This section and other parts of this Form 10-K contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can also be identified by words such as ''may'', ''will'', ''should'', ''expects'', ''plans'', ''anticipates'', ''believes'', ''estimates'', ''potential'' or ''continue'' and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled ''Risks Factors'' below. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of this Form 10-K. All information presented herein is based on the Company's fiscal calendar. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Overview

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

iMedicor was launched in October of 2007 with early registration far exceeding our pre-launch estimates by over 200% . However, based on the changing landscape of the healthcare communications and multiple federal mandates enacted post the portals initial launch and that have required significant additional development, we suspended most of our marketing efforts to drive members into the portal in late 2010 as we both redesigned the site and entered into new relationships with companies that could add value as well as technology solutions and members to iMedicor. To make up for the loss of anticipated income from a subscribing membership base iMedicor entered into a related line of business - helping state and regional HITECH (Health Information Technology for Economic and Clinical Health) initiatives enroll physicians. Funded by the HITECH Act (part of Obama's Recovery and Reinvestment Act of 2009) and overseen by Health and Human Services Office of the National Coordinator, the program federally funds state and regional offices to entice physicians to adopt the interoperability standards prior to the deadline mandated by the federal government in 2014. As of January 30, 2012 the company has generated approximately $300,000 in revenue from HITECH driven programs however only $43,000 of this revenue can be attributed to the year ended June 30 2011. Our sales in other areas virtually ceased for the year ended June 30, 2011 from 2010, as most of our internal efforts have been devoted to establishing new relationships with strategic partners, developing a pharmaceutical marketing sales channels and the redesign of the iMedicor portal and it's integration with partner sites and the introduction of increased functionality. We did generate approximately $280,000 in legacy revenue attributed to several sales contract entered into prior to the company's shirt to focusing exclusively on the healthcare and related industries; however one of these contracts, representing 260,000 in income in the year ended June 30, 2011 is in dispute and no payments have been received.

Our plan includes charging pharmaceutical and other healthcare related companies an initial set up fee of up to $95,000 to upload all product specific programs, in all formats. The initial fee will cover the set up costs and the first 1,500 qualified "click through" (i.e., a qualified click through is a physician or physicians trusted source, downloading any information available on specific products inside iMedicor). Once the 1,500 click throughs are exhausted, iMedicor will charge between $25.00 and $50.00 per additional click through.

Smaller pharmaceutical companies with limited sales and marketing budgets will be able to participate in ClearLobby with a significantly reduced up-front set-up fee, but with a sales royalty for all prescriptions written through ClearLobby. This smaller pharmaceutical company program is currently running, with information on Access Pharmaceuticals Mugard™ being offered through the ClearLobby site.

The Company anticipates having four sources of income -

· Through ClearLobby, offering a secure and non-invasive online communications and information delivery tool for the dissemination of product-specific information provided by pharmaceutical and other healthcare related companies to physicians.

· Royalty fees on prescriptions written via the ClearLobby site for smaller pharmaceutical company products. As previously noted, Access Pharmaceuticals has already launched their program in ClearLobby, however it is too soon to gauge any measure of success for this program.

· A monthly subscription fee per user. Physicians will pay up to $24.95 per month for access to the iMedicor network and functionality. It is anticipated that we will share this fee with the referring network.

· Opt-in advertizing for healthcare product and related companies. Currently there is no advertizing/promotion running within the portal, however we have already been solicited by several companies to provide advertizing space.

As of June 30, 2011, we require approximately $160,000 to $200,000 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, if we do not raise additional capital in the near future or if revenue does not begin to grow as expected we will have to curtail our spending and downsize our operations. Our cash needs are primarily attributable to funding sales and marketing efforts, strengthening technical and helpdesk support, expanding our development capabilities, satisfying existing obligations and building administrative infrastructure, including costs and professional fees associated with being a public company.

We are currently seeking up to $3,000,000 in capital through a private placement of preferred stock. 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. No assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to us. If we are unable to raise additional capital in the current private offering, we could be required to substantially reduce operations, terminate certain products or services or pursue exit strategies.

Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

We review 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 recently adopted accounting practices. 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 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

We account for income taxes under current accounting guidance ,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 earnings (loss) per share

Basic and diluted net loss per share information is presented under the requirements of FASB, 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's sources of income for the fiscal year ending June 30, 2011 were:

· Annual contracts for licensing of technology paid monthly, quarterly or once annually in advance. If paid annually the revenue is recognized in two parts: Support that is recognized 70% at the time of receipt of funds and the balance is recognized at 1/12th per month; for the licensing aspect of the contract revenue is recognized at 1/12th per month, with the remaining balances being recorded in deferred income. If paid quarterly the recognition is the same.

· Delivery of product-specific information relating to healthcare and related services to physicians through on-line, opt in direct marketing
· Assisting Regional and State HIECH programs in accelerating the adoption of mandated electronic healthcare records management and communication.
· Legacy technology contracts not related to the healthcare industry

The Company anticipates having four sources of income in the future:

· Through ClearLobby, offering a secure and non-invasive online communications and information delivery tool for the dissemination of product-specific information provided by pharmaceutical and other healthcare related companies to physicians.

· Royalty fees on prescriptions written via the ClearLobby site for smaller pharmaceutical company products. As previously noted, Access Pharmaceuticals has already launched their program in ClearLobby, however it is too soon to gauge any measure of success for this program.

· A monthly subscription fee per user. Physicians will pay up to $24.95 per month which will be shared with the referring network.

· Opt-in advertizing for healthcare product and related companies. Currently there is no advertizing/promotion running within the portal, however we have already been solicited by several companies to provide advertizing space.

Results of Operations

Year Ended June 30, 2011 Compared to Year Ended June 30, 2010

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

                                                  Year Ended June 30
                                     2011                         2010
                                   Audited           %          Restated          %
        Net Sales and Revenues        438,122         100          295,132         100
        Cost of Services                4,876         1.1           71,224        24.1
        Gross Profit                  433,246        98.9          223,908        75.9

        Operational General
        and Administrative
        Expenses                    2,092,838        49.7        5,121,100        71.4
        Depreciation and
        amortization                2,065,723        49.1        2,056,033        28.6
        Impairment of
        technology &
        medical software             854,094            *                -           *
        Bad debt expenses             52,000            *           26,000           *
        Total Expenses              5,064,655         100        7,203,113         100
        Loss before other
        income (expense)           (4,631,409 )                 (6,979,205 )

Revenues

Our revenues for the year ended June 30, 2011 increased by 48% to $438,122 from $295,132 in 2010, due primarily to two new lines of revenue: ClearLobby sales and marketing, and; HITECH Sales and consulting services.

Cost of Services

Cost of services as a percentage of revenues was 1% for the year ended June 30, 2011 as compared to 24% for 2010, representing the expiration of a revenue sharing agreement with a previous partner. While the contract remains in force the revenue share agreement has expired.

Operational, General and Administrative Expenses

Operational, general and administrative expenses decreased to $2,092,838 in the year ended June 30, 2011 from $5,121,100 in the year ended 2010, or 59%. The company's financial position required it to cut costs wherever possible resulting in a significant reduction in operational expenses.

Depreciation and Amortization

Depreciation and amortization expenses increased for the year ended June 30, 2011 to $2,065,723 from $2,056,033 in 2010, representing no material difference.

Loss from Operations

Income (loss) from operations, before Other Income (Expenses), for the year ended June 30, 2011 totaled ($4,631,409) compared to ($6,979,205) or a decrease of approximately 33.6%. The decrease in loss from operations for the year ended June 30, 2011 is a direct result of the company's election to cut costs wherever possible as well as the increase in revenue attributed to ClearLobby and the HITECH initiative. However, it should be noted that if depreciation and impairment are not considered, the decrease in loss would be approximately 46%, which more truly reflects the company's cost cutting initiatives.

Liquidity and Capital

Cash and cash equivalents were $18,208 at June 30, 2011 compared to $86,664 at June 30, 2010, representing a 79% decrease in available funds, however with the increase in cash-flow from the HITECH program as well as the commitment from several of our major investors we believe that we can sustain operations indefinitely.

Net cash used by operating activities was $1,273,349 for the year-end June 30, 2011 as compared to cash used by operating activities of $1,721,398 for the year-end June 30, 2010, representing an 35% decrease. The decrease is due to the Company's need to conserve cash until revenue begins to grow.

Net cash used by investing activities decreased by 76% to $55,000 for the year-end June 30, 2011 as compared to cash used by investing activities of $230,000 for the year-end June 30, 2010, and was primarily due to a decrease in development work on the Portal as cash was not available to maintain the previous pace of development.

Net cash provided by financing activities was $1,259,913 for the year-end June 30, 2011 as compared to net cash provided by financing activities of $1,985,427 for the year-end June 30, 2010. The decrease is primarily due to a decrease in the sale of Common Stock and issuance of debt instruments.

The Company continues to operate at a loss and is projected to do so until late in fiscal 2012. The additional decrease in available investment capital in the year ending June 30, 2011 required the Company to continue to consolidate its operations and slow-down development and marketing, The net result of this is that the Company has not been able to fully execute on its operational plan for the year resulting in a delay in generating any significant revenue. 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. From July 1, 2006 through December 31, 2007, we raised approximately $3,637,000 from accredited investors. In addition, from February 22, 2008 through July 2008, we issued 20,900,001 shares of Common Stock through a private offering to accredited investors through which we raised approximately $2,508,000. From December of 2008 to April of 2009 we issued notes in the aggregate amount of approximately $1,400,000 to accredited investors. From September 2009 to March 2010 we issued notes in the aggregate amount of 1,672,600 to accredited investors. In June of 2010 we issued 6,820,000 shares of Common Stock through a private placement offering to accredited investors through which we raised approximately $341,000. Notwithstanding the receipt of this additional capital, the Company requires significant additional capital to cover its current overhead as well as to satisfy existing obligations.