UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549









FORM
10-QSB







x Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities


Exchange
Act of 1934




For the
quarterly period ended March 31,
2008




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




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






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




There
were 49,512,425 outstanding shares of the issuer's only class of common
equity, Common Stock, $0.001 par value, on May 20, 2008.




Transitional
Small Business Disclosure Format (check one): Yes o No x




Table of Contents




VEMICS, INC.


FORM
10-QSB QUARTERLY REPORT


FOR
THE QUARTER ENDED MARCH 31, 2008




TABLE
OF CONTENTS






PagePart I
            Financial
      InformationItem 1.
            Financial Statements
            3Condensed
      Consolidated Balance Sheet as of March 31, 2008 (unaudited) andJune
      30, 2007 (audited)
            3Condensed
      Consolidated Statements of Operations for the Three Months EndedMarch
      31, 2008 and 2007 (unaudited)
            4Condensed
      Consolidated Statements of Operations for the Nine Months EndedMarch
      31, 2008 and 2007 (unaudited)
            5Condensed
      Consolidated Statements of Cash Flows for the Nine Months EndedMarch 31, 2008 and
      2007 (unaudited)
            6Financial Footnotes
            7Item
    2.
            Management's
      Discussion and Analysis of Financial Condition and Resultsof
      Operations
            10Item 3.
            Controls and Procedures
            15Part II
            Other
    InformationItem 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            15Item 6.
            Exhibits
            15Signatures
            
            16




Table of Contents




PART1:  FINANCIAL INFORMATION




ITEM
1.  FINANCIAL STATEMENTS




VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED BALANCE SHEETS




March
      31, 2008
            
            
            June
      30, 2007ASSETS
            unaudited
            
            
            AuditedCurrent
      assets:Cash
      and cash equivalents –– interest bearing
            $
            274,884
            
            
            $
            505,668Accounts
      receivable, net ofallowance
      for doubtful accounts of$5,000
      and $-0- at March 31, 2008and
      June 30, 2007, respectively
            
            147,978
            
            
            
            228,822Total
      Current Assets
            
            422,862
            
            
            
            734,490Property
      and equipment, net
            
            80,455
            
            
            
            121,314Other
      AssetsTechnology
      and Medical Software, net
            
            8,478,098
            
            
            
            9,098,209Goodwill681,673
            
            
            
            681,6739,159,771
            
            
            
            9,779,882Total
      Assets
            $
            9,663,088
            
            
            $
            10,635,686LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable –– banks
            $
            902,169
            
            
            $
            299,980Current
      maturity of capital lease obligations
            
            -
            
            
            
            5,896Short-term
      notes payable
            
            2,266,080
            
            
            
            1,451,125Accounts
      payable and accrued expenses
            
            1,927,687
            
            
            
            1,151,004Deferred
      income
            
            224,750
            
            
            
            149,338Total
      Current Liabilities
            
            5,320,686
            
            
            
            3,057,343Other
      long-term liabilitiesLong-term
      notes payable
            
            -
            
            
            
            277,622Total
      Other Long-Term Liabilities
            
            -
            
            
            
            277,622Total
      Liabilities
            
            5,320,686
            
            
            
            3,334,965Stockholders’
      EquityCommon
      stock,
              Par value $.001 per share, 75,000,000 authorized
              53,759,450 and 50,609,450
      issued and outstanding
              as of March 31, 2008 and
      June 30, 2007
            
            53,759
            
            
            
            50,609Additional
      Paid in Capital
            
            23,463,836
            
            
            
            22,981,769Less:
      Treasury stock, 368,407 shares at both March 31, 2008 and June 30,
      2007
            
            (508,195
            )
            
            
            (508,195
            )Accumulated
      deficit
            
            (18,666,999
            )
            
            
            (15,223,462
            )Total
      Stockholders’ Equity
            
            4,342,402
            
            
            
            7,300,721Total
      Liabilities and Stockholders’ Equity
            $
            9,663,088
            
            
            $
            10,635,686







See notes
to financial statements.






3
 Table of Contents




VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS




For
      the three
            
            
            For
      the threemonths
      ended
            
            
            months
      endedMarch
      31, 2008
            
            
            March
      31, 2007unaudited
            
            
            unauditedRevenues:
            $
            160,740
            
            
            $
            345,539Cost
      of Services
            
            82,197
            
            
            
            74,206Gross
      Profit
            
            78,543
            
            
            
            271,333Expenses:Consulting,
      commissions and travel
            
            179,201
            
            
            
            85,313Operational
      fees and expenses
            
            84,865
            
            
            
            445,855Professional
      fees
            
            275,430
            
            
            
            166,579Payroll
      and related taxes
            
            231,110
            
            
            
            413,281Depreciation
      and amortization
            
            471,743
            
            
            
            13,761Bad
      debt expenses
            
            5,000
            
            
            
            (6,675
            )Production,
      advertising, brochures and public relations
            
            10,000
            
            
            
            29,601Total
      Expenses
            
            1,252,349
            
            
            
            1,147,715Loss
      before other expenses
            
            (1,178,806
            )
            
            
            (876,382
            )Other
      Income/(Expenses):Interest
      income
            
            -
            
            
            
            981Interest
      expense
            
            (36,305
            )
            
            
            (46,446
            )Total
      Other Income/(Expenses)
            
            (36,305
            )
            
            
            (45,465
            )Net
      loss available to common stockholders
            $
            (1,215,111
            )
            
            $
            (921,847
            )Net
      loss per share, to common stockholders
            $
            (0.02
            )
            
            $
            (0.03
            )Weighted
      average number of shares, basic and diluted
            
            50,850,268
            
            
            
            36,155,667














See notes
to financial statements.






4
 Table of Contents






VEMICS, INC.  AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS






For
      the nine
              
              
              For
      the ninemonths
      ended
              
              
              months
      endedMarch
      31, 2008
              
              
              March
      31, 2007unaudited
              
              
              unauditedRevenues:
              
              $
              468,307
              
              
              $
              932,062Cost
      of Services
              
              
              140,813
              
              
              
              256,379Gross
      Profit
              
              
              327,494
              
              
              
              675,683Expenses:Stock
      issued for fees and services
              
              
              -
              
              
              
              5,000Consulting,
      commissions and travel
              
              
              1,009,766
              
              
              
              785,293Operational
      fees and expenses
              
              
              601,454
              
              
              
              695,843Professional
      fees
              
              
              422,884
              
              
              
              398,736Payroll
      and related taxes
              
              
              1,018,397
              
              
              
              1,051,577Depreciation
      and amortization
              
              
              811,319
              
              
              
              56,812Bad
      debt expenses
              
              
              5,000
              
              
              
              11,175Production,
      advertising, brochures and public relations
              
              
              300,741
              
              
              
              53,751Total
      Expenses
              
              
              4,169,561
              
              
              
              3,058,187Loss
      before other expenses
              
              
              (3,842,067
              )
              
              
              (2,382,504
              )Other
      Income/(Expenses):Interest
      income
              
              
              993
              
              
              
              2,585Interest
      expense
              
              
              (145,245
              )
              
              
              (116,174
              )Total
      Other Income/(Expenses)
              
              
              (144,252
              )
              
              
              (113,589
              )Loss
      before extraordinary item
              
              
              (3,981,319
              )
              
              
              (2,496,093Extraordinary
      item - litigation, net of expenses and taxes
              
              
              650,000
              
              
              
              -Net
      loss available to common stockholders
              
              $
              (3,336,319
              )
              
              $
              (2,496,093
              )Net
      loss per share, basic and diluted, before extraordinary
    item
              
              $
              (0.08
              )
              
              $
              (.08
              )Net
      loss per share, basic and diluted, extraordinary item net
              
              $
              0.01
              
              
              $
              -Net
      loss per share, to common stockholders
              
              $
              (0.07
              )
              
              $
              (0.08
              )Weighted
      average number of shares, basic and diluted
              
              
              50,850,268
              
              
              
              30,401,333










See notes
to financial statements.






5
 Table of Contents


.


VEMICS, INC.  AND
SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS




For
      the nine
            
            
            For
      the ninemonths
      ended
            
            
            months
      endedMarch
      31, 2008
            
            
            March
      31, 2007unaudited
            
            
            unauditedCash
      Flows From Operating Activities:Receipts
      from customers
            
            $
            619,563
            
            
            $
            788,783Payments
      to suppliers, salaries
            
            
            (2,715,667
            )
            
            
            (2,780,831
            )Other
      income received
            
            
            650,000
            
            
            
            -Interest
      received
            
            
            993
            
            
            
            2,585Interest
      paid
            
            
            (67,952
            )
            
            
            (37,280
            )Taxes
      paid
            
            
            (1,706
            )
            
            
            -Net
      Cash Used in Operating Activities
            
            
            (1,514,769
            )
            
            
            (2,026,743
            )Cash
      Flows Used in Investing Activities:Capitalized
      technology development costs
            
            
            (148,244
            )
            
            
            (48,714
            )Purchase
      of fixed assets
            
            
            (2,105
            )
            
            
            (18,916
            )Net
      Cash Used in Investing Activities
            
            
            (150,349
            )
            
            
            (67,630
            )Cash
      Flows From Financing Activities:Payments
      on capital lease obligations
            
            
            (5,896
            )
            
            
            (35,721
            )Payments
      on notes payable
            
            
            (65,270
            )
            
            
            -Short
      term loans
            
            
            1,127,500
            
            
            
            13,000Sale
      of Common Stock
            
            
            378,000
            
            
            
            1,877,000Net
      Cash Provided by Financing Activities
            
            
            1,434,334
            
            
            
            1,854,279Net
      Increase/(Decrease) in Cash
            
            
            (230,784
            )
            
            
            (240,094
            )Cash
      at the Beginning of Period
            
            
            505,668
            
            
            
            443,249Cash
      at End of Period
            
            $
            274,884
            
            
            $
            203,155


Reconciliation
      of Net Loss to Net CashUsed
      by Operating ActivitiesNet
      loss
              
              $
              (3,336,319
              )
              
              $
              (2,496,093
              )Adjustments
      to reconcile net income/(loss) to net cashused
      by operating activities:Depreciation
      & amortization
              
              
              811,319
              
              
              
              56,812Stock
      issued for accrued consulting fees
              
              
              -
              
              
              
              5,000Changes
      in:Trade
      receivables
              
              
              80,844
              
              
              
              (93,279
              )Prepaid
      expenses
              
              
              -
              
              
              
              90,000Accounts
      payable and accrued expenses
              
              
              776,682
              
              
              
              290,227Accrued
      interest payable
              
              
              65,956
              
              
              
              44,394Convertible
      debentures - accrued interest
              
              
              11,337
              
              
              
              34,500Deferred
      income
              
              
              75,412
              
              
              
              41,696Net
      Cash Used by Operating Activities
              
              $
              (1,514,769
              )
              
              $
              (2,026,743
              )Supplemental
      disclosures:Schedule
      of Noncash Investing and financing Transactions:Exchanged
      stock for stock for NuScribe, Inc.
              
              $
              -
              
              
              $
              9,000,000for
      common stock
              
              $
              -
              
              
              $
              5,000




See
accompanying notes.






6
 Table of Contents




VEMICS, INC.  AND
SUBSIDIARY


NOTES
TO THE FINANCIAL STATEMENTS


(Unaudited)




March
31, 2008




1.       
    Description of Business and Basis of
Presentation




Vemics,
Inc. (the “Company”) offers the following platforms as stand-alone or fully
integrated solutions: Vemics LiveAccessTM, NuScribeTM, iMedicorTM and
ELDTM.  For the past six months, the Company has focused much of its
energies and resources on iMedicorTM.  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.  On October 9, 2007, the Company announced the
commercial launch of iMedicor - the health industry's first free HIPAA compliant
personal health information exchange and secure messaging portal for physician
collaboration and community.  iMedicor features include HIPPA
compliant electronic transfer of patient medical information, voice-recognition
medical transcription, electronic medical records and image transfer and
storage, and live-interactive CME content products.  Since its launch
in early October, iMedicor registrations have passed 70,000.




The
financial statements included herein have been prepared, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission (the
“SEC”) in accordance with generally accepted accounting principles in the United
States for interim financial information.  Accordingly, they do not
include all of the information and footnotes required by generally accepted
principles for full year financial statements.  In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and are of a normal, recurring nature.




Operating
results for the nine-month period ended March 31, 2008, are not necessarily
indicative of the results that may be expected for the full
year.  These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto for
the fiscal year ended June 30, 2007 that are included in the Company’s Form
10-12G/A filed with the SEC on May 13, 2008.  We derived the condensed
consolidated balance sheet as of June 30, 2007 from the audited financial
statements for the year then ended.




In the
opinion of the Company, all adjustments necessary to present fairly the
financial position of the Company and the results of its operations and its cash
flows have been included in the accompanying financial
statements.  The table below shows the sales percentages by division
for the nine months ended March 31, 2008 and 2007:


2008
                
                
                2007Revenues:Education
                
                
                82
                %
                
                
                56
                %Healthcare
                
                
                18
                %
                
                
                44
                %Total:
                
                
                100
                %
                
                
                100
                %


As of
March 31, 2008, there have been no material changes to any of the significant
accounting policies that we have described in our Form 10-12G/A for the fiscal
year ended June 30, 2007, except for the adoption of Financial Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes.”




2.      
     Background of the Company




On
November 8, 2005, OMII Corp., a Nevada corporation originally formed on November
2, 1992 as E & M Management, Inc., acquired all the shares of Vemics, Inc.,
a Delaware corporation (“Vemics Delaware”) organized on July 17, 2001, in an
exchange of stock transaction.  Vemics Inc. became a 100% owned
subsidiary of OMII Corp.  The name of OMII was then changed to Vemics,
Inc.  Therefore, the accompanying presentation presents the historic
financials of Vemics Delaware, the accounting acquirer.






7
 Table of Contents




3.         
  Going Concern




These
financial statements have been prepared on a going concern basis. The Company
has accumulated a deficit of $19,091,000 and $15,223,000 at March 31, 2008 and
at June 30, 2007, respectively.  Since inception, the Company has yet
to achieve profitable operations.  The Company has financed its
activities primarily through convertible debentures, private placements of
equity securities and capital lease financing.  The Company’s
continuation as a going concern is dependent on attaining profitable operations
and obtaining additional outside financing.  The Company has funded
losses from operations in the current year primarily through the issuance of its
Common Stock.




The
Company anticipates that the issuance of debt and the sale of the Company’s
Common Stock will continue to fund operating losses in the short-term, or until
revenues grow to the point where they are sufficient to cover operating costs
and expenses, and retire the Company’s debt obligations.  The
accompanying financial statements do not include any adjustments relating to the
recoverability and classifications of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty.




4.    
       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.




5.     
      Warrants and Convertible Debt




From
February 22, 2008 through March 31, 2008, we issued 3,566,668 shares of Common
Stock through a private offering to accredited investors through which we raised
approximately $428,000.  During this same period, the Company reserved
630,000 shares of Common Stock for issuance upon exercise of warrants issued to
these investors.  These warrants have an expiration of three years
from their date of issuance and expire at various dates through March
2011.  Each warrant entitles its holder to purchase one share of
Common Stock at an exercise price of $.24 per share.




Prior to
that, as of December 31, 2007, the Company had issued warrants to purchase an
aggregate of approximately 6,385,086 shares of Common Stock, convertible
notes in aggregate principal amount of $737,391 that are convertible at the
Company’s option into 3,273,011 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 December 31, 2007 conversion date).




These
warrants have an expiration date of five years from their date of issuance and
expire at various dates through February 2010.  Each warrant will
entitle the holder thereof to purchase one share of Common Stock at an exercise
price ranging from $.60 to $1.50 per share.  The Company reserved 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.




6.      
     Related Party Transactions




One of
the members of the Company’s Board of Directors has been a Board member since
2002 and currently is the Company’s largest individual investor.  This
investor has invested $3,681,200 in the Company to date, and owns 13,699,237
shares of Common Stock representing approximately 25% of the issued and
outstanding shares of the Company.  The investor has the right to
acquire 2,896,140 additional shares of Common Stock currently pursuant to
exercisable warrants.




The
Company has borrowed $544,443 and $11,716 as of March 31, 2008 and June 30, 2007
including accrued interest, respectively from one member of the Board of
Directors at a rate of interest of 4%.




8
 Table of Contents








7.           
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 Company
launched the iMedicorÔ
product in late October 2007 and has begun to amortize the costs related thereto
on a straight-line basis over 60 months.  Amortization expenses were
$462,323 and $768,355 for the three and nine months ended March 31, 2008,
respectively:


March 31,
      2008
                  
                  
                  June 30,
      2007Technology
      and medical software
                  
                  $
                  9,246,453
                  
                  
                  $
                  9,098,209Less:
      Accumulated Amortization
                  
                  
                  768,355
                  
                  
                  
                  -0-Total:
                  
                  $
                  8,478,098
                  
                  
                  $
                  9,098,209




8.       
    Short Term Notes Payable




Payments
related to the short-term notes payable are comprised of the
following:




March 31,
      2008
                
                
                June 30,
      2007Short-term
      note payable
                
                $
                544,443
                
                
                $
                33,716Short-term
      portion of long-term note payable
                
                
                305,518
                
                
                
                20,566Note
      payable banks
                
                
                902,169
                
                
                
                299,980Convertible
      debentures – various rates between 8%and 18%, with various due dates betweenSeptember
      2004 and January 2008
                
                
                1,416,119
                
                
                
                1,396,843Total
      Short-term notes payable
                
                $
                3,168,249
                
                
                $
                1,751,105




9
 Table of Contents




ITEM2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Statements
made in this Report on Form 10-QSB, including without limitation this
Management's Discussion and Analysis of Financial Condition and Operations,
other than statements of historical information, are forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  These
forward-looking statements may sometimes be identified by such words as "may,"
"will," "expect," "anticipate," "believe," "estimate" and "continue" or similar
words.




We
believe that it is important to communicate our future expectations to
investors.  However, these forward-looking statements involve many
risks and uncertainties, including the risk factors disclosed under the heading
“Risk Factors” included inthe
Company's Registration Statement on Form 10/A filed with the Securities and
Exchange Commission on May 13, 2008. Our
actual results could differ materially from those indicated in such
forward-looking statements as a result of certain factors.  We are
under no duty to update any of the forward-looking statements after the date of
this Report on Form 10-QSB to conform these statements to actual
results.




Overview




Currently, our primary
focus is to provide on-line learning and productivity solutions.  We
supply organizations of all sizes with subscription-based access to fully
collaborative, real-time productivity tools that accelerate the flow of
information and education to a rapidly dispersing and highly mobile global
workforce.  Our Vemics LiveAccessTM solutions
are focused on education, training and communications and combine multipoint
video, voice and data collaboration technologies with industry specific content
produced and backed by recognized leading expertise and deep customer
support.  We offer our services through two separate divisions, Education
and Training and Healthcare
Services.




As of
March 31, 2008, we require approximately $175,000 to $250,000 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.  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.




The
Company is currently seeking up to $5,000,000 in capital.  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 over the next three
months, we could be required to substantially reduce operations, terminate
certain products lines or pursue exit strategies.




Healthcare
Services




For the
past six months, the Company has shifted most of its resources to the build-out
and promotion of iMedicorTM,our collaborative online portal designed for and by medical professionals
to facilitate practice productivity.  iMedicorTMoffers a rapid, secure exchange of education, information and ideas in
real-time which is the cornerstone of the Company’s Healthcare Services
division.  On October 9, 2007, the Company announced the commercial
launch of iMedicorTM.  iMedicorTMis the health industry's first free HIPAA compliant personal health
information exchange and secure messaging portal for physician collaboration and
community.  iMedicor’s features include HIPPA compliant electronic
transfer of patient medical information, voice-recognition medical
transcription, electronic medical records and image transfer and storage, and
live-interactive CME content product, in conjunction with our Education and
TrainingDivision.




We
believe this combination of features addresses both existing educational needs
for physicians and other healthcare providers and the ability to transfer
personal health information electronically in a method, which satisfies federal
HIPPA regulations that proscribe the transmission of records via email. 
Since its launch in October 2007, iMedicorTM registrations have exceeded
70,000.  Currently all aspects of iMedicorTMare offered free of charge to physicians and other healthcare providers
using the portal.  The content sponsors pay for CME content, which can
be accessed via the portal.  Once consistent usage by a substantial
user base has been established, iMedicorTM will begin to charge for premium
productivity tools bundled as a package through the portal.  We
anticipate 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.  We anticipate further that interested parties such as
pharmaceutical, medical device companies and other high end retailers and
service providers will be interested in accessing this highly sought after
demographic of physicians and other healthcare
providers.  Additionally, we anticipate charging connectivity fees by
late 2008 for disparate Electronic Medical Records Systems (EMRs) to be able to
transfer information to each other.




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The
Company has announced two new relationships in the last quarter focused on
iMedicorTM, which we believe will both establish iMedicor’s position as the
leader in collaborative communications for physicians in the United States and
increase the registration/user base of the portal:




·
            Microsoft
      HealthVault Solution Provider Agreement between Vemics, Inc and Microsoft
      Corporation effective February 15, 2008.  Through this
      agreement, Vemics’ iMedicorTM HIPAA compliant EHRT (Electronic Health
      Record Transport) portal will give HealthVault subscribers a user-friendly
      conduit for patient-physician communication as well as expedited access to
      their medical records and images.  There are no direct fees
      associated with this agreement.  The term of this agreement is
      one year from the effective date and will automatically renew on each
      anniversary for successive one-year periods, unless either party
      terminates with 60 days written
notice.




·
            Volume
      Purchase Agreement between Dell Marketing, LLC and Vemics, Inc. effective
      February 19, 2008.  The partnership with Dell opens the
      potential to create a coalition of large companies centered
      on iMedicorTM 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 iMedicorTM 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 from the effective date 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.




Education
and Training




Our focus
in the Education and Training Division has been threefold:




·
            The
      delivery of CME (Continuing Medical Education) courses to the medical
      community in the U.S., which continues to grow.  This quarter,
      we have either delivered or contracted to deliver CME courses for a major
      U.S. university, the U.S. military and several pharmaceutical
      sponsors.




·
            The
      licensing or our productivity tools to state education departments in the
      U.S.  The state of Pennsylvania is our first customer in this
      effort.  We plan a sales campaign to increase our state
      education department customer base.




·
            The
      launch of our Global Business English (GBE) and Advanced English programs
      primarily in Russia.  While we have multiple agreements in
      Russia with organizations, which could provide significant growth and
      success in this sector, due to the shift in focus of the Company,
      specifically with iMedicorTM, we have not had the internal resources to be
      as aggressive in building the growth of this (GBE) program.  We
      are currently reviewing our options in this area and are considering the
      possibility of licensing to or joint venturing with another company
      focused in the language education space that has the resources to grow our
      GBE and Advanced English programs.  There are no formal
      negotiations at this time.




The
Company is currently contemplating transferring all CME and healthcare related
activities from the Education and Training division to the Healthcare Services
division.  The Company may reorganize the Education and Training division
by transferring the remaining functions of that division to one of the Company's
Education and Training strategic partners.  We have no firm plans
currently, however.




Critical
Accounting Policies and Estimates




The
Company's 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.  For a complete description of
accounting policies, see page 26 of the Company's Form 10-12G/A for the year
ended June 30, 2007, filed with the SEC on May 13, 2008.  There were
no significant changes in critical accounting provisions.




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Results
of Operations




Three
months ended March 31, 2008 Compared to Three Months Ended March 31,
2007




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




Three
      Months Ended March 31,(unaudited)2008
            
            
            2007Net
      Sales and Revenues
            
            $
            160,740
            
            
            
            100
            %
            
            $
            345,539
            
            
            
            100
            %Cost
      of Services
            
            
            82,197
            
            
            
            38
            %
            
            
            74,206
            
            
            
            21
            %Gross
      Profit
            
            
            78,543
            
            
            
            62
            %
            
            
            271,333
            
            
            
            79
            %Operational
      General and Administrative Expenses
            
            
            780,606
            
            
            
            486
            %
            
            
            1,140,629
            
            
            
            330
            %Depreciation
      and amortization
            
            
            471,743
            
            
            
            294
            %
            
            
            13,761
            
            
            
            4
            %Bad
      debt expenses
            
            
            5,000
            
            
            
            0
            %
            
            
            (6,675
            )
            
            
            1
            %Total
      Expenses
            
            
            1,257,349
            
            
            
            779
            %
            
            
            1,147,715
            
            
            
            323
            %Loss
      before other income (expense)
            
            $
            (1,178,806
            )
            
            
            696
            %
            
            $
            (876,382
            )
            
            
            254
            %




Revenues




The
Company's revenues for the three months ended March 31, 2008 decreased by 54% to
$160,740 from $345,359 in 2007, due largely to a decrease in sales of the
NuScribe Voice Recognition Appliance and Application.  The decrease in
NuScribe sales was intentional, as this component is being redesigned to be
bundled as an online application within the iMedicorTM Portal.  During
the redesign period, sales efforts of the stand-alone voice recognition engine
decreased significantly and the Company redirected its sales team, which had
been engaged in NuScribe sales, to building a user base within the iMedicorTM
Portal.




By March
31, 2008, we had registered more than 70,000 individual accounts within
iMedicorTM, which exceeded our pre-launch projections by more than
200%.  Currently iMedicorTM is a free service for all users as we build
a customer base; however, we expect to begin generating revenues from various
components within iMedicorTM,
including but not limited to the redesigned NuScribe Voice Recognition
Application, sometime in the first quarter or our next fiscal year, beginning
July 1, 2008.




Our sales
in other areas remained flat for the period ending March 31, 2008 from 2007, as
most of our internal efforts have been devoted to establishing new relationships
with companies like Microsoft and Dell, which we believe will be driving forces
in significantly increasing the iMedicorTM
user base and ultimately drive significantly increased revenues to the
Company.




Cost
of Services




Cost of
services as a percentage of revenues was 51% for the quarter ended March 31,
2008 as compared to 21% for the quarter ended March 31, 2007.  The
increase in cost of services is attributed to the greater proportion of our
revenues that were generated through our joint venture with E Parent Global
Communications, our partner in producing and distributing CME content
online.  The production costs have not increased for the CME content;
however, as CME revenue increased as a percentage of total revenue, the costs
associated with revenue sharing have increased our cost of services as a
percentage of revenue.




Operational,
General and Administrative Expenses




Operational,
general and administrative expenses decreased to $780,606 in the quarter ended
March 31, 2008 from $1,140,629 in 2007, or 32%.  The Company
consolidated it’s workforce to focus most of out efforts on the iMedicorTM
build-out and to conserve available cash.




Sales and
marketing efforts in Russia of our GBE product slowed significantly, as we
deliberately shifted our focus on the exploration of a joint venture with a
partner more suited to marketing this product.  We are currently
searching for a suitable joint venture partner.  Further, the Company
has focused, during this time, on its efforts in the Healthcare
market.




12
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Depreciation
and Amortization




Depreciation
and Amortization expenses increased for the quarter ending March 31, 2008 to
$471,743 from $13,761.  This is entirely attributed to the assignment
of the purchase price of NuScribe and its iMedicorTM website to a technology
asset and the subsequent amortization of that asset.  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
$462,323 and $768,355 for the three and nine months ended March 31,
2008.




Loss
from Operations




Income
(loss) from operations for the three-month period ended March 31, 2008 totaled
($1,178,806) or approximately 696% of net revenue compared to ($876,382) or
approximately 254% of net revenue for the three-month period ended March 31,
2007.  The decrease in income from operations for the three-month
period ended March 31, 2008 was primarily due to the Company’s focus on the
continued development of iMedicorTM and on the increase of the iMedicorTM portal’s
user base.  Further, during this three-month period, the Company
suspended sales of the NuscribeTM appliance, as it is redeveloped into an online
application which the Company anticipates offering as a paid service within the
iMedicorTM portal in the future.




Nine
Months Ended March 31, 2008 Compared to Nine Months Ended March 31,
2007




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




Nine
      Months Ended March 31,(unaudited)2008
            
            
            2008
            
            
            2007
            
            
            2008Revenues
            
            $
            468,307
            
            
            
            100
            %
            
            $
            932,062
            
            
            
            100
            %Cost
      of Services
            
            
            140,813
            
            
            
            33
            %
            
            
            256,379
            
            
            
            28
            %Gross
      Profit
            
            
            327,494
            
            
            
            67
            %
            
            
            675,683
            
            
            
            72
            %Operational
      General and Administrative Expenses
            
            
            3,353,242
            
            
            
            716
            %
            
            
            2,990,200
            
            
            
            320
            %Depreciation
      and amortization
            
            
            811,319
            
            
            
            173
            %
            
            
            56,812
            
            
            
            6
            %Bad
      debt expenses
            
            
            5,000
            
            
            
            0
            %
            
            
            11,175
            
            
            
            1
            %Total
      Expenses
            
            
            4,169,561
            
            
            
            889
            %
            
            
            3,058,187
            
            
            
            328
            %Loss
      before other income (expense)
            
            
            (3,842,067
            )
            
            
            808
            %
            
            
            (2,382,504
            )
            
            
            247
            %




Revenues




The
Company’s revenues for the nine months ended March 31, 2008 decreased by 50% to
$468,307 from $932,062 in 2007.  This decrease is attributed to the
management’s decision to move away from the general subscription-based
communications and education market and focus its efforts primarily in the
healthcare market, providing communications and education.  By
changing the focus of the Company, traditional sales opportunities were less
available until such a time as iMedicorTM was ready for launch.




The
development of the iMedicorTM portal has become the Company’s primary
focus.  As a result, revenues decreased as more of the Company’s
resources were allocated to iMedicor as well as the establishment of
relationships with medical societies, educational institutions and technology
companies, which we believe will be the cornerstone of the success of
iMedicorTM.




Additionally,
NuScribe’s appliance sales have been historically flat in the July-to-September
period.  By October 2007, we had diverted sales resources to
development and acceptance of iMedicorTM in the Healthcare market, directly
affecting short-term revenue figures.  Sales opportunities continued
to grow in the online CME space however, and offset a portion of the decreases
in sales in other areas.




13
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Cost
of
Services




Cost of
services for the nine months ended March 31, 2008, was 33% as compared to 28%
for the previous nine months, representing an increase of costs due to the
larger portion of sales activities through our joint venture with EP Global
Communications and the subsequent revenue sharing to which these sales were
subject.




Operational,
General and Administrative Expenses




Operational,
general and administrative expenses increased to $3,353,242 for the nine months
ended March 31, 2008 as compared to $2,990,200 for the prior nine months, or an
increase of 11%.  This increase is due primarily to the increased
expenses associated with the acquisition of NuScribe and the assumption of its
workforce and operational expenses.  We have continuously worked at
consolidating the operations and workforce and have integrated and streamlined
operations between the two companies; however, this process took time and is
reflected in the increase in operational expenses.




Depreciation
and Amortization




Depreciation
and Amortization expenses increased for the nine months ended March 31, 2008 to
$811,319 from $56,812, which is entirely attributed to the assignment of the
purchase price of NuScribe and iMedicorTM
to a technology asset and the subsequent amortization of that
asset.




Loss
from Operations




Income
(loss) from operations for the nine-month period ended March 31, 2008 totaled
($3,842,067) or approximately 808% of net revenue compared to ($2,382,504) or
approximately 247% of net revenue for the nine-month period ended March 31,
2007.  The decrease in income from operations the nine-month period
ended March 31, 2008 was primarily due to the increased expenses associated with
the acquisition of NuScribe and the assumption of its workforce and operational
expenses.  Further, the decrease in income is attributable to the
Company’s focus on the development of iMedicorTM and on the increase of the
iMedicorTM portal’s user base.  Further, during this nine-month period,
the Company suspended sales of the NuscribeTM appliance, as it is redeveloped
into an online application which the Company anticipates offering as a paid
service within the iMedicorTM portal in the future




Liquidity
and Capital Resources




Cash and
cash equivalents were $274,884 at March 31, 2008 compared to $505,668 at June
30, 2007.
  Net cash
used by operating activities was $1,514,769 for the nine months ended March 31,
2008 as compared to cash used by operating activities of $2,026,743 for the nine
months ended March 31, 2007.  The decrease is due primarily to other
income of $650,000.
  Net cash
provided by investing activities was $150,349 for the nine months ended March
31, 2008 as compared to cash provided by investing activities of $67,630 for the
nine months ended March 31, 2007, and was primarily due to capitalization of
technology development costs.
  Net cash
provided by financing activities was $1,434,334 for the nine months ended March
31, 2008 as compared to net cash provided by financing activities of $1,854,279
for the nine months ended March 31, 2007 decreased primarily due to a decrease
in sale of Common Stock although it was almost offset by funding from short-term
loans.
 
 As a
result of the above, our cash decreased by $230,784.
  Due to
our cash position in early January 2008, the Company deferred some of its salary
obligations to its employees and consultants.  At that time, the
Company informed both its employees and consultants of the salary deferral and
gave each the option of remaining with the Company on a deferred salary basis or
being terminated.  We also released some of the consultants who were
not essential to our core focus in the healthcare division.  Of the
employees and consultants who were not released, all continue to work with the
Company.  As of the date of this filing, the Company has eliminated
all salary arrearages for its employees.  The Company hopes to cure
the arrearages with respect to the independent consultants in the near
future.  There is no guarantee that it will be able to do so
however.
  In
addition, from time to time, we have used shares of Common Stock
to compensate employees, directors, consultants and other parties for
services provided to the Company.  In view of the
Company's current limited financial resources, we foresee
the continued use of equity, as needed, to compensate our employees,
directors, consultants and other parties.  We intend to increase
the number of shares of Common Stock available under our 2007 Equity
Compensation Plan or adopt a new compensation plan.  Given the current
market price of our Common Stock, the number of shares that may be
issued could be significant if we are unable to raise capital in the short
term.  The issuance of a substantial number
of shares of Common Stock will dilute existing stockholders’
potential ownership interests and may cause our stock price to
decline.
  In the
near future, we anticipate issuing approximately 1.2 million shares as
compensation for current employees and independent contractors; approximately
7.3 million shares to other parties for services rendered to the Company; and
approximately 1.5 million shares upon conversion of outstanding convertible
notes of the Company.
  The
Company continues to operate at a loss and is projected to do so until late in
2008 or early fiscal 2009.  The Company is reliant, therefore, on
raising capital through equity investments and/or debt instruments to maintain
operations.  The Company is actively engaging in fundraising efforts
to increase its current level of operations.  From July 1, 2006
through December 31, 2007, we raised approximately $3,637,000 from accredited
investors.  In addition, from February 22, 2008 through March 31,
2008, we issued 3,566,667 shares of Common Stock through a private offering to
accredited investors through which we raised approximately
$428,000.  Notwithstanding the receipt of this additional capital, the
Company requires significant additional capital to cover its current overhead as
well as to satisfy existing obligations.




14
 Table of Contents




ITEM
3.  CONTROLSAND PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures




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 March 31, 2008, the end of the fiscal period covered by this report
on Form 10-QSB.




The
Company maintains 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.




Based on
this evaluation, the chief executive officer and chief financial officer
concluded that the Company’s disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company 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)  Changes
in Internal Controls over Financial Reporting




There
have been no changes in our internal control over financial reporting that
occurred during the quarter ended March 31, 2008 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.




PART
II – OTHER INFORMATION




Item
2.  UnregisteredSales of Equity Securities and Use
of Proceeds




During
the period covered by this Report, the Company issued 3,566,667 shares of Common
Stock for $428,000 in cash from investors.  We claimed the exemption from
registration set forth in Section 4(2) of the Securities Act and the rules
thereunder, as private transactions not involving a public
distribution.  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.




Item
6.  Exhibits




31.1
            Certification of the President and Chief Executive
      Officer pursuant to Rule
13a-14(a).




31.2
            Certification of the Chief Financial Officer and
      Treasurer pursuant to Rule
13a-14(a).




32
            Certification of the President and Chief Executive Officer
      and Chief Financial Officer and Treasurer pursuant to 18 U.S.C. ss.1350,
      as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of
      2002.






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 Table of Contents




SIGNATURES




Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




Vemics, Inc.(Registrant)Date:
      May 22,
      2008
              By:
              /s/
      Fred
      ZollaPresident
      and Chief Executive Officer(Principal
      Executive Officer)




Date:
      May 22, 2008
              By:
              /s/ Thomas OwensThomas
      OwensChief
      Financial Officer(Principal
      Accounting Officer)








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