iCoreConnect Inc. - Quarter Report: 2010 December (Form 10-Q)

imedicor10q123110.htm

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 December 31, 2010

Commission file number: 000-52765

IMEDICOR, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

523 Avalon Gardens Drive, Nanuet, New York 10954

(Address of principal executive offices) (Zip Code)

(845) 371-7380

(Registrant’s Telephone Number, Including Area Code)

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

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

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 definitions 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

There were 310,744,847 outstanding shares of the issuer’s Common Stock, $0.001 par value, on February 22, 2011.

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IMEDICOR, INC.

FORM 10-Q QUARTERLY REPORT

FOR THE QUARTER ENDED DECEMBER 31, 2010

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			Page
Part I Financial Information

Item 1.	Financial Statements		3
		Condensed Consolidated Balance Sheet as of December 31, 2010 (unaudited) and June 30, 2010 (audited)	3
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2010 and 2009 (unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended December 31, 2010 and 2009 (unaudited)	6
		Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		9

Item 3.	Quantitative and Qualitative Disclosure About Market Risk		12

Item 4T.	Controls and Procedures		12

Part II Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		13

Item 5.	Other Information		13

Item 6.	Exhibits		13

	Signatures		14

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PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IMEDICOR, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	Dec 31, 2010			June 30, 2010
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,000		$	86,644
Accounts receivable, net of allowance for doubtful accounts of $-0- at December 31, 2010 and June 30, 2010, respectively		344,780			10,000
Prepaid Expenses		4,691			6,001
Total Current Assets		350,471			102,645
Property and equipment, net		5,028			8,291
Other Assets
Technology and Medical Software, net		4,022,395			4,996,785
		4,022,395			4,996,785
Total Assets	$	4,377,894		$	5,107,721
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Notes payable –– banks	$	29,939		$	59,181
Short-term notes payable		3,350,421			5,487,120
Accounts payable and accrued expenses		1,725,981			1,791,671
Deferred income		59,000			60,000
Total Current Liabilities		5,165,341			7,397,972
Other long-term liabilities
Long-term notes payable		-			1,271,661
Total Liabilities		5,165,341			8,669,663
Stockholders’ Equity (Deficit)
Preferred stock , par value $.001, authorized 200,000,000. Issued and outstanding -39- shares and -0- shares as of Dec 31, 2010 and June 30, 2010, respectively		0			0
Common stock, par value $.001 per share, authorized 600,000,000. Issued and outstanding: 310,744,847 and 229,082,187 shares at Dec 31, 2010 and June 30 2010, respectively		310,745			229,082
Additional Paid in Capital		42,913,455			37,849,158
Less: Treasury stock, 368,407 shares at both December 31, 2010 and June 30, 2010		(508,195	)		(508,195	)
Accumulated deficit		(43,503,452	)		(41,131,957	)
Total Stockholders’ Equity (Deficit)		(787,447	)		(3,561,912	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	4,377,894		$	5,107,721

See notes to Condensed Consolidated Financial Statements (unaudited).

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IMEDICOR, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three			For the three
	months ended			months ended
	December 31, 2010			December 31, 2009
	(unaudited)			(unaudited)

Revenues:	$	296,034		$	65,832
Cost of Services		296			2,439
Gross Profit		295,738			63,143
Expenses:
Stock issued for fees and services		254,696			-
Consulting, commissions and travel		48,038			42,089
Operational fees and expenses		88,868			130,172
Professional fees		10,895			31,040
Payroll and related taxes		146,973			175,427
Depreciation and amortization		516,537			510,187
Production, advertising, brochures and public relations		3,500			38,082
Total Expenses		1,069,507			926,997
Loss before other expenses		(773,769	)		(863,854	)
Other Income/(Expenses):
Other Income – Relinquishment of Debt		91,511			-
Redemption Fee Expense					(160,646	)
Interest expense		(77,352	)		(101,823	)
Total Other Income/(Expenses)		14,159			(262,469	)

Net loss available to common stockholders	$	(759,610	)	$	(863,854	)

Net loss per share, available to common stockholders		(0.00	)		(0.01	)

Weighted average number of shares, basic and diluted		268,365,569			123,044,835

See notes to Condensed Consolidated Financial Statements (unaudited).

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IMEDICOR, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the six			For the six
	months ended			months ended
	December 31, 2010			December 31, 2009
	(unaudited)			(unaudited)

Revenues:	$	344,631		$	131,414
Cost of Services		1,508			7,937
Gross Profit		343,123			123,447
Expenses:
Stock issued for fees and services		545,308			1,261,393
Consulting, commissions and travel		114,401			35,115
Operational fees and expenses		245,605			348,187
Professional fees		10,895			97,415
Payroll and related taxes		327,539			448,086
Depreciation and amortization		1,032,653			1,013,624
Production, advertising, brochures and public relations		24,425			86,208
Total Expenses		2,300,826			3,290,028
Loss before other expenses		(1,957,703	)		(3,166,551	)
Other Income/(Expenses):
Other Income – Relinquishment of Debt		91,511			-
Redemption Fee Expense					(321,292	)
Interest expense		(319,303	)		(202,044	)
Total Other Income/(Expenses)		(227,792	)		(523,336	)
Loss before dividend		(2,185,495	)

Dividends Related to Warrants Issued		186,000

Net loss available to common stockholders	$	(2,371,495	)	$	(3,689,887	)

Net loss per share, available to common stockholders		(0.01	)		(0.03	)

Weighted average number of shares, basic and diluted		268,365,569			125,879,009

See notes to Condensed Consolidated Financial Statements (unaudited).

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IMEDICOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the six			For the six
	months ended			months ended
	December 31, 2010			December 31, 2009
	(unaudited)			(unaudited)
Cash Flows From Operating Activities:
Receipts from customers	$	8,851		$	69,794
Payments to suppliers, salaries		(697,241	)		(941,463	)
Interest paid		(191,118	)		(22,078	)
Net Cash Used in Operating Activities		(879,508	)		(893,747	)

Cash Flows Used in Investing Activities:
Purchase of Technology & Medical Software		(55,000	)
Net Cash Used in Investing Activities		(55,000	)		-

Cash Flows From Financing Activities:
Payments on notes payable		(44,242	)		(25,000	)
Short term loans proceeds		409,106			900,500
Sale of common stock		484,000			-
Net Cash Provided by Financing Activities		848,864			875,500

Net Increase/(Decrease) in Cash		(85,644	)		(18,247	)

Cash at the Beginning of Period		86,644			52,615

Cash at End of Period	$	1,000		$	34,368


Reconciliation of Net Loss to Net Cash
Used by Operating Activities
Net Loss before dividend	$	(2,185,198	)	$	(3,689,887	)
Adjustments to Reconcile net income/(loss) to net cash
Used by operating activities
Stock issued for fees and services		545,308			1,261,393
Depreciation & Amortization		1,032,653			1,013,624
Relinquishment of debt		(91,511	)		-
Loan accretion					321,292
Changes in:
Trade receivables		(334,780	)		-
Prepaid Expenses		1,310			(2,606	)
Accounts payable and accrued expenses		25,945			84,091
Accrued interest payable		127,765			179,966
Deferred income		(1,000	)		(61,620	)
Net Cash Used in Operating Activities	$	(879,508	)	$	(893,747	)

See notes to Condensed Consolidated Financial Statements (unaudited).

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IMEDICOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

December 31, 2010

1. BASIS OF PRESENTATION

IMedicor, Inc., formerly Vemics, Inc. (the “Company”), builds portal-based, virtual work and learning environments in healthcare and related industries. Our focus is twofold: iMedicor, our web-based portal which allows Physicians and other healthcare providers to exchange patient specific healthcare information via the internet while maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations, and; recently acquired ClearLobby technology, our web-based portal adjunct which provides for direct communications between pharmaceutical companies and physicians for the dissemination of information on new drugs without the costs related to direct sales forces. Our solutions allow physicians to use the internet in ways previously unavailable to them due to HIPAA restrictions to quickly and cost-effectively exchange and share patient medical information and to interact with pharmaceutical companies and review information on new drugs offered by these companies at a time of their choosing.

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 December 31, 2010, are not necessarily indicative of the results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto that are included in the Company’s Form 10-K for the fiscal year ended June 30, 2010.

2. GOING CONCERN

From inception through June 30, 2010, the Company had been 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 $43,503,000 and $41,132,000 at December 31, 2010 and at June 30, 2010, respectively. The Company’s activities have been primarily financed through convertible debentures, private placements of equity securities and capital lease financing. The Company intends to raise additional capital through the issuance of debt or equity securities to fund its operations. The financing may not be available on terms satisfactory to the Company, if at all. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding.

3. NET EARNING (LOSS) PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, warrants and convertible notes to the weighted-average number of common shares outstanding for a period, if dilutive. All potentially dilutive securities have been excluded from the computation, as their effect is anti-dilutive.

4. WARRANTS

As of December 31, 2010, following warrants were outstanding:

No. Shares
Issuable on Exercise		Expiration		Exercise Price
	1,239,999		2011	$	0.60
	1,430,000		2011	$	0.24
	1,541,667		2011	$	0.12
	4,000,000		2013	$	0.04
	13,640,000		2013	$	0.03
	16,160,000		2013 – 2015	$	0.05

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Management has not assigned a value to these warrants, as it is not practical 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 of the company’s common stock reaches certain levels.

5. TECHNOLOGY AND MEDICAL SOFTWARE

The Company has capitalized all acquisition costs associated with the acquisition of NuScribe Inc. In addition, we have elected to capitalize all related development costs associated with completion of the site. The iMedicor product was launched in late October 2007 and we have begun to amortize its cost on a straight line basis over 60 months. Amortization expenses were $514,694 for the three months ended December 31, 2010 and $1,029,391 for the six months ended December 31, 2010.

	12/31/2010		6/30/2010
Technology and medical software	$	10,293,893	$	10,238,892
Less: Accumulated Amortization		6,271,498		5,242,107
	$	4,022,395	$	4,996,785

6. SHORT TERM NOTES PAYABLE

		12/31/10
Convertible Debentures	$	3,111,315
Notes Payable		239,106
Total	$	3,350,421

7. ISSUANCE OF PREFERRED AND STOCK IN EXCHANGE FOR DEBT

On December 31, 2010 the holders exchanged short and long-term debt in the aggregate amount of approximately $3,100,000 into 28 shares of Series “A” and 11 shares of Series “B” Preferred Stock of the Company and 24,918,128 shares of Common Stock of the Company to two holders of Notes issued by the Company. Each share of Series “A” and “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share. Each share of Series “A” Preferred Stock carries a cumulative quarterly dividend of 2% of the original purchase price of the stock and each series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a 2.5% cumulative quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option. Each share of Series “A” and Series “B” preferred stock has shall be entitled to notice of any stockholders' meeting and to vote upon matters submitted to shareholders for a vote, in the same manner and with the same effect as the holders of shares of Common Stock, voting together with the holders of Common Stock as a single class to the extent permitted by law. Holders of Series B Preferred Stock shall have that number of votes equal to the number of shares of Common Stock into which such Series B Preferred Stock is convertible. Neither the Series “A” or Series “B” Prefered Stock is callable.

8. FORGIVENESS OF ACCRUED INTEREST

As a part of the sale of Series “A” Preferred Stock to in exchange for debt, the Note holder forgave approximately $220,000 in interest accrued on the principal owed.

9. REVENUE

The Company has booked revenue in the quarter ended December 31, 2010 of $260,000 based on a legacy contract which is still in force, however, the amount is being disputed by the customer and to date no funds have been received. There can be no assurance that the full amount of the revenue booked will be received.

10. SUBSEQUENT EVENTS

On February 1, 2011 the Company receive a signed subscription agreement from an accredited investor for an aggregate investment of $2,000,000 in exchange for 16 Series “B” preferred shares. The amounts are payable in 2 tranches, with the first tranche due on or before February 22, 2011, with a five day grace period post the due date and the second tranche due on or before April 1, 2011. Each share of Series “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share. Each share of Series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a cumulative 2.5% quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option.

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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, 2010. Our actual results could differ materially from those indicated in such forward-looking statements as a result of certain factors. We are under no duty to update any of the forward-looking statements after the date of this Report on Form 10-Q to conform these statements to actual results.

Overview

The Company has built a portal-based, virtual work, learning and communication/collaboration environment for healthcare and related industries called iMedicor. Our primary focus shifted with our development of iMedicor, which we acquired in connection with the acquisition of NuScribe, Inc. on October 17, 2006. Currently, our efforts are concentrated on providing secure, on-line communications, collaboration, learning and productivity solutions to healthcare and related markets, and facilitating cost-effective communications between physicians and other healthcare related workers and pharmaceutical, medical device and medical insurance companies.

iMedicor was initially launched in October of 2007 with early registration far exceeding our pre-launch estimates by over 200% . In February of 2009 we re-launched iMedicor as version 2.0 with completely redesigned functionality and security. During the redesign phase we focused less on increasing membership and more on working with a core group of physician members to address functionality within the site and make recommended changes for the launch of the 2.0 version. Late this fiscal quarter the subscription model for iMedicor switched from a free service for all users to a $24.95 per month subscription service per physician user, with reduced rates for administrative staff within a physician’s office. As part of the shift we offered all existing members as well as new members a sixty-day trial period at no cost. The adoption rate from free service to paying was not what we had hoped at less than 10%, therefore we are currently revamping the cost structure of the portal, with a free layer available to all users with limited functionality. We contemplate allowing up to a certain amount of data to be transferred for free on a monthly basis, and any member exceeding that layer will have to pay the monthly fee. Additionally, we have development plans to expand out Electronic Medical Record interoperability capabilities within the Portal and any member wishing to use this feature would be required to pay the monthly fee. We still expect to generate significant revenues through the growth of a paying membership base within the Portal, however our initial projections have been tempered to allow for the widespread adoption of EMR’s into physician practices, which is expected to begin to accelerate towards the end of this year as federal funds incentive dollars become available to early physician adopters of EMR’s.

Currently multiple partnerships give us direct access to a user-base of over 530,000 physicians in the United States. If the company enrolls only 5% of this base as paying subscribers into iMedicor, that would equal approximately $660,000 per month in top-line revenue, or more than three times our current monthly cash needs. As we build this paying customer base over time, the Company has begun to generate revenue through the delivery of drug information on Mugard™ being offered through ClearLobby. We expect these revenues to accelerate significantly over the next 6 – 9 months as the full marketing effort for the drug is deployed and additional insurance companies approve the drug for reimbursement to their patients. We have several new ClearLobby programs scheduled to launch designed around pharmaceutical marketing to physicians which we expect to generate significant revenue for the Company, however the exact timing of these launches is unknown at the moment.

We recently announced the enrollment of our first Independent Physician Association (IPA) into our subscription model. Indications through our marketing efforts point to wide spread adoption of our newly launched “National Healthcare Communications Network (NHCN)”. We are seeing significant progress with this IPA, and they have begun to use the Portal to communicate with one of the large national health insurance carriers to transmit patient specific information, which opens a merger larger spectrum for usage of the Portal than we had first envisioned.

Our revenue has increased due largely to a legacy contract which is still in place, however we continue to be encouraged by the increase in revenue being generated by the new programs which have just come into effect and are generated directly from the efforts of the portal and Clearlobby, the portal’s pharmaceutical marketing adjunct.

As of December 31, 2010, we require approximately $180,000 per month to fund our operations. This amount will increase as we expand our sales and marketing efforts and continue to develop new products and services; however we do not have the funds available to increase our operations at this time. As of the date of this filing the Company has reduced operations to a bare minimum to conserve what cash is available and costs have been further reduced from the $180,000 per month needed as of December 31, 2010. In anticipation of the investment funds expected

We are currently seeking up to $5,000,000 in capital through a private placement of preferred stock, and have received a signed subscription agreement from and accredited investor for $2,000,000, payable in two tranches of $1,000,000 with the first tranche due on or before February 22, 2011, and the final tranche due on or before April 1, 2011. While we are seeking this funding, if revenue increases to a point where we are able to sustain ourselves and increase our budget to match our growth needs, we may significantly reduce the amount of investment capital we are seeking. The exact amount of funds raised and revenue generated, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake.

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Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles as recognized in the U.S. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. Our estimates include those related to revenue recognition, the valuation of inventory, and valuation of deferred tax assets and liabilities, useful lives of intangible assets and accruals. We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Results of Operations

Three months ended December 31, 2010 Compared to Three Months Ended December 31, 2009

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

	Three Months Ended December 31
	(unaudited)
	2010		2009
Net Sales and Revenues	$	296,034	$	65,832
Cost of Services		296		2,439
Gross Profit		295,738		63,143

Operational General and Administrative Expenses		298,001		416,810
Depreciation and amortization		516,537		510,187
Stock issued for fees and services		254,969		-
Total Expenses		1,069,507		926,997
Loss before other income (expense)	$	(773,769)	$	(863,854	)

Revenues

The Company's revenues for the three months ended December 31, 2010 increased by 350% to $296,034 from $65,832 in the three months ended December 31, 2009. The increase in revenue is due largely to a legacy contract still in force which requires a payment of approximately $260,000 in 2010. The Company generated approximately $36,000 in revenue based on the Company’s new lines of business during this period, which is slightly down from the previous quarter. While we had anticipated generating more revenue attributable to new lines of business in the quarter, delays in sales of Mugard by access Pharmaceuticals attributed to delays in Insurance Companies’ approvals for reimbursement to patients of the drug have delayed our ability to collect on the sales royalty due to iMedicor.

Cost of Services

Cost of services as a percentage of revenues was less than 1% for the quarter ended December 31, 2010 as compared to 3.7% for the quarter ended December 31, 2009. The decrease is due to the reduced revenue sharing associated with our current revenue streams: however we expect the cost of goods to increase in the future as we retain outside sales and marketing representatives to generate new business for the Company on a commission basis.

Operational, General and Administrative Expenses

Operational, general and administrative expenses for the quarter ending December 31, 2010 decreased to $298,001 from $416,810, for the quarter ending December 31, 2009 or 29%. This decrease reflects the Company’s continued effort to consolidate operations until such time that it can sustain growth through revenue generation.

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Depreciation and Amortization

Depreciation and Amortization expenses increased 1% for the quarter ended December 31, 2010 to $516,537 from $510,187, for the quarter ending December 31, 2009, representing no material difference.

Loss from Operations

Income (loss) from operations for the quarter ended December 31, 2010 totaled ($773,769) compared to ($863,854) for the quarter ended December 31, 2009 or a decrease of 10%. The decrease in loss from operations for the quarter ended December 31, 2010 was due to the Company’s election to slow operations and the legacy contract still in place for 2010, however was offset by the issuance of stock for fees in the quarter.

Results of Operations

Six months ended December 31, 2010 Compared to Six Months Ended December 31, 2009

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

	Six Months Ended December 31
	(unaudited)
	2010		2009
Net Sales and Revenues	$	344,631	$	131,414
Cost of Services		1,508		7,937
Gross Profit		343,123		123,447

Operational General and Administrative Expenses		732,090		1,015,011
Depreciation and amortization		1,032,473		1,013,624
Stock issued for fees and services		515,581		1,261,393
Total Expenses		2,280,144		3,290,028
Loss before other income (expense)	$	(1,957,703)	$	(3,166,551	)

Revenues

The Company's revenues for the six months ended December 31, 2010 increased by 255% to $344,631 from $131,414 in the six months ended December 31, 2009. The increase in revenue is due in part to a legacy contract still in force which requires a payment of approximately $260,000 in 2010, however the same contract accounted for $125,000 of revenue for the same period in 2009. The Company generated approximately $85,000 in revenue based on the Company’s new lines of business during this period, which is a significant increase from the same period in 2009, when no revenue at all was generated from any new lines of business.

Cost of Services

Cost of services as a percentage of revenues was less than 1% for the six months ended December 31, 2010 as compared to approximately 8% for the six months ended December 31, 2009. The decrease is due to the reduced revenue sharing associated with our current revenue streams: however we expect the cost of goods to increase in the future as we retain outside sales and marketing representatives to generate new business for the Company on a commission basis.

Operational, General and Administrative Expenses

Operational, general and administrative expenses for the six months ending December 31, 2010 decreased to $732,090, from $1,015,011 for the six months ending December 31, 2009 or 30%. This decrease reflects the Company’s continued effort to consolidate operations until such time that it can sustain growth through revenue generation.

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Depreciation and Amortization

Depreciation and Amortization expenses increased 2% for the six months ended December 31, 2010 to $1,032,653 from $1,013,624, for the six months ending December 31, 2009, representing no material difference.

Loss from Operations

Income (loss) from operations for the six months ended December 31, 2010 totaled ($1,957,703) compared to ($3,166,551) for the six months ended December 31, 2009 or a decrease of 38%. The decrease in loss from operations for the six months ended December 31, 2010 was due to a combination of the Company’s election to significantly slow operations to conserve cash in 2010, and a reduction in shares issued for fees.

Liquidity and Capital Resources

Cash and cash equivalents were $1,000 at December 31, 2010 compared to $86,644 at June 30, 2010.

Net cash used by operating activities was $879,508 for the six months ended December 31, 2010 as compared to $893,747 for the six months ended December 31, 2009, representing no material difference.

Net cash used by investing activities was $55,000 for the six months ended December 31, 2010 as compared to cash used by investing activities of $-0- for the six months ended December 31, 2009. The difference is due to increased development of the iMedicor portal.

Net cash provided by financing activities was $848,864 for the six months ended December 31, 2010 as compared to net cash used by financing activities of $895,500 for the six months ended December 31, 2009, representing no material difference.

Due to our serious cash position and the lack of adequate sales revenue as the Portal is just beginning to generate sales, the Company has continued to reduce costs where possible, including eliminating non-essential staff positions and eliminating non-essential operating costs as well as reducing salaries of current employees.

The Company continues to operate at a loss and is projected to do so until the third or fourth quarter of this fiscal year. The Company is reliant, therefore, on raising capital through equity investments and/or debt instruments to maintain operations. The Company is actively engaging in fundraising efforts to increase its current level of operations.

Off-Balance Sheet Arrangements

The Company does not have any off-Balance Sheet Arrangements that are likely to have a current or future affect on our financial condition, revenues, results of operations, liquidity, or future effect on capital expenditures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A.

ITEM 4T. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

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

Our management (with the participation of our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer) evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2010, the period covered by this Form 10-Q.

Based on this evaluation, our 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 were 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, 2010 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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 31, 2010 the Company sold, in a private placement made in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), to certain accredited investors (the “Investors”) 28 shares of Series “A” Preferred Stock in the Company to accredited investors (the “Investors”), pursuant to the Modification Agreement with Sonoran Pacific Resources dated December 31, 2010. The purchase price was $64,285.71 for one share of Series “A” Preferred Stock, or a total aggregate investment by the Investors of $1,800,000.

Each share of Series “A” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s common stock after the 12 month anniversary of the issuance of such share of Series “A” Preferred Stock. Each share of Series “A” Preferred Stock also carries a cumulative quarterly dividend of 2% of the original purchase price payable in the Company’s Common Stock or cash, at the Company’s option.

On December 31, 2010 the Company sold, in a private placement made in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), to an accredited investors (the “Investor”) 11 shares of Series “B” Preferred Stock of the Company and 24,918,128 shares of Common Stock of the Company in exchange for a Unsecured Promissory Note, dated June 30, 2008, issued by the Company to the investor with an aggregate value of $2,096,725.14 which includes the original principal amount of the Note and accrued Interest from the date of issuance of the Note. The purchase price was $100,000 for one share of Series “B” Preferred Stock and $0.04 for one share of common stock. The total reduction in debt to the company is $2,096,725.14

Each share of Series “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share of Series “B” Preferred Stock. Each share of Series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a cumulative 2.5% quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option.

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

4.1		Secured Convertible Promissory Note of the Company dated April 18, 2009*

4.2		Modification Agreement dated December 31, 2010**

4.3		Secured Convertible Promissory Note dated December 31, 2010**

4.4		Series “A” Preferred Stock Description**

4.5		Series "B" Preferred Stock Subscription Agreement**

4.6		Series “B” Preferred Stock Description**

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.

* Incorporated by reference to the Company’s 8-K filing dated May 5, 2009

** Incorporated by reference to the Company’s 8-K filing dated January 18, 2011

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SIGNATURES

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

	IMedicor, Inc. (Registrant)

Date: February 22, 2011	By:	/s/ Fred Zolla
		Fred Zolla
		President and Chief Executive Officer (Principal Executive Officer)

Date: February 22, 2011	By:	/s/ Craig Stout
		Craig Stout
		Interim Chief Financial Officer (Principal Accounting Officer)

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