
      August 14, 2008, the Company executed a convertible promissory note for
      $2,160,767 due February 15, 2009 plus accrued interest at 8% per annum with
      Dr.
      Lee Johnson (the “LJ New Note”), the Company’s President, Chief Technology
      Officer, and Chief Financial Officer, in exchange for the unpaid LJ Note (see
      Note 7). The terms and conditions of the LJ New Note are materially the same
      as
      the LJ Note that expired August 1, 2008 which was originally issued for
      unpaid accrued
      salary, including interest, from January, 2003 through June, 2007 by Dr. Johnson
      under his employment agreement with Dot VN. At
      the
      election of the holder, the amount due and owing pursuant to such note may
      be
      converted into common stock of the Company at $1.43 per share (the “Conversion
      Price”). The Conversion Price shall be adjusted downward in the event Dot VN
      issues common stock (or securities exercisable for or convertible into common
      stock) at a price below the Conversion Price, to a price equal to such issue
      price.





On
      August
      21, 2008, the Company established Dot VN Company, Ltd. (Danang), an entity
      existing under the laws of the Country of Vietnam (“Dot VN Danang”), as a wholly
      owned subsidiary of Dot VN, Inc.





Also
      on
      August 21, 2008, Dot VN Danang, entered into a Land Sublease Agreement (the
      “Sublease Agreement”) with Massda Land Company Limited, an entity existing under
      the laws of the Country of Vietnam, pursuant to which Dot VN Danang has the
      right to lease approximately 8,176 square meters of land in the Danang
      Industrial Zone in Danang, Vietnam, for the express purpose of building an
      IDC
      and related uses, for a term of approximately 35 years, with base rent of
      $32/square meter for the term, excluding value added taxes and other possible
      fees and costs during the term.





On
      September 2, 2008, the Hi-Tek IDC Loan maturity was extended to June 30, 2009
      with no other change to the terms.





Also
      on
      September 2, 2008, the Vina Mex Loan maturity was extended to June 30, 2009
      with
      no other change to the terms.




26




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





The
      following information should be read in conjunction with (i) the condensed
      consolidated financial statements of Dot VN, Inc. and the notes thereto
      appearing elsewhere in this Form 10-Q together with (ii) the more detailed
      business information and the April 30, 2008 and 2007 audited consolidated
      financial statements and related notes included in the Company’s most recent
      Form S-1/A as filed with the Securities and Exchange Commission. Statements
      in
      this section and elsewhere in this Form 10-Q that are not statements of
      historical or current fact constitute “forward-looking statements





**OVERVIEW**





Dot
      VN,
      Inc. (“Dot VN” or the “Company”) was incorporated in the State of Delaware on
      May 27, 1998, under the name Trincomali Ltd. (“Trincomali”). Over the course of
      its history, Trincomali underwent additional name changes until becoming renamed
      Malers, Inc. on April 28, 2005. On June 21, 2006, Malers, Inc. effected a
      transaction by and among (i) Dot VN, Inc., a California corporation (“Dot VN
      CA”), (ii) Malers, Inc., a Delaware corporation (“Malers”) and (iii) Malers
      Acquisition Corp. (“MAC”), a Washington corporation and wholly owned subsidiary
      of Malers, Inc., the completion of which transaction resulted in (w) Malers
      being renamed “Dot VN, Inc.” a Delaware corporation; (x) Dot VN CA being renamed
“Hi-Tek Multimedia, Inc.” a California corporation; (y) MAC merging with and
      into “Hi-Tek Multimedia, Inc.” a California corporation thereby ending MAC’s
      corporate existence; and (z) Hi-Tek Multimedia, Inc., a California corporation,
      becoming a wholly owned subsidiary of Dot VN, Inc. a Delaware
      corporation.





Dot
      VN is
      an Internet and telecommunications company focused on the Vietnamese market.
      The
      Company intends to apply the benefits of best of breed technology through
      strategic partnerships to deploy hardware, software and wireless solutions
      in
      Vietnam. In order to maximize the benefits the Company can derive from the
      technology, the Company also intends:





·
              to
                  drive growth in registrations of the Vietnamese ccTLD
                  .vn;





·
              to
                  build and operate Internet data centers in major city centers in
                  Vietnam;
                  and





·
              to
                  identify, deploy and commercialize best of breed technologies in
                  Vietnam.





Dot
      VN
      has signed agreements with the Vietnamese Internet Network Information Center
      to
      serve as the only domain name registrar empowered to approve domain names,
      in
      real time, online which provides Dot VN with a competitive advantage vis-à-vis
      other domain name registrars. In addition to its domain registration business,
      Dot VN is currently in the process of designing an Internet data centers (“IDC”
in the singular or “IDCs” in the plural) which will serve as an internal data
      and telecommunications network within the country of Vietnam and provide
      services such as web hosting, collocation and disaster recovery services. The
      data centers will provide hosting and collocation services as well as serves
      as
      the basic infrastructure for additional Internet and data technologies such
      as
      wireless broad brand connectivity, distance e-learning and e-government
      projects. The Company has secured an agreement with Quang Trung Software City
      Development Company, a 100% State-owned (Vietnamese government) enterprise,
      (“QTSC”) to develop an IDC in Ho Chi Minh City, Vietnam located in the QTSC
      telecommunications building and intends to execute a material definitive
      agreement based on the current procedural agreement with VNNIC to build an
      IDC
      in Hanoi, Vietnam, located in the VNNIC building, both are anticipated to occur
      in the near term. In addition, the Company intends to develop additional IDCs
      in
      Danang City, Vietnam and
      the
      rest of the Country of Vietnam in
      the
      mid to long term. Dot VN will continue to explore and test, and analyze, new
      and
      best of breed technology for deployment in Vietnam.





Going
      Concern





To
      date
      the Company has had limited revenues due to the early stage of its efforts
      to
      transition into the marketing of its Internet resources. Consequently, the
      Company has incurred recurring losses from operations. These factors, as well
      as
      the risks associated with raising capital through the issuance of equity and/or
      debt securities creates uncertainty as to the Company’s ability to continue as a
      going concern.





The
      Company’s plans to address its going concern issues include:




·
              Increasing
                  revenues of its services, specifically its domain names sales,
                  through the
                  development and deployment of an application program interface
                  which the
                  Company anticipates will increase its reseller network and international
                  distribution channels and through direct marketing to existing
                  customers
                  bothonline,
                  via e-mail and direct mailings;


·
              Completion
                  and operation of the IDCs and revenue derived from the IDC services;


·
              Commercialization
                  and Deployment of certain new wireless technology;and


·
              Raising
                  capital through the sale of debt and/or equity
                  securities.




27




There
      can
      be no assurance that the Company will be successful in its efforts to increase
      revenues, issue debt and/or equity securities for cash or as payment for
      outstanding obligations. Capital raising efforts may be influenced by factors
      outside of the control of the Company, including, but not limited to, capital
      market conditions.





The
      Company is in various stages of finalizing implementation strategies on a number
      of services and is actively attempting to market its services nationally in
      Vietnam. As a result of capital constraints it is uncertain when it will be
      able
      to start deploy the application program interface or complete construction
      of
      the IDCs





**CRITICAL
      ACCOUNTING POLICIES**





The
      discussion and analysis of our financial condition and results of operations
      are
      based on our condensed consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States (“US GAAP”). The preparation of these condensed consolidated
      financial statements requires us to make estimates and judgments that affect
      the
      reported amounts of assets, liabilities, revenues and expenses, and related
      disclosure of contingent assets and liabilities. On an ongoing basis, we
      evaluate our estimates based on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates under different assumptions
      or
      conditions. We have identified the policies below as critical to our business
      operations and to the understanding of our financial results:





Basis
      of Presentation





The
      Company’s condensed consolidated financial statements are prepared using the
      accrual method of accounting and include its wholly-owned subsidiaries, which
      conforms to US GAAP. All significant intercompany accounts and transactions
      have
      been eliminated in consolidation.





Revenue
      Recognition





We
      recognize revenue in accordance with Security
      and Exchange Commission (“ SEC”)
      Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial
      Statements,” as amended by SAB 101A and 101B and as revised by SAB 104, “Revenue
      Recognition” and Emerging
      Issue Task Force (“ EITF”)
      No. 99-19  “Reporting
      Revenue Gross as a Principal Versus Net as an Agent” (“ EITF
      99-19”) .
      Accordingly, we recognize revenue  and
      the
      related costs when: (1) persuasive evidence of an arrangement exists; (2)
      delivery and acceptance has occurred or service
      has been rendered; (3) the fee is fixed or determinable; and (4) collectability of the
      resulting receivable is reasonably assured.





The
      Company principally generates revenues from the sale of ccTLD domain names
      (.vn)
      for the government of Vietnam. These revenues consist primarily of registration
      and renewal fees, which are recorded gross in accordance with EITF
      99-19.





Amounts
      invoiced or collected in advance of delivery or providing service are recorded
      as a deferred revenue liability; revenue is recognized when the domain names
      are
      authorized and released to the customer.





Stock-Based
      Compensation





SFAS
      No.
      123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) replaces SFAS No. 123
“Accounting for Stock-Based Compensation” (“SFAS 123”) and supersedes Accounting
      Principles Board (“APB”) Opinion No. 25 “Accounting for Stock Issued to
      Employees” (“APB 25”). SFAS 123R requires that the cost resulting from all
      share-based transactions be recorded in the financial statements and establishes
      fair value as the measurement objective for share-based payment transactions
      with employees and acquired goods or services from non-employees. Prior to
      the
      May 1, 2005 (fiscal year 2006) adoption of SFAS 123R, the Company applied SFAS
      123, which provided for the use of a fair value based method of accounting
      for
      stock-based compensation. However, SFAS 123 allowed the measurement of
      compensation cost for stock options granted to employees using the intrinsic
      value method of accounting prescribed by APB 25, which only required charges
      to
      compensation expense for the excess, if any, of the fair value of the underlying
      stock at the date a stock option is granted (or at an appropriate subsequent
      measurement date) over the amount the employee must pay to acquire the stock.
      Prior to fiscal year 2006, the Company had elected to account for employee
      stock
      options using the intrinsic value method under APB 25 and provided, as required
      by SFAS 123, pro forma footnote disclosures of net loss as if a fair value
      based
      method of accounting had been applied.




28





The
      Company adopted 123R in accordance with the modified retrospective application
      and has restated the consolidated financial statements from the beginning of
      fiscal year 2006 for the impact of 123R. Under this transition method,
      stock-based compensation expense in fiscal year 2006 included stock-based
      compensation expense for all share-based payment awards granted prior to, but
      not yet vested as of May 1, 2005, based on the grant-date fair value estimated
      in accordance with the original provision of SFAS 123. Stock-based compensation
      expense for all share-based payment awards granted after May 1, 2005 is based
      on
      the grant-date fair value estimated in accordance with the provisions of SFAS
      123R. The Company recognizes these compensation costs on a straight-line basis
      over the requisite service period of the award, which is generally the option
      vesting term of two years.





Use
      of
      Estimates





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





Significant
      estimates made by management are, realizability of fixed assets and long-lived
      assets, income taxes, stock option and warrant valuation, and accounts
      receivable. The Company bases our estimates on our limited historical experience
      and various other assumptions we believe to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying value of assets and liabilities that are not readily apparent
      from
      other sources and, where necessary, makes adjustments
      prospectively.





As
      the
      Company is entering into a new market it is difficult to estimate if its
      investments in long term assets will be realizable in the future. The Company’s
      assumptions, in part, include an evaluation of Internet growth within Vietnam
      and its acceptance and availability to the population (less than 4% of the
      population in December 2003 to 20% by November 2007), the country’s economic
      growth rate at over 8% per year, and the increasing capital investment from
      foreign companies.





The
      Company at this time estimates it will be able to fully recover its investment
      in intangible assets and has not recognized a charge for impairment. The
      Company’s intangible assets consist of its US trademark ($360,000) and Vietnam
      trademark ($662,336) which could be subject to impairment in the future if
      the
      assumptions noted above change adversely.





At
      this
      time the Company has suffered losses so it has not recorded any deferred tax
      assets.





The
      Company estimates the useful life of its fixed assets to be generally three
      to
      five years for assets purchased new and two to three years for assets purchased
      used and has made no changes to the depreciation life of its fixed assets.
      At
      April 30, 2008 net fixed assets to be recovered in the future are
      $671,058.





The
      Company estimates the fair value of stock-based transactions (options and
      warrants) using a Black-Sholes option pricing model which requires the Company
      to estimate the market volatility of our common stock among other input
      variables. The Company calculates market volatility based on the historic Friday
      stock market closing price from the first week the Company was publically traded
      over the counter on the Pink Sheets to the specific date of the grant in
      accordance with SFAS 123R implementation guidance provided in paragraph 32(c)
      of
      appendix A. Based on the Pink Sheet trading history of our common stock the
      market volatility has ranged from 230% (61 weekly data points) to 174% (133
      weekly data points). The future market volatility of our common stock could
      continue to fluctuate which will impact the fair value of future stock-based
      transactions.





Management
      reviews its estimates on a quarterly basis and, where necessary, makes
      adjustments prospectively.





Concentration
      of Risks





The
      Company derives the majority of its revenues from the registration of country
      code top level domain names (“ccTLD”) for the Vietnamese Ministry of Information
      and Communications under a contract with the Vietnam Internet Network
      Information Center (“VNNIC”). The Company signed its first contract with VNNIC
      on September 18, 2003 which has since been renewed annually. On January 3,
      2006,
      the Company and VNNIC signed a new contract for registration of top level
      country domain names with no fixed term.





On
      September 28, 2006, the Company and VNNIC signed a procedural agreement, with
      a
      profit sharing component, for the design, construction, and operation of an
      IDC
      in Hanoi, Vietnam with a fifty year term. VNNIC will provide four finished
      floors (approximately 10,000 square feet) rent free for ten years within a
      facility under construction. In exchange the Company will design and
      construction the IDC, acquire the equipment (hardware and software), and manage
      the operation.




29





In
      the
      event of a change in the business conditions within Vietnam; enactment,
      application or interpretation of any law in Vietnam the effect of which is
      to
      nationalize or expropriate or enforce disposal the Company’s assets within
      Vietnam; or a change in the Company’s contractual relationship with VNNIC the
      Company could be adversely affected.





On
      January 31 and February 9, 2007 the Company issued a series of convertible
      debentures for an aggregate of $1,148,212 due January 31, 2009 (the “February
      Financing”). The debentures convert at the option of each individual noteholder
      (the “February Investors”) into restricted shares of the Company’s Common Stock
      at $1.00 per share. The February Financing was funded in conjunction with a
      like
      amount of convertible debentures issued concurrently by Spot-On Networks, LLC
      (“Spot-On”) to the February Investors (the “Spot-On Debenture”). The February
      Financing terms required that the convertible debentures issued by Spot-On
      be
      convertible into either membership units of Spot-On Networks, LLC or common
      stock of the Company, at the option of the February Investors. Upon the February
      Investors’ election to convert a Spot-On Debenture into the Company’s common
      stock the Spot-On Debenture is assigned and transferred into the name of the
      Company (the “Assigned Spot-On Debentures”) at which time the Company issues the
      Common Stock and records a note receivable. Future monthly interest payments,
      at
      10% per annum, are accrued and on January 31, 2009, at maturity, the Assigned
      Spot-On Debentures principal and accrued interest will be paid to the Company
      by
      Spot-On.





Spot-On
      participated in the February Financing because, at the time, the Company and
      Spot-On contemplated consummating a business combination transaction, such
      as a
      merger, share exchange or acquisition, provided that the Company could obtain
      a
      larger amount of financing, contemplated by the parties to be approximately
      $10,000,000. The Company never obtained a larger amount of financing and, as
      a
      consequence, terms and conditions of the contemplated business combination
      transaction by and between the Company and Spot-On were never negotiated. The
      holders of the Spot-On Debentures are the same persons as the Company’s
      convertible debentures. No holder of a Spot-On Debenture, on an as-converted
      basis, is a beneficial holder of 5% or more of common stock of the
      Company.





The
      number of February Investors who may convert their Spot-On Debenture into the
      Company’s common stock is not known but could total an aggregate of $1,148,212
      in principal. The Company’s ability to collect the Assigned Spot-On Debentures
      principal and subsequent accrued interest on January 31, 2009, at maturity,
      is
      dependent on the cash reserves of Spot-On and/or their ability to raise
      additional financing.





Basic
      and Diluted Net Loss Per Share





Net
      loss
      per share is calculated in accordance with SFAS No. 128, “Earnings Per Share”
for the periods presented. Basic net loss per share is computed using the
      weighted average number of common shares outstanding. Diluted loss per share
      has
      not been presented because the assumed exercise of the Company’s outstanding
      options and warrants would be antidilutive during periods of net loss. Diluted
      earnings loss per share is based on the assumption that all dilutive stock
      options, warrants, and convertible debt are converted or exercised by applying
      the treasury stock method. Under this method, options and warrants are assumed
      exercised at the beginning of the period (or at the time of issuance, if later),
      and as if funds obtained thereby were used to purchase common stock at the
      average market price during the period. Options and/or warrants will have a
      dilutive effect, during periods of net profit, only when the average market
      price of the common stock during the period exceeds the exercise price of the
      options and/or warrants. There were options to purchase 8,010,000 shares of
      common stock and 6,337,515 warrants potentially issuable at July 31, 2008 which
      were not included in the computation of net loss per share.





Cash
      and Cash Equivalent





The
      Company considers all highly liquid investments purchased with an original
      maturity of three months or less to be cash equivalents.





Fair
      Value of Financial Instruments





Financial
      Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
      (“SFAS”) No. 107, “Disclosures about Fair Value of Financial Instruments”,
      requires disclosure of fair value information about financial instruments when
      it is practicable to estimate that value. The carrying amounts of the Company’s
      financial instruments as of April 30, 2008 and 2007 approximate their respective
      fair values because of the short-term nature of these instruments. Such
      instruments consist of cash, accounts receivable, accounts payable, promissory
      notes, due to related parties, and accrued liabilities.




30





Equipment





Equipment
      is carried at cost. Depreciation is computed using a straight-line method over
      the estimated useful lives of the depreciable property generally three to five
      years for assets purchased new and two to three years for assets purchased
      used.
      Management evaluates useful lives regularly in order to determine recoverability
      taking into consideration current technological conditions. Maintenance and
      repairs are charged to expense as incurred; additions and betterments are
      capitalized. Upon retirement or disposal of any item of equipment, the cost
      and
      related accumulated depreciation of the disposed assets is removed, and any
      resulting gain or loss is credited or charged to operations.





Interest
      on borrowings related to eligible capital expenditures is capitalized as part
      of
      the cost of the qualified asset and amortized over the estimated useful life
      of
      the asset in accordance with SFAS No. 34 “Capitalization of Interest
      Cost”.





Goodwill
      and Other Intangible Assets





Goodwill
      and acquired intangible assets determined to have an indefinite useful lives
      are
      not amortized, but instead are evaluated for impairment annually and if events
      or changes in circumstances indicate that the carrying amount may not be
      recoverable in accordance with SFAS No.142 “Goodwill and Other Intangible
      Assets” (“SFAS 142”). The impairment test consists of a comparison of the fair
      value of an intangible asset with its carrying amount. If the carrying amount
      of
      an intangible asset exceeds its fair value, an impairment loss is recognized
      in
      an amount equal to that excess. After an impairment loss is recognized, the
      adjusted carrying amount of the intangible asset is its new accounting basis.
      Subsequent reversal of a previously recognized impairment loss is prohibited.
      SFAS 142 also requires that intangible assets with estimable useful lives be
      amortized over their respective estimated useful lives to their estimated
      residual values, and reviewed for impairment in accordance with SFAS No. 144,
      “Accounting for Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”).





Long-lived
      Assets





Long-lived
      assets, such as property and equipment and purchased intangibles with finite
      lives (subject to amortization), are evaluated for impairment whenever events
      or
      changes in circumstances indicate that the carrying amount of the asset may
      not
      be recoverable in accordance with SFAS 144. Circumstances which could trigger
      a
      review include, but are not limited to: significant decreases in the market
      price of the asset; significant adverse changes in the business climate or
      legal
      factors; accumulation of costs significantly in excess of the amount originally
      expected for the acquisition or construction of the asset; current period cash
      flow or operating losses combined with a history of losses or a forecast of
      continuing losses associated with the use of the asset; and current expectation
      that the asset will more likely than not be sold or disposed significantly
      before the end of its estimated useful life.





Recoverability
      of assets is measured by a comparison of the carrying amount of an asset to
      estimated undiscounted future cash flows expected to be generated by an asset.
      If the carrying amount of an asset exceeds its estimated future cash flows,
      an
      impairment charge is recognized as the amount by which the carrying amount
      exceeds the estimated fair value of the asset. The estimated fair value is
      determined using a discounted cash flow analysis. Any impairment in value is
      recognized as an expense in the period when the impairment occurs.





Deferred
      Charges





The
      Company capitalizes costs associated with the issuance of debt instruments
      as a
      non-current asset. These costs are amortized on a straight-line basis over
      the
      term of the debt instruments.





Convertible
      Debt





In
      accordance with the provisions of EITF No. 98-5 “Accounting for Convertible
      Securities with Beneficial Conversion Features or Contingently Adjustable
      Conversion Ratios” and EITF No. 00-27 “Application of Issue No. 98-5 to Certain
      Convertible Instruments” (“EITF 00-27”) the Company evaluates debt securities
      (“Debt”) for beneficial conversion features. A beneficial conversion feature is
      present when the conversion price per share is less than the market value of
      the
      common stock at the commitment date. The intrinsic value of the feature is
      then
      measured as the difference between the conversion price and the market value
      (the “Spread”) multiplied by the number of shares into which the Debt is
      convertible and is recorded as debt discount with an offsetting amount
      increasing additional paid-in-capital. The debt discount is accreted to interest
      expense over the term of the Debt with any unamortized discount recognized
      as
      interest expense upon conversion of the Debt. If a debt security contains terms
      that change upon the occurrence of a future event the incremental intrinsic
      value is measured as the additional number of issuable shares multiplied by
      the
      commitment date market value and is recognized as additional debt discount
      with
      an offsetting amount increasing additional paid-in-capital upon the future
      event
      occurrence. The total intrinsic value of the feature is limited to the proceeds
      allocated to the Debt instrument.




31





Income
      Taxes





Income
      taxes are provided in accordance with SFAS No. 109, “Accounting for Income
      Taxes” (“SFAS 109”). Current income tax expense (benefit) is the amount of
      income taxes expected to be payable (receivable) for the current year. A
      deferred tax asset and/or liability is computed for both the expected future
      impact of differences between the financial statement and tax bases of assets
      and liabilities and for the expected future tax benefit to be derived from
      tax
      loss and tax credit carry forwards. Deferred income tax expense is generally
      the
      net change during the year in the deferred income tax asset and liability.
      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount expected to be “more likely than not” realized in future
      tax returns. Tax rate changes and changes in tax laws are reflected in income
      in
      the period such changes are enacted.





Guarantees
      of Others





FASB
      Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for
      Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FAN 45”)
      requires an initial recognition and measurement of guarantees in which the
      guarantor obligation represents a liability, as defined. FIN 45 excludes the
      from recognition guarantees which may be settled in equity shares of the
      guarantor, at its option, and instead establishes minimum disclosure
      requirements. The Company evaluated FIN 45 and determined that the Company
      currently has no guarantees which require recognition of a
      liability.





Segment
      Information





SFAS
      No.
      131, “Segment Information” (“SFAS 131”), amends the requirements for companies
      to report financial and descriptive information about their reportable operating
      segments. Operating segments, as defined in SFAS 131, are components of an
      enterprise for which separate financial information is available and is
      evaluated regularly by a Company in deciding how to allocate resources and
      in
      assessing performance. It also establishes standards for related disclosures
      about products and services, geographic areas and major customers. The Company
      evaluated SFAS No. 131 and determined that the Company currently operates in
      one
      segment, domain name registration, and will operate a second segment when it
      commences future operation of Internet data centers.





RESULTS
      OF OPERATIONS





**Three
      months ended July 31, 2008 compared to three months ended July 31,
      2007** .





REVENUES





Revenues
      of $376,680 for the three months ended July 31, 2008 (the “Current Quarter”)
      increased 29.8% or $86,427 as compared to $290,253 for the three months ended
      July 31, 2007 (the “Prior Quarter”). This increase from the Prior Quarter is the
      result of an increase of domain names under registration by the Company (9,910
      compared to 7,661 or a 29.4% increase over the previous quarter).





During
      the Current Quarter, the growth in the registration of (i) new domain names
      increased 27% to represent approximately 24% of total revenues (27% in the
      Prior
      Quarter) and (ii) domain name renewals increased 51% to represent approximately
      71% of total revenues (66% in the Prior Quarter). The balance of the Company’s
      revenues come from fees charged to process changes in an existing domain name
      record as maintained by VNNIC and other related support services.





COST
      OF
      REVENUES





For
      the
      three months ended July 31, 2008, cost of revenues increased 39.8% to $143,406
      compared to $102,585 for the three months ended July 31, 2007, an increase
      of
      $40,821. Gross profit was $233,274 or 61.9% (as a percentage of revenues) for
      the three months ended July 31, 2008 compared to $187,668 or 64.7% for the
      three
      months ended July 31, 2007. The decrease in gross profit (2.8%) was principally
      due to the reduction in other revenues from changes to an existing domain name
      record and other services which have a higher gross margin rate.





GENERAL
      AND ADMINISTRATIVE EXPENSES





For
      the
      three months ended July 31, 2008, general and administrative expenses, which
      includes consulting and professional fees, marketing and promotion, option
      bonus, bad debt expense, and other general and administrative, were $1,671,166
      compared to $3,078,249 for the three months ended July 31, 2007, a decrease
      of
      $1,407,083 or 45.7%. The decrease in total general and administrative expenses
      was primarily attributable to the following offsetting factors:





·
              Option
                  Bonus expenses decreased to $913,715 for the three months ended
                  July 31,
                  2008, from $2,485,951 for the three months ended July 31, 2007,
                  a decrease
                  of $1,572,236 or 63.2%. The decrease results from the Company’s
                  application of the graded vesting attribute method, in accordance
                  with
                  SFAS 123R, to record compensation costs for stock options. Under
                  this
                  method the Company records compensation costs for one third of
                  the fair
                  value at the first vesting date (generally the date of grant) and
                  one
                  third during the one year service period of the second vesting
                  and the
                  remaining third during the two year service period of the final
                  vesting.
                  In October 2006, the Company issued options for an aggregate of
                  7,650,000
                  shares with an estimated fair value of $19,886,786; during the
                  Prior
                  Quarter $2,485,951 was expensed compared to $828,028 during the
                  Current
                  Quarter, for a decrease of $1,657,264 in the Current Quarter. During
                  the
                  quarter ending October 31, 2007 the Company issued options for
                  an
                  aggregate of 510,000 shares with an estimated fair value of $952,025
                  resulting in the recording of $85,028 in compensation costs in
                  the Current
                  Quarter compared to no expense in the Prior
                  Quarter.




32




·
              Bad
                  debt expense increased to $26,000 for the three months ended July
                  31, 2008
                  from $860 for the three months ended July 31, 2007, an increase
                  of $25,140
                  or 2923%. The increase in bad debt expense primarily results from
                  the
                  Company’s 100% bad debt reserve applied to an additional $25,000 in note
                  receivable from Spot-On Networks, LLC (“Spot-On”) recorded in the Current
                  Quarter. The additional note receivable results from the assignment
                  by one
                  individual of the convertible debentures originally issued to him
                  by
                  Spot-On and assigned to the Company as his full consideration for
                  an
                  aggregate of 25,000 restricted shares of the Company’s Common Stock (the
                  “Assigned Spot-On Debentures”). Spot-On is a private company and does not
                  furnish the Company with financial statements to evaluate their
                  ability to
                  pay the Assigned Spot-On Debentures principal and accrued interest
                  on
                  January 31, 2009 at maturity. The Company’s ability to collect the
                  Assigned Spot-On Debentures is dependent on the cash reserves held
                  by
                  Spot-On and/or their ability to raise additional financing. Due
                  to the
                  uncertainty of collection the Company has recorded a bad debt expense
                  for
                  the full amount of the Assigned Spot-On
                  Debentures.





·
              Other
                  general and administrative expenses increased to $594,195 for the
                  three
                  months ended July 31, 2008 from $486,385 for the three months ended
                  July
                  31, 2007, an increase of $107,810 or 22.2%. The general and administrative
                  expenses increased over the Prior Quarter is primarily due to increased
                  professional fees and staffing costs in support of developing new
                  business
                  opportunities and procedures to manage the business and its financial
                  reporting requirements.





LOSS
      FROM
      OPERATIONS





We
      reported a loss from operations of $1,437,892 for the three months ended July
      31, 2008 as compared to a loss from operations of $2,890,581 for the three
      months ended July 31, 2007, a decrease of $1,452,689 or 50.3%. The decrease
      is
      primarily attributed to improved gross profit ($45,606) and decreased option
      bonus expense ($1,572,236) offset by increased bad debt expense ($25,140) and
      other general and administrative expenses ($107,810).





OTHER
      INCOME AND EXPENSES





Total
      other income and expense increased to a net expense of $894,136 for three months
      ended July 31, 2008 as compared to a net expense of $644,638 for the three
      months ended July 31, 2007. Included in this net expense increase of $249,498
      or
      38.7% are:





·
              Interest
                  income was $1,644 for the three months ended July 31, 2008 as compared
                  to
                  interest income of $4,802 for the three months ended July 31, 2007;
                  the
                  decrease of $3,158 or 65.8% was attributable to a decrease in average
                  cash
                  balances.





·
              The
                  finance expense was $164,363 for the three months ended July 31,
                  2008 as
                  compared to finance expense of $316,366 for the three months ended
                  July
                  31, 2007, a decrease of $152,003 or 48.0%. The net decreased expense
                  is
                  the result of the amortization of both cash fees paid and the fair
                  value
                  of stock warrants issued to obtain equity and/or debt financing
                  for the
                  Company, the significant items
                  were:





o
              Pursuant
                  to its engagement of Pali Capital, Inc. (“Pali”), the Company’s placement
                  agent in the February Financing, the Company paid a cash fee equal
                  to 10%
                  of the proceeds from the February Financing ($141,821) which was
                  recorded
                  as a deferred debt issuance cost (other noncurrent assets). The
                  fees will
                  be amortized over the approximate two year term of the February
                  Financing
                  with $14,353 amortized in both the Current Quarter and in the Prior
                  Quarter.


o
              Additionally,pursuant
                  to its engagement of Pali, the Companyissued
                  three series of warrants: (i) retainer warrants totaling in the
                  aggregate
                  250,000 shares exercisable at a per share price of $0.001, with
                  an
                  estimated fair value of $712,404; (ii) placement warrants “A” totaling in
                  the aggregate 229,600 shares exercisable at a per share price of
                  $1.00,
                  with an estimated fair value of $563,640; and (iii) placement warrants
“B”
                  totaling in the aggregate 68,880 shares exercisable at a per share
                  price
                  of $2.00, with an aggregate estimated fair value of $167,700 (the
                  “Placement Agent Warrants”) recorded as a deferred debt issuance cost. The
                  Placement Agent Warrants have a term of 5 years from the date of
                  issuance.
                  The retainer warrants were expensed over the one year engagement
                  term and
                  the two placement warrants will be expensed over the approximate
                  two year
                  term of the February Financing. The Company had no expense for
                  the
                  retainer warrant during the three months ended July 31, 2008 compared
                  to
                  $178,101 expensed in the Prior Quarter. During the three months
                  ended July
                  31, 2008, the Company expensed $117,304 for the two placement warrants
                  compared to $91,418 expensed in the Prior
                  Quarter.


33
  o
              Warrants
                  for an aggregate of 344,465 shares exercisable at a per share price
                  of
                  $2.00, with an estimated fair value of $259,954, as allocated,
                  were issued
                  to the February Financing investors which are amortized over the
                  approximate two year term of the convertible debt or upon conversion.
                  During the three months ended July 31, 2008, the Company expensed
                  $32,706
                  compared to $32,494 expensed in the Prior
                  Quarter.





·
                Interest
                    expense increased by $398,343 or 120% for the three months ended
                    July 31,
                    2008 to $731,417 as compared to $333,074 for the three months
                    ended July
                    31, 2007 reflecting an increase in (i) interest expense on borrowings
                    from
                    related parties, short term debt, to include the February Financing,
                    of
                    $46,065, (ii) accretion of the debt discount associated with
                    the February
                    Financing and other convertible notes of $365,696, and (iii)
                    a credit of
                    $13,418 for interest capitalized as part of the Internet data
                    center
                    construction in progress. The accretion of debt discount increase
                    results
                    from:





o
              The
                  Company issued a series of convertible debentures in the aggregate
                  amount
                  of $1,148,212 which are convertible into 1,148,212 shares of the
                  Company’s
                  restricted common stock at a per share price of $1.00 which represented
                  a
                  beneficial conversion feature with an estimated fair value at inception
                  of
                  $888,258, as allocated, which has been recorded as a discount against
                  the
                  convertible debentures and will be expensed over the term of the
                  debt or
                  upon conversion. For the three months ended July 31, 2008 the Company
                  expensed $111,758 of the beneficial conversion feature as compared
                  to
                  $111,032 for the three months ended July 31, 2007. The combined
                  fair value
                  allocated to the warrants (finance expense) and the beneficial
                  conversion
                  features are limited to the $1,148,212 proceeds of the
                  debt.


o
              On
                  August 1, 2007, the Company issued a convertible note for previous
                  unpaid
                  salaries to Mr. Thomas Johnson ($1,989,066) and Dr. Lee Johnson
                  ($1,989,066) which are convertible into shares of the Company’s restricted
                  common stock at a per share price of $1.43 which represents a beneficial
                  conversion feature with an estimated aggregate fair value at inception
                  of
                  $1,446,594 which has been recorded as a discount against the convertible
                  notes and will be expensed over the term of the debt or upon conversion.
                  For the three months ended July 31, 2008 the Company expensed $361,649
                  of
                  the beneficial conversion feature as compared to zero for the three
                  months
                  ended July 31, 2007.


o
              Other
                  convertible notes issued by the Company with a beneficial conversion
                  feature resulted in the expensing of $51,643 of the beneficial
                  conversion
                  feature during the three months ended July 31, 2008 as compared
                  to $48,322
                  for the three months ended July 31,
                  2007.





OVERALL





We
      reported a net loss for the three months ended July 31, 2008 of $2,332,028
      compared to a net loss for the three months ended July 31, 2007 of $3,535,219.
      This translates to an overall basic and diluted per-share loss available to
      shareholders of $0.09 for the three months ended July 31, 2008, compared to
      basic and diluted per-share loss of $0.13 for the three months ended July 31,
      2007 based on 27,105,489 and 26,228,154 weighted average common shares
      outstanding, respectively.





LIQUIDITY
      AND CAPITAL RESOURCES





The
      Company has financed its operations primarily through the deferral of salary
      by
      its two executive officers Thomas Johnson (CEO) and Lee Johnson (President,
      CTO,
      and CFO), the sale of equity securities, to include convertible notes, other
      private party loans, and the advance of funds by a former related party (Hi-Tek,
      Inc. a California corporation (“Hi-Tek Private”)). Overall, our liquidity and
      access to capital is very limited; we have not received any commitment for
      additional financing and given the size of our company we may be limited to
      (i)
      additional loans from Hi-Tek Private and continued deferral of salaries by
      our
      officers, (ii) the sale of the Company’s common stock or the issuance of
      convertible notes, or (iii) other debt instruments. The Company does not have
      a
      written agreement with Hi-Tek Private and no funds were advanced during the
      three months ended July 31 2008.




34




Liquidity
      is the ability of a company to generate
      funds to support its current and future operations, satisfy its obligations
      and
      otherwise operate on an ongoing basis. During the years ended April 30, 2008
      and
      2007 cash used in our operating activities was $192,618 and $43,247, and cash
      used in investing activities was $5,895 and $422,748, respectively. We funded
      our operating activities and investing activities during the three months ended
      July 31, 2008 with cash reserves in addition to the following resources and
      during the three months ended July 31, 2007 with the following resources:




**July
                31,**
            
            **July
                31,****2008**
            
            **2007**Funds
                advanced by Hi-Tek Private under revolving
              credit
                arrangement, net of $53,000 and
              zero
                repayments
            
            $
            (53,000
            )
            $
            7,460Six
                month term loan from Hi-Tek Private, due
              November
                1, 2007, extended to June 30, 2009
            
            
            -
            
            
            600,000Twelve
                month term loan from John T. Butler, due
              June
                1, 2009
            
            
            70,000Twelve
                month term loan from Tupou U. Kaho, due
              June
                1, 2009
            
            
            50,000
            
            
            -Proceeds
                from stock issuances
            
            
            53
            
            
            -Other
                short term borrowings
            
            
            -
            
            
            20,000Total
            
            $
            67,053
            
            $
            627,460





At
      July
      31, 2008, we had a cash balance of $348,890 compared to $480,350 at April 30,
      2008, a decrease of $131,460. At July 31, 2008, our working capital deficit
      was
      $9,517,000 as compared to $8,251,260 at April 30, 2008. Our current assets,
      other than cash, consist primarily of $57,390 in accounts receivable, $22,943
      in
      prepaid warrant expense, $20,625 in unearned stock based compensation, and
      $24,997 in miscellaneous receivable.





Our
      current liabilities consisted primarily of $2,168,682 due to Hi-Tek Private
      under three credit arrangements net of $37,500 discount (for the beneficial
      conversion feature of the convertible note), $2,154,626 due Thomas Johnson
      (our
      CEO), $2,154,626 due Lee Johnson (our President, CTO, and CFO), $867,231 due
      the
      February Investors net of $283,303 discount, $765,228 due Vina Mex Capital,
      $738,619 in other short term debt, $906,645 in accrued officer salaries, $91,958
      in liquidated damages to the February Investors, and $79,868 in accounts
      payable.





If
      we are
      to implement our business plan, we will need to raise significant amounts of
      additional capital during the period ending July 31, 2009. We have not received
      any commitment that any such additional financing would be forthcoming.
      Accordingly, there can be no assurance that the Company will be successful
      in
      selling equity or securing debt financing, or that any combination thereof
      will
      be sufficient to meet our capital needs or, if it could be obtained, that it
      can
      be obtained on reasonable terms in light of our circumstances at that time.
      In
      addition, if any financing should be obtained, existing shareholders will likely
      incur substantial, immediate, and permanent dilution of their existing
      investment. (See also "PLAN OF OPERATION")





RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      June
      2008, the FASB issued FASB Staff Position (“FSP”) No. EITF 03-6-1, “Determining
      Whether Instruments Granted in Share-Based Payment Transactions Are
      Participating Securities” (“FSP EITF 03-6-1”). FSP No. EITF 03-6-1 provides that
      unvested share-based payment awards that contain nonforfeitable rights to
      dividends or dividend equivalents (whether paid or unpaid) are participating
      securities and shall be included in the computation of earnings per share
      pursuant to the two-class method. FSP No. EITF 03-6-1 is effective for financial
      statements issued for fiscal years beginning after December 15, 2008, and
      interim periods within those years. Upon adoption, a company is required to
      retrospectively adjust its earnings per share data (including any amounts
      related to interim periods, summaries of earnings and selected financial data)
      to conform with the provisions of FSP EITF 03-6-1. The Company is currently
      evaluating the impact adoption of this statement could have on its financial
      statements.





In
      May
      2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
      Instruments that May be Settled in Cash Upon Conversion (Including Partial
      Cash
      Settlement)” (“FSP No. APB 14-1”). FSP No. APB 14-1 requires that the liability
      and equity components of convertible debt instruments that may be settled in
      cash (or other assets) upon conversion (including partial cash settlement)
      be
      separately accounted for in a manner that reflects an issuer's nonconvertible
      debt borrowing rate. The resulting debt discount is amortized over the period
      the convertible debt is expected to be outstanding as additional non-cash
      interest expense. FSP No. APB 14-1 is effective for fiscal years beginning
      after
      December 15, 2008 and early adoption is not permitted. Retrospective application
      to all periods presented is required except for instruments that were not
      outstanding during any of the periods that will be presented in the annual
      financial statements for the period of adoption but were outstanding during
      an
      earlier period. The Company is currently evaluating the impact adoption of
      this
      statement could have on its financial statements.




35





In
      April
      2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
      Intangible Assets” (“FSP No. FAS 142-3”). FSP No. FAS 142-3 amends the factors
      that should be considered in developing renewal or extension assumptions used
      to
      determine the useful life of a recognized intangible asset under SFAS No. 142,
      “Goodwill and Other Intangible Assets.” FSP No. FAS 142-3 is effective for
      financial statements issued for fiscal years beginning after December 15, 2008,
      and interim periods within those fiscal years. Early adoption is prohibited.
      The
      Company is currently evaluating the impact adoption of this statement could
      have
      on its financial statements.





Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date are
      not expected to have a material impact on the financial statements upon
      adoption.





**PLAN
      OF OPERATION FOR THE NEXT 12 MONTHS**





We
      anticipate three major operational events will occur in the next 12 months.
      They
      are:





1)
            the
                completion of an Application Programming
                Interface;





2)
            the
                construction and commissioning of two Internet Data Centers, and





3)
            the
                development of wireless Internet connectivity and infrastructure in
                Vietnam.





The
      Company intends to implement a three-phase plan that includes (i) the
      development of an API; (ii) the construction of two data centers located in
      Hanoi and Ho Chi Minh City, Vietnam; and (iii) the creation of a wireless
      network infrastructure. The plan provides revenue-generating opportunities
      to
      the Company throughout the development process, and leads to a complete
      operational demonstration of the technology.





The
      plan
      includes:





PHASE
      I:
      Q4 CY 2008 through Q2 CY 2009: This phase is in process. During this period,
      the
      Company, with its partners has completed the infrastructure design of the Hanoi
      IDC site and is initiating design of the Ho Chi Minh City IDC site. Further,
      the
      Company is in the process of identifying service providers and contractors
      in
      anticipation of the construction of the data center. Concurrent with the design
      of the data center, Dot VN will collaborate with VNNIC to design and test an
      API
      which will allow the Company to substantially increase its reseller
      network.





PHASE
      II:
      Q2/Q3 CY 2009: During this phase the Company will begin construction of the
      data
      center located in Hanoi and begin deployment of the API to reseller network.
      Dot
      VN will also begin to design the second data center located in Ho Chi Minh
      City,
      Vietnam.





PHASE
      III: Q2/Q3 CY 2009 - Begin construction of data center located in Ho Chi Minh
      City, Vietnam. Conduct test of wireless broadband network in urban and rural
      areas.





Subsequent
      to the successful demonstration of the facility, the Company may elect to
      solicit standard bank financing and/or other financing methods to secure funding
      to drive the growth of the Vietnamese ccTLD, construct additional data centers
      or to expand its wireless network. In conjunction with this, the Company may
      also elect to enter into joint ventures, licensing, and/or production sharing
      agreements with other companies to maximize the value of the technologies to
      the
      Company’s shareholders. The management’s analysis suggests that following this
      direction provides the highest potential, lowest risk path to high profits
      from
      our new technologies.





**Subsequent
      Events**





On
      August
      1, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued to
      Tara
      Roy 50,000 restricted shares of the Company’s Common Stock exempt from
      registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for
      the cancellation of Roy’s $50,000 Dot VN Debenture upon
      conversion.





On
      August
      6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued to
      2030617 Ontario Ltd. (“Ontario”) 21,213 restricted shares of the Company’s
      Common Stock exempt from registration pursuant to Rule 506 of Regulation D,
      as
      amended, in exchange for the cancellation of Ontario’s $21,213 Dot VN Debenture
      upon conversion.




36





Also
      on
      August 6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued
      to Jimmy Sarbh 100,000 restricted shares of the Company’s Common Stock exempt
      from registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for the cancellation of Sarbh’s $100,000 Dot VN Debenture upon
      conversion.





On
      August
      14, 2008, the Company executed a convertible promissory note for $2,160,767
      due
      February 15, 2009 plus accrued interest at 8% per annum with Thomas Johnson
      (the
“TJ New Note”), the Company’s Chief Executive Officer and Chairman of the Board
      of Directors, in exchange for the unpaid TJ Note. The terms and conditions
      of
      the TJ New Note are materially the same as the TJ Note that expired August
      1,
      2008 which was originally issued for unpaid accrued
      salary, including interest, from January, 2003 through June, 2007 by Mr. Johnson
      under his employment agreement with Dot VN. At
      the
      election of the holder, the amount due and owing pursuant to such note may
      be
      converted into common stock of the Company at $1.43 per share (the “Conversion
      Price”). The Conversion Price shall be adjusted downward in the event Dot VN
      issues common stock (or securities exercisable for or convertible into common
      stock) at a price below the Conversion Price, to a price equal to such issue
      price.





Also
      on
      August 14, 2008, the Company executed a convertible promissory note for
      $2,160,767 due February 15, 2009 plus accrued interest at 8% per annum with
      Dr.
      Lee Johnson (the “LJ New Note”), the Company’s President, Chief Technology
      Officer, and Chief Financial Officer, in exchange for the unpaid LJ Note. The
      terms and conditions of the LJ New Note are materially the same as the LJ Note
      that expired August 1, 2008 which was originally issued for unpaid accrued
      salary, including interest, from January, 2003 through June, 2007 by Dr. Johnson
      under his employment agreement with Dot VN. At
      the
      election of the holder, the amount due and owing pursuant to such note may
      be
      converted into common stock of the Company at $1.43 per share (the “Conversion
      Price”). The Conversion Price shall be adjusted downward in the event Dot VN
      issues common stock (or securities exercisable for or convertible into common
      stock) at a price below the Conversion Price, to a price equal to such issue
      price.





On
      August
      21, 2008, the Company established Dot VN Company, Ltd. (Danang), an entity
      existing under the laws of the Country of Vietnam (“Dot VN Danang”), as a wholly
      owned subsidiary of Dot VN, Inc.





Also
      on
      August 21, 2008, Dot VN Danang, entered into a Land Sublease Agreement (the
      “Sublease Agreement”) with Massda Land Company Limited, an entity existing under
      the laws of the Country of Vietnam, pursuant to which Dot VN Danang has the
      right to lease approximately 8,176 square meters of land in the Danang
      Industrial Zone in Danang, Vietnam, for the express purpose of building an
      Internet data center and related uses, for a term of approximately 35 years,
      with base rent of $32/square meter for the term, excluding value added taxes
      and
      other possible fees and costs during the term..





On
      September 2, 2008, the Hi-Tek IDC Loan maturity was extended to June 30, 2009
      with no other change to the terms.





Also
      on
      September 2, 2008, the Vina Mex Loan maturity was extended to June 30, 2009
      with
      no other change to the terms.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.**





As
      a
“smaller reporting company” as defined by Item 10 of Regulation SK, the Company
      is not required to provide information required by this Item.





**ITEM
      4T. CONTROLS AND PROCEDURES.**





*EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES*





We
      maintain disclosure controls and procedures, which are designed to ensure that
      information required to be disclosed in the reports we file or submit under
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to our management, including our Chief Executive Officer, and our President
      and
      Chief Financial Officer, as appropriate, to allow timely decisions regarding
      required disclosure.





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer, and our President and Chief Financial Officer, an evaluation
      was performed on the effectiveness of the design and operation of our disclosure
      controls and procedures as of the end of the period covered by this quarterly
      report. Based on that evaluation, our Chief Executive Officer, and our President
      and Chief Financial Officer, concluded that our disclosure controls and
      procedures were effective as of the end of the period covered by this report
      for
      the purpose of gathering, analyzing and disclosing of information that the
      Company is required to disclose in the reports it files under the Exchange
      Act,
      within the time periods specified in the SEC’s rules and forms.




37





*CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING*





There
      were no changes in the Company’s internal controls over financial reporting
      during the most recently completed fiscal quarter that have materially affected
      or are reasonably likely to materially affect the Company’s internal control
      over financial reporting.





**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS.**





The
      Company is not currently subject to any legal proceedings. From time to time,
      the Company may become subject to litigation or proceedings in connection with
      its business, as either a plaintiff or defendant. There are no such pending
      legal proceedings to which the Company is a party that, in the opinion of
      management, is likely to have a material adverse effect on the Company’s
      business, financial condition or results of operations.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS.**





On
      June
      6, 2008, the Company issued to one employee, a sophisticated purchaser, in
      consideration for the execution of Non-Disclosure and Invention Assignment
      Agreements 3,000 restricted shares of the Company’s Common Stock valued at the
      market close and recorded as a $5,100 bonus.





Also
      on
      June 6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued
      to
      Scott Clark 7,500 restricted shares of the Company’s Common Stock exempt from
      registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for
      the cancellation of Clark’s $7,500 Dot VN Debenture.





Additional
      on June 6, 2008, pursuant to the terms of the Spot-On Debenture, the Company
      issued to Gary Blum 25,000 restricted shares of the Company’s Common Stock
      exempt from registration pursuant to Rule 506 of Regulation D, as amended,
      for
      $25,000 recorded as a note receivable due January 31, 2009 plus accrued interest
      at 10% per annum.





On
      June
      26, 2008, pursuant to the terms of a Placement Agent Warrants, the Company
      issued to Scott Clark (i) 53,250 restricted shares of the Company’s Common Stock
      exempt from registration pursuant to Rule 506 of Regulation D, as amended,
      upon
      the exercise of 53,250 $0.001 warrants for $53.25 and (ii) 12,051 net restricted
      shares of the Company’s Common Stock exempt from registration pursuant to Rule
      506 of Regulation D, as amended, upon the cashless exercise of 42,180 $1.00
      warrants with 30,129 warrant shares surrendered to cover the exercise
      price.





On
      August
      1, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued to
      Tara
      Roy 50,000 restricted shares of the Company’s Common Stock exempt from
      registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for
      the cancellation of Roy’s $50,000 Dot VN Debenture.





On
      August
      6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued to
      2030617 Ontario Ltd. (“Ontario”) 21,213 restricted shares of the Company’s
      Common Stock exempt from registration pursuant to Rule 506 of Regulation D,
      as
      amended, in exchange for the cancellation of Ontario’s $21,213 Dot VN
      Debenture.





Also
      on
      August 6, 2008, pursuant to the terms of a Dot VN Debenture, the Company issued
      to Jimmy Sarbh 100,000 restricted shares of the Company’s Common Stock exempt
      from registration pursuant to Rule 506 of Regulation D, as amended, in exchange
      for the cancellation of Sarbh’s $100,000 Dot VN Debenture.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES.**





On
      May 1,
      2007, the Company executed a short-term note with Hi-Tek Private for $600,000
      due November 1, 2007 with interest at 10% per annum (the “Hi-Tek IDC Loan”).
      Proceeds were used to fund general operations and the initial design services
      for the first Internet data center (“IDC”) in Vietnam. On April 30, 2008, the
      Hi-Tek IDC Loan maturity was extended to September 1, 2008 with no other change
      to the terms. On September 2, 2008, the Hi-Tek IDC Loan maturity was extended
      to
      June 30, 2009 with no other change to the terms.





On
      September 14, 2007, the Company executed a promissory note with Vina Mex
      Capital, a California limited liability company, for $700,000 due November
      14,
      2007. Interest accrues monthly at a rate of 10% per annum (the “Vina Mex Loan”).
      Proceeds were used to fund general operations and the initial design services
      for the first IDC in Vietnam. On April 30, 2008, the Vina Mex Loan maturity
      was
      extended to September 1, 2008 with no other change to the terms. On September
      2,
      2008, the Vina Mex Loan maturity was extended to June 30, 2009 with no other
      change to the terms.




38





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.**





None.





**ITEM
      5. OTHER INFORMATION.**





None.





**ITEM
      6. EXHIBITS.**





(a)
      Exhibits required by Item 601 of Regulation SK.





**Number**
            **Description**3.1
            Amended
                and Restated Articles of Incorporation*3.2
            Bylaws*23.1
            Auditor’s
                Consent31.1
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            Certification
                of Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.





*Filed
      as
      an Exhibit to the Company’s Registration Statement on Form SB-2 (File
      No. 333-146129), as amended on Form S-1, as filed with the Securities and
      Exchange Commission on September 17, 2007.




39





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




**DOT
                VN, INC.**
              (Name
                of Registrant)Date: September
              12, 2008
            By:
            /s/ Louis
              P.
              HuynhName:
                Louis P. Huynh
              Title:General
                Counsel, Executive Vice President of Operations and Business Development,
                and Corporate Secretary





40





**EXHIBIT
      INDEX**





**Number**
            **Description**3.1
            Amended
                and Restated Articles of Incorporation*3.2
            Bylaws*23.1
            Auditor’s
                Consent31.1
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            Certification
                of Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.





*Filed
      as
      an Exhibit to the Company’s Registration Statement on Form SB-2 (File
      No. 333-146129), as amended on Form S-1, as filed with the Securities and
      Exchange Commission on September 17, 2007.




41