UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2011
OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-53941

VIRTUAL MEDICAL INTERNATIONAL, INC.

(Formerly, QE Brushes, Inc.)

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

~~469~~851 ~~St.~~Devon ~~Pierre Road~~Ave

Los Angeles, California ~~90077~~90024

(Address of principal executive offices, including zip code.)

(310) 470-2616

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days. YES [X] NO [ ]

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 (SS 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 [ ] 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,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	[ ]	Accelerated Filer	[ ]
Non-accelerated Filer	[ ]	Smaller Reporting Company	[X]
(Do not check if 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 [X] NO [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicated the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 25,367,541 as of ~~August~~December 222, 2011.

TABLE OF CONTENTS

			Page
	PART I.
Item 1.	Financial Statements.		3
		Balance Sheets (Unaudited)	~~F-1~~3
		Statements of Expenses (Unaudited)	F-2
		Statements of Income and Expenses (Unaudited)	4
		Statements of Cash Flows (Unaudited)	~~F-3~~5
		Notes to Financial Statements (Unaudited)	~~F-4~~6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		89
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		910
Item 4.	Controls and Procedures.		910
	PART II.
Item 1A.	Risk Factors.		1011
Item 5.	Other Information.		10
Item 6.	Exhibits.		11
Item 6.	Exhibits.		10
Signatures			12
Signatures			11
Exhibit Index			13
Exhibit Index			12

-2-

PART I. – FINANCIAL INFORMATION

~~VIRTUAL~~ITEM ~~MEDICAL~~1. FINANCIAL ~~INTERNATIONAL, INC~~STATEMENTS.

(VIRTUAL MEDICAL INTERNATIONAL, INC. Formerly QE Brushes, Inc.) Balance Sheets Unaudited

(A Development Stage Company)

		September 30,		December 31,
		2011		2010
ASSETS

CURRENT ASSETS
Cash	$	680	$	100
Accounts receivable (net)		111,224		-
Total Current Assets		111,904		100

Other Assets
Investment in securities available for sale, (net of market adjustment of $5,695,200)		100,800		1,176,000
Total Other Assets		100,800		1,176,000
Total Assets	$	212,704	$	1,176,100

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	39,175	$	21,661
Consulting payable		3,466		-
Note payable		7,837		-
Note payable - related party		50,554		19,567
Total Current Liabilities		101,032		41,228

Stockholders' equity
Preferred stock, $.00001 par, 50,000,000 shares authorized, 44,479,500 shares issued and outstanding		445		445
Common stock, $.00001 par, 250,000,000 shares authorized 25,367,541 shares issued and outstanding, respectively		254		254
Additional paid-in capital		83,291,570		83,291,570
Accumulated other comprehensive loss		(5,695,200)		(4,620,000)
Deficit accumulated during the development stage		(77,485,397)		(77,537,397)

Total Stockholders’ Equity		111,672		1,134,872

Total Liabilities and Stockholders' Equity	$	212,704	$	1,176,100

Balance Sheets

(Unaudited)

		June 30,		December 31,
		2011		2010
ASSETS
CURRENT ASSETS
Cash	$	361	$	100
Total Current Assets		361		100
Other Assets
Investment in securities available for sale, (net of market adjustment of $5,544,000 and 4,620,000 respectively)		252,000		1,176,000
Total Other Assets		252,000		1,176,000
Total Assets	$	252,361	$	1,176,100
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	45,363	$	21,661
Note payable - related party		54,553		19,567
Total Current Liabilities		99,916		41,228
Stockholders’ Equity
Preferred stock, $.00001 par, 50,000,000 shares authorized, 44,479,500 shares issued and outstanding		445		445
Common stock, $.00001 par, 250,000,000 shares authorized 25,367,541 shares issued and outstanding, respectively		254		254
Additional paid-in capital		83,291,570		83,291,570
Accumulated other comprehensive (loss)		(5,544,000)		(4,620,000)
Deficit accumulated during the development stage		(77,595,824)		(77,537,397)
Total Stockholders’ Equity		152,445		1,134,872
Total Liabilities and Stockholders’ Equity	$	252,361	$	1,176,100

The accompanying notes are an integral part of these unaudited financial statements.

F-1

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VIRTUAL MEDICAL INTERNATIONAL, INC. Formerly QE Brushes, Inc. Statements of Income and Expenses Unaudited

(Formerly QE Brushes, Inc.)

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2011		2010		2011		2010
Revenue
Consulting	$	124,235	$	-	$	124,235	$	-
Billing		27,015		-		27,275		-
Total revenue		151,250		-		151,510		-

OPERATING EXPENSES:
Legal fees		9,682		13,588		22,676		26,484
Accounting fees		3,830		3,830		24,595		15,919
Office expense		3,670		1,019		3,802		1,965
License and fees		825		-		7,885		2,581
Consulting and outside services		21,991		2,002,734		37,316		2,005,700
Meals and entertainment		241		-		241		-
Travel		218		708		218		2,315
Website		149		-		2,438		-
Loss on disposal of inventory		-		14,114		-		14,114
Total operating expenses		40,606		2,035,993		99,171		2,069,078

OPERATING INCOME (LOSS)		110,644		(2,035,993)		52,339		(2,069,078)

OTHER EXPENSES:
Interest expense		(216)		-		(339)		-
Total other expenses		(216)		-		(339)		-

NET INCOME (LOSS) BEFORE OTHER COMPREHENSIVE LOSS		110,428		(2,035,993)		52,000		(2,069,078)

OTHER COMPREHENSIVE LOSS

Unrealized loss in investments available for sale		(151,200)		(2,940,000)		(1,075,200)		(2,940,000)
Total comprehensive loss		(151,200)		(2,940,000)		(1,075,200)		(2,940,000)

COMPREHENSIVE INCOME (LOSS)	$	(40,772)	$	(4,975,993)	$	(1,023,200)	$	(5,009,078)

Weighted average number of shares		25,367,541		10,189,565		25,367,541		9,101,868
Weighted average number of shares, diluted		69,847,041		10,189,565		69,847,041		9,101,868
Basic net income (loss) per share	$	0.00	$	(0.20)	$	0.00	$	(0.23)
Basic and diluted net income (loss) per share	$	0.00	$	(0.20)	$	0.00	$	(0.23)

(A Development Stage Company)

Statements of Expenses

(Unaudited)

										From Inception
										(July 19, 2007)
		Three Months Ended				Six Months Ended				Through
		June 30,				June 30,				June 30,
		2011		2010		2011		2010		2011
INCOME:		260		-		260		-		260
OPERATING EXPENSES:
Legal fees	$	8,380	$	11,788	$	12,994	$	12,898	$	89,850
Accounting fees		12,210		8,589		20,765		12,089		66,141
Office expense		131		280		131		946		6,239
Interest expense		123		-		123		-		123
License and fees		44		1,579		7,060		2,581		12,968
Consulting		15,325		1,790		15,325		2,965		42,274,374
Travel		-		1,605		-		1,606		2,315
Product development costs		-		-		-		-		25,271
Website		2,289		-		2,289		-		2,289
Loss on disposal of inventory		-		-		-		-		14,114
Total operating expenses		38,502		25,631		58,687		33,085		42,493,684
OPERATING LOSS		(38,242)		(25,631)		(58,427)		(33,085)		(42,493,424)
IMPAIRMENT ON LONG LIVED ASSET		-		-		-		-		(35,102,400)
NET LOSS BEFORE OTHER COMPREHENSIVE LOSS		(38,242)		(25,631)		(58,427)		(33,085)		(77,595,824)
OTHER COMPREHENSIVE LOSS
Unrealized loss in investments available for sale		(252,000)		-		(924,000)		-		(5,544,000)
Total comprehensive loss		(252,000)		-		(924,000)		-		(5,544,000)
NET LOSS	$	(290,242)	$	(25,631)	$	(982,427)	$	(33,085)	$	(83,139,824)
Weighted average number of shares		14,453,953		7,832,363		14,453,953		7,347,624
Basic net loss per share	$	(0.02)	$	(0.00)	$	(0.07)	$	(0.00)

The accompanying notes are an integral part of these unaudited financial statements.

F-2

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VIRTUAL MEDICAL INTERNATIONAL, INC. Formerly QE Brushes, Inc. Statements of Cash Flows Unaudited

(Formerly QE Brushes, Inc.)

					Nine Months Ended
					September 30,
					2011		2010
Cash Flows From Operating Activities
	Net Income (loss)			$	52,000	$	(2,069,079)

	Adjustments to reconcile net income (loss) to net cash
		used in operating activities:
		Common stock issued for services			-		2,001,500

	Changes in assets and liabilities:
		Accounts receivable			(111,224)		-
		Accounts payable and accrued expenses			17,514		-
		Consulting payable			3,466		(142)

			Total Cash Used For Operating Activities		(38,244)		(67,721)

Cash Flows From Financing Activities

	Notes payable				7,837		-
	Notes payable - related party				30,987		19,468

			Total Cash Provided by Financing Activities		38,824		19,468

			Net Increase (Decrease) in Cash		580		(48,253)

			Cash at Beginning of Period		100		48,253

			Cash at End of Period	$	680	$	-

Supplemental Disclosure of Cash Flow Information
		Interest paid		$	216	$	31
		Income taxes paid		$	-	$	-

Non-Cash transactions from investing and financing activities
		Asset purchase agreement		$	-	$	5,796,000
		Mark to market AFSS		$	1,075,200	$	2,940,000

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

									From Inception
									(July 19, 2007)
					Six Months Ended				Through
					June 30,				June 30,
					2011		2010		2011
Cash Flows From Operating Activities
	Net Loss			$	(58,427)	$	(33,085)	$	(77,595,824)
	Adjustments to reconcile net loss to net cash
		used in operating activities:
		Common stock issued for services			-		1,500		42,261,094
		Impairment of long lived asset			-		-		35,102,400
	Changes in assets and liabilities:
		Prepaid expenses			-		(14,114)		142
		Accounts payable			23,702		2,172		45,221
			Total cash used in operating activities		(34,725)		(43,527)		(186,967)
Cash Flows From Financing Activities
	Sale of common stock to founder				-		-		3,775
	Notes payable - related party				34,986		-		54,553
	Proceeds from sale of common stock				-		-		129,000
			Total cash provided by financing activities		34,986		-		187,328
			Net Increase (Decrease) in Cash		261		(43,527)		361
			Cash at Beginning of Period		100		48,253		-
			Cash at End of Period	$	361	$	4,726	$	361
Supplemental Disclosure of Cash Flow Information
		Interest paid		$	-	$	-	$	31
		Income taxes paid		$	-	$	-	$	-
Non- Cash transactions from investing and financing activities
		Asset purchase agreement		$	-	$	-	$	5,796,000
		Mark to market AFSS		$	924,000	$	-	$	5,292,000
		Acquisition of subsidiary		$	-	$	-	$	35,102,165

F-3

The accompanying notes are an integral part of these unaudited financial statements.

-5-

VIRTUAL MEDICAL, INTERNATIONAL

(FORMERLY QE BRUSHES, INC.)

(ANOTES ~~DEVELOPMENT~~TO ~~STAGE~~UNAUDITED ~~COMPANY)~~FINANCIAL STATEMENTS

~~NOTES~~NOTE TO1 ~~FINANCIAL~~– ~~STATEMENTS~~DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

~~(Unaudited)~~Description of Business

~~NOTE~~Virtual 1Medical —International, ~~BASIS~~Inc., OFformerly ~~PRESENTATION~~known as QE Brushes, Inc. (the predecessor name of the corporation) was incorporated in the state of Nevada on July 19, 2007, for the purpose of developing, manufacturing and selling toothbrushes designed specifically for dogs and cats. Subsequently, the board of directors and shareholders decided to change the business direction and the name of the company. On August 26, 2010, the name was officially changed to Virtual Medical International, Inc.

The is in the business of medical education through the internet, and will seek to develop and or acquire websites that are designed to convey to patients the risks and benefits of medical treatments in an easy to understand, yet comprehensive fashion. By using these services, patients will be able to make more informed decisions regarding their care and treatment thereby decreasing risk of a misinformed malpractice suit against a physician or a hospital.

This decrease in risk will result in a decrease in the overall cost to malpractice liability insurance companies, which represent our primary compensation targets. The company also plans to create virtual waiting rooms where patients will be able to see physicians online twenty four hours a day.

Basis of Presentation

The unaudited financial statements of Virtual Medical International, Inc. (hereafter referred to as “VMI” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended December 31, 2010, included in the Company’s Form 10-K.

The financial statements included herein reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year ended December 31, 2011.

Reclassifications

Certain reclassifications have been made to prior period’s balances to conform to classifications used in 2011.

NOTE 2. – DESCRIPTION OF BUSINESS

Virtual Medical International, Inc., formerly known as QE Brushes, Inc. (the predecessor name of the corporation) was incorporated in Nevada on July 19, 2007, for the purpose of developing, manufacturing and selling toothbrushes designed specifically for dogs and cats. Subsequently, the board of directors and shareholders decided to change the business direction and the name of the company. On August 26, 2010, the name was officially changed to Virtual Medical International, Inc.

The Company plans to be in the business of medical education through the internet, and will seek to develop and or acquire websites that are designed to convey to patients the risks and benefits of medical treatments in an easy to understand, yet comprehensive fashion. By using these services, patients will be able to make more informed decisions regarding their care and treatment thereby decreasing risk of a misinformed malpractice suit against a physician or a hospital.

NOTE 3. – GOING CONCERN

The company has incurred net losses from the date of inception (July 19, 2007) through June 30, 2011, and has generated minimal revenue. Currently the company has minimal cash and will have to raise additional capital through the sale of equity securities.

F-4

-6-

VIRTUAL MEDICAL, INTERNATIONAL

(FORMERLY QE BRUSHES, INC.)

(ANOTES ~~DEVELOPMENT~~TO ~~STAGE~~UNAUDITED ~~COMPANY)~~FINANCIAL STATEMENTS

~~NOTES~~NOTE TO2 ~~FINANCIAL~~– ~~STATEMENTS~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~(Unaudited)~~Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates used herein include those relating to management’s estimate of market value of accounts receivable, investments and contracts. It is reasonably possible that actual results could differ from those and other estimates used in preparing these financial statements and such differences could be material.

~~These~~Accounts ~~conditions~~Receivable and ~~uncertainties~~Revenue ~~raise~~Recognition ~~substantial~~– ~~doubt~~The asCompany torecognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the ~~Company’s~~sales ~~ability~~price is fixed or determinable, and collectability is reasonably assured. The company earns consulting fees by providing medical education through the internet which explains to ~~continue~~patients asthe arisks ~~going~~and ~~concern~~benefits of medical treatments. The ~~financial~~Company ~~statements~~also doearns ~~not~~revenues ~~include~~from ~~any~~billing ~~adjustments~~and ~~that~~collecting ~~might~~fees befrom ~~necessary~~the ifinsurance ~~VMI~~companies isfor ~~unable~~services toprovided ~~continue~~by asDoctor’s afor ~~going~~doctor ~~concern~~reports and use of in office web-based consulting.

~~NOTE~~For 4the consulting fees VMI performs 100% of the services; thus, is entitled to 100% of revenue earned. The –recognition ~~STOCKHOLDERS’~~occurs ~~EQUITY~~when the company provides consultation to patients. The Company estimates that it will receive on average 30% of the total amount initially billed for the consulting to Patients. Accordingly, the Company reports only the net expected collectible amount, both with respect to revenue and accounts receivable. As the Company develops an experience rate as to the actual percentage of amounts billed that is collected the revenue recognition percentage will be adjusted accordingly. Any change in revenue recognized as a result of changes in the accounts receivable collection rate will be recorded in the period of the adjustment.

~~The~~In ~~accumulated~~regards ~~other~~to ~~comprehensive~~billing ~~loss~~revenue, ~~account~~the ~~was~~Company ~~charged~~has ~~$5,544,000~~multiple agreements with Doctors’ whereby VMI will bill insurance companies for ~~the~~Doctor ~~decrease~~Reports inand ~~value~~usage of ~~the~~in ~~investment~~house inweb ~~securities~~based ~~available~~consulting. ~~for~~Based ~~sale~~on (1arrangements,~~680,000~~ ~~shares~~VMI ofis ~~common~~entitled ~~stock~~to 50% of ~~Entertainment~~the ~~Arts~~billings ~~Research,~~collected ~~Inc~~from the insurance companies.) The company recognizes revenue when VMI collects from the insurance companies.

~~NOTE~~Consulting 5.and outside services expense and related consultants payable – ~~RELATED~~In ~~PARTY~~many cases the Company incurs a liability to the specific doctor for which the consulting services are rendered through. The consultant is entitled to receive 50% of the net amount collected for the consulting services.

~~The~~Development ~~current~~Stage – ~~CEO~~From the date of ~~VMI~~inception, ~~Frank~~July ~~D’ Ambrosio has advanced WMI $~~19,~~567~~ 2007 through June 30, 2011. ~~This~~the ~~amount~~Company ~~bears~~was noin ~~interest,~~the isdevelopment ~~unsecured~~stage as defined in ASC 915, “Accounting and ~~due~~Reporting onby ~~demand~~Development Stage Enterprises”. As ~~There~~a ~~was~~result ~~not~~of acontracts ~~cash~~with ~~advance~~Doctor’s to ~~VMI,~~perform ~~rather~~consulting ~~Frank~~services D’to ~~Ambrosio~~patients ~~caused~~VMI ~~various~~has ~~invoices~~begun to begenerate ~~paid~~revenue onfrom ~~behalf~~operations ofand ~~VMI.~~has emerged from the development stage

During the first quarter ended March 31, 2011, VMI borrowed $34,986 from two shareholders of the company; Marc Stein advanced $4,000 and Nicholas D’Ambrosio advanced $30,986. These advances are unsecured, due on demand, and bear 2% interest.

F-5

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VIRTUAL MEDICAL, INTERNATIONAL

(FORMERLY QE BRUSHES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – GOING CONCERN

The Company has accumulated deficit as of September 30, 2011, and has generated minimal revenue. Currently the company has minimal cash and will have to raise additional capital through the sale of equity securities.

These conditions and uncertainties raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if VMI is unable to continue as a going concern.

NOTE 4 – STOCKHOLDERS’ EQUITY

The accumulated other comprehensive loss account was charged $5,695,200 for the decrease in value of the investment in securities available for sale (1,680,000 shares of common stock of Entertainment Arts Research, Inc.).

NOTE 5 – RELATED PARTY

The current CEO of VMI, Frank D’ Ambrosio advanced VMI $19,567 through September 30, 2011. This amount bears no interest, is unsecured and due on demand. There was not a cash advance to VMI, rather Frank D’ Ambrosio paid various invoices on behalf of VMI.

As of September 30, 2011, Marc Stein advanced $4,000 and Nicholas D’Ambrosio advanced $26,987. These advances are unsecured, due on demand, and bear 2% interest.

-8-

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section of the quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results of our predictions.

We are a start-up corporation and have not yet generated or realized any revenues from our business operations. Our auditors have issued a going concern opinion on the financial statements for the year ended December 31, 2010. The Company has now begun to generate limited revenue.

Results of Operations

During the ~~six~~nine months ended ~~June~~September 30, 2011, we had revenues of $~~260~~151,510 and incurred operating expenses of $5899,~~427~~171, which were primarily legal, accounting and consulting fees. During the comparable ~~three~~nine month period ended ~~June~~September 30, 2010, the Company had no revenues and incurred operating expenses of $332,~~085~~069,078, which primarily consisted of legal, accounting and license fees.

For the period ending ~~June~~September 30, 2011, the Company experienced an unrealized loss in investments available for sale in the amount of $~~924~~1,~~000~~075,200 as a result of a decline in the market value of the investment. There ~~were~~was noa unrealized losses from investments of $2,940,000 for the period ending ~~June~~September 30, 2010.

We own and operate two public portal websites: Explain My Surgery.com and Explain My Chiropractic Care.com. The purpose of each site is to provide patients with an easy to understand, interactive information system that educates patients, allows them to understand the risks, benefits and alternatives to surgical or chiropractic intervention. Prior to December 2010, we were engaged in the business of manufacturing and selling toothbrushes specifically for use by pet owners to clean canine and feline mouths. We never generated any revenues from the sale of toothbrushes.

Financial Condition

Cash remained virtually unchanged from December 31, 2010 to ~~June~~September 30, 2011, increasing from $100 to $~~361~~680. Current operating expenses are paid through borrowings from a related party. Accounts payable increased from $21,661 as of December 31, 2010 to $4539,~~363~~175 as of ~~June~~September 30, 2011. In order to pay current operating expenses, the Company borrowed $3450,~~986~~554 from ~~friends~~related parties of the Company~~’s president~~. The Company also owns 1,680,000 shares of common stock of Entertainment Arts, Inc., which trades on the over-the-counter pink sheets. The market price of the stock was $.1506 per share on ~~June~~September 30, 2011, which resulted in a market value of $~~252~~100,~~000~~800. The price dropped by almost 5060% from the previous quarter. The common stock of Entertainment Arts, Inc. is thinly traded and Virtual medical does not intend to sell this stock in the short-term.

Liquidity

The Company has limited capital resources and may have to rely upon the additional sale of equity securities in order to continue in business. There is no assurance that financing, whether debt or equity, will be available to the Company at any particular time, or could be obtained on terms satisfactory to the Company.

Our common stock is thinly traded on the Bulletin Board operated by the Financial Industry Regulatory Authority (FINRA).

-89-

Capital Resources

The Company owns no property or assets other than 1,680,000 restricted shares of common stock with a current market price of $0.1506 per shares or approximately $~~252~~100,~~000~~800.

Contractual Obligations

	Payments due by periods
Obligations	Total	Less than	1-3 Years	3-5 Years	More than
		1 year			5 years
Long-Term Debt Obligations	-0-	-0-	-0-	-0-	-0-
Capital (Finance) Lease Obligations	-0-	-0-	-0-	-0-	-0-
Operating Lease Obligations	-0-	-0-	-0-	-0-	-0-
Purchase Obligations	-0-	-0-	-0-	-0-	-0-
Other Long Term Liabilities	-0-	-0-	-0-	-0-	-0-
Total	-0-	-0-	-0-	-0-	-0-

Changes in Accounting Policies

We did not change our accounting policies during 2011 or 2010.

Off-Balance Sheet Arrangements

During the ~~six~~nine months ended ~~June~~September 30, 2011, we did not have any off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES.

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission 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. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.

The material weakness relates to the monitoring and review of work performed by our limited accounting staff in the preparation of financial statements, footnotes and financial data provided to our independent registered public accounting firm in connection with the annual audit. More specifically, the material weakness in our internal control over financial reporting is due to the fact that:

The Company lacks proper segregation of duties. We believe that the lack of proper segregation of duties is due to our limited resources.

The Company does not have a comprehensive and formalized accounting and procedures manual.

-910-

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 5. OTHER INFORMATION.

On July 8, 2011, David Hostelley resigned as our principal financial officer, principal accounting officer, treasurer and was replaced in these positions by Frank d’Ambrosio, our current president, principal executive officer and director. This matter was supposed to be reported on Form 8-K on or before July 14, 2011, but was not.

ITEM 6. EXHIBITS.

		Incorporated by reference
Exhibit	Document Description	Form	Date	Number	Filed herewith
3.1	Articles of Incorporation.	S-1	3/16/09	3.1
3.2	Bylaws.	S-1	3/16/09	3.2
4.1	Specimen Stock Certificate.	S-1	3/16/09	4.1
10.1	Consulting Agreement – Greg Ruff.	8-K	9/16/10	10.1
10.2	Consulting Agreement – Robert Tassinari.	8-K	9/16/10	10.2
10.3	Agreement with Entertainment Arts Research.	8-K	9/16/10	10.1
10.4	Agreement with Entertainment Arts Research.	8-K	12/10/10	10.1
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
99.1	Audit Committee Charter.	10-K	4/12/10	99.1
99.2	Disclosure Committee Charter.	10-K	4/12/10	99.2
101.INS	XBRL Instance Document.				X
101.SCH	XBRL Taxonomy Extension – Schema.				X
101.CAL	XBRL Taxonomy Extension – Calculations.				X
101.DEF	XBRL Taxonomy Extension – Definitions.				X
101.LAB	XBRL Taxonomy Extension – Labels.				X
101.PRE	XBRL Taxonomy Extension – Presentation.				X

-1011-

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this ~~22nd~~30th day of ~~August~~November, 2011.

	VIRTUAL MEDICAL INTERNATIONAL, INC.
	(the “Registrant”)


	BY:	FRANCIS D’AMBROSIO
		Francis D’Ambrosio
		Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

-11-

EXHIBIT INDEX

		Incorporated by reference
Exhibit	Document Description	Form	Date	Number	Filed herewith
3.1	Articles of Incorporation.	S-1	3/16/09	3.1
3.2	Bylaws.	S-1	3/16/09	3.2
4.1	Specimen Stock Certificate.	S-1	3/16/09	4.1
10.1	Consulting Agreement – Greg Ruff	8-K	9/16/10	10.1
10.2	Consulting Agreement – Robert Tassinari	8-K	9/16/10	10.2
10.3	Agreement with Entertainment Arts Research	8-K	9/16/10	10.1
10.4	Agreement with Entertainment Arts Research	8-K	12/10/10	10.1
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
99.1	Audit Committee Charter.	10-K	4/12/10	99.1
99.2	Disclosure Committee Charter.	10-K	4/12/10	99.2

-12-

EXHIBIT INDEX

		Incorporated by reference
Exhibit	Document Description	Form	Date	Number	Filed herewith
3.1	Articles of Incorporation.	S-1	3/16/09	3.1

3.2	Bylaws.	S-1	3/16/09	3.2

4.1	Specimen Stock Certificate.	S-1	3/16/09	4.1

10.1	Consulting Agreement – Greg Ruff.	8-K	9/16/10	10.1

10.2	Consulting Agreement – Robert Tassinari.	8-K	9/16/10	10.2

10.3	Agreement with Entertainment Arts Research.	8-K	9/16/10	10.1

10.4	Agreement with Entertainment Arts Research.	8-K	12/10/10	10.1

31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

99.1	Audit Committee Charter.	10-K	4/12/10	99.1

99.2	Disclosure Committee Charter.	10-K	4/12/10	99.2

101.INS	XBRL Instance Document.				X

101.SCH	XBRL Taxonomy Extension – Schema.				X

101.CAL	XBRL Taxonomy Extension – Calculations.				X

101.DEF	XBRL Taxonomy Extension – Definitions.				X

101.LAB	XBRL Taxonomy Extension – Labels.				X

101.PRE	XBRL Taxonomy Extension – Presentation.				X

-13-

Filing Compare · VIRTUAL MEDICAL INTERNATIONAL, INC.