UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-Q







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





For the quarterly period ended December
31, 2009




Rider 1A
  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)





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





Rider
1B




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 definition of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer       ̈
            Accelerated
      filer 
                      
       ̈Non-accelerated
      filer         ̈
            Smaller
      reporting company   x(Do
      not check if a smaller reporting
      company)





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





Table of Contents




VEMICS,
INC.


FORM
10-QSB QUARTERLY REPORT


FOR
THE QUARTER ENDED DECEMBER 31, 2009





TABLE OF CONTENTS








Part
      I Financial Information
            PageItem
      1.
            Financial Statements
            1Condensed
      Consolidated Balance Sheets as of December 31, 2009 (unaudited) andJune
      30, 2009 (audited)
            1Condensed
      Consolidated Statements of Operations for the Three Months EndedDecember
      31, 2009 and 2008 (unaudited)
            2Condensed
      Consolidated Statements of Operations for the Six Months EndedDecember
      31, 2009 and 2008 (unaudited)
            3Condensed
      Consolidated Statements of Cash Flows for the Six Months EndedDecember
      31, 2009 and 2008 (unaudited)
            4Financial Footnotes
            5Item
      2.
            Management's Discussion and Analysis of Financial Condition and
      Results of Operations
            8Item
      3.
            Quantitative and Qualitative Disclosure About Market
      Risk
            13Item
      4T.
            Controls and Procedures
            13Part
      II Other InformationItem
      2
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            14Item
      6.
            Exhibits
            14Signatures
            15





Table of Contents


PART
1:  FINANCIAL INFORMATION





ITEM 1.  FINANCIAL
STATEMENTS





VEMICS,
INC. AND SUBSIDIARY


CONDENSED CONSOLIDATED BALANCE SHEETS






December
      31, 2009
            
            
            June
      30,
              2009ASSETS
            
            unaudited
            
            
            AuditedCurrent
      assets:Cash
      and cash equivalents –– interest bearing
            
            $
            34,368
            
            
            $
            52,615Advances
            
            
            2,606
            
            
            
            -Accounts
      receivable, net of allowance for doubtful accounts of $-0- and $5,000 at
      December 31, 2009 and June 30, 2009, respectively
            
            
            3,214
            
            
            
            3,214Total
      Current Assets
            
            
            40,188
            
            
            
            55,829Property
      and equipment, net
            
            
            10,561
            
            
            
            16,544Other
      AssetsDeferred
      Expenses
            
            
            60,798
            
            
            
            60,798Technology
      and Medical Software, net
            
            
            5,941,923
            
            
            
            6,814,563Goodwill
            
            
            681,673
            
            
            
            681,6736,684,394
            
            
            
            7,557,035Total
      Assets
            
            $
            6,735,143
            
            
            $
            7,629,408LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable –– banks
            
            $
            87,354
            
            
            $
            87,354Current
      portion of long-term debt
            
            
            4,526,353
            
            
            
            3,624,198Accounts
      payable and accrued expenses
            
            
            1,427,501
            
            
            
            1,585,901Deferred
      income
            
            
            60,000
            
            
            
            121,620Total
      Current Liabilities
            
            
            6,101,208
            
            
            
            5,419,073Capital
      long-term liabilitiesLong-term
      notes payable
            
            
            1,305,198
            
            
            
            1,268,996Total
      Liabilities
            
            
            7,406,406
            
            
            
            6,688,069Stockholders’
      EquityCommon
      stock,  par value $001 per share, authorized
      200,000,000
              Issued
      and outstanding 135,332,558 and 114,562,000 shares at December 31, 2009
      and June 30, 2009, respectively
            
            
            135,333
            
            
            
            114,562Additional
      Paid in Capital
            
            
            33,018,557
            
            
            
            30,962,043Less:
      Treasury stock, 368,407 shares at both December 31, 2009 and June 30,
      2009
            
            
            (508,195
            )
            
            
            (508,195
            )Accumulated
      deficit
            
            
            (33,316,958
            )
            
            
            (29,627,071
            )Total
      Stockholders’ Equity
            
            
            (671,263
            )
            
            
            941,339Total
      Liabilities and Stockholders’ Equity
            
            $
            6,735,143
            
            
            $
            7,629,408





See notes
to financial statements.




1
 Table of Contents





VEMICS,
INC. AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS





For
      the three
            
            
            For
      the threemonths
      ended
            
            
            months
      endedDecember
      31, 2009
            
            
            December
      31, 2008unaudited
            
            
            unauditedRevenues:
            
            $
            65,582
            
            
            $
            79,150Cost
      of Services
            
            
            2,439
            
            
            
            8,431Gross
      Profit
            
            
            63,143
            
            
            
            70,719Expenses:Consulting,
      commissions and travel
            
            
            42,089
            
            
            
            87,032Operational
      fees and expenses
            
            
            130,172
            
            
            
            157,115Professional
      fees
            
            
            31,040
            
            
            
            10,861Payroll
      and related taxes
            
            
            175,427
            
            
            
            242,405Depreciation
      and amortization
            
            
            510,187
            
            
            
            497,321Production,
      advertising, brochures and public relations
            
            
            38,082
            
            
            
            9,056Total
      Expenses
            
            
            926,997
            
            
            
            1,003,790Loss
      before other expenses
            
            
            (863,854
            )
            
            
            (933,071
            )Other
      Income/(Expenses):Redemption
      Fee
            
            
            (160,646
            )
            
            
            44Interest
      expense
            
            
            (101,823
            )
            
            
            (38,934
            )Total
      Other Income/(Expenses)
            
            
            (262,469
            )
            
            
            (38,890
            )Net
      loss available to common stockholders
            
            $
            (1,126,323
            )
            
            $
            (971,961
            )Net
      loss per share, to common stockholders
            
            $
            (0.01
            )
            
            $
            (0.01
            )Weighted
      average number of shares, basic and diluted
            
            
            123,044,835
            
            
            
            83,093,198





See notes
to financial statements.




2
 Table of Contents




VEMICS,
INC.  AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS





For
      the six
            
            
            For
      the sixmonths
      ended
            
            
            months
      endedDecember
      31, 2009
            
            
            December
      31, 2008unaudited
            
            
            unauditedRevenues:
            
            $
            131,414
            
            
            $
            161,510Cost
      of Services
            
            
            7,937
            
            
            
            23,540Gross
      Profit
            
            
            123,447
            
            
            
            137,970Expenses:Stock
      Issued for Fees and Services
            
            
            1,261,393
            
            
            
            -Consulting,
      commissions and travel
            
            
            35,115
            
            
            
            217,766Operational
      fees and expenses
            
            
            348,187
            
            
            
            326,721Professional
      fees
            
            
            97,415
            
            
            
            91,404Payroll
      and related taxes
            
            
            448,086
            
            
            
            512,836Depreciation
      and amortization
            
            
            1,013,624
            
            
            
            991,675Production,
      advertising, brochures and public relations
            
            
            86,208
            
            
            
            37,997Total
      Expenses
            
            
            3,290,028
            
            
            
            2,178,399Loss
      before other expenses
            
            
            (3,166,551
            )
            
            
            (2,040,429
            )Other
      Income/(Expenses):Interest
      Income
            
            
            -
            
            
            
            4,128Redemption
      Fee
            
            
            (321,292
            )
            
            
            -Interest
      expense
            
            
            (202,044
            )
            
            
            (78,130
            )Total
      Other Income/(Expenses)
            
            
            (523,336
            )
            
            
            (74,002
            )Net
      loss available to common stockholders
            
            $
            (3,689,887
            )
            
            $
            (2,112,838
            )Net
      loss per share, basic and diluted
            
            $
            (0.03
            )
            
            $
            (0.03
            )Weighted
      average number of shares, basic and diluted
            
            
            125,879,009
            
            
            
            83,093,198




See notes
to financial statements.


3
 Table of Contents


VEMICS,
INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For
      the six
            
            
            For
      the sixmonths
      ended
            
            
            months
      endedDecember
      31, 2009
            
            
            December
      31, 2008unaudited
            
            
            unauditedCash
      Flows From Operating Activities:Receipts
      from customers
            
            $
            69,794
            
            
            $
            43,179Payments
      to suppliers, salaries
            
            
            (941,463
            )
            
            
            (1,702,757
            )Interest
      Received
            
            
            
            
            
            
            4,128Interest
      paid
            
            
            (22,078
            )
            
            
            (31,296
            )Net
      Cash Used in Operating Activities
            
            
            (893,747
            )
            
            
            (1,685,936
            )Cash
      Flows Used in Investing Activities:Purchase
      of Technology & Medical Software
            
            
            -
            
            
            
            (475,271
            )Net
      Cash Used in Investing Activities
            
            
            -
            
            
            
            (475,271
            )Cash
      Flows From Financing Activities:Payments
      on capital lease obligations
            
            
            -
            
            
            
            -Payments
      on notes payable
            
            
            (25,000
            )
            
            
            (220,926
            )Short
      term loans proceeds
            
            
            900,500
            
            
            
            539,985Short
      term loans paid
            
            
            
            
            
            
            (147,442
            )Sale
      of common stock
            
            
            -
            
            
            
            (1,700,000
            )Net
      Cash Provided by Financing Activities
            
            
            875,500
            
            
            
            1,979,563Net
      Increase/(Decrease) in Cash
            
            
            (18,247
            )
            
            
            (189,590
            )Cash
      at the Beginning of Period
            
            
            52,615
            
            
            
            212,566Cash
      at End of Period
            
            $
            34,368
            
            
            $
            22,976


Reconciliation
      of Net Loss to Net CashUsed
      by Operating ActivitiesNet
      Loss
            
            $
            (3,689,887
            )
            
            $
            (2,114,413
            )Adjustments
      to Reconcile net income/(loss) to net cashUsed
      by operating activitiesDepreciation
      & Amortization
            
            
            1,013,624
            
            
            
            991,675Shares issued in exchange for services
            
            
            1,261,393
            
            
            
            -Loan
      Accretion
            
            
            321,292
            
            
            
            -Changes
      in:Trade
      receivables
            
            
            -
            
            
            
            11,419Advances
            
            
            (2,606
            )
            
            
            -Deferred
      Expenses
            
            
            -
            
            
            
            -Accounts
      payable and accrued expenses
            
            
            84,091
            
            
            
            519,943Convertible
      debentures – accrued interest
            
            
            179,966
            
            
            
            26,185Deferred
      income
            
            
            (61,620
            )
            
            
            (123,500
            )Net
      Cash Used by Operating Activities
            
            $
            (893,747
            )
            
            $
            (1,685,936
            )





See notes
to financial statements.




4
 Table of Contents


VEMICS,
INC.


NOTES TO THE FINANCIAL STATEMENTS


(Unaudited)





December
31,  2009





1.           BASIS
OF PRESENTATION





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 1986 (“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.




The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America for interim financial
information.  Accordingly, they do not include all of the information
and footnotes required by generally accepted principles in the United States 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 six and
three month period ended December 31, 2009, 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 that are included in the Company’s Form 10-K
for the fiscal year ended June 30, 2009.


2.           GOING
CONCERN





From
inception through June 30, 2009, the Company has 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 $33,316,000 and $29,627,000
at December 31, 2009 and at June 30, 2009, respectively.  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.





3.           NET
EARNING (LOSS) 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
 Table of Contents




4.           WARRANTS





As of
December 31, 2009, following warrants were outstanding:


No.
    shares
              
              
              Expiration
              
              
              Exercise
      Price778,419
              
              
              
              2010
              
              
              $
              1.502,206,666
              
              
              
              2010-2011
              
              
              $
              .601,430,000
              
              
              
              2011
              
              
              $
              .241,541,667
              
              
              
              2011
              
              
              $
              .124,000,000
              
              
              
              2013
              
              
              $
              .0413,620,000
              
              
              
              2013-2014
              
              
              $
              .051,000,000
              
              
              
              2014
              
              
              $
              .01





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.





5.           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.





6.           TECHNOLOGY
AND MEDICAL SOFTWARE





The
Company has capitalized all acquisition costs associated with the acquisition of
NuScribe Inc. In addition, we have elected to capitalize all related development
costs associated with completion of the site. 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
$510,187 for the three months ended December 31, 2009.




12/31/2009
            
            
            6/30/2009Technology and
      medical software
            
            $
            10,008,893
            
            
            $
            10,008,893Less: Accumulated
      Amortization
            
            
            4,066,970
            
            
            
            3,194,330$
            5,941,923
            
            
            $
            6,814,563








Convertible
      Debentures
            
            $
            3,943,956Notes
      Payable
            
            
            1,887,595Total
            
            $
            5,831,551Less:
      portion in current liabilities
            
            
            (4,526,343
            )Balance
      of long term debt
            
            $
            1,305,198Long
      term debt matures as follows:June
      30, 2010
            
            $
            4,526,353June
      30, 2011
            
            
            1,305,198Total
            
            $
            5,831,551






6
 Table of Contents




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 $.45 per share.
              Original interest rate was 17.98%, however interest is not accruing
      per
              subsequent agreement between parties270,000
            
            
            
            
            8.00
            %
            convertible into
      common shares at $.138 per share. No longer
              accruing
      interest.57,500
            
            
            
            
            12.00
            %
            convertible into
      common shares at 10% discount to the 20 day
              trailing
      average closing price23,800
            
            (Ucko)
            
            
            4.00
            %
            convertible into
      common shares at $.05 per share370,000
            
            
            
            
            10.00
            %
            convertible into
      common shares at $.05 per share, with an
              additional
      redemption premium of 50% of principal on conversion3,072,656
            
            
            
            
            15.00
            %
            convertible into
      common shares at $.05 per share$
            3, 943,956






NOTES
      PAYABLEDelk
      Road
            
            $
            281,282Director
            
            
            600,000Director
            
            
            1,006,313$
            1,887,595







Long-lived
assets are reviewed for impairmentannually as of December
31, 2009 andwhenever
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.  The Company has alsoevaluated the goodwill for
impairment as of December 31, 2009utilizing present value
method to projected cash flows and concluded that no impairment has
occurred.




9.      SUBSEQUENT
EVENTS





On
January 27th,
2010 the company entered into a bridge financing agreement with an accredited
investor totaling $600,000.  Portions of these funds were received
prior to the end of the quarter ending December 31, 2009, however no definitive
agreement was reached until January 2010.  Full details of the
agreement are explained in PART II: Item 2 of this 10-Q filing as well as the
company’s 8-K dated February 4, 2010.




7
 Table of Contents





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





Statements
made in this Quarterly Report on Form 10-Q, 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 (the
Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).  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 in the Company's Form 10-K filed with the Securities and
Exchange Commission (“SEC”) on October 14, 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-Q to conform
these statements to actual results.





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 and more on 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, we currently generate revenues
through the delivery of on-line CME courses and have begun generating revenues
from various components within iMedicor; 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 February/March 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 as iMedicor member physicians
begin to use our inter—EMR communications tool sometime in the third
quarter and later in the calendar year the redesigned NuScribe Voice Recognition
Application.


Our sales
remained flat in other areas for the quarter ended December 31, 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.  We are,
however, in the process of launching several new programs with pharmaceutical
companies and one medical liability insurance company which we expect to start
producing revenue in the third fiscal quarter 2010.


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.  Our first contract for this format was
signed with the American Medical Association Insurance Agency (AMAIA) on August
of 2009, and seminars have begun as of September to promote AMAIA products to
physicians and physician practices.




8
 Table of Contents





As of
December 31, 2009, we required approximately $180000 to $200,000 of cash per
month to fund our operations, however in the interest of preserving available
cash we have reduced that figure to approximately $130,000 per month as of the
date of this filing.   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
require substantial, immediate funding to meet our current operating and capital
expenditure requirements.  To execute on our business plan
successfully, we will need to raise additional money in the near
future.  The exact amount of funds raised, if any, will determine how
aggressively we can grow and what additional projects we will be able to
undertake.  In the quarter ended December 31, 2009, we were successful
in raising $330,000 through short-term debt instruments.  All funds
raised have been used to maintain current operations and continue development
work on iMedicor as we begin to establish paying clients and generate additional
revenues.





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, 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.





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.




9
 Table of Contents





Results of
Operations





Three
months ended December 31, 2009 Compared to Three Months Ended December 31,
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:





Three
      Months Ended December 31(unaudited)2009
            
            
            
            
            
            2008Net
      Sales and Revenues
            
            $
            65,582
            
            
            
            100
            %
            
            $
            79,150
            
            
            
            100
            %Cost
      of Services
            
            
            2,439
            
            
            
            4
            %
            
            
            8,431
            
            
            
            11
            %Gross
      Profit
            
            
            63,413
            
            
            
            96
            %
            
            
            70,719
            
            
            
            89
            %Operational
      General and Administrative Expenses
            
            
            416,810
            
            
            
            635
            %
            
            
            506,469
            
            
            
            714
            %Depreciation
      and amortization
            
            
            510,187
            
            
            
            778
            %
            
            
            497,321
            
            
            
            703
            %Total
      Expenses
            
            
            926,997
            
            
            
            1,413
            %
            
            
            1,003,790
            
            
            
            1,266
            %Loss
      before other income (expense)
            
            $
            (863,854
            )
            
            
            1,317
            %
            
            $
            (933,071
            )
            
            
            1.179
            %




Revenues
  The
Company's revenues for the three months ended December 31, 2009 decreased by 17%
to  $65,582 from $79,150 in comparable period ending December 31,
2008, due wholly to the termination of sales of the NuScribe Voice Recognition
Appliance and Application (“Nuscribe”).  The termination was
instituted prior to the quarter ending December 31, 2008, however there were
several sales which were initiated prior to the termination but finalized during
that quarter, attributing to the difference in revenues from 2008 to
2009.  The termination in NuScribe sales was intentional, as this
component is being redesigned to be bundled as an online application within the
iMedicorTM Portal.  The company believes that there is a significant
market for the redesigned, on-line NuScribe, and expects it to be a significant
revenue driver in the pay-for services within the portal.
 
 Cost
of Services
 
 Cost of
services as a percentage of revenues was 4% for the quarter ended December 31,
2009 as compared to 11% for the quarter ended December 31, 2008.  The
decrease in cost of services can be attributed to the limited sales of NuScribe,
which bore a higher cost of sale than other services offered.


10
 Table of Contents





Operational,
General and Administrative Expenses
 
 Operational,
general and administrative expenses decreased to $416,810 in the quarter ended
December 31, 2009 from $506,469 for the quarter ended December 31, 2008, or
17%.  The Company continues to cut costs and consolidate its workforce
where possible to conserve cash.
 
 Depreciation
and Amortization
 
 Depreciation
and Amortization expenses increased for the quarter ending December 31, 2009 to
$510,187 from $497,321 for the quarter ending December 31, 2008 or 1.9%,
representing no material difference.
 
 Loss
from Operations
 
 Income
(loss) from operations for the quarter ended December 31, 2009 totaled
($863,854) or approximately 1,317% of net revenue compared to ($933,071) or
approximately 1,171% of net revenue for the quarter ended December 31,
2008.  As stated before, the decrease in income was wholly due to the
election to terminate sales of Nuscribe while developing the on-line version of
this tool for deployment in the iMedicor portal.


Six
Months Ended December 31, 2009 Compared to Six Months Ended December 31,
2008





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




Six
      Months Ended December 31(unaudited)2009
            
            
            2009
            
            
            2008
            
            
            2008Revenues
            
            $
            131,414
            
            
            
            100
            %
            
            $
            161,510
            
            
            
            100
            %Cost
      of Services
            
            
            7,937
            
            
            
            6
            %
            
            
            23,540
            
            
            
            15
            %Gross
      Profit
            
            
            123,447
            
            
            
            94
            %
            
            
            137,970
            
            
            
            85
            %Operational,
      General and Administrative Expenses
            
            
            2,276,404
            
            
            
            1,732
            %
            
            
            1,186,724
            
            
            
            859
            %Depreciation
      and amortization
            
            
            1,013,624
            
            
            
            771
            %
            
            
            991,675
            
            
            
            719
            %Total
      Expenses
            
            
            3,290,028
            
            
            
            2,504
            %
            
            
            2,178,399
            
            
            
            1,578
            %Loss
      before other income (expense)
            
            $
            (3,166,511
            )
            
            
            2,410
            %
            
            $
            (2,040,429
            )
            
            
            947
            %





Revenues





The
Company’s revenues for the six months ended December 31, 2009 decreased by 19%
to $131,414 from $161,510 in the six months ended December 31,
2008.  As previously noted, this decrease in sales is attributed
entirely to the termination of sales of the NuScribe application and
appliance.




11
 Table of Contents





Cost
of
Services





Cost of
services for the six months ended December 31, 2009, was 6% as compared to 15%
for the the six months ended December 31, 2008, representing the reduced cost of
services/sales associated with the reduced sales of NuScribe.
 
 Operational,
General and Administrative Expenses
 
 Operational,
general and administrative expenses increased to $2,276,404 for the six months
ended December 31, 2009 as compared to $1,186,724 for the the six months ended
December 31, 2008, or 92%.  This increase reflects the company’s
decision to pay certain vendors with shares of common stock in the company as
opposed to cash.
 
 Depreciation
and Amortization
 
 Depreciation
and Amortization expenses increased for the six months ended December 31, 2008
to $1,013,624 from $991,675 of the six months ended December 31, 2008,
representing no material difference.
 
 Loss
from Operations
 
 Income
(loss) from operations for the six months ended December 31, 2009 totaled
(3,166,511) or approximately 2,410% of net revenue as opposed to (2,357,229) or
approximately 947% of net revenue for the six months ended December 31,
2008.  The increase in loss from operations for the six months ended
December 31, 2009 was largely due to the Company’s election to issue stock for
fees and services in the quarter ended September 30, 2009, , which enabled the
Company to maintain a high pace of development, pubic relations, investor
relations and sales during a period when the company had little cash
available.
 
 Liquidity and Capital
Resources
 
 Cash and
cash equivalents were $34,368 at December 31, 2009 compared to $52,615 at June
30, 2008.
 
 Net cash
used by operating activities was $893,747 for the six months ended December 31,
2009 as compared to $1,685,936 for the six months ended December 31,
2008.  The decrease  is primarily due to the company’s
continued cost-cutting to preserve cash.
 
 Net cash
used by investing activities was $0 for the six months ended December 31, 2009
as compared to cash used by investing activities of $475,271 for the six months
ended December 31, 2008, and was primarily due to capitalization of technology
development costs and the purchase in September 2008 of the ClearLobby
technology platform.
 
 Net cash
provided by financing activities was $875,500 for the six months ended December
31, 2009 as compared to net cash used by financing activities of $1,979,563 for
the six months ended December 31, 2008.  The difference is attributed
to the sale of $1,700,000 worth of the company’s common stock in July of
2008
 
 Beginning
on August of 2009, the Company entered into a series of Convertible Promissory
Notes with independent private accredited investors totaling an aggregate gross
investment of $720,000.  $290,000 of these investments are from one
investor, Sonoran Pacific Resources, and are considered part of a larger bridge
funding investment of $600,000 reported in the company’s Form 8-K Report filed
February 4, 2010.




12
 Table of Contents




Due to
our serious cash position and the reduction in sales revenue prior to generating
any revenues through the iMedicor website, the Company has continued to
reduce costs where possible, including eliminating certain non-essential staff
positions and reducing or eliminating non-essential operating
costs.  The company’s operational expenses, excluding shares issued
for fees and services, averaged approximately $180,000 per month for the three
months ending December 31, 2009.  As of the date of this filing, the
company has further reduced operational costs to approximately $130,000 per
month.





The
Company continues to operate at a loss and is projected to do so until the third
or fourth quarter of this fiscal year.  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.





ITEM 3.QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





N/A.





ITEM 4T.  CONTROLSAND 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 the Exchange Act, 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 Exchange Act, as of December 31, 2008, the period covered by
this Form 10-Q.





Based on
this evaluation, the chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are not 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 SEC rules and forms.





(b)  Changes
in Internal Controls over Financial Reporting





There
have been no changes in our internal controls over financial reporting (as
defined in Exchange Act Rule 13a-15(f)) during the three-months ended December
31, 2008 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.




13
 Table of Contents





PART
II – OTHER INFORMATION





Item 2.  UnregisteredSales of Equity Securities and Use
of Proceeds





As previously
noted,  the company has entered into a series of convertible
promissory notes (the “Notes”) with accredited investors representing an
aggregate investment of  $430,000,  The Notes carry an
annual interest of 10% and a conversion option into common stock in the company
at a rate of $0.05 per share.  If the investors elect to convert the
loan amount into the company’s common stock, there will be a redemption fee
associated with the conversion equal to 50% of the principal amount of the
loan.  If all of the $430,000 invested is converted into common stock,
the total number of shares that will be issued at conversion is
12,900,000.





Additionally,
in January of 2010, the company issued a series of convertible promissory notes
to an independent accredited investor, Sonoran Pacific Resources, for an
aggregate gross investment of $600,000 representing 12 units of a bridge funding
with each unit representing $50,000.  The Convertible Notes bear
interest at the rate of 10% per annum and provide for the repayment, in either
cash or stock at the discretion of the investor, of principle and unpaid
interest thereon to the Investors within 120 days of receipt of
funds.  In addition  the Convertible Notes provide for, the
immediate payment of 500,000 shares of common stock in the Company per unit and
1 warrant to purchase up to 1 million additional shares in the
Company.  The Investors may at any time prior to the payment of the
Convertible Notes convert all or any portion of the Convertible Notes into
shares of common stock in the Company at a conversion rate of $0.05 per
share.




In
connection with the borrowing, the Company is obligated to issue warrants (the
“Warrants”) to the Investors to purchase per Unit up to an aggregate of 1
million shares of the Company's common stock.  The exercise price of
each Warrant escalates during the 5 year period beginning with $0.05 in year one
and increasing to $0.15 in year 2, $0.30 in year three, $0.50 in year four and
$1.00 in year five.




The
Company issued and sold the Convertible Note and Warrants in a private placement
transaction made in reliance upon the exemption from securities registration
afforded by Section 4(2) under the Securities Act and Regulation D
thereunder.  The Company believes that the Investors are “accredited
investors” as defined in Rule 501 of Regulation D under the Securities
Act.





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.




14
 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:
      February 22, 2010
            By:
            /s/ Fred
      ZollaFred
      ZollaPresident
      and Chief Executive Officer(Principal
      Executive Officer)




Date:
      February 22, 2010
              By:
              /s/ Craig
      StoutCraig
      StoutInterim
      Chief Financial Officer(Principal
      Accounting Officer)








15
 Table of Contents