UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q







x Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934




For the
quarterly period ended September 30,
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)










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






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). YesoNox




There
were 81,656,418 outstanding shares of the issuer’s only class of common equity,
Common Stock, $0.001 par value, on November 13, 2008.




Table of Contents




VEMICS,
INC.


FORM
10-Q QUARTERLY REPORT


FOR
THE QUARTER ENDED SEPTEMBER 30, 2008





TABLE OF CONTENTS





Part
      I Financial InformationItem
      1.
              Financial Statements
              1Condensed Consolidated Balance Sheet as of September 30, 2008
      (unaudited) and June 30, 2008 (audited)
              1Condensed Consolidated Statements of Operations for the Three
      Months Ended September 30, 2008 and 2007 (unaudited)
              2Condensed Consolidated Statements of Cash Flows for the Three
      Months Ended September 30, 2008 and 2007(unaudited)
              3Financial Footnotes
              4Item
      2.
              Management's Discussion and Analysis of Financial Condition and
      Results of Operations.
              7Item
      4T.
              Controls and Procedures
              11Part
      II Other
      InformationItem
      2
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              12Item
      6.
              Exhibits
              12Signatures


Table of Contents





PART
1:  FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED BALANCE SHEETS





September
      30, 2008
            
            
            June
      30, 2008ASSETS
            
            unaudited
            
            
            audited(as
      restated)Current
      assets:Cash
      and cash equivalents –– interest bearing
            
            $
            195,594
            
            
            $
            246,630Accounts
      receivable, net of allowance for doubtful accounts of $5,000 and $-0- at
      March 31, 2008 and June 30, 2007, respectively
            
            
            52,444
            
            
            
            153,843Other
      Receivable
            
            
            -
            
            
            
            650,000Advances
            
            
            5,000
            
            
            
            0Total
      Current Assets
            
            
            253,038
            
            
            
            1,050,473Property
      and equipment, net
            
            
            52,461
            
            
            
            109,043Other
      AssetsTechnology
      and Medical Software, net
            
            
            7,892,148
            
            
            
            9,150,530Goodwill
            
            
            681,673
            
            
            
            681,6738,573,821
            
            
            
            9,832,203Total
      Assets
            
            $
            8,879,320
            
            
            $
            10,991,719LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable –– banks
            
            $
            87,000
            
            
            $
            299,980Current
      maturity of capital lease obligations
            
            
            -
            
            
            
            834Short-term
      notes payable
            
            
            1,651,857
            
            
            
            2,151,566Accounts
      payable and accrued expenses
            
            
            1,259,481
            
            
            
            1,259,887Deferred
      income
            
            
            65,000
            
            
            
            98,056Total
      Current Liabilities
            
            
            3,073,338
            
            
            
            3,810,313Capital
      long-term liabilitiesLong-term
      notes payable
            
            
            1,141,931
            
            
            
            272,219Total
      Liabilities
            
            
            4,215,296
            
            
            
            4,082,532Stockholders’
      EquityCommon
      stock,
            
            
            83,093
            
            
            
            50,609Additional
      Paid in Capital
            
            
            27,907,280
            
            
            
            26,981,769Less:
      Treasury stock, 368,407 shares at both September 30, 2008 and June 30,
      2008
            
            
            (508,195
            )
            
            
            (508,195
            )Accumulated
      deficit
            
            
            (22,818,127
            )
            
            
            (15,614,996
            )Total
      Stockholders’ Equity
            
            
            4,664,051
            
            
            
            6,909,187Total
      Liabilities and Stockholders’ Equity
            
            $
            8,879,320
            
            
            $
            10,991,719





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
      endedSeptember
      30, 2008
            
            
            September
      30, 2007unaudited
            
            
            (as
      restated)Revenues:
            
            $
            76,910
            
            
            $
            166,717Cost
      of Services
            
            
            15,109
            
            
            
            36,346Gross
      Profit
            
            
            61,801
            
            
            
            130,371Expenses:Consulting,
      commissions and travel
            
            
            128,068
            
            
            
            530,023Operational
      fees and expenses
            
            
            166,822
            
            
            
            235,985Professional
      fees
            
            
            80,543
            
            
            
            84,553Payroll
      and related taxes
            
            
            270,431
            
            
            
            277,462Depreciation
      and amortization
            
            
            494,354
            
            
            
            14,376Production,
      advertising, brochures and public relations
            
            
            28,941
            
            
            
            158,048Total
      Expenses
            
            
            1,169,159
            
            
            
            1,300,447Loss
      before other expenses
            
            
            (1,107,358
            )
            
            
            (1,170,076
            )Other
      Income/(Expenses):Interest
      income
            
            
            4,048
            
            
            
            552Interest
      expense
            
            
            (39,196
            )
            
            
            (35,704
            )Total
      Other Income/(Expenses)
            
            
            (35,112
            )
            
            
            (35,152
            )Loss
      before extraordinary item
            
            
            (1,142,470
            )
            
            
            (1,205,228
            )Extraordinary
      item – Litigation net of expenses and taxes
            
            
            -
            
            
            
            650,000Net
      loss available to common stockholders
            
            $
            (1,142,470
            )
            
            $
            (555,228
            )Net
      loss per share, basic and diluted, before extraordinary
    item
            
            
            (0.01
            )
            
            
            (0.02
            )Net
      loss per share, basic and diluted, extraordinary item net
            
            $
            -
            
            
            $
            0.01Net
      loss per share, to common stockholders
            
            $
            (0.01
            )
            
            $
            (0.01
            )Weighted
      average number of shares, basic and diluted
            
            
            78,745,373
            
            
            
            50,609,453







See notes
to financial statements.




2
 Table of Contents





VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For
      the three
            
            
            For
      the threemonths
      ended
            
            
            months
      endedSeptember
      30, 2008
            
            
            September
      30, 2007unaudited
            
            
            (as
      restated)Cash
      Flows From Operating Activities:Receipts
      from customers
            
            $
            23,087
            
            
            $
            190,414Payments
      to suppliers, salaries
            
            
            (1,264,903
            )
            
            
            (1,348,133
            )Other
      income received
            
            
            
            
            
            
            300,000Interest
      received
            
            
            4,084
            
            
            
            562Interest
      paid
            
            
            (18,547
            )
            
            
            (10,688
            )Bad
      Debt Expense
            
            
            -
            
            
            
            (1,706
            )Net
      Cash Used in Operating Activities
            
            
            (1,256,279
            )
            
            
            (869,551
            )Cash
      Flows Used in Investing Activities:Purchase
      of Technology and Medical Software
            
            
            (340,000
            )
            
            
            (52,321
            )Purchase
      of fixed assets
            
            
            (271
            )
            
            
            (2,105
            )Net
      Cash Used in Investing Activities
            
            
            (340,271
            )
            
            
            (54,426
            )Cash
      Flows From Financing Activities:Payments
      on capital lease obligations
            
            
            -
            
            
            
            (5,062
            )Payments
      on notes payable
            
            
            (212,980
            )
            
            
            (179,989
            )Short
      term loans proceeds
            
            
            240,000
            
            
            
            850,000Short
      term loans paid
            
            
            (147,442
            )
            
            
            -Sale
      of Common Stock
            
            
            1,700,000
            
            
            
            -Net
      Cash Provided by Financing Activities
            
            
            1,579,578
            
            
            
            664,949Net
      Increase/(Decrease) in Cash
            
            
            (16,972
            )
            
            
            (259,028
            )Cash
      at the Beginning of Period
            
            
            212,566
            
            
            
            505,668Cash
      at End of Period
            
            $
            195,594
            
            
            $
            246,640





Reconciliation
      of Net Loss to Net Cash Used by Operating ActivitiesNet
      loss
            
            $
            (1,142,470
            )
            
            $
            (555,228
            )Adjustments
      to reconcile net income/(loss) to net cash used by operating
      activitiesDepreciation
      & Amortization
            
            
            494,354
            
            
            
            14,376Changes
      in:Trade
      receivables
            
            
            4,667
            
            
            
            74,979Other
      receivables
            
            
            -
            
            
            
            (650,000
            )Prepaid
      expenses
            
            
            (5,000
            )
            
            
            -Accounts
      payable and accrued expenses
            
            
            (569,989
            )
            
            
            269,306Accrued
      interest payable
            
            
            20,649
            
            
            
            16,788Convertible
      Debentures  accrued interest
            
            
            -
            
            
            
            11,500Deferred
      income
            
            
            (58,500
            )
            
            
            (51,282
            )Net
      Cash Used by Operating Activities
            
            
            (1,256,279
            )
            
            
            (869,651
            )





See notes
to the financial statements.




3
 Table of Contents




VEMICS, INC.


NOTES
TO THE FINANCIAL STATEMENTS


(Unaudited)





September
30, 2008





1.           DESCRIPTION
OF THE BUSINESS AND BASIS OF PRESENTATION





We build
portal-based, virtual work and learning environments primarily in healthcare and
related industries that enable individuals and organizations of any size to
communicate, collaborate, work and learn at a distance as if everyone were in
the same office or room.  Currently, the focus of our efforts is on
solutions for the healthcare industry, primarily through our iMedicorÔ web-based
portal.  Our hosted solutions eliminate the need for companies,
medical practices and individuals to buy, integrate or maintain continually
evolving collaborative technologies and provide a single point of access for
online communication, collaboration and learning.





Our solutions
combine the best in standards-based, productivity-enhancing tools with
educational and informational content, adding real-time spontaneity, impact and
face-to-face interactivity to meetings, presentations or learning
sessions.  We provide customer and technical support to ensure our
customers get the most out of their solutions.  Our technology
teams have been creating on-line, leading edge solutions, centered on real-time
communication, video, audio, data collaboration tools and content distribution
technologies delivered through on-line portals.  The team has been at
the forefront of bringing people and information together in ways that maximize
time, reduces cost and eliminates distance.  Our solutions are
fully hosted and managed and can be customized to fit specific
needs.





The table below shows the sales
percentages by division for the three-months ended September 30, 2008 and2007,
respectively:




2008
              
              
              2007Revenues:Education
              
              
              92
              %
              
              
              56
              %Healthcare
              
              
              8
              %
              
              
              44
              %Total
              
              
              100
              %
              
              
              100
              %





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 three-month period ended September
30, 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
that are included in the Company’s Form 10-K for the fiscal year ended June 30,
2008.





As of
September 30, 2008, there have been no material changes to any of the
significant accounting policies described in our Form 10-K for the fiscal year
ended June 30, 2008, except for the adoption of Financial Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes.”





2.           BACKGROUND
OF THE COMPANY; PRINCIPLES OF CONSOLIDATION





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.




4
 Table of Contents





3.           GOING
CONCERN





From
inception through June 30, 2005, we were a developmental stage company that
devoted substantially all of our efforts to research and development of our
technologies, acquisition of equipment and raising capital.  We have
incurred operating losses to date and have an accumulated deficit of
approximately $23,038,000 and $21,521,000 at September 30, 2008 and at June 30,
2008, respectively.  These foregoing amounts raise doubt as to our
ability to continue as a going concern.  In the past, we have raised
capital in private placements, but continue to sustain losses and negative
operating cash flows.





We
believe that our current available capital as of September 30, 2008, coupled
with verbal commitments for bridge financing as needed from a current investor
would enable us to continue as a going concern through February 1,
2009.  Anticipated revenues along with a potential equity raise from
the current private placement could enable us to continue our current operations
through at least June 30, 2009, if we are able to restructure portions of our
short-term debt.  We intend to raise additional capital through the
issuance of debt or equity securities to fund our operations.  The
financing may not be available on terms satisfactory to us, if, at
all.  In addition, other than as noted above, no formal commitments or
arrangements to advance or loan funds to us or repay any such advances or loans
exist presently.  There is no legal obligation for either management
or significant stockholders to provide additional future funding.  Our
inability to obtain needed funding will have a material adverse effect on our
operations and our ability to achieve profitability.





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





As of
September 30, 2008, we have issued warrants to purchase 11,301,753 shares of
common stock.  These warrants have an expiration date of either three or
five years from their date of issuance and expire at various dates through July
2011.  Each warrant will entitle the holder thereof to purchase one share
of common stock at an exercise price ranging from $.04 to $1.50 per share. 
Management has not assigned a value to these warrants, as it is not practicable
to estimate fair value for these financial instruments.  It also reserves
the rights to redeem the warrants at $.10 per warrant if there is a subsequent
initial public offering and market value per share meets certain
levels.





6.           RELATED
PARTY TRANSACTIONS





There is
one member of our Board of Directors who has served since 2002 and who is the
largest individual investor in the Company, having invested $3,681,200 to
date.  This investor currently owns 22,850,655 shares of common stock
and has the right to acquire 2,896,140 additional shares of common stock
pursuant to currently exercisable warrants.





We have
borrowed $1,411,538 as of September 30, 2008, including accrued interest,
respectively from the same member of the board of directors at a rate of
interest of 4%.




5
 Table of Contents





7.           TECHNOLOGY
AND MEDICAL SOFTWARE





We have
capitalized all acquisition costs associated with the acquisition of NuScribe
Inc.  In addition, we have elected to capitalize all related
development costs associated with the completion of the iMedicorÔ website.  We
have launched the iMedicorÔ product in October 2007
and has begun to amortize our cost on a straight-line basis over 60
months.  Amortization expenses were $480,195 for the three-months
ended September 30, 2008 and September 30, 2007, respectively.




September
      30, 2008
              
              
              June
      30, 2008Technology
      and medical software
              
              $
              9,603,894
              
              
              $
              9,263,894Less:
      Accumulated Amortization
              
              
              1,711,744
              
              
              
              1,231,550$
              7,892,149
              
              
              $
              8,032,344


8.           SHORT
TERM NOTES PAYABLE





Amounts
recorded as Notes Payable to banks and short-term notes payable is comprised of
the following:




September
      30, 2008
              
              
              June
      30, 2008Short-term
      note payable
              
              $
              535,218
              
              
              $
              -0-Short-term
      portion of long-term note payable
              
              
              269,607
              
              
              
              357,461Note
      payable banks
              
              
              87,000
              
              
              
              299,980Convertible
      debenture - 17.98%
              
              
              150,000
              
              
              
              150,000Convertible
      debenture – 8%
              
              
              270,000
              
              
              
              270,000Convertible
      debenture – 10% - 12%
              
              
              427,032
              
              
              
              502,206Total
      Short-term notes payable
              
              $
              1,738,857
              
              
              $
              1,579,647


9.           ASSET
PURCHASE AGREEMENT – ClearLobby




On
September 12, 2008, Vemics, Inc. entered into a Limited Asset Purchase Agreement
with ClearLobby, Inc., a
Delaware corporation, pursuant to which Vemics agreed to purchase trademarks,
software, license agreements and other assets related to ClearLobby's
pharmaceutical communications platform technology. The
ClearLobby technology will lead to an online service designed to change the
dynamic between physicians and
pharmaceutical companies by placing control of the relationship firmly in the
hands of the physician.




In
consideration for the assets purchased under the Limited Asset Purchase
Agreement, the Company paid $250,000,
consisting of $10,000 in cash and $240,000 in the form of an unsecured
promissory note, and 20,000
shares of restricted common stock of the Company.  The Promissory Note
bears no interest and is payable in twelve monthly installments of $20,000
beginning on January 31, 2009 and each succeeding month-end thereafter until the
Promissory Note is paid in full on December 30, 2009.





6
 Table of Contents




ITEM2.                      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, 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'sForm 10-Kfiled with the Securities and
Exchange Commission(“SEC”)onOctober 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





We are a
provider of portal-based, virtual work and learning environments that enable
organizations of any size to communicate, work and learn at a distance as if
everyone were in the same room.  Our hosted, service solutions
eliminate the need for companies to buy, integrate or maintain continually
evolving collaborative technologies and provide a single point of access for
online communication, collaboration and learning.





Our
primary focus shifted with our acquisition of NuScribe and subsequent deployment
of iMedicorTM.  Currently, our efforts are concentrated on providing
secure, on-line communications, collaboration, learning and productivity
solutions to the healthcare and related markets.  We supply
organizations of all sizes with subscription-based access to fully
collaborative, real-time productivity tools that accelerate the flow of
information and education to a rapidly dispersing and highly mobile global
workforce.  Secondarily, we plan to provide direct access to
physicians by pharmaceutical companies, circumventing the pharmaceutical
companies need for costly and only moderately effective sales
forces.





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
the redesigned NuScribe Voice Recognition Application, direct pharmaceutical
company to physician marketing and product dissemination and inter-Electronic
Medical Records (“EMR”) communications, sometime in the third quarter, beginning
January 1, 2009.





Our sales
in other areas decreased for the quarter ended September 30, 2008 from 2007, as
most of our internal efforts have been devoted to redesigning iMedicorTM with
increased functionality and establishing new relationships with companies which
we believe will be driving forces in significantly increasing the iMedicorTM user
base and ultimately drive significantly increased revenues to the
Company.





Our
iMedicorTM and LiveAccess solutions are focused on education, collaboration,
and training.  We offer our services through two separate divisions,
Education and Training
and Healthcare
Services.





We
anticipate having five sources of income.  Currently, we will generate
our primary source of revenue through charging pharmaceutical companies an
initial set up fee of between $95,000 and $250,000 per year to upload their
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 a physician’s trusted source, downloading any
information available on specific products inside iMedicorTM).  Once
the 1,500 click throughs are exhausted, iMedicorTM currently intends to
charge $25.00 per additional click through.  The second source of
revenue will be derived through our iMedicorTM Integration Driver, allowing
physicians and hospitals using different, incompatible EMR systems to exchange
patient information for a monthly fee currently ranging between $25 and $35 per
user.  Providing premium services through iMedicorTM, such as NuScribeTM
and LiveAccessTM for a monthly fee of $99 per user represents the third source of
revenue.  Production, distribution and archiving of sponsored and pay
per view CME courses will provide the fourth revenue source.  Lastly,
we expect to generate revenues from direct marketing to our iMedicorTM user-base
on an “opt in” unobtrusive level from companies who have a desire to reach this
particular demographic.  This last source of revenue, while ultimately
expected to be a primary revenue stream, will take longer to develop and may not
generate any significant revenues in the near future.  In addition, we
intend to provide consulting help desk and instructional design services to
customers and will bill as consultation and other services are
rendered.





As of
September 30, 2008, we require approximately $200,000 per month to fund our
operations.  If we are successful in raising additional capital, 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.




7
 Table of Contents




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
future.  The exact amount of funds raised, if any, will determine how
aggressively we can grow and what additional projects we will be able to
undertake.  No assurance can be given that our current private
placement will be successful or that even the minimum offering amount will be
raised.  Thereafter, there is no assurance we will be able to raise
additional capital, when needed or at all, or that such capital, if available,
will be on terms acceptable to us.  We are currently seeking to raise
up to $10,000,000 in capital through a private placement of preferred
stock. If we are not able to raise additional capital in the near term, our
business will likely suffer and we will be required to substantially reduce
operations, terminate certain products or services or pursue exit strategies in
the near future.





Healthcare
Services





For the
past nine months, we have shifted most of our resources to the build-out and
promotion of iMedicorTM, a 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, the health
industry's first free HIPAA compliant personal health information exchange and
secure messaging portal for physician collaboration and
community.  iMedicorTM’s features include HIPAA 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 that satisfies federal HIPAA regulations
that proscribe the transmission of records via email.  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.





Education
and Training





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





·
            The
      delivery of CME (Continuing Medical Education) courses to the medical
      community in the U.S., which continues to
grow.




·
            The
      licensing of 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.




We are
currently contemplating transferring all CME and healthcare related activities
from the Education and Training division to the Healthcare Services
division.  We 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





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 and 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 the Company's Form 10-K for the fiscal year ended June
30, 2008, filed with the SEC on October 14, 2008.  There were no
significant changes in critical accounting provisions.




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Results of
Operations





Three
months ended September 30, 2008 Compared to Three Months Ended September 30,
2007





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


Three
      Months Ended September 30(unaudited)2008
            
            
            2007Net
      Sales and Revenues
            
            $
            76,910
            
            
            
            100
            %
            
            $
            166,717
            
            
            
            100
            %Cost
      of Services
            
            
            15,109
            
            
            
            20
            %
            
            
            36,346
            
            
            
            22
            %Gross
      Profit
            
            
            61,801
            
            
            
            80
            %
            
            
            130,371
            
            
            
            78
            %Operational
      General and Administrative Expenses
            
            
            674,805
            
            
            
            877
            %
            
            
            1,286,071
            
            
            
            771
            %Depreciation
      and amortization
            
            
            494,354
            
            
            
            642
            %
            
            
            14,376
            
            
            
            8
            %Bad
      debt expenses
            
            
            -
            
            
            
            0
            %
            
            
            -
            
            
            
            1
            %Total
      Expenses
            
            
            1,169,159
            
            
            
            1520
            %
            
            
            1,300,447
            
            
            
            780
            %Loss
      before other income (expense)
            
            $
            (1,107,358
            )
            
            
            1440
            %
            
            $
            (1,170,076
            )
            
            
            702
            %





Revenues





Our
revenues for the three-months ended September 30, 2008 decreased by 54% to
$76,910 from $166,717 in 2007, due largely to a decrease in sales of the
NuScribe Voice Recognition Appliance and Application.  We reduced our
sales efforts of the NuScribe Voice Recognition Appliance and Application
because we are redesigning with the intent to repackage this component as an
online application within the iMedicorTM Portal.  During this
redesigning period, we decreased our sales efforts of the stand-alone voice
recognition engine significantly, and we have redirected our sales team to
building a user base within the iMedicorTM Portal.





By June
30, 2008, we had exceeded our projected individual registrations of the
iMedicorTM service by more than 200%.  Currently, we offer iMedicorTM as
a free service for all users in order to 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, by charging a fee for
its use sometime in our third fiscal quarter (i.e., January through March
2009).





Our sales
in other areas remained flat for the period ending September 2008 from 2007, as
most of our internal efforts have been devoted to establishing new relationships
with companies which we believe will be driving forces in significantly
increasing the iMedicorTM user base with the end goal
of generating revenues for the Company as well as increasing individual member
usage of the iMedicorTM portal.





Cost
of Services





Cost of
services as a percentage of revenues was 20% for the quarter ended September 30,
2008 as compared to 22% for the quarter ended September 2007.  This
represents no material or significant change in Cost of Services.





Operational,
General and Administrative Expenses





Operational,
general and administrative expenses decreased to $674,805 in the quarter ended
September 30, 2008 from $1,286,071 in 2007, or 47.5%.  We reduced our
workforce to focus most of our effort on the development and marketing of the
iMedicorTM service as
well as to conserve available cash.





Sales and
marketing efforts relating to our education line of business decreased following
the Company’s decision to shift our focus exclusively to the healthcare market,
thereby reducing the need for additional sales and marketing staff on the
education side.  As a result, are sales costs decreased
significantly.




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Depreciation
and Amortization





Depreciation
and amortization expenses increased for the quarter ended September 30, 2008 to
$494,354 from $14,376.  This is entirely attributed to the assignment
of the purchase price of NuScribe and iMedicorTM website to a technology asset
and the subsequent amortization of that asset.  We have capitalized
all acquisition costs associated with the acquisition of NuScribe
Inc.  In addition, we have elected to capitalize all related
development costs associated with its completion.  We launched the
iMedicorÔ product in
late October 2007 at which time we began to amortize its cost on a straight-line
basis over 60 months.





Loss
from Operations





Income
(loss) from operations for the quarter ended September 30, 2008 totaled
($1,107,358) or approximately 1440% of net revenue compared to ($1,170.076) or
approximately 702% of net revenue for the quarter ended September 30,
2007.  The decrease in income from operations for the quarter ended
September 30, 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
and the belief that a larger user base prior to instituting revenue generating
programs via the iMedicorTM portal would inherently increase the value of not
only the portal, but the company as well.  It should also be noted
that the disparity between percentage losses between the quarter ended September
30, 2008 and September 30, 2007 is largely (but not wholly) attributable to the
amortization of the iMedicorTM technology asset.





Liquidity and Capital
Resources





Cash and
cash equivalents were $195,594 at September 30, 2008 compared to $246,630 at
June 30, 2008.
 
 Net cash
used by operating activities was $1,256,279 for the three months ended September
30, 2008 as compared to cash used by operating activities of $896,551 for the
three months ended September 30, 2007.  The increase is due primarily
to  receipt of investment income and the subsequent pay-down of
outstanding accounts payable.
 
 Net cash
used by investing activities was $340,271 for the three months ended September
30, 2008  as compared to cash used by investing activities of $54,426
for the three months ended September 30, 2007, and was due to purchase of the
Clearlobby technology asset and the continued development of the iMedicorÔ  website and
the capitalization of those costs.
 
 Net cash
provided by financing activities was $1,579,578 for the three months ended
September 30, 2008 as compared to net cash used by financing activities of
$664,949 for the three months ended September 30, 2007 and increased primarily
due to a sale of Common Stock, which generated $1,700,000 in investment
capital.
 
 Due to
our cash position and the reduction in sales revenue prior to generating
revenues through the iMedicorÔ  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 continues to operate at a loss and is projected to do so until the third
or fourth quarter of 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.  In July 2008, we
issued 14,166,667 shares of Common Stock through a private offering to
accredited investors through which we raised
$1,700,000.  Notwithstanding the receipt of this additional capital,
the Company requires significant additional capital to cover its current
overhead as well as to satisfy existing obligations.




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ITEM
3.                      
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





N/A.





ITEM
4T.                      CONTROLS
AND PROCEDURES





(a)
Evaluation of Disclosure Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act of 1934, as
amended (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 September 30, 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 effective to ensure
that information required to be disclosed by us in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.





(b)  Changes
in Internal Controls over Financial Reporting





There
have been changes in our internal controls over financial reporting (as defined
in Exchange Act Rule 13a-15(f)) during the three-months ended September 30, 2008
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.





As
disclosed in our amended Annual Report on Form 10-K for the year ended June 30,
2008, which we filed on October 14, 2008, we had material weaknesses in our
internal controls over financial reporting related to:





·
            lack
      of adequate accounting experience with personnel tasked with recording
      financial transactions;·
            lack
      of timely and accurate posting of accounts payable and accounts receivable
      entries to accounting system;·
            inadequate
      communication between the chief executive officer and chief financial
      officer with regards to contractual obligations and
      receivables;·
            inaccurate
      recording of company contracts and related deferral of
    income;·
            inaccurate
      amortization of company assets and recording of payroll and related tax
      liabilities.





During
the three-months ended September 30, 2008, management has implemented the
following changes to our internal controls over financial
reporting:





·
            Hired
      a new bookkeeper with a bachelor’s degree in accounting and 15 years of
      post-degree bookkeeping/accounting
experience;


·
            Instituted
      weekly reviews of accounts payable and accounts receivable
      postings;


·
            Instituted
      regular meetings between the Chief Executive officer and Chief Financial
      Officer regarding all accounts’


·
            Managements’
      review and revisions to its method of recording annual contracts and
      posting deferred income; and


·
            Contracted
      with an outside payroll processor to ensure accurate and timely recording
      of payroll liabilities.





As a
result, we believe that we have strengthened our review procedures over the
financial reporting process, therefore, improving the quality of financial
reporting on an ongoing basis.




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PART
II – OTHER INFORMATION





Item 2.  UnregisteredSales of Equity Securities and Use
of Proceeds





As
previously reported in part on Form 8-K on August 4, 2008, during the quarter
end September 30, 2008, the Company issued 14,166,666 shares of common stock for
$1,700,000 in cash from investors.  We claimed the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933 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




Exhibit
              
              Description10.1
              
              Limited
      Asset Purchase Agreement Between Vemics, Inc. and ClearLobby, Inc.,
      incorporated by reference from our Current Report on Form 8-K filed August
      4, 2008.31.1
              
              Certification of the Chief Executive Officer pursuant to
      Rule 13a-14(a).31.2
              
              Certification of the Chief Financial Officer and
      Treasurer pursuant to Rule 13a-14(a).32
              
              Certification of the 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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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:
      November 19, 2008
              By:
              /s/
      Fred
      ZollaFred
      ZollaChief
      Executive Officer
                (Principal
      Executive Officer)
 Date:
      November 19, 2008
              By:
              /s/ Craig
      StoutCraig
      StoutInterim
      Chief Financial Officer
                (Principal Accounting Officer)





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