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 March 31,
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 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). Yes o     No
x




Table of Contents





VEMICS,
INC.


FORM
10-QSB QUARTERLY REPORT


FOR
THE QUARTER ENDED March 31, 2009


TABLEOF CONTENTS




PagePart
      I Financial InformationItem
      1.
                              Financial
      Statements
                              1Condensed
      Consolidated Balance Sheet as of March 31, 2009 (unaudited) and June 30,
      2008 (audited)
                              1Condensed
      Consolidated Statements of Operations for the Three Months Ended March 31,
      2009 and 2008 (unaudited)
                              2Condensed
      Consolidated Statements of Operations for the Nine Months Ended March 31,
      2009 and 2008 (unaudited)
                              3Condensed
      Consolidated Statements of Cash Flows for the Three Months Ended March 31,
      2009 and 2008 (unaudited)
                              4Notes
      to Condensed Consolidated FinancialStatements (unaudited)
                              6Item
      2.
                              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                              9Item
      3.
                              Quantitative
      and Qualitative Disclosure About Market Risk
                              13Item
      4T.
                              Controls
      and Procedures
                              13Part
      II Other InformationItem
      2
                              Unregistered
      Sales of Equity Securities and Use of Proceeds
                              14Item
      6.
                              Exhibits
                              14Signatures
                              14


Table of Contents




PART
1:  FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS


VEMICS, INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED BALANCE SHEETS




March
      31, 2009
                          
                          
                          June
      30, 2008ASSETS
                          
                          
                          unaudited
                          
                          
                          AuditedCurrent
      assets:Cash
      and cash equivalents –– interest bearing
                          
                          $
                          12,670
                          
                          
                          $
                          212,566Accounts
      receivable, net of allowance for doubtful accounts of $5,000 and $-0- at
      December 31, 2008 and June 30, 2008, respectively
                          
                          
                          
                          23,714
                          
                          
                          
                          57,121Advances
                          
                          
                          
                          5,000Deferred
      Expenses
                          
                          
                          
                          91,197Total
      Current Assets
                          
                          
                          
                          132,581
                          
                          
                          
                          269,687Property
      and equipment, net
                          
                          
                          
                          18,459
                          
                          
                          
                          66,349Other
      AssetsTechnology
      and Medical Software, net
                          
                          
                          7,210,008
                          
                          
                          
                          8,032,343Goodwill
                          
                          
                          
                          681,673
                          
                          
                          
                          681,6737,891,681
                          
                          
                          
                          8,714,016Total Assets
                          
                          
                          $
                          8,042,721
                          
                          
                          $
                          9,050,052LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable –– banks
                          
                          
                          $
                          87,354
                          
                          
                          $
                          299,980Short-term
      notes payable
                          
                          
                          
                          2,504,409
                          
                          
                          
                          1,279,667Accounts
      payable and accrued expenses
                          
                          
                          1,593,920
                          
                          
                          
                          1,839,470Deferred income
                          
                          
                          
                          182,430
                          
                          
                          
                          123,500Total
      Current Liabilities
                          
                          
                          
                          4,368,113
                          
                          
                          
                          3,542,617Other
      long-term liabilitiesLong-term notes payable
                          
                          
                          
                          1,260,823
                          
                          
                          
                          1,400,914Total
      Other Long-Term Liabilities
                          
                          
                          1,260,823
                          
                          
                          
                          1,400,914Total
      Liabilities
                          
                          
                          
                          5,628,936
                          
                          
                          
                          4,943,531Stockholders’
      EquityCommon
      stock,  par value $0.01 per share, authorized
      200,000,000.  Issued and outstanding 83,093,198
                            and 68,926,581 shares at December 31, 2008 and June 30, 2008,
      respectively
                          
                          
                          83,093
                          
                          
                          
                          68,926Additional
      Paid in Capital
                          
                          
                          
                          27,977,148
                          
                          
                          
                          26,066,447Less:
      Treasury stock, 368,407 shares at both December 31, 2008 and June 30,
      2008
                          
                          
                          (508,195
                          )
                          
                          
                          (508,195
                          )Accumulated deficit
                          
                          
                          
                          (25,138,260
                          )
                          
                          
                          (21,520,657
                          )Total Stockholders’ Equity
                          
                          
                          
                          2,413,785
                          
                          
                          
                          4,106,521Total Liabilities and Stockholders’ Equity
                          
                          
                          $
                          8,042,721
                          
                          
                          $
                          9,050,052




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
      endedMarch
      31, 2009
                
                
                March
      31, 2008unaudited
                
                
                (As
      Restated)Revenues:
                
                $
                131,707
                
                
                $
                160,740Cost
      of Services
                
                
                68,877
                
                
                
                82,197Gross
      Profit
                
                
                62,830
                
                
                
                78,543Expenses:Consulting,
      commissions and travel
                
                
                82,556
                
                
                
                179,201Operational
      fees and expenses
                
                
                166,676
                
                
                
                84,737Professional
      fees
                
                
                94,863
                
                
                
                275,430Payroll
      and related taxes
                
                
                259,436
                
                
                
                231,130Depreciation
      and amortization
                
                
                518,821
                
                
                
                471,743Bad
      debt expense
                
                
                -
                
                
                
                5,000Production,
      advertising, brochures and public relations
                
                
                50,214
                
                
                
                10,000Total
      Expenses
                
                
                1,172,566
                
                
                
                1,257,241Loss
      before other expenses
                
                
                (1,109,736
                )
                
                
                (1,178,698
                )Other
      Income/(Expenses):Other
      income
                
                
                -
                
                
                
                138,867Redemption
      fee
                
                
                (121,111
                )
                
                
                (8,438
                )Interest
      expense
                
                
                (47,458
                )
                
                
                (16,768
                )Total
      Other Income/(Expenses)
                
                
                (168,569
                )
                
                
                113,661Net
      loss available to common stockholders
                
                $
                (1,278,305
                )
                
                $
                (1,065,037
                )Net
      loss per share, to common stockholders
                
                $
                (0.02
                )
                
                $
                (0.02
                )Weighted
      average number of shares, basic and diluted
                
                
                83,093,198
                
                
                
                51,342,023





See Notes
to Condensed Consolidated Statements (unaudited).





2
 Table of Contents




VEMICS, INC.  AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS





For
      the nine
                  
                  
                  For
      the ninemonths
      ended
                  
                  
                  months
      endedMarch
      31, 2008
                  
                  
                  March
      31, 2007unaudited
                  
                  
                  unauditedRevenues:
                  
                  $
                  293,217
                  
                  
                  $
                  468,307Cost
      of Services
                  
                  
                  92.417
                  
                  
                  
                  140,813Gross
      Profit
                  
                  
                  200,800
                  
                  
                  
                  327,494Expenses:Consulting,
      commissions and travel
                  
                  
                  304,060
                  
                  
                  
                  1,009,766Operational
      fees and expenses
                  
                  
                  484,217
                  
                  
                  
                  601,326Professional
      fees
                  
                  
                  194,860
                  
                  
                  
                  422,884Payroll
      and related taxes
                  
                  
                  773,120
                  
                  
                  
                  1,018,397Depreciation
      and amortization
                  
                  
                  1,510,496
                  
                  
                  
                  811,319Bad
      Debt Expense
                  
                  
                  -
                  
                  
                  
                  5,000Production,
      advertising, brochures and public relations
                  
                  
                  84,211
                  
                  
                  
                  300,741Total
      Expenses
                  
                  
                  3,350,964
                  
                  
                  
                  4,169,433Loss
      before other expenses
                  
                  
                  (3,150,164
                  )
                  
                  
                  (3,841,939
                  )Other
      Income/(Expenses):Other
      Income
                  
                  
                  
                  
                  
                  
                  138,867Interest
      income
                  
                  
                  4,128
                  
                  
                  
                  993Redemption
      fee
                  
                  
                  (129,549
                  )
                  
                  
                  -Interest
      expense
                  
                  
                  (117,150
                  )
                  
                  
                  (134,146
                  )Total
      Other Income/(Expenses)
                  
                  
                  (252,571
                  )
                  
                  
                  5,714Loss
      before extraordinary item
                  
                  
                  (3,392,735
                  )
                  
                  
                  (3,836,225
                  )Extraordinary
      item - litigation, net of expenses and taxes
                  
                  
                  -
                  
                  
                  
                  650,000Net
      loss available to common stockholders
                  
                  $
                  (3,392,735
                  )
                  
                  $
                  (3,186,225
                  )Net
      loss per share, basic and diluted, before extraordinary
    item
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.07
                  )Net
      loss per share, basic and diluted, extraordinary item net
                  
                  $
                  -
                  
                  
                  $
                  0.01Net
      loss per share, to common stockholders
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.06
                  )Weighted
      average number of shares, basic and diluted
                  
                  
                  81,633,645
                  
                  
                  
                  51,342,023





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
      endedMarch
      31, 2008
                      
                      
                      March
      31, 2007unaudited
                      
                      
                      unauditedCash
      Flows From Operating Activities:Receipts
      from customers
                      
                      $
                      366,115
                      
                      
                      $
                      308,438Payments
      to suppliers, salaries
                      
                      
                      (563,614
                      )
                      
                      
                      (574,385
                      )Other
      income received
                      
                      
                      -
                      
                      
                      
                      -Interest
      received
                      
                      
                      -
                      
                      
                      
                      -Interest
      paid
                      
                      
                      (14,074
                      )
                      
                      
                      (39,987
                      )Net
      Cash Used in Operating Activities
                      
                      
                      (241,573
                      )
                      
                      
                      (305,934
                      )Cash
      Flows Used in Investing Activities:Purchase
      of Technology & Medical Software
                      
                      
                      (165,000
                      )
                      
                      
                      (65,482
                      )Net
      Cash Used in Investing Activities
                      
                      
                      (165,000
                      )
                      
                      
                      (65,482
                      )Cash
      Flows From Financing Activities:Payments
      on notes payable
                      
                      
                      (11,233
                      )
                      
                      
                      211Short
      term loans proceeds
                      
                      
                      415,000
                      
                      
                      
                      65,000Short
      term loans paid
                      
                      
                      (7,500
                      )
                      
                      
                      (5,189
                      )Sale
      of  common stock
                      
                      
                      -
                      
                      
                      
                      378,000Net
      Cash Provided by Financing Activities
                      
                      
                      396,267
                      
                      
                      
                      438,022Net
      Increase/(Decrease) in Cash
                      
                      
                      (10,306
                      )
                      
                      
                      66,606Cash
      at the Beginning of Period
                      
                      
                      22,976
                      
                      
                      
                      208,278Cash
      at End of Period
                      
                      $
                      12,670
                      
                      
                      $
                      274,884








See Notes
to Condensed Consolidated Statements (unaudited).




4
 Table of Contents




VEMICS, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For
      the three
                  
                  
                  For
      the threemonths
      ended
                  
                  
                  months
      endedMarch
      31, 2009
                  
                  
                  March
      31, 2009unaudited
                  
                  
                  unauditedReconciliation
      of Net Loss to Net CashUsed
      by Operating ActivitiesNet
      Loss
                  
                  $
                  (1,278,305
                  )
                  
                  $
                  (1,065,037
                  )Adjustments
      to Reconcile net income/(loss) to net cashUsed
      by operating activitiesDepreciation
      & Amortization
                  
                  
                  518,821
                  
                  
                  
                  471,743Changes
      in:Trade
      receivables
                  
                  
                  21,978
                  
                  
                  
                  84,429Other
      receivables
                  
                  
                  -
                  
                  
                  
                  -Deferred
      expense
                  
                  
                  (91,197
                  )
                  
                  
                  -Accounts
      payable and accrued expenses
                  
                  
                  247,392
                  
                  
                  
                  283,253Redemption
      fee
                  
                  
                  121,111
                  
                  
                  
                  -Accrued
      interest
                  
                  
                  36,197
                  
                  
                  
                  23,474Deferred
      income
                  
                  
                  182,430
                  
                  
                  
                  (104,066
                  )Net
      Cash Used by Operating Activities
                  
                  $
                  (241,573
                  )
                  
                  $
                  (305,934
                  )





See Notes
to Condensed Consolidated Statements (unaudited).




5
 Table of Contents




VEMICS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





March
2009











1.      
     BASIS OF PRESENTATION





Vemics,
Inc. (the “Company”) was organized on July 17, 2001 as a Delaware corporation.
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, primarily to the healthcare
and related industries.
 .
 The table
below shows the sales percentages by division of the Company for the three
months ended March 31, 2009 and 2008, respectively:




2009
                        
                        
                        2008Revenues:Education
                        
                        
                        92
                        %
                        
                        
                        89
                        %Healthcare
                        
                        
                        8
                        %
                        
                        
                        11
                        %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 March 31, 2009, are not necessarily indicative of the
results that may be expected for the full year. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto that are included in the Company’s Form 10-SB
for the fiscal year ended June 30, 2008.





As of
March  31, 2009, there have been no material changes to any of the
significant accounting policies described in our Form 10-SB for the fiscal year
ended June 30, 2008, except for the adoption of Financial Interpretation No.48,
“Accounting for Uncertainty in Income Taxes.


2.      
     PRINCIPLES OF CONSOLIDATION





On November 8, 2005 OMII Corp. acquired
all the shares of Vemics, Inc. the Delaware Corporation in an exchange
of stock transaction and it became a 100% owned subsidiary of
OMII.  The name of OMII was then changed
to Vemics, Inc., a Nevada corporation.  Therefore, the accompanying
presentation presents the historicfinancials of Vemics, Delaware, the accounting
acquirer.





3.      
     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 $25,138,000 and $21,521,000 at March 31, 2009 and at June 30,
2008, 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.  Financing may not be available on terms satisfactory to
the Company, if at all.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.


4.     
      NET EARNINGS (LOSS) PER SHARE





Basic and
diluted net loss per share information is presented under the requirements of
SFAS No. 128, Earnings per Share.  Basic net loss per share is
computed by dividing net loss by the weighted average number of shares of common
stock outstanding for the period, less shares subject to
repurchase.  Diluted net loss per share reflects the potential
dilution of securities by adding other common stock equivalents, including stock
options, shares subject to repurchase, warrants and convertible notes to the
weighted-average number of shares of common  stock 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
March 31, 2009, the Company reserved 260,000 of Common Stock for issuance upon
the exercise of warrants issued to various short-term lenders. These warrants
expire on various dates through March 2014.  Each warrant entitles the
holder thereof to purchase one share of Common Stock at an exercise price of
$.05 per share.
  As of
October 1, 2008, the Company reserved 1,541,667 shares of Common Stock for
issuance upon the exercise of warrants issued to one vendor for their research
and development of the medical portal. These warrants have expire on various
dates through October 2011.  Each warrant will entitles the holder
thereof to purchase one share of Common Stock at an exercise price of $.12 per
share.


6
 Table of Contents




As of
September 30, 2008, the Company reserved 4,916,667 shares of Common Stock
reserved for issuance upon the exercise of warrants issued to various
shareholders.  These warrants expire on various dates through July
2011.  Each warrant entitles the holder thereof to purchase one share
of Common Stock at an exercise price ranging from $.04 to $.24 per
share.
  As of
June 30, 2008, the Company reserved 6,385,086 shares of Common Stock for
issuance upon the exercise of warrants issued to various shareholders and
service providers.  These warrants expire at various dates through
February 2010.  Each warrant entitles the holder thereof to purchase
one share of Common Stock at an exercise price ranging from $.60 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.  The Company has reserved the right 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 since 2002 who is the largest individual
investor in the Company, having invested $3,681,200 to date. He 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.





The
Company has borrowed funds from one member of the board of directors which
equal, including accrued interest at 4% per annum, $1,584,883 and $1,400,914 as
of March 31, 2009 and June 30, 2008, respectively.


7.            TECHNOLOGY
AND MEDICAL SOFTWARE





The
Company has capitalized all acquisition costs associated with the acquisition of
NuScribe Inc. In addition, we have elected to capitalize all related development
costs associated with the completion of the iMedicorTM portal and the underlying
technology supporting the portal. The iMedicorÔ
portal 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 March 31, 2009.


3/31/2009
                      
                      
                      6/30/2008Technology
      and medical software
                      
                      $
                      9,903,892
                      
                      
                      $
                      9,263,894Less:
      Accumulated Amortization
                      
                      
                      2,693,884
                      
                      
                      
                      1,231,550$
                      7,210,008
                      
                      
                      $
                      8,032,344


8.      
     SHORT TERM NOTES PAYABLE





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




3/31/2009
                      
                      
                      6/30/2008Short-term
      note payable
                      
                      $
                      232,500
                      
                      
                      $
                      -0-Short-term
      portion of long-term note payable
                      
                      
                      258,040
                      
                      
                      
                      357,461Note
      payable banks
                      
                      
                      87,354
                      
                      
                      
                      299,980Convertible
      promissory notes – 15%
                      
                      
                      823,960Convertible
      debentures – 15%
                      
                      
                      330,411
                      
                      
                      
                      -0-Convertible
      debentures - 17.98%
                      
                      
                      150,000
                      
                      
                      
                      150,000Convertible
      debentures – 8%
                      
                      
                      270,000
                      
                      
                      
                      270,000Convertible
      debentures – 10% - 12%
                      
                      
                      439,497
                      
                      
                      
                      502,206Total
      Short-term notes payable
                      
                      $
                      2,591,763
                      
                      
                      $
                      1,579,647
  9.        
   CLEARLOBBY ASSET PURCHASE AGREEMENT





On
September 12, 2008, Vemics, Inc. entered into a Limited Asset Purchase Agreement
with ClearLobby, Inc., a Delaware corporation, pursuant to which Vemics
purchased trademarks, software, license agreements and other assets related to
ClearLobby's pharmaceutical communications platform technology.
  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 issued to the two owners of
ClearLobby, Inc.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.  As mutually between the twp parties, the payments
have been temporarily suspended except for one payment of $7,500 in March 2009,
however all monies owed are still due on or before December 30,
2009.


10.    
    CONVERTIBLE NOTES




The
Company issued a series of Convertible Promissory Notes (the "Convertible
Notes") with independent private accredited investors totaling an aggregate
gross investment of $1.65 million. The Company has received $650,000 of these
gross proceeds through March 31, 2009 and another $375,000 in April 2009. The
terms of the Convertible Notes changed subsequent to March 31, 2009 (see
subsequent event footnote below).


7
 Table of Contents





The
Convertible Notes provide for the repayment of principle to the investors on or
before the maturity dates, which range between June 1, 2009 and August 1, 2009,
which dates can be extended for an additional six-month period at the Company's
sole discretion. The Convertible Notes provide for fifteen (15%) percent per
annum interest payable on the maturity date to the Investors in either cash or
stock in the discretion of the Investor. Under certain circumstances, the
Company can prepay each Convertible Note prior to its 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 the rate of $0.05 per share into shares of the Company's
common stock. The Convertible Notes carry a redemption fee equal to 50% of each
Note, which fee is due to the Investors from the Company upon repayment. For
example, an Investor who paid in principle of $200,000 would receive $300,000 at
redemption, plus interest accrued to date. In connection with the borrowing, the
Company has issued warrants (the "Warrants") to the investors to purchase up to
an aggregate of 660,000 shares of the Company's common stock. The exercise price
of each Warrant will be $0.05 per share and the Warrants will have a 5-year
term, unless previously exercised.


11.           SUBSEQUENT
EVENTS





On April
24, 2009, Vemics, Inc., a Nevada corporation (the "Company"), issued a secured
convertible promissory note (the "Convertible Note") to Sonoran Pacific
Resources, LLP (the "Holder") representing an aggregate gross investment of $1.2
million made and to be made by the Holder in the Company. To date, the Company
has received $595,000 of the $1.2 million. The remaining $605,000 will be paid
by the Holder to the Company, upon receipt by the Holder of monthly draw
requests made by the Company on or before the 2nd of each month, as a supplement
to the Company's cash receipts subject to the reasonable approval of the
Holder.





The
Convertible Note provides for the repayment of the outstanding principle amount
and any and all accrued but unpaid interest thereon to the Holder on or before
December 31, 2009 (the "Maturity Date). The Convertible Note provides for
interest at the rate of fifteen (15%) percent per annum payable to the Holder on
the last day of each month and on the Maturity Date. Under certain
circumstances, upon 30-days' advance notice to the Holder, the Company can
prepay all or any portion of the Convertible Note at any time. Any prepayment of
the Convertible Note requires the payment of a redemption fee equal to 50% of
the amount prepaid, which fee is payable to the Holder by the Company upon
repayment. The Convertible Note also contains certain affirmative and negative
covenants relating to the Company's operations.





The
Holder at its option may elect to convert all or any portion of the Convertible
Note into shares of the Company's preferred stock ("Preferred Stock") at the
rate of $67,500 per share of Preferred Stock. Each share of Preferred Stock
issued shall be immediately automatically converted into shares of the Company's
common stock ("Common Stock") or at such time determined by the Holder, equal to
1% of the equity ownership in the Company. For this purpose, equity ownership
includes all issued Common Stock including all shares of Common Stock to be
issued to the Holder upon conversion of the portion of the Convertible Note to
be converted, and all outstanding warrants and options that have exercise prices
up to double the average trading day price for the previous 20 days prior to
conversion into Common Stock.





In
connection with the borrowing, the Company issued to the Holder (a) 4,000,000
shares of Common Stock as a closing fee and (b) warrants (the "Original 480,000
Warrants") to purchase up to an aggregate of 480,000 shares of Common Stock. The
exercise price of each Original 480,000 Warrant is $0.05 per share, subject to
adjustment. The Original 480,000 Warrants have a 5-year term. In addition, if
the Convertible Note is fully drawn and runs to the Maturity Date, the Company
will issue to the Holder warrants (the "4,000,000 Warrants") to purchase up to
an aggregate of 4,000,000 shares of Common Stock. The exercise price of each
4,000,000 Warrants is $0.05 per share, subject to adjustment. The 4,000,000
Warrants have a 5-year term.





If the
Company is able to repay the outstanding balance of the Convertible Note plus
accrued interest and the 50% redemption fee on or prior to May 31, 2009, then
(a) the Company shall issue to the Holder warrants (the "2,500,00 Warrants") to
purchase up to an aggregate of 2,500,000 shares of Common Stock, which 2,500,000
Warrants shall supersede the 4,000,000 Warrants and (b) the Company shall be
granted a credit in the amount of $75,000 against the outstanding balance of the
Convertible Note. The exercise price of each 2,500,000 Warrant shall be $0.05
per share, subject to adjustment. The 2,500,000 Warrants shall have a 5 year
term.





The
Company issued and sold the Convertible Note and the Original 480,000 Warrants
and 4,000,000 Warrants, and, if the Company is able to repay the outstanding
balance of the Convertible Note, plus accrued interest and the 50% redemption
fee on or prior to May 31, 2009, will issue and sell the 2,500,000 Warrants, in
a private placement transaction made in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), and Regulation D thereunder.





On April
24, 2009, pursuant to the Vemics, Inc. 2007 Equity Compensation Plan as Amended,
the Company issued 12,450,000 shares of Common Stock to employees, previous
employees and directors of the Company for services rendered. Of the shares
issued, 8,550,000 shares were issued to executive officers and directors of the
Company.





On April
24 the Company issued 5.6 million shares of Common Stock to F. Chandler
Coddington, a director of the Company, in consideration for (a) lines of credit
guaranteed by Mr. Coddington in the aggregate amount of $683,000 which have been
fully drawn upon by the Company and (b) direct short term loans made by Mr.
Coddington to the Company in the aggregate amount of $462,000.





On April
24, 2009 the Company issued 300,000 shares of Common Stock to Dr. Larry Shemen,
a director of the Company, for consulting services performed on the Company's
behalf by Dr. Shemen other than in his role as a director of the
Company.




8
 Table of Contents




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





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





We believe that it is important to
communicate our future expectations to investors.  However, these
forward-looking statements involve many risks and uncertainties, including the
risk factors disclosed under the heading “Risk Factors” included in the
Company's Form 10-K filed with the Securities and Exchange Commission (“SEC”) on
October 14, 2008.  Our actual results could differ
materially from those indicated in such forward-looking statements as a result
of certain factors.  We are under no duty to update any of the
forward-looking statements after the date of this Report on Form 10-Q to conform
these statements to actual results.





Overview





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 direct sales
forces.





Currently,
iMedicorTM is a free service for all end-users as we build a customer base;
however, we have begun to generate revenues through advertising within
iMedicorTM.  We expect to significantly increase revenues generated
from various components of iMedicorTM, including direct
pharmaceutical company to physician marketing and product dissemination and
inter-Electronic Medical Records (“EMR”) communications, during the next two
fiscal quarters.





Our sales
in other areas decreased for the quarter ended March 31, 2009 from 2008, as most
of our internal efforts have continued to be 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. iMedicor’s redesigned site with added functionality and integration
into ClearLobbyTM and NaviNetTM was launched in late in February 2009 and our
focus is now expanding our user base, generating revenues through relationships
with pharmaceutical companies and medical/healthcare services advertisers and
continued integration into our partner sites .





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.  We will generate our
primary source of revenue through charging pharmaceutical companies an initial
set up fee of approximately $95,000 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 to $75 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 to $199 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 however, we have retained our first client, MedPro, a
Berkshire Hathaway company selling medical malpractice insurance, in February of
2009.





As of
March 31, 2009, 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, 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.


9
 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 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 March 31, 2008, we were successful in
raising $415,000 through short-term debt instruments, and another $1,200,000 was
committed by February 20, 2009 on the same terms.  The investor
committing the $1,200,000 has asked for, and we have granted an extension until
May 31, 2009 for this investment.  To off-set the delay in receipt of
these funds, we have secured a line of credit in the amount of 1,200,000 with
another investor, as reported in an our form 8-K filed May 5,
2009.  All funds raised will be used to maintain current operations
and continue development work on iMedicor as we begin to establish paying
clients and generate additional revenues.


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.




Healthcare
Services





For the
past twelve 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 is focused on the delivery of CME
(Continuing Medical Education) courses to the medical community in the U.S.,
which continues to grow. We are currently in the process of 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.


10
 Table of Contents


Results of
Operations





Three
months ended March 31, 2009 Compared to Three Months Ended March 31,
2008





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





Three
      Months Ended March 31(unaudited)2009
                                  
                                  
                                  2009
                                  
                                  
                                  2008
                                  
                                  
                                  2008Net
      Sales and Revenues
                                  
                                  $
                                  131,707
                                  
                                  
                                  
                                  100
                                  %
                                  
                                  $
                                  160,740
                                  
                                  
                                  
                                  100
                                  %Cost
      of Services
                                  
                                  
                                  68,877
                                  
                                  
                                  
                                  52
                                  %
                                  
                                  
                                  82,197
                                  
                                  
                                  
                                  51
                                  %Gross
      Profit
                                  
                                  
                                  62,830
                                  
                                  
                                  
                                  48
                                  %
                                  
                                  
                                  78,543
                                  
                                  
                                  
                                  49
                                  %Operational
      General and Administrative Expenses
                                  
                                  
                                  653,745
                                  
                                  
                                  
                                  496
                                  %
                                  
                                  
                                  780,498
                                  
                                  
                                  
                                  485
                                  %Depreciation
      and amortization
                                  
                                  
                                  518,821
                                  
                                  
                                  
                                  394
                                  %
                                  
                                  
                                  471,743
                                  
                                  
                                  
                                  293
                                  %Bad
      debt expenses
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0
                                  %
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  3
                                  %Total
      Expenses
                                  
                                  
                                  1,172,556
                                  
                                  
                                  
                                  890
                                  %
                                  
                                  
                                  1,257,241
                                  
                                  
                                  
                                  782
                                  %Loss
      before other income (expense)
                                  
                                  $
                                  (1,109,736
                                  )
                                  
                                  
                                  843
                                  %
                                  
                                  $
                                  (1,178,698
                                  )
                                  
                                  
                                  733
                                  %





Revenues





The
Company's revenues for the three months ended March 31, 2009 decreased by 18% to
$131,707 from $160,740 in 2008, due wholly to the complete suspension of sales
of the NuScribe Voice Recognition Appliance and Application.  This
suspension of 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.
  Current
data shows that at any given time during the day there are between 1,000 and
3,500 concurrent users logged into the iMedicorTM site.  iMedicorTM is a
free service for all users as we build the customer base; however, we expect to
begin generating revenues from various components within iMedicorTM,
including, but not limited to, the redesigned NuScribe Voice Recognition
Application, sometime in the first or second quarter or our next fiscal year,
beginning July 1, 2009.
  Our sales
in other areas remained flat for the period ending March 31, 2009 compared to
the same period for 2008, as most of our internal efforts have been devoted to
establishing new relationships with companies like Microsoft, Dell, NaviNet,
MedPro and pharmaceutical companies, which we believe will be driving forces in
significantly increasing the iMedicorTM
user base and ultimately drive significantly increased revenues to the
Company.


Cost
of Services





Cost of
services as a percentage of revenues was 52% for the quarter ended March 31,
2009 as compared to 51% for the quarter ended March 31, 2008 representing no
significant difference.





Operational,
General and Administrative Expenses





Operational,
general and administrative expenses decreased to $653,745 in the quarter ended
March 31, 2009 from $780,498 in 2008, or 16%.  The Company continued
to consolidate it’s workforce to focus most of out efforts on the iMedicorTM build-out and to conserve
available cash and has also phased out all marketing a sales operations overseas
in Russia and other countries as the focus has turned specifically to the US
Healthcare Services market.





Depreciation
and Amortization





Depreciation
and Amortization expenses increased for the quarter ending March 31, 2009 to
$518,821 from $471,743.  This is attributed to the capitalization of
development costs associated with the redesign and redevelopment of the
iMedicorTM website to a technology asset and the subsequent
amortization.  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.





Loss
from Operations





Income
(loss) from operations for the quarter ended March 31, 2009 totaled ($1,109,736)
or approximately 843% of net revenue compared to ($1,178,698) or approximately
733% of net revenue for the quarter ended March 31, 2008.  The
decrease in income from operations for the quarter ended March 31, 2009 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 March 31, 2009 and March 31,
2008 is wholly attributable to the increased amortization of the iMedicorTM
technology asset and, without the increase in depreciation and amortization, the
operating loss for the three months ending March 31, 2009 would have been a
similar percentage of revenue to the operating loss from the same three months
in 2008.


11
 Table of Contents


Nine
Months Ended March 31, 2009 Compared to Nine Months Ended March 31,
2008





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




Nine
      Months Ended March 31(unaudited)2009
                                  
                                  
                                  2009
                                  
                                  
                                  2008
                                  
                                  
                                  2008Revenues
                                  
                                  $
                                  293,217
                                  
                                  
                                  
                                  100
                                  %
                                  
                                  $
                                  468,307
                                  
                                  
                                  
                                  100
                                  %Cost
      of Services
                                  
                                  
                                  92,417
                                  
                                  
                                  
                                  32
                                  %
                                  
                                  
                                  140,813
                                  
                                  
                                  
                                  31
                                  %Gross
      Profit
                                  
                                  
                                  200,800
                                  
                                  
                                  
                                  68
                                  %
                                  
                                  
                                  327,494
                                  
                                  
                                  
                                  69
                                  %Operational
      General and Administrative Expenses
                                  
                                  
                                  1,840,468
                                  
                                  
                                  
                                  628
                                  %
                                  
                                  
                                  3,353,114
                                  
                                  
                                  
                                  717
                                  %Depreciation
      and amortization
                                  
                                  
                                  1,510,496
                                  
                                  
                                  
                                  515
                                  %
                                  
                                  
                                  811,319
                                  
                                  
                                  
                                  173
                                  %Bad
      debt expenses
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0
                                  %
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  1
                                  %Total
      Expenses
                                  
                                  
                                  3,350,964
                                  
                                  
                                  
                                  1,142
                                  %
                                  
                                  
                                  4,169,433
                                  
                                  
                                  
                                  890
                                  %Loss
      before other income (expense)
                                  
                                  
                                  (3,150,164
                                  )
                                  
                                  
                                  1,074
                                  %
                                  
                                  
                                  (3,841,939
                                  )
                                  
                                  
                                  820
                                  %





Revenues





The
Company’s revenues for the nine months ended March 31, 2009 decreased by 37% to
$293,217 from $468,307 in 2008.  This decrease is attributed to the
management’s decision to move away from both the general subscription-based
communications and education market and the slow-down and ultimately suspension
of sales of the Nuscribe appliance pending it’s integration into the iMedicorTM
site, and the focus of our efforts primarily in the healthcare market, providing
communications and education.  By changing the focus of the Company,
traditional sales opportunities were less available until such a time as
iMedicorTM was ready for launch.
  The
development of the iMedicorTM portal has become the Company’s primary
focus.  As a result, revenues decreased as more of the Company’s
resources were allocated to iMedicor as well as the establishment of
relationships with medical societies, educational institutions, pharmaceutical
companies and technology companies, which we believe will be the cornerstone of
the projected success of iMedicorTM.




Cost
of
Services





Cost of
services for the nine months ended March 31, 2009, was 32% as compared to 31%
for the previous nine month period, representing no material
difference.





Operational,
General and Administrative Expenses





Operational,
general and administrative expenses decreased to $1,840,468 for the nine months
ended March 31, 2009 as compared to $3,353,114 for the prior six months, or
45%.  This decrease is due primarily to the consolidation of our
workforce, the slow-down of NuScribe sales efforts and related costs associated
with new Nuscribe customers and the phase-out of overseas marketing and sales
efforts.





Depreciation
and Amortization





Depreciation
and Amortization expenses increased for the nine months ended March 31, 2008 to
$1,510,496from $811,319,
which is entirely attributed to the assignment of the purchase price of NuScribe
and iMedicorTM to a
technology asset, the capitalization of development costs associated with the
continued development of iMedicorTM and the subsequent amortization of that
asset.




Loss
from Operations





Income
(loss) from operations for the nine-month period ended March 31, 2009 totaled
($3,150,164) or approximately 1,074% of net revenue compared to ($3,841,939) or
approximately 820% of net revenue for the nine-month period ended March 31,
2008.  The decrease in income from operations 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 March 31, 2009 and March 31, 2008 is wholly
attributable to the amortization of the iMedicorTM technology asset and in fact,
without the increase in depreciation and Amortization, the operating loss for
the nine months ending March 31, 2009 would have been a smaller percentage of
revenue than the operating loss from the same nine months in 2008.




12
 Table of Contents




Liquidity and Capital
Resources





Cash and
cash equivalents were $12,670 at March 31, 2009 compared to $212,566 at June 30,
2008.  $200,000 of this difference is due to the company’s election to
use an interest-bearing certificate of deposit it held with a bank, which was
offsetting a note payable accruing greater interest to pay down a significant
portion of that note.





Net cash
used by operating activities was $241,573 for the three months ended March 31,
2009 as compared to $305,934 for the three months ended March 31,
2008.  The decrease is primarily due the companies continued
consolidation of operations to preserve cash.





Net cash
used by investing activities was $165,000 for the three months ended March 31,
2009 as compared to cash used by investing activities of $65,482 for the three
months ended March 31, 2008, and was primarily due to capitalization of
technology development costs.





Net cash
provided by financing activities was $396,267 for the three months ended March
31, 2009 as compared to net cash used by financing activities of $438,022 for
the three months ended March 31, 2008, representing no material
difference.





In the
quarter ending March 31, 2009 the Company entered into a series of Convertible
Promissory Notes with independent private accredited investors totaling an
aggregate investment of $1,615,000.  The Company had received $415,000
of these gross proceeds as of March 31, 2009.  The remaining
$1,200,000 was due on or before February 20, 2009, however the investor
committing these funds has asked for, and the Company has granted, an extension
until May 31, 2009 to remit these funds.  The Company has not received
these amounts as of the date of this filing of Form 10-Q.  As of the
date of this filing, we have been informed by the investor who has committed the
$1,200,000 to expect to receive the funds no later than May 31, 2009. To
off-set the delay in receipt of these funds, we have secured a line of credit of
1,200,00 with another investor, as reported in an 8-K filed May 5,
2009.





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
second or third quarter of our next 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.  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.


ITEM 3.     QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





N/A.





ITEM 4T.  CONTROLSAND PROCEDURES





(a)
Evaluation of Disclosure Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our the Exchange Act, reports are
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.





Our
management (with the participation of our Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer) evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, as of March 31, 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 effective to ensure
that information required to be disclosed by us in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms.





(b)  Changes
in Internal Controls over Financial Reporting





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




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PART
II – OTHER INFORMATION





Item 2.  UnregisteredSales of Equity Securities and
Use of Proceeds





In the
quarter ending March 31, 2009 the Company issued a series of Convertible
Promissory Notes (the “Convertible  Notes”) with independent
private accredited investors (the “Investors”) representing investments totaling
an aggregate gross investment of $1,615,000.  As of March 31, 2009,
$415,000 of these notes had been executed and funds had been
received.  The Convertible Notes provide for the repayment of
principle to the Investors on or before the maturity dates, which range between
June 1, 2009 and August 1, 2009, which date can be extended for an additional
six-month period at the Company’s sole discretion.  The Convertible
Notes provide for fifteen (15%) percent annual interest payable on the maturity
date to the Investors in either cash or stock in the discretion of the
Investor.  Interest on the Convertible Notes is due on the maturity
date of each Note.  Under certain circumstances, the Company can
prepay 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.
  Each
holder of a Convertible Note has the option to convert the Convertible Notes at
$0.05 per share into the Common Stock.  The Convertible Notes carry a
liquidation redemption fee equal to 50% of each Note, which fee is due to the
Investors from the Company upon repayment.  For example, an Investor
who holds a convertible note in principle amount of $200,000 would receive
$300,000 at redemption, plus interest accrued to date.
  In
connection with the borrowing, the Company is obligated to issue warrants to the
Investors to purchase up to an aggregate of 640,000 shares of the Common
Stock.  The exercise price of each warrant will be $0.05 per share and
the Warrants will have a 5-year term, unless previously exercised.
  The Company 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.


Item 6.  Exhibits




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




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




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










SIGNATURES





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




Vemics,
Inc.
                  (Registrant)Date:
      May 15, 2009
                By:
                /s/ Fred
      ZollaFred
      ZollaPresident
      and Chief Executive Officer
                  (Principal Executive Officer)Date:
      May 15, 2009
                
                /s/
      Craig
      StoutCraig
      StoutInterim
      Chief Financial Officer(Principal Accounting
      Officer)


















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