Form 10-SB

Item 1. Index to Financial Statements

Vemics, Inc.

Report of Independent Auditor F-2

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Vemics, Inc

We have audited the accompanying balance sheets of Vemics, Inc (a development stage company) as of June 30, 2005 and 2004 and the related statements of operations and deficit accumulated during the development stage, stockholders’ deficit, and cash flows for each of the two years in the period ended June 30, 2005. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those statements require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vemics, Inc (a development stage company) as of June 30, 2005 and 2004, and the results of its operations and its cash flows for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States of America.

The accumulated results for the period of Inception to June 30, 2003 which appear on the statements of operations and deficit accumulated during development stage are unaudited.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As more fully described in Note 2 to the financial statements, the Company has incurred operating losses since its inception which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

DEMETRIUS & COMPANY, L.L.C.

Wayne, New Jersey

September 22, 2005

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Vemics, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of Vemics, Inc. and Subsidiary as of June 30, 2006 and the related consolidated statements of operations, consolidated shareholders’ deficiency and consolidated statement of cash flows for the year then ended. We have also audited the consolidated statements of operations (Development Stage) and cash flows (Development Stage) for the year end June 30, 2005. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vemics, Inc. as of June 30, 2006 and the results of its operations and its cash flows for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As more fully described in Note 2 to the consolidated financial statements, the Company has incurred operating losses since its inception which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

DEMETRIUS & COMPANY, L.L.C.

Wayne, New Jersey

November 17, 2006

VEMICS, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007, JUNE 30, 2006 AND 2005

VEMICS, INC. AND SUBSIDIARY

MARCH 31, 2007, JUNE 30, 2006 AND 2005

TABLE OF CONTENTS

Consolidated Balance Sheets:

As of June 30, 2006 and 2005, and

March 31, 2007

Consolidated Statements of Operations:

Nine months ended March 31, 2007 and 2006

Years ended June 30, 2006 and 2005

Consolidated Statements of Changes in

Stockholders’ Deficiency:

Nine months ended March 31, 2007 and 2006

Years ended June 30, 2006 and 2005

Consolidated Statements of Cash Flows:

Nine months ended March 31, 2007 and 2006

Years ended June 30, 2006 and 2005

Notes to Financial Statements

Consolidated Balance Sheets as of June 30, 2006 and March 31, 2007 F-3


		3/31/2007			6/30/2006			6/30/2005
ASSETS		unaudited
Current assets:
Cash and cash equivalents - interest bearing	$	204,565		$	443,249		$	274,482
Accounts receivable, net of allowance for doubtful accounts
of $111,660, $100,485 and $21,860 as of March 31, 2007,
June 30, 2006 and 2005, respectively		290,426			293,647			44,978
Inventory		64,085			64,085			-
Prepaid expenses		-			90,000			-
Total Current Assets		559,076			890,981			319,460

Property and equipment, net		127,089			163,835			223,264

Other assets:
Goodwill		9,572,222			-
Organizational costs, net		-			1,150			3,450
Total Other Assets		9,572,222			1,150			3,450

	$	10,258,387		$	1,055,966		$	546,174


LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Notes payable - banks	$	299,980		$	299,980		$	299,980
Current maturity of capital lease obligations		18,469			47,628			38,963
Short-term notes payable		585,605			511,941			30,606
Accounts payable and accrued expenses		1,173,003			626,117			707,263
Convertible debentures		150,000			150,000			150,000
Deferred income		11,126			-			-
Total Current Liabilities		2,238,183			1,635,666			1,226,812

Other liabilities:
Other long-term liabilities, includes accrued interest of
$139,391, $104,891 and $58,891 as of March 31, 2007,
June 30, 2006 and 2005, respectively		997,309			979,079			633,891
Capital lease obligations		-			6,562			46,465
Total Other Liabilities		997,309			985,641			680,356

Total Liabilities		3,235,492			2,621,307			1,907,168

Stockholders' Deficiency:
Common stock, par value $.001 per share, authorized 75,000,000
Issued and outstanding: 40,581,929 shares at March 31, 2007,
and 23,345,483 and 16,694,517 shares at
June 30, 2006 and 2005, respectively		40,582			23,345			16,695
Additional Paid in Capital		19,158,430			7,971,445			6,095,095
Less: Treasury stock		(508,195	)		(508,195	)		(208,195	)
Deficit accumulated during development stage		(7,264,589	)		(7,264,589	)		(7,264,589	)
Accumulated deficit		(4,403,333	)		(1,787,347	)		-

Total Stockholders' Deficiency		7,022,895			(1,565,341	)		(1,360,994	)

	$	10,258,387		$	1,055,966		$	546,174

Consolidated Statements of Operations for the Years Ended June 30, 2006 and 2005, and for the period from inception (July 21, 2001) to June 30, 2005, and the

Nine Months Ended March 31, 2007 and 2006 F-4


		For the nine			For the nine			For the year			For the year			Period from Inception
		months ended			months ended			ended			ended			July 21, 2001 to
		3/31/2007			3/31/2006			6/30/2006			6/30/2005			June 30, 2005
		unaudited			unaudited									unaudited
Revenues
Revenues	$	816,133		$	403,633		$	693,574		$	109,149		$	221,320
Interest Income		2,585			349			476			-			1,439
Total Revenues		818,718			403,982			694,050			109,149			222,759

Expenses:
Stock issued for fees and services		5,000			383,000			383,000			3,557,000			3,940,634
Consulting, commissions and travel		759,671			267,367			484,168			846,082			1,811,608
Operational fees and expenses		924,106			449,894			548,957			294,925			634,583
Professional fees		407,923			102,953			218,840			340,823			439,675
Payroll and related taxes		1,051,571			334,625			486,363			-			-
Depreciation and amortization		56,812			71,232			95,253			82,754			187,798
Research & development		48,714			-			-			-
Bad debt expenses		11,175			41,016			78,626			20,660			21,860
Production, advertising, brochures and public relations		54,008			62,873			54,298			70,922			155,229

Total Expenses		3,318,980			1,712,960			2,349,505			5,213,166			7,191,387

Loss before other expenses		(2,500,262	)		(1,308,978	)		(1,655,455	)		(5,104,017	)		(6,968,628	)

Other expenses:
Interest expense		115,724			78,817			131,892			57,349			281,160
Deemed dividend		-			-			-			-			14,801
Total Other Expenses		115,724			78,817			131,892			57,349			295,961

Net loss	$	(2,615,986	)	$	(1,387,795	)	$	(1,787,347	)	$	(5,161,366	)	$	(7,264,589	)

Net loss per share, basic and diluted	$	(0.08	)	$	(0.07	)	$	(0.09	)	$	(0.53	)

Weighted average number of shares, basic and diluted		31,963,706			19,575,000			20,020,000			9,821,997

Consolidated Statements of Changes in Stockholders’ Deficiency for the Years Ended

June 30, 2006 and 2005 and the Nine Months Ended March 31, 2007 F-5

						DEFICIT
						ACCUMULATED		TOTAL
				ADDITIONAL		DURING		STOCKHOLDERS'
			TREASURY	PAID IN	TREASURY	DEVELOPMENT	ACCUMULATED	EQUITY/
DESCRIPTION	SHARES	AMOUNT	SHARES	CAPITAL	STOCK	STAGE	DEFICIT	DEFICIENCY
Balance as of June 30, 2004	2,949,477	$ 2,949	(368,407)	$ 1,083,152	$ (208,195)	$ (2,103,223)		$ (1,225,317)

Issuance of stock for fees/services	1,109,660	1,110		8,890				10,000

Issuance of common stock	377,284	377		84,623				85,000

Issuance of stock for bank loan guarantees	443,864	444		99,556				100,000

Issuance of stock in exchange for accrued
consulting fees	199,739	200		119,800				120,000

Issuance of stock in exchange for convertible
debentures and accrued interest	2,073,955	2,074		474,416				476,490

Issuance of stock for fees/services	7,182,836	7,183		3,179,817				3,187,000

Issuance of common stock	324,360	324		130,675				130,999

Issuance of common stock	346,658	347		155,853				156,200

Issuance of stock for bank loan guarantees	343,995	344		154,656				155,000

Issuance of stock for fees/services	55,483	55		24,945				25,000

Issuance of common stock - PPM raise	1,109,660	1,110		498,890				500,000

Issuance of stock for fees/services - PPM	177,546	178		79,822				80,000

Net loss						(5,161,366)		(5,161,366)
Balance as of June 30, 2005	16,694,517	16,695	(368,407)	6,095,095	(208,195)	(7,264,589)		(1,360,994)

Issuance of stock for fees/services	850,000	850		382,150				383,000

Issuance of common stock	510,966	511		449,489				450,000

Stock for stock exchange	4,400,000	4,400		(4,400)				-

Net loss							(1,387,795)	(1,387,795)

Balance as of March 31, 2006 (unaudited)	22,455,483	22,455	(368,407)	6,922,335	(208,195)	(7,264,589)	(1,387,795)	(1,915,789)

Issuance of common stock	890,000	890		1,049,110				1,050,000

Exchange of common stock for notes payable					(300,000)			(300,000)

Net loss							(399,552)	(399,552)
Balance as of June 30, 2006	23,345,483	23,345	(368,407)	7,971,445	(508,195)	(7,264,589)	(1,787,347)	(1,565,341)





						DEFICIT
						ACCUMULATED		TOTAL
				ADDITIONAL		DURING		STOCKHOLDERS'
			TREASURY	PAID IN	TREASURY	DEVELOPMENT	ACCUMULATED	EQUITY/
DESCRIPTION	SHARES	AMOUNT	SHARES	CAPITAL	STOCK	STAGE	DEFICIT	DEFICIENCY

Issuance of common stock	6,120,334	6,120		1,870,879				1,876,999

Issuance of common stock for fees/services	5,000	5		4,995				5,000

Acquistion of NuScribe Inc for stock	10,000,000	10,000		8,990,000				9,000,000

Acquisition of e-Learning Desktop for stock	1,111,112	1,111		321,111				322,222

Net loss							(2,615,986)	(2,615,986)
Balance as of March 31, 2007 (unaudited)	40,581,929	$ 40,582	(368,407)	19,158,430	$ (508,195)	$ (7,264,589)	$ (4,403,333)	$ 7,022,895

Consolidated Statements of Cash Flows for the Years Ended June 30, 2006 and 2005 and for the period from inception (July 21, 2001) to June 30, 2005, and the

Nine Months Ended March 31, 2007 and 2006 F-6



		For the nine			For the nine			For the year			For the year			Period from Inception
		months ended			months ended			ended			ended			July 21, 2001 to
		3/31/2007			3/31/2006			6/30/2006			6/30/2005			June 30, 2005
		unaudited			unaudited									unaudited
Cash Flows From Operating Activities
Receipts from customers	$	819,354		$	389,238		$	366,279		$	19,962		$	130,933
Payments to suppliers, salaries		(2,859,156	)		(1,459,259	)		(2,025,483	)		(999,646	)		(2,412,471	)
Interest received		2,585			349			476			-			1,439
Interest paid		(36,830	)		(30,763	)		(50,368	)		(30,851	)		(64,921	)
Taxes paid		-			-			(2,375	)		(300	)		(1,125	)
Net Cash Used in Operating Activities		(2,074,047	)		(1,100,435	)		(1,711,471	)		(1,010,835	)		(2,346,145	)

Cash Flows Used in Investing Activities
Organization costs		-			-			-			-			(11,500	)
Purchase of fixed assets		(18,916	)		(25,000	)		(33,524	)		-			(244,103	)
Net Cash Used in Investing Activities		(18,916	)		(25,000	)		(33,524	)		-			(255,603	)

Cash Flows From Financing Activities
Loans from banks		-			-			-			230,050			299,980
Payments on capital lease obligations		(35,721	)		(19,323	)		(31,238	)		(33,306	)		(33,680	)
Proceeds from issuance of convertible debentures		-			-			-			-			1,655,500
Short term loans		13,000			445,000			445,000			31,395			30,000
Sale of common stock		1,877,000			550,000			1,500,000			872,200			924,430
Net Cash Provided by Financing Activities		1,854,279			975,677			1,913,762			1,100,339			2,876,230

Net Increase in Cash		(238,684	)		(149,758	)		168,767			89,504			274,482

Cash at the Beginning of Year		443,249		$	274,482			274,482			184,978			-

Cash at End of Year	$	204,565		$	124,724		$	443,249		$	274,482		$	274,482










		For the nine			For the nine			For the year			For the year			Period from Inception
		months ended			months ended			ended			ended			July 21, 2001 to
		3/31/2007			3/31/2006			6/30/2006			6/30/2005			June 30, 2005
		unaudited			unaudited									unaudited
Reconciliation of Net Loss to Net Cash
Used by Operating Activities
Net loss	$	(2,615,986	)	$	(1,387,795	)	$	(1,787,347	)	$	(5,161,366	)	$	(7,264,589	)
Adjustments to reconcile net income/(loss) to net cash
used by operating activities:
Depreciation & amortization		56,812			71,232			95,253			82,754			187,798
Stock issued for fees and related expenses		5,000			383,000			383,000			3,557,000			3,940,634
Stock issued for accrued consulting fees		-			-			-			120,000			120,000
Deemed dividend issued in conversion for stock		-			-			-			-			14,801
Accrued interest exchanged for stock		-			-			-			21,385			150,516
Treasury stock exchanged for officers's advances		-			-			-			-			(208,195	)
Changes in:
Trade receivables		3,221			(14,395	)		(248,669	)		(44,979	)		(44,979	)
Inventory		-			-			(64,085	)		-			-
Prepaid expenses		90,000			(90,000	)		(90,000	)		-			-
Accounts payable and accrued expenses		296,886			(103,281	)		(81,146	)		409,258			707,263
Accrued interest payable		44,394			24,635			35,523			606			606
Convertible debentures - accrued interest		34,500			23,419			46,000			4,507			50,000
Deferred income		11,126			-			-			-			-
Net Cash Used by Operating Activities	$	(2,074,047	)	$	(1,093,185	)	$	(1,711,471	)	$	(1,010,835	)	$	(2,346,145	)

Supplemental disclosures:
Schedule of Noncash Investing and financing Transactions:
Exchanged stock for assets and liabilities of
e-Learning Desktop	$	572,222		$	-		$	-		$	-		$	-
Exchanged stock for stock for NuScribe, Inc.	$	9,000,000		$	-		$	-		$	-		$	-
Exchanged stock to note payable	$	-		$	-		$	300,000		$	-		$	-
Capital equipment contributed in exchange
for common stock	$	-		$	-		$	-		$	-		$	39,800
Accrued consulting fees exchanged
for common stock	$	5,000		$	383,000		$	383,000		$	120,000		$	503,000
Convertible debentures and accrued interest
exchanged for common stock	$	-		$	-		$	-		$	471,314		$	1,096,867

Notes to Consolidated Financial Statements F-7

1. NATURE OF OPERATIONS

Vemics, Inc. (the “company”) was organized on July 17, 2001 as a Delaware corporation. The Company is engaged as a visual communications hosted service providing the ability to end users to replicate the same dynamic of a live business meeting or classroom. Vemics has developed a proprietary user interface that sits on top of a technology platform that is built on a series of licensing agreements that, in total enables real time, interactive instructor-led courses or business meetings to be delivered via easily accessible, broadband connections to our servers using standard off the shelf modern computers.

Vemics delivers live, instructor-led courses, from “best of Class” content providers, directly to its clients in a replication of a fully functional live classroom environment. The Vemics system allows teachers to see and hear students live, students can see and hear teachers live, and students can see and hear each other live, all of which is controlled at the teacher station. In addition, Vemics provides this hosted service as both a classroom and business meeting application.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company was formerly a development stage company because it had not achieved planned principal operations and accordingly the Company’s activities had been accounted for as those of a "Development Stage Enterprise" as set forth in Financial Accounting Standards Board Statement No. 7 ("SAFAS 7"). As of July 1, 2005 the Company achieved its planned operations and began to earn substantial revenue and accordingly we no longer report on the basis of SAFAS 7. Our deficit accumulated from inception until June 30, 2005 is shown as a separate component in our equity section.

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 OMI was than changed to Vemics, Inc., a Nevada corporation (see Note 3 for details). The acquisition was accounted for as a reverse acquisition, no goodwill or other intangible assets have been recorded. Vemics, Inc. the Delaware Corporation has been treated as the “Acquirer” of OMII for financial reporting purposes as it shareholders control more then 50% of the post transaction of the combined company. Therefore, the accompanying presentation presents the historic financials of Vemics, Delaware, and the accounting acquirer.

Unaudited Interim Results

The accompanying unaudited interim consolidated balance sheet as of March 31, 2007, the statements of operations and cash flows for the nine months ended March 31, 2007 and the statement of stockholders’ deficiency for the nine months ended March 31, 2007 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2007 and results of operations and cash flows for the nine months ended March 31, 2007 and 2006. The results of operations for the nine months ended March 31, 2007 are not necessarily indicative of the results to be expected for the year ending June 30 2007 or for any other interim period or for any other future year.

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 $9,052,000 at June 30, 2006. The Company’s activities have been primarily financed through convertible debentures, private placements of equity securities and capital lease financing. The Company may need to raise additional capital through the issuance of debt or equity securities to fund its operations. The financing may not be available on terms satisfactory to the Company, if at all.

Basis of Accounting

The accompanying consolidated financial statements include the accounts of Vemics, Delaware and OMII Corp. (now Vemics, Inc). The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Significant accounting principles followed by the Company and the methods of applying those principles, which materially affect the determination of financial position and cash flows are summarized below.

Cash Equivalents

Money market funds and investment instruments with original maturities of ninety days or less are considered

cash equivalents.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash,

cash equivalents and accounts receivable.

As of March 31, 2007 and June 30, 2006 and 2005, the Company had cash balances at a certain financial institution in excess of federally insured limits. However, the Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company mitigates this risk by depositing its cash in high quality financial institutions

To reduce credit risk, the Company performs ongoing credit evaluations of its customers’ financial condition but does not generally require collateral. Approximately 88%, 99% and 85% of the accounts receivable balances represent amounts due from two customers at March 31, 2007, June 30, 2006 and 2005, respectively. At March 31, 2007, June 30, 2006 and 2005, accounts receivables of approximately $338,000, $702,000 and $56,038, respectively were from such customers.

Approximately 48%, 84% and 89%of sales represents amounts sold to 5, 4 and 5 customers for the nine months period ending March 31, 2007 and for the years ended June 30, 2006 and 2005, respectively.

The Company has historically provided financial terms to customers in accordance with what management views as industry norms. Financial terms, for credit -approved customers, are generally on a net 30-61 day basis, though most customers are entitled to a prompt payment discount. Management periodically and regularly reviews customer account activity in order to assess the adequacy of allowances for doubtful accounts, considering such as economic conditions and each customer’s payment history and creditworthiness. If the financial condition of our customers were to deteriorate, or if they were otherwise unable to make payments in accordance with management’s expectations, we might have to increase our allowance for doubtful accounts, modify their financial terms and/or pursue alternative collection methods.

Property, Equipment and Depreciation

Depreciation and amortization are provided for by straight-line method over the useful lives of the assets, which varies from five to seven years. Cost of repairs and maintenance are charged to operations in the period incurred.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with Statement of financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment for Disposal of Long-Lived Assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows

Impairment of Long-Lived Assets - continued

expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount of the asset exceeds the fair value of the asset.

Fair Value of Financial Instruments

Management believes that the carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amount of the Company’s long-term debt also approximates fair value, based on market quote values (where applicable) or discounted cash flow analyses.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. Valuation allowances are established when it is necessary to reduce deferred income tax assets to the amount, if any, expected to be realized in future years.

Net earning (loss) per share

Basic and diluted net loss per share information is presented under the requirements of SFAS No. 128, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, warrants and convertible notes in the weighted-average number of common shares outstanding for a period, if dilutive. All potentially dilutive securities have been excluded from the computation, as their effect is anti-dilutive.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue recognition

The Company anticipates having four sources of income. The primary revenue will be generated through the delivery of sponsored educational programs in the Medical, Financial and Legal markets. The second source of revenue is the licensing of “seats” on our hosted service.

The Company will also provide consulting help desk and instructional design services to customers and will bill as consultation and other services are rendered.

The installations of hardware and software systems will be earned after installation has been completed.

Advertising costs

Advertising costs are reported in selling, general and administrative expenses and include advertising, marketing and promotional programs. As of March 31, 2007 and June 30, 2006, all of these costs were charged to expenses in the period or year in which incurred. Advertising costs for the nine months ended March 31, 2007 and for year ended June 30, 2006 were $54,922 and $43,422, respectively.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123®, Share-Based Payment. SFAS 123® establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services. Under SFAS 123®, companies will no longer be able to account for share-based compensation transactions using the intrinsic method in accordance with APB No. 25, Accounting for Stock Issued to Employees. Instead, companies will be required to account for such transactions using a fair-value method and to recognize compensation expense over the period during which an employee is required to provide services in exchange for the ward. In April 2005, the SEC delayed the effective date of SFAS 123® to fiscal years beginning after June 15, 2005. Management is currently assessing the impact that adoption of this Statement will have on the Company’s Consolidated Financial Statements.

3. SHAREHOLDERS’ EQUITY (DEFICIENCY)

Common stock

The Company as of March 31, 2007, June 30, 2006 and 2005 has a total of 37,457,183, 23,345,483 and 16,694,517 units outstanding, respectively. There are an additional 368,407 units in Treasury Stock as of March 31, 2007, June 30, 2006 and 2005.

Warrants

As of March 31, 2007, the Company has 5,211,753 shares of Common Stock reserved for issuance upon exercise of warrants to various shareholders and service providers. These warrants have an expiration date of five years from their date of issuance and expire at various dates through February 2010. Each warrant will entitle the holder thereof to purchase one share of Common Stock at an exercise price of $1.50 per share. Management has not assigned a value to these warrants, as it is not practicable to estimate fair value for these financial instruments. It also reserves the rights to redeem the warrants at $.10 per warrant if there is a subsequent initial public offering and market value per share meets certain levels.

Recapitalization

The Company had an exchange of stock of 2.21932 shares of OMII Corp. a Nevada corporation, the acquiring company, for one share of Vemics, Inc. a Delaware corporation on November 8, 2005. The surviving company changed its name to Vemics, Inc. and the management of the new company became the responsibility of the original Vemics, Inc., the Delaware Corporation.

Vemics, Inc. a Delaware corporation exchanged shares of outstanding common stock on December 1, 2004 at 500 to 1. As a result of that exchange, the shares outstanding of approximately 6,446 shares were exchanged for 3,222,985 of new shares of common stock. Additional shares of 109,863 were issued and exchanged to protect original shareholders from an anticipated offering of common stock at a purchase price of $1.00 and a warrant to purchase one share of Common stock at an exercise price of $1.50 per share. There were 6,374 additional shares exchanged at 500 to 1 for 3,187,000 of new shares of common stock.

4. PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE

Depreciation and amortization expense for the nine months ended March 31, 2007 and 2006 was $55,661 and $72,232 for the years ended June 30, 2006 and 2005 was $95,253 and $82,754. The cost and related accumulated depreciation of disposed assets are removed from the applicable accounts and any gain or loss is included in income in the period of disposal.

Property, equipment and purchased software are stated at cost and consist of the following:

	3/31/2007	6/30/2006	6/30/2005
Furniture and fixtures	2,600	2,600	2,600
Software	72,430	72,430	72,430
Equipment	380,422	361,508	327,982
	455,452	436,538	403,012

Less Accumulated Depreciation & Amortization	328,363	272,703	179,748
	127,089	163,835	223,264

5. SHORT TERM NOTES PAYABLE

The Company has borrowed $10,000, from one member of the Board of Directors and another $20,000 from another board member that had been paid back, at a rate of interest of 4% payable for a total amount due including accrued interest of $10,933, $31,806 and $30,606 as of March 31, 2007 and June 30, 2006 and 2005, respectively. The funds were borrowed in December 2004 with the intention of repaying these lenders with the anticipation of raising sufficient funds from a Private Placement Offering.

6. LONG TERM NOTE PAYABLE

On October 20, 2005, the Company agreed to purchase back shares of several shareholders referred to as theWellbrock Group, that was exchanged for a three year balloon note for $300,000 to be amortized over ten years at 8%. The shares of stock are to be held in escrow until the notes are completely paid. If there are any late payments per the payment schedule, the shares are to be released from escrow and to revert back to the original shareholders. An additional payment of $10,000 to satisfy legal fees incurred was paid by the Company in two installments of $5,000 in October 2005 and January 2006. As of March 31, 2007 and June 30, 2006 the amount owed was $303,078 and $306,792, respectively. The first ten monthly payments of principal and interest are to be in installments of $1,000 and the remaining 26 payments are to be installments of $3,639.83. The balloon payment of $272,076 is payable on November 1, 2008.

Payments related to the long-term note payable described above for the years ending June 30th are as follows:

2007	$8604
2008	20,566
2009	277,622
Total	$306,792

7. CONVERTIBLE DEBENTURES:

17.98% - Convertible debenture - Payable on September 30, 2004

On December 19, 2001, the Company issued a $100,000 Convertible Debenture. The original note was to be paid back at quarterly intervals for $18,500 starting September 2002 until completed for a total of $150,000. The note has been revised to accrue interest of $50,000 through September 30, 2004 the original due date. The effective interest rate is 17.98%.

The debenture is to begin to be paid in January 2008 over a period of 18 months at a monthly amount of $8,333.

The bondholder has agreed to no additional interest beyond September 30, 2004.

At any time, the Debenture is convertible into common shares at a conversion price of $500 per share.

Convertible Debenture - 8%

From the time period of July 31, 2003 through June 30, 2004, the Company issued a total of $905,500 Convertible Debentures. Interest on the unpaid balance of the Debentures is calculated at the rate of 8% per annum and unless the Debenture is converted to common stock as described below; such interest is payable by January 1, 2008 (the "Maturity Date") or the earlier prepayment of the Debenture.

On October 1, 2004, accrued interest of $9,472 and $330,500 of Debentures were converted into 1,509,138 of common shares. There is remaining $575,000 of Debentures and accrued interest of $139,391 and $104,891 $58,891 as of March 31, 2007, June 30, 2006 and 2005, respectively payments related to the convertible debenture described above for the years ending June 30^th are as follows:

2007

-0-

2008

575,000

Total

575,000

Convertible Debenture - 10%

Since September 1, 2005, the Company has issued a total of $445,000 Convertible Debentures. Interest on the unpaid balance of the Debentures is calculated at the rate of 10% per annum and unless the debenture is converted to common stock such interest and principal is payable by September 30, 2006 (the “Maturity Date”) or the earlier prepayment of the Debenture.

This Debenture is convertible to one share of Common Stock at $1.00 per share and one warrant at $1.00.

As of March 31, 2007 and June 30, 2006 there was outstanding Debentures of $445,000. On March 31, 2007 and June 30, 2006 there was accrued interest of $60,181 and $26,532, respectively. This debenture is included in Short Term Notes Payable.

Payments related to the Convertible Debentures described above for the year ending June 30th are as follows:

2006	-0-
2007	-0-
2008	445,000
Total	445,000

8. BANK LINE OF CREDIT

The Company has a $300,000 secured working capital line of credit of which $100,000 is guaranteed by a shareholder with Somerset Hills Bank payable on October 5, 2006. On October 12, 2006, the Line of Credit was extended to October 5, 2007. On February 12, 2007, the Company invested in a six month Certificate of Deposit with an interest rate of 4.64% with the bank and this security acts as a collateral for the remaining $200,000 line of credit. The terms of the promissory note is at rate referred to as independent index, which is the Prime Rate, as published in The Wall Street Journal (the “index”) plus .5% rounded up to the nearest 0.125%. The rate of interest for both March 31, 2007 and June 30, 2006 was 8.75%. As of March 31, 2007 and June 30, 2006 the outstanding balance was $299,980. There was no accrued interest payable as of March 31, 2007 and June 30, 2006, and $3,526 as of June 30, 2005.

The initial line of credit was $100,000 dated April 21, 2004. On September 30, 2004 the line of credit was extended an additional $100,000 for a total of $200,000. On January 27, 2005 the line of credit was extended an additional $100,000 for a total of $300,000.

9. CAPITAL LEASES

The Company is leasing computer equipment from Dell Financial. The lease term is 48 months with an expiration date of September 2007. At the end of the lease the Company will own the equipment. Monthly payments including principal and interest at 25.99% per annum are $165.

The Company is also leasing computer equipment from Valley Commercial Capital, LLC. The lease term is 36 months with an expiration date of July 2007. At the end of the lease the Company will own the equipment. Monthly payments including principal and interest at 7% are $3,526.

The Company is also leasing computer equipment from CitiCapital. The lease term is 36 months with an expiration date of August 2007. At the end of the lease the Company will own the equipment. Monthly payments including principal and interest at 25% per annum are $987.

These assets are being depreciated over their estimated useful economic lives and are included in the depreciation expenses for the nine months ended March 31, 2007 and 2006 for the years ended June 30, 2006 and 2005.

Future minimum lease payments and purchase options under capital leases are:

	3/31/2007	6/30/2006	6/30/05
June 30, 2005	-0-	-0-	44,299
2006	-0-	28,141	44,299
2007	22,582	36,652	4,516

Total	22,582	64,794	93,114
Less: Amount representing Interest	4,113	10,604	7,686
Present Value of Minimum Lease Payments
And Purchase Options	18,469	54,190	85,428
Less: Current Portion	18,469	47,628	38,963

Long term portion	-0-	6,562	46,465

10. Rent

The Company has used a customer’s office space for its operations on as needed basis. The Company has paid $14,367 and $70,551 for the years ended June 30, 2006 and 2005 and $29,318 and $21,334 and $30,518 for the nine months ended March 31, 2007 and 2006, respectively.

Related Party Transactions

Total rent expense paid to these related parties for the nine months ended March 31, 2007 and 2006 was $4,500 and $10,000, respectively, and for the years ended June 30, 2006 and 2005 was $14,367 and $34,410, respectively.

11. INCOME TAXES

	3/31/2007	6/30/2006	6/30/05

Taxes on income include provision (benefits) for:
Federal income taxes	-0-	-0-	-0-
State and local income taxes	-0-	2,375	-0-
Total	-0-	2,375	-0-

Taxes on income are comprised of:
Current	-0-	-0-	-0-
Deferred	-0-	-0-	-0-
Total	-0-	-0-	-0-

The Company did not have a current or deferred provision for income taxes for the period from inception July 21, 2001 to December 31, 2003. Deferred tax assets comprise the following at March 31, 2007 and June 30, 2006. At September 30, 2006, the Company had net operating loss (NOL) carryforwards of approximately $11,597,000. Utilization of NOL carryfoward may be limited under various sections of the Internal Revenue Code depending on the nature of the Company’s operations.

12. LEGAL CONTINGENCIES

In the normal course of business the Company is involved in lawsuits and claims. While the amounts claimed could be material, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. Therefore, it is possible that results of operations or liquidity in a particular period could be affected by certain contingencies. However, based on facts currently available including the insurance coverage that the Company has in place, management believes that the outcome of these lawsuits and claims will not have a material adverse effect on the Company’s financial position.

13.	SEGMENT REPORTING - UNAUDITED

The Company has two reportable segments Education and Healthcare services as of October 16, 2006 as a result of the acquisition of NuScribe, Inc. The Company’s reportable segments are strategic business units that offer different services. The accounting policies of the segments are the same as those described in the summary of accounting policies.

Financial information by industry segments is summarized below for the nine months ended March 31, 2007:

Revenues:
	Education		516,925
	Healthcare		299,208
		Total Revenues	816,133
Cost of Revenues:
	Education		157,791
	Healthcare		97,691
		Total Cost of Revenues	255,482
Gross Profit:
	Education		359,134
	Healthcare		201,517
		Total Gross Profit	560,651
Segment Assets:
	Education		678,666
	Healthcare		7,500
		Total Reportable Segments	686,166
		Corporate and others	9,572,222
		Consolidated Assets	10,258,388

14. SUBSEQUENT EVENT- UNAUDITED

On October 16, 2006, the Company announced that it acquired all of the shares of NuScribe™, Inc. The transaction is valued at up to $9 million in an all-stock transaction with Vemics’ stock valued at $.90 per share (issued 10 million shares valued at $.90 per share). NuScribe™, Inc. is a developer of voice recognition software applications and web-based productivity tools for the medical, pharmaceutical and healthcare industries. The combined Vemics and NuScribe technologies will be well positioned to serve a market of over 600,000 physicians in the United States with an integrated real-time productivity toolset, greatly reducing the cost and time spent creating electronic medical records industry-wide.

Physicians nationwide will benefit from greatly simplified electronic medical records creation, freeing more time for patients. In addition, doctors will have real-time access to medical records and other healthcare professionals nationwide, lowering medical costs and improving clinical results. Also, the new web conferencing platform eliminates travel to live continuing medical education seminars and medical events. Medical professionals can also utilize the platform to deliver online seminars.

NuScribe SMR™, NuScribe’s flagship product, is a web-based, speech-enabled medical documentation system that helps medical professionals save time, increase revenue and cut costs while streamlining the entire medical transcription process. The system enables physicians to create, edit, sign and dispatch patient notes, electronic medical records, prescriptions, referral letters and more. NuScribe’s document templates, voice marcos and patient-specific fields, customized for the physician, greatly reduce physical dictation time and costs.

On February 15, 2007, Vemics acquired the assets and liabilities of e-Learning Desktop Inc. (ELD) a technology company based in British Columbia, Canada that has developed a learning platform that provides a safe,technology-based

shortcut to a western education via an online virtual classroom for students worldwide. ELD had nominal revenues and losses since inception.

15. PRO FORMA ADJUSTMENTS OF ACQUISITION

On October 16, 2006 Vemics, Inc, completed its acquisition of a hundred percent acquisition of the shares of NuScribe, Inc. Both companies are incorporated and domiciled in the United States. The unaudited pro-forma condensed consolidated financial statements for the year ended June 30, 2006 herewith has been presented as if the acquisition of the subsidiary had occurred by the date of the financial statement.

15.a PRO FORMA ADJUSTMENTS

The pro-forma adjustments arising from the consolidation of Vemics, Inc. and NuScribe, Inc. are explained below.

(1) Eliminations of intercompany receivable and payable

15.b UNAUDITED PRO FORMA CONDENSED CONSOLIDIATED BALANCE SHEETS

AT JUNE 30, 2006

			Pro-forma
	Vemics	NuScribe	Combined
CURRENT ASSETS
Cash and cash equivalents	443,249	53,141	496,390
Trade and other receivables	293,647	-0-	293,647
Inventory	64,085	-0-	64,085
Prepaid expenses	90,000	6,000	96,000
TOTAL CURRENT ASSETS	890,981	59,141	950,122

NON-CURRENT ASSETS
Property and equipment, net	163,835	-0-	163,835
Other assets	1,150	-0-	1,150
TOTAL NON-CURRENT ASSETS	164,985	-0-	164,985

TOTAL ASSETS	1,055,966	59,141	1,115,107

CURRENT LIABILITIES
Notes and leases payables - current	1,009,549	-0-	1,009,549
Trade and other payables	626,117	59,769	685,886
TOTAL CURRENT LIABILITIES	1,635,666	59,769	1,695,335

NON-CURRENT LIABILITIES
Convertible debentures	679,891	-0-	679,891
Notes and leases payables	305,750	-0-	305,750
TOTAL NON-CURRENT LIABILITIES	985,641	-0-	985,641

SHAREHOLDERS’ EQUITY/DEFICIENCY
Prefered stock	-0-	1,750	1,750
Common stock	23,345	-0-	23,345
Paid In capital	7,971,445	348,250	8,319,695
Less: Treasury Stock	(508,195)	-0-	(508,195)
Accumulated deficiency	(9,051,936)	(350,628)	(9,304,986)
TOTAL SHAREHOLDERS’
EQUITY/DEFICIENCY	(1,565,341)	(628)	(1,565,969)

TOTAL LIABILITES AND SHAREHOLDERS’
EQUITY/DEFICIENCY	1,055,966	59,141	1,115,107

15.c UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2006

	Vemics	NuScribe	Pro-forma
			Combined

Revenues	693,574	365,103	1,058,677
Expenses	2,478,546	715,731	3,194,277

Profit (loss) before income tax expense	(1,784,972)	(350,628)	(2,135,600)

Income tax expense	2,375	-0-	2,375

Net profit (loss)	(1,787,347)	(350,628)	(2,137,975)

Loss per common share	(0.09)		(0.11)

Weighted average number of shares outstanding	20,020,000		20,020,000

NuScribe, Inc.

Report of Independent Auditor F-8

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Vemics, Inc.

We have audited the accompanying balance sheet of NuScribe, Inc. as of June 30, 2006 and the related statements of operations, changes in partner’s equity (deficiency) and stockholders’ equity (deficiency) and statements of cash flows for each of the two years in the period then ended. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NuScribe, Inc. as of June 30, 2006 and the results of its operations and its cash flows for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As more fully described in Note 3 to the financial statements, the Company has incurred operating losses since its inception which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

DEMETRIUS & COMPANY, L.L.C.

Wayne, New Jersey

March 14, 2007

Balance Sheets - As of September 30, 2006 and June 30 2006 F-9





		9/30/2006			6/30/2006
ASSETS		unaudited
Current assets:
Cash and cash equivalents - interest bearing	$	-		$	53,141

Security deposit		6,000			6,000

Total Current Assets		6,000			59,141

	$	6,000		$	59,141


LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIENCY)

Current liabilities:
Short-term notes payable	$	25,000		$	-
Accounts payable and accrued expenses		61,528			59,769
Total Current Liabilities		86,528			59,769

Total Liabilities		86,528			59,769

Stockholders' Equity/(Deficiency):
Preferred StockSeries A, convertible, non cumulative, par value $.001
2,000,000 shares authorized
1,750,000 shares issued and outstanding		1,750			1,750
Common stock, par value $.001, 12,000,000 shares authorized,
8,000,000 shares issued and outstanding		8,000			8,000
Subscriptions receivable		(8,000	)		(8,000	)
Additional Paid in Capital		348,250			348,250
Accumulated deficit		(430,528	)		(350,628	)

Total Stockholders' Equity (Deficiency)		(80,528	)		(628	)

	$	6,000		$	59,141

Statement of Operations - Three months ended September 30, 2006, and 2005, and for the years ended

June 30, 2006 and 2005 F-10



		For the three	For the three	For the year	For the year
		months ended	months ended	ended	ended
		9/30/2006	9/30/2005	6/30/2006	6/30/2005
		unaudited	unaudited
Revenues
Revenues		$ 95,525	$ 83,194	$ 365,103	$ 338,511

Cost of goods sold		17,410	10,196	109,876	94,311

Gross Profit		78,115	72,998	255,227	244,200

Expenses:
Research and development		13,745	-	20,076	10,080
Consulting, commissions and travel		56,198	50,632	438,979	156,440
Operational fees and expenses		23,575	16,546	90,700	44,796
Professional fees		4,755	3,143	6,010	5,301
Payroll and related taxes		45,841	-	-	-
Production, advertising, brochures and public relations		11,482	1,139	41,589	7,177

	Total Expenses	155,596	71,460	597,354	223,794

Income/(Loss) before other expenses		(77,481)	1,538	(342,127)	20,406

Other expenses:
Interest income		31	-	1,487	-
Interest expense		(2,450)	(1,984)	(9,988)	(535)
	Total Other Expenses	(2,419)	(1,984)	(8,501)	(535)

Net income/(loss)		$ (79,900)	$ (446)	$ (350,628)	$ 19,871

Net loss per share, diluted		$ (0.01)		$ (0.04)

Weighted average common shares outstanding, diluted		8,000,000		8,000,000

Statements of Changes in Partners Equity (Deficiency) and Stochholders Equity (Deficiency)

for the Three months ended September 30, 2006, and years ended June 30, 2006 and 2005 F-11

     
               
               
               
               
               
               
               
               
             
            
 
               
               
               
               
               
               
               
               
               
             
            
 
               
               
               
               
               
               
               
               
              TOTAL
             
            
 
               
               
               
               
               
               
               
               
              PARTNER'S
             
            
 
               
               
               
               
               
               
               
              RETAINED
              EQUITY/(DEFICIT)
             
            
 
               
               
               
               
              ADDITIONAL
              PARTNERS
               
              EARNINGS/
              STOCKHOLDERS'
             
            
 
              COMMON
              PREFERRED
              COMMON
              PREFERRED
              PAID IN
              CONTRIBUTIONS/
              SUBSCRIPTIONS
              ACCUMULATED
              EQUITY/
             
            
DESCRIPTION
              SHARES
              SHARES
              AMOUNT
              AMOUNT
              CAPITAL
              DISTRIBUTIONS
              RECEIVABLE
              DEFICIT
              DEFICIENCY
             
            
Balance as of June 30, 2004
              - 
              - 
              $ - 
              $ - 
              $ - 
              $ - 
              $ - 
              $ 2,568 
              $ 2,568 
             
            
                                       
            
Partners Contributions/Distributions
                                  (43,569)
                      (43,569)
             
            
                                       
            
Net income
                                          19,871 
              19,871 
             
            
Balance as of June 30, 2005
              - 
              - 
              - 
              - 
              - 
              (43,569)
              - 
              22,439 
              (21,130)
             
            
                                       
            
Partners Contributions/Distributions
                                  21,130 
                      21,130 
             
            
                                       
            
Convert LP to a Corporation
                                  22,439 
                  (22,439)
              - 
             
            
                                       
            
Issuance of common stock
              8,000,000 
                  8,000 
                          (8,000)
                  - 
             
            
                                       
            
Issuance of preferred stock
                  350,000 
                  1,750 
              348,250 
                          350,000 
             
            
                                       
            
Net loss
                                          (350,628)
              (350,628)
             
            
Balance as of June 30, 2006
              8,000,000 
              350,000 
              8,000 
              1,750 
              348,250 
              - 
              (8,000)
              (350,628)
              (628)
             
            
                     
                             
            
Net loss
                               
                      (79,900)
              (79,900)
             
            
Balance as of September 30, 2006 (unaudited)
              8,000,000 
              350,000 
              $ 8,000 
              $ 1,750 
              $ 348,250 
              $ - 
              $ (8,000)
              $ (430,528)
              $ (80,528)

Statement of Cash flows for the Three months ended September 30, 2006, and September 30 2005, and years ended

June 30, 2006, and 2005 F-12

 
             
             
            For the three
             
             
            For the three
             
             
            For the year
             
             
            For the year
             
            
            
 
             
             
            months ended 
             
             
            months ended
             
             
            ended
             
             
            ended
             
            
            
 
             
             
            9/30/2006 
             
             
            9/30/2005
             
             
            6/30/2006
             
             
            6/30/2005
             
            
            
 
             
             
            unaudited
             
             
            unaudited
             
             
             
             
             
             
             
            
            
Cash Flows From Operating Activities
                                     
            
Receipts from customers
              $
            83,628
              $
            82,883
              $
            367,103
              $
            336,511
             
            
Payments to suppliers, salaries
                (159,350
            )
              (67,530
            )
              (692,323
            )
              (279,243
            )
            
            
Interest received
                31 
                - 
                1,487 
                - 
             
            
Interest paid
                (2,450
            )
              (1,984
            )
              (9,988
            )
              (535
            )
            
            
Net Cash Provided by/(Used in) Operating Activities
                (78,141
            )
              13,369 
                (333,721
            )
              56,733 
             
            
                           
            
Cash Flows From Financing Activities
                                     
            
Short term loans
                25,000 
                - 
                - 
                - 
             
            
Partners contribution/distributions
                      (26,114
            )
              21,130 
                (43,569
            )
            
            
Sale of preferred stock
                - 
                - 
                350,000 
                - 
             
            
Net Cash Provided by/(Used in) Financing Activities
                25,000 
                (26,114
            )
              371,130 
                (43,569
            )
            
            
                           
            
Net Increase/(Decrease) in Cash
                (53,141
            )
              (12,745
            )
              37,409 
                13,164 
             
            
                           
            
Cash at the Beginning of Year
                53,141 
              $
            15,732
                15,732 
                2,568 
             
            
                           
            
Cash at End of Year
              $
            -
              $
            2,987
              $
            53,141
              $
            15,732
             
            
      
                
                
                
             
            
      
                
                
                
             
            
Reconciliation of Net Income/(Loss) to Net Cash
                                  
             
            
Used by Operating Activities
                                  
             
            
Net income
              $
            (79,900
            )
            $
            (446
            )
            $
            (350,628
            )
            $
            19,871
             
            
Adjustments to reconcile net income/(loss) to net cash 
                                     
            
provided by/(used by) operating activities:
                                     
            
Changes in:
                                     
            
Trade receivables 
                - 
                (311
            )
              2,000 
                (2,000
            )
            
            
Prepaid expenses 
                - 
                - 
                (6,000
            )
              - 
             
            
Accounts payable and security deposits 
                1,759 
                14,126 
                20,907 
                38,862 
             
            
 Net Cash Provided by/(Used by) 
                                     
            
 Operating Activities
              $
            (78,141
            )
            $
            13,369
              $
            (333,721
            )
            $
            56,733
             
            
      
                
                
                
             
            

            
            
 
 
 
            
 

            
            
 
            
            
PART III

Nevada
(State or other jurisdiction	95-4696799
of incorporation or organization)	(I.R.S. Employer Identification No.)

	March 31, 2007	March 31, 2006	June 30, 2006	June 30, 2005
	(Unaudited)	(Unaudited)	(Audited)	(Audited)
Statement of Operations Data:
Revenue	$ 816,133	$ 403,633	$ 693,574	$ 109,149
Cost of revenues	$ 255,482	$ 237,767	$ 259,429	$ 13,610
Gross profit	$ 560,651	$ 165,866	$ 434,145	$ 95,539
Total Expenses	$ 3,063,496	$ 1,560,911	$ 2,221,492	$5,256,905
Net loss after taxes	$ (2,615,984)	$ (1,395,045)	$(1,787,347)	$(5,161,366)
Net loss per share	$ (0.08)	$ (0.07)	$ (.09)	$ (0.53)

	Stock Owned (1)	Warrants	Total
Coddington	13,699,237	2,896,140	16,595,377	(A)	33.52%
Bornhuetter	3,966,667	953,333	4,920,000		9.94%
Dorsett	3,767,077	-	3,767,077		7.61%
Zolla	3,649,783	588,500	4,238,283		8.56%
Marciniak	2,130,752	-	2,130,752		4.30%
Howell	1,294,572	-	1,294,572		2.61%
Groh	786,538	-	786,538		1.59%
Shemen	347,633	113,333	460,966		0.93%
Stout	1,000,000	-	1,000,000		2.20%
	30,642,259	4,551,307	35,193,566
					49,512,426	(B)
					=(A) / (B)

NAME	AGE	POSITION
Fred Zolla	57	Chief Executive Officer & Chairman
Craig Stout *	39	Chief Operating Officer
Brian Howell	46	Chief Technology Officer
Thomas J. Owens *	51	Chief Financial Officer
F. Chandler Coddington, Jr.	75	Director
Larry Shemen	52	Director
Brian Groh	49	Director

Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compensation ($) (1)	Securities Underlying Options (#) (2)	Long-Term Compensation Awards	All Other Compensation

Fred Zolla,	2005	$70,000	-	-	-	-	-
CEO & Chairman	2006	$130,000	-	-	-	-	-

Craig Stout,*	2005	$ -0-	-	-	-	-	-
Chief Operating Officer	2006	$98,000	-	-	-	-	-

R.L. Marciniak,**	2005	$93,000	-	-	-	-	-
Chief Strategy Officer	2006	$107,000	-	-	-	-	-

Brian Howell,	2005	$93,000	-	-	-	-	-
Chief Technology Officer	2006	$107,000	-	-	-	-	-

Thomas Owens,*	2005	$23,500	-	-	-	-	-
Chief Financial Officer	2006	$47,000	-	-	-	-	-

Quarter-End Date	Low Bid	High Bid
June 30, 2007	$.25	$.42
March 31, 2007	$.19	$.45
December 31, 2006	$.11	$.95
September 30, 2006	$.80	$1.35
June 30, 2006	$.98	$1.55
March 31, 2006	$1.10	$2.95
December 31, 2005	$1.51	$3.00



									TOTAL
									PARTNER'S
								RETAINED	EQUITY/(DEFICIT)
					ADDITIONAL	PARTNERS		EARNINGS/	STOCKHOLDERS'
	COMMON	PREFERRED	COMMON	PREFERRED	PAID IN	CONTRIBUTIONS/	SUBSCRIPTIONS	ACCUMULATED	EQUITY/
DESCRIPTION	SHARES	SHARES	AMOUNT	AMOUNT	CAPITAL	DISTRIBUTIONS	RECEIVABLE	DEFICIT	DEFICIENCY
Balance as of June 30, 2004	-	-	$ -	$ -	$ -	$ -	$ -	$ 2,568	$ 2,568

Partners Contributions/Distributions						(43,569)			(43,569)

Net income								19,871	19,871
Balance as of June 30, 2005	-	-	-	-	-	(43,569)	-	22,439	(21,130)

Partners Contributions/Distributions						21,130			21,130

Convert LP to a Corporation						22,439		(22,439)	-

Issuance of common stock	8,000,000		8,000				(8,000)		-

Issuance of preferred stock		350,000		1,750	348,250				350,000

Net loss								(350,628)	(350,628)
Balance as of June 30, 2006	8,000,000	350,000	8,000	1,750	348,250	-	(8,000)	(350,628)	(628)

Net loss								(79,900)	(79,900)
Balance as of September 30, 2006 (unaudited)	8,000,000	350,000	$ 8,000	$ 1,750	$ 348,250	$ -	$ (8,000)	$ (430,528)	$ (80,528)