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 September
30,  2009





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





Table of Contents





VEMICS,
INC.


FORM
10-QSB QUARTERLY REPORT


FOR
THE QUARTER ENDED SEPTEMBER 30, 2009





TABLE OF CONTENTS




Part
      I Financial InformationItem
      1.
              Financial Statements
              1Condensed Consolidated Balance Sheet as of September 30, 2009
      (unaudited) and June 30, 2009 (audited)
              1Condensed Consolidated Statements of Operations for the Three
      Months Ended September 30, 2009 and 2008 (unaudited)
              2Condensed Consolidated Statements of Cash Flows for the Three
      Months Ended September 30, 2009 and 2008 (unaudited)
              3Notes to Condensed Consolidated Statements
      (unaudited)
              5Item
      2.
              Management's Discussion and Analysis of Financial Condition
      and Results of Operations
              8Item
      3.
              Quantitative and Qualitative Disclosure About Market
      Risk
              10Item
      4T.
              Controls and Procedures
              11Part
      II Other InformationItem
      2
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              12Item
      6.
              Exhibits
              12Signatures
              13




Table of Contents




PART
1:  FINANCIAL INFORMATION





ITEM1.  FINANCIAL
STATEMENTS


VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED BALANCE SHEETS




September
      30, 2009
            
            
            June
      30,
              2008ASSETS
            
            unaudited
            
            
            AuditedCurrent
      assets:Cash
      and cash equivalents –– interest bearing
            
            $
            3,175
            
            
            $
            52,615Accounts
      receivable, net of allowance for doubtful accounts of $5,000 and $5,000
              at September 30, 2009 and June 30,
      2009, respectively
            
            
            3,214
            
            
            
            3,214Total
      Current Assets
            
            
            6,389
            
            
            
            55,828Property
      and equipment, net
            
            
            13,553
            
            
            
            16,545Other
      AssetsDeferred
      Expenses
            
            
            60,798
            
            
            
            60,798Technology
      and Medical Software, net
            
            
            6,314,118
            
            
            
            6,814,563Goodwill
            
            
            681,673
            
            
            
            681,6737,056,590
            
            
            
            7,557,035Total
      Assets
            
            $
            7,076,531
            
            
            $
            7,629,408LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable –– banks
            
            $
            87,354
            
            
            $
            87,354Current
      portion of long-term debt
            
            
            3,868,028
            
            
            
            3,624,198Accounts
      payable and accrued expenses
            
            
            1,722,870
            
            
            
            1,585,901Deferred
      income
            
            
            120,810
            
            
            
            121,620Total
      Current Liabilities
            
            
            5,799,062
            
            
            
            5,419,074Other
      long-term liabilitiesLong-term
      notes payable
            
            
            1,268,996
            
            
            
            1,268,996Total
      Liabilities
            
            
            7,068,057
            
            
            
            6,688,070Stockholders’
      EquityPreferred
      stock, par value $0.001 per share, authorized 1,00,000.  Issued
      and outstanding -0- shares as of
              September 30, 2009 and June 30, 2009, respectively
            
            
            -
            
            
            
            -Common
      stock,  par value $0.001 per share, authorized
      200,000,000.  Issued and outstanding
      128,119,000
              and
      114,561,998 shares at September 30, 2009 and June 30, 2009,
      respectively
            
            
            128,119
            
            
            
            114,562Additional
      Paid in Capital
            
            
            32,631,329
            
            
            
            30,962,043Less:
      Treasury stock, 368,407 shares at both September 30, 2008 and June
      30, 2008
            
            
            (508,195
            )
            
            
            (508,195
            )Accumulated
      deficit
            
            
            (32,242,799
            )
            
            
            (29,627,071
            )Total
      Stockholders’ Equity
            
            
            8,474
            
            
            
            941,339Total
      Liabilities and Stockholders’ Equity
            
            $
            7,076,531
            
            
            $
            7,629,409




See Notes
to Condensed Consolidated Statements (unaudited).





1
 Table of Contents





VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS





For
      the three
            
            
            For
      the threemonths
      ended
            
            
            months
      endedSeptember
      30, 2009
            
            
            September
      30, 2008unaudited
            
            
            unauditedRevenues:
            
            $
            65,832
            
            
            $
            76,910Cost
      of Services
            
            
            10,995
            
            
            
            15,109Gross
      Profit
            
            
            54,837
            
            
            
            61,801Expenses:Stock
      issued for fees and services
            
            
            1,231,530
            
            
            
            -Consulting,
      commissions and travel
            
            
            88,764
            
            
            
            128,068Operational
      fees and expenses
            
            
            177,922
            
            
            
            166,822Professional
      fees
            
            
            105,375
            
            
            
            80,534Payroll
      and related taxes
            
            
            223,015
            
            
            
            270,431Depreciation
      and amortization
            
            
            503,437
            
            
            
            494,354Production,
      advertising, brochures and public relations
            
            
            62,279
            
            
            
            28,941Total
      Expenses
            
            
            2,392,322
            
            
            
            1,257,241Loss
      before other income/(expenses)
            
            
            (2,337,485
            )
            
            
            (1,107,358
            )Other
      Income/(Expenses):Interest
      income
            
            
            -
            
            
            
            4,084Redemption
      fee
            
            
            (148,146
            )
            
            
            -Interest
      expense
            
            
            (130,097
            )
            
            
            (39,196
            )Total
      Other Income/(Expenses)
            
            
            (278,243
            )
            
            
            (35,112
            )Net
      loss available to common stockholders
            
            $
            (2,615,728
            )
            
            $
            (1,142,470
            )Net
      loss per share, to common stockholders
            
            $
            (0.02
            )
            
            $
            (0.01
            )Weighted
      average number of shares, basic and diluted
            
            
            122,961,154
            
            
            
            78,745,353





See Notes
to Condensed Consolidated Statements (unaudited).





2
 Table of Contents




VEMICS, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For
      the three
            
            
            For
      the threemonths
      ended
            
            
            months
      endedSeptember
      30, 2009
            
            
            September
      30, 2008unaudited
            
            
            unauditedCash
      Flows From Operating Activities:Receipts
      from customers
            
            $
            65,832
            
            
            $
            23,087Payments
      to suppliers, salaries
            
            
            (611,930
            )
            
            
            (1,264,903
            )Interest
      received
            
            
            -
            
            
            
            4,084Interest
      paid
            
            
            42,468
            
            
            
            (18,547
            )Net
      Cash Used in Operating Activities
            
            
            (503,360
            )
            
            
            (1,256,279
            )Cash
      Flows Used in Investing Activities:Purchase
      of Technology & Medical Software
            
            
            -
            
            
            
            (340,000
            )Purchase
      of fixed assets
            
            
            -
            
            
            
            (271
            )Net
      Cash Used in Investing Activities
            
            
            -
            
            
            
            (340,271
            )Cash
      Flows From Financing Activities:Payments
      on notes payable
            
            
            (15,000
            )
            
            
            (212,980
            )Short
      term loans proceeds
            
            
            470,000
            
            
            
            240,000Short
      term loans paid
            
            
            -
            
            
            
            (147,442
            )Sale
      of  common stock
            
            
            -
            
            
            
            1,700,000Net
      Cash Provided by Financing Activities
            
            
            455,000
            
            
            
            1,579,578Net
      Increase/(Decrease) in Cash
            
            
            (48,360
            )
            
            
            (16,972
            )Cash
      at the Beginning of Period
            
            
            52,615
            
            
            
            212,566Cash
      at End of Period
            
            $
            3,175
            
            
            $
            195,594




See Notes
to Condensed Consolidated Statements (unaudited).




3
 Table of Contents




VEMICS,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For
      the three
            
            
            For
      the threemonths
      ended
            
            
            months
      endedSeptember
      30, 2009
            
            
            September
      30, 2008unaudited
            
            
            unauditedReconciliation
      of Net Loss to Net CashUsed
      by Operating ActivitiesNet
      Loss
            
            $
            (2,615,708
            )
            
            $
            (1,142,470
            )Adjustments
      to Reconcile net income/(loss) to net cashUsed
      by operating activitiesStock
      issued for fees and services
            
            
            1,231,530Depreciation
      & Amortization
            
            
            503,437
            
            
            
            494,354Changes
      in:Trade
      receivables
            
            
            -
            
            
            
            4,667Other
      receivables
            
            
            -
            
            
            
            -Accounts
      payable and accrued expenses
            
            
            106,861
            
            
            
            (569,989
            )Prepaid expenses
            
            
            -
            
            
            
            (5,000
            )Convertible
      debentures - accrued interest
            
            
            271,330
            
            
            
            20,649Deferred
      income
            
            
            (810
            )
            
            
            (58,500
            )Net
      Cash Used in Operating Activities
            
            $
            (503,360
            )
            
            $
            (1,256,279
            )





See Notes
to Condensed Consolidated Statements (unaudited).




4
 Table of Contents





VEMICS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





September
30, 2009




NATURE OF
OPERATIONS
 
 Vemics,
Inc. (the "Company") builds portal-based, virtual work and learning environments
in healthcare and related industries.  Our focus is twofold: iMedicor,
our web-based portal which allows Physicians and other healthcare providers to
exchange patient specific healthcare information via the internet while
maintaining compliance with all Health Insurance Portability and Accountability
Act of 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.




1.
            BASIS OF
      PRESENTATION





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, 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.
  In June
2009, the FASB issued guidance now codified as FASB ASC Topic 105, "Generally
Accepted Accounting Principles," as the single source of authoritative
nongovernmental U.S. GAAP. FASB ASC Topic 105 does not change current U.S. GAAP,
but is intended to simplify user access to all authoritative U.S. GAAP by
providing all authoritative literature related to a particular topic in one
place. All existing accounting standard documents will be superseded and all
other accounting literature not included in the FASB Codification will be
considered non-authoritative. These provisions of FASB ASC Topic 105 are
effective for interim and annual periods ending after September 15, 2009 and,
accordingly, are effective for the Company for the current fiscal reporting
period. The adoption of this pronouncement did not have an impact on the
Company's financial condition or results of operations, but will impact our
financial reporting process by eliminating all references to pre-codification
standards. On the effective date of this Statement, the Codification superseded
all then-existing non-SEC accounting and reporting standards, and all other
non-grandfathered non-SEC accounting literature not included in the Codification
became non-authoritative.
 2.
              GOING
    CONCERN


From
inception through June 30, 2005, the Company had been in the development stage,
devoting substantially all of its efforts to research and development of its
technologies, acquisition of equipment and raising capital. The Company has
incurred operating losses to date and has an accumulated deficit of
approximately $32,243,000 and $29,627,000 at September 30, 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 and/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 and
diluted net loss per share information is presented in association with the
requirements of SFAS No. 128in accordance with current accounting guidance,
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 to 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.
  4.
                WARRANTS


As of
September 30, 2009, the Company has issued warrants to purchase shares of Common
Stock reserved for issuance upon exercise to various stockholders and service
providers according to the schedule below:




No. shares
              
              
              Expiration
              
              
              Exercise Price4,178,419
              
              
              
              2009
      – 2010
              
              
              $
              1.502,206,666
              
              
              
              2010
      – 2011
              
              
              $
              .601,430,000
              
              
              
              2011
              
              
              $
              .241,541,667
              
              
              
              2011
              
              
              $
              .124,000,000
              
              
              
              2013
              
              
              $
              .04660,000
              
              
              
              2013
      – 2014
              
              
              $
              .05


Management
has not assigned a value to these warrants, as it is not practicable to estimate
fair value for these financial instruments. The
Company has reserved the rightto redeem the warrants at $.10 per warrant
if there is a subsequent initial public offering and market value per share
meets certain levels.


5
 Table of Contents
  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 its completion. The iMedicorÔ product was
launched in late October 2007 and we have begun to amortize its cost on a
straight line basis over 60 months. Amortization expenses were $495,195 for the
three months ended September 30, 2009.
 9/30/2009
                  
                  
                  6/30/2009Technology
      and medical software
                  
                  $
                  10,008,893
                  
                  
                  $
                  10,008,893Less:
      Accumulated Amortization
                  
                  
                  3,694,775
                  
                  
                  
                  3,194,330$
                  6,314,118
                  
                  
                  $
                  6,814,563


7.
              SHORT AND LONG TERM DEBT
 
 Convertible
      Debentures
                
                $
                3,233,472Notes
      Payable
                
                
                1,903,553Total
                
                $
                5,137,024Less:
      portion in current liabilities
                
                
                (3,868,028
                )Balance
      of long term debt
                
                $
                1,268,996Long
      term debt matures as follows:June
      30, 2010
                
                $
                3,868,028June
      30, 2011
                
                
                1,268,996Total
                
                $
                5,137,024
  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 share270,000
              
              
              
              8.00
              %
              
              convertible
      into common shares at $.138 per share289,937
              
              
              
              12.00
              %
              
              the
      20 day trailing average closing price less a 10%
  discount23,800
              
              
              
              4.00
              %
              
              convertible
      into common shares at $.10 per share2,499,734
              
              
              
              15.00
              %
              
              convertible
      into common shares at $.05 per share$
              3,233,472


NOTES PAYABLE


Payee
                  
                  $
                  273,333
                  
                  
                  8
                  %Director
                  
                  
                  601,863
                  
                  
                  8
                  %Director
                  
                  
                  1,028,357
                  
                  
                  8
                  %$
                  1,903,553


8.
              SUBSEQUENT EVENTS




In
May 2009, the FASB issued guidance now codified as FASB ASC Topic 855,
“Subsequent Events,”
which establishes general standards of accounting for, and disclosures of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This pronouncement is effective for
interim or fiscal periods ending after June 15, 2009. Accordingly, the
Company adopted these provisions of FASB ASC Topic 855 on March 29, 2009.
The adoption of this pronouncement did not have a material impact on our
consolidated financial position, results of operations or cash flows. However,
the provisions of FASB ASC Topic 855 resulted in additional disclosures with
respect to subsequent events.
  The
company has evaluated subsequent events from the period September 30, 2009, the
date of these financial statements, through November 17, 2009, which represents
the date these financial statements are being filed with the
Commission,


Pursuant
to the requirements of FASB ASC topic 855, there were no events or transactions
occurring during this subsequent event reporting period that require recognition
or disclosure in the financial statements.


7
 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 (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 have currently generate
revenues through the delivery of on-line CME courses and have begun generating
revenues from various components within iMedicorthrough our partnership
with Navinet and our recent acquisition of ClearLobby; focusing on direct
pharmaceutical company to physician marketing and product
dissemination.  We have several new programs scheduled to launch in
the third fiscal quarter beginning in January 2010 designed around
pharmaceutical marketing to physicians which we expect to generate significant
revenue for the Company We also expect to begin to generate additional
revenues as iMedicor member physicians begin to use our inter—EMR
communications tool sometime in the third quarter and later in the year the
redesigned NuScribe Voice Recognition Application.





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





As of
September 30, 2009, we require approximately $170,000 to $230,000 of cash per
month to fund our operations.  This amount may increase as we expand
our sales and marketing efforts and continue to develop new products and
services; however, if we do not raise additional capital in the near future we
will have to curtail our spending and downsize our operations.  Our
cash needs are primarily attributable to funding sales and marketing efforts,
strengthening technical and helpdesk support, expanding our development
capabilities, satisfying existing obligations and building administrative
infrastructure, including costs and professional fees associated with being a
public company.





We
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 September 30, 2009, we were
successful in raising $470,000 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.




8
 Table of Contents




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.





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 reduce operations substantially, terminate certain
products or services or pursue exit strategies in the near
future.





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.





Results of
Operations





Three
months ended September 30, 2009 Compared to Three Months Ended September 30,
2008





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





Three
      Months Ended September 30(unaudited)2009
            
            
            2009
            
            
            2008
            
            
            2008Net
      Sales and Revenues
            
            $
            65,832
            
            
            
            100
            %
            
            $
            76,910
            
            
            
            100
            %Cost
      of Services
            
            
            10,995
            
            
            
            17
            %
            
            
            15,109
            
            
            
            19
            %Gross
      Profit
            
            
            54,837
            
            
            
            83
            %
            
            
            61,801
            
            
            
            91
            %Operational
      General and Administrative Expenses
            
            
            657,355
            
            
            
            998
            %
            
            
            674,805
            
            
            
            878
            %Depreciation
      and amortization
            
            
            503,437
            
            
            
            764
            %
            
            
            494,354
            
            
            
            642
            %Stock
      issued for fees and services
            
            
            1,231,530
            
            
            
            1,871
            %Total
      Expenses
            
            
            2,392,302
            
            
            
            3,635
            %
            
            
            1,169,159
            
            
            
            1,520
            %Loss
      before other income (expense)
            
            $
            (2,337,485
            )
            
            
            3,550
            %
            
            $
            (1,107,358
            )
            
            
            1,485
            %





Revenues





The
Company's revenues for the three months ended September 30, 2009 decreased by
14% to $65,832 from $76,910 in the three
months ending September 30,2008, due primarily to the complete
suspension of sales of the NuScribe Voice Recognition Appliance and
Application.  This suspension in NuScribe sales was intentional, as
this component is being redesigned to be bundled as an online application within
the iMedicorTM Portal.  During the redesign period, sales efforts of
the stand-alone voice recognition engine decreased significantly in 2008 and
were suspended completely in 2009 pending deployment as an integrated part of
the iMedicorTM portal.   The Company reduced its sales team, which
had been engaged in NuScribe sales, and redirected the remaining sales force to
building a user base within the iMedicorTM Portal and securing relationships with
pharmaceutical companies and advertisers.







9
 Table of Contents




Cost
of Services





Cost of
services as a percentage of revenues was 17% for the quarter ended September 30,
2009 as compared to 19% for the quarter ended September 30, 2008 representing no
significant difference.





Operational,
General and Administrative Expenses




Operational,
general and administrative expenses decreased to $657,355 in the quarter ended
September 30, 2009 from $674,805 in the comparable quarter 2008, or 2.2%,
representing no material difference.
  Depreciation
and Amortization





Depreciation
and Amortization expenses increased for the quarter ending September 30, 2009 to
$503,437 from $494,354, for the
quarter ending September 30, 2008or 1.9%, representing no material
difference.





Loss
from Operations





Income
(loss) from operations for the quarter ended September 30, 2009 totaled
($2,337,485) or approximately 3,550% of net revenue compared to ($1,107,358) or
approximately 1,485% of net revenue for the quarter ended September 30,
2008.  The increase in loss from operations for the quarter ended
September 30, 2009 was wholly due to the Company’s election to issue stock for
fees and services, which enabled us 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 $3,175 at September 30, 2009 compared to $52,615 at June
30, 2008.





Net cash
used by operating activities was $503,360 for the three months ended September
30, 2009 as compared to $1,256,279 for the three months ended September 30,
2008.  The decrease is primarily due to the companies continued
consolidation of operations to preserve cash.





Net cash
used by investing activities was $0 for the three months ended September 30,
2009 as compared to cash used by investing activities of $340,271 for the three
months ended September 30, 2008.





Net cash
provided by financing activities was $455,000 for the three months ended
September 30, 2009 as compared to net cash used by financing activities of
$1,579,578 for the three months ended September 30, 2008, representing no
material difference.




In the
quarter ending September 30, 2009 the Company sold a series of short-term
Convertible Promissory Notes to independent private accredited investors in
exchange for  an aggregate investment of $470,000.  The
notes all have a conversion provision which allows the note holder to convert to
equity in the company at a conversion price of $0.05 per share.


Due to
our serious 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 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 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.





ITEM3.     QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





N/A.




10
 Table of Contents




ITEM4T.  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 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, 2009, 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 September
30, 2008 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.






11
 Table of Contents





PART
II – OTHER INFORMATION





Item2.  Unregistered Sales of Equity Securities and Use
of Proceeds




In the
quarter ending September 30, 2009 the Company entered into a series of
Convertible Promissory Notes (the “Convertible  Notes”)
with independent private accredited investors (the “Investors”) totaling an
aggregate gross investment of $470,000.    The Convertible
Notes provide for the repayment of principle to the Investors on or before the
maturity dates, which range between December 1, 2009 and March 1, 2010, which
dates can be extended for an additional six-month period at the Company’s sole
discretion.  The Convertible Notes provide for ten (10%) percent
annual interest payable on the maturity date to the Investors in either cash or
stock in the discretion of the Investor.  Interest on the Convertible
Notes is due on the maturity date of each Note.  Under certain
circumstances, the Company can prepay each Convertible Note prior to the
maturity date or prior to conversion with 30-days’ advance notice to the
Investors.  The Convertible Notes also contain certain affirmative and
negative covenants relating to the Company’s operations.


As
holders of the Convertible Notes, the Investors have the option to convert the
Convertible Notes at $0.05 per share into the Common Stock.  The
Convertible Notes carry a conversion redemption fee equal to 50% of each Note,
which fee is due to the Investors from the Company upon conversion to equity,
but not if the note is paid back in cash.  For example, an Investor
who paid in principle of $50,000 would receive 1,500,000 shares of common stock
at conversion,.





The
Company also issued 4,000,000 shares of the company’s common stock for the
reduction of a 432,500 in debt to various noteholders.





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.




Item6.  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.














12
 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:
      November 17, 2009
              By:
              /s/ Fred
      ZollaFred
      ZollaPresident
      and Chief Executive Officer
                (Principal Executive Officer)




Date:
      November 17, 2009
              By:
              /s/ Craig
      StoutCraig
      StoutInterim
      Chief Financial Officer
                (Principal Accounting Officer)






13
 Table of Contents