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 October 31, 2008





OR





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For the
transition period from _____ to ____





Commission
File No. 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
 ̈





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  ̈Accelerated filer
 ̈Non-accelerated
filer  ̈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  ̈  No x





APPLICABLE
ONLY TO CORPORATE ISSUERS





As of
December 5, 2008, there were 27,345,356 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 OCTOBER 31, 2008





INDEX




Index
                                                                      
                                                                      PagePart
      I.
                                                                      Financial
      InformationItem
      1.   Financial
      Statements
                                                                      4Basis
      of Presentation
                                                                      4Report
      of Independent Registered Public Accounting Firm
                                                                      5Condensed
      Consolidated Balance Sheets as of October 31, 2008 (unaudited) and April
      30, 2008
                                                                      6Condensed
      Consolidated Statements of Operations and Comprehensive Income for the
      Three Months ended October 31, 2008 and 2007 (unaudited)
                                                                      7Condensed
      Consolidated Statements of Operations and Comprehensive Income for the Six
      Months ended October 31, 2008 and 2007 (unaudited)
                                                                      8Condensed
      Consolidated Statements of Changes in Stockholders Equity for the Six
      Months ended October 31, 2008 (unaudited) and Year ended April 30,
      2008
                                                                      9Condensed
      Consolidated Statements of Cash Flows for the Six Months ended October 31,
      2008 and 2007 (unaudited)
                                                                      11Notes
      to Condensed Consolidated Financial Statements (unaudited)
                                                                      13Item
      2.   Management’s Discussion and Analysis of Financial
      Condition and Results of Operations.
                                                                      30Item
      3.   Quantitative and Qualitative Disclosures About Market
      Risk.
                                                                      44Item
      4T. Controls and Procedures.
                                                                      44Part
      II.
                                                                      Other
      InformationItem
      1.   Legal Proceedings.
                                                                      45Item
      2.   Unregistered Sales of Equity Securities and Use of
      Proceeds.
                                                                      45Item
      3.   Defaults Upon Senior Securities.
                                                                      46Item
      4.   Submission of Matters to a Vote of Security
      Holders.
                                                                      46Item
      5.   Other Information.
                                                                      46Item
      6.   Exhibits.
                                                                      46Signatures
                                                                      
                                                                      47Certifications




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 40.9% 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 38.1% 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 October 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 six months ended October 31, 2008 and October 31, 2007 and
the condensed consolidated statement of stockholders equity for the period of
April 30, 2007 to October 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 six months ended October 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 October 31, 2008, and the related condensed consolidated
statements of operations for the three months and six months ended October 31,
2008, condensed consolidated statements of changes in stockholders’ equity
(deficit) and condensed consolidated cash flows for the six months ended October
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
U.S. 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, CPAChang
      G. Park, CPA
  December
12, 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





October 31,
                                                    
                                                    
                                                    April 30,2008
                                                    
                                                    
                                                    2008(unaudited)ASSETSCurrent
      assets:Cash
                                                    
                                                    $
                                                    165,039
                                                    
                                                    
                                                    $
                                                    480,350Accounts
      receivable
                                                    
                                                    
                                                    88,410
                                                    
                                                    
                                                    
                                                    29,845Prepaid
      warrant expense, current
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    91,771Prepaid
      expenses and other current assets
                                                    
                                                    
                                                    54,482
                                                    
                                                    
                                                    
                                                    74,059Notes
      receivable, net
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Total
      current assets
                                                    
                                                    
                                                    307,931
                                                    
                                                    
                                                    
                                                    676,025Equipment,
      net
                                                    
                                                    
                                                    692,075
                                                    
                                                    
                                                    
                                                    654,129Intangible
      assets
                                                    
                                                    
                                                    1,022,336
                                                    
                                                    
                                                    
                                                    1,022,336Other
      noncurrent assets
                                                    
                                                    
                                                    245,976
                                                    
                                                    
                                                    
                                                    328,149Total
      assets
                                                    
                                                    $
                                                    2,268,318
                                                    
                                                    
                                                    $
                                                    2,680,639LIABILITIES
      AND SHAREHOLDERS' EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
                                                    
                                                    $
                                                    49,574
                                                    
                                                    
                                                    $
                                                    52,997Customer
      deposits
                                                    
                                                    
                                                    34,081
                                                    
                                                    
                                                    
                                                    5,900Due
      to related party, net of zero and $444,149 discount
                                                    
                                                    
                                                    6,649,927
                                                    
                                                    
                                                    
                                                    5,983,630Short-term
      debt, net of $120,250 and $434,410 discount
                                                    
                                                    
                                                    2,687,161
                                                    
                                                    
                                                    
                                                    2,076,075Accrued
      liabilities
                                                    
                                                    
                                                    1,260,273
                                                    
                                                    
                                                    
                                                    808,683Total
      current liabilities
                                                    
                                                    
                                                    10,681,016
                                                    
                                                    
                                                    
                                                    8,927,285Commitments
      and ContingenciesShareholders'
      equity (deficit):Preferred
      stock: 50,000,000 shares authorized of $0.001 par value;
      120,000shares
      designated Series A, $10.00 stated value; 0 issued and
      outstandingas
      of October 31, 2008 and April 30, 2008
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Common
      stock: 250,000,000 shares  authorized of $0.001 par
      value;27,345,356
      and 27,059,423 shares issued and outstanding as of October
    31,2008
      and April 30, 2008
                                                    
                                                    
                                                    27,345
                                                    
                                                    
                                                    
                                                    27,059Additional
      paid-in capital
                                                    
                                                    
                                                    29,834,438
                                                    
                                                    
                                                    
                                                    28,079,334Accumulated
      deficit
                                                    
                                                    
                                                    (38,274,539
                                                    )
                                                    
                                                    
                                                    (34,353,039
                                                    )Accumulated
      comprehensive income
                                                    
                                                    
                                                    58
                                                    
                                                    
                                                    
                                                    -Total
      shareholders' equity (deficit)
                                                    
                                                    
                                                    (8,412,698
                                                    )
                                                    
                                                    
                                                    (6,246,646
                                                    )Total
      liabilities and shareholders' equity (deficit)
                                                    
                                                    $
                                                    2,268,318
                                                    
                                                    
                                                    $
                                                    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 and Comprehensive Income
(Unaudited)





Three Months Ended October 31,2008
                                      
                                      
                                      2007Revenues
                                      
                                      $
                                      227,671
                                      
                                      
                                      $
                                      256,950Cost
      of revenues
                                      
                                      
                                      111,975
                                      
                                      
                                      
                                      118,104Gross
      profit
                                      
                                      
                                      115,696
                                      
                                      
                                      
                                      138,846General
      and administrative expenses:Consulting
      and professional fees
                                      
                                      
                                      57,708
                                      
                                      
                                      
                                      394,689Marketing
      and promotion
                                      
                                      
                                      12,000
                                      
                                      
                                      
                                      6,030Option
      bonus
                                      
                                      
                                      618,614
                                      
                                      
                                      
                                      2,352,914Bad
      debt expense
                                      
                                      
                                      1,185
                                      
                                      
                                      
                                      1,202Other
      general & administrative expenses
                                      
                                      
                                      514,224
                                      
                                      
                                      
                                      1,098,882Total
      general and administrative expenses
                                      
                                      
                                      1,203,731
                                      
                                      
                                      
                                      3,853,717(Loss)
      from operations
                                      
                                      
                                      (1,088,035
                                      )
                                      
                                      
                                      (3,714,871
                                      )Other
      income (expenses):Interest
      income
                                      
                                      
                                      738
                                      
                                      
                                      
                                      3,611Finance
      expense
                                      
                                      
                                      (129,736
                                      )
                                      
                                      
                                      (316,365
                                      )Interest
      expense
                                      
                                      
                                      (374,359
                                      )
                                      
                                      
                                      (700,622
                                      )Other
      income and (expense)
                                      
                                      
                                      1,920
                                      
                                      
                                      
                                      28Total
      other income (expenses)
                                      
                                      
                                      (501,437
                                      )
                                      
                                      
                                      (1,013,348
                                      )Net
      loss
                                      
                                      $
                                      (1,589,472
                                      )
                                      
                                      $
                                      (4,728,219
                                      )Loss
      per common share:Basic
      and diluted
                                      
                                      $
                                      (0.06
                                      )
                                      
                                      $
                                      (0.18
                                      )Weighted
      average common shares outstanding:Basic
      and diluted
                                      
                                      
                                      27,323,505
                                      
                                      
                                      
                                      26,742,718Comprehensive
      income (loss):Net
      loss
                                      
                                      $
                                      (1,589,472
                                      )
                                      
                                      $
                                      (4,728,219
                                      )Other
      comprehensive income:Foreign
      currency translation
                                      
                                      
                                      58
                                      
                                      
                                      
                                      -Comprehensive
      loss
                                      
                                      $
                                      (1,589,414
                                      )
                                      
                                      $
                                      (4,728,219
                                      )





The
accompanying notes are an integral part of these condensed consolidated
financial statements





7









Dot
VN, INC. AND SUBSIDIARIES


Condensed
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)





Six Months Ended October 31,2008
                                    
                                    
                                    2007Revenues
                                    
                                    $
                                    604,351
                                    
                                    
                                    $
                                    547,203Cost
      of revenues
                                    
                                    
                                    255,381
                                    
                                    
                                    
                                    220,689Gross
      profit
                                    
                                    
                                    348,970
                                    
                                    
                                    
                                    326,514General
      and administrative expenses:Consulting
      and professional fees
                                    
                                    
                                    182,964
                                    
                                    
                                    
                                    493,712Marketing
      and promotion
                                    
                                    
                                    24,000
                                    
                                    
                                    
                                    12,060Option
      bonus
                                    
                                    
                                    1,532,329
                                    
                                    
                                    
                                    4,838,865Bad
      debt expense
                                    
                                    
                                    27,185
                                    
                                    
                                    
                                    2,062Other
      general & administrative expenses
                                    
                                    
                                    1,108,419
                                    
                                    
                                    
                                    1,585,267Total
      general and administrative expenses
                                    
                                    
                                    2,874,897
                                    
                                    
                                    
                                    6,931,966(Loss)
      from operations
                                    
                                    
                                    (2,525,927
                                    )
                                    
                                    
                                    (6,605,452
                                    )Other
      income (expenses):Interest
      income
                                    
                                    
                                    2,382
                                    
                                    
                                    
                                    8,413Finance
      expense
                                    
                                    
                                    (294,099
                                    )
                                    
                                    
                                    (632,731
                                    )Interest
      expense
                                    
                                    
                                    (1,105,776
                                    )
                                    
                                    
                                    (1,033,696
                                    )Other
      income and (expense)
                                    
                                    
                                    1,920
                                    
                                    
                                    
                                    28Total
      other income (expenses)
                                    
                                    
                                    (1,395,573
                                    )
                                    
                                    
                                    (1,657,986
                                    )Net
      loss
                                    
                                    $
                                    (3,921,500
                                    )
                                    
                                    $
                                    (8,263,438
                                    )Loss
      per common share:Basic
      and diluted
                                    
                                    $
                                    (0.14
                                    )
                                    
                                    $
                                    (0.31
                                    )Weighted
      average common shares outstanding:Basic
      and diluted
                                    
                                    
                                    27,214,497
                                    
                                    
                                    
                                    26,485,436Comprehensive
      income (loss):Net
      loss
                                    
                                    $
                                    (3,921,500
                                    )
                                    
                                    $
                                    (8,263,438
                                    )Other
      comprehensive income:Foreign
      currency translation
                                    
                                    
                                    58
                                    
                                    
                                    
                                    -Comprehensive
      loss
                                    
                                    $
                                    (3,921,442
                                    )
                                    
                                    $
                                    (8,263,438
                                    )





The
accompanying notes are an integral part of these condensed consolidated
financial statements





8









Dot
VN, INC. AND SUBSIDIARIES


Condensed
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
(Unaudited)





Common
                      
                      
                      Additional
                      
                      
                      
                      
                      
                      AccumulatedCommon
                      
                      
                      stock
                      
                      
                      paid-in
                      
                      
                      Accumulated
                      
                      
                      comprehensivestock
                      
                      
                      amount
                      
                      
                      capital
                      
                      
                      deficit
                      
                      
                      income
                      
                      
                      TotalBalance,
      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 rightsagreement
                      
                      
                      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 Networksdebenture
                      
                      
                      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
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,730,234Comprehensive
      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
                      )





The
accompanying notes are an integral part of these condensed consolidated
financial statements




9







Dot
VN, INC. AND SUBSIDIARIES


Condensed
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)
(continued)





Common
                        
                        
                        Additional
                        
                        
                        
                        
                        
                        AccumulatedCommon
                        
                        
                        stock
                        
                        
                        paid-in
                        
                        
                        Accumulated
                        
                        
                        comprehensivestock
                        
                        
                        amount
                        
                        
                        capital
                        
                        
                        deficit
                        
                        
                        income
                        
                        
                        TotalBalance,
      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 for services
                        
                        
                        2,252
                        
                        
                        
                        2
                        
                        
                        
                        2,410
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        2,412Shares
      issued upon conversion of debenture
                        
                        
                        178,713
                        
                        
                        
                        179
                        
                        
                        
                        178,533
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        178,712Shares
      issued upon conversion of Spot-On Networksdebenture
                        
                        
                        25,000
                        
                        
                        
                        25
                        
                        
                        
                        24,975
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        25,000Shares
      issued as payment on term debt
                        
                        
                        11,667
                        
                        
                        
                        12
                        
                        
                        
                        11,772
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        11,784Shares
      issued upon exercise of warrants
                        
                        
                        53,250
                        
                        
                        
                        53
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        53Shares
      issued upon cashless exercise of warrants
                        
                        
                        12,051
                        
                        
                        
                        12
                        
                        
                        
                        (12
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Stock
      options expensed
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,532,329
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,532,329Comprehensive
      loss, six months ended October 31, 2008
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (3,921,500
                        )
                        
                        
                        58
                        
                        
                        
                        (3,921,442
                        )Balance,
      October 31, 2008
                        
                        
                        27,345,356
                        
                        
                        $
                        27,345
                        
                        
                        $
                        29,834,438
                        
                        
                        $
                        (38,274,539
                        )
                        
                        $
                        58
                        
                        
                        $
                        (8,412,698
                        )





The
accompanying notes are an integral part of these condensed consolidated
financial statements





10









Dot
VN, INC. AND SUBSIDIARIES


Condensed
Consolidated Statements of Cash Flows (Unaudited)





For the Six Months Ended
                                      October 31,2008
                                    
                                    
                                    2007Cash
      flows from operating activities:Net
      loss
                                    
                                    $
                                    (3,921,500
                                    )
                                    
                                    $
                                    (8,263,438
                                    )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
                                    
                                    
                                    5,448
                                    
                                    
                                    
                                    3,086(Gain)
      loss on sale of equipment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Accrued
      interest expense
                                    
                                    
                                    365,898
                                    
                                    
                                    
                                    309,518Accrued
      bad debt expense
                                    
                                    
                                    25,000
                                    
                                    
                                    
                                    -Amortization
      of debt issuance costs
                                    
                                    
                                    195,778
                                    
                                    
                                    
                                    182,835Amortization
      of service warrants
                                    
                                    
                                    91,771
                                    
                                    
                                    
                                    677,919Amortization
      of debt discounts
                                    
                                    
                                    758,309
                                    
                                    
                                    
                                    751,988Stock
      issued to convertible debentures holders for liquidating
      damages
                                    
                                    
                                    -
                                    
                                    
                                    
                                    12,202Stock
      options expensed
                                    
                                    
                                    1,532,329
                                    
                                    
                                    
                                    4,838,865Stock
      issued to employees
                                    
                                    
                                    18,100
                                    
                                    
                                    
                                    630,543Stock
      issued for services
                                    
                                    
                                    28,579
                                    
                                    
                                    
                                    37,846Changes
      in operating assets and liabilities:(Increase)
      decrease in accounts receivable
                                    
                                    
                                    (58,565
                                    )
                                    
                                    
                                    47,472(Increase)
      decrease in prepaid expenses and other current assets
                                    
                                    
                                    (19,590
                                    )
                                    
                                    
                                    (9,101
                                    )(Increase)
      decrease in other noncurrent assets
                                    
                                    
                                    (113,604
                                    )
                                    
                                    
                                    28,705Increase
      (decrease) in accounts payable
                                    
                                    
                                    (3,423
                                    )
                                    
                                    
                                    9,952Increase
      (decrease) in customer deposits
                                    
                                    
                                    28,181
                                    
                                    
                                    
                                    9,932Increase
      (decrease) in accrued liabilities
                                    
                                    
                                    407,969
                                    
                                    
                                    
                                    363,105Net
      cash (used in) operating activities
                                    
                                    
                                    (659,320
                                    )
                                    
                                    
                                    (368,571
                                    )Cash
      flows from investing activities:Purchase
      of equipment
                                    
                                    
                                    (14,871
                                    )
                                    
                                    
                                    (2,356
                                    )Internet
      data center design services
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (572,500
                                    )Proceeds
      from equipment sale
                                    
                                    
                                    870
                                    
                                    
                                    
                                    -Net
      cash (used in) investing activities
                                    
                                    
                                    (14,001
                                    )
                                    
                                    
                                    (574,856
                                    )Cash
      flows from financing activities:Proceeds
      from term notes
                                    
                                    
                                    420,000
                                    
                                    
                                    
                                    700,000Advances
      from related parties
                                    
                                    
                                    -
                                    
                                    
                                    
                                    607,459Repayments
      to related parties
                                    
                                    
                                    (62,101
                                    )
                                    
                                    
                                    (18,451
                                    )Proceeds
      from stock issuances
                                    
                                    
                                    53
                                    
                                    
                                    
                                    -Net
      cash provided by financing activities
                                    
                                    
                                    357,952
                                    
                                    
                                    
                                    1,289,008Effect
      of exchange rate changes on cash
                                    
                                    
                                    58
                                    
                                    
                                    
                                    -Net
      increase (decrease) in cash
                                    
                                    
                                    (315,311
                                    )
                                    
                                    
                                    345,581Cash,
      beginning of the period
                                    
                                    
                                    480,350
                                    
                                    
                                    
                                    329,151Cash,
      end of the period
                                    
                                    $
                                    165,039
                                    
                                    
                                    $
                                    674,732





The
accompanying notes are an integral part of these condensed consolidated
financial statements





11







Dot
VN, INC. AND SUBSIDIARIES


Condensed
Consolidated Statements of Cash Flows (Unaudited) (continued)





For the Six Months Ended
                      October 31,2008
                    
                    
                    2007Non-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
                    
                    $
                    178,712
                    
                    
                    $
                    -Common stock issued to
      employees
                    
                    $
                    5,100
                    
                    
                    $
                    630,543Common stock issued for
      services
                    
                    $
                    2,412
                    
                    
                    $
                    103,263Common stock issued for note
      receivable
                    
                    $
                    25,000
                    
                    
                    $
                    7,500Common stock issued as payment on
      term debt
                    
                    $
                    11,784
                    
                    
                    $
                    -Common stock issued to convertible
      debenture holders for liquidated damages
                    
                    $
                    -
                    
                    
                    $
                    12,202Supplemental
      cash flow disclosure:Interest paid
                    
                    $
                    50,553
                    
                    
                    $
                    36,624Taxes paid
                    
                    $
                    -
                    
                    
                    $
                    -





The
accompanying notes are an integral part of these condensed consolidated
financial statements




12







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





1.      Condensed
consolidated financial statements





The
accompanying October 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 October 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
October 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 has
secured a 35-year lease for approximately 8,768 square meters of land in the
Danang Industrial Zone in Danang, Vietnam.  In addition, the Company
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.  The IDC developments are anticipated to occur in
the near to mid term.  In long term, the Company intends to develop
additional IDCs in the rest of the Country of Vietnam.  Dot VN will
continue to explore and test, and analyze, new and best of breed technology for
deployment in Vietnam, including but not limited to wireless virtual
fiber.





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”).




13







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





2.      Organization
(continued)





Reverse Merger
(continued)





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.





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 October 31 and April 30, 2008 consisted of the following:





October
      31,
                            
                            
                            April
      30,2008
                            
                            
                            2008Computer
      equipment
                            
                            $
                            48,712
                            
                            
                            $
                            36,534Other
      furniture and equipment
                            
                            
                            7,036
                            
                            
                            
                            5,214Internet
      data center, construction in progress
                            
                            
                            652,689
                            
                            
                            
                            623,295708,437
                            
                            
                            
                            665,043Less
      accumulated depreciation
                            
                            
                            16,362
                            
                            
                            
                            10,914Equipment,
      net
                            
                            $
                            692,075
                            
                            
                            $
                            654,129





Depreciation expense charged to operations was
$5,448 and $6,832 for the six months ended October 31, 2008 and the year ended
April 30, 2008, respectively.  Capitalized interest on borrowings
related to the Internet data center was $29,394 and $38,295 for the six months
ended October 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
8).  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.




14







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 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:





October
      31,
                      
                      
                      April
      30,2008
                      
                      
                      2008Balance,
      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 six months ended October 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 Debentures”) 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 Debentures
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 Debentures’ 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 October 31,
2008 $15,485 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 ($15,485) will be recognized upon
collection from Spot-On.





October
      31,
                      
                      
                      April
      30,2008
                      
                      
                      2008Notes
      receivable
                      
                      $
                      236,213
                      
                      
                      $
                      211,213Less
      allowance
                      
                      
                      (236,213
                      )
                      
                      
                      (211,213
                      )Notes
      receivable, net
                      
                      $
                      -
                      
                      
                      $
                      -




15







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





6.      Other
noncurrent assets





Other
noncurrent assets at October 31 and April 30, 2008 consisted of the
following:





October
      31,
                      
                      
                      April
      30,2008
                      
                      
                      2008Deposits
                      
                      $
                      9,488
                      
                      
                      $
                      9,071Deferred
      debt issuance cost
                      
                      
                      92,827
                      
                      
                      
                      317,310Prepaid
      land lease Danang, Vietnam
                      
                      
                      142,352
                      
                      
                      
                      -Other
      noncurrent assets
                      
                      
                      1,309
                      
                      
                      
                      1,768Total
      other noncurrent assets
                      
                      $
                      245,976
                      
                      
                      $
                      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 $224,483 and
$423,081 expensed in the six months ended October 31, 2008 and the year ended
April 30, 2008, respectively.  Amortization for the year ending April
30, 2009 will be $317,310.





On August
21, 2008, Dot VN Company, Ltd. (Danang), an entity established under the laws of
the Country of Vietnam (“Dot VN Danang”) as a wholly owned subsidiary of Dot VN,
Inc. 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 leases approximately 8,768 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.  The base rent of $32 per square meter,
excluding value added taxes (“VAT”) and other possible fees and costs, for the
term is payable 50% one month after lease signing, 30% on the earlier of
occupancy of the land or six months after lease signing, and 20% on the earlier
of building occupancy or twelve  months after lease
signing.  On September 8, 2008, the Company paid the initial 50%
payment of $154,322.08, including a 10% VAT.





7.      Convertible
notes





As of
October 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
                                                                            
                                                                            June
      30, 2009
                                                                            
                                                                            $
                                                                            1.00
                                                                            
                                                                            
                                                                            $
                                                                            360,000
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            81,394
                                                                            
                                                                            
                                                                            $
                                                                            441,394Convertible
      Notes 2
                                                                            
                                                                            Feb.
      9, 2007
                                                                            
                                                                            Jan.
      31, 2009
                                                                            
                                                                            $
                                                                            1.00
                                                                            
                                                                            
                                                                            
                                                                            962,000
                                                                            
                                                                            
                                                                            
                                                                            120,250
                                                                            
                                                                            
                                                                            
                                                                            12,187
                                                                            
                                                                            
                                                                            
                                                                            853,937Convertible
      Note 3
                                                                            
                                                                            June
      29, 2007
                                                                            
                                                                            June
      30, 2009
                                                                            
                                                                            $
                                                                            1.43
                                                                            
                                                                            
                                                                            
                                                                            92,336
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            10,432
                                                                            
                                                                            
                                                                            
                                                                            102,768Convertible
      Notes 4
                                                                            
                                                                            Aug.
      1, 2007
                                                                            
                                                                            Aug.
      1, 2008
                                                                            
                                                                            $
                                                                            1.43
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Convertible
      Notes 5
                                                                            
                                                                            Aug.
      14,2008
                                                                            
                                                                            Feb.
      15, 2009
                                                                            
                                                                            $
                                                                            1.43
                                                                            
                                                                            
                                                                            
                                                                            4,321,533
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            75,249
                                                                            
                                                                            
                                                                            
                                                                            4,396,7825,735,869
                                                                            
                                                                            
                                                                            
                                                                            120,250
                                                                            
                                                                            
                                                                            
                                                                            179,262
                                                                            
                                                                            
                                                                            
                                                                            5,794,881Less
      notes 1 and 5 included in due to related parties, current(see
      Note 8)
                                                                            
                                                                            
                                                                            
                                                                            4,681,533
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            156,643
                                                                            
                                                                            
                                                                            
                                                                            4,838,176Less
      notes 2 and 3 included in short-term debt, current (see Note
      9)
                                                                            
                                                                            
                                                                            
                                                                            1,054,336
                                                                            
                                                                            
                                                                            
                                                                            120,250
                                                                            
                                                                            
                                                                            
                                                                            22,619
                                                                            
                                                                            
                                                                            
                                                                            956,705Total
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -





16







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





7.      Convertible
notes (continued)





Convertible
note 1 for $360,000 was issued on October 16, 2006 with a two year term,
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





Convertible
notes 2 are a set of convertible debentures with an aggregate face value of
$962,000 issued January 31 and February 9, 2007 (the “February Debentures”), 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 combined 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
Debentures.  During the six months ended October 31, 2008, four
February Investors exercised the conversion option on a $178,713 convertible
debenture.  Upon conversion, $44,991 of unamortized debt discount for
the converted debenture was expensed.  As of October 31, 2008, the
unamortized debt discount was $120,250.





The
February Debentures 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 Debentures 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 Debentures, the Company paid a cash fee equal to 10% of the
aggregate convertible debentures and issued three series of warrants: (i)
retainer warrants issued on January 31, 2007 totaling in the aggregate 250,000
shares exercisable at a per share price of $0.001 (the “Pali Retainer
Warrants”); (ii) placement warrants issued on February 9,
2007  totaling in the aggregate 229,600 shares exercisable at a per
share price of $1.00 (the “Pali Placement Warrants A”); and (iii) placement
warrants issued on February 9, 2007 totaling in the aggregate 68,880 shares
exercisable at a per share price of $2.00 (the “Pali Placement Warrants B”)
(collectively the “Pali Placement Agent Warrants”).  The Pali
Placement Agent Warrants have a term of five years from the date of issuance
(see Note 12).  The Pali 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 Debentures as deferred debt issuance
costs.  Upon exercise of a Pali Placement Agent Warrants the
unamortized deferred debt issuance costs is expensed.





On
February 9, 2007, in connection with the February Debentures, the Company
executed an investor’s registration rights agreement (the “IRRA”) by and between
the February Investor participating in the February Debentures and the
Company.  Pursuant to the terms of the IRRA, in connection with the
February Debentures, 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 days 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 Debentures 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
Debentures 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).




17







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





7.      Convertible
notes (continued)




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”).  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.  On July 23, 2008, the Business.com.VN Loan was
amended to extend the due date to June 30, 2009 and accrues interest at the rate
of 8% per annum.  The Company has accrued interest of $10,432 at
October 31, 2008.  In accordance with EITF 00-27, there is no
beneficial conversion feature at the time of the extension.  As of
October 31, 2008 the unamortized debt discount was zero.





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.  On August 14, 2008, the unpaid notes and accrued interest
were replaced with new convertible notes with materially the same terms and
conditions as convertible notes 4, with an aggregate face value of $4,321,533
issued to Mr. Thomas Johnson (50%) and Dr. Lee Johnson (50%) (see convertible
notes 5).





Convertible
notes 5 are a set of two individual notes with an aggregate face value of
$4,321,533 issued August 14, 2008 to Mr. Thomas Johnson (50%) (the “TJ New
Note”) and Dr. Lee Johnson (50%) (the “LJ New Note”).  The notes are
due February 15, 2009 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.  In accordance with EITF 00-27, there is no beneficial
conversion feature at the time of issuance.  As of October 31, 2008
there is no unamortized debt discount.





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
six months ended October 31, 2008 and the year ended April 30, 2008
are:




18









Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





8.      Loans
from related party (continued)





October
      31,
                          
                          
                          April
      30,2008
                          
                          
                          2008Balance
      at beginning of period
                          
                          $
                          1,120,928
                          
                          
                          $
                          1,025,066Funds advanced
                          
                          
                          -
                          
                          
                          
                          8,230Repayments
                          
                          
                          (62,101
                          )
                          
                          
                          (19,271
                          )Interest
accrued
                          
                          
                          54,717
                          
                          
                          
                          106,903Balance
      at end of period
                          
                          $
                          1,113,544
                          
                          
                          $
                          1,120,928





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





October
      31,
                          
                          
                          April
      30,2008
                          
                          
                          2008Hi-Tek
      Revolver
                          
                          $
                          1,113,544
                          
                          
                          $
                          1,120,928Hi-Tek
      Trademark Loan, net of zero and $82,500 discount at October 31 and April
      30, 2008
                          
                          
                          441,394
                          
                          
                          
                          337,276Hi-Tek
      IDC Loan
                          
                          
                          698,207
                          
                          
                          
                          663,560TJ
      Notes, net of zero and $180,824 discount at October 31 and April 30,
      2008
                          
                          
                          2,198,391
                          
                          
                          
                          1,930,933LJ
      Notes, net of zero and $180,825 discount at October 31 and April 30,
      2008
                          
                          
                          2,198,391
                          
                          
                          
                          1,930,9336,649,927
                          
                          
                          
                          5,983,630Less
      current portion
                          
                          
                          6,649,927
                          
                          
                          
                          5,
      983,630Balance,
      end of period
                          
                          $
                          -
                          
                          
                          $
                          -




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.  On October 13,
2008, the Hi-Tek Trademark Loan was amended to extend the due date to June 30,
2009, with no other change to the terms of the note (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 was amended to extend
the due date to September 1, 2008 with no other change to the
terms.  On September 2, 2008, the Hi-Tek IDC Loan was amended to
extend the due date 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 had 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 $2,160,766 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 (collectively the “TJ
Notes”).  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 (see Note 7).




19







Dot
VN, INC. AND SUBSIDIARIES


Notes
to Condensed Consolidated Financial Statements (Unaudited)


As
of October 31, 2008





8.      Loans
from related party (continued)




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 had 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 (collectively the “LJ Notes”).  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 (see Note 7).





9.      Short-term
debt





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





October
      31,
                        
                        
                        April
      30,2008
                        
                        
                        2008Vina
      Mex Capital
                        
                        $
                        1,087,904
                        
                        
                        $
                        746,000Convertible
      Notes 2, net of $120,250 and $427,767 discount  at October 31
      and April 30, 2008
                        
                        
                        853,937
                        
                        
                        
                        735,009Convertible
      Note 3, net of zero and $6,643 discount at October 31 and April 30,
      2008
                        
                        
                        102,768
                        
                        
                        
                        92,076Aussy
      Manuhu
                        
                        
                        253,977
                        
                        
                        
                        252,573Darron
      Raymond Rishwain Living Trust
                        
                        
                        263,491
                        
                        
                        
                        250,417John
      T. Butler, IRA
                        
                        
                        72,966
                        
                        
                        
                        -Tupou
      U. Kaho, IRA
                        
                        
                        52,118
                        
                        
                        
                        -Balance
      at end of period
                        
                        $
                        2,687,161
                        
                        
                        $
                        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 1st
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 1st Loan
was amended to extend the due date to September 1, 2008 with no other change to
the terms.  On September 2, 2008, the Vina Mex 1st Loan
was amended to extend the due date to June 30, 2009 with no other change to the
terms.





On
September 16, 2008, the Company executed a promissory note with Vina Mex
Capital, for $200,000 due March 31, 2009.  Interest accrues monthly at
a rate of 10% per annum.  Proceeds were primarily used to fund the
initial Dot VN Danang payment on the Sublease Agreement pursuant to which Dot VN
Danang leases approximately 8,768 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.





On
October 17, 2008, the Company executed a promissory note with Vina Mex Capital,
for $100,000 due September 17, 2009.  Interest accrues monthly at a
rate of 10% per annum.  Proceeds were used to fund general
operations.




20







Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 9.
              Short-term
      debt (continued)
 
 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 (the “Aussy Note”).  Proceeds were used to fund general
operations.  On October 31, 2008, the Company issued 11,667 restricted
shares of the Company’s Common Stock valued at the market close and recorded as
an $11,784 payment on the Aussy Note.
 
 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 October 31, and April 30, 2008 consisted of the
following:
 
 October
      31,
                              
                              
                              April
      30,2008
                              
                              
                              2008Officer
      salaries
                              
                              $
                              1,113,230
                              
                              
                              $
                              703,609Other
      payroll accruals
                              
                              
                              16,780
                              
                              
                              
                              21,929Liquidated
      damages
                              
                              
                              103,441
                              
                              
                              
                              57,509Other
      accrued liabilities
                              
                              
                              26,822
                              
                              
                              
                              25,636Total
      other noncurrent assets
                              
                              $
                              1,260,273
                              
                              
                              $
                              808,683
 
 As of
October 31 and April 30, 2008, the Company has unpaid salaries and accrued
interest owed to officers of $1,113,230 and $703,609,
respectively.  The unpaid salaries bear interest at a rate of 10
percent per annum.  As of October 31 and April 30, 2008, accrued
interest on the salaries was $86,507 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 $1,989,066 for unpaid salary,
including interest, accrued through June, 2007 (see Notes 7 and 8).
 
 On
February 9, 2007, in connection with the February Debentures, the Company
executed an investor’s registration rights agreement (the “IRRA”) by and between
the February Investors participating in the February Debentures 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 Debentures (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.  On September 21, 2007 the February Investors were paid one
such thirty day period as a condition of the August 10, 2007 IRRA
amendment.  As of October 31, 2008, the February Investors are owed
for the remaining nine 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.
  21
  Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 11.
              Related
      party transactions (continued)
 
 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 was due two years from the date of execution.  On
October 13, 2008, the Hi-Tek Trademark Loan was amended to extend the due date
to June 30, 2009, with no other change to the terms of the note (see Note
8).
 
 On August
7, 2007, the Company issued an aggregate of 233,334 shares of the Company’s
restricted common stock valued at $420,001 as additional compensation to Thomas
Johnson (116,667 shares) and Lee Johnson. (116,667 shares).
 
 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.
 
 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 7,200,000 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
 
 22
  
  Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 11.
              Related
      party transactions (continued)
 
 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 had 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 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.
 
 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 had 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
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.
 
 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; 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
October 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).
 
 23
 
 
 Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 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 from the date of
vesting.  As of October 31, 2008, 7,650,000 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; $1,381,145 and $6,076,853 were expensed during the six
months ended October 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 October 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 Debentures (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 October 31, 2008 was $27,231.  As of
October 31, 2008, no warrants were exercised.
 
 Additionally,
pursuant to its engagement of Pali Capital, Inc., the Company’s placement agent
in the February Debentures, the Company issued three series of warrants: (i)
Pali Retainer Warrants issued 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) Pali Placement Warrants A issued 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) Pali Placement Warrants B issued 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 “Pali Placement Agent
Warrants”).  The Pali 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 Debentures or upon the earlier
election to exercise; the unamortized balance of the two placement warrants at
October 31, 2008 was $78,475.  As of October 31, 2008, 53,250 Pali
Retainer Warrants and 42,180 $1.00 Pali Placement Warrants A have been
exercised.  In addition, the Company agreed to register the shares
associated with the Pali Placement Agent Warrants in the registration statement
required in connection with the February Debentures (see Note 7).
 
 The fair
value of these warrants 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 October 31, 2008.  As of October 31,
2008, no warrants were exercised.
 
 24
 
 
 Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 12.
              Warrants,
      options and stock based compensation
(continued)
 
 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).
 
 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 from the date of vesting.  As of October 31, 2008,
233,334 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; $104,857 was expensed in the six months ended October 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 from the grant
date.  As of October 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; there
is no unamortized balance at October 31, 2008.  As of October 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 from 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 six months ended October 31,
2008.
 
 25
 
 
 Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 12.
              Warrants,
      options and stock based compensation
(continued)
 
 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).
 
 On August
5, 2008, the Company issued options to purchase 75,000 restricted shares of the
Company’s Common Stock with an estimated fair value of $75,561 to an
employee.  The options have an exercise price of $1.80 per share, vest
one third at the date of grant and one third on February 14, 2009 and 2010 and
expire ten years from the date of vesting.  As of October 31, 2008,
25,000 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, seven,
and nineteen months).  The value of each tranche is amortized on a
straight-line basis; $39,933 was expensed during the six months ended October
31, 2008.  Amortization for the year ending April 30, 2009 will be
$62,291
 
 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 185.1%; risk-free interest rate of 4.04%; contractual life of ten
years; and a closing market price of $1.01.  Expected volatility is
calculated based on the historic Friday stock market closing price of the
preceding one hundred and sixty-seven week period (from Pink Sheet
inception).
 
 A summary
of the Company’s stock options as of October 31 and April 30, 2008 and changes
during the periods is as follows:
 
 Period
      endedOctober
      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 ofthe
      period
                                              
                                              
                                              8,160,000
                                              
                                              
                                              $
                                              0.581
                                              
                                              
                                              
                                              
                                              
                                              
                                              7,650,000
                                              
                                              
                                              $
                                              0.500Granted
                                              
                                              
                                              75,000
                                              
                                              
                                              $
                                              1.800
                                              
                                              
                                              
                                              
                                              
                                              
                                              510,000
                                              
                                              
                                              $
                                              1,804Exercised
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -Cancelled
                                              
                                              
                                              150,000
                                              
                                              
                                              $
                                              1.800
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -Outstanding
      at the end of the period
                                              
                                              
                                              8,085,000
                                              
                                              
                                              $
                                              0.570
                                              
                                              
                                              $
                                              1.99
                                              
                                              
                                              
                                              8,160,000
                                              
                                              
                                              $
                                              0.581
                                              
                                              
                                              $
                                              1.97Vested
      at the end of the period
                                              
                                              
                                              7,918,334
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              5,226,667Exercisable
      at the end of period
                                              
                                              
                                              7,918,334
                                              
                                              
                                              
                                              
                                              
                                              
                                              $
                                              2.03
                                              
                                              
                                              
                                              5,226,667
                                              
                                              
                                              
                                              
                                              
                                              
                                              $
                                              2.05Weighted
      average fair value peroption
      of options granted duringthe
      period
                                              
                                              
                                              
                                              
                                              
                                              $
                                              1.007
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              $
                                              1.867
 
 26
 
 
 Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 12.
              Warrants,
      options and stock based compensation
(continued)
 
 The
following table summarizes information regarding employee stock options
outstanding at October 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$
                            0.50
                            
                            
                            
                            7,650,000
                            
                            
                            
                            8.7
                            
                            
                            
                            0.500
                            
                            
                            
                            7,650,000
                            
                            
                            
                            $
                            0.500$
                            1.80
      to 2.00
                            
                            
                            
                            435,000
                            
                            
                            
                            9.7
                            
                            
                            $
                            1.805
                            
                            
                            
                            268,334
                            
                            
                            
                            $
                            1.8078,085,000
                            
                            
                            
                            8.7
                            
                            
                            $
                            0.570
                            
                            
                            
                            7,918,334
                            
                            8.7
                            
                            $
                            0.544
 
 A summary
of the Company’s warrants as of October 31 and April 30, 2008 and changes during
the periods is as follows:
 
 Period endedOctober 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 warrants granted during the
      period
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          
                                          $
                                          1.552
 
 27
  
 Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 12.
              Warrants,
      options and stock based compensation
(continued)
 
 The
following table summarizes information regarding stock purchase warrants
outstanding at October 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
                                                    
                                                    3.3
                                                    
                                                    $
                                                    0.001
                                                    
                                                    196,750
                                                    
                                                    
                                                    
                                                    $
                                                    0.001$
                                                    1.000
                                                    
                                                    187,420
                                                    
                                                    3.3
                                                    
                                                    $
                                                    1.000
                                                    
                                                    187,420
                                                    
                                                    
                                                    
                                                    $
                                                    1.000$
                                                    1.500
                                                    
                                                    240,000
                                                    
                                                    1.9
                                                    
                                                    $
                                                    1.500
                                                    
                                                    240,000
                                                    
                                                    
                                                    
                                                    $
                                                    1.500$
                                                    2.000
                                                    
                                                    5,713,345
                                                    
                                                    1.0
                                                    
                                                    $
                                                    2.000
                                                    
                                                    5,713,345
                                                    
                                                    
                                                    
                                                    $
                                                    2.0006,337,515
                                                    
                                                    1.2
                                                    
                                                    $
                                                    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;
 
 ·
              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 February Debentures, 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 February Debentures upon
conversion.
 
 28
  
 Dot
VN, INC. AND SUBSIDIARIES
 Notes
to Condensed Consolidated Financial Statements (Unaudited)
 As
of October 31, 2008
 
 14.
              Stock
      issuances (continued)
 
 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 Pali 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 Pali Retainer 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 Pali Placement Warrants A with 30,129 warrant shares surrendered to
cover the exercise price.
 
 On August
1, 2008, pursuant to the terms of a February Debentures, 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 February Debentures upon
conversion.
 
 On August
6, 2008, pursuant to the terms of a February Debentures, 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 $21,212 February
Debentures upon conversion.
 
 Also on
August 6, 2008, pursuant to the terms of a February Debentures, 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 February Debentures upon
conversion.
 
 On
September 16, 2008, pursuant to the terms of a consulting agreement, the Company
issued to Mai Liem Truc, a sophisticated purchaser, 1,000 restricted shares of
the Company’s Common Stock for services valued at the market closing price and
recorded as $1,150 in consulting fees.
 
 On
October 29, 2008, pursuant to the terms of a consulting agreement, the Company
issued to Gary Shehorn, a sophisticated purchaser, 1,250 restricted shares of
the Company’s Common Stock for services valued at the market closing price and
recorded as $1,262 in consulting fees.
 
 On
October 31, 2008, the Company issued 11,667 restricted shares of the Company’s
Common Stock to Aussy Manuhu, a sophisticated purchaser, valued at the market
close and recorded as an $11,784 payment on Aussy Note.
 
 15.
              Subsequent
      events
 
 On
November 17, 2008, Dot VN Danang executed an office lease of approximately 1,022
square feet in downtown Danang City, Vietnam for a term of two years commencing
January 1, 2009.  Rent of $1,473 per month is payable quarterly in
advance.
 
 On
December 4, 2008, the Company executed a promissory note for $50,000 due
December 3, 2009 plus accrued interest at 10% per annum with IDCG SA de
CV.
 
 29


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 has secured a
35-year lease for approximately 8,768 square meters of land in the Danang
Industrial Zone in Danang, Vietnam.  In addition, the Company 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.  The IDC developments are anticipated to occur in the near
to mid term.  In the long term, the Company intends to develop
additional IDCs in the rest of the Country of Vietnam.  Dot VN will
continue to explore and test, and analyze, new and best of breed technology for
deployment in Vietnam, including but not limited to wireless virtual
fiber.
 
 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;
  30
  ·
              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.
  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.
  31
 
 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.
 
 Foreign Currency
Translation
 
 The
functional currency of the Company’s foreign subsidiary is the applicable local
currency.  The functional currency is translated into U.S. dollars for
balance sheet accounts using current exchange rates in effect as of the balance
sheet date and for revenue and expense accounts and cash flow items using a
weighted-average exchange rate during the reporting
period.  Adjustments resulting from translation are included in
accumulated comprehensive income (loss), a separate component of shareholders’
equity (deficit).  Gains or losses resulting from transactions
denominated in foreign currencies are included in other income and expense, net
in the consolidated statements of operations.
 
 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 October 31, 2008 net fixed assets to be recovered in the
future are $692,075.
 
 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.
  32
 
 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.
 
 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
Debentures”).  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 Debentures 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 Debentures 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 Debentures 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 8,085,000 shares of common
stock and 6,337,515 warrants potentially issuable at October 31, 2008 which were
not included in the computation of net loss per share.
  33
 
 Comprehensive Income
(Loss)
 
 Comprehensive
income (loss) is defined as the change in equity (net assets) of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources, and is comprised of “net income (loss)” and “other
comprehensive income (loss).” The Company’s other comprehensive income is
comprised exclusively of changes in the Company’s currency translation
adjustment account.
 
 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 October 31 and April 30, 2008 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.
 
 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.
  34
 
 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.
 
 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” (“FIN 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.
  35
 
 RESULTS
OF OPERATIONS
 
 Three
months ended October 31, 2008 compared to three months ended October 31,
2007.
 
 REVENUES
 
 Revenues
of $227,671 for the three months ended October 31, 2008 (the “Current Quarter”)
decreased 11.4% or $29,279 as compared to $256,950 for the three months ended
October 31, 2007 (the “Prior Quarter”).  This decrease from the Prior
Quarter is the result of a small decrease in total number of domain name
registrations processed by the Company (2,494 compared to 2,514 or a 0.8%
decrease when compared to the previous quarter).
 
 During
the Current Quarter, the small decrease in registrations is the net of two
factors (i) new domain name registrations decreased 19% to represent
approximately 27% of total revenues (33% in the Prior Quarter) offset by (ii)
domain name renewals increased 9% to represent approximately 67% of total
revenues (62% in the Prior Quarter).  The average domain name renewal
revenue is less than that for a new domain name registration resulting in the
11.4% decrease in revenue on the 0.8% decrease in registration
activity.  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 and GROSS PROFIT
 
 For the
three months ended October 31, 2008, cost of revenues decreased 5.2% to $111,975
compared to $118,104 for the three months ended October 31, 2007, a decrease of
$6,129.  Gross profit was $115,696 or 50.8% (as a percentage of
revenues) for the three months ended October 31, 2008 compared to $138,846 or
54.0% for the three months ended October 31, 2007.  The decrease in
gross profit (3.2%) was principally due to the 19% reduction in new domain name
registrations during the Current Quarter when compared to the Prior
Quarter.
 
 GENERAL
AND ADMINISTRATIVE EXPENSES
 
 For the
three months ended October 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 $1,203,731
compared to $3,853,717 for the three months ended October 31, 2007, a decrease
of $2,649,986 or 68.8%.  The decrease in total general and
administrative expenses was primarily attributable to the following offsetting
factors:
 
 ·
              Option
      Bonus expenses decreased to $618,614 for the three months ended October
      31, 2008, from $2,352,914 for the three months ended October 31, 2007, a
      decrease of $1,734,300 or 73.7%.  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 second vesting period
      (generally one year) and the remaining third during final vesting period
      (generally two years).  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 $1,933,529 was expensed compared
      to $552,458 during the Current Quarter, for a decrease of $1,381,071 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; during the Prior Quarter $419,385 was
      expensed compared to $26,223 during the Current Quarter, for a decrease of
      $393,162 in the Current Quarter.  During the quarter ending
      October 31, 2008 the Company issued options for an aggregate of 75,000
      shares with an estimated fair value of $75,561 resulting in the recording
      of $39,933 in compensation costs in the Current Quarter compared to no
      expense in the Prior Quarter.
 
 ·
              Consulting
      and professional fees decreased to $57,708 for the three months ended
      October 31, 2008, from $394,689 for the three months ended October 31,
      2007, a decrease of $336,981 or 85.4%.  The decreased expense is
      the result of both cash fees paid and the amortization of the fair value
      of stock warrants issued for business development and consulting services
      for the Company, the significant items
were:
 
 o
              Legal
      and accounting fees decreased to $11,307 for the Current Quarter from
      $68,263 for the Prior Quarter a decrease of $56,956 or 83.4%.; the Prior
      Quarter included fees for the audit of two complete years compared to the
      Current Quarter fees to review one
quarter.
 o
              Consulting
      services decreased to $23,459 for the Current Quarter from $77,795 for the
      Prior Quarter a decrease of $54,336 or 69.8%; in addition to general
      administrative support services the Prior Quarter included additional
      services in support of the two audit years and general marketing services
      within Vietnam.
 
  36
 o
                Warrants
      for an aggregate of 120,000 shares exercisable at a per share price of
      $1.50, with an estimated fair value of $202,746 were expensed in the Prior
      Quarter as issued.  Also during the Prior Quarter warrants for
      200,000 shares exercisable at a per share price of $2.00, with an
      estimated fair value of $275,312 and a service period of twelve months
      were issued resulting in the amortization of $45,885 (two months) during
      the Prior Quarter compared to $22,942 in the Current
    Quarter.
  ·
              Other
      general and administrative expenses decreased to $514,224 for the three
      months ended October 31, 2008 from $1,098,882 for the three months ended
      October 31, 2007, a decrease of $584,658 or 53.2%.  The
      decreased expense is the net result the following significant
      items:
 
 o
              Employee
      wages and payroll taxes increased to $319,453 for the Current Quarter from
      $309,364 for the Prior Quarter, an increase of $10,089 or
      3.3%.
 o
              Services
      outsourced in Vietnam to manage the domain name registry increased to
      $30,000 for the Current Quarter from $15,000 for the Prior Quarter, an
      increase of $15,000 or 100.0%.
 o
              Travel
      and related expenses decreased to $27,107 for the Current Quarter from
      $74,117 for the Prior Quarter, a decrease of $47,010 or
    63.4%.
 o
              Employee
      bonuses paid with shares of the Company’s restricted common stock
      decreased to zero for the Current Quarter from $70,051 for the Prior
      Quarter, a decrease of 100%.
 o
              Officer
      bonuses paid with shares of the Company’s restricted common stock
      decreased to zero for the Current Quarter from $508,752 for the Prior
      Quarter, a decrease of 100%.
 o
              All
      other general and administrative expenses increased to $137,664 for the
      Current Quarter from $121,598 for the Prior Quarter, an increase of
      $16,066 or 13.2%.
 
 LOSS FROM
OPERATIONS
 
 We
reported a loss from operations of $1,088,035 for the three months ended October
31, 2008 as compared to a loss from operations of $3,714,871 for the three
months ended October 31, 2007, a decrease of $2,626,836 or 70.7%.  The
decrease is primarily attributed to decreases in option bonus expense
($1,734,300), consulting and professional fees ($336,981), and officer bonuses
paid with common stock ($508,752).
 
 OTHER
INCOME AND EXPENSES
 
 Total
other income and expense decreased to a net expense of $501,437 for three months
ended October 31, 2008 as compared to a net expense of $1,013,348 for the three
months ended October 31, 2007.  Included in this net expense decrease
of $511,911 or 50.5% are:
 
 ·
              Interest
      income was $738 for the three months ended October 31, 2008 as compared to
      interest income of $3,611 for the three months ended October 31, 2007; the
      decrease of $2,873 or 79.6% is attributable to a decrease in average cash
      balances.
 
 ·
              The
      finance expense was $129,736 for the three months ended October 31, 2008
      as compared to finance expense of $316,365 for the three months ended
      October 31, 2007, a decrease of $186,629 or 59.0%.  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 Debentures, the Company paid a cash fee equal to 10%
      of the proceeds from the February Debentures ($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
      Debentures with $14,353 amortized in both the Current Quarter and in the
      Prior Quarter.
 o
              Additionally,
      pursuant to its engagement of Pali, the Company issued three series of
      warrants: (i) Pali 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) Pali 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) Pali 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 (collectively
      the “Pali Placement Agent Warrants”) recorded as a deferred debt issuance
      cost.  The Pali 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
      Debentures.  The Company had no expense for the retainer warrant
      during the three months ended October 31, 2008 compared to $178,101
      expensed in the Prior Quarter.  During the three months ended
      October 31, 2008, the Company expensed $78,474 for the two placement
      warrants compared to $91,417 expensed in the Prior
  Quarter.
 37
  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 Debentures investors which are amortized over the
      approximate two year term of the convertible debt or upon
      conversion.  During the three months ended October 31, 2008, the
      Company expensed $36,909 compared to $32,494 expensed in the Prior
      Quarter.
 
 ·
              Interest
      expense decreased by $326,263 or 46.6% for the three months ended October
      31, 2008 to $374,359 as compared to $700,622 for the three months ended
      October 31, 2007 reflecting (i) interest expense on borrowings from
      related parties, short term debt, to include the February Debentures,
      increased $53,714, (ii) accretion of the debt discount associated with the
      February Debentures and other convertible notes decreased $364,002, and
      (iii) a credit of $15,975 for interest capitalized as part of the Internet
      data center construction in progress.  The accretion of debt
      discount decrease 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 October 31, 2008
      the Company expensed $126,144 of the beneficial conversion feature as
      compared to $111,032 for the three months ended October 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 October 31, 2008 the
      Company expensed zero of the beneficial conversion feature as compared to
      $361,649 for the three months ended October 31,
  2007.
 o
              Other
      convertible notes issued by the Company with a beneficial conversion
      feature resulted in the expensing of $37,500 of the beneficial conversion
      feature during the three months ended October 31, 2008 as compared to
      $54,965 for the three months ended October 31,
  2007.
 
 OVERALL
 
 We
reported a net loss for the three months ended October 31, 2008 of $1,589,472
compared to a net loss for the three months ended October 31, 2007 of
$4,728,219.  This translates to an overall basic and diluted per-share
loss available to shareholders of $0.06 for the three months ended October 31,
2008, compared to basic and diluted per-share loss of $0.18 for the three months
ended October 31, 2007 based on 27,323,505 and 26,742,718 weighted average
common shares outstanding, respectively.
 
 Six
months ended October 31, 2008 compared to six months ended October 31,
2007.
 
 REVENUES
 
 Revenues
of $604,351 for the six months ended October 31, 2008 (the “Current Period”)
increased 10.4% or $57,148 as compared to $547,203 for the six months ended
October 31, 2007 (the “Prior Period”).  This increase from the Prior
Period is the result of an increase in total number of domain name registrations
processed by the Company (5,696 compared to 4,733 or a 20% increase when
compared to the previous period).  The total number of domain names
under registration by the Company at October 31, 2008 increased to 10,210
compared to 8,533 at October 31, 2007 or a 19.4% increase during the twelve
month period.
 
 During
the Current Period, the growth in the registration of (i) new domain names
increased 0.3% to represent approximately 25% of total revenues (30% in the
Prior Period) and (ii) domain name renewals increased 30% to represent
approximately 69% of total revenues (64% in the Prior Period).  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.
  38
 
 COST OF
REVENUES and GROSS PROFIT
 
 For the
six months ended October 31, 2008, cost of revenues increased 15.7% to $255,381
compared to $220,689 for the six months ended October 31, 2007, an increase of
$34,692.  Gross profit was $348,970 or 57.7% (as a percentage of
revenues) for the six months ended October 31, 2008 compared to $326,514 or
59.7% for the six months ended October 31, 2007.  The decrease in
gross profit (1.9%) was principally due to the five percentage point swing of
revenue from new domain name registrations to domain name renewals.
 
 GENERAL
AND ADMINISTRATIVE EXPENSES
 
 For the
six months ended October 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 $2,874,897
compared to $6,931,966 for the six months ended October 31, 2007, a decrease of
$4,057,069 or 58.5%.  The decrease in total general and administrative
expenses was primarily attributable to the following offsetting
factors:
 
 ·
              Option
      Bonus expenses decreased to $1,532,329 for the six months ended October
      31, 2008, from $4,838,865 for the six months ended October 31, 2007, a
      decrease of $3,306,536 or 68.3%.  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 second vesting period
      (generally one year) and the remaining third during the final vesting
      period (generally two years).  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 Period $4,419,480 was expensed
      compared to $1,381,144 during the Current Period, for a decrease of
      $3,038,336 in the Current Period.  During the six months ending
      October 31, 2007 the Company issued options for an aggregate of 510,000
      shares with an estimated fair value of $952,025; during the Prior Period
      $419,385 was expensed compared to $111,251 during the Current Period, for
      a decrease of $308,134 in the Current Period.   During the
      period ending October 31, 2008 the Company issued options for an aggregate
      of 75,000 shares with an estimated fair value of $75,561resulting in the
      recording of $39,933 in compensation costs in the Current Period compared
      to no expense in the Prior Period.
 
 ·
              Consulting
      and professional fees decreased to $182,964 for the six months ended
      October 31, 2008, from $493,712 for the six months ended October 31, 2007,
      a decrease of $310,748 or 62.9%.  The decreased expense is the
      result of both cash fees paid and the amortization of the fair value of
      stock warrants issued for business development and consulting services for
      the Company, the significant items
were:
 
 o
              Legal
      and accounting fees decreased to $47,194 for the Current Period from
      $71,700 for the Prior Period a decrease of $24,506 or 34.2%.; the Prior
      Period included fees for the audit of two complete years compared to the
      Current Period fees to audit one year and review one
    quarter.
 o
              Consulting
      services decreased to $44,000 for the Current Period from $100,295 for the
      Prior Period a decrease of $56,295 or 56.1%; in addition to general
      administrative support services the Prior Period included additional
      services in support of the two audit years and general marketing services
      within Vietnam.
 o
              Warrants
      for an aggregate of 160,000 shares exercisable at a per share price of
      $1.50, with an estimated fair value of $275,832 were expensed in the Prior
      Period as issued.  Also during the Prior Period warrants for
      200,000 shares exercisable at a per share price of $2.00, with an
      estimated fair value of $275,312 and a service period of twelve months
      were issued resulting in the amortization of $45,885 (two months) during
      the Prior Period compared to $91,770 (four months) in the Current
      Period.
 
 ·
              Bad
      debt expense increased to $27,185 for the six months ended October 31,
      2008 from $2,062 for the six months ended October 31, 2007, an increase of
      $25,123 or 1218%.  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 Period.  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.
  39
 
 ·
              Other
      general and administrative expenses decreased to $1,108,419 for the six
      months ended October 31, 2008 from $1,585,267 for the six months ended
      October 31, 2007, a decrease of $476,848 or 30.1%.  The
      decreased expense is the net result the following significant
      items:
 
 o
              Employee
      wages and payroll taxes increased to $657,491 for the Current Period from
      $589,392 for the Prior Period, an increase of $68,099 or
      11.6%.
 o
              Services
      outsourced in Vietnam to manage the domain name registry increased to
      $60,000 for the Current Period from $30,000 for the Prior Period, an
      increase of $30,000 or 100.0%.
 o
              Travel
      and related expenses decreased to $45,697 for the Current Period from
      $118,644 for the Prior Period, a decrease of $72,947 or
    61.5%.
 o
              New
      product testing (wireless virtual fiber) increased to $25,185 for the
      Current Period from zero for the Prior Period, an increase of
      100%.
 o
              Employee
      wages and bonuses paid with shares of the Company’s restricted common
      stock decreased to $18,100 for the Current Period from $121,791 for the
      Prior Period, a decrease of $103,691 or
85.1%.
 o
              Officer
      bonuses paid with shares of the Company’s restricted common stock
      decreased to zero for the Current Period from $508,752 for the Prior
      Period, a decrease of 100%.
 o
              All
      other general and administrative expenses increased to $301,946 for the
      Current Period from $216,688 for the Prior Period, an increase of $81,918
      or 37.8%.
 
 LOSS FROM
OPERATIONS
 
 We
reported a loss from operations of $2,525,927 for the six months ended October
31, 2008 as compared to a loss from operations of $6,605,452 for the six months
ended October 31, 2007, a decrease of $4,079,525 or 61.8%.  The
decrease is primarily attributed to improved gross profit ($22,456) and
decreased option bonus expense ($3,306,536), consulting and professional fees
($310,748), and other general and administrative expenses ($476,848) offset by
increased bad debt expense ($25,122).
 
 OTHER
INCOME AND EXPENSES
 
 Total
other income and expense decreased to a net expense of $1,395,573 for six months
ended October 31, 2008 as compared to a net expense of $1,657,986 for the six
months ended October 31, 2007.  Included in this net expense decrease
of $262,413 or 15.8% are:
 
 ·
              Interest
      income was $2,382 for the six months ended October 31, 2008 as compared to
      interest income of $8,413 for the six months ended October 31, 2007; the
      decrease of $6,031 or 71.7% is attributable to a decrease in average cash
      balances.
 
 ·
              The
      finance expense was $294,099 for the six months ended October 31, 2008 as
      compared to finance expense of $632,731 for the six months ended October
      31, 2007, a decrease of $338,632 or 53.5%.  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, the Company’s placement agent in the February
      Debentures, the Company paid a cash fee equal to 10% of the proceeds from
      the February Debentures ($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 Debentures
      with $28,705 amortized in both the Current Period and in the Prior
      Period.
 o
              Additionally,
      pursuant to its engagement of Pali, the Company issued six series of
      warrants: (i) Pali 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) Pali 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) Pali 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 (collectively
      the “Pali Placement Agent Warrants”) recorded as a deferred debt issuance
      cost.  The Pali 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
      Debentures.  The Company had no expense for the retainer warrant
      during the six months ended October 31, 2008 compared to $356,202 expensed
      in the Prior Period.  During the six months ended October 31,
      2008, the Company expensed $195,778 for the two placement warrants
      compared to $182,835 expensed in the Prior
  Period.
  40
  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 Debentures investors which are amortized over the
      approximate two year term of the convertible debt or upon
      conversion.  During the six months ended October 31, 2008, the
      Company expensed $69,616 compared to $64,989 expensed in the Prior
      Period.
 
 ·
              Interest
      expense increased by $72,080 or 7.0% for the six months ended October 31,
      2008 to $1,105,776 as compared to $1,033,696 for the six months ended
      October 31, 2007 reflecting an increase in (i) interest expense on
      borrowings from related parties, short term debt, to include the February
      Debentures, of $99,779, (ii) accretion of the debt discount associated
      with the February Debentures and other convertible notes of $1,694, and a
      credit of $29,393 for interest capitalized as part of the Internet data
      center construction in progress.  Interest expense on borrowings
      from related parties, and short term debt increased due to additional
      borrowing.
 
 OVERALL
 
 We
reported a net loss for the six months ended October 31, 2008 of $3,921,500
compared to a net loss for the six months ended October 31, 2007 of
$8,263,438.  This translates to an overall basic and diluted per-share
loss available to shareholders of $0.14 for the six months ended October 31,
2008, compared to basic and diluted per-share loss of $0.31 for the six months
ended October 31, 2007 based on 27,214,497 and 26,485,436 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) 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 six months ended October 31
2008.
 
 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 six months ended October 31, 2008 and 2007 cash
used in our operating activities was $659,320 and $368,571, and cash used in
investing activities was $14,001 and $574,856, respectively.  We
funded our operating activities and investing activities during the six months
ended October 31, 2008 with cash reserves in addition to the following resources
and during the six months ended October 31, 2008 and 2007 with the following
resources:
 
 For the Six Months Ended
                          October 31,2008
                        
                        
                        2007Funds
      advanced by Hi-Tek Private under revolving credit arrangement, net of
      $62,101 and $18,451 repayments
                        
                        $
                        (62,101
                        )
                        
                        $
                        (10,992
                        )Six
      month term loan from Hi-Tek Private, due November 1, 2007, extended to
      June 30, 2009
                        
                        
                        -
                        
                        
                        
                        600,000Two
      month term loan from Vina Mex Capital, due November 14, 2007, extended to
      June 30, 2009
                        
                        
                        
                        
                        
                        
                        700,000Twelve
      month term loan from John T. Butler, due June 1, 2009
                        
                        
                        70,000
                        
                        
                        
                        -Twelve
      month term loan from Tupou U. Kaho, due June 1, 2009
                        
                        
                        50,000
                        
                        
                        
                        -Six
      and one half month term loan from Vina Mex Capital, due March 31,
      2009
                        
                        
                        200,000
                        
                        
                        
                        -Twelve
      month term loan from Vina Mex Capital, due September 17,
    2009
                        
                        
                        100,000
                        
                        
                        
                        -Proceeds
      from stock issuances
                        
                        
                        53
                        
                        
                        
                        -Total
                        
                        $
                        357,952
                        
                        
                        $
                        1,289,008
  41
 
 At
October 31, 2008, we had a cash balance of $165,039 compared to $480,350 at
April 30, 2008, a decrease of $315,311.  At October 31, 2008, our
working capital deficit was $10,373,085 as compared to $8,251,260 at April 30,
2008.  Our current assets, other than cash, consist primarily of
$88,410 in accounts receivable, $8,708 in prepaid land lease, $7,583 in unearned
stock based compensation, and $29,497 in miscellaneous receivable.
 
 Our
current liabilities consisted primarily of $2,253,145 due to Hi-Tek Private
under three credit arrangements net of zero discount (for the beneficial
conversion feature of the convertible note), $2,198,391 due Thomas Johnson (our
CEO), $2,198,391 due Lee Johnson (our President, CTO, and CFO), $853,937 due the
February Investors net of $120,250 discount, $1,087,904 due Vina Mex Capital
under three term notes, $745,320 in other short term debt, $1,113,230 in accrued
officer salaries, $103,441 in liquidated damages to the February Investors,
$49,574 in accounts payable, and $34,081 in customer deposits.
 
 If we are
to implement our business plan, we will need to raise significant amounts of
additional capital during the period ending October 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
October, 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-3,
“Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active” (“FSP FAS 157-3”).  FSP FAS 157-3 clarifies the
application of SFAS No. 157 in a market that is not active and addresses
application issues such as the use of internal assumptions when relevant
observable data does not exist, the use of observable market information when
the market is not active, and the use of market quotes when assessing the
relevance of observable and unobservable data.  FSP 157-3 is effective
for all periods presented in accordance with SFAS No. 157.  The
adoption of FSP 157-3 did not have any material effect on the Company’s
financial statements.
 
 In June
2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP
EITF 03-6-1”).  FSP 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 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 June
2008, the FASB ratified EITF No. 07-5, “Determining Whether an Instrument (or an
Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF
07-5”).  EITF 07-5 provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions.  It also clarifies the
impact that foreign currency denominated strike prices and market-based employee
stock option valuation instruments have on the evaluation.  EITF 07-5
is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years.  The
Company is currently evaluating the impact adoption of this statement could have
on its financial statements.
  42
 
 In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts - an interpretation of FASB Statement No. 60” (“SFAS
163”).  SFAS 163 requires that an insurance enterprise recognize a
claim liability prior to an event of default (insured event) when there is
evidence that credit deterioration has occurred in an insured financial
obligation.  SFAS 163 also clarifies how SFAS No. 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim
liabilities.  SFAS 163 requires expanded disclosures about financial
guarantee insurance contracts.  SFAS 163 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those years.  SFAS 163 requires that
disclosures about the risk-management activities of the insurance enterprise be
effective for the first period (including interim periods) beginning after
issuance of this Statement.  Except for those disclosures, earlier
application is not permitted.  The adoption of this statement is not
expected to have a material effect on the Company's 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 APB 14-1”).  FSP 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 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.
 
 In April
2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
Intangible Assets” (“FSP FAS 142-3”).  FSP 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 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.
  43
 
 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
November 17, 2008, Dot VN Danang executed an office lease of approximately 1,022
square feet in downtown Danang City, Vietnam for a term of two years commencing
January 1, 2009.  Rent of $1,473 per month is payable quarterly in
advance.
 
 On
December 4, 2008, the Company executed a promissory note for $50,000 due
December 3, 2009 plus accrued interest at 10% per annum with IDCG SA de
CV.
 
 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.
 
 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.
  44





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.  The offer and sale was
made to one person, in a non-public offering, where the offeree had access to
the kind of information that registration would disclose, in reliance on the
exemption from registration afforded by Section (4)(2), promulgated pursuant to
the Securities Act of 1933, as amended


(the
“Securities Act”).





Also on
June 6, 2008, pursuant to the terms of a February Debentures, 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, promulgated under the
Securities Act, in exchange for the cancellation of Clark’s $7,500 February
Debentures 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, promulgated under
the Securities Act, 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 Pali 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, promulgated under
the Securities Act, 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, promulgated under the
Securities Act, 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 February Debentures, 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, promulgated under the
Securities Act, in exchange for the cancellation of Roy’s $50,000 February
Debentures upon conversion.





On August
6, 2008, pursuant to the terms of a February Debentures, 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,
promulgated under the Securities Act, in exchange for the cancellation of
Ontario’s $21,213 February Debentures upon conversion.





Also on
August 6, 2008, pursuant to the terms of a February Debentures, 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, promulgated under
the Securities Act, in exchange for the cancellation of Sarbh’s $100,000
February Debentures upon conversion.





On
September 16, 2008, pursuant to the terms of a consulting agreement, the Company
issued to Mai Liem Truc, a sophisticated purchaser, 1,000 restricted shares of
the Company’s Common Stock for services valued at the market closing price and
recorded as $1,150 in consulting fees exempt from registration pursuant to Rule
903(b)(3) of Regulation S, promulgated pursuant to the Securities Act, on the
basis that the securities were sold outside of the US, to a non-US person, and
with no directed selling efforts in the US.





On
October 29, 2008, pursuant to the terms of a consulting agreement, the Company
issued to Gary Shehorn, a sophisticated purchaser, 1,250 restricted shares of
the Company’s Common Stock for services valued at the market closing price and
recorded as $1,263 in consulting fees.  The offer and sale was made to
one person, in a non-public offering, where the offeree had access to the kind
of information that registration would disclose, in reliance on the exemption
from registration afforded by Section (4)(2), promulgated pursuant to the
Securities Act of 1933, as amended (the “Securities Act”).


45





On
October 31, 2008, the Company issued 11,667 restricted shares of the Company’s
Common Stock to Aussy Manuhu, a sophisticated purchaser, valued at the market
close and recorded as an $11,784 payment on Aussy Note.  The offer and
sale was made to one person, in a non-public offering, where the offeree had
access to the kind of information that registration would disclose, in reliance
on the exemption from registration afforded by Section (4)(2), promulgated
pursuant to the Securities Act of 1933, as amended (the “Securities
Act”).




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 June
29, 2007, the Company executed a convertible promissory note with
Business.com.VN, a Vietnamese company, with a face value of $100,000, which
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.  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.





On August
1, 2007, the Company executed a set of two individual convertible notes with an
aggregate face value of $3,978,132 issued 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.  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 notes originally issued in
consideration for, and in satisfaction of, accrued salary and interest accruing
since January 31, 2003 through June 30, 2007 by each of Thomas Johnson and Lee
Johnson under their respective employment agreements with Dot VN.  On
August 14, 2008, the unpaid notes and accrued interest were replaced with new
convertible notes due February 15, 2009 with materially the same terms and
conditions as the TJ Note and the LJ Note, with an aggregate face value of
$4,321,533 issued to Mr. Thomas Johnson (50%) and Dr. Lee Johnson
(50%).





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.




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
                
                Description3.1
                
                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.


46





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: December 15, 2008
                        By:
                        /s/ Louis P. HuynhName: Louis P. HuynhTitle:General Counsel, Executive Vice President of Operationsand Business Development, and Corporate Secretary


47





EXHIBIT
INDEX





Number
                    
                    Description3.1
                    
                    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.


48