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, 2009




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





For the transition period from ________ to ________.




Commission file number: 000-52765





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 York 10954


(Address of principal executive offices) (Zip Code)





(845) 371-7380


(Registrant’s Telephone Number, Including Area Code)




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




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





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes 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




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




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




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.  r





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 December 30, 2008: $3,521,259.






The number of shares outstanding of the Registrant's common stock as of September 29, 2009: 128,623,635




DOCUMENTS INCORPORATED BY REFERENCE




None


Table of Contents


VEMICS, INC.


FORM 10-K ANNUAL REPORT


FOR THE YEAR ENDED JUNE 30, 2009





TABLE OF CONTENTS





PagePart IItem 1.
The Business
3Item 1A.
Risk Factors
9Item 1B.
Unresolved Staff CommentsItem 2.
Properties
14Item 3.
Legal Proceedings
15Item 4.
Submission of Matters to a Vote of Security Holders
15Part II
Other InformationItem 5.
Market for Registrant’s Common Equity, Related StockholderMatters and Issuer Purchases
of Equities Securities
16Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
18Item 7A.
Quantitative and Qualitative Disclosure about Market RiskItem 8.
Financial Statements and Supplementary Data
22Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
36Item 9A
Controls and Procedures
36Item 9B
Other MattersPART IIIItem 10.
Directors, Executive Officers and Corporate Governance
37Item 11.
Executive Compensation
38Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
40Item 13.
Certain Relationships and Related Transactions, and Director Independence
40Item 14.
Principal Accounting Fees and Services
41Item 15.
Exhibits, Financial Statement Schedules
42


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





Item 1.               Business





OVERVIEW





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





§
Provide services that are comprehensive and end-to-end


§
Are portal-based and require little or no capital investment for equipment or infrastructure


§
Support interactive real-time collaboration and learning


§
Are flexible, configurable and interoperable


§
Utilize and migrate with all available real-time communications and learning technologies


§
Include peripheral or adjunct productivity tools, services and support


§
Are highly mobile and affordable for medical practices of any size


§
Are convenient and extendable throughout the organization (EMRs, Hospitals, HMOs Etc)


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





OUR TECHNOLOGY-BASED SOLUTIONS





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




After registering with iMedicor authenticating their identity, physicians, healthcare professionals and patients are prompted to either fill out their own profile or edit their CV that can be pre-populated into the portal through a partner database that expedites physicians’ registration on the portal and allows them to begin using
it immediately to take advantage of all the benefits the portal has to offer.  Once a patient/physician relationship is confirmed within iMedicor, a secure sub-network is created for them to enable safe, private information exchange.





iMedicor employs a proprietary print driver technology that allows for exportation of documents and images from any EMR system, thus addressing the issue of Interoperability.  iMedicor also facilitates the exchange of CCR (Continuity
of Care Records – the expected soon to be standard for Interoperabilitybetween EMR’s) files between users. As a use-case-scenario, specialists have the ability to send a CCR from their EMR to a patient’s primary care physician and copy the patient. The patient can then export the CCR directly into their Microsoft
HealthVault account for future retrieval anytime, anywhere.  Until the launch of iMedicor, management believes that no such solution existed for the healthcare industry. With the Obama administration’s healthcare initiative to transform all healthcare records to digital format by 2013, the need for an on-line transport system has become acute.  The Company believes that:





·
iMedicor allows patients and healthcare professionals to transport digital records in an electronic, HIPAA-compliant environment.


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


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




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Within the iMedicor Portal and in conjunction with partners the Company has created a combined solution that provides a unique, targeted alert system that delivers interventions at the point-of-care before a prescription is written.  Utilizing patient data and analytics, alerts are triggered and delivered through the iMedicor
mobile platform, that inform the doctor of medication qualifications and if the patient is adhering to a specific prescribed medication program.  Alerts are electronically sent directly to the physician at their office, on their cell phone or mobile device before they begin the patient encounter.  In addition, staff members are notified that they should print-out an alert to be placed directly in the patient’s chart for the physician to see.  This ability is significant throughout
the entire healthcare system:  Physicians will have the ability to deliver higher quality healthcare to patients; Insurance companies can potentially reduce costs because the patient receives better, faster and less intrusive care; and, pharmaceutical companies can create greater product awareness.





Online CME and CE programs are also available through iMedicor – across multiple specialties – with emphasis given to programs developed and offered by medical associations and premiere providers.  All programs are accredited and most are free.  iMedicor offers up-to-the minute medical news content and a
powerful web-search engine that spiders over 600 health related websites.





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.    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 offices each day.  Many have banned these visits 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, the pharmaceutical company is then charged a fee for that “click-through.”





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.





RECENT DEVELOPMENTS





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.  On August 3, 2009, the Company completed this acquisition with the issuance of 2,000,000 shares of the Company’s common stock.




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




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iMedicorLiveAccessTM --LiveAccess is an  interactive 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.  The system is currently used in self-generated CME productions that are staged, marketed and delivered by iMedicor.  Later in 2009 the system will be integrated into iMedicor’s collaboration tool set, providing real time video, audio and data
to physicians seeking to upgrade their on-line collaboration capability.





iMedicorNuScribeTM --NuScribe is a voice-recognition document creation and information
management system that enables physicians to create and manage patient medical records online, using advanced voice recognition technology.  NuScribeTM is HIPAA-compliant and includes SureScripts’s® e-Prescribing tools. The NuScribe system will be integrated into the core services offered by iMedicor by the end of 2009.




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





iMedicor has aggressively and efficiently launched its growth strategy and plans to deploy resources to accomplish the following:





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


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


·
Evolve our business model into a market access consulting company that executes e-marketing strategies for pharmaceutical and medical device companies that require access to specific demographics (physicians and other healthcare professionals);


·
Enhance the product and service suite to include a more robust suite of features as demanded by our subscribers;


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


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


·
Hire sales representatives who understand how major advertising agencies directly penetrate pharmaceutical companies at the highest level of the decision-making chain;


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


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


·
Develop new verticals such as clinical trial marketing and recruiting.




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





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





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BUSINESS OPERATIONS





In our fiscal year 2009 we have  shifted all of our efforts and resources to the build-out and promotion of iMedicorand ClearLobby.  We have also completely integrated what was our Education and Training group into iMedicor operations and we now operate as
one group and no longer delineate between Healthcare Services and Education and Training.   iMedicor has achieved significant early-stage success. Since the initial launch of iMedicor 1.0 on October 10, 2007, iMedicor has continued to develop its technology and has successfully launched iMedicor version 2.0 (February, 2009) and version 2.2 (July 2009), each with added features and integrations.  The company has secured a target audience of hundreds of thousands of doctors to which it
plans to market via its marketing partnerships, and also has access to over a million non-physician professionals in the healthcare system. The successful launch of iMedicor 2.0 and 2.2 has begun to drive brand awareness within our target markets and we expect to start to generate multiple revenue streams in the second and third quarters of 2010.





The combination of features offered by iMedicor addresses  existing educational needs for physicians and other healthcare providers and the ability to transfer personal health information electronically in a method which satisfies federal 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, however we expect to begin charging for premium services within the portal in the third quarter of this year.  The content sponsors pay for CME content, which users can access via 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 the 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.





We have recently announced multiple new relationships focused on iMedicor, which we believe will both help establish iMedicor’s position as a leader in collaborative communications for healthcare professionals in the U.S. and increase the registration/user base of the portal.  For example:





·
Strategic Alliance with NaviNet effective December, 2008.  NaviNet is a leader and innovator in unifying electronic communications between healthcare providers and their business partners. Over 730,000 physicians and 1.5 million healthcare workers in the US have subscribed to the NaviNet system. The industry's leading health plans and partners
rely on NaviNet's breakthrough approach to redefining provider communications. NaviNet touches virtually every staff member in a medical clinic, including physicians, but focuses specifically on physician / insurance carrier communications. The NaviNet portal is free to physicians. The paying clients are large health insurance companies.  iMedicor’s strategic alliance with NaviNet that will allow its healthcare providers access to iMedicor’s suite of productivity and communications tools.  By
integrating NaviNet’s user base into iMedicor’s technology interface, iMedicor has created a significant barrier to entry in the on-line digital records transport space. iMedicor has concurrently created the critical mass required to effectively market access to the medical community demographic to interested parties, such as pharmaceutical companies, medical device companies and other such businesses.





·
Joint Marketing Agreement with Franklyn Ideas, LLC.  Franklyn Ideas is a 15-year-old pharmaceutical marketing firm working with 10 active pharmaceutical companies and more than 100 individual pharmaceutical products. Franklyn and its principals were significantly involved with the launch of Lipitor, the largest grossing drug in the world. The
company provides services to its pharmaceutical clients by creating and managing content, providing graphic design services, designing marketing programs, executing new product launches, and managing labeling compliance oversight. Franklyn Ideas has determined that iMedicor represents s significant opportunity to give it’s clients a low-cost alternative to traditional pharmaceutical marketing.





·
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.  In August of 2009   eRx and iMedicor launched their pilot program with a mid-western pharmacy chain to mutually implement bi-directional connectivity services between the eRx and iMedicor web portals to facilitate the exchange of prescription related data.  On September 30, 2009, following the successful launch, all 225 of the pilot pharmacy's outlets went live, well ahead of the projected schedule.  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 (for example:  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
(x-ray, MRI etc) 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.  Beta testing for the integration of the two platforms is ongoing, and the Company expects to launch the integration in the second quarter of 2009.  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.




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·
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.





·
Agreement with Medical Protective.   In February of 2009 the Company entered into an agreement with Medical Protective to utilize iMedicor's medical community portal to market medical malpractice liability insurance to doctors and their staff nationwide.  These communications, transmitted through the portal in video, audio or text,
will allow recipients to make product inquiries or schedule appointments with Medical Protective representatives on a 24/7 basis.  Under the program, the revenue will be generated for every lead generated for Medical Protective through the iMedicor portal




·
Agreement with AMA Insurance Agency (“AMAIA”).  On July 21, 2009, the Company, entered into a Service Agreement with AMAIAI whereby the Company shall produce a series of  educational seminars/webinars for  AMAIAI to be broadcast  to eligible entities/individuals accessing Vemics via its iMedicorTM portal.  iMedicor
will also be responsible for promoting the seminars through direct messaging to its users and by placing advertisements within iMedicor 14 days prior to the  initial broadcast of each seminar.  AMAIAI shall be responsible for developing the content of each seminar, including the selection of the appropriate speaker(s).  The first seminar was scheduled for broadcast on August 19, 2009 and broadcast of additional seminars will continue thereafter.  AMAIAI will pay Vemics
$60,000 within 7 days of July 21, 2009 and an additional $35,000 on or before January 15, 2010.  The payments represent an advance payment for the marketing, production, staging and distribution of the seminars and up to 1,500 registrations and/or other leads that will be generated to AMAIAI through the broadcast of the seminars and through marketing efforts provided by iMedicor.  Any additional activity in regard to registrations and / or other leads above 1,500 total will be paid for at
a scheduled rate.  For the purpose of the Agreement, a registration and/or  lead will be any eligible entity/individual which registers for a seminar and/or requests information about AMAIAI’s products by filling out the registration or request form provided by iMedicor containing the AMAIAI required data.  The first of the seminars was aired in August of  2009 with semicars scheduled to air approximately every six weeks into 2010.




·
Agreement with Transgenomic (OTCBB:TBIO).On September 15, 2009 the companies entered into an agreement to develop an educational marketing program for NuroPro, Transgenomic's diagnostic tests for Alzheimer's and Parkinson's disease. 
The alerts-based Internet program will target neurologists, gerontologists and primary care physicians to announce the commercial launch of Transgenomic's NuroPro assays for these devastating neurological diseases.  Through its HIPAA-compliant information transfer and communications portal, iMedicor's proprietary Alert system will provide a unique, in-depth targeted program that places client messages in the hands of specific physicians and their staff at the point of care.




·
Agreement with Access Pharmaceuticals (OTCBB: ACCP).  This program, scheduled to launch in the fourth quarter of 2009, will deliver targeted online marketing messages to 216,000 specialty medical practices across the country via the iMedicor portal for the North American commercial launch of MuGard, its FDA-approved oral wound rinse, for the
management of oral mucositis and stomatitis caused by radiotherapy and/or chemotherapy..  Access Pharmaceuticals will pay a monthly fee for specific click through responses, and iMedicor will receive royalties of up to five percent on sales generated by the program.




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 conduct product demonstrations and consult with potential customers such as physicians, pharmaceutical companies,
by means of  trade shows, national medical association meetings and trade print advertising.  We have also developed programs to expand the iMedicor user base through invitations by existing users to their colleagues to communicate through the iMedicor portal.  We seek in the coming year to accelerate our efforts to build a loyal user audience within 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.  Furthermore, we have enhanced our product offerings in the releases of iMedicor 2.0 and 2.2 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 continues to grow and expand through our numerous strategic alliances.  Further expansion will be facilitated through viral growth, expanded use of our ClearLobby Pharmaceutical marketing tool and additional strategic alliances.  Through its user-base, iMedicor has the ability to market
any number of different products and services.  Thus, a sales team has begun to market the iMedicor technology service to organizations such as pharmaceutical companies and medical device manufacturers with initial successes that include relationships with AMAIA. Medical Protective, Access Pharmaceutical and Tansgenomic.  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.





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 have confirmed that pharmaceutical companies
are now actively looking for new, relatively low-cost platforms to gain access to physicians that differentiate them from the common perception.  Pharmaceutical company representatives get less and less time in front of physicians, and physicians grow exceedingly impatient with the overly aggressive tactics and constant flow of representatives visiting their offices on a daily basis.  Although the relationship creates frustration amongst physicians, the information that the pharmaceutical
companies are trying to deliver is very important to the proper prescribing of the drugs themselves.  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.





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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.





COMPETITION





The Company experiences potential 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.





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





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





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




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




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




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




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




●
Medical Social Networks: These are sites that promote the exchange of thoughts, ideas and opinions by physicians through electronic polls and forums. These forums are in most cases physicians only and they allow users to create polls with multiple-choice answers that draw on the “wisdom of the crowd”. Most of  these networks offer
other standard features such as job boards and CME content. They monetize their user base in various ways such as offering access to postings to paying clients that can benefit from understanding physician thoughts on drugs and medical devices such as investment firms and pharmas. iMedicor is often compared to sites like Sermo because we market ourselves as a social/ professional network for physicians; however we are very different because we focus on healthcare IT and personal information exchange instead of
discussion forums. iMedicor gives physicians a tool that helps them practice real medicine around real cases.  Market leaders in Medical Social Networking include:  Sermo; Medpedia; Medscape Physician Connect; SocialMD; Doctornetworking.com.





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




EMPLOYEES





On September 29, 2009, the Company had 12 full-time employees.  In addition we have several contract workers and consultants.  We believe our relations with our employees are good.





Item 1A.                   Risk Factors





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





Our predecessor entity, E & M Management, was formed in 1992; however, Vemics-Delaware, our current operating business, was incorporated on July 17, 2001, and remained a developmental state company until recently.  Because of our limited operating history, we do not have significant historical financial information on which
to base planned revenues and operating expenses.  For the first four years, gross revenue was slightly over $200,000 in total.  Gross revenue has declined from $942,000 for the fiscal year ended June 30, 2007, to approximately $347,000 for this past fiscal year.  We expect to experience fluctuations in future quarterly and annual operating results that may be caused by many factors, including:





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





■     the cost of technology, software and other costs associated with 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 United States and worldwide.




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




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





To execute on our business plan successfully and provide for our future operating and capital expenditure requirements, we require substantial additional funding.  The exact amount of funds raised, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake.  No
assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to us.  If we are not able to raise additional capital, our business will 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.  Since inception, we have incurred recurring operating losses and negative operating cash flows, including a net loss attributable to common shareholders of approximately $8,100,000 and negative operating cash flows of approximately
$2,500,000 for the fiscal year ended June 30, 2009.  At June 30, 2009, we had cash and cash equivalents of approximately $52,000 and an accumulated deficit of approximately $30,000,000.  The foregoing factors, among others, raise doubt as to our ability to continue as a going concern.  In the past, we have raised capital in private placements, but continue to sustain losses and negative operating cash flows.  We believe that our available capital as of August 31, 2009 and access to available
capital will enable us to continue as a going concern beyond December 31, 2009.  Anticipated Revenues late in 2009 could enable us to continue through June 30, 2010 if we are able to restructure portions of our short-term debt.





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





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





Historically and currently, we are dependent on a small number of major customers, the loss of which would adversely affect our operations.





Historically, our business and revenue growth potential depended on a few customers, as we have set forth in this report.  While we expect that the scope of commercial applications of our products will expand our potential number of customers, there is no guarantee that we can attract and retain potential customers.  As
a result, we may continue to experience operating losses even if our revenues increase.  If we are unable to generate significant revenue from these customer relationships, the results could materially and adversely affect our business, financial condition and results of operations.





We may make strategic acquisitions or investments, which involve 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 integrate 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 and 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.




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





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





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





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





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





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





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





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





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





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





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





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





Although we carry general liability, 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.





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





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





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





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





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 services, products or technologies developed by others will not render our services or products noncompetitive or obsolete.  In addition, there can be no assurance that our services, products or enhancements will achieve or sustain market acceptance or be able to address compatibility, interoperability or other issues raised by technological changes or new industry standards.





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





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





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





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




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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, 2009, we had 12 employees, four of whom are members of executive management.  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 as the result of the death (notwithstanding coverage by key-man insurance), disability or voluntary departure of any such executive officer.  Further, the loss of the services of any one or more of these employees could have a materially adverse effect on our
business and our financial condition.  In addition, we will also need to attract and retain other highly skilled technical and managerial personnel for whom competition is intense.  If we are unable to do so, our business, results of operations and financial condition could be materially adversely affected.





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





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





As of September 29, 2009, we have issued warrants to purchase an aggregate of approximately 14,000,000 shares of Common Stock, convertible notes in aggregate principal amount of approximately $1,400,000 that are convertible into 28,000,000 shares of Common Stock, and a convertible note in the aggregate principal amount of
$484,269 convertible at the holder’s option into 2,174,046 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, 2009 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.





If one or more of these events occurs, the number of shares of Common Stock that may be issued upon conversion or exercise would increase.  Accordingly, if Vemics were to engage in a financing transaction involving the offering of Vemics Common Stock (or securities convertible into Vemics 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 will incur increased costs as a result of recently becoming a reporting company.





We recently became a Securities and Exchange Commission (“SEC”) reporting company.  Prior to this time, we had not filed reports with the SEC and had no history operating as a reporting company.  In addition, the Sarbanes-Oxley Act of 2002, as well as a variety of related rules implemented by the SEC,
have required changes in corporate governance practices and generally increased the disclosure requirements of public companies.  For example, as a result of becoming a reporting 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 will incur significant additional legal, accounting
and other expenses in connection with our public disclosure and other obligations.  Management has also been engaged in assisting executive officers, directors and, to a more limited extent, stockholders, with matters related to insider trading and beneficial ownership reporting.  Although not presently applicable to us, in the future we will be required to establish, evaluate and report on our internal control 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, and, therefore, broker-dealers may have trouble in completing customer transactions and trading activity in our securities may be adversely affected.





A penny stock is generally defined under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as any equity security other than a security that: (i) is 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.





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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.


Weare 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 42% of the outstanding shares of Common Stock as of August 31, 2008.  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 the ask prices of our Common Stock and you may not be able to sell shares of our Common Stock when or at prices you desire.





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.





Item 1B.              Unresolved Staff Comments





None





Item 2.                 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.





In addition, many of our employees work from home offices throughout the U.S.  We have no ownership interest or formal lease arrangements with such properties.





We do not have a formal investment policy and we have not invested in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities and have no current intention to do so in the future.





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Item 3.                 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, the Company 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 The Company and its CEO, Fred Zolla.  The Company alleges that the defendants, led
by defendant Meade, asserted a host of unfounded allegations of fraudulent misrepresentation and breach of contract against The Company and Mr. Zolla to coerce The Company 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.  The Company further alleges that the defendants' threats and harassment have materially interfered with several lucrative business
transactions The Company negotiated and have defamed The Company and Mr. Zolla.  The Company 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 The Company and Mr. Zolla.  Defendants filed a counterclaim against The Company 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 The Company 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.  The Company 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 The Company presented a written settlement agreement to the defendants.  While The Company 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.  In April of 2009 the Court moved to enforce the settlement agreement, at which time the defendants could not produce the original documents called for in the settlement agreement.  On July 23, 2009 the Court therefore found in favor of the plaintiff and dismissed the Motion to Enforce Settlement with prejudice.  The Courts
ruling is currently under appeal by the defendants.





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 The Company 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.  The Company 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.





Cause No. D-1-GN-09-0019460; John Mehmet Ulgar Dogru, Oleg Knut, Anastassia Zaitseva, Arnis Supe, Andrei Poryvkin, Vadim Palamarchuk, and Pavel Vohmjanin v. Vemics, Inc., Nuscribe, Inc., Fred Zolla, and Craig Stout, in the 419th Judicial District Court, Travis County, Texas.





On June 17, 2009, John Mehmet Ulgar Dogru, Oleg Knut, Anastassia Zaitseva, Arnis Supe, Andrei Poryvkin, Vadim Palamarchuk, and Pavel Vohmjanin filed a complaint against the Company, Nuscribe, Inc., Fred Zolla, and Craig Stout in the 419th Judicial District Court, Travis County, Texas for breach of contract as well as several other causes
of actions related to seeking to recover approximately $1,300,000.00 plus interest and attorneys fees.  The Company has timely answered the complaint, submitting a general denial that it is liable for any  amounts, and is vigorously defending such claims.  The parties are in the process of engaging in written discovery.




Item 4.                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, 2009.




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PART II





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





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





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, 2009First Quarter

$
0.04


$
0.12Second Quarter

$
0.026


$
0.09Third Quarter

$
0.03


$
0.085Fourth Quarter

$
0.02


$
0.39Fiscal Year Ended June 30, 2008First Quarter

$
0.27


$
0.30Second Quarter

$
0.09


$
0.32Third Quarter

$
0.04


$
0.26Fourth Quarter

$
0.04


$
0.18





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:





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


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


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


●
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.





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Holders of our Common Stock





According to our transfer agent, Pacific Stock Transfer, as of September 29, 2009, there were 191 record holders of shares of our Common Stock and additional stockholders held shares in street name.





Dividends





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





Securities Authorized for Issuance under Equity Compensation Plans





Information for our equity compensation plans in effect as of June 30, 2009 is as follows (amounts in thousands, except per share amounts):





(a)


(b)


(c)Plan Category

Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights


Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights


Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))Equity compensation plans approved by security holders


1,895,000


$
0.07



5,500,000Equity compensation plans not approved by security holders


0



0



0Total


1,895,000



0



5,500,000





On June 6, 2007, our stockholders approved the Vemics, Inc. 2007 Equity Compensation Plan (the “Equity Plan”), which is designed to provide employees, non-employee directors, consultants and advisors with the opportunity to receive grants of stock options and stock awards.  The purpose of the Equity Plan is to give
participants an ownership interest in our Company, and to create an incentive to contribute to our economic success.  The Equity Plan authorizes the issuance of incentive stock options, nonqualified stock options and other stock based awards.  As 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 and shareholders approved an amendment of the Equity Plan to increase the number of shares of Common Stock underlying the Equity Plan from 6,300,000 to 17,000,000.  On August 14, 2008, the Company granted stock
options to purchase up to 11,195,000 shares of Common Stock to employees, directors and service providers, each with an exercise price of $0.07 per share.   Of the options granted, options to purchase 9,300,000 shares of the Common Stock were granted to the Company’s executive officers and directors; however, upon further reflection the officers and directors voluntarily decided not to accept these grants at that time and they were cancelled.





Recent Sales of Unregistered Securities





During the three months ended September 30, 2008, we sold 14,166,666 shares of Common Stock for an aggregate purchase price of $1,700,000 ($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.




From December 22, 2008 to June 27, 2009 the Company issued a series of short-term Convertible notes with maturity dates, which range between June 1, 2009 and August 1, 2009, which date have been extended for an additional six-month period at the Company’s sole discretion,to accredited
investors in the aggregate amount of $1,650,000.  Each note bears interest at a rate of 15% per annum. Each note additionally carries with it a conversion option for principle and interest accrued into shares of the Company’s common stock in the Company at a conversion price of $0.05 per share.





On April 23, 2009, the Company entered into a Secured Convertible Promissory Note (the “Convertible  Note”) with an accredited investor in exchange for cash and a line of credit totaling an aggregate gross investment of $1.2 million.  As of August
3, 2009  the Company has received the entire balance of funds due under the terms of the note.  The Convertible Note provides for the repayment of principle to the Investors on or before the maturity dates of December 31, 2009.  The Convertible Note provide for fifteen (15%) percent annual interest payable on the maturity date to the Investors in either cash or stock in the discretion of the Investor.  Interest on the Convertible Notes is due on the maturity date of
each Note.  Under certain circumstances, the Company can prepay the Convertible Note prior to the maturity date or prior to conversion with 30-days’ advance notice to the Investors.  The Convertible Note also contains certain affirmative and negative covenants relating to the Company’s operations.  As holder of the Convertible Note, the Investor has the option to convert the Convertible Notes at $67,500 per share into the Company's preferred stock, where each share of
preferred stock will equal 1% equity in the Company.  The Convertible Note carries a liquidation redemption fee equal to 50% of the Note, which fee is due to the Investor from the Company upon repayment.  In connection with the borrowing, the Company issued warrants (the “Warrants”) to the investor to purchase up to an aggregate of 480,000 shares of the Company's common stock.  The exercise price of each Warrant will be $0.05 per share and the Warrants will have a 5-year
term, unless previously exercised.  The Company is also obligated to issue 4 million shares of Common Stock in the Company at the maturity date of the Convertible Note.





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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.





In April of 2009 the Company issued 10,555,000 shares of common stock to various companies and contractors for services performed on behalf of the Company, including 7,080,000 shares to the outside software/portal development company, 1,300,000 shares for public/investor relations services and 750,000 shares for legal services.




In April of 2009 the Company issued 2,040,000  shares of common stock in anticipation on a legal settlement with a group of note holders.  As of June 30, 2009 no settlement had been reached and agreed to by the courts.  The shares remain in the possession of the Company.


On August 14, 2008, we granted stock options under the Vemics, Inc. 2007 Equity Compensation Plan to purchase up to 1,895,000 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.





In April of 2009 the Company issued 9,650,000 shares of Common Stock under the Vemics, Inc. 2007 Equity Compensation Plan to Officers, Employees and former employees of the Company.




We intend to raise a minimum of $3,000,000 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”).  Terms for the warrants have not been decided and will be subject to negotiation.  The Company has received one term sheet for $3,000,000 based on the outline of the offering and is currently in the due diligence phase with the potential investor.  Marketing efforts for the Units are
anticipated to continue into the second or third 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.





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





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





Overview





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





iMedicor was launched in October of 2007 with early registration far exceeding our pre-launch estimates by over 200% .  In February of 2009 we re-launched iMedicor as version 2.0 with completely redesigned functionality and security.  During the redesign phase we focused less on increasing membership as to working with
a core group of physician members to address functionality within the site and make recommended changes for the launch of the 2.0 version.  Currently iMedicor is a free service for all users as we build a customer base; however, have currently generate revenues through the delivery of on-line CME courses and have begun generating revenues from various components within iMedicorthrough our partnership with Navinet and our recent acquisition
of ClearLobby; focusing on direct pharmaceutical company to physician marketing and product dissemination.  We have several new programs scheduled to launch in the third fiscal quarter beginning in January 2010 designed around pharmaceutical marketing to physicians which we expect to generate significant revenue for the Company We also expect to begin to generate additional revenues through the adoption by iMedicor member physicians using our inter—EMR communications sometime in the third quarter
and later in the year the redesigned NuScribe Voice Recognition Application.





Our sales in other areas decreased for the year ended June 30, 2009 from 2008, as most of our internal efforts have been devoted to establishing new relationships with strategic partners, developing a pharmaceutical marketing sales channels and the redesign of the iMedicor portal and it’s integration with partner sites and the introduction
of increased functionality.





Our plan includes charging pharmaceutical and other healthcare related companies an initial set up fee of up to $95,000 to upload all product specific programs, in all formats.  The initial fee will cover the set up costs and the first 1,500 qualified "click 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 1,500 click throughs are exhausted, iMedicor will charge between $25.00 and $50.00 per additional click through.





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The Company anticipates having five sources of income –





·
Offering a secure and non-invasive online communications and information delivery tool for the dissemination of product-specific information provided by pharmaceutical and other healthcare related companies to physicians.  Our first two customers in this area are scheduled to launch programs in January of 2010.




·
The 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.  We have two customers in this area with projects currently ongong.





As of June 30, 2009, we require approximately $170,000 to $230,000 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.





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.




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Use of Estimates





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





Revenue Recognition





The Company’s current sources of income are:





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




·
Sponsored CME programs – 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.


·
Delivery of product-specific information relating to healthcare and related services to physicians through on-line, opt in direct marketing





The Company anticipates having four 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.




·
iMedicor Integration Driver – billed at $25 - $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.




·
iMedicor ClearLobby – Flat fee per participating Pharmaceutical company of up to $95,000 per year for maintaining their chosen content on the iMedicor site.  Based on upfront fee, a guarantee of x views of pharmaceutical content.  All views after the pre-paid number of views has been met will be billed monthly in arrears at $25 - $50 per
view.  In certain cases we envision circumstances where no up-front fee will be charged, however there will be a revenue royalty of 2 – 5% of all sales generated through iMedicor’s marketing efforts




·
Click through advertising





Results of Operations





Year Ended June 30, 2009 Compared to Year Ended June 30, 2008





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 30Audited2009


%


2008


%Net Sales and Revenues


347,096



100



588,691



100Cost of Services


149,561



43.1



183,767



31.2Gross Profit


197,534



56.9



404,924



68.8Operational General and Administrative Expenses


5,459,906



73.8



6,080,727



86.8Depreciation and amortization


2,012,855



26.2



1,288,620



18.4Bad debt expenses


7,500



*



41,961



*Total Expenses


7,480,261



100



7,411,308



100Loss before other income (expense)


(7,282,726
)






7,006,114


*           Less than 0.1%





20
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Revenues





Our revenues for the year ended June 30, 2009 decreased by 41% to $347,096 from $588,691 in 2008, due largely to a complete suspension in sales of the NuScribe Voice Recognition Appliance and Application.  The suspension in NuScribe sales was planned.  We are redesigning this component for bundling as an online application
within the iMedicor portal.  During the final phase or the redesign period we suspended sales efforts of the stand-alone voice recognition engine decreased significantly, and we redirected or let-go the members of our Nuscribe sales team.





Cost of Services





Cost of services as a percentage of revenues was 43% for the year ended June 30, 2009 as compared to 31% for 2008.  Increase in cost of services is attributed to a larger percentage of our sales being driven through partner company efforts with revenue sharing agreements in place.    Going forward we expect
cost of services to remain in the same area, approximately 35% - 45% 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 decreased to $5,459,906 in the year ended June 30, 2009 from $6,080,727, or 10%.    Payroll and related taxes costs decreased in 2009, 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 2010.




Depreciation and Amortization





Depreciation and amortization expenses increased for the year ended June 30, 2009 to $2,012,855 from $1,288,620.  This is entirely attributed to the continued capitalization of development costs associated with the iMedicor portal and subsequent amortization of that asset.  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, 2009 totaled ($7,899,582) or approximately 2,276% of net revenue compared to ($7,062,091)  or approximately 1,199%  of net revenue for 2008.  The decrease in income from operations for the year ended June 30, 2009 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 2009 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 56% from the previous year, and; the increase in stock issued for fees and services by 60% from the previous year.





Liquidity and Capital





Cash and cash equivalents were $52,615 at June 30, 2009 compared to $212,566 at June 30, 2008.  The disparity in cash and cash equivalents at the end of 2009 versus 2008 is due solely to the Company’s election to pay down $200,000 of a loan with a bank, using funds it held in a certificate of deposit account that was securitizing
the loan.





Net cash used by operating activities was $2,535,564 for the year-end June 30, 2009 as compared to cash used provided by operating activities of $2,267,147 for the year-end June 30, 2008, representing an 11% increase.  The increase is due to in a large part to increased reliance on an outside developer to continue to improve and
redeploy the iMedicor portal.





Net cash used by investing activities was $745,271 for the year-end June 30, 2009 as compared to cash used by investing activities of $167,789 for the year-end June 30, 2008, and was primarily due to capitalization of technology development costs and the purchase of the ClearLobby technology





Net cash provided by financing activities was $3,120,884 for the year-end June 30, 2009 as compared to net cash provided by financing activities of $2,141,834 for the year-end June 30, 2009. The increase is primarily due to a increase in sale of Common and the issuance of short term notes in the aggregate amount of  approximately
$1,400,000.





The Company continues to operate at a loss and is projected to do so until late in fiscal 2010.  The Company is reliant, therefore, on raising capital through equity investments and/or debt instruments to maintain operations.  The Company is actively engaging in fundraising efforts to increase its current level of operations.  From
July 1, 2006 through December 31, 2007, we raised approximately $3,637,000 from accredited investors.  In addition, from February 22, 2008 through July 2008, 2008, we issued 20,900,001 shares of Common Stock through a private offering to accredited investors through which we raised approximately $2,508,000.  From December of 2008 to April of 2009 we issued notes in the aggregate amount of approximately $1,400,000 to accredited investors.   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.




21
 Table of Contents





Item 8.                 Financial Statements and Supplementary Data


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To the Board of Directors and Stockholders
 Vemics, Inc. and Subsidiary
 
 We have audited the accompanying consolidated balance sheets of Vemics, Inc. and Subsidiary as of June 30, 2009 and 2008 and the related consolidated statements of operations, stockholders’ equity and statements of cash flows for each of the two years in the period ended June 30, 2009. 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.
 
 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, 2009 and 2008 and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2009 in conformity with accounting
principles generally accepted in the United States of America.
 
 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. These consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
 
 
 
 Demetrius & Company, L.L.C.
 
 Wayne, New Jersey
 October 13, 2009






22
 Table of Contents





VEMICS, INC.
 BALANCE SHEETS
 YEARS ENDED JUNE 30, 2009 AND 2008







6/30/2009


6/30/2008ASSETSCurrent assets:Cash and cash equivalents - interest bearing

$
52,615


$
212,566Accounts receivable, net of allowance for doubtful accounts of $7,500and $5,000 at June 30, 2009 and June 30, 2008, respectively


3,214



57,121Total Current Assets


55,828



269,687Property and equipment, net


16,545



66,349Other assets:Deferred Expenses



60,798Technology & Medical software


6,814,563



8,032,343Goodwill



681,673



681,6737,557,035



8,714,016Total Assets


$
7,629,408


$
9,050,052LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Line of credit - bank


$
87,354


$
299,980Current portion of long-term debt


3,624,198



1,279,667Accounts payable and accrued expenses


1,585,901



1,839,470Deferred income



121,620



123,500Total Current Liabilities


5,419,074



3,542,617Long-term liabilitiesLong-term notes debt



1,268,996



1,400,914Total Liabilities


6,688,070



4,943,531Stockholders' EquityPreferred Stock, par value $.001, authorized 1,000,000Issued and outstanding -0 shares as of June 30, 2009 and 2008Common stock, par value $.001 per share, authorized 2,000,000Issued and outstanding:  114,561,998 and 68,926,531 shares atJune 30, 2009 and 2008, respectively


114,562



60,795Additional Paid in Capital


30,962,043



26,074,578Less: Treasury stock, 368,407 shares at both June 30, 2009and June 30, 2008



(508,195
)


(508,195
)Accumulated deficit



(29,627,071
)


(21,520,657
)Total Stockholders' Equity


941,339



4,106,521Total Liabiliaties and Stockholders' Equity

$
7,629,408


$
9,050,052




See notes to financial statements.


23
 Table of Contents




VEMICS, INC.
 STATEMENTS OF OPERATIONS
 YEARS ENDED JUNE 30, 2009 AND 2008




For the


For theYear Ended


Year Ended6/30/2009


6/30/2008Revenues

$
347,096


$
588,691Cost of Services


149,561



183,767Gross Profit


197,534



404,924Expenses:Stock issued for fees and services


3,034,000



1,895,340Consulting, commissions and travel


453,256



1,190,605Operational fees and expenses


596,731



1,102,563Professional fees


302,580



661,689Payroll and related taxes


916,178



962,807Depreciation and amortization


2,012,855



1,288,620Bad debt expenses


7,500



41,691Production, advertising, brochures and public relations


157,161



267,723Total Expenses


7,480,261



7,411,038Loss before other expenses


(7,282,726
)


(7,006,114
)Other Income/(Expenses:)Other income - reduction of indebtedness


-



138,873Interest income


4,128



10,723Other expense - Redemption fee expense


(396,209
)


-Interest expense


(224,775
)


(205,573
)Total Other Income/(Expenses)


(616,856
)


(55,977
)Loss before extraordinary item


(7,899,582
)


(7,062,091
)Extraordinary item - litigation, net of expenses and taxes


-



650,000Loss before dividend


(7,899,582
)


(6,412,091
)Dividends related to warrants issued


206,833



-Net loss attributable to common stockholders

$
(8,106,414
)

$
(6,412,091
)Net loss per share, basic and diluted, before extraordinary item

$
(0.09
)

$
(0.13
)Net income per share, basic and diluted, extraordinary item net

$
-


$
0.01Net loss per share, available to common stockholders

$
(0.09
)

$
(0.12
)Weighted average number of shares, basic and diluted


85,455,301



53,574,940




See notes to financial statements.


24
 Table of Contents


VEMICS, INC.
 STATEMENT OF EQUITY


TOTALADDITIONAL





STOCKHOLDERS'TREASURY


PAID IN


TREASURY


ACCUMULATED


EQUITY/DESCRIPTION

SHARES


AMOUNT


SHARES


CAPITAL


STOCK


DEFICIT


DEFICIENCYBalance as of June 30, 2007


50,609,450


$
50,609



(368,407
)

$
22,981,768


$
(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



10,027







1,885,313











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



68,927



(368,407
)


26,066,446



(508,195
)


(21,520,656
)


4,106,521Issuance of stock for ClearLobby asset purchase


20,000



20







1,380











1,400Issuance of common stock


14,166,666



14,167







1,685,833











1,700,000Misc Issuance of common stock


73,800



74







(74
)










-Issuance of stock for fees/services


21,725,000



21,725







2,046,275











2,068,000Issuance of Stock under Employee Compensation Incentive Plan


9,650,000



9,650







955,350











965,000Deemed dividends














206,833











206,833Net loss






















(8,313,247
)


(8,313,247
)Balance as of June 30, 2009

$
114,561,997


$
114,562



(368,407
)

$
30,962,043


$
(508,195
)

$
(29,627,071
)

$
734,507




See notes to financial statements.


25
 Table of Contents




VEMICS, INC.
 STATEMENT OF CASH FLOWS
 YEARS ENDED JUNE 30, 2009 AND 2008


For the


For theYear Ended


Year Ended6/30/2009


6/30/2008Cash Flows From Operating ActivitiesReceipts from customers

$
399,123


$
734,554Payments to suppliers, salaries


(2,908,636
)


(3,527,518
)Other income received


-



650,000Interest received


4,128



10,723Interest paid


(22,679
)


(93,215
)Bad debt expense


(7,500
)


(41,691
)Net Cash Used in Operating Activities


(2,535,564
)


(2,267,147
)Cash Flows Used in Investing ActivitiesPurchase of Technology & Medical software


(745,000
)


(165,684
)Purchase of fixed assets


(271
)


(2,105
)Net Cash Used in Investing Activities


(745,271
)


(167,789
)Cash Flows From Financing ActivitiesPayments on capital lease obligations


-



(5,896
)Payments on notes payable


(432,101
)


(237,770
)Short term loans


1,852,985



1,577,500Sale of common stock


1,700,000



808,000Net Cash Provided by Financing Activities


3,120,884



2,141,834Net Increase/(Decrease) in Cash


(159,951
)


(293,102
)Cash at the Beginning of Period


212,566



505,668Cash at End of Period

$
52,615


$
212,566
  Reconciliation of Net Loss to Net CashUsed by Operating ActivitiesNet loss

$
(8,106,414
)

$
(6,412,091
)Adjustments to reconcile net income/(loss) to net cashused by operating activities:Depreciation & amortization


2,012,855



1,288,620Stock issued for accrued consulting fees


3,034,000



1,895,340Loan accretion


396,209



-Income derived from relinquishment of debt


-



(138,873
)Changes in:Trade receivables


53,907



121,701Deferred expenses


(60,798
)


-Accounts payable and accrued expenses


(253,569
)


841,637Accrued interest payable


182,894



112,357Deferred income


(1,880
)


24,162Net Cash Used by Operating Activities

$
(2,742,396
)

$
(2,267,147
)Supplemental disclosures:Schedule of Noncash Investing and financing Transactions:Exchanged stock for note payable and accrued interest

$
-


$
350,857Consulting fees exchanged for common stock

$
3,034,000


$
1,895,340


See notes to financial statements.


26
 Table of Contents




VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008




1.             NATURE OF OPERATIONS
 
 Vemics, Inc. (the “Company”) builds portal-based, virtual work and learning environments  in healthcare and related industries. Our focus is twofold: iMedicor, our web-based portal which allows Physicians and other healthcare providers to exchange patient specific healthcare information via the internet while
maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations, and; recently acquired ClearLobby technology, our web-based portal adjunct which provides for direct communications between pharmaceutical companies and physicians for the dissemination of  information on new drugs without the costs related to direct sales forces.   Our solutions allow for physicians use the internet in ways previously unavailable to them due
to HIPAA restrictions to quickly and cost-effectively exchange and share patient medical information and to interact with pharmaceutical companies and review information on new drugs offered by these companies at a time of their choosing.    .  Our solutions –
 
 §
Provide services that are comprehensive and end-to-end
 §
Are portal-based and require little or no capital investment for equipment or infrastructure
 §
Support interactive real-time collaboration and learning
 §
Are flexible, configurable and interoperable
 §
Utilize and migrate with all available real-time communications and learning technologies
 §
Include peripheral or adjunct productivity tools, services and support
 §
Are highly mobile and affordable for medical practices of any size
 §
Are convenient and extendable throughout 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.
 
 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 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 $29,833,903 at June 30, 2009.  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.
 
 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.
 
 27
 Table of Contents
 VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 
 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, 2009, the Company had no cash balances at any financial institution in excess of federally insured limits.
 
 The Company has historically provided financial terms to customers in accordance with what management views as industry norms.  Financial terms, for credit –approved customers, are generally on a net 30-61 day basis, though most customers are entitled to a prompt payment discount.  Management periodically and
regularly reviews customer account activity in order to assess the adequacy of allowances for doubtful accounts, considering such 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.
 
 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, 2008utilizing 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.
 
 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.
  28
 Table of Contents
 VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 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 monthly, quarterly or once annually in advance.  If paid annually the revenue is recognized in two parts:  Support that is recognized 70% at the time of receipt of funds and the balance is recognized at 1/12th per month;
for the licensing aspect of the contract revenue is recognized at 1/12th per month, with the remaining balances being recorded in deferred income.  If paid quarterly the recognition is the same.
 ·
Sponsored CME programs – 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.
 ·
Delivery of product-specific information relating to healthcare and related services to physicians through on-line, opt in direct marketing
  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.
 
 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.
  29
 Table of Contents
  VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 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, 2009 and 2008 were $157,161
and $267,723, 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.
 
 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
  The Company records stock-based compensation expense related to employee and director stock options and the Employee Stock Purchase Plan (“ESPP”) in accordance with “Share Based Payment – a revision of SFAS No. 123, Accounting for Stock-Based Compensation” (“SFAS No. 123(R), as interpreted by SEC
Staff Accounting Bulletin No. 107 (“SAB No. 107”).  The Company adopted the modified prospective transition method provided for under SFAS No. 123(R).
 
 3.             SHAREHOLDERS’ EQUITY (DEFICIENCY)
 
 Common stock
 
 The Company as of June 30, 2009 and 2008 68,926,531 had a total of 128,623,635 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 April 27th 2009,
the Board of Directors approved the issue of 600,000 shares of restricted stock to current and past members of the Board of Directors, and issued another 21,175,000 to certain employees, consultants, vendors and advisors.
 
 Warrants
 
 As of June 30, 2009, the Company has issued warrants to purchase shares  of Common Stock reserved for issuance upon exercise to various shareholders and service providers according to the schedule below:
  No. Shares


Expiration


Exercise Price4,178,419



2009 – 2010


$
1.502,206,666



2010 – 2011


$
0.601,430,000



2011


$
0.241,541,667



2011


$
0.124,000,000



2013


$
0.04660,000



2013 – 2014


$
0.05
 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.
  30
 Table of Contents
  VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 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 or controls 25,746,795 shares of common stock and has the right to acquire 2,896,140
additional shares of common stock pursuant to currently exercisable warrants.
 
 On April 17, 2009 this board member received 5,600,000 shares of common stock for services outside normal duties as a board member and various personal guarantees for loans secured from banks on behalf of the Company.
 
 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.
 
 4.             PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE
 
 Depreciation and amortization expense for the years ended June 30, 2009 and 2008 was $50,075 and $57,070, 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:
  6/30/2009


6/30/2008Furniture and fixtures

$
2,600


$
2,600Software


72,430



72,430Equipment


392,097



391,826467,127



466,856Less Accumulated Depreciation & Amortization


450,582



400,507$
16,545


$
66,349
 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 $1,962,780 for the year ended June 30, 2009.
  6/30/2009


6/30/2008Technology and medical software

$
10,008,893


$
9,263,893Less: Accumulated Amortization


3,194,330



1,231,550$
6,814,563


$
9,098,209
 
 31
 Table of Contents


VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 
 6.             LONG TERM DEBT
  Convertible Debentures

$
3,121,319Notes Payable


1,771,875Total

$
4,893,194Less: portion in current liabilities


(3,624,198
)Balance of long term debt

$
1,268,996
  Long term debt matures as follows:
  June 30, 2010

$
3,624,198June 30 2011


1,268,996Total

$
4,893,194
 Convertible Debentures
 
 The company has issued Convertible Debentures at various times. Interest rates on these debentures vary from 8% to 17.98% with various maturity dates through December 31, 2009.
  Amount outstanding


Interest Rate

Conversion Features$
150,000



17.98
%
convertible into common shares at $0.45 per share.270,000



8.00
%
convertible into common shares at $0.138 per share399,602



12.00
%
convertible into common shares at a 10% discountto the 20 day trailing average closing price2,301,717



15.00
%
convertible into common shares at $0.05 per share$
3,121,319
 7.             NOTES PAYABLE
  Delk Road

$
270,379Director


600,000Director


668,996ClearLobby, Inc.


232,500Total

$
1,771,875
 Delk Road
 
 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, 2009.  Payments related to the long-term
note payable described above are as follows:
 32
 Table of Contents
  VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 Director
 
 The Company has borrowed $ 1,600,700,and $1,400,914 as of June 30, 2009 and June 30, 2008 including accrued interest, respectively from one member of the board of directors at a rate of interest is at 8%.  The funds were borrowed recently with the intention of repaying this lender with the anticipation of raising sufficient funds
in the near future and include $600,000 borrowed on the Company’s behalf by a financial institution, however, the lender has extended the note to be due on June 30, 2011.
 
 The Company services the interest on a monthly basis for the loan from the financial institution and is accruing 8% interest per annum on the balance.  However, the lender has extended the note to be due on June 30, 2011.
 
 ClearLobby, Inc.
 
 In consideration for the assets purchased under the ClearLobby Limited Asset Purchase Agreement (referenced later), 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 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.
 
 8.             RENT
 
 Related Party Transactions
 
 Total rent expense paid to various related parties for the years ended June 30, 2009 and 2008 were $4,500 and $-0-, respectively.
 
 9.             DEEMED COMMON STOCK DIVIDEND
 
 During the years ended June 30, 2009 and 2008, the Company issued 6,201,667 and 1,423,333 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, 2009 and 2008 were $354,450 and $48,798, 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.
 
 10.           INCOME TAXES
  6/30/2009


6/30/2008Taxes on income include provision (benefits) for:Federal income taxes

$
-0-


$
-0-State and local income taxes


-0-



-0-Total

$
-0-


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

$
-0-


$
-0-Deferred


-0-



-0-Total

$
-0-


$
-0-
 
 Deferred tax assets comprise the following at June 30, 2009 and June 30, 2008, 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.
  6/30/2009


6/30/2008Deferred Income Tax Assets

$
4,887,432


$
3,489,000Valuation allowance


(4,887,432
)


(3,489,000
)Net Deferred Tax Asset

$
-0-


$
-0-
 
 33
 Table of Contents
  VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 11.           2007 EQUITY COMPENSATION PLAN
 
 Effective June 6, 2007, Vemics 2007 Equity Compensation Plan authorized 6,300,000 shares to be available to provide designated employees of the Company and its parents and subsidiaries, certain consultants and advisors who perform services for the
Company or its parents or subsidiaries, and non-employee members of the Board of Directors of the Company (the “Board”) with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards.  On July 29, 2008, the Company’s Board of Directors and shareholders approved an amendment of the Equity Plan to increase the number of shares of Common Stock underlying
the Equity Plan from 6,300,000 to 17,000,000.
 
 As of June 30, 2009, the Company had issued 11,220,000 shares and 1,8750,000 option to purchase shares in the Company to Officers, employees, former employees and contractors under the 2007 Equity Compensation Plan.  All options issued have an exercise price of $0.07.
 
 12.          ACQUISITIONS
 
 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  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.
  13.           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.
 
 14.           LEGAL ARBITRATION DECISION
 
 On April 21, 2009, the Company was ordered to pay an award to an unrelated third party in the amount of $116,768.61 in conjunction with the Company’s E Learning Desktop Asset Purchase Agreement.  The Company had originally accounted for $75,000 of this liability which had been disclosed as part of the asset purchase,
however the amount awarded $41,761 in excess of the amount originally recorded.  This additional amount is reflected in the financial statements as of June 30, 2009.
 
 15.           EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
 
 a.
The Company and Mr. Fred Zolla, its Chief Executive Officer and Chairman of the Board, entered into a three-year employment agreement effective as of October 1, 2004, pursuant to which Mr. Zolla was paid an annual salary (based on a calendar year) of $70,000 in 2005, $130,000 in 2006 and$168,000
for 2007.  The Agreement 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.
 
 b.
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 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.
 
 c.
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.
  34
 Table of Contents
  VEMICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009 AND 2008
 16.           SUBSEQUENT EVENTS
 
 a.
REDUCTION OF DEBT – Settlement Agreement
 
 On July 23, 2009 the United States District Court, Southern Court of New York voided the Settlement Agreement reached with the note holders in conjunction with the $270,000 convertible debenture and found in favor of the company.  Since the note holders could not produce the original signed notes for settlement, as was agreed
upon in the Settlement Agreement, the judge dismissed all the note holders’ claims with prejudice.  This amount is not reflected in the Company’s financials due to the fact that the note holders have appealed the decision and no final decision as been rendered by the appellate court.
  b.
ISSUANCE OF STOCK FOR FEES AND SERVICES
 
 On August 3, 2009 the Board approved the issuance of 9,389,867 shares of the Company’s common stock to vendors, consultants, employees and former employees for fees and services.
 
 c.
CONVERSION OF DEBT
 
 In August of 2009 the Company issued 3,000,000 shares to two convertible note holders and reduced the principle amounts of their notes by an aggregate of $200,000.00.
 
 d.
ASSET PURCHASE AGREEMENT – ClearLobby
 
 On September 3, 2009 the Company and ClearLobby, Inc. mutually agreed to an amendment to the Limited Asset Purchase Agreement entered into in September of 2008 whereby ClearLobby, Inc accepted in lieu of the $240,000 originally agreed to in the Agreement, 2,000,000 shares of the Company’s common stock as payment in full under
the terms of the agreement.  The stock has been issued and there is no balance due.




35
 Table of Contents




Item 9.             Changes and Disagreements with Accountants on Accounting and Financial Disclosure





None.





Item 9A.             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, 2009.





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




Evaluation of Disclosure Controls and Procedures
 
 As of June 30, 2009, management performed, with the participation of our Chief Executive Officer/Chief Financial Officer (who is the same person), an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed
to ensure that information required to be disclosed in the report we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management including our Chief Executive Officer/Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on the evaluation and the identification of the material weaknesses in our internal control over
financial reporting described below, our Chief Executive Officer/Chief Financial Officer concluded that, as of June 30, 2009, our disclosure controls and procedures were not effective.
 
 Management’s Report on Internal Control Over Financial Reporting
 
 The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:
  ●pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
  ●provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and
  ●provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Under the supervision and with the participation of our management, the Company assessed the effectiveness of the internal control over financial reporting as of June 30, 2009. In making this assessment, we used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this assessment and on those criteria, the Company concluded that a material weakness exists in the internal
controls as of June 30, 2009.
 
 A material weakness in the Company’s internal controls exists in that, there is a limited financial background and lack of appropriate experience and knowledge of U.S. GAAP and SEC reporting requirements amongst all of the executive officers and the board of directors.  This material weakness may affect management’s ability
to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with U.S. GAAP.  In making this assessment, our management used the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of the material weaknesses described above, our management concluded that as of October 13, 2009, we did not maintain effective internal control
over financial reporting based on the criteria established in Internal Control — Integrated Framework issued by the COSO.
 
 This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal controls over financial reporting.   Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management’s report in this annual report.  We will be subject to this requirement for our next fiscal year ending June 30, 2010.
 
 Remediation of Material Weaknesses in Internal Control over Financial Reporting
 
 We are in the process of implementing remediation efforts with respect to the material weaknesses noted above as follows:
 
 (i) we are in the process of retaining an accountant with U.S. GAAP experience to assist us in recording and the valuation of these types of transactions.
 
 We believe the foregoing efforts will enable us to improve our internal control over financial reporting. Management is committed to continuing efforts aimed at improving the design adequacy and operational effectiveness of its system of internal controls. The remediation efforts noted above will be subject to our internal control assessment,
testing and evaluation process.
 
 This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Commission that permit the company to
provide only management's report in this quarterly report.


(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, 2009, 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 weekly reviews of accounts payable and accounts receivable by the chief financial officer with the new accounting personnel.  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.




36
 Table of Contents




PART III





Item 10.            Directors, Executive Officers and Corporate Governance.





Set forth below are the names, ages, titles, principal occupation and certain biographical information as of September 29, 2008, concerning the Company’s directors and executive officers.  All of the Company’s officers have been appointed by and serve at the discretion of the Board.





NAME

AGE

POSITIONFred Zolla

58

CEO & ChairmanCraig Stout

41

Chief Operating Officer/Interim Chief Financial OfficerTom Dorsett

34

PresidentBrian Howell

47

Chief Technology OfficerF. Chandler Coddington, Jr.

76

DirectorLarry Shemen

53

DirectorBrian Groh

50

DirectorMichael Lorelli

58

DirectorMichael McGee

53

DirectorStacey Richter

41

Director





Fred Zolla, CEO and Chairman.Mr. Zolla has served as our Chief Executive Officer and Chairman of the Board of Vemics since the date of our acquisition of Vemics-Delaware in November 2005.  Further,
Mr. Zolla served as the CEO and Chairman of Vemics-Delaware since its inception on July 17, 2001.  Before founding Vemics-Delaware, Mr. Zolla served as the Chief Operating Officer of Educational Video Conferencing, Inc., a publicly traded company in the technology and distance learning fields from April 1999 to June 2001.  From January 1990 to February 1999, Mr. Zolla was the President of Distance Learning Associates, the first content aggregator in the K-12 and corporate distributed learning
space in the U.S.  In 1996, he served on the White House Committee for technology in education chaired by then vice-president Al Gore.  Mr. Zolla has taught and lectured in England, France, Italy, Spain, Korea and throughout the U.S. on the “Integration of distance learning resources and technology in the classroom and workplace.”  Mr. Zolla served as chairman of the board of the New York Film Festival, non-broadcast division from 1992 through 1995 and remains an active
board member.  Mr. Zolla has been married to Michelle, the original co-founder of Vemics, since 1969, they have two daughters and four grandchildren all of who live in Rockland County, New York.





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





Tom Dorsett, President.Mr. Dorsett joined Vemics in October 2006 and brings 10 years of experience in the healthcare IT market.  He
was co-founder of NuScribe, a privately held medical software company acquired by Vemics in November 2006, where he served as Chief Executive Officer from January 2002 to October 2006.  Before NuScribe, Mr. Dorsett founded and operated Channel Management Software from 1996 to 2002, a reseller of medical voice recognition and electronic medical records applications.  He served as sales manager for MD Productivity, a manufacturer of voice recognition driven healthcare documentation applications
and he was Chief Executive Officer and founder of Industryworks Software, a manufacturer of management applications for the transportation and insurance industries.





Brian Howell, Chief Technology Officer.Mr. Howell has served as our Chief Technology Officer since the date of our acquisition of Vemics-Delaware in November 2005.  He served in the same
capacity for Vemics-Delaware since 2003.  He brings more than 20 years of video, voice, data and network technology experience.  Before joining Vemics, from 2001 to 2002 he was Senior Manager for Video Systems and Solutions at Cetacean Networks where he worked on applying real-time routing technologies to the Internet.  From 1984 to 2001, Mr. Howell was a member of the start-up team at PictureTel Corporation (now Polycom).  During his 16 years at that company, he was a
key member of the team that brought about advances in the marketplace including development of the first integrated Rollabout Videoconferencing System, MCU and PC-based videophone.  Mr. Howell also managed the “Living Lab” working on future technologies and is named on three patents with PictureTel and Polycom.





F. Chandler Coddington, Jr., Director.Mr. Coddington has served as a director of Vemics since the date of our acquisition of Vemics-Delaware in November 2005 and served as a director of Vemics-Delaware
since 2002.  Mr. Coddington has 46 years of experience in the insurance and retail/agency brokerage business and has served in several chair posts, including Travelers, St. Paul, Cigna, Connecticut General Life Insurance Company.  He is active in many local non-profit endeavors, including United Way, Overlook Hospital, Chamber of Commerce and the YMCA.





37
 Table of Contents





Larry Shemen, MD, Director.  Dr.  Shemen has served as a director of Vemics since the date of our acquisition of Vemics-Delaware in November 2005 and served as a director of Vemics-Delaware
since June 2006.  Dr. Shemen is a practicing physician and currently operates his medical practice from his Manhattan location and in Queens, New York.  He is a Surgical Attending - Manhattan Eye Ear and Throat Hospital, St. Vincent's Hospital, New York Hospital Queens, Beth Israel Medical Center, Hackensack Medical Center, Catholic Medical Center, Lenox Hill Hospital, New York Eye and Ear Infirmary.  Dr. Shemen served as Chief Resident of
St. Michael's Hospital and The Wellesley Hospital and was Chief Fellow, Head and Neck Surgery Memorial Sloan-Kettering Cancer Center.  Dr. Shemen currently serves on the Editorial Board for Otolaryngology- Head and Neck Surgery; is a Diplomat of the National Board of Medical Examiners; is aLicencate of the Medical Council of Canada, licensed as general practitioner with the College of Physicians and Surgeons
of Ontario, is aLicencate State of California Board of Medical Quality Assurance as Physician and Surgeon andLicencate with the State of New York and New Jersey.  Dr. Shemen is a member of American Medical Association, Canadian Otolaryngological Society, American Academy of Otolaryngology, Head and Neck Surgery, American Academy of Facial Plastic and
Reconstructive Surgery, New York Society of Head and Neck Surgeons, Society of Head and Neck Surgeons, Academy of Oral Medicine, American College of Surgeons, American Society for Head and Neck Surgery, American Rhinologic Society.





Brian Groh, Director.Mr. Groh has served as a director of Vemics since September 2006.Mr. Groh is currently a Managing Director with
Blackwater Capital and has served in that capacity since May 2007.  In 1996, Mr. Groh founded and became President and CEO of Xplore Technologies trading on the Toronto Stock Exchange and recognized as a global leader in the engineering, development, integration and marketing of rugged mobile wireless pen-based computing systems.  After leaving Xplore in 2005 through spring 2007, Mr. Groh worked as an independent consultant to Valt.X Inc, Aerius, Vemics, Screen Innovations and Wistron Corporation.  Mr.
Groh worked as a consultant to these   early stage technology companies   assisting them in   raising funds, with marketing, and consulting with respect to a number of mergers and acquisitions.  Previously, Mr. Groh was one of Bell Mobility and Motorola’s first cellular dealers in Canada and became one of owners of the first Bell Cellular Mobility Centers in Canada.  In 1986, he founded Telular Canada.





Michael Lorelli, Director.Mr. Lorelli has served  as a director of Vemics since his appointment
in June of 2009.Mr. Lorelli's 30-year career spans a wide range of consumer products and services, and B2B categories, with responsibilities for both domestic and international units. For the last decade, acting as CEO, he has led revitalizations and turnarounds for private equity firms. He is presently CEO of Carlstadt, NJ based WaterJel Technologies, the leader in burn care products. WaterJel is a Riverside, NJ Company. Previously, he led the growth of Latex International, a Pouschine-Cook
company. Mr. Lorelli has also led CEO engagements for Rutledge Capital, and Cerberus.





Mr. Lorelli’s assignments at PepsiCo included Executive Vice President - Marketing, Sales and R&D for Pepsi-Cola North America, President of Pepsi-Cola East, a $1.5 Billion operating company, and President for Pizza Hut's International division where he led a "global or bust" campaign, resulting in expanding the Company's presence
from 68 to 92 countries, surpassing McDonalds in country count. During his PepsiCo tenure, he is given credit for authoring the soft drink company's "Big Event Marketing" strategy, which coupled the product with leading-edge events in entertainment, sports, consumer electronics, movies and home video.





Mr. Lorelli holds a Bachelor of Engineering degree in Industrial Engineering from New York University, and an MBA in Marketing from NYU's Stern Graduate School of Business. He is a member of The CEO Trust, former member of YPO, and author of the children's best-seller "Traveling Again, Dad?" with profits donated to children's charities.
Mr. Lorelli is a Director of WorkPlace Media, a private national media company that focuses solely on helping marketers reach the working consumer.





Michael McGee, Director.Mr. McGee has served as a director of Vemics since August of 2009.Mr.
McGee founded Amalgam Capital in June of 1995 to focus on investment and financial advisory roles with small emerging technology companies in the health care sector.  Amalgam Capital has held diverse interests in approximately a dozen health care related entities since inception.  These holdings comprised both public and private companies covering a wide range of the health care universe.  He also served as a director of HealthFusion, Inc., a company providing IT services to physicians
and New Horizons Diagnostics, Inc a company specializing in diagnostic and therapeutic technologies. Prior to forming Amalgam, Mr. McGee served in financial consulting roles with both Merrill Lynch and Lehman Brothers and served as vice president at both Oppenheimer & Company and Cohen & Company in Chicago, IL.  While at Cowen he hosted a weekly television show on financial matters entitled Ask An Expert.  His focus was largely
in the health care sector.





Stacey Richter, Director.   Ms. Richter has served as a director of Vemics since August
of 2009.Ms. Richter founded Franklyn Ideas, LLC in 1993.  Franklyn Ideas develops promotional programs for some of the world's largest, as well as up and coming, pharmaceutical companies. The company’s scope of services includes managed care messaging platforms, representative-delivered and non-personal communication tactics and tactical plans, package insert and packaging management and digital asset maintenance.   Prior to the Franklyn Ideas start-up, Stacey
worked in advertising operations at Parke-Davis/Warner Lambert as well as gained invaluable experience during her years as a medical device sales representative. She graduated Magna Cum Laude from the University of Pennsylvania, Wharton School of Business.





Code of Ethics





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





Item 11.             Executive Compensation





The following table sets forth annual compensation paid to our named executive officers for the fiscal year ended June 30, 2008 and for the year ended June 30, 2009.




38
 Table of Contents





SUMMARY COMPENSATION TABLE




Name and Principal Position
(a)

Year
(b)


Salary
($)
(c)


Bonus
($)
(d)


Stock
Awards
($) (1)
(e)


Option
Awards
($)
(f)


Non-Equity Incentive Plan Compensation
($)
(g)


Non-Qualified Deferred Compensation
Earnings
($)
(h)


All
Other Compensation
($)
(i)


Total
($)Fred Zolla, CEO & Chairman (2)


2009
2008


$
137,200 $120,000



- -


$
350,000



- -



- -



- -



- -


$
480,200 $120,000Craig Stout,  Chief Operating Officer/Interim Chief Financial Officer (3)


2009
2008


$
130,000 $100,800



- -


$
125,000 -



- -



- -



- -



- -


$
255,000 $100,800Tom Dorsett, President  (4)


2009
2008


$
110,000 $ 93,000


$
50,000 -


$
200,000 -



- -



- -



- -



- -


$
360,000 $ 93,000Brian Howell, Chief Technology Officer (5)


2009
2008


$
104,800 $ 81,600



- -


$
150,000 -



- -



- -



- -



- -


$
254,800 $ 81,600






(1) On April 17, 2009, Mr. Zolla was awarded 3,500,000 shares of Common Stock by the Board of Directors as a bonus.





(2) On April 17, 2009, Mr. Stout was awarded 1,250,000 shares of Common Stock by the Board of Directors as a bonus.




(3) On April 17, 2009, Mr. Dorsett was awarded 2,000,000 shares of Common Stock by the Board of Directors as a bonus.




(4) On April 17, 2009, Mr. Howell was awarded 1,500,00 shares of Common Stock by the Board of Directors as a bonus.




Employment Agreements with Executive Officers





The Company and Mr. Fred Zolla, its Chief Executive Officer and Chairman of the Board, entered into a three-year employment agreement effective as of October 1, 2004, pursuant to which Mr. Zolla was paid an annual salary (based on a calendar year) of $70,000 in 2005, $130,000 in 2006 and $168,000 for 2007.  Mr. Zolla may terminate
the agreement for any reason on 90-days written notice to the Company or by the Company immediately for cause.  The Agreement provides for 18 months of severance in the event of termination without cause.  Mr. Zolla's initial agreement expired on December 31, 2007; however, this agreement was renewed for two years and is due to expire on December 1, 2009.  The Company expects to renew the Agreement prior to its expiration.





In addition, effective as of October 1, 2004, the Company and Brian Howell, its Chief Technology Officer, entered into a three-year employment agreement pursuant to which 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.  Mr. Howell's initial agreement expired on December 31, 2007; however, this agreement was renewed for two years and is due to expire on December 1, 2009.  The Company expects to renew the Agreement prior to its expiration.





On March 10, 2008, the Company entered into an employment agreement with Craig Stout pursuant to which Mr. Stout will serve as our Chief Operating Officer at an initial term of three years.  This agreement commenced April 1, 2008 and terminates on March 31, 2011.  The agreement provides for an annual salary of $120,000,
which amount would increase to $156,000 if the Company raises in excess of $5,000,000 in equity.  Mr. Stout may terminate the agreement for any reason on 90-days written notice to the Company or by the Company immediately for cause.  In the event of a termination by the Company for any reason other than cause, the Company is to pay Mr. Stout an amount equal to 12 months' salary.





On October 12, 2006, as part of the acquisition of NuScribe, the Company entered into an agreement with Tom Dorsett the former CEO of NuScribe.  Mr. Dorsett currently serves as President of the Company.  The agreement has an initial term of two years, commencing on October 12, 2006 and ending on October 12, 2008, which
has automatically renewed for an additional two-year term through October 12, 2010.  This agreement provided for an annual salary of $80,000, which was increased to $120,000 upon a funding event to the Company in excess of $1,000,000 earlier in 2008.  Mr. Dorsett may terminate the agreement for any reason on 90-days written notice to the Company or by the Company immediately for cause.  The Company expects to renew the Agreement prior to its expiration.





Equity Incentive Plan





The Company adopted the Vemics, Inc. 2007 Equity Compensation Plan, which was approved by our stockholders on June 6, 2007 (the “Equity Plan”), to provide employees, non-employee directors, consultants and advisors with the opportunity to receive grants of stock options and stock awards.  The purpose of the Equity
Plan is to give participants an ownership interest in our Company, and to create an incentive to contribute to our economic success.  The Equity Plan authorizes the issuance of incentive stock options, nonqualified stock options and other stock based awards to employees, non-employee directors, consultants and advisors.  There are 17,000,000 shares of Common Stock authorized under the Equity Plan.  As of June 30, 2009, the Company has issued options to purchase 1,895,000 shares of
Vemics Common Stock to non-executive officers employees, former employees and consultants of the company.  Additionally, the Company issued  2,970,000 shares to non-executive officers, employees, former employees and consultants of the Company




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Item 12.               Security Ownership of Certain Beneficial Owners and Management





The following table sets forth as of September 29, 2009, certain information with respect to the beneficial ownership of the Common Stock by: (1) each person known by us to beneficially own more than 5% of our outstanding shares, (2) each of our directors, (3) each named executive officer and (4) all of our executive officers and directors
as a group.





Except as otherwise indicated, each person listed below has sole voting and investment power with respect to the shares of Common Stock set forth opposite such person's name.  Applicable percentage of ownership is based on 128,623,635 shares of our Common Stock outstanding on September 29, 2008.





In computing the number and percentage of shares beneficially owned by a person, shares of Common Stock subject to options and/or warrants currently exercisable, or exercisable within 60 days of September 29, 2008, are counted as outstanding, but these shares are not counted as outstanding for computing the percentage ownership
of any other person.





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

Amount of Beneficial Ownership


Percent of Outstanding SharesF. Chandler Coddington, Jr.  (3)


28,642,935



21.56
%Fred Zolla (4)


8,110,116



6.23
%Tom Dorsett


5,792,077



4.50
%Brian Howell


2,815,572



2.19
%Craig Stout


2,275,000



1.77
%Brian Groh


936,538



0.73
%Dr. Larry Shemen (5)


1,210,966



0.94
%All officers and directors as a group (7 persons) (6)


46,085,590



31.69
%





* less than 1%





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





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





(3)
Includes 2,896,140 shares of Common Stock that may be acquired upon exercise of currently exercisable warrants.  Also includes 7,913,816 shares of Common Stock owned by trusts of which Mr. Coddington is trustee but not beneficiary.  Mr. Coddington has dispositive power over the shares owned by the trusts and is therefore
considered to be beneficial owner of such shares, although he disclaims beneficial ownership thereof.





(4)
Includes 953,333 shares of Common Stock that may be acquired upon exercise of currently exercisable warrants.




(5)
Includes 205,000 shares of Common Stock that may be acquired upon exercise of currently exercisable warrants.





(6)
Includes 8,642,974 shares of Common Stock that may be acquired upon exercise of currently exercisable warrants.





Item 13.             Certain Relationships and Related Transactions and Director Independence





Vemics utilizes office space provided by some of its key employees and officers.  Vemics’ President and CEO, Fred H. Zolla provides Vemics’ principal office space located at 523 Avalon Gardens Drive, Nanuet, NY 10954.  Vemics pays approximately $4,500 per year to Mr. Zolla for the use of the office space
he provides.  Vemics will continue to maintain this office for the near future.  Vemics website lists the home offices of the Company’s chief technology officer, Brian Howell, located at 247 Green St, Marblehead, MA 01945, and a consultant of the Company, John Walber, located at 403 Vernon Rd, Jenkintown, PA 19046.  The Company does not pay any compensation to Mr. Howell or Mr. Walber for the use of this additional office space.





F. Chandler Coddington has been member of our Board of Directors since 2002.  He 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.  In addition, as of June 30, 2007 and December 31, 2007, we have outstanding short-term loans from Mr. Coddington totaling $11,716 and $487,024, respectively.




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Mr. Coddington received 200,000 shares of Common Stock 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.





Mr. Coddington has also received 832,245 shares of Common Stock in exchange for providing personal guarantees on behalf of the Company for the following credit facilities:  Somerset Community Bank ($300,000 equipment credit line established on April 30, 2004); Valley National Bank ($115,000 credit line established on September 30,
2004); and Citibank ($600,000 credit line established in September 2007).  Mr. Coddington is the primary obligor on the foregoing credit facilities.  Accordingly, the Company issued a three-year promissory note to Mr. Coddington on June 30, 2008, in the amount of $1,400,914 with interest payable at 8%, which promissory note calls for $2,500 interest payments to Mr. Coddington commencing July 1, 2008.





In addition, on December 1, 2006, Mr. Coddington 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 placements (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.





In April of 2009 Mr. Coddington received 5,600,000 shares of stock for loans that he personally guaranteed on behalf of Vemics and various other consulting services to the Company outside his duties as a director.





Between June 30, 2005 and February 28, 2008, Dr. Larry Shemen, a member of our Board of Directors, has invested $170,000 into the Company in exchange for shares of Common Stock.




Between February and April of 2009 Craig Stout loaned $38,000.00 to the company interest free and with no specific terms for repayment.  As of June 30, 2009, all but $13,000 of these loans had been paid back.





Item14.             Principal Accountant Fees and Services





Cost of Fees and Services





During fiscal years 2008 and 2007, the Company’s independent registered public accounting firm, Demetrius & Company L.L.C., rendered services to the Company for the following fees:





2009


2008Audit Fees

$
45,000


$
44,000All Other Fees(*)






43,000Total

$
45,000


$
87,000
 
 (*)

Other services consist of fees related to review of our registration statement on Form 10-SB





Audit Committee's Pre-Approval Practice





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




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 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 April 1, 2008, by and between Craig Stout and Vemics, Inc.*




10.8
Service Agreement by and between eRx Network, LLC and Vemics, Inc. entered into as of November 30, 2007.*




10.9
Microsoft HealthVault Solution Provider Agreement by and between Microsoft Corporation and Vemics, Inc. effective February 15, 2008.*





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 Table of Contents




10.10
Volume Purchase Agreement by and between Dell Marketing, L.P. and Vemics, Inc. effective as of February 19, 2008.*


10.18
Service Agreement between AMA Insurance Agency, Inc and Vemics, Inc. d/b/a iMedicor *******
 10.19
Amendment to the Limited Asset Purchase Agreement with ClearLobby, Inc.
31.1
Certification of the  Chief Executive Officer pursuant to Rule 13a-14(a)
31.2
Certification of the Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a)
32
Certification of the President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002
*Incorporated by reference to exhibits of Registrant’s Form 10 filed on May 13, 2008.
**Incorporated by reference to Exhibits to Registrant's Form 10-K filed on October 13, 2008.
***Incorporated by reference to Exhibit 10.1 of Registrants 8-K filed September 18, 2008.
****Incorporated by reference to Exhibit 10.1 of Registrants 8-K filed August 8, 2008.
*****Incorporated by reference to Exhibit 10.1 of Registrants 8-K filed December 15, 2008
******Incorporated by reference to Exhibit 4.1 of Registrants 8-K filed January 20, 2009
*******Incorporated by reference to Exhibit 10.1 of Registrants 8-K filed May 05, 2009
********Incorporated by reference to Exhibit 10.1 of Registrants 8-K filed July 27, 2009







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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
Chief Executive Officer,
October 13, 2009Fred Zolla
(Principal Executive Officer)/s/ Thomas Dorsett
President
October 13, 2009Thomas Dorsett/s/ Craig Stout
Chief Operating Officer and
October 13, 2009Craig Stout
Interim Chief Financial Officer/s/ Brian Howell
Chief Technology Officer
October 12, 2009Brian Howell/s/ F. Chandler Coddington, Jr.
Director
October 12, 2009F. Chandler Coddington, Jr./s/ Larry Shemen
Director
October 13, 2009Larry Shemen, MD/s/ Brian Groh
Director
October 12, 2009Brian Groh/s/ Stacy Richter
Director
October 12, 2009Stacy Richter/s/ Michael McGee
Director
October 12, 2009Michael McGee/s/ Michael Lorelli
Director
October 12, 2009Michael Lorelli







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