UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549










FORM 10-K











x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal Year ended June 30, 2011





o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ________ to ________.





Commission file number: 000-52765





iMEDICOR, INC.


(Exact Name of Registrant as Specified in Its Charter)





Nevada
95-4696799(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)





523 Avalon Gardens Drive, Nanuet, New York 10954


(Address of principal executive offices) (Zip Code)





(845) 371-7380


(Registrant’s Telephone Number, Including Area Code)





Securities registered pursuant to Section 12(b) of the Act: None





Securities registered under Section 12(g) of the Act: Common Stock, $.001 par value





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o    No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No x





Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes o   No x





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o





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





Large accelerated filer o      Accelerated filer o    Non-accelerated filer o    Smaller reporting company x





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





The number of shares outstanding of the Registrant's common stock as of February 23, 2012:  332,376,993





DOCUMENTS INCORPORATED BY REFERENCE





None




Table of Contents





IMEDICOR, INC.


FORM 10-K ANNUAL REPORT


FOR THE YEAR ENDED JUNE 30, 2011


TABLE OF CONTENTS





PagePart IItem 1.
Business
3Item 1A.
Risk Factors
17Item 1B.
Unresolved Staff Comments
23Item 2.
PropertiesItem 3.
Legal ProceedingsPart II
Other InformationItem 5.
Market for Registrant’s Common Equity, Related Stockholder  Matters and Issuer Purchases of Equities Securities
23Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26Item 7A.
Quantitative and Qualitative Disclosure about Market RiskItem 8.
Financial Statements and Supplementary Data
31Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A
Controls and ProceduresItem 9B
Other MattersPART IIIItem 10.
Directors, Executive Officers and Corporate Governance
47Item 11.
Executive Compensation
48Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
49Item 13.
Certain Relationships and Related Transactions, and Director Independence
50Item 14.
Principal Accountant Fees and Services
50PART IVItem 15.
Exhibits, Financial Statement Schedules
51





Table of Contents





FORWARD-LOOKING STATEMENTS





This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements inherently are subject to risks and uncertainties, some of which we cannot predict or quantify.  Our actual results may differ materially from the results projected in the forward-looking statements.  Factors that might cause such a difference include, but are not limited to, those discussed in “ITEM 1A – Risk Factors” and “ITEM 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  You generally can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “may,” “will,” “expects,” “intends,” “estimates,” “anticipates,” “plans,” “seeks,” or “continues,” or the negative thereof or variations thereon or similar terminology.  Forward-looking statements also include the assumptions underlying or relating to any such statements.  Forward-looking statements contained within this document represent a good-faith assessment of iMedicor, Inc.’s future performance for which management believes there is a reasonable basis.  iMedicor, Inc. disclaims any obligation to update the forward-looking statements contained herein, except as may be required by law.





PART I





Item 1.  Business





OVERVIEW





The nation's healthcare system is continuing to undergo a transformation in an effort to improve quality, safety and efficiency of care.  The adoption of Electronic Health Records (EHR’s) and Health Information Exchanges (HIE’s) by health workers has now been mandated by the federal government, with the expectation that all physicians and other healthcare providers will have made the move to using EHR’s by 2014.iMedicor, Inc. (the “Company”) has built a portal-based, virtual work and learning environment  for the healthcare and related industries (the “Portal”), to address the rapid and now mandated shift to a national HER/HIE mandate.  We view the Portal as a Social HIE, incorporating both the ability to exchange health information online in a HIPAA compliant fashion as well as the ability for physicians and other health care workers to communicate beyond just exchanging patient information, much like a social professional network like Linked-In. The Portal’s focus is threefold: Offer a virtual collaboration environment which allows physicians and other healthcare providers to collaborate, communicate and exchange patient specific healthcare information via the internet while maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations; create a social networking environment for physicians and other healthcare workers in which they can communicate and collaborate beyond the direct patient care and information needs, and; through ClearLobby, our web-based portal adjunct, provide for direct communications between pharmaceutical companies and physicians for the dissemination of  information on new drugs without the costs related to direct sales forces.   The Portal allows for physicians to use the internet in ways previously unavailable to them due to HIPAA restrictions to quickly and cost-effectively exchange and share patient medical information and to interact with pharmaceutical companies and review information on new drugs offered by these companies at a time of their choosing.   Our solution –








§
Provides services that are comprehensive and end-to-end.


§
Represents ease of integration into an industry that has been limited in its ability to use internet technology due to federal privacy restraints.§
Has minimal impact in day to day workflow during implementation.§
Is portal-based and requires little or no capital investment for equipment or infrastructure.


§
Supports interactive real-time collaboration.§
Is flexible, configurable and interoperable.


§
Includes peripheral or adjunct productivity tools, services and support.


§
Is highly mobile and affordable for medical practices of any size.§
Is convenient and extendable throughout organizations (Electronic Medical Records.( EMR) systemss, Hospitals, HMOs Etc).


§
Can be customized to align with current communication, learning and healthcare business needs.





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iMedicor began developing its HIPAA compliant network over 4 years ago.  It has been in active use by physicians for approximately 3 years.  iMedicor developed its Network to include “interoperability” or the ability to securely transport and exchange, electronically, all forms of medical documentation between the vast array of disparate healthcare systems.  One of the key components of the Federal “Meaningful Use” guidelines to be eligible for stimulus funds is interoperability. iMedicor has solved that problem with its HIPAA compliant, interoperable communications network, now referred to as iMedicor’s SocialHIE.





OUR TECHNOLOGY-BASED SOLUTIONS





Our Portal is designed to place mission-critical tools and features in the hands of physicians and their staff.  The Portal allows medical practices to reduce cost and increase healthcare to patients through upgraded, HIPAA-compliant modern communication technology.  iMedicor provides a HIPAA-compliant transport network that moves electronic on-line records and images.  It allows for peer collaboration, expansion of the physicians referral network, the ability to create communities and to access educational resources in various formats for various purposes. Educational content is available as certified continuing medical education (CME), non-certified telemedicine and product-specific resources.





The iMedicor portal offers hospital systems, State Health Information Exchanges (HIEs), Independent (Physician) Practice Associations (IPAs), and Regional Health Information Organizations (RHIOs) the extensive functionality needed to demonstrate “Meaningful Use” as defined by the US Department of Health and Human Services Office of the National Coordinator (ONC).  The Portal provides and immediate, low-cost solution for the US government’s mandate for an interoperable health information infrastructure that allows healthcare providers to become interconnected.





iMedicor employs a proprietary technology that allows for the exportation of documents and images from any EMR system, thus addressing the issue of Interoperability.  iMedicor also facilitates the exchange CCD’s  (Continuity of Care Documents) and will include CCR’s (Continutity of Care Records) soon:   which have become the standard for Interoperabilitybetween EMR files between users. As a use-case-scenario, specialists have the ability to send a CCR / CCD from their EMR to a patient’s primary care physician instantaneously so that both physicians can immediately have available the most up-to-date records for the patient, and can collaborate on the patients care in a more efficient manner.





Recently iMedicor incorporated a National Health Information Network (NHIN) Direct Project Solution within iMedicor’s HIPAA-compliant Social Health Information Exchange (SocialHIE) Platform and will now act as a secure Health Information Service (HISP) Provider. As a result, hospitals, health information exchanges, physicians and other healthcare professionals who are members of iMedicor’s SocialHIE will be able to not only send and receive secure messages within iMedicor’s social networking architecture, but also to communicate in a secure environment with other physicians and professionals outside the network.  The NHIN Direct Project Solution assures that all point-to-point transactions of health information will adhere to the highest standards and specifications required by The Office of the National Coordinator for Health Information Technology (ONC). Now, with its advanced NHIN Direct service added to the core services of iMedicor’s SocialHIE, any hospital, health information exchange or health organization can access the industry’s first secure, social network coupled with a health information exchange that is low cost and quick to deploy, while addressing 100% of the ONC Meaningful Use requirements for interoperability between disparate electronic health record (EHR) systems. A significant advancement, due to the inclusion of the NHIN Direct Solution will be the iMedicor’s SocialHIE’s ability to transport and communicate patient specific data inside our HIPAA compliant network, but NHIN Direct allows for the transport and communication of patient specific data outside of the iMedicor network within a secure enviorment, as well.




iMedicor's objective is to provide a market leading secure, HIPAA-compliant solution for interoperable medical information exchange, coupled with a professional network, to physicians, healthcare providers and patients. Using iMedicor’s Portal, health information can be exchanged across disparate Electronic Health Record (EHR) systems to communicate with physicians, collaborate, make referrals and enhance communication with patients.  With the addition of iMedicor’s EMR and network partners, we believe that iMedicor’s unique package of solutions does not exist anywhere else.




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With the Obama administration’s healthcare regulations (initiated in the second term of the Bush Administration, funded under the Obama Administration) to transform all healthcare records to digital format by 2014, the need for an on-line transport system has become acute.  The Company believes that:





·
iMedicor allows healthcare professionals to transport digital records in an electronic, HIPAA-compliant environment both within and outside of the iMedicor portal.





·
iMedicor provides a communications-based technology service that could change the profile of healthcare communication by reducing the time from referral, to testing, to diagnosis from several days to just minutes.





·
iMedicor helps lower the cost of healthcare by reducing the duplication of testing since test results can be shared electronically instead of having to repeat the tests.





Online CME and CE programs are also available through the iMedicor Portal – across multiple specialties – with emphasis given to programs developed and offered by medical associations and premiere providers.  All programs are accredited and most are free.





The Company sees the following opportunities for revenue that it is beginning to capitalize on or will begin to capitalize on in the near future :





1.
Collaboration with the Company’s EMR / HIS strategic alliance partners





The Company has executed agreements with its strategic alliance partners to market and deliver its SocialHIE as a Total Solution Service (a fully integrated secure communication platform featured within a variety of accredited EHR / HISP service at a competitive price) integrated into iMedicor’s HIE and social community network for doctors.  iMedicor, as the prime contractor, or primary communication service, creates revenue sharing opportunities derived from participating healthcare provider and patient portals, Electronic Health Record (EHR) systems, and electronic data interchange solutions.  iMedicor will combine its community-based, secure messaging platform with its strategic alliance partners’ technologies to offer a suite of functions that complies with the US federally mandated inter-operability requirements for the adoption of EHRs, and ensures that participating physicians are eligible for American Recovery and Reinvestment Act (ARRA) “stimulus” funding.





2.
White labeling the portal for use by other companies for their members





We currently have several pilot programs in place with ancillary healthcare companies such as regional medical malpractice liability insurance providers that a beginning to use white labeled versions of the iMedicor portal to communicate directly with their network members for a fee.  These white-labeled “sub-networks’ are part of the larger iMedicor network as well, however the current model allows for the administrators to communicate directly with their membership and to control certain portions of the data regarding their members.  Based on the initial success of the pilots we expect to roll this initiative out nationally and to share in the fees charged by the network owners.





3.
iMedicor’s “ClearLobby”





ClearLobby is a pharmaceutical marketing platform and content delivery system.  It allows physicians to receive disease management and medication adherence alerts and electronically communicate directly with their pharmaceutical representatives.  It also has the ability to place important drug marketing information in front of physicians in a more effective method than traditional pharmaceutical industry direct marketing methods. Within ClearLobby, physicians gain control of the relationship between their medical practice and a pharmaceutical representative.  A physician can also order samples, make specific appointments with pharmaceutical representatives and directly contact a Medical Science Liaison (MSL) for in-depth information concerning a drug, including off-label usage instructions not available through a pharmaceutical representative.  Development of ClearLobby is complete, however due to lack of resources available to market and administrate the ClearLobby platform, the current roll-out is on hold.





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HISTORY AND BACKGROUND





Pursuant to a Share Exchange Agreement dated October 12, 2005, the Company issued an aggregate of 17,600,000 shares of Common Stock, representing approximately 80% of our Common Stock immediately outstanding after the transaction, to the stockholders of Vemics, Inc., a Delaware corporation (“Vemics-Delaware”), in exchange for all of the outstanding stock of Vemics-Delaware.  Vemics-Delaware became a wholly owned subsidiary of the Company, though for accounting purposes Vemics-Delaware was deemed to have been the acquirer in a “reverse merger.”  In connection with the reverse merger, we changed our name from OMII, Inc. to Vemics, Inc. , and then  in March of 2010 the Company changed our name to iMedicor with the Secretary of State of Nevada.  We will file appropriate documents with respect to the change in our name to iMedicor, Inc  with FiNRA and the Securities Exchange Commission later this calendar year.





RECENT DEVELOPMENTS





Based on recent development throughout the Healthcare Community, beginning in June of 2011 when incentive funds began to be released from the ONC (Office of the national coordinator) and new communications standards from the NHIN Direct, NHIN Connect Gateways, esMD and HIH in support of CMS (Center of Medicaid and Medicare Services) iMedicor has positioned itself to focus on its core competency of secure communication. In addition, ancillary features, created to enhance user participation or increase revenue have now been added and explained as follows:




iMedicor is a Health Care Professional Network that maximizes provider efficiency and delivery of cost-effective care, while permitting secure HIPAA transactions to and between all parts of the health care industry.   Whether the network is used by a Provider, Payer, ACO, MSO, PPO or Clearinghouse, iMedicor’s unique design and patented components create a low-cost, high return network that positions users for the future of health care.




Because of its forward-looking design, iMedicor can offer its strategic partners solutions that address network  and secure communication issues BEFORE they become costly operational problems.




iMedicor provides a health information exchange (HIE) specifically designed to address the growing demand for interoperability between the large varieties of electronic health record (EHR) systems. iMedicor’s SocialHIE provides secure communication inside a HIPAA-compliant closed network, and, as of January, 2012 integrates the “Direct” project solution to allow for secure communication outside the core iMedicor network as well.  [The “Direct” project solution is the new standard adopted by the federal Office of the National Coordinator (ONC) to standardize communication between healthcare providers, facilities and other entities in the health care industry.]   iMedicor proposes to offer the ability to co-brand its SocialHIE so that strategic network partners can offer its own network one of the most advanced health care communication tools available today.




The five areas of interaction available between potential partners and iMedicor are:




A.
Secure Communication


B.
Interoperability for Healthcare Providers


C.
Patient Portal


D.
Continuing Medical Education (CME) Programs and Staff Development Education


E.
Ancillary Revenue Opportunities




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A.
SECURE COMMUNICATION




IMedicor’s SocialHIE is the first information exchange platform to offer NHIN Direct secure messaging services within a social/professional networking architecture. It is a flexible communication and health information transport system that features interoperability between disparate EHR, HIE and HIS systems, PPOs, MCOs, Payors and Clearinghouses.




The communications features can easily be adopted for use by its network partners to establish a secure communication link between healthcare providers, healthcare facilities and patients.  This communications network can provide:




·
Secure communication between all healthcare stakeholders including patients


·
Reduce communication cost while increasing the quality of the encounter


·
Replace direct mail, e-mail blasts and faxing to communicate with its user base


·
Increase the business/service opportunities to its clients, at all levels by using modern communication methods linked to secure messaging with attachments.


·
Deliver a wide variety of communications options inside or outside our HIPAA compliant network


·
Become a leader in providing interoperable communication to its partners healthcare providers in support of the ONC’s Meaningful Use Regulations.


·
Reduce communication and marketing costs while increasing and providing additional and valuable communication options to its members





B.
INTEROPERABILITY




iMedicor’s SocialHIE provides a unique tool within today’s HIPAA-compliant environment that enhances the use of EHR’s at all levels of the healthcare spectrum.  In a word that tool is “interoperability.”  With almost 400 EHR systems currently in the market, it is becoming increasingly common for a practitioner to find that despite a significant fiscal and operational investment in an electronic health system, that practitioner is unable to use the EHR to satisfy one of the most basic clinical care management functions:  communicating with another provider.  Why?  Because most EHR’s are designed and built to be functional only for those providers using that particular EHR.   If another practitioner (or hospital system or ancillary service) has a different EHR, communication reverts back to paper.




iMedicor has solved this problem with the original design of its original SocialHIE.  Recently, iMedicor has integrated the federal government’s “Direct” technology and placed it into its network.  By integrating the iMedicor SocialHIE platform into the service set provided by any of its partners, providers will have a cutting-edge tool for making intra-provider communication a communication function of the future.




Most EHR’s have a semi-qualified secure system, mostly designed for those practices within their own network. The real challenge of efficiently transitioning to EHRs is the ability to transmit medical data outside an established EHR network. For example, a hospital may have one of the Hospital Information System (HIS) that serves as a transport and communication network to its referral network of medical practices. Our EHR and / or HIE healthcare partner community can reap the direct benefits of iMedicor’s SocialHIE, which include:




• The best combination of low-cost and easy-to-use technology offering an interoperable health information infrastructure that allows for all providers to become interconnected - a primary requirement of Meaningful Use certification and one of the last steps in qualifying for federal incentive funds.




• A HIPAA-compliant platform offering the speed and efficiency of the internet to transmit, transport and communicate patient-specific information including records, files, images or any other attachments to its secure messaging system – all structured within the NHIN Direct Solution.




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• Opportunity to leverage the many advantages that consumer-based social networks offer in terms of growth and rapid adoption:




·
Creating a private communications network


·
Emulating real-time day-to-day clinical workflow


·
Sending and receiving referrals electronically


·
Access to other communities, work groups and referral groups within iMedicor’s SocialHIE platform


·
Extensive peer-reviewed catalogue of programs for CME credits from some of the top medical schools, societies and facilities in the country.


·
Staff development program.


·
Viral growth, which represents an opportunity for XYZ by attracting new healthcare providers, facilities and insured’s


·
The iMedicor secure SocialHIE represents a multi-level marketing opportunity to expose its partners to a wider range of healthcare providers, hospitals and the ancillary healthcare community


·
Assist XYZ to establish a strong ownership position on the provider/staff desk top




Simply put, iMedicor can:




·
Provide secure communication to the entire XYZ network


·
Reduce marketing expense, increase marketing frequency and increase open rates of the marketing message


·
Provide the interoperable solution required for XYZ providers to become Meaningful Use Compliant and, in most cases qualify for Meaningful Use Incentive funds which would be between $44k and $63K per provider (see below)


·
Offer XYZ a co-branded network tool




Optional programs and services developed by iMedicor and its strategic partners can be customized for a medical practice, hospital, IPA, PPO, MCO or any other healthcare provider to suit the needs of its members:




·
To encourage providers to adopt-and use- EHR’s, the federal government has made available a financial incentive for providers who achieve “meaningful use” (MU) of EHR’s.  The MU regulations provide for first year funding of up to $18K per provider, with a total $44K to $64K balance to be spread over four additional years.  One of the prime directives of qualifying for MU compliance and receiving the attestation number, which release incentive funds, is interoperability. This means that every medical practice must demonstrate the ability to send and receive medical records, e-prescriptions and other patient specific information electronically over a 90 day period to qualify for funding approval, once the basic qualification are met.  iMedicor’s Social HIE provides that interoperability, and can therefore help the providers to obtain those federal dollars.


·
Recently the Center for Medicare and Medicaid Services (CMS) created a new technology standard and certification called esMD (Electronic Submission of Medical Data) and HIH (Health Information Handlers) that will govern how providers respond to CMS inquiries, audits and other communications electronically.  There will be only twelve (12) organizations that have the licensing authority to distribute the esMD and HIH technology and certifications. iMedicor (through a strategic partner) will have one of the licenses, and it will be the only license, at this point, that will be national in scope.




Meaningful Use compliance, HIPAA compliant secure messaging, NHIN Direct and esMD/HIH will be very important to providers, hospitals and ancillary care facilities that have any connection to the CMS system.




PATIENT PORTAL




The move to Electronic Health Records adds a new dimension that enhances patients as participants in the decision, treatment and care process. As patients become move involved in the healthcare process they will need, and want more immediate access to their records when they want them and where they want them. Patient portals are in use today on a limited basis and their real security and protection of patient specific information is still suspect.




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The iMedicor SocialHIE has a patient portal already built into the basic service. This portal has a basic design that works as follows:




·
Once the Physician establishes their account and creates their practice, they can begin creating their community.


·
The community can be divided into professionals and patients through a simple click of a drop down box when identifying the individual or group being invited into a community.


·
If the “Patient” icon is selected, the system identifies the invitee as such.


·
The Patient then is included into the community on a very limited basis.


·
That limitation is the ability to receive and send electronic medical records to the originating physician


·
In this manner the originating physician remains the central hub of the patients’ medical records from all professional members of the community, but can allow the patient to acquire their records as needed.


·
This process of immediate access to patient records was one of the foundation blocks that prompted the transition from paper to electronic medical records aimed at reducing healthcare costs through better communication, elimination of duplicate tests, and providing more accurate diagnosis regardless of time or distance from the originating entity (Physician, Lab, Imaging Center)




The iMedicor Social HIE Health Communications Network completes the communications cycle within the healthcare community.




C.
CONTINUING MEDICAL EDUCATION  (CME) PROGRAMS AND STAFF DEVELOPMENT  EDUCATION




A very important requirement for each licensed physician in the country is the completion of a set amount of Continuing Medical Education credits (CME). On average each state requires approximately 22 hours per year of qualified, speciality related CME that focus on updating skills and / or knowledge within the area of expertise of choice of the individual physician.




iMedicor’s SocialHIE has complied one of, if not the largest collection of certified CME offered by some of the top medical schools, medical socialites, medical associations, US Military, hospital associations, pharmaceutical and medical device companies and commercial producers. 80% of the programs in the CME catalog are offered free through various underwriting grants. 20% carry tuition and represent much broader more intensive study courses leading to additional or higher degrees.




In addition the CME catalog, offered by iMedicor, is a peer reviewed service. That is, a group of approximately twelve licensed physicians reviews every program that goes into the catalog and offers their assessment on content, quality and delivery. Only the highest ranking CME programs are listed in the catalog.




In addition to the CME programs offered for physician use, iMedicor’s SocialHIE offers a wide variety of Staff Development education resources as well. Staff development resources are offered in the following areas:




·
Billing and Collections


·
Career Development


·
Coding and Reimbursement


·
Electronic Medical Records


·
Meaningful Use Consulting


·
Federal Funding Incentives


·
Finance


·
Retirement


·
Human Resources


·
Regulatory / Legal


·
Practice Management


·
Technology




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The follow list represent the variety of CME by category offered in the iMedicor catalog:




CME by Medical Specialty:Addition Medicine,Allergy, Anesthesiology, Breast Imaging, Canadian CME, Cancer Medicine, Cardiovascular, Imaging, Cardiology, Chest Medicine, Child & Adolescent, Psychiatry, Computed Tomography, Critical Care, CT-MR, Dentistry, Dermatology, Diabetes, Emergency Medicine, Endocrinology, ENT, Family Medicine, Free CME (Multiple Specialties), Gastroenterology, General Surgery, Genetics, Hematology, HIV / AIDS, Hospital Medicine, Imaging, Laboratory Medicine, Magnetic Resonance,, Multiple Sclerosis, Nephrology, Neurology, Neuroradiology, Neurosurgery, Nuclear Medicine, Nurse Practioner, Obstetrics/Gynecology, Oncology, Ophthalmology, Oral/Maxillofacial, Surgery, Orthopedic Surgery, Osteopathic Physician, Otolaryngology, Pain Medicine, Pathology, Pediatrics, Pediatric Radiology, Pharmacist, Physician Assistant, Physical Medicine, Plastic Surgery, Podiatry, Psychiatry, Pulmonology, Radiology, Rheumatology, Sports Medicine, General Surgery, Thoracic Surgery, Ultrasound, Urology, Vascular Surgery, Women’s Health, CME for All Physicians (Cross Specialties),Audio-Digestive, Alternative Medicine, Cultural Competence, Domestic Violence, End of Life / Palliative care, Ethics, Infection Control, Legal Issues, Licensure Requirements, Long Term Care, Medical Errors, Nutrition, Patient Safety, Errors, Practice Management, Preventative Medicine, Public Health, Quality Assurance, Risk Management, Substance Abuse, State Mandated , ME, Vaccinations, Wellness/Prevention, Comprehensive Board Reviews,Anesthesiology Board Reviews, Cardiology Board Reviews, Child and Adolescent, Psychiatry, Critical Care, Medicine Board Reviews, Endocrinology, Family Medicine, Gastroenterology, General Surgery, Geriatrics, Hematology, Hospice & Palliative, Medicine Board, Infectious Disease, Internal Medicine, Laboratory, Medicine, Nephrology, Neurology, , eurosurgery, OB/GYN, Oncology, Ophthalmology, Orthopedic, Otolaryngology, Pathology, Pediatrics, Plastic Surgery, Psychiatry, Pulmonology




ANCILLARY REVENUE OPPORTUNITIES




As the network attains critical mass (a number to be subsequently determined), there are several revenue opportunities already built into the iMedicor SocialHIE. These revenue opportunities are designed to provide opt-in access to services and products in which physicians, their staff and eventually patients would have a high degree of interest. By providing an Opt-In position there would be no pop-up ads, or anything on the site that would detract from the actual administration of healthcare to patients. In several cases, as described in this section, the ancillary revenue services could be of extreme importance to the physician.  In other cases the opportunities described could be classified as time saving and convenient, two items that are very important in the day to day activity of a busy physician or medical practice.




Those ancillary revenue opportunities, that do not affect the core competency of our Strategic Partners, but assist in leveraging additional revenue opportunities for them and iMedicor within their established client base are:




·
Meaningful Use Consulting.  iMedicor has been named as a primary agent by the ONC to work within the HITEC / REC programs. This consulting service is focused on providing medical practices with up to the minute advice that leads to “meaningful Use” compliance and qualifies the medical practice for incentive funds which range from $44K to $64K per physician. The process includes practice assessment, EHR (Electronic Health Records) systems recommendations, Meaningful Use Gap Analysis, attestation and funding. iMedicor has assisted thousands of medical practices, directly or indirectly, through this process nationally in both the medical and dental fields. Typically, outside of the ONC HITEC / REC underwritten projects, we charge $2500 per physician for the consulting portion plus 10% of the funds raised. We have not pressed for higher fees although our sense is that higher fees are very possible. A revenue share with Our Strategic Partners could be included in the strategic alliance.





·
EHR sales.   iMedicor has relationships with ten EHR companies, with more lining up on a regular basis. This is happening for two reasons. The EHR companies have recognized that iMedicor, in many instances, has become, by default, a gatekeeper to the physician and medical practice. Ultimately, as we recommend a variety of EHRs to the physician (typically up to three) the physician or practice manager asks us for advice as to which system they should select. Our criteria for working with EHR companies are very strict and we set the bar very high in regard to performance.




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·
ClearLobby.  Designed as a “next-Generation” marketing vehicle specifically for pharmaceutical and medical device companies. Clearlobby can profile a target audience, drop a message into the targeted audience Message Center and expose the physician to a product or service that normally would require a Pharma rep to stand around in the practice lobby for hours waiting for the magic moment with the physician. ClearLobby changes the dynamic of that encounter by placing the control in the hands of the physician or assigned staff member. ClearLobby can deliver data, samples, make appointments with a rep, if warranted, or provide a direct communication link back to the Pharma itself. Pharmaceutical companies are constantly reducing their field sales staff and looking for more efficient methods to communicate with their targeted audience. ClearLobby represents a major paradigm shift in pharma marketing that could have unlimited opportunities for the iMedicor SocialHIE and its Health Communications Network.





·
The iMedicor Store.  A new feature to be incorporated into the overall feature set. On the bottom right hand area of the secure site we will insert a 2”x 2’ icon that looks like a store entrance. A physician, staff member or eventually a patient clicks on this area and, based on their profile / position within the iMedicor community a list of “Channels” opens up. Those channels represent market segments, products or services. Once you click on a channel icon you will open another area that contains the information you requested. For example, a physician may be looking for medical supplies. They click, on their own time, on the store front; open the channels, select medical supplies then choose from the list of sponsoring companies. This places control of the information flow in the hands of the physician (or staff member) puts everything in one place, reduces the traffic of sales people in the practice itself and consolidates information saving time, effort and money. Thinking in regard to other services or products physicians or their staff would have an interest; this concept could be expanded into travel, entertainment, automobiles, real estate, investments etc. All under one “Storefront Roof” in a non-invasive, non-intrusive manner using the Opt-In principle and preserves the sanctity of the site as a comprehensive healthcare communication tool.




iMedicor and its strategic partners will take a leadership position by expanding the iMedicor communications platform and allowing medical practices to use the network to address the interoperability issue discussed in this document along with the Direct, esMD and HIH technologies and certifications. From a provider’s point of view, iMedicor will be offering it the opportunity to:




·
Create a secure account inside iMedicor


·
Create a practice whereby, just like in a real time medical practice, staff members have certain permission to use the iMedicor Communication Network for specific responsibilities focused on electronic health records and other requirements


·
Once the practice is established the practice can create a community by simply inviting in and authenticating their peer community (GP’s, Specialists, Hospital Departments, Imaging Centers, Labs, etc)


·
Physicians and their staff will have access to workgroups, blogs, peer collaboration


·
Telemedicine


·
The largest peer reviewed catalog of Continuing Medical Education (CME) organized by speciality, cross speciality, clinical trails and medical white papers.


·
Access to the largest aggregation of Staff development programs focused on practice management, billing, coding, EHR’s, Etc.


·
Access the Direct Solution Software for secure communication outside of the iMedicor Communication Network


·
Access esMD software and HIH certification to address the communication standards imposed by CMS, soon to become mandatory.





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PRODUCTS AND SERVICES





iMedicor –A collaborative online portal designed for and by medical professionals to facilitate practice productivity and the rapid, secure exchange of education, information and ideas in real-time.  The site is HIPAA compliant and represents a significant change in technology driven communication within the medical community and meets the “Meaningful Use” criteria as established by the federal government.





iMedicorIntegration Driver–Is newly integrated software that allows an iMedicor user to communicate and transmit records and images across any EMR system securely and effectively.  The introduction of this technology  in December 2007 provided a unique low-cost solution to a significant and fundamental problem that prevented widespread adoption of electronic (Internet) communication.  Prior to this time, EMR systems could not communicate electronically with any referring doctor, lab or test center outside the EMR network and remain HIPAA compliant.  The Integration Driver creates the communication link that resolves the problem. The Integration Drive has been updated several times from its initial launch. Most recently, it is being upgraded to include the NHIN Direct, esMD and HIH standards, technology and certification.





iMedicorClearLobby–ClearLobby is a content delivery system that has the ability to place important drug marketing information in front of physicians far more effectively than traditional pharmaceutical industry direct marketing methods. By using ClearLobby, physicians gains control of the relationship between their medical practices and pharmaceutical representatives.  A physician can also electronically access the most recently updated drug and device information, peer-reviewed journals, case studies, clinical trial reports, etc. from ClearLobby. In addition, a physician can order samples, make specific appointments with pharmaceutical representatives and directly contact a Medical Science Liaison (MSL) for in-depth information concerning a drug, including off-label usage instructions not available through a pharmaceutical representative.





iMedicorContinuing Medical  Education (CME) Catalogue–The CME catalogue is organized by medical specialty, and approximately 90% of the courses offered within the catalogue are free to physicians and address their requirements of securing a set amount of credit hours in order to maintain their medical doctor accreditation.   All CME programs within the catalogue are  peer reviewed and produced by nationally and internationally recognized authorities, medical schools and societies and other accredited sources.





Fulfilling a Market Demand





iMedicor is deploying  its resources to accomplish the following:





·
Continue to build a brand with a loyal, receptive audience that continues to use the tools and services that we provide within our portal for increasing periods of time each day as normal-course-of-business;





·
Increase technological barriers to entry by competitors while increasing our revenue and market share in each of our particular businesses;





·
Enhance the products and services that we presently provide to include additional features demanded by our subscribers;





·
Provide online surveys using our services to better understand physicians' needs, habits and behaviors and offer that intelligence to our revenue generating clients;





·
Enhance our sales capabilities by partnering with experienced pharmaceutical marketing consultants to ”co-brand” an integrated electronic marketing strategy to prospective pharmaceutical clients;





·
Evolve our core business into a business that provides the capability for our clients to improve the healthcare system in the country;





·
Have the resources available as needed to support the development of systems ahead of the Obama healthcare initiative for on-line, digital medical records;





·
Develop new lines of business such as clinical trial marketing and recruiting.





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Attributes of our Products and Services





Secure HIPAA Compliant Messaging and File Transfer –HIPAA guidelines preclude the use of regular email for transporting patient medical information creating unnecessary delays in moving medical information and ideas.  iMedicor’s Messaging and File Transfer feature operates within a closed encrypted network that is accessible by participating members as well only – however can be transmitted outside the portal using our recently incorporated NHIN direct solution, providing complete security and the rapid exchange of personal health information—greatly accelerating the speed of healthcare communication and file / record transfers.





Professional Community, Referrals and Consultations –Physicians and other medical professionals typically collaborate very little outside of their local circle of influence often due to the challenges of identifying and building a database of trusted peers.  iMedicor makes it easy to identify, invite and collaborate with a constantly growing membership base.  Members can review other member biographies; read posted papers and articles, contribute and share information and ideas; consult; provide referrals, and; choose when and with whom they wish to communicate.





Pharmaceutical Company Content Delivery –With ClearLobby, we provide a content management and delivery system that allows pharmaceutical companies to post pertinent content that is then accessed and reviewed by physicians.  Once a physician reviews the information available within ClearLobby, he may request a meeting, ask questions and order samples directly from the pharmaceutical representative assigned to the physician - all through ClearLobby.  The sales representative then communicates directly with the physician to fulfill the physician’s requests.  This new electronic exchange of information will make use of the representative’s time far more effectively and empowers the physician in this relationship.  The platform is not used in the place of pharmaceutical company representatives, but instead makes their interactions with physicians more frequent and more effective.





Access to Certified CME and Non-CME Educational Resources–iMedicor provides access to extensive online practice-relevant education and CME.  Portal members can access traditional on-demand (asynchronous) programs and view live, streamed programming and video archives.





BUSINESS OPERATIONS





In our fiscal year 2011, we shifted all of our efforts and resources to the build-out and promotion of iMedicorand its adjunct, ClearLobby as well as incorporating the rapidly developing standards as mandated by the Office of the ONC.  iMedicor has achieved significant early-stage success.  The combination of features offered by iMedicor addresses  existing educational needs for physicians and other healthcare providers and the ability to transfer personal health information electronically in a method which satisfies federal HIPAA regulations that proscribe the transmission of records via email.   The Portal also meets the standards of “meaningful use” established by the US Department of Health and Human Services.





Revenue is derived from multiple sources within the portal.





·
Network Subscription.





A monthly fee will charged to each Physician using the portal.  This fee will be predominantly bundled by partners such as EMR’s who’s members already pay a monthly subscription fee.  A portion of this fee will be paid to iMedicor by our partners.  Each agreement will be different based on the fees being charged and the services being offered.





·
Royalties on prescriptions written through ClearLobby.





For small pharmaceutical companies with limited or no budgets for marketing new products to physicians, the ClearLobby solution uses an alternative marketing and sales plan with the ability to target specialty groups.  The up-front cost to the smaller pharmaceutical companies that utilize ClearLobby is minimal and the access to physicians is extensive.  iMedicor will generate revenue by charging up to a 5% royalty on prescriptions written through the portal





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·
Collaboration with HIE / EMR partners





The most significant trend in healthcare today is the universal adoption of a comprehensive health information technology (HIT) and Electronic Health Records (EHR) solution, but according to a number of qualified sources (including the New England Journal of Medicine), over 40% of all physicians have begun the process to convert to any sort of electronic system.  Conversely, these same sources also estimate that as of late 2010, over 80% of all physicians were using handheld devices in their practices, and that the use of “smart-phones” was expected to continue to grow.  iMedicor believes that physicians are willing to adopt new technology if it contributes to their being able to practice better medicine in a more time and cost effective manner and if it relieves federal regulation, especially when compliance comes with financial incentives





Through the American Reconstruction and Recovery Act of 2009 (ARRA), there are a number of financial incentives to encourage the adoption of some form of an EHR systems.   In addition, those who are not in compliance by 2012 will with federal HER mandates will face sanctions such as reduced Medicare reimbursements.





iMedicor has executed agreements with strategic alliance partners to market and deliver what the Company calls a Total Solution Service (a fully featured EHR / HISP service at a very competitive price) integrated into iMedicor’s Health Information Exchange and social community network for doctors.  iMedicor as the prime contractor creates revenue sharing derived from participating healthcare providers and patient portals, Electronic Health Record (EHR) systems, and electronic data interchange solutions providers.  iMedicor will combine its community-based, secure messaging platform with its strategic alliance partners to offer a healthcare communications solution that complies with the US federally mandated inter-operability requirements for the adoption of EHRs, and ensure that participating physicians are eligible for ARRA “stimulus” funding.





The product combination described has a pricing advantage of between 30-60% over competitive solutions in today’s market.  The initial installation fees for the EHR program are less than $3,000/physician, and monthly usage fees are typically less than $400/physician based on the modules used.  Interface development charges for large institutions (hospitals) range between $15,000-25,000 per hospital based on the complexity.  A Health Information Exchange of 500 physicians would generate upwards of $200,000/month in recurring revenue for iMedicor.





SALES AND MARKETING





iMedicor Marketing





Our marketing strategy consists of building our brand by creating a company and product presence in the healthcare industry through our partner relationships as well as direct outreach to physicians and physician associations and presences at conferences and events in order to raise our visibility within the industry.  We conduct product demonstrations and consult with potential customers such as physicians, pharmaceutical companies, by means of on-line presentations, in-person sales calls, trade shows and national medical association meetings.  We have also developed programs to expand the iMedicor user base through invitations by existing users to their colleagues to communicate through the iMedicor portal.  We seek in the coming year to accelerate our efforts to build a loyal user audience within the Portal, thereby increasing the average time per day that a physician or practice uses our suite of productivity and communications tools as a normal part of running a healthcare organization.





The initial user-base of iMedicor continues to grow and expand through our numerous strategic alliances.  Further expansion will be facilitated through expanded use of our ClearLobby Pharmaceutical marketing solution and the adoption of usage by members of our alliance partners.    Through its user-base, iMedicor has the ability to market any number of different products and services.   Advertising sales for iMedicor will be handled through third- party organizations but will not begin until the Portal’s paying membership has reached a number equal to approximately 10 – 20% of registered physicians in the US.  iMedicor will also make available to subscribers product specific educational programs paid for initially by pharmaceutical companies and medical device companies.




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Pharmaceutical Company Marketing





We believe that the pharmaceutical marketing landscape has changed dramatically over the last ten years for the worse due to the overall negative perspective that the pharmaceutical companies’ sales and marketing methods are too aggressive and result in conflicts of interest.  We believe that we have established, through extensive interactions with multiple pharmaceutical companies marketing products in the United States, that pharmaceutical companies are now actively looking for new, relatively low-cost platforms to gain access to physicians that differentiate them from the common perception.  Pharmaceutical company representatives get less and less time in front of physicians, and physicians grow exceedingly impatient with the overly aggressive tactics and constant flow of representatives visiting their offices on a daily basis.  Although the relationship creates frustration amongst physicians, the information that the pharmaceutical companies are trying to deliver is very important to the proper prescribing of the drugs themselves.





iMedicor is making in-roads to PhRMA members to ensure that our newly acquired ClearLobby technology is consistent with the marketing values agreed to by each of its member companies.  In the near future, we anticipate that our ClearLobby technology will provide a content management and delivery system that will allow pharmaceutical companies to post pertinent content that is then accessed and reviewed by the physician.  Once the physician reviews the information, the ClearLobby platform will enable any physician to request a meeting, ask questions and order samples directly from their representative.  The representative then would communicate directly with the physician to fulfill the requests.  This new electronic exchange of information makes the use of the representative’s time more effective.  The platform is not used in the place of pharmaceutical company representatives, but instead makes their interactions with physicians more frequent and more effective.





We anticipate marketing our ClearLobby platform to our own user base as well as to clients of our various strategic partners.  iMedicor will not itself deploy a direct sales force to handle the program recruiting itself.  Marketing will coordinated between iMedicor and our strategic partners, thereby leveraging our partners’ existing sales personnel, relationships and operations to further the goals of all participants without increasing costs.





COMPETITION





The Company experiences competition from a variety of sources with respect to virtually all of its products and services.  The Company knows of no single entity that competes with it across the full range of its products and systems; however, each of the lines of business in which the Company is engaged is highly competitive.  Competition in the markets served is based on a number of considerations, which may include price, technology, applications experience, know-how, reputation, service and distribution.  While we believe we offer a unique combination of products and services to the healthcare industry, such as our personal health information exchange, CME, pharmaceutical marketing and medical transcription, a number of competitors offer one or more similar products and services in one or more of our niche markets.





●
Electronic Medical Records Systems (EMR):EMR systems create, store and manage personal health information (PHI). Physicians and office staff rely on the systems to complete all encounter charting and coding. Most EMR systems employ e-prescribing and lab interfaces. EMR systems do not typically represent direct competition to iMedicor because they don’t represent a neutral offering of information exchange or secure messaging. Although they may offer some secure messaging functionality, they do not interact with other EMR systems and are of limited value.  Many EMR systems push and pull granular data in the form of a CCR or CCD. IMedicor is an excellent transporter for these types of data because they are exported in the format of an XML file. Leaders in this area include:  Allscripts, Athenahealth, Cerner, eClinicalWorks, Eclipsys, e-MDs, Epic, GE Centricity / IDX, Greenway, McKesson / Practice Partner, Misys, NextGen, Pulse Systems, Sage.





●
Personal Health Records (PHRs):A PHR is typically a health record that is initiated and maintained by an individual. An ideal PHR would provide a complete and accurate summary of the health and medical history of an individual by gathering data from many sources and making this information accessible online to anyone who has the necessary electronic credentials to view the information.  One of the principle distinguishing features of a PHR is the platform by which it is delivered. The types of platforms include: paper, personal computers, the internet, and portable devices.  PHRs compete with us only on the level that we have a partnership with Microsoft HealthVault. HealthVault is positioned by Microsoft as a platform and not a PHR. Each PHR site wants other sites such as iMedicor and PHR vendors to utilize their platform so that they can monetize traffic and data. We have taken a stance of neutrality and would be willing to work with most any PHR site; however this is not a priority. We have the ability to move data from physician to patient to patient’s PHR if properly integrated.  PHR market leaders include:  Microsoft HealthVault; Google Health; Active Health; Medem; Revolution Health/ Waterfront P.E.




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●
Health Information Exchanges (HIEs)are products that facilitate the mobilization of healthcare information electronically across organizations within a region or community. An HIE provides the capability to electronically move clinical information among disparate health care information systems while maintaining the data integrity of the information being exchanged. The goal of an HIE is to facilitate access to and retrieval of clinical data to provide safer, more timely, efficient, effective, equitable, patient-centered care. An HIE is also useful to state public health authorities to assist in the analyses of the population. Formal organizations are now emerging to provide both form and function for health information exchange efforts. These organizations (often called Regional Health Information Organizations, or RHIOs) are ordinarily geographically-defined entities which develop and manage a set of contractual conventions and terms, arrange for the means of electronic exchange of information, and develop and maintain HIE standards.





We compete with most HIE companies in that their applications typically encapsulate the functionality that iMedicor offers in addition to their core function of more granular data exchange. The overlap is secure messaging, electronic referrals and CCR/ CCD exchange. The additional functions they offer are the ability to integrate fully with EMRs and to centralize data pulled from multiple, disparate information systems with an enterprise master patient index.








●
Patient Portals/ e-consults/ Secure messaging: These types of companies offer healthcare-related online applications that allow patients to interact and communicate with their healthcare providers, such as physicians and hospitals, and represent the greatest direct competition to the iMedicor Portal because their products, unlike HIEs, are mostly based on the same core functions that iMedicor offers such as electronic referrals, secure messaging and CCR/ CCD exchange and physician to patient messaging.. Typically, portal services are available on the Internet at all hours of the day. Some patient portal applications exist as stand-alone web sites and sell their services to healthcare providers, while other portal applications are implemented into the existing web site of the healthcare provider. Patient portals benefit both patients and healthcare providers by increasing efficiency and productivity. Patient portal applications might allow patients to register and complete forms online, which can streamline and shorten visits to clinics and hospitals. Many portal applications also allow patients to request prescription refills online, access medical records, pay bills, and schedule appointments. Patient portals also typically allow patients to directly communicate with healthcare providers by asking questions and leaving comments   None of the companies we have identified, however, have the same model as iMedicor does. All information is only available for use within that particular system rather than being interoperable with all existing systems. iMedicor differs in that it creates one large health community with private sub-networks within.  Market leaders include:  Medem; Relay Health;  Kryptiq; Med Fusion; Quest Care360.





●
E-Detailing:E-detailing refers to the use of computer technology to enhance or bypass the pharmaceutical representative's traditional sales call to healthcare providers. (The traditional sales call is known as "detailing.")  Either internet based or loaded onto a tablet PC, an e-detail is an interactive presentation which is backed up by CRM systems to allow for a tailored marketing approach for every single customer. Internet based e-detailing is seen by some as a method to overcome the challenge sales representatives face to secure physician meeting, the e-detail effectively replacing the face-to-face contact. Because it is an interactive medium, the belief is that the physician will be more engaged in the messages that she or he is exposed to and thus the message will have higher relevance and retention.





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e-Detailing portals typically offer only content delivery and face a constant up-hill battle for recruiting physicians to come back to their portals given that there is nothing else for them to experience there. iMedicor’s ClearLobby is also a content delivery system, but goes one critical step further than traditional e-detailing by connecting the physician with the pharmaceutical representative directly through electronic messaging. iMedicor also differs in that it offers a value-added set of free tools and services outlined above under the products and services portion of this report, which physicians and healthcare professionals become reliant upon for regular use. This allows iMedicor to position ClearLobby in front of regular physician traffic through iMedicor initially to eradicate the recruiting challenge.  Market leaders include:  Closer Look; Lathian; Physician’s interactive; Aptilon; Medsite.





●
Medical Social Networks: These are sites that promote the exchange of thoughts, ideas and opinions by physicians through electronic polls and forums. These forums are in most cases physicians only and they allow users to create polls with multiple-choice answers that draw on the “wisdom of the crowd”. Most of  these networks offer other standard features such as job boards and CME content. They monetize their user base in various ways such as offering access to postings to paying clients that can benefit from understanding physician thoughts on drugs and medical devices such as investment firms and pharmas.  iMedicor is often compared to sites like Sermo because we market ourselves as a social/ professional network for physicians; however we are very different because we focus on healthcare IT and personal information exchange instead of discussion forums. iMedicor gives physicians a tool that helps them practice real medicine around real cases, rather than hypothetical possibilities discussed in public forums that are not HIPAA compliant.  Market leaders in Medical Social Networking include:  Sermo; Medpedia; Medscape Physician Connect; SocialMD; Doctornetworking.com.





●
Physician’s Interest Portals/ CME/ Journal Articles: Physician’s interest portals are sites that typically create large physician traffic numbers by offering them relevant content that they need to maintain their medical licenses or just keep up-to-date on the latest treatments and practices. These sites offer CME, news, journal articles and medical conference updates.  We can look at these sites as competitors, but in reality they may come to be strategic partners due to their substantial traffic. There is overlap in some cases in that we also offer CME. We have already partnered with Physician’s Practice because we can use their content, news and medical search engine which are all being piped into and offered through iMedicor.  Market leaders include:  Medscape; MDLinx; Medline; Physician’s Practice (CMPMedica); MedPage.





EMPLOYEES





On January 25, 2012, the Company had 9 full-time employees and consultants.  In addition we have several contract workers and part-time employees.  We believe our relations with our employees are good.





Item 1A.  Risk Factors





Our business is difficult to evaluate because we have a limited operating history.





Our predecessor entity, E & M Management, was formed in 1992; however, Vemics-Delaware, our current operating business, was incorporated on July 17, 2001, and remained a developmental state company until recently.  Because of our limited operating history, we do not have significant historical financial information on which to base planned revenues and operating expenses.  For the first four fiscal years, 2002 – 2005, gross revenue was slightly over $200,000 in total.  Gross revenue has declined from $942,000 for the fiscal year ended June 30, 2007, to approximately $400,000 for the year ended June 30, 2011.  We expect to experience fluctuations in future quarterly and annual operating results that may be caused by many factors, including:





■     our ability to achieve significant sales for our products and services;





■     the cost of technology, software and other costs associated with the production and distribution of our products and services;





■     the size and rate of growth of the market for Internet products and online content and services;




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■     the potential introduction by others of products that are competitive with our products;





■     the unpredictable nature of online businesses and e-commerce in general; and





■     the general economic conditions in the United States and worldwide.





In view of the foregoing, our results of operations and projections of future operating results are not necessarily meaningful and should not be relied upon as an indication of future performance.





We require substantial additional capital to continue as a going concern which if not obtained could result in a need to curtail or cease operations.





To execute on our business plan successfully and provide for our future operating and capital expenditure requirements, we require substantial additional funding.  The exact amount of funds raised, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake.  No assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to us.  If we are not able to raise additional capital, our business will suffer.





Our financial statements are prepared assuming we are a going concern.  The accompanying financial statements do not include any adjustments that might result from being unable to raise the necessary additional capital.





Our consolidated financial statements have been prepared assuming that we will continue as a going concern.  Since inception, we have incurred recurring operating losses and negative operating cash flows, including a net loss attributable to common shareholders of approximately $4,021,000 and negative operating cash flows of approximately $1,273,000 for the fiscal year ended June 30, 2011.  At June 30, 2011, we had cash and cash equivalents of approximately $18,000 and an accumulated deficit of approximately $45,000,000.  The foregoing factors, among others, raise doubt as to our ability to continue as a going concern.  In the past, we have raised capital in private placements, but continue to sustain losses and negative operating cash flows.  We believe that our available capital as of January 30, 2012 and access to available capital will enable us to continue as a going concern beyond June 30 2012.





Our success will be limited if we are unable to attract, retain and motivate highly skilled personnel.





Our future success also will depend on our ability to attract, retain and motivate highly skilled engineering, community management, healthcare/pharmaceutical sales and other key personnel.  Competition for such personnel is, at times, intense in the Internet industry, and we may be unable to successfully attract, integrate or retain sufficiently qualified personnel.  In addition, our ability to generate revenues relates directly to our personnel in terms of both the numbers and expertise of the personnel we have available to work on our projects.  Moreover, competition for qualified employees may require us to increase our cash or equity compensation, which may have an adverse effect on earnings.





Any system failure or slow down could significantly harm our reputation and damage our business.





System failures would harm our reputation and reduce our attractiveness to clients.  Our ability to attract potential customers will depend significantly on the performance of our network infrastructure.  In addition, a key element of our strategy is to perform services for customers to increase their usage of our services.  Usage of our online services could strain the capacity of our infrastructure, resulting in a slowing or outage of services.  We may be unable to improve our technical infrastructure in relation to increased usage of our services.  In addition, the users of the services we maintain for our costumers depend on Internet service providers, online service providers and other web site operators for access to our web sites.  Many of these providers and operators have also experienced significant outages in the past, and they could experience outages, delays and other difficulties due to system failures unrelated to our systems.





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We depend on third-party software to deliver specified aspects of our services.  If we are required to update or replace the software it could result in increased costs or delays in production.





Our products and services have a significant reliance on third-party software.  If software purchased from third parties to perform aspects of our services does not function properly or is not updated, or the contractual relationships were to end, we would need to purchase new software from other third-party providers or develop replacement software on our own.  Even though the third-party software we currently use would likely be replaceable through other third-party providers or developed internally, doing so would likely require increases in operating expenses and could cause a disruption in our business.  This could have a material adverse effect on our business, financial condition and operating results.





We compete in a highly competitive market and many of our competitors have greater financial resources and established relationships with major corporate customers.





Our future profitability depends on our ability to compete successfully by continuing to differentiate our products and services from the products and services of our competitors.  If one or more of our competitors begins to offer integrated, Internet Based, HIPAA Compliant healthcare information collaboration solutions, there may be a material adverse effect on our business, financial condition or operating results.  We believe that our ability to compete successfully depends on a number of factors:





·
our ability to produce products that are superior in quality to that of our competitors and get those products and services to market first;





·
our ability to deliver our products and services at a price that remains competitive with that of our competitors;





·
our ability to respond promptly and effectively to the challenges of technological change, evolving standards, and our competitors’ innovations;





·
the scope of our products and services and the rate at which we and our competitors introduce them;





·
customer service and satisfaction; and





·
industry and general economic trends.





The establishment of our brand is important to our future success.





Establishing and maintaining a brand name and recognition is critical for attracting and expanding our client base.  The promotion and enhancement of our name depends on the effectiveness of our marketing and advertising efforts and on our success in continuing to provide high-quality services, neither of which can be assured.  If our brand marketing efforts are unsuccessful, our business could fail.





Our business could suffer if we are unable to protect our intellectual property rights or are liable for infringing the intellectual property rights of others.





We regard our copyrights, trademarks, trade dress, trade secrets and similar intellectual property as critical to our success, and we rely upon trademark and copyright law, trade secret protection, and confidentiality and license agreements with our employees, strategic partners, and others to protect our proprietary rights, which can have only limited effectiveness.  The development of the Internet has also increased the ease with which third parties can distribute our copyrighted material without our authorization.





We intend to pursue the registration of our material trademarks in the United States and, based upon anticipated use, in certain other countries.  We may not be entitled to the benefits of any such registration for an extended period due to the cost and delay in effecting such registration.  In addition, effective trademark, copyright and trade secret protection may not be available in every country in which our products are available.  We expect that we may license, in the future, elements of our trademarks, trade dress and similar proprietary rights to third parties.  Further, we may be subject to claims in the ordinary course of our business, including claims of alleged infringement of the trademarks, copyrights and other intellectual property rights of third parties by us and our licensees.





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Other parties may assert claims of infringement of intellectual property or other proprietary rights against us.  These claims, even if without merit, could require us to expend significant financial and managerial resources.  Furthermore, if claims like this were successful, we might be required to change our trademarks, alter our content or pay financial damages, any of which could substantially increase our operating expenses.  We also may be required to obtain licenses from others to refine, develop, market and deliver new services.  We may be unable to obtain any needed license on commercially reasonable terms or at all, and rights granted under any licenses may not be valid and enforceable.  In the future we could be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of trademarks and other intellectual property rights of third parties by us and our licensees.  Any such claims could have a material adverse effect on our business, financial condition and operating results.





We may be exposed to liability for publishing or distributing content over the Internet.





We may be subject to claims relating to content that is published on or downloaded from our website or the websites we operate for our clients.  We also could be subject to liability for content that is accessible from our website through links to other websites.  For example, as part of our service, we publish content for distribution to our customers that is provided to us by our content providers.  It would not be feasible for us to check the accuracy and copyright status of all of the content we distribute.  Accordingly, it is possible that our content could, on one or more occasions, be incomplete or contain inaccuracies or infringe upon a copyright.  Further, we cannot completely control breaches of privacy policies, warranties, or other claims that may be made by third parties.





Although we carry general liability and errors and omissions insurance, our insurance may not cover potential claims of this type or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liability that may be imposed.  In addition, any claims like this, with or without merit, could have a material adverse effect on our business, financial condition and operating results.





The disclosure or misuse of data we collect could harm our business.





If third parties were able to penetrate our network security or otherwise misappropriate our users’ personal information, we might be subject to liability.  These could include claims for impersonation or other similar fraud claims.





Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), we face potential liability related to the privacy of health information we obtain.





Most health care providers, from which we may obtain patient information, are subject to privacy regulations promulgated under the Health Insurance Portability and Accountability Act of 1996, or HIPAA.  Although we are not directly regulated by HIPAA, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a health care provider that has not satisfied HIPAA’s disclosure standards.  Further, we may face civil liability if our HIPAA compliant system fails to satisfy its disclosure standards.  Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.





Regulatory changes with regards to the sponsorship of Continuing Medical Education and the application of HIPAA guidelines, could adversely affect our ability to provide CME and transfer patient health information via the iMedicor portal.





The CME industry is regulated and the regulations that govern the delivery of CME and interpretations of HIPAA guidelines and other restrictions placed on physicians in transferring and sharing patient information are subject to change.  Current federal regulations allow for CME to be sponsored by pharmaceutical and other for profit companies as long as there is no direct promotion of the companies, their products or services.  If these regulations were to change significantly and become more restrictive, such changes could limit the ability to procure sponsored programming for the iMedicor portal, thereby reducing both a revenue stream for the Company and limit the development of new features, which would otherwise attract more users.





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We believe that we meet the HIPAA requirements currently in effect that are applicable to our internal operations and our clients.  However, if we are unable to deliver applications solutions that achieve or maintain compliance with the applicable HIPAA rules in effect, or as they may be modified or implemented in the future, then clients may move business to applications solutions providers whose systems are, or will be, HIPAA compliant.  As a result, our business could suffer.





Our business will not succeed if we are unable to keep pace with rapid technological changes.





Our services and products are impacted by rapidly changing technology, evolving industry standards, emerging competition and frequent new use, software and other product introductions.  There can be no assurance that we can successfully identify new business opportunities or develop and bring new services or products to market in a timely and cost-effective manner, or those services, products or technologies developed by others will not render our services or products noncompetitive or obsolete.  In addition, there can be no assurance that our services, products or enhancements will achieve or sustain market acceptance or be able to address compatibility, interoperability or other issues raised by technological changes or new industry standards.





If we suffer system failures or overloading of computer systems, our business and prospects could be harmed.  The success of our online offerings is highly dependent on the efficient and uninterrupted operation of our computer and communications hardware systems.  Fire, floods, earthquakes, power fluctuations, telecommunications failures, hardware “crashes,” software failures caused by “bugs” or other causes, and similar events could damage or cause interruptions in our systems.  Computer viruses, electronic break-ins or other similar disruptive problems could also adversely affect our websites.  If our systems, or the systems of any of the websites on which we advertise or with which we have material marketing agreements, are affected by any of these occurrences, our business, results of operations and financial condition could be materially and adversely affected.





We presently carry insurance policies that cover losses that may occur due to any failures or interruptions in our systems.  We do not presently have any secondary “off-site” systems or a formal disaster recovery plan.  In addition, our users depend on Internet service providers and other Internet site operators for access to our websites.  Many Internet service providers have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems.  If we experience any of these problems, and if our insurance does not cover the costs of such occurrences, our business, results of operations and financial condition could be materially and adversely affected.





Regulatory developments in the future related to the Internet create a legal uncertainty; such developments could material harm our business.





We are not currently subject to direct regulation by any government agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations directly applicable to access to or commerce on the Internet.  However, it is possible that a number of laws and regulations will be adopted with respect to the Internet, covering issues such as user privacy, pricing, characteristics, e-mail marketing and quality of products and services.  Such laws and regulations could dampen the growth in use of the Internet generally and decrease the acceptance of the Internet as a communications and commercial medium, and could thereby have a material adverse effect on our business, results of operations and financial condition.





We are dependent on our management and employees.





We are dependent on the services of our executive officers and key employees.  As of January 30, 2012 we had 9 employees, two of whom are members of executive management.  We currently maintain key-man life insurance policies on Fred Zolla in the amounts of $3,000,000.  There can be no assurance, however, that we can obtain executives of comparable expertise and commitment in the event of death, or that our business would not suffer material adverse effects as the result of the death (notwithstanding coverage by key-man insurance), disability or voluntary departure of any such executive officer.  Further, the loss of the services of any one or more of these employees could have a materially adverse effect on our business and our financial condition.  In addition, we will also need to attract and retain other highly skilled technical and managerial personnel for whom competition is intense.  If we are unable to do so, our business, results of operations and financial condition could be materially adversely affected.




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We may be required to issue more shares of Common Stock upon the exercise of outstanding warrants, the conversions of outstanding convertible notes or as part of raising additional capital, resulting in dilution of our existing stockholders.





The exercise of outstanding warrants or conversions of outstanding convertible notes could result in substantial numbers of additional shares being issued, which will dilute existing stockholders’ potential ownership interests and may cause our stock price to decline.





As of January 30, 2012, we have issued warrants to purchase in an aggregate of approximately 38,200,000 shares of Common Stock and convertible notes in aggregate principal amount of approximately $3500,000 that are convertible into approximately 30,000,000 shares of Common Stock,.  If exercised or converted, these securities will dilute existing stockholders’ percentage ownership of Common Stock.  Unlike the Common Stock, those securities provide for anti-dilution protection upon the occurrence of stock splits, redemptions, mergers, reclassifications, reorganizations and other similar corporate transactions.





If one or more of these events occurs, the number of shares of Common Stock that may be issued upon conversion or exercise would increase.  Accordingly, if iMedicor were to engage in a financing transaction involving the offering of Imedicor Common Stock (or securities convertible into iMedicor Common Stock) following conversion of some of all of the convertible notes, iMedicor may be required to provide the holders that had previously converted the opportunity to maintain their percentage ownership interest in iMedicor.





During the terms of the warrants, the holders thereof are given an opportunity to benefit from a rise in the market price of the common stock, with a resultant dilution of the interests of existing stockholders.  The existence of these warrants could make it more difficult for us to obtain additional financing while such securities are outstanding.





Our Common Stock is subject to the SEC’s penny stock rules, and, therefore, broker-dealers may have trouble in completing customer transactions and trading activity in our securities may be adversely affected.





A penny stock is generally defined under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as any equity security other than a security that: (i) is a national market system stock listed on a “grandfathered” national securities exchange, (ii) is a national market system stock listed on a national securities exchange or an automated quotation system sponsored by a registered national securities association that satisfies certain minimum quantitative listing standards, (iii) has a transaction price of five dollars or more, or (iv) is a security whose issuer has met certain net tangible assets or average revenues, among other exemptions. Our Common Stock is not currently traded on a national securities exchange or quotation system sponsored by a national securities exchange and our price as reported on the OTC:BB, is currently less than five dollars.





In accordance with the rules governing penny stocks, broker-dealers participating in transactions in low-priced securities must first deliver to the client a risk disclosure document that describes the risks associated with such stocks, the broker-dealers’ duties in selling the stock, the customer’s rights and remedies and certain market and other information.  Furthermore, the broker-dealer must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience and objectives.  Broker-dealers must also disclose these restrictions in writing to the customer, as well as obtain specific written consent from the customer and provide monthly account statements to the customer.





The effect of these restrictions may decrease the willingness of broker-dealers to make a market in our Common Stock, decrease liquidity of our Common Stock and increase transaction costs for sales and purchases of our Common Stock as compared to other securities.  Broker-dealers may find it difficult to effect customer transactions in our Common Stock and trading activity in our Common Stock may be adversely affected.  As a result, the market price of our Common Stock may be depressed and shareholders may find it more difficult to sell their shares of Common Stock.




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If we fail to maintain an effective system of internal control over financial reporting and disclosure controls and procedures, we may be unable to accurately report our financial results and comply with the reporting requirements under the Exchange Act.





Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), we are required to include in our annual reports on Form 10-K, our management’s report on internal control over financial reporting and possibly at a future date the registered public accounting firm’s attestation report on our management’s assessment of our internal control over financial reporting.





Our Common Stock has a very limited trading market.





Our Common Stock is traded on the over-the-counter Bulletin Board LLC electronic quotation service, an inter-dealer quotation system that provides significantly less liquidity than the NASDAQ stock market or any other national securities exchange.  In addition, trading in our Common Stock has historically been extremely limited.  This limited trading adversely affects the liquidity of our Common Stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us.  As a result, there could be a larger spread between the bid and the ask prices of our Common Stock and you may not be able to sell shares of our Common Stock when or at prices you desire.





Our bylaws provide for our indemnification of our officers and directors.





Our bylaws require that we indemnify and hold harmless our officers and directors, to the fullest extent permitted by law, from certain claims, liabilities and expenses under certain circumstances and subject to certain limitations and the provisions of Nevada law.  Under Nevada law, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, against expenses, attorneys fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with an action, suit or proceeding if the person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation.





Item 1B.  Unresolved Staff Comments





None.





PART II





Item 5.    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equities Securities





Until October 27, 2008 our Common Stock was quoted over-the-counter on the Pink Sheets, LLC (OTC:PINK) electronic quotation service for OTC securities under the trading symbol “VMCI,” but was not quoted on the OTC Bulletin Board (“OTC:BB”) or NASDAQ, nor listed on any national or regional securities exchange.  On October 28, 2008, upon acceptance of a Form 211 filed with the Financial Industry Regulatory Authority (“FINRA”) by a market maker, our Common Stock began to be and is now quoted on the OTCBB(www.otcbb.com).




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The following table sets forth the range of the high and low bid quotations for our Common Stock for the periods shown, as furnished by the over-the-counter market.





Common StockHigh Bid


Low BidFiscal Year Ended June 30, 2011First Quarter

$
0.05


$
0.02Second Quarter

$
0.0259


$
0.0001Third Quarter

$
0.01


$
0.0015Fourth Quarter

$
0.0011


$
0.0045Fiscal Year Ended June 30, 2010First Quarter

$
0.06


$
0.35Second Quarter

$
0.04


$
0.095Third Quarter

$
0.025


$
0.065Fourth Quarter

$
0.02


$
0.07





The SEC has adopted regulations, which generally define “penny stock” to be any equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.  Our common stock is currently a “penny stock” as defined in the Exchange Act.  As a result, an investor may find it more difficult to dispose of or obtain accurate price quotations.  In addition, the “penny stock” rules adopted by the SEC subject the sale of the shares of the common stock to certain regulations which impose sales practice requirements on broker-dealers such as requiring that they provide their customers with documentation of the risks of investing in such securities before effecting the transaction, along with:





o
The bid and offer price quotes for the penny stock,





o
The number of shares to which the quoted prices apply,





o
The brokerage firm’s compensation for the trade, and





o
The compensation received by the brokerages firm’s salesperson for the trade.





In addition, the brokerage firm must send to the investor monthly account statement that gives an estimate of the value of each penny stock in the investor’s account, and a written statement of the investor’s financial situation and investment goals.  These disclosure and other requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.  Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.  The penny stock rules may discourage investor interest in and limit the marketability of our Common Stock.





Holders of our Common Stock





According to our transfer agent, Pacific Stock Transfer, as of June 30, 2011, there were 201 record holders of shares of our Common Stock and additional stockholders held shares in street name.





Dividends





The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the near future.  It is our present intention to utilize all available funds for the development of our business.




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Securities Authorized for Issuance under Equity Compensation Plans





Information for our equity compensation plans in effect as of June 30, 2010 is as follows (amounts in thousands, except per share amounts):





(a)


(b)


(c)Plan Category

Number of

Securities to be Issued

Upon Exercise of

Outstanding Options,

Warrants and Rights


Weighted-average

Exercise Price of

Outstanding Options,

Warrants and Rights


Number of Securities Remaining

Available for Future Issuance

Under Equity Compensation

Plans (Excluding Securities

Reflected in Column (a))Equity compensation plans approved by security holders


1,895,000


$
0.07



10,385,000Equity compensation plans not approved by security holders


0



0



0Total


1,895,000



0



10,385,000





On June 6, 2007, our stockholders approved the Vemics, Inc. 2007 Equity Compensation Plan (the “Equity Plan”), which is designed to provide employees, non-employee directors, consultants and advisors with the opportunity to receive grants of stock options and stock awards.  The purpose of the Equity Plan is to give participants an ownership interest in our Company, and to create an incentive to contribute to our economic success.  The Equity Plan authorizes the issuance of incentive stock options, nonqualified stock options and other stock based awards.





As previously reported on Form 8-K filed on August 20, 2008, on July 29, 2008, the Company’s Board of Directors and shareholders approved an amendment of the Equity Plan to increase the number of shares of Common Stock underlying the Equity Plan from 6,300,000 to 17,000,000.  On August 14, 2008, the Company granted stock options to purchase up to 11,195,000 shares of Common Stock to employees, directors and service providers, each with an exercise price of $0.07 per share.   Of the options granted, options to purchase 9,300,000 shares of the Common Stock were granted to the Company’s executive officers and directors; however, upon further reflection the officers and directors voluntarily decided not to accept these grants at that time and they were cancelled.





In December of  2009, several officers of the Company elected voluntarily to return 6,500,000 shares awarded them in April of 2009.  The shares were returned to the Company’s transfer agent and made available for reissuance.  The available shares in the equity compensation plan have therefore been increased as of that date by 6,500,000.  There were no shares or options granted to employees for the fiscal year ending June 30, 2011.





Recent Sales of Unregistered Securities





As previously reported in part on Form 10-Q filed for the quarter ended September 30, 2010, the Company issued 11,000,003 shares of its common stock for an aggregated purchase amount of $484,000 in a series of private placements to investors.




On December 31, 2010 the Company sold, in a private placement made in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), to certain accredited investors (the “Investors”) 28 shares of Series “A” Preferred Stock in the Company to accredited investors (the “Investors”), pursuant to the Modification Agreement with Sonoran Pacific Resources dated December 31, 2010.  The purchase price was $64,285.71 for one share of Series “A” Preferred Stock, or a total aggregate investment by the Investors of $1,800,000.




Each share of Series “A” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s common stock after the 12 month anniversary of the issuance of such share of Series “A” Preferred Stock.  Each share of Series “A” Preferred Stock also carries a cumulative quarterly dividend of 2% of the original purchase price payable in the Company’s Common Stock or cash, at the Company’s option.




On December 31, 2010 the Company sold, in a private placement made in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), to an accredited investors (the “Investor”) 11 shares of Series “B” Preferred Stock of the Company and 24,918,128 shares of Common Stock of the Company in exchange for a Unsecured Promissory Note, dated June 30, 2008, issued by the Company to the investor with an aggregate value of $2,096,725.14 which includes the original principal amount of the Note and accrued Interest from the date of issuance of the Note.  The purchase price was $100,000 for one share of Series “B” Preferred Stock and $0.04 for one share of common stock.  The total reduction in debt to the company is $2,096,725.14




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On June 30, 2011 the company issued 7.75 shares of Series “B” Preferred Stock in exchange for six convertible notes previously issued to investors in the company with an aggregate value, including accrued interest, of $937,773.38.




Each share of Series “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share of Series “B” Preferred Stock.  Each share of Series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a cumulative 2.5% quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option.




During the twelve months ended June 30, 1the Company issued 10,122,850 shares of the company’s common stock for fees and services.  These shares were issued for Directors fees, fees related to the issuance of notes, fees related to the extension of note maturity dates, consulting fees and shares to employees in lieu of salary and/or bonuses.





We intend to raise a minimum of $2,000,000 and a maximum of $3,000,000 through the sale of common stock, preferred stock and warrants to accredited investors.  We intend to apply the proceeds of this private placement, if any, for salaries, technical infrastructure, marketing, research and development, debt repayment and working capital.  The private placement consists of units of the Company’s preferred stock coupled with warrants to purchase shares of Common Stock with a purchase price of $125,000 per unit (the “Units”).  Terms for the warrants have not been decided and will be subject to negotiation.





This description does not constitute an offer to sell or the solicitation of an offer to buy any securities.  The securities sold in the private placement have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the Securities Act or applicable state securities laws.





Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations





This section and other parts of this Form 10-K contain forward-looking statements that involve risks and uncertainties.  Forward-looking statements can also be identified by words such as ‘‘may’’, ‘‘will’’, ‘‘should’’, ‘‘expects’’, ‘‘plans’’, ‘‘anticipates’’, ‘‘believes’’, ‘‘estimates’’, ‘‘potential’’ or ‘‘continue’’ and similar terms.  Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements.  Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled ‘‘Risks Factors’’ below.  The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of this Form 10-K.  All information presented herein is based on the Company’s fiscal calendar.  The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.





Overview





The Company has built a portal-based, virtual work, learning and communication/collaboration environment (a SocialHIE –Social Health Information Exchange) for healthcare and related industries called iMedicor. Our primary focus shifted with our acquisition of iMedicor, which we acquired in connection with the acquisition of NuScribe, Inc. on October 17, 2006.  Currently, our efforts are concentrated on providing secure, on-line communications, collaboration, learning and productivity solutions to healthcare and related markets, and facilitating cost-effective communications between physicians and other healthcare related workers and pharmaceutical, medical device and medical insurance companies.




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iMedicor was launched in October of 2007 with early registration far exceeding our pre-launch estimates by over 200% .  However, based on the changing landscape of the healthcare communications and multiple federal mandates enacted post the portals initial launch and that  have required significant additional development, we suspended most of our marketing efforts to drive members into the portal in late 2010 as we both redesigned the site and entered into new relationships with companies that could add value as well as technology solutions and members to iMedicor.  To make up for the loss of anticipated income from a subscribing membership base iMedicor entered into a related line of business – helping state and regional HITECH (Health Information Technology for Economic and Clinical Health) initiatives enroll physicians.  Funded by the HITECH Act (part of Obama’s Recovery and Reinvestment Act of 2009) and overseen by Health and Human Services Office of the National Coordinator, the program federally funds state and regional offices to entice physicians to adopt the interoperability standards prior to the deadline mandated by the federal government in 2014.  As of January 30, 2012 the company has generated approximately $300,000 in revenue from HITECH driven programs however only $43,000 of this revenue can be attributed to the year ended June 30 2011. Our sales in other areas virtually ceased for the year ended June 30, 2011 from 2010, as most of our internal efforts have been devoted to establishing new relationships with strategic partners, developing a pharmaceutical marketing sales channels and the redesign of the iMedicor portal and it’s integration with partner sites and the introduction of increased functionality.  We did generate approximately $280,000 in legacy revenue attributed to several sales contract entered into prior to the company’s shirt to focusing exclusively on the healthcare and related industries; however one of these contracts, representing 260,000 in income in the year ended June 30, 2011 is in dispute and no payments have been received.





Our plan includes charging pharmaceutical and other healthcare related companies an initial set up fee of up to $95,000 to upload all product specific programs, in all formats.  The initial fee will cover the set up costs and the first 1,500 qualified "click through" (i.e., a qualified click through is a physician or physicians trusted source, downloading any information available on specific products inside iMedicor).  Once the 1,500 click throughs are exhausted, iMedicor will charge between $25.00 and $50.00 per additional click through.





Smaller pharmaceutical companies with limited sales and marketing budgets will be able to participate in ClearLobby with a significantly reduced up-front set-up fee, but with a sales royalty for all prescriptions written through ClearLobby.  This smaller pharmaceutical company program is currently running, with information on Access Pharmaceuticals MugardTM being offered through the ClearLobby site.





The Company anticipates having four sources of income –





·
Through ClearLobby, offering a secure and non-invasive online communications and information delivery tool for the dissemination of product-specific information provided by pharmaceutical and other healthcare related companies to physicians.





·
Royalty fees on prescriptions written via the ClearLobby site for smaller pharmaceutical company products.  As previously noted, Access Pharmaceuticals has already launched their program in ClearLobby, however it is too soon to gauge any measure of success for this program.





·
A monthly subscription fee per user.  Physicians will pay up to $24.95 per month for access to the iMedicor network and functionality.  It is anticipated that we will share this fee with the referring network.





·
Opt-in advertizing for healthcare product and related companies. Currently there is no advertizing/promotion running within the portal, however we have already been solicited by several companies to provide advertizing space.





As of June 30, 2011, we require approximately $160,000 to $200,000 per month to fund our operations.  This amount will increase as we expand our sales and marketing efforts and continue to develop new products and services; however, if we do not raise additional capital in the near future or if revenue does not begin to grow as expected we will have to curtail our spending and downsize our operations.  Our cash needs are primarily attributable to funding sales and marketing efforts, strengthening technical and helpdesk support, expanding our development capabilities, satisfying existing obligations and building administrative infrastructure, including costs and professional fees associated with being a public company.





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We are currently seeking up to $3,000,000 in capital through a private placement of preferred stock.  While we are seeking this funding, if revenue increases to a point where we are able to sustain ourselves and increase our budget to match our growth needs, we may significantly reduce the amount of investment capital we are seeking.  The exact amount of funds raised and revenue generated, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake.  No assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to us.  If we are unable to raise additional capital in the current private offering, we could be required to substantially reduce operations, terminate certain products or services or pursue exit strategies.





Critical Accounting Policies and Estimates





Our discussion and analysis of financial condition and results of operations are based upon the condensed financial statements, which have been prepared in accordance with generally accepted accounting principles as recognized in the U.S.  The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Our estimates include those related to revenue recognition, the valuation of inventory, and valuation of deferred tax assets and liabilities, useful lives of intangible assets and accruals.  We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.





Impairment of Long-Lived Assets





We review long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with recently adopted accounting practices.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount of the asset exceeds the fair value of the asset.





Fair Value of Financial Instruments





Management believes that the carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.  The carrying amount of the Company’s long-term debt also approximates fair value, based on market quote values (where applicable) or discounted cash flow analyses.





Income Taxes





We account for income taxes under current accounting guidance ,the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse.  Valuation allowances are established when it is necessary to reduce deferred income tax assets to the amount, if any, expected to be realized in future years.





Net earnings (loss) per share





Basic and diluted net loss per share information is presented under the requirements of FASB, Earnings per Share.  Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase.  Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, warrants and convertible notes in the weighted-average number of common shares outstanding for a period, if dilutive.  All potentially dilutive securities have been excluded from the computation, as their effect is anti-dilutive.





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Use of Estimates





The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.





Revenue Recognition





The Company’s sources of income for the fiscal year ending June 30, 2011 were:





·
Annual contracts for licensing of technology paid monthly, quarterly or once annually in advance.  If paid annually the revenue is recognized in two parts:  Support that is recognized 70% at the time of receipt of funds and the balance is recognized at 1/12th per month; for the licensing aspect of the contract revenue is recognized at 1/12th per month, with the remaining balances being recorded in deferred income.  If paid quarterly the recognition is the same.


·
Delivery of product-specific information relating to healthcare and related services to physicians through on-line, opt in direct marketing·
Assisting Regional and State HIECH programs in accelerating the adoption of mandated electronic healthcare records management and communication.·
Legacy technology contracts not related to the healthcare industry





The Company anticipates having four sources of income in the future:





·
Through ClearLobby, offering a secure and non-invasive online communications and information delivery tool for the dissemination of product-specific information provided by pharmaceutical and other healthcare related companies to physicians.


·
Royalty fees on prescriptions written via the ClearLobby site for smaller pharmaceutical company products.  As previously noted, Access Pharmaceuticals has already launched their program in ClearLobby, however it is too soon to gauge any measure of success for this program.


·
A monthly subscription fee per user.  Physicians will pay up to $24.95 per month which will be shared with the referring network.


·
Opt-in advertizing for healthcare product and related companies. Currently there is no advertizing/promotion running within the portal, however we have already been solicited by several companies to provide advertizing space.





Results of Operations





Year Ended June 30, 2011 Compared to Year Ended June 30, 2010





The following table sets forth for the periods indicated the percentage of total revenues represented by certain items reflected in our statements of operations:




Year Ended June 302011

Audited


%


2010

Restated


%Net Sales and Revenues


438,122



100



295,132



100Cost of Services


4,876



1.1



71,224



24.1Gross Profit


433,246



98.9



223,908



75.9Operational General and Administrative Expenses


2,092,838



49.7



5,121,100



71.4Depreciation and amortization


2,065,723



49.1



2,056,033



28.6Impairment of technology &

medical software


854,094



*



-



*Bad debt expenses


52,000



*



26,000



*Total Expenses


5,064,655



100



7,203,113



100Loss before other income (expense)


(4,631,409
)






(6,979,205
)* Less than 0.1%







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 Table of Contents





Revenues





Our revenues for the year ended June 30, 2011 increased by 48% to $438,122 from $295,132  in 2010, due primarily to two new lines of revenue: ClearLobby sales and marketing, and; HITECH Sales and consulting services.





Cost of Services





Cost of services as a percentage of revenues was 1% for the year ended June 30, 2011 as compared to 24% for 2010, representing the expiration of a revenue sharing agreement with a previous partner.  While the contract remains in force the revenue share agreement has expired.





Operational, General and Administrative Expenses





Operational, general and administrative expenses decreased to $2,092,838 in the year ended June 30, 2011 from $5,121,100 in the year ended 2010, or 59%.    The company’s financial position required it to cut costs wherever possible resulting in a significant reduction in operational expenses.





Depreciation and Amortization





Depreciation and amortization expenses increased for the year ended June 30, 2011 to $2,065,723 from $2,056,033 in 2010, representing no material difference.





Loss from Operations





Income (loss) from operations, before Other Income (Expenses), for the year ended June 30, 2011 totaled ($4,631,409) compared to ($6,979,205) or a decrease of approximately 33.6%.  The decrease in loss from operations for the year ended June 30, 2011 is a direct result of the company’s election to cut costs wherever possible as well as the increase in revenue attributed to ClearLobby and the HITECH initiative.  However, it should be noted that if depreciation and impairment are not considered, the decrease in loss would be approximately 46%, which more truly reflects the company’s cost cutting initiatives.




Liquidity and Capital





Cash and cash equivalents were $18,208 at June 30, 2011 compared to $86,664 at June 30, 2010,  representing a 79% decrease in available funds, however with the increase in cash-flow from the HITECH program as well as the commitment from several of our major investors we believe that we can sustain operations indefinitely.





Net cash used by operating activities was $1,273,349 for the year-end June 30, 2011 as compared to cash used by operating activities of $1,721,398 for the year-end June 30, 2010, representing an 35% decrease.  The decrease is due to the Company’s need to conserve cash until revenue begins to grow.





Net cash used by investing activities decreased by 76% to $55,000 for the year-end June 30, 2011 as compared to cash used by investing activities of $230,000 for the year-end June 30, 2010, and was primarily due to a decrease in development work on the Portal as cash was not available to maintain the previous pace of development.




Net cash provided by financing activities was $1,259,913 for the year-end June 30, 2011 as compared to net cash provided by financing activities of $1,985,427 for the year-end June 30, 2010. The decrease is primarily due to a decrease in the sale of Common Stock and issuance of debt instruments.





The Company continues to operate at a loss and is projected to do so until late in fiscal 2012.  The additional decrease in available investment capital in the year ending June 30, 2011 required the Company to continue to consolidate its operations and slow-down development and marketing, The net result of this is that the Company has not been able to fully execute on its operational plan for the year resulting in a delay in generating any significant revenue.  The Company is reliant, therefore, on raising capital through equity investments and/or debt instruments to maintain operations.  The Company is actively engaging in fundraising efforts to increase its current level of operations.  From July 1, 2006 through December 31, 2007, we raised approximately $3,637,000 from accredited investors.  In addition, from February 22, 2008 through July 2008, we issued 20,900,001 shares of Common Stock through a private offering to accredited investors through which we raised approximately $2,508,000.  From December of 2008 to April of 2009 we issued notes in the aggregate amount of approximately $1,400,000 to accredited investors.  From September 2009 to March 2010 we issued notes in the aggregate amount of 1,672,600 to accredited investors.  In June of 2010 we issued 6,820,000 shares of Common Stock through a private placement offering to accredited investors through which we raised approximately $341,000.   Notwithstanding the receipt of this additional capital, the Company requires significant additional capital to cover its current overhead as well as to satisfy existing obligations.





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 Table of Contents





Item 8.    Financial Statements and Supplementary Data





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To The Board of Directors and
  Shareholders of iMedicor, Inc. and Subsidiary
  We have audited the accompanying consolidated balance sheets of iMedicor, Inc. and Subsidiary (“the Company”) as of June 30, 2011 and 2010 and the related consolidated statements of operations, stockholders' deficit and cash flows for each of the years in the two-year period ended June 30, 2011.  The Company’s management is responsible for these consolidated financial statements.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing   the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of iMedicor, Inc. and Subsidiary as of June 30, 2011 and 2010 and the results of their operations and their cash flows for each of the years in the two year period ended June 30, 2011 in conformity with accounting principles generally accepted in the United States of America.
  The accompanying consolidated financial statements have been prepared assuming that iMedicor, Inc. and Subsidiary will continue as a going concern.  As shown in the consolidated financial statements, the Company has experienced significant losses resulting in a working capital deficiency and shareholders’ deficit.  These conditions raise substantial doubt about its ability to continue as a going concern.   Management’s plans in regard to these matters are more fully described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
   /s/ Demetrius & Company, L.L.C.
  Wayne, New Jersey
 February 23, 2012




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 Table of Contents





IMEDICOR, INC.


CONSOLIDATED BALANCE SHEETS


YEARS ENDED JUNE 30, 2011 AND 2010





6/30/2011


6/30/2010ASSETS




RestatedCurrent assets:Cash and cash equivalents - interest bearing

$
18,208


$
86,644Accounts receivable, net of allowance for doubtful accounts of

$-0- at June 30, 2011 and June 30, 2010, respectively


251,780



10,000Prepaid expenses


16,108



6,001Total Current Assets


568,096



206,645Property and equipment, net


1,345



8,291Other assets:Technology & Medical software


2,138,914



4,996,785Accounts receivable in litigation net of allowance for doubtful accounts of

$78,000 and $26,000 at June 30, 2011 and 2010, respectively


282,000



104,000Total Assets

$
2,708,355


$
5,211,721LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities:Notes payable - banks

$
-


$
59,181Short-term notes payable


3,293,079



5,487,120Accounts payable and accrued expenses


1,804,101



1,791,670Deferred income


182,000



60,000Total Current Liabilities


5,279,180



7,397,971Long-term liabilitiesLong-term notes payable


-



1,271,661Total Long-Term Liabilities


-



1,271,661Total Liabilities


5,279,180



8,669,632Stockholders' DeficitPreferred Stock, non-cumulative Series A par value $.001, authorized

200,000,000 Issued and outstanding 28 and -0- shares as of June 30, 2011

and 2010, respectively


-



-Preferred Stock, non-cumulative, Series B par value $.001, authorized

200,000,000 Issued and outstanding 18.75 and -0- shares as of June 30, 2011

and 2010, respectively


-



-Common stock, par value $.001 per share, authorized 600,000,000

Issued: 332,744,934 and 229,450,597 shares; and

Outstanding: 332,376,527 and 229,082,190 at June 30, 2011 and 2010, respectively


332,377



229,082Additional Paid in Capital


43,839,597



37,849,159Less: Treasury stock, 368,407 shares at both June 30, 2011and June 30, 2010


(508,195
)


(508,195
)Accumulated deficit


(46,234,604
)


(41,027,957
)Total Stockholders' Deficit


(2,570,825
)


(3,457,911
)Total Liabilities and Stockholders' Deficit

$
2,708,355


$
5,211,721





See notes to financial statements.




32
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IMEDICOR, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


YEARS ENDED JUNE 30, 2011 AND 2010


For the


For theYear Ended


Year Ended6/30/2011


6/30/2010RestatedRevenues

$
438,122


$
295,132Cost of Services


4,876



71,224Gross Profit


433,246



223,908Expenses:Stock issued for fees and services


545,309



2,992,978Consulting, commissions and travel


831,042



187,012Operational fees and expenses


598,753



630,273Professional fees


82,342



241,316Payroll and related taxes


6,751



916,497Depreciation and amortization


2,065,723



2,056,033Bad debt expenses


52,000



26,000Impairment of technology & medical software


854,094



-Production, advertising, brochures and public relations


28,641



153,004Total Expenses


5,064,655



7,203,113Loss before other expenses


(4,631,409
)


(6,979,205
)Other Income/(Expenses:)Other income - debt cancellation


161,511



-Other income - lawsuit settlements


-



74,500Interest expense


(550,749
)


(710,640
)Default expense


-



(1,800,000
)Impairment of goodwill


-



(681,673
)Other expense - Redemption Fee expense


-



(459,668
)Total Other Income/(Expenses)


(389,238
)


(3,577,481
)Loss before dividend


(5,020,647
)


(10,556,686
)Dividends related to warrants issued


186,000



844,200Net loss attributable to common shareholders

$
(5,206,647
)

$
(11,400,886
)Net loss per share, available to common stockholders

$
(0.02
)

$
(0.08
)Weighted average number of shares, basic and diluted


287,100,363



144,428,423




See notes to financial statements.




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IMEDICOR, INC.


CONSOLIDATED STATEMENT OF CHANGES


IN STOCKHOLDER EQUITY (DEFICIT)





PREFERRED SERIES A


PREFERRED SERIES A


PREFERRED SERIES B


PREFERRED SERIES B


COMMON


COMMON


TREASURY


ADDITIONAL

PAID IN


TREASURY


ACCUMULATED


TOTAL

STOCKHOLDERS'

EQUITY/DESCRIPTION

SHARES


STOCK


SHARES


STOCK


SHARES


STOCK


SHARES


CAPITAL


STOCK


DEFICIT


DEFICITBalance as of June 30, 2009


-



-



-



-



114,561,997



114,562



(368,407
)


30,962,043



(508,195
)


(29,627,071
)


941,339Issuance of stock in exchange for vendor payables


















793,010



793







64,707











65,500Issuance of stock in exchange for legal settlement


















3,500,000



3,500







192,000











195,500Issuance of stock in exchange for legal fees


















2,000,000



2,000







112,000











114,000Issuance of stock in exchange for convertibledebentures and accrued interest


















47,154,710



47,155







2,515,603











2,562,758Issuance of common stock


















6,820,000



6,820







334,180











341,000Issuance of stock for fees/services


















54,252,000



54,252







2,824,726











2,878,978Deemed dividends on warrants issued






























844,200







(844,200
)


-Net loss - restated






































(10,556,68
)


(10,556,686
)Balance as of June 30, 2010


-



-



-



-



229,081,717



229,082



(368,407
)


37,849,159



(508,195
)


(41,027,957
)


(3,457,911
)Issuance of stock in exchange for convertible debentures and accrued interest


28



























1,800,000











1,800,000Issuance of stock in exchange for convertible debentures and accrued interest










19



















2,037,774











2,037,774Issuance of stock in exchange for convertibledebentures and accrued interest


















62,778,418



62,778







1,002,571











1,065,349Issuance of common stock


















12,300,000



12,300







446,700











459,000-Issuance of stock for fees/services


















28,216,392



28,216







517,093











545,309-Deemed dividends on warrants issued






























186,000







(186,000
)


-Net loss






































(4,181,199
)


(5,020,647
)Balance as of June 30, 2011


28


$
-



19


$
-



332,376,527


$
332,377



(368,407
)

$
43,839,597


$
(508,195
)

$
(46,234,604
)

$
(2,570,825
)





See notes to financial statements.




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IMEDICOR, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


YEARS ENDED JUNE 30, 2011 AND 2010





For the


For theYear Ended


Year Ended6/30/2011


6/30/2010(Restated)Cash Flows From Operating ActivitiesReceipts from customers

$
88,342


$
96,725Payments to suppliers, salaries


(1,388,270
)


(1,744,069
)Interest paid


26,579



(74,054
)Net Cash Used in Operating Activities


(1,273,349
)


(1,721,398
)Cash Flows Used in Investing ActivitiesPurchase of Technology & Medical software


(55,000
)


(230,000
)Net Cash Used in Investing Activities


(55,000
)


(230,000
)Cash Flows From Financing ActivitiesPayments on bank note payable


(14,087
)


(28,173
)Payments on notes payable


(140,000
)


-Short term loans


955,000



1,672,600Sale of common stock


459,000



341,000Net Cash Provided by Financing Activities


1,259,913



1,985,427Net Increase/(Decrease) in Cash


(68,436
)


34,029Cash at the Beginning of Period


86,644



52,615Cash at End of Period

$
18,208


$
86,644
 
 See notes to financial statements.





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IMEDICOR, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


YEARS ENDED JUNE 30, 2011 AND 20010




For the


For theYear Ended


Year Ended6/30/2011


6/30/2010(Restated)Reconciliation of Net Loss to Net Cash

Used by Operating ActivitiesNet loss

$
(5,020,647
)

$
(10,556,686
)Adjustments to reconcile net income/(loss) to net cash

used by operating activities:Allowance for bad debt


52,000



26,000Impairment of technology & medical software


854,094



-Depreciation & amortization


2,065,723



2,056,033Stock issued for accrued consulting fees


545,309



2,992,978Income derived from cancellation of dent


(161,511
)Income derived from relinquishment of debt


-



(270,000
)Loan accretion


-



459,668Impairment of goodwill


-



681,673Stock issued for legal settlement


-



195,500Stock issued for vendor payable


-



65,500Default fee expense on notes payable


-



1,800,000Changes in:Trade receivables


(471,780
)


(110,606
)Prepaid expenses


(10,107
)


(6,001
)Deferred expenses


-



60,798Accounts payable and accrued expenses


174,244



270,968Accrued interest payable


577,326



700,577Deferred income


122,000



(61,620
)Net Cash Used by Operating Activities

$
(1,273,349
)

$
(1,721,398
)Supplemental disclosures:Schedule of Noncash Investing and financing Transactions:Stock issued for fees and services

$
545,309


$
2,992,978Exchanged stock for note payable and accrued interest


4,903,123



2,448,013Income derived from debt cancellation


(161,511
)


-Income derived from relinquishment of debt


-



(270,000
)Stock issued for legal settlement


-



195,500Stock issued for vendor payable


-



65,500Default fee expense on notes payable


-



1,800,000





See notes to financial statements.





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iMEDICOR, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS ENDED JUNE 30, 2011 AND 2010





1.             NATURE OF OPERATIONS





IMedicor, Inc., formerly Vemics, Inc. (the “Company”), builds portal-based, virtual work and learning environments  in healthcare and related industries. Our focus is twofold: iMedicor, our web-based portal which allows Physicians and other healthcare providers to exchange patient specific healthcare information via the internet while maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations, and; recently acquired ClearLobby technology, our web-based portal adjunct which provides for direct communications between pharmaceutical companies and physicians for the dissemination of  information on new drugs without the costs related to direct sales forces.   Our solutions allow physicians to use the internet in ways previously unavailable to them due to HIPAA restrictions to quickly and cost-effectively exchange and share patient medical information and to interact with pharmaceutical companies and review information on new drugs offered by these companies at a time of their choosing.  Our solutions –





§
Provide services that are comprehensive and end-to-end§
Are portal-based and require little or no capital investment for equipment or infrastructure


§
Support interactive real-time collaboration and learning§
Are flexible, configurable and interoperable


§
Utilize and migrate with all available real-time communications and learning technologies§
Include peripheral or adjunct productivity tools, services and support


§
Are highly mobile and affordable for medical practices of any size§
Are convenient and extendable throughout healthcare organizations (EMRs, Hospitals, HMOs Etc)


§
Can be customized to interact with current communication, learning and business needs





On October 10, 2007, we launched the iMedicor portal – a HIPAA compliant online personal health data exchange and secure messaging portal for physician collaboration, community and referrals.  HIPAA, which stands for the American Health Insurance Portability and Accountability Act of 1996, is a set of strict rules that are required to be followed by doctors, hospitals and other health care providers concerning the handling and privacy protection of vital patient medical data.





Through the iMedicor portal, physicians will be able to communicate securely with other doctors, sharing HIPAA compliant patient files, records and images quickly and safely.  The portal can also help doctors use corresponding services from other professionals in the medical industry.  Moreover, the portal environment allows for document creation and management tasks in a user-friendly, online environment.  Costly transcription services and tedious handwritten documentation can actually be eliminated through iMedicor’s voice recognition advanced technology. The  iMedicor portal will also be a repository for Certified Continuing Medical Education courses and non-certified and product specific educational resources made available to any registered member on a non-intrusive opt in basis.





2.           GOING CONCERN





The Company has incurred operating losses to date and has an accumulated deficit of approximately $46,200,000 at June 30, 2011.  The Company’s activities have been primarily financed through convertible debentures, private placements of equity securities and capital lease financing.  The Company intends to raise additional capital through the issuance of debt or equity securities to fund its operations.  The financing may not be available on terms satisfactory to the Company, if at all.However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist.  There is no legal obligation for either management or significant stockholders to provide additional future funding.





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3.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis of Accounting





The accompanying consolidated financial statements include the accounts of Vemics, Delaware and OMII Corp. (now IMedicor, Inc).  The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.  Significant accounting principles followed by the Company and the methods of applying those principles, which materially affect the determination of financial position and cash flows are summarized below.





Cash Equivalents





Money market funds and investment instruments with original maturities of ninety days or less are considered cash equivalents.





Concentrations of Credit Risk





Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable.





As of June 30, 2011, the Company had no cash balances at any financial institution in excess of federally insured limits.





The Company has historically provided financial terms to customers in accordance with what management views as industry norms.  Financial terms, for credit –approved customers, are generally on a net 30-61 day basis, though most customers are entitled to a prompt payment discount.  Management periodically and regularly reviews customer account activity in order to assess the adequacy of allowances for doubtful accounts, considering such factors as economic conditions and each customer’s payment history and creditworthiness.  If the financial conditions of our customers were to deteriorate, or if they were otherwise unable to make payments in accordance with management’s expectations, we might have to increase our allowance for doubtful accounts, modify their financial terms and/or pursue alternative collection methods.





Property, Equipment and Depreciation





Property and Equipment are recorded at their historical cost.  Depreciation and amortization are provided for by the straight-line method over the useful lives of the assets, which vary from five to seven years.  The cost of repairs and maintenance is charged to operations in the period incurred.





Goodwill and Other Intangible Assets





The Company accounts for goodwill and other intangible assets in accordance with recently issued and adopted accounting pronouncements, which require that goodwill and intangible assets with indefinite useful lives should not be amortized, but instead be tested for impairment at least annually at the reporting unit level.  If impairment exists, a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded.  Intangible assets with finite lives are amortized primarily on a straight-line basis over their estimated useful lives and are reviewed for impairment.  The Company hasevaluated  goodwill for impairment as of June 30, 2010 for the EL Desktop acquisition.  The asset has been completely impaired and has been deemed of no value and completely written off.





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3.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued





Software Development Costs





We account for software development costs, including costs to develop software products or the software component of products to be marketed to external users, as well as software programs to be used solely to meet our internal needs.





We have determined that technological feasibility for our products to be marketed to external users was reached before the release of those products.  As a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred.  Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.





Acquisitions





Assets acquired and liabilities assumed in business combinations were recorded on the Company’s Consolidated Balance Sheets as of the respective acquisition dates based upon their estimated fair values at such dates.  The results of operations of businesses acquired by the Company have been included in the Statements of Consolidated Earnings since their respective dates of acquisition.  The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill.  In certain circumstances, the allocations of the excess purchase price are based upon preliminary estimates and assumptions.  Accordingly, the allocations are subject to revision when the Company receives final information, including appraisals and other analyses.





Impairment of Long-Lived Assets





Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimate undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount that the asset exceeds the fair value of the asset.





Fair Value of Financial Instruments





Management believes that the carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.  The carrying amount of the Company’s long-term debt also approximates fair value, based on market quote values (where applicable) or discounted cash flow analyses.





Income Taxes





The Company follows the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse.  Valuation allowances are established when it is necessary to reduce deferred income tax assets to the amount, if any, expected to be realized in future years.




iMedicor adopted the provision of FASB Accounting Standards Codification (“ASC”) 740, Income Taxes,on September 1, 2009, as it relates to uncertain income tax positions. Adoption of ASC 740 had no effect on the accompanying financial statements. iMedicor evaluates its uncertain tax positions as to whether it is more likely than not a tax position could be sustained in the event of an audit by the applicable taxing authority. Accordingly, a loss contingency is recognized when it is probable that a liability has been incurred as of the date of the financial statements, and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. As of June 30, 2011, there are three open tax years: 2011, 2010, and 2009.




39
 Table of Contents





3.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued





Use of Estimates





The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.





Revenue recognition





The Company’s current sources of income are:





·
Annual contracts for licensing of technology paid monthly, quarterly or once annually in advance.  If paid annually the revenue is recognized in two parts:  Support that is recognized 70% at the time of receipt of funds and the balance is recognized at 1/12th per month; for the licensing aspect of the contract revenue is recognized at 1/12th per month, with the remaining balances being recorded in deferred income.  If paid quarterly the recognition is the same.·
Fees generated from consulting services to federally funded State initiatives supporting the HITECH Act part of the American Recovery and Reinvestment Act of 2009.·
Delivery of product-specific information relating to healthcare and related services to physicians through on-line, opt in direct marketing·
Sunscription fees paid by healthcare workers using the iMedicor portal.





Maintenance or monitoring revenue that is bundled with an initial license fee is deferred and recognized ratably over the contract period.  We have established guidelines on all undeliverable elements of the user license and software arrangements, which consist of maintenance, monitoring and, at times, training and consulting.





Allowance for doubtful accounts





We maintain an allowance for doubtful accounts from estimated losses resulting from the potential inability of certain customers to make required future payments on amounts due us.  Management determines the adequacy of this allowance by periodically evaluating the aging and past due nature of individual customer accounts receivable balances and considering the customer’s current financial situation as well as the existing industry economic conditions and other relevant factors that would be useful in assessing the risk of collectability.  If the future financial condition of our customers were to deteriorates, resulting in their inability to make specific required payments, additions to the allowance for doubtful accounts may be required.  In addition, if the financial condition of our customers improves and collections of amounts outstanding commence or are reasonably assured, then we may reverse previously established allowances for doubtful accounts.





Advertising costs





Advertising costs are reported in selling, general and administrative expenses and include advertising, marketing and promotional programs and are charged to expenses in the period or year in which incurred.  Advertising costs for the years ended June 30, 2011 and 2010 were $28,641and $153,004, respectively.




Recently Issued Accounting Pronouncements




From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations upon adoption.




40
 Table of Contents




3.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued





Common stock





Common stock refers to the $.001 par value capital stock as designated in the company’s Certificate of Incorporation.  Treasury stock is accounted for using the cost method.





Net earning (loss) per share





Basic and diluted net loss per share information is presented under recently adopted accounting pronouncement.  Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase.  Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, shares issuable on exercise of warrants and convertible notes in the weighted-average number of common shares outstanding for a period, if dilutive.  All potentially dilutive securities have been excluded from the computation, as their effect is anti-dilutive.





Share-Based Payment




STOCK-BASED COMPENSATION




The Company accounts for all stock-based payments and awards under the fair value based method. Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if the Company had paid cash instead of paying with or using equity based instruments on an accelerated basis. The cost of the stock-based payments to nonemployees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.




The Company accounts for the granting of share purchase ptions to employees using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant. Share based awards granted to employees with a performance condition are measured based on the probable outcome of that performance condition during the requisite service period. Such an award with a performance condition is accrued if it is probable that a performance condition will be achieved. Compensation costs for stock-based payments to employees that do not include performance conditions are recognized on a straight-line basis. The fair value of all share purchase options is expensed over their vesting period with a corresponding increase to additional capital surplus. Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in additional capital surplus, is recorded as an increase to share capital




The Company uses the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of the grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.




The compensation expense recognized for the years ended March 31, 2011 and 2010 was $545,309 and $2,992,978, respectively.





4.  SHAREHOLDERS’ EQUITY (DEFICIENCY)





Common stock





The Company as of June 30, 2011 and 2010 had a total of 332,376,527 and 229,082,190 shares outstanding, respectively.  There are an additional 368,407 shares in Treasury Stock as of June 30, 2011 and 2010.  On March 15, 2010, the Board of directors amended the Articles of Incorporation, and a majority of the shareholders approved the amendment, to increase the authorized number of shares in the company to 600 million shares of common stock.




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Preferred Stock





The company is authorized to issue up to 200,000,000 shares of blank check preferred stock.  There are 28 shares of Series “A” preferred and .and 18.75 shares of Series “B” Preferred stock as of June 30, 2011.




Each share of Series “A” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s common stock after the 12 month anniversary of the issuance of such share of Series “A” Preferred Stock.  Each share of Series “A” Preferred Stock also carries a cumulative quarterly dividend of 2% of the original purchase price payable in the Company’s Common Stock or cash, at the Company’s option.




Each share of Series “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share of Series “B” Preferred Stock.  Each share of Series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a cumulative 2.5% quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option.





Warrants





As of June 30, 2011, the Company has issued warrants to purchase shares  of Common Stock reserved for issuance upon exercise to various shareholders and service providers according to the schedule below:





No. SharesIssuable on Exercise


Expiration


Exercise Price1,239,999



2011


$
0.604,000,000



2013


$
0.044,840,000



2013


$
0.038,800,000



2014


$
0.0316,160,000



2013 – 2015


$
0.05





Management has reserved the right to redeem the warrants at $.10 per warrant if there is a subsequent initial public offering and market value per share meets certain levels.




5.             PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE





Equipment and fixed-asset depreciation and amortization expense for the years ended June 30, 2011 and 2010 was $7,366 and $8,854, respectively.  The cost and related accumulated depreciation of disposed assets are removed from the applicable accounts and any gain or loss is included in income in the period of disposal.





Property, equipment and purchased software are stated at cost and consist of the following:





6/30/2011



6/30/2010Furniture and fixtures

$
2,600


$
2,600Software


72,430



72,430Equipment


252,883



252,883327,913



327.913Less Accumulated Depreciation & Amortization


326,568



319,622$
1,345


$
8,291




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6.             TECHNOLOGY AND MEDICAL SOFTWARE





The Company has capitalized all acquisition costs associated with the acquisition of NuScribe Inc.  In addition, we have elected to capitalize all related development costs associated with the completion of the iMedicor portal, which was included in the asset purchase of Nuscribe.  The iMedicorÔ portal was launched in late October 2007 and we have begun to amortize its cost on a straight-line basis over 60 months.  Amortization expenses were $2,056,033 for the year ended June 30, 2010.  The Company accounts for impairment of technology assets in accordance with recently issued and adopted accounting pronouncements, which require that technology with indefinite useful lives should be amortized, but als be tested for impairment at least annually at the reporting unit level.  If impairment exists, a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded.  Intangible assets with finite lives are amortized primarily on a straight-line basis over their estimated useful lives and are reviewed for impairment.  The Company hasevaluated the technology and medical software for impairment as of June 30, 2011 for and has determined that the asset be impaired by $854,094.




6/30/2011


6/30/2010Technology and medical software

$
10,238,894


$
10,238,894Less: Accumulated Amortization


7,245,886



5,242,107Less: Impairment as of June 30, 2011


854,094



-$
2,138,914


$
4,996,785





7.             LONG TERM DEBT




2011


2010Convertible Debentures

$
538,935


$
4,872,120Notes Payable


2,754,144



1,886,661Total

$
3,293,079


$
6,758,781Less: portion in current liabilities


3,293,079



(5,487,120
)Balance of long term debt

$
-


$
1,271,661







8.             SHORT-TERM NOTES PAYABLE AND CONVERTIBLE DEBENTURES




Convertible Debentures





The company has issued Convertible Debentures at various times. Interest rates on these debentures vary from 8% to 17.98% with various maturity dates ending June 30, 2012.





Amount outstanding*


Interest Rate

Conversion Features$
**150,000



17.98
%
convertible into common shares at $0.45 per share123,360



8.00
%
convertible into common shares at $0.03 per share209,274



15.00
%
convertible into common shares at $0.05 per share56,301



8.00
%
convertible into common shares at $0.05 per share$
538,935


Total





*Amounts include interest accrued to June 30, 2011.


**Initial note calls for 17.98%  interest, however interest has stopped accruing and note holder has agreed to accept payment of principal as payment in full.




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Terms of the notes payable vary from 0% to 18% interest.





2011



2010Company

$
2,601,219


-Individual – Former Director


77,925



1,871,661Individual


50,000



20,000Trust


15,000



15,000Individual – Former Director


10,000



10,000Total

$
2,754,144


$
1,916,661





9.             DEEMED COMMON STOCK DIVIDEND





During the years ended June 30, 2011 and 2010, the Company issued 8,800,000 and 21,340,000 common stocks warrants, respectively, in connection with the sale of its common stock and convertible notes issued.  The warrants were fair valued at their respective grant dates using Black Scholes Model and as a result were shown as a deemed dividend in effect as a reduction to the net income (loss) and as an addition to Additional Paid In Capital.   The deemed dividends for the years ended June 30, 2011 and 2010 were $186,000 and $844,200 respectively.





The Company used the Black-Scholes model to estimate the Deemed Dividends with the following assumptions:





At June 30, 2011


At June 30, 2010Expected Live (years)


3 – 7



3 – 7Risk-free interest rate


1.00 – 1.79
%


1.00 – 1.79
%Expected Volatility


113.00
%


131.00
%Expected Yield


0.00
%


0.00
%





10.           INCOME TAXES





6/30/2011


6/30/2010Taxes on income include provision (benefits) for:Federal income taxes

$
-0-


$
-0-State and local income taxes


-0-



-0-Total

$
-0-


$
-0-Taxes on income are comprised of:Current

$
-0-


$
-0-Deferred


-0-



-0-Total

$
-0-


$
-0-





Deferred tax assets comprise the following at June 30, 2011 and June 30, 2010, respectively.  Utilization of NOL carry forward may be limited under various sections of the Internal Revenue Code depending on the nature of the Company’s operations.





6/30/2010


6/30/2009Deferred Income Tax Assets

$
13,174,920


$
7,945,281Valuation allowance


(13,174,920
)


(7,945,281
)Net Deferred Tax Asset

$
-0-


$
-0-





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11.           2007 EQUITY COMPENSATION PLAN





Effective June 6, 2007, the Vemics Equity Compensation Plan (the “Equity Plan”) authorized 6,300,000 shares to be available to provide designated employees of the Company and its parents and subsidiaries, certain consultants and advisors who perform services for the Company or its parents or subsidiaries, and non-employee members of the Board of Directors of the Company (the “Board”) with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards.  On July 29, 2008, the Company’s Board of Directors and its shareholders approved an amendment of the Equity Plan to increase the number of shares of Common Stock underlying the Equity Plan from 6,300,000 to 17,000,000.





As of June 30, 2011, the Company had issued 4,720,000 shares and 1,895,000 option to purchase shares in the Company to Officers, employees, former employees and contractors under the 2007 Equity Compensation Plan.  All options issued have an exercise price of $0.07.





In the fiscal year ended June 30, 2011  there were no shares or options issued under the equity compensation plan.





A summary of the status of the company’s stock option plan is presented below:





2011


2010Weighted





WeightedAverage





AverageExercise





ExerciseShares


Price


Shares


PriceOutstanding at the beginning of the year


1,895,000



0.07



-0-



0Granted


-0-







1,895,000



0.07Exercised


-0-







-0-



0Forfeited


-0-







-0-



0Outstanding at the end of the year


1,895,000







1,895,000



0.07Options exercisable at year end


1,895,000







1,895,000



0.07Weighted Average fair value of options granted during the year





$
0.00






$
0.07Stock-Based Compensation Expense





$
0.00






$
132,650.00





12.           LEGAL CONTINGENCIES





In the normal course of business, the Company is involved in lawsuits and claims.  While the amounts claimed could be material, the ultimate liability cannot now be determined because of the considerable uncertainties that exist.  Therefore, it is possible that the  results of operations or liquidity in a particular period could be affected by certain contingencies.  However, based on facts currently available, including the insurance coverage that the Company has in place, management believes that the outcome of these lawsuits and claims will not have a material adverse effect on the Company’s financial position.





13.           INCOME





The Company has recorded income in the year ended June 30, 2011 from Mass Mutual Insurance in the amount of 260,000 and from Access Health in the amount of approximately 80,00.  Both companies have refused to pay citing unenforceable contracts.  iMedicor has instituted legal proceedings against both companies and is confident that we will collect all amounts due plus legal fees associated with the lawsuits.  The company has taken an allowance for bad debt relating to these two receivables of 20% on the gross amount in the year ended June 30, 2011, however the attornies representing the company have indicated that the entire amount should be collectable.




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14.           PRIOR YEAR ADJUSTMENT / RESTATEMENT
 
 In the year ended June 30, 2010, the Company did not account for $160,000 in receivables from one customer, as the continuation of the contract was not recorded in the beginning of the year.  The financial statements for the year ended June 30, 2010 have been restated to account for this income.


15.           EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS





a.
The Company and Mr. Fred Zolla, its Chief Executive Officer and Chairman of the Board, entered into a three-year employment agreement effective as of October 1, 2004, pursuant to which Mr. Zolla was paid an annual salary (based on a calendar year) of $70,000 in 2005, $130,000 in 2006 and$168,000 for 2007.  The Agreement provided for 18 months of severance in the event of termination without cause.  Mr. Zolla's initial agreement expired on December 31, 2007 and was renewed for a period of 2 years, expiring December 31, 2010.  To date, Mr. Zolla has not renewed his Employment Agreement, however he is currently in discussions with the board of directors as to the renewal of the Agreement.





b.
On March 10, 2008, the Company entered into an employment agreement with Craig Stout pursuant to which Mr. Stout as our Chief Operating Officer.  The agreement had an initial term of three years, commencing on April 1, 2007 and ending in March 2011.  Mr. Stout has not renewed his employment contract and currently acts as a consultant to the Company with the duties of Chief Operating Officer and Chief Financial Officer.





16.           SUBSEQUENT EVENTS





The Company has evaluated subsequent events from the balance sheet date through February 22, 2012, the date the accompanying financial statements were issued and have found no material events to report.





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PART III




Item10.  Directors, Executive Officers and Corporate Governance.





Set forth below are the names, ages, titles, principal occupations and certain biographical information as of October 13, 2010, concerning the Company’s directors and executive officers.  All of the Company’s officers have been appointed by and serve at the discretion of the Board.





NAME

AGE

POSITIONFred Zolla

60

Chief Executive Officer & ChairmanCraig Stout

44

Chief Operating Officer/Interim Chief Financial OfficerKenneth Mathews

73

DirectorJD Smith

41

Director





Fred Zolla,Chief Executive Officerand Chairman.Mr. Zolla has served as our Chief Executive Officer and Chairman of the Board of IMedicor since the date of our acquisition of Vemics-Delaware in November 2005.  Further, Mr. Zolla served as the CEO and Chairman of Vemics-Delaware since its inception on July 17, 2001.  Before founding Vemics-Delaware, Mr. Zolla served as the Chief Operating Officer of Educational Video Conferencing, Inc., a publicly traded company in the technology and distance learning fields from April 1999 to June 2001.  From January 1990 to February 1999, Mr. Zolla was the President of Distance Learning Associates, the first content aggregator in the K-12 and corporate distributed learning space in the U.S.  In 1996, he served on the White House Committee for technology in education chaired by then vice-president Al Gore.  Mr. Zolla has taught and lectured in England, France, Italy, Spain, Korea and throughout the U.S. on the “Integration of Distance Learning Resources and Technology in the Classroom and Workplace.”  Mr. Zolla served as chairman of the board of the New York Film Festival, non-broadcast division from 1992 through 1995 and remains an active board member.





Craig Stout, Chief Operating Officer and Interim Chief Financial Officer.Mr. Stout has been our Chief Operating Officer since the date of our acquisition of Vemics-Delaware, Inc. in November 2005 and has served as Interim Chief Financial Officer since June 30, 2008.  Mr. Stout has 20 years of operational and corporate finance experience in multiple industries.  Before joining Vemics, Mr. Stout acted as a consultant to an international reinsurance firm, Renaissance Reinsurance, based in Hamilton, Bermuda working on a number of operations projects, including assisting in managing the conversion to Sarbanes Oxley compliance.  In addition, from 2000 to 2005, Mr. Stout worked on a consulting basis to approximately 35 companies in connection with the acceleration and management of their growth through strategic acquisitions, restructurings and refinancing.  From 1992 to 1999 Mr. Stout served as the Chief Operating Officer and Chief Financial Officer of a small fund management company based in Washington, DC and Tortolla, BVI.  From 1989 to 1991, Mr. Stout was employed by Elders IXL in London as part of the strategic business development group where he was part of the European acquisition team that identified businesses of strategic value to Elders interests, initiated acquisitions and developed execution plans focused on integrating these new businesses into the Elders corporate structure.





Kenneth Mathews., Director.Mr. Matthews serves as the Managing Director for  Cambridge Capital Corp., a financial services company that he founded in 1992 which provides innovative  solutions to the capital needs of small, middle market and large business enterprises and  raises capital , debt and equity for early, mid-size and troubled businesses.  He is a a Certified Cash Manager with more than thirty years of financial experience.  His specialties include capital sourcing, market planning, and financial consultation for profit improvement and cost effectiveness.





Prior to joining Cambridge Capital in 1992 Mr. Mathews served for twenty years with First Fidelity Bancorporation, a $30 billion commercial banking company serving the New York, New Jersey, and Pennsylvania markets.  As an executive vice president, he was responsible for Corporate Cash Management, Product Management, Correspondent Banking, and Insurance Brokerage. He also administered the National Corporate Banking Division, the Equipment Leasing and Finance Department, the Corporate Marketing Department, and the Governmental and Institutional Banking Department. In the Commercial Banking Division, Mr. Mathews managed a regional network with a portfolio of secured and unsecured loans for small and middle-market companies.





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 Table of Contents





A graduate of Saint Peter's College, Mr. Mathews received his B.S. degree in economics in 1960, and studied for an M.B.A. in finance and marketing at New York University's Graduate School of Business Administration.





Mr. Mathews has served on the Board of Trustees of Saint Peter's College and Saint Joseph's Hospital and Medical Center. He is also a trustee of the American Diabetes Association -- New Jersey Affiliate.





JD Smith, Director.  Mr. Smith is the Chairman of WESCO Energy Corporation, a company owned by Sonoran Pacific Resources, one of the largest investor's in iMedicor, Inc.. WESCO owns the patents on a number of new technologies in the oil and gas business, such as the gas to liquid conversion of stranded gas, heavy oil upgrading, and a process for producing environmentally friendly tailings from oil and tar sands. He recently facilitated the negotiation and signing of agreements concerning projects in the USA, Canada, China, and Russia. He is presently overseeing new prospective projects in Thailand, Nigeria, Madagascar, Ecuador, Dubai and other parts of the world.  Mr. Smith advises and assists Sonoran Pacific on numerous projects in which it has venture capital and real estate investments.





Code of Ethics





As a result of the Company's limited operations over the past couple of years, the Company has not adopted a code of ethics as defined in Item 406 of Regulation S-K under the Securities Exchange Act of 1934.  The Company expects to adopt a code of ethics within the next twelve months.





Item11.  Executive Compensation





The following table sets forth annual compensation paid to our named executive officers for the fiscal year ended June 30, 2010 and for the year ended June 30, 2009.





SUMMARY COMPENSATION TABLE




Name and Principal Position

Fees earned or paid in cash

($)


Stock

Awards

($)


Option

Awards

($)


Non-Equity Incentive Plan Compensation

($)


Non-Qualified Deferred Compensation

Earnings

($)


All

Other Compensation

($)


Total

($)Fred Zolla, CEO & Chairman

$
95,000


-



-



-



-



-


$
95,000Craig Stout,  Chief Operating Officer/Interim

Chief Financial Officer

$
83,290



-



-



-



-



-


$
83,290





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 Table of Contents




Employment Agreements with Executive Officers





The Company and Mr. Fred Zolla, its Chief Executive Officer and Chairman of the Board, entered into a three-year employment agreement effective as of October 1, 2004, pursuant to which Mr. Zolla was paid an annual salary (based on a calendar year) of $70,000 in 2005, $130,000 in 2006 and $168,000 for 2007.  Mr. Zolla may terminate the agreement for any reason on 90-days written notice to the Company or by the Company immediately for cause.  The Agreement provides for 18 months of severance in the event of termination without cause.  Mr. Zolla's initial agreement expired on December 31, 2007; however, this agreement was renewed for two years and is due to expire on December 1, 2009.  Mr. Zolla has not yet renewed his contract; however he is currently in discussions with the board of directors regarding the renewal.





On March 10, 2008, the Company entered into an employment agreement with Craig Stout pursuant to which Mr. Stout will serve as our Chief Operating Officer at an initial term of three years.  This agreement commenced April 1, 2008 and terminates on March 31, 2011.  The agreement provides for an annual salary of $120,000, which amount would increase to $156,000 if the Company raises in excess of $5,000,000 in equity.  Mr. Stout may terminate the agreement for any reason on 90-days written notice to the Company or by the Company immediately for cause.  In the event of a termination by the Company for any reason other than cause, the Company is to pay Mr. Stout an amount equal to 12 months' salary.  Mr. Stout has not renewed his employment contract and currently acts as a consultant to the Company with the duties of Chief Operating Officer and Chief Financial Officer.  As such, the terms of the original contract are no longer in force.





Equity Incentive Plan





The Company adopted the Vemics, Inc. 2007 Equity Compensation Plan, which was approved by our stockholders on June 6, 2007 (the “Equity Plan”), to provide employees, non-employee directors, consultants and advisors with the opportunity to receive grants of stock options and stock awards.  The purpose of the Equity Plan is to give participants an ownership interest in our Company, and to create an incentive to contribute to our economic success.  The Equity Plan authorizes the issuance of incentive stock options, nonqualified stock options and other stock based awards to employees, non-employee directors, consultants and advisors.  There are 17,000,000 shares of Common Stock authorized under the Equity Plan.  As of June 30, 2010, the Company has issued options to purchase 1,895,000 shares of IMedicor Common Stock to non-executive officers employees, former employees and consultants of the company.  Additionally, the Company issued 2,970,000 shares to non-executive officers, employees, former employees and consultants of the Company





Item 12.  Security Ownership of Certain Beneficial Owners and Management





The following table sets forth as of January 20, 2012, certain information with respect to the beneficial ownership of the Common Stock by: (1) each person known by us to beneficially own more than 5% of our outstanding shares, (2) each of our directors, (3) each named executive officer and (4) all of our executive officers and directors as a group.





Except as otherwise indicated, each person listed below has sole voting and investment power with respect to the shares of Common Stock set forth opposite such person's name.  Applicable percentage of ownership is based on 332,377,971 shares of our Common Stock outstanding on





In computing the number and percentage of shares beneficially owned by a person, shares of Common Stock subject to options and/or warrants currently exercisable, or exercisable within 60 days of January 30, 2012, are counted as outstanding, but these shares are not counted as outstanding for computing the percentage ownership of any other person.





Name and Address of Beneficial Owner (1) (2)

Amount of Beneficial Ownership


Percent of Outstanding SharesFred Zolla


4,610,116



1.37
%Craig Stout


1,025,000



*Kenneth Mathews


1,029,903



*JD Smith


-



*All officers and directors as a group (4 persons)


7,585,354



2.42
%* less than 1%





(1)
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.  Unless otherwise indicated, this column reflects amounts as to which the beneficial owner has sole voting power and sole investment power.





(2)
The address of each of the executive officers and directors is care of Vemics, Inc., 523 Avalon Gardens Drive, Nanuet, NY 10954.





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 Table of Contents




Item 13.  Certain Relationships and Related Transactions and Director Independence





iMedicor utilizes office space provided by some of its key employees and officers.  iMedicor’s’ President and CEO, Fred H. Zolla provides IMedicor’ principal office space located at 523 Avalon Gardens Drive, Nanuet, NY 10954.  In previous years  iMedicor has paid approximately $4,500 per year to Mr. Zolla for the use of the office space he provides, however no such payment was made in the year ending June 30, 2011.  IMedicor will continue to maintain this office for the near future.





Item 14.  PrincipalAccountant Fees and Services





Cost of Fees and Services





During fiscal years 2011 and 2010, the Company’s independent registered public accounting firm, Demetrius & Company L.L.C., rendered services to the Company for the following fees:





2011


2010Audit Fees(1)

$
45,000


$
42,000Tax Fees(2)


-



-Total

$
45,000


$
42,000





(1)

Audit Fees and Audit related fees consisted principally of audit work performed on the consolidated financial statements for our fiscal year end.(2)

The Company did not engage Demetrius & Company, LLC for any Tax services.





Audit Committee's Pre-Approval Practice





Inasmuch as the Company does not have an audit committee, its board of directors performs the functions of its audit committee.  Section 10A(i) of the Securities Exchange act of 1934 prohibits our auditors from performing audit services for us as well as any services not considered to be "audit services" unless such services are pre-approved by the board of directors (in lieu of the audit committee) or unless the services meet certain de minimis standards.





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 Table of Contents





PART IV








Item 15.  Exhibits, Financial Statements Schedules





1.1
Share Exchange Agreement by and between Vemics, Inc. a Delaware corporation, and OMII, Inc., a Nevada corporation (1)2.1
Articles of Incorporation (1)2.2
Amended and Restated Articles of Incorporation of Vemics, Inc. filed on April 15, 2008 (1)2.3
Amendment to the Articles of Incorporation of Vemics, Inc. filed on July 29, 2009 reflected name change2.4
Bylaws (1)3.1
Stock Purchase Agreement, dated October 16, 2006, by and among the Company and the stockholders of NuScribe, Inc., a Delaware corporation (1)3.2
Asset Purchase Agreement, dated January 25, 2007, by and between the Company and e-Learning Desktop, Inc. (2)3.3
Limited Asset Purchase Agreement with ClearLobby, Inc. entered in on September 12, 2008 (3)3.4
Amendment to the Limited Asset Purchase Agreement with ClearLobby, Inc. (4)4.1
Vemics, Inc. 2007 Equity Compensation Plan (1)4.2
Vemics, Inc 2007 Equity Compensation Plan as Amended August 15, 2008. (8)4.2
Employment Agreement dated as of October 1, 2004 July 17, 2006 by and between Fred Zolla and Vemics, Inc. (1)4.3
Employment Agreement dated as of April 1, 2008, by and between Craig Stout and Vemics, Inc. (1)5.1
Convertible Promissory Note dated April 27, 2009 issued to Sonoran Pacific Resources. (5)5.2
Form of Convertible Note (6)5.2
Form of Subscription Agreement (7)7.1
Agreement between iMedicor, Inc and USAMCO.7.2
Revised Agreement between Access Pharmaceuticals and iMedicor, Inc.7.3
Agreement between PASHealth and iMedicor, Inc.7.4
Agreement between Physicians Alliance of America and iMedicor, Inc.31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14 (a)31.2
Certification of the Chief Financial Officer and Treasurer pursuant to Rule 13a-14 (a)32
Certification of the President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 20021.
Incorporated by reference to exhibits of Registrant’s Form 10 filed on May 13, 2008.2.
Incorporated by reference to Exhibits to Registrant's Form 10-K filed on October 13, 2008.3.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on September 18, 2008.4.
Incorporated by reference to Exhibits to Registrant's Form 10-K filed on October 12, 2009.5.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on May 05, 2009.6.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on February 4, 2010.7.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on February 4, 2010.8.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on August 20, 2008





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 Table of Contents


SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) 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.





Name

Title

Date/s/ Fred Zolla

President, Chief Executive Officer,

February 23, 2012Fred Zolla

(Principal Executive Officer)/s/ Craig Stout

Chief Operating Officer and

February 23, 2012Craig Stout

Interim Chief Financial Officer/s/ Kenneth Mathews

Director

February 23, 2012Kenneth Mathews/s/ JD Smith

Director

February 23, 2012JD Smith/s/ Granger Whitelaw

Director

February 23, 2012Granger Whitelaw





52