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, 2008
 
 r TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 Commission
file number: 000-52765
 
 VEMICS,
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 York10954
 (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 r    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 r No x
  Check
whether the issuer: (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 x No r
  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.  x
  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 r Accelerated filer r Non-accelerated
filer r    
 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 r No x
  Aggregate
market value of the Registrant’s common stock held by non-affiliates of the
Registrant as of September 29, 2008: $3,450,907.70.
  The
number of shares outstanding of the Registrant's common stock as of September
29, 2008: 81,656,418
   DOCUMENTS
INCORPORATED BY REFERENCE
  Portions
of the registrant’s definitive proxy statement for its 2008 annual meeting of
shareholders are incorporated by reference into Part III of this Form
10-K.
   Table of Contents
  VEMICS, INC.
 FORM
10-K ANNUAL REPORT
 FOR
THE YEAR ENDED JUNE 30, 2008
 
 TABLE
OF CONTENTS
 
 PagePart
      IItem
      1.
              The Business
              3Item
      1A.
              Risk Factors
              8Item
      2.
              Properties
              13Item
      3.
              Legal Proceedings
              14Item
      4.
              Submission of Matters to a Vote of Security
      Holders
              14Part
      II
              Other
      InformationItem
      5.
              Market for Registrants Common Equity, Related
      Stockholder
              15Item
      7.
              Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              17Item
      8.
              Financial Statements and Supplementary Data
              22Item
      9.
              Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
              42Item
      9A
              Controls and Procedures
              42PART
      IIIItem
      10.
              Directors, Executive Officers and Corporate
      Governance
              43Item
      11.
              Executive Compensation
              43Item
      12.
              Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
              43Item
      13.
              Certain Relationships and Related Transactions, and Director
      Independence
              43Item
      14.
              Principal Accounting Fees and Services
              43Item
      15.
              Exhibits, Financial Statement Schedules
              44
  
 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 Vemics, Inc.’s future performance for which
management believes there is a reasonable basis.  Vemics, Inc.
disclaims any obligation to update the forward-looking statements contained
herein, except as may be required by law.
 
 PART
I
 
 Item1.  Business
 
 OVERVIEW
 
 Vemics,
Inc. (the “Company”) builds portal-based, virtual work and learning environments
primarily in healthcare and related industries that enable individuals and
organizations of any size to communicate, collaborate, work and learn at a
distance as if everyone were in the same office or room.  Recently, we
decided to focus our efforts on solutions for the healthcare industry, primarily
through our iMedicor web-based portal.  Our hosted solutions eliminate
the need for companies, medical practices and individuals to buy, integrate or
maintain continually evolving collaborative technologies and provide a single
point of access for online communication, collaboration and
learning.  Our solutions combine the best in standards-based
productivity-enhancing tools with educational / informational content, adding
real-time spontaneity, impact and face-to-face interactivity to meetings,
presentations or learning sessions.  We provide deep customer and
technical support to ensure our customers get the most out of their
solutions.  Our technology teams have been creating on-line, leading
edge solutions, centered on real-time communication, video, audio, data
collaboration tools and content distribution technologies delivered through
on-line portals.  The team has been at the forefront of bringing
people and information together in ways that maximize time, reduces cost and
eliminates distance.  Our solutions are fully hosted and managed and
can be customized to fit specific needs.  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 the organization (EMRs, Hospitals,
      HMOs Etc)
 §
              Can
      be customized to align with current communication, learning and business
      needs
 
 OUR
TECHNOLOGY-BASED SOLUTION
 
 Our
current focus is the introduction of technology to the healthcare industry that
will revolutionize the way the industry communicates.  Until Vemics
introduced its iMedicor portal on October 10, 2007, physicians and other
healthcare professionals generally were unable to use the Internet as a
communications tool except within the restrictions of their individual
Electronic Medical Records(“EMR”)
systems.  Due to the stringent privacy regulations under Health
Insurance Portability and Accountability Act of 1996(“HIPAA”) in the United
States, and similar privacy regulations in countries throughout the world,
physicians were excluded from transferring medical records and images of
patients using Internet related communications systems.  In addition,
the few EMR products that currently facilitate information exchange may be cost
prohibitive for many physician practices.
 
 We
believe that iMedicor is the first portal to couple a HIPAA-compliant personal
health information exchange and a social/professional network.  Our
Electronic Health Record Transport portal technology gives physicians and other
healthcare professionals the ability to transfer personal health information
electronically in a method, which satisfies federal HIPAA regulations in the
U.S. and similar privacy regulations in targeted countries throughout the
world.
 
 Until the
launch of iMedicor, federal regulations made it very difficult for records or
images and discreet data to be transmitted using the
Internet.  Standard email services that most professional markets
employ today are not HIPAA compliant and do not protect the privacy of
individual patient records.  Absent our technology, the Internet
failed as a communications tool for healthcare organizations except for limited
use through virtual private networks.  In addition to the information
exchange capabilities, iMedicor offers world-class educational content and a
voice recognition driven documentation system.  We believe
iMedicorhas set a
precedent by opening up the Internet to physicians and healthcare professionals
to exchange personal health information within a HIPAA compliant environment
freely.
 
 Healthcare
businesses and practitioners are finally looking seriously at the Internet as a
way to simplify and accelerate the way they work, communicate and
learn.  We have observed a growing willingness to shift the ownership
of business process and productivity solutions from the company or individual to
service providers.  We attribute this to the rise of social
networking; the rapidly increasing demand for human interactivity regardless of
time and distance; the demand for real-time information sharing; the current
explosion in affordable broadband and networks; and the acceptance of
implementing mission critical software as a service.
 
 3
 Table of Contents
  Finally,
iMedicor is offering productivity tools and essential services to physicians who
comprise a highly desirable demographic that is otherwise difficult to
access.  iMedicor is becoming a trusted source to this targeted market
and has developed a non-intrusive manner to reach this audience.
 
 Vemics
sees two important opportunities that it can capitalize on now:
 
 1.
              To
      build a sought-after demographic of physicians, their associates and other
      healthcare workers that we leverage to generate revenue.  Vemics
      is the first provider of fully collaborative, HIPAA compliant learning and
      productivity solutions to this healthcare professional demographic
      regardless of location or connectivity options, creation of community and
      increase referral network, and provide access to certified educational
      programs.  Access to this demographic will have value to a
      number of different industries.  Additionally, as the user base
      grows, so will revenues from various enhanced productivity tools within
      the portal.
 
 2.
              To
      redefine the relationship between pharmaceutical companies and
      physicians.  Physicians are pushing back further and further
      from the pharmaceutical representatives who visit their office each
      day.  Many have banned them all together.  Vemics’
      newly acquired ClearLobby Pharmaceutical Communications Platform
      technology will change the dynamic in the pharmaceutical company-physician
      relationship, giving control to the physician and allowing the physician
      to choose when and what information is
      presented.  Pharmaceutical companies are billed transactionally
      based on messaging interactions, which means that when a physician clicks
      on any type of content (message) which has been placed into iMedicor by a
      pharmaceutical company, then the pharmaceutical company is charged a fee
      for that “click-through.”
 
 RECENT
DEVELOPMENTS
 
 Merger
with GNM Healthcare Consultants.
 
 As
previously reported on Form 8-K filed on August 1, 2008, on July 24, 2008, we
entered into a binding letter of intent (the “Letter of Intent”) with GNM
Healthcare Consulting Group LLC, a New York limited liability company and all of
its subsidiaries (“GNM”), whereby GNM would merge with a wholly-owned subsidiary
of the Company.  A condition to the closing of the merger is receipt
of a minimum of $10 million dollars of financing on or before the closing of the
merger and the satisfactory completion of due diligence by the Company and
GNM.
 
 Although
the Letter of Intent has not terminated formally, GNM and Vemics have
reevaluated the merger and based on current market conditions and the delay in
closing on $10 million in financing, have mutually agreed to explore
alternatives other than a merger to a continuing relationship between the two
companies, including a potential joint venture or strategic
partnership.
 
 Acquisition
of Pharmaceutical Communications Platform Technology from ClearLobby,
Inc.
 
 On
September 12, 2008, the Company entered into a Limited Asset Purchase Agreement
with ClearLobby, Inc., a Delaware corporation, pursuant to which the Company
agreed to purchase trademarks, software, license agreements and other assets
related to ClearLobby’s pharmaceutical communications
platform technology.  The ClearLobby technology will lead to an
online service designed to change the dynamic between physicians and
pharmaceutical companies by placing control of the relationship firmly in the
hands of the physician.  In consideration for the assets purchased
under the Limited Asset Purchase Agreement, the Company paid $250,000,
consisting of $10,000 in cash and $240,000 in the form of an unsecured
promissory note and 20,000 shares of restricted Common
Stock.
 
 HISTORY
AND BACKGROUND
 
 Pursuant
to a Share Exchange Agreement dated October 12, 2005, we 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.  Thereafter, 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.
 
 PRODUCTS
AND SERVICES
 
 iMedicor
-- is 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.
 
 iMedicorIntegration DriverTM --is newly integrated software that allows an iMedicor user to communicate,
transmit records and images across any EMR system securely and
effectively.  The introduction of this feature in December 2007 has
provided a unique low-cost solution to a significant hurdle that prevented
widespread adoption of electronic (Internet) communication.  Up to
this point, EMR systems could not communicate electronically with any referring
doctor, lab or test center outside the EMR network and remain HIPAA
compliant.  This feature creates the communication link.
 
 iMedicorClearLobbyTM --is
a powerful pharmaceutical company-marketing platform that will allow physicians
to communicate directly with their pharmaceutical company certified sales
representatives electronically.  ClearLobby is also a content delivery
system that gets important drug marketing information in front of physicians far
more effectively than traditional pharmaceutical company direct marketing
methods.
 
 4
 Table of Contents
  iMedicorLiveAccessTM --is
a next–generation collaboration platform that delivers video, wideband audio and
a full suite of web–collaboration tools in a single browser window accessible
from PCs or Laptops enabling organizations and individuals to work and learn
"virtually" as if everyone were in the same room.
 
 iMedicorNuScribeTM --is a
voice-recognition driven document creation and management system that enables
physicians to create and manage patient medical records online using the most
advanced voice recognition technology available today.  NuScribe is
HIPAA compliant and includes SureScripts® e-Prescribing tools.
 
 iMedicorCME
Education Solutions–is a service that delivers an unparalleled educational experience for
physicians, administrators, nurses and other high-level healthcare
workers.  Our iMedicor continuing medical education (“CME”) solutions
utilizes several of our technology platforms to offer distance-learning programs
that are available from any computer anywhere in the world.  The
Education Solutions division is directly responsible for providing services to
EP-Live On-Line, a joint venture between Vemics and EP Global Communications,
publishers of Exceptional Parent Magazine serving the special needs of people
within the lifelong chronic disability segment of our
population.  This alliance has produced high quality CME programs
delivered to doctors, nurse practitioners, administrators, occupational
therapists and physical therapists, parents and patients.  The CME
programs produced and distributed through this alliance are sponsored by
pharmaceutical companies and the U.S. Military.
 
 Fulfilling
a Market Demand
 
 We
believe that our proprietary technology platforms fulfill a deficiency within
the healthcare information technology communication infrastructure in the U.S.
and beyond.  iMedicor offers a communications system that enables
physicians to transmit electronic medical records and images in a HIPAA
compliant environment directly or through various EMR systems in a highly
accessible and affordable fashion.  This single proprietary technology
upgrades healthcare communication to Internet based speed, efficiency and cost,
something we all take for granted in our regular business
activities.  Up until now, electronic Internet based communications
have been elusive for doctors and other high-level healthcare
professionals.
 
 The
difficulties healthcare organizations have had integrating business process
solutions are well documented.  Based on these difficulties there is
finally a willingness to accept that a new paradigm is needed for medical
practices, hospitals, EMR companies and insurance companies to focus on core
capabilities and outsource anything that gets in the way of meeting outcome
objectives.  Businesses and professionals that can take advantage of
technology-based services and productivity-oriented solutions without having to
own the technology or the responsibility to adapt and maintain it will be able
to provide a broader scope of targeted solutions to both internal and external
constituencies.  Our technology-based services help to maximize our
customers’ ability to compete and provide increased service to their
patients.
 
 Portal
members subscribing to upgrade services can participate in live, 2-way
interactive programs and events via the portals’ video, voice and data
collaboration tools.  Participants can see, hear and interact with
presenters, view a streamed version of the live presentation or access the
session in archived form after the event.  The iMedicor instructional
design team is available to work with accredited CME providers to develop live
programming and events.
 
 Strategic
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 only, 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 Consults -- 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
piers.  iMedicor makes it easy to identify, invite and collaborate
with a constantly growing membership base.  Members can review other
member bios; read posted papers and articles, contribute and share information
and ideas; consult; provide referrals and choose when and with whom they wish to
communicate.
 
 Access to Certified CME and Non-CME
Educational Resources -- iMedicor provides access to the best in online
practice-relevant education and CME.  Portal members can access
traditional on-demand (asynchronous) programs and view live, streamed
programming and video archives.
 
 Pharmaceutical Company Content
Delivery -- The iMedicor ClearLobby platform is 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 they request a meeting, ask questions and
order samples directly from their representative - all through
ClearLobby.  The sales representative then communicates directly with
the physician to fulfill their requests.  This new electronic exchange
of information will make the use of the representative’s time far more effective
and then empowers the physician in this very necessary
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.
 
 5
 Table of Contents
  BUSINESS
OPERATIONS
 
 Healthcare
Services
 
 For the
past nine months, we have shifted most of our efforts and resources to the
build-out and promotion of iMedicor,our collaborative online
portal designed for and by healthcare professionals to facilitate
productivity.  iMedicoroffers a rapid, secure
exchange of education, information and ideas in real-time that is the
cornerstone of our Healthcare Services division.  On October 9, 2007,
the Company announced the commercial launch of
iMedicor.  iMedicoris the health
industry's first free HIPAA compliant personal health information exchange and
secure messaging portal for physician collaboration and
community.  iMedicor’s features include HIPPA compliant electronic
transfer of patient medical information, voice-recognition medical
transcription, electronic medical records and image transfer and storage,
simplified and secure communications between pharmaceutical companies and
physicians, and CME content, both live and static.
 
 We
believe this combination of features addresses both existing educational needs
for physicians and other healthcare providers and the ability to transfer
personal health information electronically in a method, which satisfies federal
HIPPA regulations that proscribe the transmission of records via
email.   Currently all aspects of iMedicorare offered free of
charge to physicians and other healthcare providers using the
portal.  The content sponsors pay for CME content, which users can
access via the portal.  Once consistent usage by a substantial user
base is established, iMedicor will begin to charge for premium productivity
tools bundled as a package through the portal.
 
 Revenue
will be derived from multiple sources within the portal:  Access to
premium productivity tools including iMedicor NuScribeTM and iMedicor LiveAccess;
the iMedicor Integration Driver by charging monthly fees for two-way access
between disparate EMR technologies; iMedicor ClearLobby by providing direct
access to physicians by pharmaceutical companies’ product information on a
per-physician interaction basis; and production, distribution and archiving of
Continuing Medical Education courses.  We anticipate, however, that
the principal revenue generated through iMedicor will be derived from profiled
direct marketing and access to our user base in a non-intrusive manner whether
through advertisements, sponsorships or other marketing
relationships.  We anticipate further that interested parties such as
pharmaceutical companies, medical device companies and other high-end retailers
and service providers will be interested in accessing this highly sought after
demographic of physicians and other healthcare
providers.  Additionally, we anticipate charging fees for premium
services associated with the NuScribeTM voice recognition transcription service
by November 2008 and iMedicor Integration Driver connectivity fees by December
2008 for disparate Electronic Medical Records Systems (“EMR”) to transfer
information to each other.
 
 We have
announced several new relationships in the last year focused on iMedicor, which
we believe will both establish iMedicor’s position as the leader in
collaborative communications for healthcare professionals in the U.S. and
increase the registration/user base of the portal:
 
 ·
              Service
      Agreement with eRx Network (“eRx”) effective November 30,
      2008.  eRx Network is a leading provider of third-party claims
      management and analysis services, Medicare and Medicaid DME billing
      services, and electronic prescribing services to the retail pharmacy
      industry.  Our solutions provide our customers the tools
      necessary for improving their profitability, efficiency and
      accuracy.  Through this agreement, eRx and iMedicor will
      mutually implement bi-directional connectivity services between the eRx
      and iMedicor web portals to facilitate the exchange of prescription
      related data.  The term of this Agreement is three years from
      the effective date with an automatic one-year renewal unless either party
      gives ninety day written notice prior to the initial term or any renewal
      term of intent not to renew.
 
 ·
              Service
      Agreement with Medlink effective December 27, 2007.  Medlink
      network offers discounted fees for major tests (CAT Scans, MRI, X-Rays
      Etc) to patients with inadequate or no insurance administered directly
      through doctors’ offices.  Currently MedLink represents over
      1900 freestanding medical images facilities, 500 neurologists and over
      40,000 referring physicians.  We have executed an agreement that
      will allow Medlink to offer iMedicor to its network
      members to transport test results from the imaging facilities directly to
      the referring doctor and primary care physicians.  The
      widespread adoption of iMedicor by MedLink providers will improve
      healthcare communications by reducing the time it takes to receive test
      results from several days to several
minutes.
 
 ·
              Microsoft
      HealthVault Solution Provider Agreement between Vemics, Inc and Microsoft
      Corporation effective February 15, 2008.  Through this
      Agreement, Vemics’ iMedicor HIPAA compliant Electronic Health Record
      Transport portal will give HealthVault subscribers a user-friendly conduit
      for patient-physician communication as well as expedited access to their
      medical records and images.  There are no direct fees associated
      with this Agreement.  The term of this agreement is one year
      from the effective date and will automatically renew on each anniversary
      for successive one-year periods, unless either party terminates with 60
      days written notice.
  ·
              Volume
      Purchase Agreement between Dell Marketing, LLC and Vemics, Inc. effective
      February 19, 2008.  The partnership with Dell opens the
      potential to create a coalition of large companies centered
      on iMedicor who will sponsor free, electronic PHI (Personal Health
      Information) exchange to physicians in the U.S.  As we grow our
      relationship with Dell, we anticipate that iMedicor will actively be
      marketed by Dell to its large client base.  There are no direct
      fees associated with this agreement.  The term of this agreement
      is three years and will automatically renew on each anniversary for
      successive one-year periods, unless either party terminates by providing
      the other with 90 days prior written
notice.
 
 ·
              Strategic
      Alliance with Ameriplan.  Under this alliance, iMedicor will
      provide a group page within the iMedicor web portal for Ameriplan member
      physicians, dentists and chiropractors to participate in blogs, forums and
      other areas of interest, as well as full access to all other iMedicor
      services and Ameriplan will deliver to iMedicor its list of physicians,
      dentists, chiropractors and other healthcare workers. There are no direct
      fees associated with this agreement.  The term of this agreement
      is three years from effective date with an automatic one-year renewal
      unless either party gives ninety day written notice prior to the initial
      term or any renewal term of intent not to
renew.
 
 ·
              Strategic
      Alliance with the American Academy of Family Physicians
      (“AAFP”).  The AAFP along with the American National Standards
      Institute (“ANSI”) has created the Continuity of Care Record (“CCR”)
      standard for widespread personal health information
      exchange.  The CCR is an XML file that contains information
      regarding the patient’s demographic, health insurance, medication,
      diagnosis and health plan information.  To date, 22 leading
      medical associations including the American Medical Association (“AMA”)
      back the CCR standard, which associations represent and have access to
      most practicing physicians in the U.S.  They have rallied the
      support of 70 different electronic medical record (EMR)
      vendors.  We believe the CCR standard has yet to catch on with
      the physician population because the only providers that have the ability
      to carry a CCR file are several private networks that charge a substantial
      fee per EMR message sent.  We approached the AAFP regarding a
      partnership that would make CCR standard more affordable and accessible to
      physicians.  iMedicor in conjunction with the AAFP will offer a
      free network for the exchange of CCR files.  We are currently
      engaged in an exclusive launch with e-MDs, a well-respected EMR vendor
      based in Austin, TX.  After the launch concludes in November
      2008, the AAFP will be promoting our service to all of the EMR vendors as
      well.
 
 6
 Table of Contents
  Education
and Training
 
 During
2007 – 2008, our focus in the Education Division had been
threefold:
 
 ·
              The delivery of CME courses to
      the medical community in the U.S.The demand for CME
      continues to grow nationally, and our preparedness to provide this service
      has grown as well.  This year, we have either delivered or
      contracted to deliver CME courses for a major U.S. university, the U.S.
      military and several pharmaceutical company
  sponsors.
  ·
              The licensing or our
      productivity tools to state education departments in the
      U.S.  The state of Pennsylvania is our first customer in
      this effort.  We intend to initiate a sales campaign to increase
      our state education department customer
base.
  ·
              The launch of our Global
      Business English (GBE) and Advanced English programs primarily inRussia.While we have
      multiple agreements in Russia with organizations, that could provide
      significant growth and success in this sector, due to the shift in our
      focus to building out iMedicor, we have not had the internal resources to
      be as aggressive in building the growth of the GBE program.  We
      are currently reviewing our options in this area and are considering the
      possibility of licensing to or joint venturing with another company
      focused in the language education space that has the resources to grow our
      GBE and Advanced English programs.  There are no formal
      negotiations at this time.
  We are
currently in the process of transferring all CME and healthcare related
activities from the Education Division to the Healthcare Services
division.  We may reorganize the Education Division by transferring the
remaining functions of that division to one of our Education-related strategic
partners.  We have no firm plans as of the date of this
Report.
  SALES
AND MARKETING
 
 iMedicor
Marketing
 
 Our
marketing strategy consists of building our brand by creating a company and
product presence in the healthcare industry as well as at conferences and events
in order to raise visibility within that industry.  We intend to
conduct product demonstrations and consult with potential customers such as
physicians, pharmaceutical companies, via trade shows, national medical
association meetings, trade print advertising.  We also are developing
programs to expand iMedicor user base through viral growth through invitations
by existing users to their colleagues to communicate through the iMedicor
portal.  Since February 2008, our primary focus has been on the
promotion of iMedicor and the development of brand awareness within our targeted
markets and developing the revenue streams associated with
iMedicor.
 
 We seek
in the coming year to accelerate our efforts to build a loyal user audience
within our 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.  Further, we seek to
enhance the product palette with the features demanded by actual users and
provide online surveys using our services to better understand physicians’
needs, habits and behaviors and offer that intelligence to our revenue
generating clients.
 
 The
initial user-base of iMedicor has been built and expanded through our numerous
strategic alliances.  Further expansion will be facilitated through
viral growth.  Through its user-base, iMedicor has the ability to
market any number of different products and services.  Thus, a sales
team will be deployed to market the iMedicor technology service to organizations
such as pharmaceutical companies and medical device
manufacturers.  Advertising sales for iMedicor will be handled through
third- party organizations.  iMedicor will also make available product
specific educational programs paid for initially by pharmaceutical companies and
medical device companies.  We believe iMedicor represents a direct
path to physicians in an effective, opt in, non-intrusive method.
 
 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
pharmaceutical companies are now actively looking for new 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.  In addition, the Pharma Research and
Manufacturers of America (PhRMA) imposed a moratorium that requires
pharmaceutical companies to educate physicians for a full six months before the
drug is available for prescribing.
 
 Vemics 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 the
ClearLobby technology will provide a content management and delivery system that
allows pharmaceutical companies to post pertinent content that is then accessed
and reviewed by the physician.  Once the physician reviews the
information, ClearLobby will enable physicians to request a meeting, ask
questions and order samples directly from their representative.  The
representative then would communicate directly with the physician to fulfill
their 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 ClearLobby to our own user base as well as to clients of
our various strategic partners.  Vemics will not deploy a direct sales
force to handle the program recruiting itself.  Marketing will be
prevalent in both 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.
 
 At the
start, we intend to hire pharmaceutical company consultants to pitch their
current and potential clients with enhanced iMedicor
offerings.  Ultimately, we anticipate hiring sales representatives
with a deep seeded knowledge of the healthcare and or pharmaceutical
industries.  These consultants and sales reps will be tasked with
attracting and bringing into our portals larger healthcare organizations such as
hospitals and clinics and maintaining the relationships with these organizations
to minimize attrition.
 
 7
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  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.
 The lines of business in which the Company is engaged are 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 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.
 
 In the
Medical Portal/Secure File
Transfer market, we are aware of four competitors, Kryptiq, Medem,
Medseek, SafteySend (which offer EMR file transfer services on a per message
sent basis).  In the collaboration market, we are
aware of several competitors, WebEx, PolyCom, Tandberg, Adobe (Macromedia),
Microsoft (MS Office Live Meeting) as well as a broad variety of service bureaus
that provide access to various conferencing and collaboration
technologies.  In the CME market, there are many
competitors such as CME producers, medical societies and medical
schools.  In the content market, we are aware
of the following competitors, Doctors Guide, PubMed, WebMD Health, Excerpta
Medica and Ovid.
 
 Vemics
believes that it differentiates itself technologically from its competitors in
the CME market by focusing on the dynamics of live in-person learning sessions
by combining high quality video conferencing video streaming, archiving and a
full suite of data and web conferencing tools into one seamless
service.  Vemics is responding to the need to reach greater numbers of
participants in either classroom or meeting sessions.  In response,
Vemics has integrated the ability to video stream and provides on-line archiving
of its sessions to an unlimited number of one-way participants.
  The
experience of Vemics’ senior management team brings together a unique mix of
distance education, video and web conferencing technologies, asynchronous and
synchronous learning designs, business service providers network services,
corporate training, marketing, new product development and introduction, sales
and operations and management experienced in the public
markets.  Further, Vemics believes that it has additional competitive
advantages such as that, to our knowledge, no competitor currently delivers
comprehensive customer centric solutions that feature the delivery of live fully
interactive programming.  By combining proprietary and readily
available technologies in innovative customer centric products and services, we
provide customers the solutions they want now.  As a result, we
eliminate the need for them to subscribe to expensive, secure networks or
purchase products that only solve part of the problem or may become obsolete or
incompatible with future products.
 
 In
addition, no competitors provide the breadth of technologies that can be applied
to a totally integrated customer solution taking educational programming to
high-speed mobile phones, smart-phones, and Internet enabled PDAs
worldwide.  We believe that the ClearLobby technology has the ability
to change the relationship between the physician, the pharmaceutical
representative and the pharmaceutical company by placing control in the hands of
the physician and making the interactions far more effective and less costly to
all parties.  We also believe that professional portal solutions will
follow consumer portal success and stimulate viral membership growth creating
additional and expanding markets for Vemics.
 
 EMPLOYEES
 
 On
September 29, 2008, the Company had 20 full-time employees and 2 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.
 
 Though
our predecessor entity, E & M Management, was formed in 1992,
Vemics-Delaware, our current operating business, was incorporated later on July
17, 2001.  Because of our limited history as a healthcare portal, we
do not have significant historical financial information on which to base
planned revenues and operating expenses.  We expect to experience
fluctuations in future 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 production
      and distribution;
 ·
              the
      size and rate of growth of the market for Internet products and online
      content and services;
 ·
              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 U.S. 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.
 
 8
 Table of Contents
  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.
 
 We
require substantial additional funding to meet our future operating and capital
expenditure requirements.  To execute on our business plan
successfully, we will need to raise additional money in the
future.  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 our current private
placement will be successful or that even the minimum offering amount will be
raised.  Thereafter, there is no assurance 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 likely 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.  At June 30, 2007, we had cash and cash
equivalents of $505,668, a working capital deficit of $2,159,158 and an
accumulated deficit of $15,059,767.  At June 30, 2008, we had cash and cash
equivalents of $202,836, a working capital deficit of $4,673,844 and an
accumulated deficit of $21,520,657.  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 current available
capital as of September 29, 2008, coupled with verbal commitments for bridge
financing as needed from a current investor would enable us to continue as a
going concern through February 1, 2009.  Anticipated revenues along
with a potential equity raise from the current private placement could enable us
to continue our current operations through at least June 30, 2009, if we are
able to restructure portions of our short-term debt.  Subsequent to
July 1, 2009, our inability to obtain needed funding would have a material
adverse effect on our operations and our ability to achieve
profitability.  If we fail to generate increased revenues or fail to
sell additional securities, you may lose all or a substantial portion of your
investment.
 
 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 and 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 numbers and expertise of the personnel we have available to work
on the projects.  Moreover, competition for qualified employees may
require us to increase our cash or equity compensation, which may have an
adverse effect on earnings.
  We
may make strategic acquisitions or investments, which involves numerous risks,
including the risk that we might pay too much for an acquisition or investment,
that any transaction could distract management and that the failure to
successfully integrated an acquired business could harm us and our stock
price.
 
 As part
of our strategy to expand our services and revenues, we have acquired, and may
acquire, or make investments in businesses, joint ventures, technologies,
services or products we view as complementary.  Identifying suitable
acquisition or investment candidates at reasonable prices or on reasonable terms
may be difficult, and the failure to do so could harm our growth
strategy.  If we do acquire a company or make other types of
acquisitions, we could have difficulty integrating the acquired services,
personnel or technologies.  These difficulties could disrupt our
ongoing business, distract our management and employees and increase our
expenses.  As a result, the failure to consummate potential
acquisitions or investments or to integrate them into the business properly
could have a material adverse effect on our business, financial condition and
operating results.
 
 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 clients will depend
significantly on the performance of our network infrastructure.  In
addition, a key element of our strategy is to perform services for clients 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 and reduced traffic to clients’ web sites.  We may
be unable to improve our technical infrastructure in relation to increased usage
of our services.  In addition, the users of the systems we deploy for
our clients 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.  We may provide some of our clients
with a service level agreement guarantee based on the size of the client and the
amount of the business generated with our Company.  This guarantee
could result in financial penalties to us that could have a material adverse
effect on our business, financial condition and operating results.
 
 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.
 
 9
 Table of Contents
  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 on a competitive basis, 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;
 ·
              our
      ability to timely deliver our products to
  consumers;
 ·
              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 our iMedicor 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 have
filed for registration of our material trademarks in the U.S. and, based upon
anticipated use, may do so in certain other countries.  We may not be
entitled to the benefits of such registration for an extended period 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.
 
 Other
parties may assert claims of infringement of intellectual property or other
proprietary rights against us.  Even meritless claims 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, multimedia 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.
 
 10
 Table of Contents
  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.  In addition, we currently use personal
information we collect about the users of the services we provide to clients for
internal information and to share with those clients to determine how to improve
our services, applications and features, and to provide clients with
feedback.  These practices are limited by each client’s privacy
policies.  We could be subject to liability claims by clients’ users
for misuses of personal information by the clients, such as for unauthorized
marketing purposes.  In addition, the Federal Trade Commission has
previously investigated various Internet companies regarding their use of
personal information.  We could incur additional expenses if new
regulations regarding the use of personal information are introduced or if our
privacy practices are investigated.  This could have a material
adverse effect on our business, financial condition and operating
results.
 
 Under
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 concerning the sponsorship of CME and the application of HIPAA
guidelines could adversely affect our business.
 
 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 CME to be sponsored by
pharmaceutical companies 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.
 
 We
believe that we have met 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 that
our 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 did 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.
 
 11
 Table of Contents
  We
are dependent on our management and employees.
 
 We are
dependent on the services of our executive officers and key
employees.  As of September 29, 2008, we had 22 employees, four of
whom are executive officers.  We currently maintain key-man life
insurance policies on Fred Zolla and Brian Howell, both executive officers of
the Company, in the amounts of $3,000,000 and $2,000,000,
respectively.  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 notwithstanding coverage
by key-man insurance, the result of the death, 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.
 
 We
will 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
would 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 September 29, 2008, we have issued
warrants to purchase an aggregate of approximately 13,315,086 shares of
Common Stock with exercise prices ranging from $0.005 to $3.00, convertible
notes in aggregate principal amount of $270,000 that are convertible at the
Company’s option into 1,198,433 shares of Common Stock, and a convertible
note in the aggregate principal amount of $502,206 convertible at the holder’s
option into 8,370,106 shares of Common Stock (based on the average closing price
for the ten trading days preceding conversion, which for this purpose we have
assumed a September 29, 2008 conversion date).  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.  In addition, certain of our securities
provide anti-dilution protection in the event we issue securities subsequently
at a price that is less than such previously issued securities.
 
 If one or
more of these events occurs, the number of shares of Common Stock that may be
acquired upon conversion or exercise would increase.  Accordingly, if
Vemics were to engage in a financing transaction involving the issuance of our
Common Stock (or securities convertible into our Common Stock) following
conversion of some of all of the convertible notes, Vemics may be required to
provide the holders that had previously converted the opportunity to maintain
their percentage ownership interest in Vemics.  The convertible notes
do not specify the manner in which such anti-dilution protection is to be
implemented.  Vemics believes its obligations under the notes would be
fulfilled by offering converting note holders the right to participate, on a
pro rata basis, in any
financing transaction occurring within 24 months after conversion on the same
terms and at the same price as other investors.
 
 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.
 
 We
have incurred increased compliance costs because of becoming a reporting
company.
 
 In April
2008, we became a Securities and Exchange Commission (“SEC”) reporting
company.  Before this time, we had no history operating as a reporting
company.  The Securities Exchange Act of 1934, as amended (“Exchange
Act”), the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) along with a
variety of related rules implemented by the SEC, have required changes in
corporate governance practices and procedures including at our
Company.  We are required to file periodic and current reports, proxy
statements and other information with the SEC and we must adopt policies
regarding disclosure controls and procedures and regularly evaluate those
controls and procedures.  As a reporting company, we have and will
continue to incur significant additional legal, accounting and other expenses in
connection with our public disclosure and other obligations.  Our
management has also been engaged in the compliance and reporting process, which
includes in part assisting executive officers, directors and, to a limited
extent, stockholders, with matters related to insider trading and beneficial
ownership reporting.  In the future, we will be required to establish,
evaluate and report on our internal controls over financial reporting and to
have our registered independent public accounting firm issue an attestation as
to such reports.
  We have
incurred, and expect to continue to incur, increased general and administrative
expenses as a reporting company.  We also believe that compliance with
the myriad rules and regulations applicable to reporting companies and related
compliance issues will divert time and attention of management away from
operating and growing our business.  Being a public company also
increases the risk of exposure to class action stockholder lawsuits and SEC
enforcement actions, and increases the expense to obtain appropriate director
and officer liability insurance on acceptable or even reduced policy limits and
coverage.  As a result, we may find it more difficult to attract and
retain qualified persons to serve on our board of directors or as executive
officers.
 
 Our
Common Stock is subject to the SEC’s penny stock rules; 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 Exchange Act as any equity security other
than a security that: (i) is an 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
Pink Sheets, LLC, 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 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 stockholders may find it more difficult
to sell their shares of Common Stock.
 
 12
 Table of Contents
  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 (“Section 404”), we will be
required, beginning with our annual report on Form 10-K for the fiscal year
ending June 30, 2009, to include in our annual reports on Form 10-K, our
management’s report on internal control over financial reporting and at a future
date the registered public accounting firm’s attestation report on our
management’s assessment of our internal control over financial
reporting.  We intend to prepare an internal plan of action for
compliance with the requirements of Section 404.  As a result, we
cannot guarantee that we will not have any “significant deficiencies” or
“material weaknesses” within our processes.  Indeed, our auditor has
alerted to us to several material weaknesses each of which are set forth in
“Item 9A - Controls and Procedures” in this Form 10-K.  Compliance
with the requirements of Section 404 is expected to be expensive and
time-consuming.  If we fail to complete this evaluation in a timely
manner, we could be subject to regulatory scrutiny and a loss of public
confidence in our internal control over financial reporting.  In
addition, any failure to establish an effective system of disclosure controls
and procedures could cause our current and potential stockholders and customers
to lose confidence in our financial reporting and disclosure required under the
Exchange Act, which could adversely affect our business.
 
 We are controlled by our principal
stockholders and management.  Other stockholders have limited ability
to influence our operations or to receive a premium for their securities through
a change in control.
 
 Our
executive officers, directors and principal stockholders and their affiliates
own approximately 65.37% of the outstanding shares of Common Stock as of
September 29, 2008 (prior to the closing of the current private
placement).  These parties effectively control the Company, direct its
affairs and have significant influence in the election of directors and approval
of significant corporate transactions.  The interests of these
stockholders may conflict with those of other stockholders.  This
concentration of ownership may also delay, defer or prevent a change in control
of us and some transactions may be more difficult or impossible without the
support of these stockholders.
 
 Our
Common Stock has a very limited trading market.
 
 Our
Common Stock is traded on the over-the-counter Pink Sheets, 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
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.  We will seek to have our
Common Stock quoted on the OTC Bulletin Board (“OTCBB”) in the near future,
though there can be no assurance that we will be successful in doing
so.
  We
do not intend to pay dividends on our Common Stock.
 
 We
currently intend to retain any future earnings to fund growth and, therefore, do
not expect to pay any dividends to our stockholders in the near
future.
 
 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.
 
 Item2.  Properties
 
 Vemics’
principal office space is located in Nanuet, New York, which office is provided
by our President and CEO, Fred H. Zolla.  Vemics reimburses Fred Zolla
approximately $4,500 annually for the office space that he provides to us
pursuant to an oral agreement.
 
 Our Healthcare Services
operations are located in at 3600 Bee Caves Road, Suite 216, Austin,
Texas 78746, pursuant to a written Lease Agreement between Cheryl Ogle and
NuScribe, dated March 10, 2006.  The term of the lease is 36 months
beginning April 1, 2006 with a current lease payment of $3,434.81 per month plus
a proportionate share of the operating expenses for the building.  The
President of NuScribe, Tom C. Dorsett, signed a personal guaranty under this
Lease Agreement, which covers six months worth of rental payment in the event of
our default.
 
 In
addition, several of our employees work from home offices throughout the
U.S.  We have no ownership interest or formal lease arrangements with
such properties.  Our website lists the home offices of (i) the
Company’s chief technology officer, Brian Howell, 247 Green St, Marblehead, MA
01945; and (ii) a consultant of the Company, John Walber, whose title is
Director of Instructional Design, 403 Vernon Rd, Jenkintown, PA
19046.  We believe these existing facilities are in good condition and
are adequate for our current needs.
 
 We do not
have a formal investment policy and we have not invested in real estate, real
estate mortgages or securities of, or interest in, persons primarily engaged in
real estate activities and have no current intention to do so in the
future.
 
 13
 Table of Contents
  Item3.  Legal Proceedings
  We are,
from time to time, involved in various lawsuits generally incidental to our
business operations.  In the opinion of management, the ultimate
resolution of these matters, if any, will not have a significant effect on the
financial position, operations or cash flows of the
Company.  Currently, the Company is involved in the following ongoing
matters.
  Vemics,
Inc. and Fred Zolla v. Louis Meade, Jr., Dorothy Valenti, Michael Jesse, Ron
Francesco, Vito Petruzzella, Dennis O’Brien, Ed Pedicine, Conrad Nowicki, and
Joseph Talarico, Case No. 1:06-cv-8716, U.S. District Court, Southern District
of New York, commenced October 11, 2006.
 
 In this
action, Vemics asserts claims against all of the defendants for declaratory
judgment, breach of contract and tortuous interference with business
relationship, and, in addition, against defendant Louis Meade, Jr. for
defamation of Vemics and its CEO, Fred Zolla.  Vemics alleges that the
defendants, led by defendant Meade, asserted a host of unfounded
allegations of fraudulent misrepresentation and breach of contract against
Vemics and Mr. Zolla to coerce Vemics to repay certain note
obligations on a schedule faster than that required by the notes and wrongfully
place defendants in a position ahead of other similarly situated
noteholders.  Vemics further alleges that the defendants' threats and
harassment have materially interfered with several lucrative business
transactions Vemics negotiated and have defamed Vemics and Mr. Zolla. 
Vemics seeks damages of a minimum of $2.5 million plus punitive damages,
attorneys' fees and costs because of defendants' breach of contract, tortuous
interference with business relationship and defamation of Vemics and Mr.
Zolla.  Defendants filed a counterclaim against Vemics and Mr. Zolla,
alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5,
violations of Section 20(a) of the Exchange Act by Mr. Zolla, fraudulent
inducement, breach of contract, breach of the covenant of good faith and fair
dealing, and unjust enrichment.  Defendants’ counterclaim also sought
a declaration from the court that Vemics and Mr. Zolla breached their
contractual obligations to defendants and as a result, defendants were no longer
obligated to perform the remainder of their obligations under the notes, and
that defendants could accelerate repayment of their notes.  Vemics and
Mr. Zolla denied defendants’ allegations, believe the claims are without merit
and have actively defended against the counterclaim.
 
 The
parties to this action reached agreement to resolve the entire case, including
defendants’ counterclaim, and Vemics presented a written settlement agreement to
the defendants.  While Vemics was waiting for the defendants’ signatures on
and performance under the settlement agreement, the defendants, on January 23,
2008, filed with the Court a “Motion to Enforce the Settlement Agreement” even
though they had not signed or performed under the settlement agreement. 
The motion has been fully briefed by the parties and is awaiting a ruling by the
Court.
 
 Glowpoint,
Inc v. Vemics, Inc., Index No. 106433-07, N.Y. Superior Court, commenced May 1,
2007.
 
 On May
11, 2007, Glowpoint, Inc. filed a complaint against Vemics in the Supreme Court
of the State of New York, County of New York for breach of contract and seeking
to recover $312,346 plus interest and attorneys fees.  Vemics timely
answered the complaint on July 5, 2007, denying that it is liable to Glowpoint
for such amount, and is vigorously defending such claims.  The parties
have engaged in some written discovery and are continuing to discuss the basis
for a potential settlement.
 
 LearningStation.com,
Inc. v. E-Learning Desktop Venture, Inc. and Vemics, Inc., Claim No. 02-8KQ-W4P,
American Arbitration Association, International Centre for Dispute Resolution,
commenced April 3, 2008.
 
 In this
arbitration, LearningStation.com alleges that Vemics, when it acquired certain
assets of E-Learning Desktop Venture, Inc. (“ELD”) pursuant to an Asset Purchase
Agreement, agreed to assume and pay certain amounts due to LearningStation.com
pursuant to a Delivery Agreement and loan between LearningStation.com and
ELD.  LearningStation.com’s Demand for Arbitration seeks $76,236.00
plus interest, attorneys’ fees, cost and expenses.  On May 30, 2008,
Vemics filed a cross-claim against ELD, claiming that ELD materially breached
the Asset Purchase Agreement by failing to pay the allegedly outstanding sums to
LearningStation.com prior to closing under the Asset Purchase
Agreement.  Vemics also cross-claimed against ELD for indemnification
and/or contribution, asserting that ELD is obligated to provide a defense for
Vemics against the claims asserted by LearningStation.com in the arbitration,
and to indemnify and hold harmless Vemics for any and all amounts for which
Vemics may be found liable to LearningStation.com at the conclusion of the
arbitration.  Additionally, Vemics asserted a counterclaim for
conversion against LearningStation.com, claiming that LearningStation.com
negotiated a $15,000 payment that accompanied an offer of settlement from
Vemics, even though LearningStation.com never agreed to Vemics’ proposed
settlement terms.
 
 On June
3, 2008, LearningStation.com amended its demand for arbitration to include
alternative claims against Vemics for fraud, negligent misrepresentation and
unjust enrichment.  ELD has yet to appear in the arbitration, which
has been proceeding in ELD’s absence.  Vemics and LearningStation.com
have selected a neutral arbitrator, and a pre-hearing conference call occurred
on September 26, 2008 to set forth the schedule for the
proceedings.  The hearing in this matter is expected to take place in
December 2008.
 
 Item4.   Submission of Matters to a Vote of Security
Holders
 
 No
matters were submitted for a vote to our security holders during the fourth
quarter of our fiscal year ended June 30, 2008.
 
 14
 Table of Contents
  PART
II
 
 Item5. Market for Registrants
Common Equity, Related Stockholder
 Matters
and Issuer Purchase of Equities Securities
  Our
Common Stock is quoted over-the-counter on the Pink Sheets, LLC
(www.pinksheets.com) electronic quotation service for OTC securities under the
trading symbol “VMCI,” but is not quoted on the OTC Bulletin Board (“OTCBB”) or
NASDAQ, nor listed on any national or regional securities
exchange.  We intend to have a market maker file a Form 211 with
the Financial Industry Regulatory Authority (“FINRA”) to permit our Common Stock
to be quoted on the OTCBB shortly after this Report is filed.
 
 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
      StockLow
      Bid
              
              
              High
      BidFiscal
      Year Ended June 30, 2008First
      Quarter
                Second
      Quarterarch 31, 2008
              
              $
              0.27
              
              
              $
              0.30Second
      Quarter
              
              $
              0.09
              
              
              $
              0.32Third
      Quarter
                Fourth
      Q
              
              $
              0.04
              
              
              $
              0.26Fourth
      Quarter
              
              $
              0.04
              
              
              $
              0.18Fiscal
      Year Ended June 30, 2007First
      Quarter
                Second
      Quarterarch 31, 2008
              
              $
              0.80
              
              
              $
              1.35Second
      Quarter
              
              $
              0.11
              
              
              $
              0.95Third
      Quarter
                Fourth
      Q
              
              $
              0.19
              
              
              $
              0.45Fourth
      Quarter
              
              $
              0.25
              
              
              $
              0.42
 
 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 September 29, 2008, there
were 155 record holders of shares of our Common Stock and additional
stockholders held shares in street name.
 
 15
 Table of Contents
  Dividends
 
 Vemics
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.
 
 Securities
Authorized for Issuance under Equity Compensation Plans
 
 Information
for our equity compensation plans in effect as of June 30, 2008 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
              
              0
              
              
              0
              
              0Equity
      compensation plans not approved by security holders
              
              0
              
              
              0
              
              0Total
              
              0
              
              
              0
              
              0
 
 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 of June 30, 2008, there were
6,300,000 shares of Common Stock authorized under the Equity Plan and no options
to purchase shares of Common Stock had been granted under the Equity
Plan.
 
 As
previously reported on Form 8-K filed on August 20, 2008, on July 29, 2008, the
Company’s Board of Directors 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 16,469,467 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 following Company’s executive
officers and directors, however, upon further reflection in an attempt to
preserve shareholder equity, these officers and directors voluntarily decided to
reject these grants at this time.
  Recent
Sales of Unregistered Securities
 
 During thesixmonths ended June 30,
2008, we sold 6,733,332 shares of Common Stock for an aggregate purchase
price of $808,000 ($0.12 per share) to certain unaffiliated investors in private
placement transactions.  We have used and will continue to use the
proceeds net of associated costs for general working capital
purposes.
 
 The foregoing purchases
and sales were exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) thereof, on the basis that the transactions
did not involve a public offering.  The facts we relied upon to
claim the exemption include: (i) the purchasers represented that they purchased
shares from the Company for investment and not with a view to distribution to
the public; (ii) each certificate issued for unregistered securities contains a
legend stating that the securities have not been registered under the Securities
Act and setting forth the restrictions on the transferability and the sale of
the securities; (iii) the purchasers represented that they were accredited
investors and sophisticated and were familiar with our business activities; and
(iv) the purchasers were given full and complete access to any corporate
information requested by them.
 
 On August
14, 2008, we granted stock options under the Vemics, Inc. 2007 Equity
Compensation Plan to purchase up to 7,169,467 shares of Common Stock to
employees, directors and service providers, each with an exercise price of
$0.07 per share, the previous day’s closing price of the Common Stock on the
Pink Sheets, LLC, as provided in the plan.  We intend to file a
Registration Statement on Form S-8 to register the sale of the underlying common
stock upon exercise of such options.
 
 We intend
to raise a minimum of $2,500,000 and a maximum of $10,000,000 through the sale
of 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 $250,000 per unit (the “Units”).  Each warrant is
exercisable at a price per share of $0.20.  Marketing efforts for the
Units are anticipated to continue into the second quarter of fiscal
2009.  No Units have been issued as of the date hereof.
 
 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.
 
 16
 Table of Contents
  Item7.    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
 
 We are a leading provider
ofportal-based, virtual work and learning environments that enable
organizations of any size to communicate, work and learn at a distance as if
everyone were in the same room.  Our hosted, service solutions
eliminate the need for companies to buy, integrate or maintain continually
evolving collaborative technologies and provide a single point of access for
online communication, collaboration and learning.
 
 Ourprimary 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.  We supply organizations of all sizes with subscription-based
access to fully collaborative, real-time productivity tools that accelerate the
flow of information and education to a rapidly dispersing and highly mobile
global workforce.  Secondarily, we plan to provide direct access to
physicians by pharmaceutical companies, circumventing the pharmaceutical
companies need for costly and only moderately effective sales
forces.
 
 By June
30, 2008, individual registrations within iMedicor exceeded our pre-launch
projections by more than 200%.  Currently iMedicor is a free service
for all users as we build a customer base; however, we expect to begin
generating revenues from various components within iMedicor, including the redesigned
NuScribe Voice Recognition Application, direct pharmaceutical company to
physician marketing and product dissemination and inter—EMR communications,
sometime in the third quarter, beginning January 1, 2009.
 
 Our sales
in other areas remained flat for the year ended June 30, 2008 from 2007, as most
of our internal efforts have been devoted to establishing new relationships with
companies like eRx, Medlink, Microsoft and Dell, which we believe will be
driving forces in significantly increasing the iMedicor user base and ultimately
drive increased revenues to the Company.
 
 Our
proposed plan includes charging pharmaceutical companies an initial set up fee
of $250,000 to upload all product specific programs, in all
formats.  The initial fee will cover the set up costs and the first
2,500 qualified "click throughs" (i.e., a qualified click
through is a physician or physicians trusted source, downloading any information
available on specific products inside iMedicor).  Once the 2,500 click
throughs are exhausted, iMedicor will charge $50.00 per additional click
through.
 
 Our
iMedicor and LiveAccess solutions are focused on education, collaboration,
training.  We offer our services through two separate divisions, Education and Training and
Healthcare
Services.
 
 The
Company anticipates having five sources of income –
 
 ·
              In
      the near term, we expect to generate our primary source of
      revenue through offering a secure and non-invasive online
      communications and information delivery tool for the dissemination of
      product-specific information provided by pharmaceutical companies to
      physicians.
  ·
              The
      second source of revenue will be derived through our iMedicor Integration
      Driver, allowing physicians and hospitals using different,
      incompatible  EMR systems to exchange patient information for a
      monthly fee of between $25 and $35 per
user.
  ·
              Providing
      premium services through iMedicor, such as NuScribeTM and LiveAccessTM for a
      monthly fee of $99 per user represents the third source of
      revenue.
  ·
              Production,
      distribution and archiving of sponsored and pay per view CME courses will
      provide the fourth revenue source.
  ·
              Lastly,
      we expect to generate significant revenues from direct marketing to our
      iMedicor user-base on an “opt in” unobtrusive level from companies who
      have a desire to reach this particular
      demographic.  This last source of revenue, while ultimately
      expected to be a primary revenue stream, will take longer to develop and
      may not generate any significant revenues in the near
      future.  We will also provide consulting help desk and
      instructional design services to customers and will bill as consultation
      and other services are rendered.
 
 As of
June 30, 2008, we require approximately $200,000 to $270,000 per month to fund
our operations.  This amount may 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 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.
 
 We are
currently seeking up to $10,000,000 in capital through a private placement of
preferred stock.  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 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.
 
 17
 Table of Contents
  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 Statement of financial Accounting Standards
(“SFAS”) No. 144, Accounting for the Impairment for Disposal of Long-Lived
Assets.  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 SFAS No. 109, which requires 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
SFAS No. 128, 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.
 
 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.
 
  18
 Table of Contents
  Revenue
Recognition
  The
Company’s current sources of income are:
 
 ·
                Annual
      contracts for licensing of technology paid either monthly, quarterly or
      once annually in advance.  If paid annually the revenue is recognized
      in two parts:  Support which 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, with 1/3 of
      licensing revenue being recognized each
month.
  ·
                Sponsored
      CME programs – These programs are paid in advance with costs associated
      with the development of the program being recognized immediately as
      revenue and the balance recognized when the program (or programs) is
      delivered..
 
 The
Company anticipates having four additional sources of income in the
future:
  ·
                iMedicor
      Premium Services (NuScribe and Live Access) billed monthly in advance and
      paid via credit card at a rate of $99 per user.  This revenue
      will be recognized immediately on
payment.
  ·
                iMedicor
      Integration Driver – billed at $35 per user by the users EMR
      company.  20% of monthly fee per user is revenue share to the EMR
      company with 80% paid to Vemics.  Amounts batched and paid in arrears
      by each EMR company once per month.  This revenue will be
      recognized immediately of receipt of
payment
  ·
                iMedicor
      ClearLobby – This will revenue will be contractual and will initially
      consist of a flat fee per participating Pharmaceutical company of between
      $100,000 and $250,000 per year for posting their chosen content on the
      iMedicor site.  Based on upfront fee, a guarantee of x views of
      pharmaceutical content where x = $50 divided by the upfront amount
      paid.  All views after the pre-paid number of views has been met will
      be billed monthly in arrears at $50 per view.  Revenue for the
      initial payment will be recognized on receipt of the
      payment.  Additional revenues generated from fees associated
      with views beyond the pre-paid amount will be recognized on a monthly
      basis.
  ·
                Click
      through advertising.  No formal structure for this revenue stream has
      been created yet as it is still in the planning stage, however for
      non-pharmaceutical  related click through advertising we are
      anticipating a $5 - $10 per click on an opt-in advertising basis, which
      will be recognized monthly in
arrears.
  Results
of Operations
 
 Year
Ended June 30, 2008 Compared to Year Ended June 30, 2007
 
 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 30Audited2008
              
              
              %
              
              
              2007
              
              
              %Net
      Sales and Revenues
              
              
              588,691
              
              
              
              100
              
              
              
              941,756
              
              
              
              100Cost
      of Services
              
              
              183,767
              
              
              
              31.2
              
              
              
              399,267
              
              
              
              42.3Gross
      Profit
              
              
              404,924
              
              
              
              68.8
              
              
              
              542,489
              
              
              
              58.7Operational
      General and Administrative Expenses
              
              
              6,080,727
              
              
              
              86.8
              
              
              
              4,928,470
              
              
              
              97.4Depreciation
      and amortization
              
              
              1,288,620
              
              
              
              18.4
              
              
              
              71,885
              
              
              
              1.4Bad
      debt expenses
              
              
              41,961
              
              
              
              *
              
              
              
              59,528
              
              
              
              0.2Total
      Expenses
              
              
              7,411,308
              
              
              
              100
              
              
              
              5,059,883
              
              
              
              100Loss
      before other income (expense)
              
              
              7,006,114
              
              
              
              
              
              
              
              4,517,394
 *           Less
than 0.1%
 
 19
 Table of Contents
  Revenues
 
 Our
revenues for the year ended June 30, 2008 decreased by 37% to $588,691 from
$941,756 in 2007, due largely to a decrease in sales of the NuScribe Voice
Recognition Appliance and Application.  The decrease in NuScribe sales
was anticipated because we are redesigning this component for bundling as an
online application within the iMedicor portal.  During the redesign
period, sales efforts of the stand-alone voice recognition engine decreased
significantly, and we redirected our sales team, which had been engaged in
NuScribe sales, to building a user base of physicians and medical/healthcare
professionals within the iMedicor portal.
 
 Cost
of Services
 
 Cost of
services as a percentage of revenues was 31% for the year ended June 30, 2008 as
compared to 42% for 2007.  Decrease in cost of services as a
percentage of revenue is attributed to the decrease in sales of the NuScribe
Appliance, which entailed licensing and hardware fees associated with each sale
and are booked as cost of sales.  With the decrease in sales of the
appliance, there was a subsequent percentage decrease in cost of
sales.  Going forward we expect cost of services to remain in the same
area, approximately 35% of revenues based on current projections.  Our
current projections show the largest costs of services will be revenue sharing,
maintenance of underlying hardware supporting our portals and
commissions.
 
 Operational,
General and Administrative Expenses
 
 Operational,
general and administrative expenses increased to $6,080,727 in the year ended
June 30, 2008 from $4,928,470, or 23.4%.  This increase is largely
attributable to an increase in shares issued for fees and services related to
certain loans and loan guarantees.  Payroll and related taxes costs
decreased in 2008, as did consulting, commissions and travel expenses as the
Company consolidated its workforce to focus most of our efforts on the iMedicor
build-out and to conserve available cash.  We expect these costs to
increase significantly with the expansion of services; however, our ability to
support these increased costs will be determined primarily by our success in
raising additional capital and the successful increase in revenues in fiscal
year 2009.
 
 Sales and
marketing efforts in Russia of our GBE product slowed significantly, as we
deliberately shifted our focus on the exploration of a joint venture with a
partner more suited to marketing this product.  This attributed to
approximately 10 – 12% of our total reduction in costs for the
year.  We are currently searching for a suitable joint venture
partner.  Further, have focused, during this time, on our efforts in
the Healthcare market.
 
 Depreciation
and Amortization
 
 Depreciation
and amortization expenses increased for the year ended June 30, 2008 to
$1,288,620 from $71,886.  This is entirely attributed to the
allocation of the purchase price of NuScribe and its iMedicor website to a
technology asset and the subsequent amortization of that asset.  We
have capitalized all acquisition costs associated with the acquisition of
NuScribe Inc.  In addition, we have elected to capitalize all related
development costs associated with its completion.  We launched
iMedicor in late October 2007 and we have begun to amortize its cost on a
straight-line basis over 60 months.
 
 Loss
from Operations
 
 Income
(loss) from operations, before extraordinary item, for the year ended June 30,
2008 totaled ($7,062,091) or approximately 1,199% of net revenue compared to
(4,672,466) or approximately 514% of net revenue for 2007.  The
decrease in income from operations for the year ended June 30, 2008 was
primarily due to our focus on the continued development of iMedicor and on the
increase of the iMedicor portal’s user base.  Further, during 2008 we
suspended sales of the NuScribe Voice appliance, as it is redeveloped into an
online application which we anticipate offering as a paid service within the
iMedicor portal in the future.  The increase in losses from operations
is additionally attributed to two other factors:  the amortization of
the iMedicor technology asset, which increased our depreciation, and
amortization by approximately 1,789% from the previous year, and; the increase
in stock issued for fees and services, related specifically to certain loans and
loan guarantees, which increased by approximately 295% over the previous
year.  It should be noted that an extraordinary income item of
$650,000, the net result of a litigation that the Company was involved in which
was resolved during the 2008 fiscal year, decreased our net loss by
approximately 9.8%, however this event is considered outside the course of
normal operations.
 
 Liquidity and
Capital
 
 Cash and
cash equivalents were $212,566 at June 30, 2008 compared to $505,668 at June 30,
2007.
 
 Net cash
used by operating activities was $2,267,147 for the year-end June 30, 2008 as
compared to cash used by operating activities of $3,382,262 for the year-end
June 30, 2008.  The decrease is due primarily to the consolidation of
operations during the course of the year to conserve available
cash.
 
 Net cash
used by investing activities was $167,789 for the year-end June 30, 2008 as
compared to cash used by investing activities of $126,424 for the year-end June
30, 2007, and was primarily due to capitalization of technology development
costs.
 
 Net cash
provided by financing activities was $2,141,834for the year-end June 30, 2008 as
compared to net cash used by financing activities of $3,571,035 for the year-end
June 30, 2007 decreased primarily due to a decrease in sale of Common Stock
although it was almost offset by funding from loans for
$1,577,500.  Because of the above our cash decreased by
$293,102.
 
 20
 Table of Contents
  In
connection with our recent acquisition of a pharmaceutical communications
platform technology from ClearLobby, we entered into a $240,000 Promissory Note
as partial consideration under the Limited Asset Purchase
Agreement.  The Promissory Note bears no interest and is payable in
twelve monthly installments of $20,000 beginning on January 31, 2009 and each
succeeding month-end thereafter until the Promissory Note is paid in full on
December 30, 2009.  The repayment terms shall be accelerated if the
Company receives $10 million or more in investment funds in its current private
placement (as described herein) or any subsequent offering.  If the
Company raises $5 million or more but less than $10 million while the Promissory
Note is outstanding, the Company shall accelerate the payment of 50% of the
amount outstanding under the Promissory Note at such time the Company received
such investment funds and then continue repayment under the original repayment
schedule.
 
 Due to
our cash position in early January 2008, we deferred some of our salary
obligations to our employees and consultants.  At that time, we
informed our employees and consultants of the salary deferral and gave each the
option of remaining with the Company on a deferred salary basis or being
terminated.  We also released some of the consultants who were not
essential to our core focus in the healthcare division.  Of the
employees and consultants who were not released, all continue to work with
us.  As of the date of this filing, the Company has eliminated all
salary arrearages for its employees.  We hope to cure the arrearages
with respect to the independent consultants and former employees in the near
future.  There is no guarantee that it will be able to do so
however.
 
 We
continue to operate at a loss and are projected to do so until late in 2008 or
early fiscal 2009.  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 June 2008,
2008, we issued 6,733,335 shares of Common Stock through a private offering to
accredited investors through which we raised approximately
$808,000.  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.
 
 Subsequent
to the reporting period, in July of 2008, we issued 14,166,667 shares of common
stock through a private offering to accredited investors, which raised
$1,700,000.  13,333,333 of these shares are entitled to broad-based,
weighted average anti-dilution protection until the earlier of the consummation
of (i) a merger or consolidation of the Company with another corporation our
shareholders, immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than 51% of all votes to which all
shareholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) a sale or other disposition of all or
substantially all of our assets, or (iii) a debt or equity raise in one or more
series of transactions of at least $3 million (the “Expiration
Date”).  Under the Subscription Agreement involving the 13,333,333
shares, we issued warrants (the “Warrants”) to purchase 4,000,000 shares of the
Common Stock at an exercise price of $0.04 per share.
 
 The
Warrants are exercisable commencing on July 29, 2008, the execution date of the
Subscription Agreement, and expire on July 29, 2013 or earlier upon the
Company’s redemption of the Warrants.  The Company may redeem the
outstanding Warrants in whole, but not in part, at a price of $0.10 per Warrant,
at any time, provided that the last sales price of the Common Stock has been
equal to or greater than $5.25 per share for a period of ten (10) consecutive
trading days prior to the date on which notice of redemption is
given.  If prior to the Expiration Date we issue shares of Common
Stock for a price per share less than $0.12, then we will be obligated to issue
and deliver for no additional consideration, that number of shares equal to the
difference between the number of shares determined by dividing $1,600,000 by the
Broad-Based Weighted Average Price (as defined in the Subscription Agreement),
less 13,333,333 shares.
 
 The
Subscription Agreement provides further that if the investor introduces a
prospective institutional investor who consummates an investment of $10 million
or more in the Company during the twelve months following the date of the
Subscription Agreement, the Company agrees to issue an additional five-year
warrant to purchase 2,100,000 shares of Common Stock with an exercise price of
$0.04 per share.
     21
 Table of Contents
 
 Item8.  Financial Statements and Supplementary
Data




REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To the
Board of Directors
 Vemics,
Inc. and Subsidiary
 
 We have
audited the accompanying consolidated balance sheets of Vemics, Inc. and
Subsidiary as of June 30, 2008 and 2007 and the related consolidated statements
of operations, stockholders’ equity and statements of cash flows for the two
year period then ended. These consolidated financial statements are the
responsibility of the Corporation’s management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of 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.
 
 As
described in Note 2 to the accompanying consolidated financial statements,
the Company has restated its consolidated balance sheet as of June 30, 2007 and
the related consolidated statement of operations, shareholders’ equity, and cash
flows for the year then ended.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As more fully described in Note 2 to
the consolidated financial statements, the Company has incurred operating losses
since its inception and a net working capital deficit which raises substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that may result from the
outcome of this uncertainty.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Vemics, Inc. as
of June 30, 2008 and 2007 and the results of operations and its cash flows for
each of the two years in the period ended June 30, 2008 in conformity with
accounting principles generally accepted in the United States of
America.
 
 
 
 
 
 DEMETRIUS
& COMPANY, L.L.C.
 
 Wayne,
New Jersey
 October 14,
2008












22
 
 6/30/2008
                  
                  
                  6/30/2007ASSETS
                  
                  
                  
                  
                  (As
      Restated)Current
      assets:Cash
      and cash equivalents - interest bearing
                  
                  $
                  212,566
                  
                  
                  $
                  505,668Accounts
      receivable, net of allowance for doubtful accounts of
    $5,000and
      $-0- at June 30, 2008 and June 30, 2007, respectively
                  
                  
                  57,121
                  
                  
                  
                  228,822Total
      Current Assets
                  
                  
                  269,687
                  
                  
                  
                  734,490Property
      and equipment, net
                  
                  
                  66,349
                  
                  
                  
                  121,314Other
      assets:Technology
      & Medical software
                  
                  
                  8,032,343
                  
                  
                  
                  9,098,209Goodwill
                  
                  
                  681,673
                  
                  
                  
                  681,6738,714,016
                  
                  
                  
                  9,779,882Total
      Assets
                  
                  $
                  9,050,052
                  
                  
                  $
                  10,635,686LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Notes
      payable - banks
                  
                  $
                  299,980
                  
                  
                  $
                  299,980Current
      maturity of capital lease obligations
                  
                  
                  -
                  
                  
                  
                  5,896Short-term
      notes payable
                  
                  
                  1,279,667
                  
                  
                  
                  1,451,125Accounts
      payable and accrued expenses
                  
                  
                  1,839,470
                  
                  
                  
                  987,309Deferred
      income
                  
                  
                  123,500
                  
                  
                  
                  149,338Total
      Current Liabilities
                  
                  
                  3,542,617
                  
                  
                  
                  2,893,648Other
      long-term liabilitiesLong-term
      notes payable
                  
                  
                  1,400,914
                  
                  
                  
                  277,622Total
      Other Long-Term Liabilities
                  
                  
                  1,400,914
                  
                  
                  
                  277,622Total
      Liabilities
                  
                  
                  4,943,531
                  
                  
                  
                  3,171,270Stockholders'
      EquityCommon
      stock, par value $.001 per share, authorized 200,000,000Issued
      and outstanding: 68,926,531 and 50,609,450 shares at June 30,
      2008June
      30, 2008 and 2007, respectively
                  
                  
                  60,795
                  
                  
                  
                  50,609Additional
      Paid in Capital
                  
                  
                  26,074,578
                  
                  
                  
                  22,981,769Less:
      Treasury stock, 368,407 shares at both June 30, 2008 and June 30,
      2007(508,195
                  )
                  
                  
                  (508,195
                  )Accumulated
      deficit
                  
                  
                  (21,520,657
                  )
                  
                  
                  (15,059,767
                  )Total
      Stockholders' Equity
                  
                  
                  4,106,521
                  
                  
                  
                  7,464,416Total
      Liabiliaties and Stockholders' Equity
                  
                  $
                  9,050,052
                  
                  
                  $
                  10,635,686
 23
 Table of Contents
 
 
 For
      the
                
                
                For
      theYear
      Ended
                
                
                Year
      Ended6/30/2008
                
                
                6/30/2007Revenues
                
                $
                588,691
                
                
                $
                941,756Cost
      of Services
                
                
                183,767
                
                
                
                399,267Gross
      Profit
                
                
                404,924
                
                
                
                542,489Expenses:Stock
      issued for fees and services
                
                
                1,895,340
                
                
                
                643,000Consulting,
      commissions and travel
                
                
                1,190,605
                
                
                
                1,909,098Operational
      fees and expenses
                
                
                1,102,563
                
                
                
                627,233Professional
      fees
                
                
                661,689
                
                
                
                478,125Payroll
      and related taxes
                
                
                962,807
                
                
                
                1,171,116Depreciation
      and amortization
                
                
                1,288,620
                
                
                
                71,885Bad
      debt expenses
                
                
                41,691
                
                
                
                59,528Production,
      advertising, brochures and public relations
                
                
                267,723
                
                
                
                99,898Total
      Expenses
                
                
                7,411,038
                
                
                
                5,059,883Loss
      before other expenses
                
                
                (7,006,114
                )
                
                
                (4,517,394
                )Other
      Income/(Expenses:)Other
      income - reduction of indebtedness
                
                
                138,873
                
                
                
                -Interest
      income
                
                
                10,723
                
                
                
                2,714Interest
      expense
                
                
                (205,573
                )
                
                
                (157,786
                )Total
      Other Income/(Expenses)
                
                
                (55,977
                )
                
                
                (155,072
                )Loss
      before extraordinary item
                
                
                (7,062,091
                )
                
                
                (4,672,466
                )Extraordinary
      item - litigation, net of expenses and taxes
                
                
                650,000
                
                
                
                -Net
      loss available to common stockholders
                
                $
                (6,412,091
                )
                
                $
                (4,672,466
                )Net
      loss per share, basic and diluted, before extraordinary
    item
                
                $
                (0.13
                )
                
                $
                (0.13
                )Net
      loss per share, basic and diluted, extraordinary item net
                
                $
                0.01
                
                
                $
                -Net
      loss per share, available to common stockholders
                
                $
                (0.12
                )
                
                $
                (0.13
                )Weighted
      average number of shares, basic and diluted
                
                
                53,574,940
                
                
                
                37,008,998
   24
 Table of Contents
  TOTALADDITIONAL
                
                
                
                
                
                
                
                
                STOCKHOLDERS'TREASURY
                
                
                PAID
      IN
                
                
                TREASURY
                
                
                ACCUMULATED
                
                
                EQUITY/DESCRIPTION
                
                SHARES
                
                
                AMOUNT
                
                
                SHARES
                
                
                CAPITAL
                
                
                STOCK
                
                
                DEFICIT
                
                
                DEFICIENCYBalance
      as of June 30, 2006
                
                
                23,345,483
                
                
                $
                23,345
                
                
                
                (368,407
                )
                
                $
                8,641,935
                
                
                $
                (508,195
                )
                
                $
                (9,722,426
                )
                
                $
                (1,565,341
                )Issuance
      of common stock
                
                
                11,986,998
                
                
                
                11,987
                
                
                
                
                
                
                
                3,625,013
                
                
                
                
                
                
                
                
                
                
                
                3,637,000Issuance
      of stock for fees/services
                
                
                4165857
                
                
                
                4,165
                
                
                
                
                
                
                
                638,835
                
                
                
                
                
                
                
                
                
                
                
                643,000Acquisition
      of NuScribe Inc. for stock
                
                
                10,000,000
                
                
                
                10,000
                
                
                
                
                
                
                
                8,990,000
                
                
                
                
                
                
                
                
                
                
                
                9,000,000Acquisition
      of e-Learning Desktop for stock
                
                
                1,111,112
                
                
                
                1,111
                
                
                
                
                
                
                
                421,111
                
                
                
                
                
                
                
                
                
                
                
                422,222Deemed
      Common Stock Dividend upon     issuance of
      warrants
                
                
                
                
                
                
                
                
                
                
                
                664,875
                
                
                
                
                
                
                
                (664,875
                )
                
                
                -Net
      loss (As Restated)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (4,672,466
                )
                
                
                (4,672,466
                )Balance
      as of June 30, 2007
                
                
                50,609,450
                
                
                
                50,608
                
                
                
                (368,407
                )
                
                
                22,981,769
                
                
                
                (508,195
                )
                
                
                (15,059,767
                )
                
                
                7,464,415Issuance
      of stock in exchange for convertibledebentures
      and accrued interest
                
                
                1,557,330
                
                
                
                1,557
                
                
                
                
                
                
                
                349,300
                
                
                
                
                
                
                
                
                
                
                
                350,857Issuance
      of common stock
                
                
                6,733,333
                
                
                
                6,733
                
                
                
                
                
                
                
                801,267
                
                
                
                
                
                
                
                
                
                
                
                808,000Issuance
      of stock for fees/services
                
                
                10,026,418
                
                
                
                1,895
                
                
                
                
                
                
                
                1,893,445
                
                
                
                
                
                
                
                
                
                
                
                1,895,340Deemed
      Common Stock Dividend upon     issuance of
      warrants
                
                
                
                
                
                
                
                
                
                
                
                
                
                48,798
                
                
                
                
                
                
                
                (48,798
                )
                
                
                -Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (6,412,091
                )
                
                
                (6,412,091
                )Balance
      as of June 30, 2008
                
                
                68,926,531
                
                
                
                60,793
                
                
                
                (368,407
                )
                
                
                26,074,579
                
                
                
                (508,195
                )
                
                
                (21,520,656
                )
                
                
                4,106,521
    25
 Table of Contents
  For
      the
                
                
                For
      theYear
      Ended
                
                
                Year
      Ended6/30/2008
                
                
                6/30/2007Cash
      Flows From Operating ActivitiesReceipts
      from customers
                
                $
                734,554
                
                
                $
                1,155,919Payments
      to suppliers, salaries
                
                
                (3,527,518
                )
                
                
                (4,417,193
                )Other
      income received
                
                
                650,000
                
                
                
                -Interest
      received
                
                
                10,723
                
                
                
                2,714Interest
      paid
                
                
                (93,215
                )
                
                
                (64,174
                )Bad
      debt expense
                
                
                (41,691
                )
                
                
                (59,528
                )Net
      Cash Used in Operating Activities
                
                
                (2,267,147
                )
                
                
                (3,382,262
                )Cash
      Flows Used in Investing ActivitiesPurchase
      of Technology & Medical software
                
                
                (165,684
                )
                
                
                (98,209
                )Purchase
      of fixed assets
                
                
                (2,105
                )
                
                
                (28,215
                )Net
      Cash Used in Investing Activities
                
                
                (167,789
                )
                
                
                (126,424
                )Cash
      Flows From Financing ActivitiesPayments
      on capital lease obligations
                
                
                (5,896
                )
                
                
                (47,291
                )Payments
      on notes payable
                
                
                (237,770
                )
                
                
                (18,604
                )Short
      term loans
                
                
                205,000
                
                
                
                -Long
      term loans
                
                
                1,372,500
                
                
                
                -Sale
      of common stock
                
                
                808,000
                
                
                
                3,637,000Net
      Cash Provided by Financing Activities
                
                
                2,141,834
                
                
                
                3,571,105Net
      Increase/(Decrease) in Cash
                
                
                (293,102
                )
                
                
                62,419Cash
      at the Beginning of Period
                
                
                505,668
                
                
                
                443,249Cash
      at End of Period
                
                $
                212,566
                
                
                $
                505,668
   26
 Table of Contents
  1.           
 NATURE OF OPERATIONS
 
 Vemics,
Inc. (the “Company”) builds portal-based, virtual work and learning environments
primarily in healthcare and related industries that enable individuals and
organizations of any size to communicate, collaborate, work and learn at a
distance as if everyone were in the same office or room.  Recently, we
decided to focus our efforts on solutions for the healthcare industry, primarily
through our iMedicor web-based portal.  Our hosted solutions eliminate
the need for companies, medical practices and individuals to buy, integrate or
maintain continually evolving collaborative technologies and provide a single
point of access for online communication, collaboration and
learning.
 
 Our
solutions combine the best in standards-based productivity-enhancing tools with
educational / informational content, adding real-time spontaneity, impact and
face-to-face interactivity to meetings, presentations or learning
sessions.  We provide deep customer and technical support to ensure
our customers get the most out of their solutions.  Our technology
teams have been creating on-line, leading edge solutions, centered on real-time
communication, video, audio, data collaboration tools and content distribution
technologies delivered through on-line portals.  The team has been at
the forefront of bringing people and information together in ways that maximize
time, reduces cost and eliminates distance.  Our solutions are fully
hosted and managed and can be customized to fit specific needs.  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 the organization (EMRs, Hospitals,
      HMOs Etc)
 §
                Can
      be customized to align with current communication, learning and business
      needs
 
 On
October 10, 2007, Vemics launched iMedicortm – the
health industry’s first, free, 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 to be
followed by doctors, hospitals and other health care providers concerning the
handling and privacy protection of vital patient medical data.
 
 Through
iMedicortm,
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 tap corresponding services
from other professionals in the medical industry.  Moreover, the
portal environment allows for fundamental 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.  iMedicortm 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.
 
 NuScribeTM,
Inc. (see Note 16) is a developer of voice recognition software applications and
web-based productivity tools for the medical, pharmaceutical and healthcare
industries.  NuScribe SMRTM, NuScribe’s flagship product, is a
web-based, speech-enabled medical documentation system that helps medical
professionals save time, increase revenue and cut costs while streamlining the
entire medical transcription process.  The system enables physicians
to create, edit, sign and dispatch patient notes, electronic medical records,
prescriptions, referral letters and more.  NuScribe’s document
templates, voice marcos and patient-specific fields, customized for the
physician, greatly reduce physical dictation time and costs.
 
 27
 Table of Contents
  2.     
       SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 Consolidation and Basis of
Presentation
 
 On
November 8, 2005, OMII Corp. acquired all the shares of Vemics, Inc. the
Delaware Corporation in an exchange of stock transaction and it became a 100%
owned subsidiary of OMII.  The name of OMII was then changed to
Vemics, Inc., a Nevada corporation (see Note 3 for details).  The
acquisition was accounted for as a reverse acquisition, no goodwill or other
intangible assets have been recorded.  Vemics, Inc. the Delaware
Corporation has been treated as the “Acquirer” of OMII for financial reporting
purposes as it shareholders control more then
50% of the post transaction of the combined company.  Therefore, the
accompanying presentationpresents the historic financials of Vemics, Delaware,
the accounting acquirer.  Additionally, the consolidatedfinancial
statements reflect the acquisitions of NuScribe, Inc. and e-Learning Desktop and
the elimination of any intercompany transactions.
 
 Going
Concern
 
 From
inception through June 30, 2005, the Company had been in the development stage,
devoting substantially all of its
efforts to research and development of its technologies, acquisition of
equipment and raising capital.  The Company
has incurred operating losses to date and has an accumulated deficit of
approximately $21,521,000 at June 30,
2008.  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.
 
 Restatement
of Historical Financial Statements
 
 During
the year ended June 30, 2008, a prior period adjustment related to accrued
bonuses for the year ended June 30,
2007 was recorded, which has decreased net loss and accumulated deficit by
approximately $164,000. If the
Company were to raise $5 million in the future, then cash bonuses of
approximately $214,100 would be paid out to
designated employees.  In addition, these same employees would receive
in total approximately 357,000 shares of
stock.
 
 Restatement
of Historical Financial Statements
 
 During
the year ended June 30, 2008, a prior period adjustment related to accrued
bonuses for the year ended June 30,
2007 was recorded, which has decreased net loss and accumulated deficit by
approximately $164,000. If the
Company were to raise $5 million in the future, then cash bonuses of
approximately $214,100 would be paid out to
designated employees.  In addition, these same employees would receive
in total approximately 357,000 shares of
stock.
 
 Basis of
Accounting
 
 The
accompanying consolidated financial statements include the accounts of Vemics,
Delaware and OMII Corp. (now Vemics, 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 consideredcash
equivalents.
 
 
 28
 Table of Contents
 
 2.        
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
 
 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, 2008, the Company had cash balances at a certain financial institution
in excess of federally insured limits.  However, the Company does not
believe that it is subject to unusual credit risk beyond the normal credit risk
associated with commercial banking relationships.  The Company
mitigates this risk by depositing its cash in high quality financial
institutions
 
 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 as economic conditions and each customer’s
payment history and creditworthiness.  If the financial condition 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.
 
 Inventory
 
 Inventory
consists of finished goods and is stated at the lower of cost or
market.
 
 Property, Equipment and
Depreciation
 
 Property
and Equipment are recorded at their historical cost.  Depreciation and
amortization are provided for by straight-line method over the useful lives of
the assets, which vary from five to seven years.  Cost of repairs and
maintenance are charged to operations in the period incurred.
 
 Goodwill
and Other Intangible Assets
 
 The
Company accounts for goodwill and other intangible assets in accordance with
SFAS No. 142, “Goodwill and Other Intangible Assets,” which states that goodwill
and intangible assets with indefinite useful lives should not be amortized, but
instead 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 in accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS No. 144”).  The Company hasevaluated the goodwill
for impairment as of December 31, 2007utilizing present value
method to projected cash flows and concluded that no impairment has
occurred.
 
 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
in accordance with SFAS No. 86,Accounting for Costs of Computer
Software to be Sold.
 
 Leased, or
Otherwise Marketedand
Statement of Position No. 98-1,Accounting for
Costs of Computer Software Developed or Obtained for Internal Use.  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.
 
 29
 Table of Contents
 
 
 2.  
          SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES - continued
 
 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
 
 In
accordance with SFAS No. 144, 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 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
 
 The
Company accounts for income taxes under SFAS No. 109, which requires 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.
 
 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 either monthly, quarterly or
      once annually in advance.  If paid annually the revenue is recognized
      in two parts:  Support which 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, with 1/3 of
      licensing revenue being recognized each
month.
  ·
                  Sponsored
      CME programs – These programs are paid in advance with costs associated
      with the development of the program being recognized immediately as
      revenue and the balance recognized when the program (or programs) is
      delivered.
 30
 Table of Contents
  2.            
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
  The
Company anticipates having four additional sources of income in the
future:
  ·
                  iMedicor
      Premium Services (NuScribe and Live Access) billed monthly in advance and
      paid via credit card at a rate of $99 per user.  This revenue
      will be recognized immediately on
payment.
  ·
                  iMedicor
      Integration Driver – billed at $35 per user by the users EMR
      company.  20% of monthly fee per user is revenue share to the EMR
      company with 80% paid to Vemics.  Amounts batched and paid in arrears
      by each EMR company once per month.  This revenue will be
      recognized immediately of receipt of
payment.
  ·
                  iMedicor
      ClearLobby – This will revenue will be contractual and will initially
      consist of a flat fee per participating Pharmaceutical company of between
      $100,000 and $250,000 per year for posting their chosen content on the
      iMedicor site.  Based on upfront fee, a guarantee of x views of
      pharmaceutical content where x = $50 divided by the upfront amount
      paid.  All views after the pre-paid number of views has been met will
      be billed monthly in arrears at $50 per view.  Revenue for the
      initial payment will be recognized on receipt of the
      payment.  Additional revenues generated from fees associated
      with views beyond the pre-paid amount will be recognized on a monthly
      basis.
  ·
                  Click
      through advertising.  No formal structure for this revenue stream has
      been created yet as it is still in the planning stage, however for
      non-pharmaceutical  related click through advertising we are
      anticipating a $5 - $10 per click on an opt-in advertising basis, which
      will be recognized monthly in
arrears.
 The
company records revenue in accordance with Statement of Position 97-2 “Software
Revenue Recognition” (“SOP 97-2”) issued by the American Institute of Certified
Public Accountants (as modified by Statement of Position 98-9) and SEC Staff
Accounting Bulletin 104 “Revenue Recognition” (“SAS 104”) regarding revenue
recognition in financial statements.  SOP 97-2 provides additional
guidance with respect to multiple element arrangements;
returns, exchanges and platform transfer rights; resellers; funded software
development arrangements and contract accounting.
  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.
 
 The
Company is also an independent software vendor (ISV) and generates revenue from
software sales and related hardware requirements, including support and
maintenance, and consulting services.  The Company has a contract with
a value-added reseller (VAR).  The Company’s contracts with the VAR
that does not include special considerations such as rights of return, stock
rotation, price protection and special acceptance or warranty
provisions.  The Company recognizes revenue for software license sales
in accordance with Statement of Position 97-2 Software Revenue
Recognition.  The Company exercises judgment in connection with the
determination of the amount of software and services revenue to be recognized in
each accounting period.  The nature of each licensing arrangement
determines how revenues and related costs are recognized.
 
 The
standard single user license includes a Dell Inspiron D520 Laptop 1.6 ghz, 1 GB
RAM, microphone and includes on-line training, telephone support and upgrades
for 1 year.  Revenue for shipping and handling are included within the
Equipment and Consulting revenue and the related costs are included in cost of
revenue in the accompanying consolidated statements of operations.
 
 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 towards assessing the risk of
collectability.  If the future financial condition of our customers
were to deteriorate, 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.
   
 31
 Table of Contents
  2.   
         SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES – continued
 
 Advertising costs --
continued
 
 Advertising
costs are reported in selling, general and administrative expenses and include
advertising, marketing and promotional programs.  As of June 30, 2008,
all of these costs were charged to expenses in the period or
year in which incurred.  Advertising costs for the years ended June
30, 2008 and 2007 were $296,161 and $70,703, respectively.
 
 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.  When treasury stock is reissued, the value is
computed and recorded using a weighted average basis.
 
 Net
earning (loss) per share
 
 Basic and
diluted net loss per share information is presented under the requirements of
SFAS No. 128, 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.
 
 Share-Based Payment
 
 In
December 2004, the FASB issued SFAS No. 123, Share-Based
Payment.  SFAS 123 establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods and
services.  Under SFAS 123, companies are no longer able to account for
share-based compensation transactions using the intrinsic method in accordance
with APB No. 25, Accounting for Stock Issued to Employees.  Instead,
companies are required to account for such transactions using a fair-value
method and to recognize compensation expense over the period during which an
employee is required to provide services in exchange for the award.
 
 3.    
        SHAREHOLDERS’ EQUITY
(DEFICIENCY)
 
 Common stock
 
 The
Company as of June 30, 2008 had a total of 68,926,521 shares outstanding,
respectively.  There are an additional 368,407 shares in Treasury
Stock as of June 30, 2008.  On June 4, 2008, the Board of directors
approved and authorized 200 million shares of common stock.  On June
6, 2007, the Board of Directors approved the issue of 930,000 shares of
restricted stock to current and past members of the Board of Directors, and
issued another 2,777,409 to certain employees, consultants and
advisors.
 
 Warrants
 
 As of
June 30, 2008, the Company has recently issued 1,781,667 of Common Stock
reserved for issuance upon exercise of warrants to various
shareholders.  These warrants have an expiration of three years from
their date of issuance
and expire at various dates through June 2011.  Each warrant will
entitle the holder thereof to purchase one share of Common Stock at an exercise
price of $.24 per share. As of June 30, 2007, the Company has 6,385,086 shares
of Common Stock reserved for issuance upon exercise of warrants to various
shareholders and service providers.  These warrants have an expiration
date of five years from their date of issuance and expire at various dates
through February 2010.  Each warrant will entitle the holder thereof
to purchase one share of Common Stock at an exercise price ranging from $.60 to
$1.50 per share.  Management has not assigned a value to these
warrants, as it is not practicable to estimate fair value for these financial
instruments.  It also reserves the rights to redeem the warrants at
$.10 per warrant if there is a subsequent initial public offering and market
value per share meets certain levels.
   32
 Table of Contents
 
 3.        
    SHAREHOLDERS’ EQUITY (DEFICIENCY) -
continued
 
 Related
Party Transactions
 
 One
member of our Board of Directors since 2002 is the largest individual investor
in the Company, having invested $3,681,200 to date (or $3,733,254 when including
accrued interest on convertible debt that was converted to
equity).  He currently owns 13,699,237 shares of common stock and has
the right to acquire 2,896,140 additional shares of common stock pursuant to
currently exercisable warrants.
 
 This
board member received 200,000 shares of common stock on June 6, 2007 in exchange
for consulting services he provided to the Company.  These services
included financial advisory services, insurance advisory services and corporate
governance, as well as for making introductions to potential clients and
investors and other related business matters to the Company.
 
 In
addition, on June 6, 2007, this board member received 80,000 shares for his
service to the Vemics-Delaware Board of Directors while Vemics was a private
company from 2002 through 2005.
 
 The
Company’s methodology for calculating the fair value of his services involved
multiplying the price of the common stock at the value that shares were being
sold by the Company in private transactions (before the Company’s shares were
quoted on the Pink Sheets) or at the market closing price on the date of the
transaction once the Company began trading on the Pink Sheets.
 
 Recapitalization
 
 The
Company had an exchange of stock of 2.21932 shares of OMII Corp. a Nevada
corporation, the acquiring company, for one share of Vemics, Inc. a Delaware
corporation on November 8, 2005.  The surviving company changed its
name to Vemics, Inc. and the management of the new company became the
responsibility of the original Vemics, Inc., the Delaware Corporation.
 
 Vemics,
Inc. a Delaware corporation exchanged shares of outstanding common stock on
December 1, 2004 at 500 to 1.  Because of that exchange, the shares
outstanding of approximately 6,446 shares were exchanged for 3,222,985 of new
shares of common stock.
 
 Additional
shares of 109,863 were issued and exchanged to protect original shareholders
from an anticipated offering of common stock at a purchase price of $1.00 and a
warrant to purchase one share of Common stock at an exercise price of $1.50 per
share.  There were 6,374 additional shares exchanged at 500 to 1 for
3,187,000 of new shares of common stock.
 
 4.        
    PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE
 
 Depreciation
and amortization expense for the years ended June 30, 2008 and 2007 was $57,070
and $71,885, 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:
 
 6/30/2008
                
                
                6/30/2007Furniture
      and fixtures
                
                $
                2,600
                
                
                $
                2,600Software
                
                
                72,430
                
                
                
                72,430Equipment
                
                
                391,826
                
                
                
                389,721466,856
                
                
                
                464,751Less
      Accumulated Depreciation & Amortization
                
                
                400,507
                
                
                
                343,437$
                66,349
                
                
                $
                121,314
 
 
 33
 Table of Contents
  5.          
  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 its
completion.  The iMedicorÔ product 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
$1,231,550 for the year ended June 30, 2008.
 
 6/30/2008
                
                
                6/30/2007Technology
      and medical software
                
                $
                9,263,893
                
                
                $
                9,098,209Less:
      Accumulated Amortization
                
                
                1,231,550
                
                
                
                -0-$
                8,032,343
                
                
                $
                9,098,209
 
 6.         
   SHORT TERM NOTES PAYABLE
 
 The
Company has borrowed $20,000 from one member of the Board of Directors, at a
rate of interest of 4% per annum payable for a total amount due including
accrued interest of $22,600 and $22,000 as of March 31, 2008 and June 30, 2007,
respectively.  The funds were borrowed in December 2004 with the
intention of repaying this lender with the anticipation of raising sufficient
funds from a Private Placement Offering.
 
 The
Company has borrowed $-0- and $11,716 as of June 30, 2008 and June 30, 2007
including accrued interest, respectively from one member of the board of
directors at a rate of interest is at 4%.  The funds were borrowed
recently with the intention of repaying this lender with the anticipation of
raising sufficient funds in the near future.
 
 Payments
related to the short-term notes payable is comprised of the
following:
  6/30/2008
                
                
                6/30/2007Short-term
      note payable
                
                $
                -0-
                
                
                $
                11,716Short-term
      portion of long-term note payable
                
                
                361,342
                
                
                
                42,566Note
      payable banks
                
                
                299,980
                
                
                
                299,980Convertible
      debenture - 17.98%
                
                
                150,000
                
                
                
                150,000Convertible
      debenture – 8%
                
                
                270,000
                
                
                
                725,891Convertible
      debenture – 10% - 12%
                
                
                502,206
                
                
                
                520,952Total
      Short-term notes payable
                
                $
                1,579,647
                
                
                $
                1,751,105
  7.     
       LONG TERM NOTE PAYABLE
 
 On
October 20, 2005, the Company agreed to repurchase shares of several
shareholders referred to as theWellbrock Group that was exchanged for a
three-year balloon note for $300,000 to be amortized over ten years at 8%.The
shares of stock are to be held in escrow until the notes are completely
paid.  If the Company is late on its payments per the payment
schedule, the shares are to be released from escrow and to revert to the
original shareholders.
 
 An
additional payment of $10,000 to satisfy legal fees incurred was paid by the
Company in installments of$5,000 in October 2005 and January 2006.  As
of June 30, 2008, the amounts owed were $288,542. The first ten monthly payments
of principal and interest are to be in installments of $1,000 and the remaining
26 payments are to be installments of $3,639.83.  The balloon payment
of $272,076 is payable on November 1, 2008.  Payments related to the
long-term note payable described above are as follows:
 
 6/30/20072008
                
                $
                20,5662009
                
                
                277,622Total
                
                $
                298,188
    34
 Table of Contents
  7.       
     LONG TERM NOTE PAYABLE -- continued
 
 The
Company has borrowed $1,400,914 and $-0- as of June 30, 2008 and June 30, 2007
including accrued interest,
respectively from one member of the board of directors at a rate of interest is
at 4%.  The funds were borrowed
recently with the intention of repaying this lender with the anticipation of
raising sufficient funds in the near
future.  However, the lender has extended the note to be due on June
30, 2011.
 
 6/30/2008
                
                
                6/30/20072008
                
                $
                -0-
                
                
                $
                -0-2009
                
                
                -0-
                
                
                
                -0-2010
                
                
                -0-
                
                
                
                -0-2011
                
                
                1,400,914
                
                
                
                -0-Total
                
                $
                1,400,914
                
                
                $
                -0-
  8.     
       CONVERTIBLE DEBENTURES
 
 17.98% - Convertible debenture –
Payable on September 30, 2004
 
 On
December 19, 2001, the Company issued a $100,000 Convertible
Debenture.  The original note was to be paid back at quarterly
intervals for $18,500 starting September 2002 until completed for a total of
$150,000.  The note has been revised to accrue interest of $50,000
through September 30, 2004 the original due date.  The effective
interest rate is 17.98%.
 
 The debenture was to begin to be paid
in January 2007 over a period of 18 months at a monthly amount of $8,333. The
bondholder has agreed to no additional interest beyond September 30,
2004.  Vemics is in breach of this agreement
as of January 2007 as a result of not any commencing payments.
 
 At any
time, the Debenture is convertible into common shares at a conversion price of
$500 per share.
 
 Convertible
Debenture – 8%
 
 From the
time period of July 31, 2003 through June 30, 2004, the Company issued a total
of $905,500 Convertible Debentures.  Interest on the unpaid balance of
the Debentures is calculated at the rate of 8% per annum and unless the
Debenture is converted to common stock as described below; such interest is
payable by January 1, 2008 (the "Maturity Date") or the earlier prepayment of
the Debenture.
 
 On
October 1, 2004, accrued interest of $9,472 and $330,500 of Debentures were
converted into 1,509,138 of common shares.  There was remaining
$575,000 of Debentures and accrued interest of $150,891 as of June 30,
2007.
 
 As of
January 1, 2008, several debt holders settled a dispute with management and
converted to equity.  As a result, 1,557,330 shares were issued in
exchange for debentures and accrued interest of $350,857.  In
addition, there was a gain from a relinquishment of debt of
$138,890.  As an added part of the settlement, $270,000 of convertible
debentures remains but interest expense is no longer accruing.
 
 6/30/2008
                
                
                6/30/20072008
                
                $
                270,000
                
                
                $
                575,000Total
                
                $
                270,000
                
                
                $
                575,000
  Convertible
Debenture – 10% and 12%
 
 Since
September 1, 2005, the Company has issued a total of $445,000 Convertible
Debentures.  Interest on the unpaid balance of the Debentures is
calculated at the rate of 10% per annum and unless the debenture is converted to
common stock such interest and principal is payable by November 30, 2006 (the
“Maturity Date”) or the earlier prepayment of the Debenture.
   35
 Table of Contents
 
 8.   
         CONVERTIBLE DEBENTURES -
continued
 
 On
November 29, 2006, Vemics exercised its option to extend the maturity of the
note to November 30, 2007.  As part of the maturity extension, the
interest on the note was changed to 12% beginning December 1, 2006 to November
30, 2007.
 
 This
Debenture is convertible to one share of Common Stock at $1.00 per share and one
warrant at $1.00.
 
 As of
June 30, 2008 and 2007, there was outstanding Debentures of $377,500 and
$445,000, respectively, plus accrued interest of $124,706 and $111,001,
respectively.  This debenture is included in Short Term Notes
Payable.  Payments related to the Convertible Debentures described
above are as follows:
 
 6/30/2008
                
                
                6/30/2007$
                377,500
                
                
                $
                445,000Total
                
                $
                377,500
                
                
                $
                445,000
 
 9.       
     BANKS - LINE OF CREDIT
 
 The
Company has a $300,000 secured working capital line of credit of which $100,000
is guaranteed by a shareholder (and is also a member of the board of directors)
with Somerset Hills Bank payable on October 5, 2006.  On October 6,
2007, the Line of Credit was extended to October 5, 2008.  On February
12, 2007, the Company invested in a six-month Certificate of Deposit with an
interest rate of 4.64% with the bank and this security acts as collateral for
the remaining $200,000 line of credit.
 
 The terms
of the promissory note is at rate referred to as independent index, which is the
Prime Rate, as published in The Wall Street Journal (the “index”) plus .5%
rounded up to the nearest 0.125%.  The rate of interest for June 30,
2008 was 5.50%.  As of June 30, 2008, the outstanding balance was
$299,980.  There was no interest due as of June 30, 2008.
 
 The
Company has a $600,000 secured working line of credit as of September 21, 2007
of which $600,000 is guaranteed by a shareholder (and is also a member of the
board of directors) with Citibank NA payable on March 31, 2008.  On
December 27, 2007, the Line of Credit was extended to December 31,
2008.  As of June 30, 2008, the outstanding balance was $600,000 and
accrued interest of $8,433.  The term of the promissory note is at a
rate referred to as the lender’s base rate plus .5%.  The rate of
interest for June 30, 2008 was 5.50%.
 
 10.     
     STOCK ISSUED IN LIEU OF MANAGEMENT
FEE
 
 Vemics
had defaulted on an agreement to pay Valiant Holdings Company $30,000 in total
consulting fees that were to be paid monthly at $2,000 beginning April 1, 2007
until they were fully paid.  Because of this default, a settlement was
agreed to in which Vemics issued 350,000 shares of stock in lieu of paying the
$30,000 in fees.
 
 11.           RENT
 
 The
Company has a three-year office lease terminating on March 31, 2009 located in
Austin, TX resulting from the acquisition of NuScribe, Inc.  The
Company has paid total rent expenses of $51,916 and $48,163 for the years ended
June 30, 2008 and 2007, respectively.
 
 Related
Party Transactions
 
 Total
rent expense paid to various related parties for the years ended June 30, 2008
and 2007 were $-0- and $4,796, respectively.
 
 Future
minimum lease payments under the office lease agreement are:
  6/30/2008
                
                
                6/30/20072008
                
                $
                -0-
                
                
                $
                40,6062009
                
                
                30,913
                
                
                
                30,913Total
                
                $
                30,913
                
                
                $
                71,519
   36
 Table of Contents
  12.           DEEMED
COMMON STOCK DIVIDEND
 
 During
the years ended June 30, 2008 and 2007, the Company issued 1,423,333 and
2,217,467 common stocks warrants, respectively, in connection with the sale of
its common stock.  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, 2008 and 2007 were $48,798 and $664,875,
respectively.  For the years preceding June 30, 2007, there were a
total of 4,154,619 common stocks warrants issued in connection with the sale of
its common stock.  Using the Black Scholes Model for these previously
issued warrants, it was determined that the values are zero.
 
 13.           INCOME
TAXES
  6/30/2008
                
                
                6/30/2007Taxes
      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-
 
 The
Company did not have a current or deferred provision for income taxes for the
period from inception July 21, 2001 to December 31, 2003.  Deferred
tax assets comprise the following at June 30, 2008, June 30, 2007 and June 30,
2006.  At June 30, 2008, June 30, 2007, and June 30, 2006 the Company
had net operating loss (NOL) carry forwards of approximately $13,106,000,
$9,020,000 and $4,728,000, 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.
 
 6/30/2008
                
                
                6/30/2007
                
                
                6/30/2006Deferred
      Income Tax Assets
                
                $
                3,489,000
                
                
                $
                2,402,000
                
                
                $
                1,259,000Valuation
      allowance
                
                
                (3,489,000
                )
                
                
                (2,402,000
                )
                
                
                (1,259,000
                )Net
      Deferred Tax Asset
                
                $
                -0-
                
                
                $
                -0-
                
                
                $
                -0-
  14.           2007
EQUITY COMPENSATION PLAN
 
 Effective
June 6, 2007, Vemics 2007 Equity Compensation Plan authorized 6,300,000 shares
to be available toprovide 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.
 
 The
Company believes that the Plan will reward participants for past services to the
Company and encourage participants to contribute to the growth of the Company,
therebybenefitting the Company’s shareholders, and will align the economic
interests of the participants with those of the shareholders.
 
 As of
June 30, 2008, no shares have been issued.
 
 On July
29, 2008, the Company’s Board of Directors 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.
 
 37
 Table of Contents
  15.      
    ACQUISITIONS
 
 On October 16, 2006, the Company
acquired all of the shares of NuScribeTM, Inc.  The transaction is
valued at $9 million in an all-stock transaction with Vemics’ stock valued at
$.90 per share (issued 10 million shares valued at $.90 per share, per the
market price).  The value of $9 million was assigned to Technology and
Medical Software.  NuScribeTM, Inc. is a developer of voice recognition
software applications and web-based productivity tools for the medical,
pharmaceutical and healthcare industries.
 
 The
initial interest in NuScribe was the potential for combining our LiveAccess
software with their NuScribe SMR software.  After several discussions based
on this alone, the concept of iMedicor was presented to us.
 
 We
immediately saw the long-term value of this product and the potential for rapid
growth and new revenue streams based on the successful implementation of the
iMedicor portal, and this became the primary reason for our continued pursuit of
the acquisition.
 
 The
purchase price reflects our valuation of the concept of iMedicor, based on our
own intuitions as well as those of our Board of Directors and certain other
related parties with knowledge of the healthcare industry.
 
 On
February 15, 2007, Vemics acquired certain assets and liabilities of e-Learning
Desktop Inc. (ELD) a technology Company based in British Columbia, Canada that
has developed a learning platform that provides a safe, technology-based
shortcut to a western education via an online virtual classroom for students
worldwide.
 
 The transaction was valued at $681,673
including assumption of liabilities of $259,450 and 1,111,112 shares of our
Common Stock valued at $.38 (per the market price on date of acquisition), which
resulted in recorded goodwill of $681,673.
 
 16.a         UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
YEAR ENDED JUNE 30, 2007
 
 The
consolidated financial statements and related notes to consolidated financial
statements include the results of these acquired entities from their respective
dates of acquisition.  In addition, per the respective columns
designating the acquired companies reflects the operating activity from July 1,
2006 up to the date of their acquisition.
 
 Lastly,
we have provided additional applicable disclosures required by paragraph 55 of
SFAS 141 such as there were no further adjustments necessary to get the books
and records of the acquisitions to comply with the significant accounting
policies of the Company.
 
 e-Learning
                
                
                Pro-formaVemics
                
                
                NuScribe
                
                
                Desktop
                
                
                CombinedRevenues
                
                $
                941,756
                
                
                $
                106,618
                
                
                $
                -0-
                
                
                $
                1,048,374Expenses
                
                
                5,876,125
                
                
                
                216,185
                
                
                
                85,462
                
                
                
                6,177,772Profit
      (loss) before income tax expense
                
                
                (4,934,369
                )
                
                
                (109,567
                )
                
                
                (85,462
                )
                
                
                (5,129,398
                )Income
      tax expense
                
                
                -0-
                
                
                
                -0-
                
                
                
                -0-
                
                
                
                -0-Net
      profit (loss)
                
                $
                (4,934,369
                )
                
                $
                (109,567
                )
                
                $
                (85,462
                )
                
                $
                (5,129,398
                )Loss
      per common share
                
                $
                (0.13
                )
                
                $
                (0.00
                )
                
                $
                (0.00
                )
                
                $
                (0.14
                )Weighted
      average number of shares outstanding
                
                
                37,008,998
                
                
                
                28,942,314
                
                
                
                31,963,702
                
                
                
                37,008,998
 
 
 38
 Table of Contents
  17.      
    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 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.
 
 18.     
     SEGMENT REPORTING – UNAUDITED
 
 The
Company has two reportable segments Education and Healthcare services as of
October 16, 2006 as a result of the acquisition of NuScribe, Inc.  The
Company’s reportable segments are strategic business units that offer different
services.  The accounting policies of the segments are the same as
those described in the summary of accounting policies.  Financial
information by industry segments is summarized below:
 
 6/30/2008
                
                
                6/30/2007Revenues:Education
                
                $
                465,624
                
                
                $
                528,789Healthcare
                
                
                123,067
                
                
                
                412,967Total
      Revenues
                
                
                588,691
                
                
                
                941,756Cost
      of Revenues:Education
                
                
                167,493
                
                
                
                255,071Healthcare
                
                
                16,274
                
                
                
                144,196Total
      Cost of Revenues
                
                
                183,767
                
                
                
                399,267Gross
      Profit:Education
                
                
                298,131
                
                
                
                273,718Healthcare
                
                
                106,794
                
                
                
                268,771Total
      Gross Profit
                
                $
                404,924
                
                
                $
                542,488Segment
      Assets:Education
                
                $
                797,643
                
                
                $
                1,024,309Healthcare
                
                
                8,039,843
                
                
                
                9,105,709Total
      Reportable Segments
                
                
                8,837,486
                
                
                
                10,130,018Corporate
      and others
                
                
                212,566
                
                
                
                505,668Consolidated
      Assets
                
                $
                9,050,052
                
                
                $
                10,635,686
 
 19. LEGAL
SETTLEMENT (unaudited)
 
 On August
21, 2007, the Company entered into a Confidential Settlement Agreement and
Mutual Releases to resolve various legal proceedings relating to a
license agreement evolving from the Company’s license of software from an
unrelated party.
   39
 Table of Contents
 
 20. 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.  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 and was renewed for a period of 2 years and will now expire
on December 1, 2009.
 
 On
October 1, 2004, the Company entered into an employment agreement with Brian
Howell pursuant to which Mr. Howell as our Chief Technology
Officer.  The agreement had an initial term of three years ending n
December 2007, but was recently renewed until December 31, 2009.  Mr.
Howell was paid an annual salary of $93,000 in 2005, $107,000 in 2006
and $134,400 for 2007.  Mr. Howell 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 us for any reason other than
cause, the Company is to pay Mr. Howell an amount equal to 12 months'
salary.
 
 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 has an initial term of
three years, commencing on April 1, 2008 and ending in March 2011.  Mr.
Stout will be paid an annual salary of $120,000.  The annual salary
amount will increase to $156,000 on any single funding event to the Company of
funds in excess of $5 million.  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.  Until the commencement date of the agreement,
Mr. Stout intends to remain as a consultant to the Company acting in the role of
Chief Operating Officer.
 
 On
October 1, 2004, the Company entered into an employment agreement with Richard
L. Marciniak pursuant to which Mr. Marciniak served as its Vice President
Business Development and pursuant to which he was paid an annual salary of
$93,000 in 2005, $107,000 in 2006 and $134,400 for 2007.  Mr.
Marciniak resigned from the Company's employment in June 2007; however, he
remained under contract to Vemics until December 2007 and remains active in a
consultancy relationship.  He continued to receive his semi-monthly
salary through December 31, 2007.
 
 21. PRIOR
PERIOD ADJUSTMENT
 
 During
the year ended June 30, 2008, a prior period adjustment related to accrued
expenses in the year ended June 30, 2007 was recorded, which has decreased net
loss and accumulated deficit by approximately $164,000.
 
 22. SUBSEQUENT
EVENTS
  ASSET
PURCHASE AGREEMENT – ClearLobby
 
 On
September 12, 2008, Vemics, Inc. entered into a Limited Asset Purchase Agreement
with ClearLobby, Inc., a Delaware corporation, pursuant to which Vemics agreed
to purchase trademarks, software, license agreements and other assets related to
ClearLobby's pharmaceutical communications platform technology. The ClearLobby
technology will lead to an online service designed to change the dynamic between
physicians and pharmaceutical companies by placing control of the relationship
firmly in the hands of the physician.
 
 In
consideration for the assets purchased under the Limited Asset Purchase
Agreement, the Company paid $250,000,
consisting of $10,000 in cash and $240,000 in the form of an unsecured
promissory note, and 20,000
shares of restricted common stock of the Company.  The Promissory Note
bears no interest and is and is
payable in twelve monthly installments of $20,000 beginning on January 31, 2009
and each succeeding month-end
thereafter until the Promissory Note is paid in full on December 30,
2009.
 
 AMENDED
2007 EQUITY COMPENSATION PLAN
 
 On July
29, 2008, the Company's Board of Directors approved an amendment of the Equity
Plan to increase the
number of shares of common stock, par value $0.001 per share, underlying the
Equity Plan from 6,300,000 to 17,000,000.
  22. SUBSEQUENT
EVENTS
 
 STOCK
OPTION AWARDS UNDER THE EQUITY PLAN
 
 On August
14, 2008, the Company granted stock options to purchase up to 16,469,467 shares
of the Company’s Common Stock to employees, directors and service providers,
each with an exercise price of $0.07 per share, the previous day’s closing price
of the Common Stock on the Pink Sheets, as provided in the Equity
Plan.  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
as follows:
 
 Name
                Position
                Number
      of SharesFred
      Zolla
                CEO
      & Chairman
                3,250,000Tom
      Dorsett
                President
      – Healthcare Solutions
                2,250,000Brian
      Howell
                Chief
      Technology Officer
                1,750,000Craig
      Stout
                Interim
      CFO & COO
                1,250,000Chan
      Coddington
                Director
                800,000
   40
 Table of Contents
  On August
20, 2008, upon further reflection and in an attempt to preserve shareholder
equity, these five officers and directors have voluntarily and unanimously
declined the receipt of these option awards presently (see table
above).  The Company may in the future determine to re-offer such
stock options upon approval of our Board of Directors.  Accordingly,
these 9,300,000 shares will remain unissued under the Equity Plan
presently.
 
 EXPANDED
THE BOARD OF DIRECTORS
 
 On July
28, 2008, the Board of Directors of Vemics expanded the size of the Board from
four to five directors, in
accordance with our Amended and Restated Articles of Incorporation and our
Bylaws.  Contemporaneously, the Board
appointed, effective as of the execution of the Subscription Agreement, Dr.
James H. Desnick, manager
and member of RVP, to fill the vacancy created by the increase to our
Board.  This appointment became
effective on July 29, 2008.
 
 ISSUE OF
COMMON STOCK FOR $1,700,000 RAISED
 
 On July
29, 2008, Vemics, Inc., entered into a subscription agreement with Ravine Valley
Partners, LLC, an Illinois limited liability company ("RVP"), for the purchase
of 13,333,333 shares of the Company's common stock, par value $0.001 per share,
at a purchase price of $0.12 per share and for the purchase of warrants to
purchase 4,000,000 shares of the Common Stock at an exercise price of $0.04 per
share.  The total aggregate investment by RVP was
$1,600,000.
 
 In
addition, if a prospective institutional investor introduced by RVP consummates
an investment of $10 million or more in Vemics during the twelve months
following the date of the Subscription Agreement, the Company agrees to issue an
additional five-year warrant to purchase 2,100,000 shares of Common Stock with
an exercise price of $0.04 per share.
 
 Vemics
raised an additional $100,000 for the purchase of 833,333 shares of common
stock, par value $0.001 per
share, at a purchase price of $0.12 per share and for the purchase of warrants
to purchase 166,667 shares of
the Common Stock at an exercise price of $0.24 per share.
 
 OTHER
 
 The
Company applied the Certificate of Deposit of $200,000 held at Somerset Bank
(originally held as collateral to the note payable) against $200,000 of note
payable owed to Somerset Bank.  The amount owed at June 30, 2008 was
$299,980.  The amount owed Somerset Bank now is approximately
$87,000.
 41
 Table of Contents
 
 Item9.  Changes and Disagreements with Accountants on
Accounting and Financial Disclosure
  None.
 
 Item9A.  Controls and Procedures
 
 (a)
Evaluation of Disclosure Controls and Procedures
 
 We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act of 1934
reports are recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure.
 
 Our
management (with the participation of our Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer) evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), as of June 30, 2008.
 
 Based on
this evaluation, the chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
 
 (b)  Management’s
Annual Report on Internal Control over Financial Reporting
 
 This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
 
 Notwithstanding
the forgoing, management has identified material weaknesses with regards to
internal controls over
financial reporting with respect to accurately and timely recording
transactions.  Without adequately designed procedures in place, we had
we had material weaknesses in our internal control over financial reporting
related to:
 
 ·
              lack
      of adequate accounting experience with personnel tasked with recording
      financial transactions;
 ·
              lack
      of timely and accurate posting of accounts payable and accounts receivable
      entries to accounting system;
 ·
              inadequate
      communication between the chief executive officer and chief financial
      officer with regards to contractual obligations and
      receivables;
 ·
              inaccurate
      recording of company contracts and related deferral of
    income;
 ·
              inaccurate
      amortization of company assets; and
 ·
              inaccurate
      recording of payroll and related tax
  liabilities.
 
 These
material weaknesses were discovered during the audit of our financial statements
for the year ended June 30, 2008.  Accordingly, we had an opportunity
to prepare corrections to our financial statements for  the year ended
June 30, 2008.  As a result, we do not believe these weaknesses have
impacted our financial statements for the period presented.
 
 (c) 
Changes in Internal Controls over Financial Reporting
  There
have been no changes in our internal control over financial reporting that
occurred during the year ended June 30, 2008, that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting, however the company plans to take steps to rectify these material
weaknesses in the future which includes in part, hiring new accounting
personnel, scheduling meetings between the chief executive officer and chief
financial officer to discuss and record contract obligations and receivables
correctly, weekly reviews of accounts payable and accounts receivable by the
chief financial officer with the new accounting personnel, preparations of
amortization schedules for company assets and preparation of interest accruals
for company loans.  While all of the our material weaknesses have not been
remediated to date, we believe that all weaknesses identified will be remediated
by the next reporting period.
 
 42
 Table of Contents
 
  PART
III
  Item10.  Directors and Executive Officers of the
Registrant
 
 Information
required by this item with respect to directors of the Company will be contained
in the Company’s Proxy Statement for its 2008 Annual Meeting of Stockholders,
which is expected to be filed with the Securities and Exchange Commission not
later than 120 days after the Company’s 2008 fiscal year end and is
incorporated herein by reference.
 
 Information
required by this item with respect to executive officers of the Company is
included in Part I of this report and is incorporated herein by
reference.
 
 Item11.  Executive Compensation
 
 Information
required by this item is incorporated herein by reference to the Company’s Proxy
Statement for its 2008 Annual Meeting of Stockholders, which is expected to be
filed with the Commission not later than 120 days after the end of the
Company’s 2008 fiscal year.
 
 Item12.  Security Ownership of Certain Beneficial
Owners and Management
 
 Information
required by this item is incorporated herein by reference to the Company’s Proxy
Statement for its 2008 Annual Meeting of Stockholders, which is expected to be
filed with the Commission not later than 120 days after the end of the
Company’s 2008 fiscal year.
 
 Item13.  Certain Relationships and Related
Transactions
 
 Information
required by this item is incorporated herein by reference to the Company’s Proxy
Statement for its 2008 Annual Meeting of Stockholders, which is expected to be
filed with the Commission not later than 120 days after the end of the
Company’s 2008 fiscal year.
 
 Item14.  Principal Accountant Fees and
Services
 
 Information
required by this item is incorporated herein by reference to the Company’s Proxy
Statement for its 2008 Annual Meeting of Stockholders, which is expected to be
filed with the Commission not later than 120 days after the end of the
Company’s 2008 fiscal year.
   43
 Table of Contents
  PART
IV
  Item
15.  Exhibits, Financial Statements
Schedules
  2.1
              Share
      Exchange Agreement by and between Vemics, Inc. a Delaware corporation, and
      OMII, Inc., a Nevada corporation*
  3.1
              Articles
      of Incorporation*
  3.2
              Amended
      and Restated Articles of Incorporation of Vemics, Inc. filed on April 15,
      2008*
  3.3
              Bylaws*
  10.1
              Stock
      Purchase Agreement, dated October 16, 2006, by and among the Company and
      the stockholders of NuScribe, Inc., a Delaware
  corporation*
  10.2
              Asset
      Purchase Agreement, dated January 25, 2007, by and between the Company and
      e-Learning Desktop, Inc.*
  10.3
              Secured
      Convertible Promissory Note Bridge Funding dated December 2, 2005, by and
      between the Company and Valiant Holding Co., for
  $445,000.*
  10.4
              Vemics,
      Inc. 2007 Equity Compensation Plan*
  10.5
              Employment
      Agreement dated as of October 1, 2004 July 17, 2006 by and
      between Fred Zolla and Vemics,
Inc.*
  10.6
              Employment
      Agreement dated as of October 1, 2004, by and between Brian Howell and
      Vemics, Inc.*
  10.7
              Employment
      Agreement dated as of October 1, 2004, by and between Richard L. Marciniak
      and Vemics, Inc.*
  10.8
              Employment
      Agreement dated as of April 1, 2008, by and between Craig Stout and
      Vemics, Inc.*
  10.9
              Agreement
      by and between Vemics, Inc. and EP Global Communications, Inc. entered
      into as of November 3, 2005.*
  10.10
              Lease
      Agreement between Cheryl Ogle, as lessor, and NuScribe, LP as lessee,
      entered into March 10, 2006 for the premises located at 3600 Bee Cave
      Road, Austin, Texas.*
 
 10.11
              Agreement
      by and between University of Miami Division of Continuing and
      International Education and Vemics, Inc. entered into as of December 12,
      2006.*
  10.12
              Sprint
      PCS Advantage Agreement for Business with Vemics, Inc. dated as of May 10,
      2007.*
  10.13
              Agreement
      by and between Thomas Jefferson University and Vemics, Inc.
      entered into as of May 25, 2007.*
 
 10.14
              Service
      Agreement by and between eRx Network, LLC and Vemics, Inc. entered into as
      of November 30, 2007.*
  10.15
              Agreement
      by and between the Association of Black Cardiologists, Inc. and Vemics,
      Inc., entered into as of May 15,
2007.*
  10.16
              Agreement
      by and between the American Society of Hypertension, Inc. and Vemics,
      Inc., entered into as of November 29,
2007.*
  10.17
              Agreement
      by and between the Pulmonary Hypertension Association, Inc. and Vemics,
      Inc., entered into as of June 28,
2007.*
  10.18
              Agreement
      by and between the Hypertrophic Cardiomyopic Association, Inc. and Vemics,
      Inc., entered into as of June 15,
2007.*
  10.19
              Consent
      to the Amendment of the Termination Date by and between EP Global
      Communications, Inc. and Vemics, Inc. effective as of March 4,
      2008.*
  10.20
              Microsoft
      HealthVault Solution Provider Agreement by and between Microsoft
      Corporation and Vemics, Inc. effective February 15,
      2008.*
  10.21
              Volume
      Purchase Agreement by and between Dell Marketing, L.P. and Vemics,
      Inc. effective as of February 19, 2008.*10.22
              Service
      Agreement with eRx Network effective November 30, 2007.10.23
              Service
      Agreement with Medlink effective, as of December 27, 2007.10.24
              Letter
      Agreement with Aegis Capital Corp. regarding placement of Units in the
      Private Offering dated July 9, 2008.10.25
              Contract
      for Services with the State of Pennsylvania dated July 1,
  2007.10.26
              Limited
      Asset Purchase Agreement with ClearLobby, Inc. entered in on September 12,
      2008.**
 21.1
              Subsidiaries*
 
 31.1
              Certification of the President and 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
      2002.
  *  
 Incorporated by reference to exhibits of Registrant’s Form 10 filed on May
13, 2008.
 **
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on
September 18, 2008.
 
 
 44
 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
      and Chief Executive Officer,
                October
      12, 2008Fred
      Zolla
                (Principal
      Executive Officer)/s/ Craig
      Stout
                Chief
      Operating Officer and
                October
      12, 2008Craig
      Stout
                Interim
      Chief Financial Officer/s/ Brian
      Howell
                Chief
      Technology Officer
                October
      12, 2008Brian
      Howell/s/ F. Chandler
      Coddington,
      Jr.
                Director
                October
      12, 2008F.
      Chandler Coddington, Jr./s/ Larry
      Shemen
                Director
                October
      13, 2008Larry
      Shemen, MD/s/ Brian
      Groh
                Director
                October
      12, 2008Brian
      Groh
   45
 Table of Contents