ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.

This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Exchange Act which represent the expectations or beliefs concerning future events that involve risks and uncertainties, including but not limited to the demand for Company products and services and the costs associated with such goods and services. All other statements other than statements of historical fact included in this Quarterly Report including, without limitation, the statements under "Management's Discussion and Analysis or Plan of Operations" and elsewhere in the Quarterly Report, are forward-looking statements. While the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

The following discussion of the results of operations and financial conditions should be read in conjunction with the financial statements and related notes appearing in this report.

EnXnet, Inc. was formed under the laws of the State of Oklahoma on March 30, 1999 as Southern Wireless, Inc. It is a business and technology development enterprise engaged in the development, marketing, and licensing of emerging technologies and innovative business strategies and practices, focusing primarily on products, solutions, and services which support and enhance multimedia management.

The Company currently can satisfy its current cash requirements for approximately 15-30 days and has a plan to raise additional working capital by the sale of shares of the Company common stock to select prospective individuals and from additional borrowings. Additionally, holders of outstanding stock options have been exercising those options which have provided additional working capital for the Company. This plan should provide the additional necessary funds required to enable the Company to continue marketing and developing its products until the Company can generate enough cash flow from sales to sustain its operations.

The Company does not anticipate any significant cash requirements for the purchase of any facilities or equipment.

The Company currently has four full-time employees on the payroll. It is anticipated that the Company will not need to hire additional employees in order to expand the marketing and developing of its products. The Company currently has arrangements with marketing and manufacturing affiliates Duplium for our DVDplus product and with Duplium, One28 Marketing Group and Interactive Affinities for our ThinDisc product. Currently our employees and other outside consultants are used for the further development of our products.

Results of Operations - Three months ended December 31, 2008 and 2007.

Revenues have not been substantial as we refocused our efforts on developing the ThinDisc technologies and developing marketing affiliates. For the three months ended December 31, 2008 and 2007, the Company had revenues of $3,990 and $3,991.

The Company incurred operating expenses of $174,242 and $151,630 for the three months ended December 31, 2008 and 2007.

The increase in operating expenses of $22,612 (13%) is attributed to a decrease in consulting fees of $19,480 for the three months ended December 31, 2008 when compared to the three month period ended December 31, 2007.

Payroll expenses decreased by $3,993 for the three months ended December 31, 2008 when compared to the three month period ended December 31, 2007.

Professional services increased by $38,887 for the three months ended December 31, 2008 when compared to the three month period ended December 31, 2007. The increase is attributable to legal fees associated with patent applications.

Occupancy expense increased $8,904 for the three months ended December 31, 2008 when compared to the three month period ended December 31, 2007. The increase was attributed to repairs made on our equipment.

Other classifications of expenses did not fluctuate substantially for the three month period ended December 31, 2008 to December 31, 2007.

In the three months ended December 31, 2008 and 2007, we recorded expenses related to the issuance of stock options to employees, Board members and consultants of $17,117 and $26,801, respectively.

During the three months ended December 31, 2008 and 2007 we incurred net losses of $185,202 and $163,060 or $(0.006) and $(0.005) per share.

Results of Operations - Nine months ended December 31, 2008 and 2007.

Revenues have not been substantial as we refocused our efforts on developing the ThinDisc technologies and developing marketing affiliates. For the nine months ended December 31, 2008 and 2007, the Company had revenues of $14,708 and $13,511.

The Company incurred operating expenses of $549,930 and $508,820. The increase in operating expenses of $41,110 (8%) is attributed to an increase in payroll expense of $23,376 an increase in professional services of $73,927 and a decrease in consulting fees of $43,065 and a decrease in bad debt expense of $10,295 for the nine months ended December 31, 2008 when compared to the nine month period ended December 31, 2007.

Payroll expenses increased by $23,367 for the nine months ended December 31, 2008 when compared to the nine months ended December 31, 2007. In the nine months ended December 31, 2008, payroll expenses included a charge of $26,000 for Black-Scholes valuation of 135,000 options that were re-priced by the Board of Directors.

---

Table of Contents

Professional services increased by $73,927 for the nine months ended December 31, 2008 because of increased activity associated with our patent filings which protect our proprietary products.

Consulting fees decrease by $43,065 for the nine months ended December 31, 2008 when compared to the nine months ended December 31, 2007.

During the nine month ended December 31, 2007, we had a charge to bad debt expense of $10,295.

Other categories of expenses increased or decreased less than $10,000 for the nine months ended December 31, 2008 when compared to the nine month period ended December 31, 2007.

In the nine months ended December 31, 2008 and 2007, we recorded expenses related to the issuance of stock options to employees, Board members and consultants of $127,627 and $207,903, respectively.

During the nine months ended December 31, 2008 and 2007 we incurred net losses of $576,243 and $541,055 or $(0.018) and $(0.018) per share.

Liquidity and Capital Resources.

From inception through December 31, 2008, the Company has issued 32,401,924 shares of its Common Stock to officers, directors and outside shareholders. The Company has little operating history and no material assets other than the license agreement for ClearVideo and DVDplus, the patent for EnXcase and the pending patents for ThinDisc, Disc Security Tag, "acoustic-magnetic" EAS tags, ARFIDTag and HyTag. The Company has $34,497 in cash as of December 31, 2008.

The Company has incurred operating losses each year since its inception and has had a working capital deficit at December 31, 2008. At December 31, 2008 and March 31, 2008 the working capital deficit was $1,352,483 and $1,303,775, respectively. Current liabilities include notes payable, accrued interest on those notes and advances from the CEO and shareholders in the aggregate amount of $1,134,356 and $1,193,890, respectively. The adjusted working capital deficit without these related party liabilities for December 31, 2008 and March 31, 2008 is $218,127 and $109,885, respectively. The working capital deficit and cash balance raise substantial doubt about the Company's ability to continue as a going concern. As a result of these factors, the Company's independent certified public accountants have included an explanatory paragraph in their reports on the Company's March 31, 2008 financial statements which expressed substantial doubt about the Company's ability to continue as a going concern.

Contractual Obligations.

At the present time, the Company has no material commitments for capital expenditures. If capital expenditures are required after operations commence, the Company will pay for the same through the sale of common stock; or through loans from third parties. There is no assurance, however, that such financing will be available and in the event such financing is not available, the Company may have to cease operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.

Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America.

Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and 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. The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of our consolidated financial statements:

---

Table of Contents

Licenses

The costs associated with acquiring exclusive licensing rights to patented technology have been capitalized and are being charged to expense using the straight line method of amortization over ten years, the estimated remaining useful lives of the patents.

In accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", management of the Company reviews the carrying value of its intangible assets on a regular basis.
Estimated undiscounted future cash flows from the intangible assets are compared with the current carrying value. Reductions to the carrying value are recorded to the extent the net book value of the property exceeds the estimate of future discounted cash flows.

Revenue Recognition

Revenue is generally recognized and earned when all of the following criteria are satisfied: a) persuasive evidence of sales arrangements exists; b) delivery has occurred; c) the sales price is fixed or determinable, and d) collectibility is reasonably assured.

Persuasive evidence of an arrangement is demonstrated via a purchase order from our customers. Delivery occurs when title and all risks of ownership are transferred to the purchaser which generally occurs when the products are shipped to the customer. No right of return exists on sales of products except for defective or damaged products. The sales price to the customer is fixed upon acceptance of purchase order. To assure that collectibility is reasonably assured we perform ongoing credit evaluations of all of our customers.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets as of March 31, 2008 and 2007 for cash equivalents and accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

Contingent Liability

In accordance with Statement of Financial Accounting Standards Interpretation No. 14, we may have certain contingent liabilities with respect to material existing or potential claims, lawsuits and other proceedings. We accrue liabilities when it is probable that future cost will be incurred and such cost can be measured.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES.

Currently the Company's stock is traded under the symbol "EXNT" on the NASD OTC Bulletin Board, and the symbol "AOHMDW" on the Frankfurt, Berlin and Stuttgart Stock Exchanges in Germany. There can be no assurance that an active or regular trading market for the common stock will develop or that, if developed, will be sustained. Various factors, such as operating results, changes in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors may have a significant impact on the market of the Company securities. The market price for the securities of public companies often experience wide fluctuations that are not necessarily related to the operating performance of such public companies such as high interest rates or impact of overseas markets.