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 January 31, 2011

 [  ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from _____ to _____

Commission File Number:  000-52827

OMNICITY CORP.
(Exact name of registrant as specified in its charter)

(765) 570-4221
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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 [   ]

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 [   ]     No [   ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [  ]    No   [X]   

Indicate the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: As of May 10, 2011, there were 43,745,414 shares of common stock, par value $0.001, outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Omnicity Corp.
Consolidated Balance Sheets
As at January 31, 2011 (Unaudited) and July 31, 2010

(See accompanying notes to these consolidated financial statements)

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Consolidated Statements of Operations
For the Three Months and Six Months Ended January 31, 2011 and 2010
(Unaudited)

(See accompanying notes to these consolidated financial statements)

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Consolidated Statements of Cash Flows
For the Six Months Ended January 31, 2011 and 2010
(Unaudited)

(See accompanying notes to these consolidated financial statements)

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Omnicity Corp.
Notes to the Consolidated Financial Statements

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

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements that involve risks and uncertainties.  Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology.  In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties outlined in this report under “Risk Factors”.  These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this report.  Forward-looking statements in this report include, among others, statements regarding:

• our capital needs;
• business plans; and
• expectations. 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.  Some of the risks and assumptions include:

• our need for additional financing;
• our limited operating history;
• our history of operating losses;
• the competitive environment in which we operate;
• changes in governmental regulation and administrative practices;
• our dependence on key personnel;
• conflicts of interest of our directors and officers;
• our ability to fully implement our business plan;
• our ability to effectively manage our growth; and
• other regulatory, legislative and judicial developments.

We advise the reader that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf.  Important factors that you should also consider, include, but are not limited to, the factors discussed under “Risk Factors” in this report.

The forward-looking statements in this report are made as of the date of this report and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.

REFERENCES

As used in this quarterly report: (i) the terms “we”, “us”, “our”, “Omnicity” and the “Company” mean Omnicity Corp.; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the United States  Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the United States Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

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Plan of Operations

Our business plan is to be a rural wireless internet service provider in the United States through a consolidation strategy and organic growth of all acquired business units and to partner with REMCs, Telcos and local governments for nationwide marketing. We also plan to partner with regional and national telecommunication companies for the delivery of voice services and complete negotiations and logistics of satellite television resell agreements. We further plan to partner with local governments to provide essential services, including mobile internet for emergency mobile communications, fire and police and to establish new utility applications such as automated meter reading. We plan to bring WISP based services to rural America through three distinct market channels: (1) Telco and Electric partnerships, (2) strategic acquisitions and (3) local government and private enterprise partnerships.

Developing relationships with REMCs and "value added" institutional services and facilities we provide for municipalities and local governments, we plan to organize and consolidate within the rural broadband market initially in Indiana and Ohio, and then in the Midwestern United States and ultimately nationwide. Collaborations with both the REMCs and municipalities may act as effective barriers for competition and provide additional sources of revenue and customer service for the REMCs and municipalities as well as income and cash flow for our company. The bundling of broadband services, including internet, voice, and video, in partnership with rural electric and/or municipal services provides an opportunity to imbed, cross promote, and extend services in collaboration with these institutional providers.

Our plan of operations for the next twelve months is to:

• develop and expand, through organic growth, the subscriber base through our sales and marketing programs, to increase our number of  sales teams in the field, and to launch new marketing initiatives tailored to specific markets;
• acquire, and transition into our operations assets of competing WISP operators and expand our network in Indiana , Ohio, and other states, and continue expansion into all of Midwest USA by identifying strategic regional acquisitions;
• launch the next generation of WiMax equipment in all new builds and in all rebuild opportunities to standardize Omnicity networks with carrier grade deployments;
• increase operational cash flow to over $250,000 per month and build a liquidity floor under operations of $200,000 minimum by  July 31, 2011;
• partner with   local and State governments, Rural Telcos,  Original Equipment Manufacturers "OEMs", and REMCs to efficiently and cost effectively expand our network across rural America; and
• develop and expand our service offerings to become a total broadband solution including VOIP and video.

Future Financing Requirements

At January 31, 2011, we had cash of $31,000 and a working capital deficit of $4,187,000.  A total of $500,000 was loaned to the Company by two directors during the six months ended January 31, 2011. We estimate that approximately $6 million will be required during the remainder of the year ended July 31, 2011 to finance our short-term working capital deficit and to finance the expansion of, and the addition of subscribers through acquisition to, our existing and to be acquired network infrastructures. A total of $1 million will be required for working capital purposes, $1.5 million for organic growth and $3.5 million for acquisitions. Upon closing our second large acquisition in Ohio at the end of March, 2010, and with a reduction of employees, we became operationally cash flow positive and will require no additional funds to finance operational deficits. We will continue to seek a combination of equity and long-term debt financing as well as other traditional cash flow and asset backed financing to meet our financing needs and to reduce our overall cost of capital. Additionally, in order to accelerate our growth rate and to finance general corporate activities, we may supplement our existing sources of funds with financing arrangements at the operating system level or through additional borrowings, joint ventures or other off balance sheet arrangements. As a further capital resource, we may sell or lease certain wireless rights or assets from our portfolio as appropriate opportunities become available. However, there can be no assurance that we will be able to obtain any additional financing, on acceptable terms or at all.

Current Financing Arrangements

We are currently in negotiations with various individuals to raise approximately $2 million in capital through the sale of our common stock. We anticipated these agreements will be consummated during the upcoming quarter with funding to occur in incremental traunches post closing. Proceeds from the potential aforementioned sale will primarily be utilized to fund future acquisitions.

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We have also entered into discussions to raise additional capital through a private bond issuance. Proceeds from the bond fund will be designated to accelerate network build-outs and new subscriber deployments in several counties and other jurisdictions in the State of Ohio. We anticipate this process to extend throughout a minimum of twelve months.

Results of Operations

Three months ended January 31, 2011 and 2010

The following table sets forth certain financial information relating to the Company for the three months ended January 31, 2011 (“2011”) and January 31, 2010 (“2010”). The financial information presented has been rounded to the nearest thousand $ and is derived from the unaudited interim consolidated financial statements included under Item 1 in this Form 10-Q.

The following discussion should be read in conjunction with the unaudited interim consolidated financial statements (including the notes thereto) included under Item 1 in this Form 10-Q.

Revenues

The Company's revenues for the 2^nd quarter of 2011 increased by $570,000 to $1,206,000 (2^nd quarter 2010 - $636,000) an increase of 90%. These increases were achieved mainly through our Lightspeed and BrightChoice Ohio acquisitions and through organic growth. The number of active subscribers was 10,600 as at January 31, 2011. This subscriber count does not differentiate a subscriber, for example, one school, hospital or business subscriber is counted as one subscriber. On an equivalent subscriber unit basis we ended at 11,700 as at January 31, 2011. This is important to note because going forward the Company will be adding schools, hospitals and business accounts at an accelerated rate. The Company receives revenue mainly from monthly service and modem rental fees collected from its subscribers. The Company’s installation revenue, while representing 4% of revenues currently, is expected to increase rapidly as we complete current financing arrangements and, as a result, we expand our marketing efforts. The Company also receives web hosting fees, fiber construction project fees and late fees which together represent less than 1% of total revenue. The Company expects revenues to increase rapidly as a result of organic growth, planned acquisitions and increase in average revenue per unit (“ARPU”).

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Operational Expenses

Operational expenses include service costs, plant and signal delivery, marketing and sales, general and administration and salaries and benefits, stock based compensation and depreciation and amortization.

Service costs include the cost of billing and collection, the cost of buying DSL service and the cost of providing Lifeline and satellite services in Ohio. During the 2^nd quarter of 2011, service costs increased by $131,000 to $144,000 (2^nd quarter 2010 - $13,000). This increase was due mainly to the acquisition of Bright Choice, Inc. in Ohio. Approximately two-thirds of Bright Choice revenue comes from satellite and Lifeline services which started in April, 2010. The increase also comes from an increase in the number of customers accounts offset by a decrease in the cost of collection.

Plant and signal delivery expenses include the rental of towers, the cost of internet transmission (“backhaul”) the cost of installing equipment on the towers and at customers’ premises (“housedrops”) and the operating lease costs of housedrop or tower equipment. We currently have a portfolio of transmission rights covering 452 tower sites located principally in Indiana and Ohio. These markets represent approximately 434,000 households, approximately 369,000 of which are believed to be serviceable by line-of-sight transmissions from Omnicity antenna locations. During the 2^nd quarter of 2011, plant and signal delivery expenses increased by $78,000 to $396,000 (2^nd quarter 2010 - $318,000), an increase of 25%. The increase in revenues was 90% during this period. As subscribers are added to the network the incremental cost of providing our signal to that subscriber is lower. This increase was due mainly to the increase in the number of towers under rental arrangements, the amount of backhaul needed to service the increase in subscribers, the increase in tower and customer premises equipment being leased pursuant to operating lease arrangements and the increase in customer installations. Plant and signal delivery costs per customer will significantly decrease as the Company populates its towers with customers. The Company, on average, has a penetration of approximately 4% of homes passed whereas the minimum target penetration is at least 20% (>74,000 subscribers) which is the penetration rate in the Wabash REMC coverage area.

Marketing and sales expenses include REMC fees, advertising and preparation of marketing materials. During 2^nd quarter 2011, marketing and sales expenses decreased by $3,000 to $2,000 (2^nd quarter 2010 - $5,000). Marketing and sales expenses are expected to significantly increase during the balance of 2011 as the Company increases its marketing plan to significantly increase organic growth.   

General and administration expenses include professional fees (legal, audit, accounting and outside professional consulting), investor relations consulting fees, office expenses (including rent, property tax, utilities, telephone and insurance), travel and automobile, software fees and fees associated with late payments and bank charges. During the 2^nd quarter of 2011, general and administration expenses decreased by $80,000 to $150,000 (2^nd quarter 2010 - $230,000), a decrease of 35%. General and administration expenses are not expected to increase significantly during the remainder of 2011 in relation to revenue. As the Company grows, general and administration expenses become significantly lower on a percentage of revenue basis.

Salaries and benefits for the 2^nd quarter of 2011 increased by $13,000 to $513,000 (2^nd quarter 2010 - $500,000) an increase of 3% while revenue increased by 90%. This increase is mainly due to a small net gain of essential support personnel for acquired properties over the last 12 months. Staffing levels have remained constant at around 49 full-time employees as at January 31, 2011. The Company does not expect to increase its number of employees significantly during 2011, except for certain key people to be brought on as a result of acquisitions and increasing the number of marketing teams we have in current and new regions brought on through acquisitions. The Company continues to upgrade its employees as better trained personnel become available through acquisitions.

Depreciation and amortization for the 2^nd quarter of 2011 increased by $184,000 to $331,000 (2^nd quarter 2010 - $147,000). This increase was attributed to an increase in amortization of customers’ relationships of $53,000 to $123,000 (2^nd quarter 2010 - $70,000) and an increase in depreciation of our network system, automobiles, software and office equipment of $131,000 to $208,000 (2^nd quarter 2010 - $77,000).

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Other Income and Expense

Interest expense for the 2^nd quarter of 2011 increased by $64,000 to $104,000 (2^nd quarter 2010 - $40,000). The increase was a result of increased short-term and long-term debt levels. The Company may selectively issue short-term and long-term notes as part consideration of planned acquisitions.

Financing expenses are costs associated with consultants hired to secure additional debt and/or equity financing for the Company. Once equity financing is secured the related cost will reduce the proceeds of the equity instrument issued. Financing expense for 2nd quarter 2011 increased by $5,000 to $14,000 (2^nd quarter 2010 - $9,000). The increase was a result of the Company relying more upon financial consultants to assist the Company in raising capital.

Net Loss

The net loss for the 2^nd quarter of 2011 decreased by $216,000 to $418,000 (2^nd quarter 2010 - $634,000). This decrease in loss was due to the 90% increase in revenues while expenses increased at a lower rate and will continue to increase at an incrementally lower rate, as a percentage of revenue, as we expand through acquisitions and organic growth. To highlight this trend our first quarter earnings before interest, income taxes, depreciation and amortization (“EBITDA”) was positive $40,000 and our 2^nd quarter was $30,000 while our 4^th quarter of 2010 was negative $17,000.

Six months ended January 31, 2011 and 2010

The following table sets forth certain financial information relating to the Company for the six months ended January 31, 2011 (“2011”) and January 31, 2010 (“2010”). The financial information presented has been rounded to the nearest thousand $ and is derived from the unaudited interim consolidated financial statements included under Item 1 in this Form 10-Q.

The following discussion should be read in conjunction with the unaudited interim consolidated financial statements (including the notes thereto) included under Item 1 in this Form 10-Q.

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Revenues

The Company's revenues for 2011 increased by $1,215,000 to $2,468,000 (2010 - $1,253,000) an increase of 97%. These increases were achieved mainly through our Lightspeed and BrightChoice Ohio acquisitions and through organic growth. The number of active subscribers was 10,600 as at January 31, 2011. This subscriber count does not differentiate a subscriber, for example, one school, hospital or business subscriber is counted as one subscriber. On an equivalent subscriber unit basis we ended at 11,700 as at January 31, 2011. This is important to note because going forward the Company will be adding schools, hospitals and business accounts at an accelerated rate. The Company receives revenue mainly from monthly service and modem rental fees collected from its subscribers. The Company’s installation revenue, while representing 4% of revenues currently, is expected to increase rapidly as we complete current financing arrangements and, as a result, we expand our marketing efforts. The Company also receives web hosting fees, fiber construction project fees and late fees which together represent less than 1% of total revenue. The Company expects revenues to increase rapidly as a result of organic growth, planned acquisitions and increase in average revenue per unit (“ARPU”).

Operational Expenses

Operational expenses include service costs, plant and signal delivery, marketing and sales, general and administration and salaries and benefits, stock based compensation and depreciation and amortization.

Service costs include the cost of billing and collection, the cost of buying DSL service and the cost of providing Lifeline and satellite services in Ohio. During 2011, service costs increased by $206,000 to $233,000 (2010 - $27,000). This increase was due mainly to the acquisition of Bright Choice, Inc. in Ohio. Approximately two-thirds of Bright Choice revenue comes from satellite and Lifeline services which started in April, 2010. The increase also comes from an increase in the number of customers accounts offset by a decrease in the cost of collection.

Plant and signal delivery expenses include the rental of towers, the cost of internet transmission (“backhaul”) the cost of installing equipment on the towers and at customers’ premises (“housedrops”) and the operating lease costs of housedrop or tower equipment. We currently have a portfolio of transmission rights covering 452 tower sites located principally in Indiana and Ohio. These markets represent approximately 434,000 households, approximately 369,000 of which are believed to be serviceable by line-of-sight transmissions from Omnicity antenna locations. During the 2011, plant and signal delivery expenses increased by $179,000 to $835,000 (2010 - $656,000), an increase of 27%. The increase in revenues was 97% during this period. As subscribers are added to the network the incremental cost of providing our signal to that subscriber is lower. This increase was due mainly to the increase in the number of towers under rental arrangements, the amount of backhaul needed to service the increase in subscribers, the increase in tower and customer premises equipment being leased pursuant to operating lease arrangements and the increase in customer installations. Plant and signal delivery costs per customer will significantly decrease as the Company populates its towers with customers. The Company, on average, has a penetration of approximately 4% of homes passed whereas the minimum target penetration is at least 20% (>74,000 subscribers) which is the penetration rate in the Wabash REMC coverage area.

Marketing and sales expenses include REMC fees, advertising and preparation of marketing materials. During 2011  marketing and sales expenses decreased by $4,000 to $4,000 ( 2010 - $8,000). Marketing and sales expenses are expected to significantly increase during the balance of 2011 as the Company increases its marketing plan to significantly increase organic growth.   

General and administration expenses include professional fees (legal, audit, accounting and outside professional consulting), investor relations consulting fees, office expenses (including rent, property tax, utilities, telephone and insurance), travel and automobile, software fees and fees associated with late payments and bank charges. During 2011, general and administration expenses decreased by $201,000 to $322,000 (2010 - $523,000), a decrease of 38%. General and administration expenses are not expected to increase significantly during the remainder of 2011 in relation to revenue. As the Company grows, general and administration expenses become significantly lower on a percentage of revenue basis.

Salaries and benefits for 2011 increased by $126,000 to $1,037,000 (2010 - $911,000) an increase of 14% while revenue increased by 97%. This increase is mainly due to a small net gain of essential support personnel for acquired properties over the last 12 months. Staffing levels have remained constant at around 49 full-time employees as at January 31, 2011. The Company does not expect to increase its number of employees significantly during 2011, except for certain key people to be brought on as a result of acquisitions and increasing the number of marketing teams we have in current and new regions brought on through acquisitions. The Company continues to upgrade its employees as better trained personnel become available through acquisitions.

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Depreciation and amortization for 2011 increased by $329,000 to $646,000 (2010 - $317,000). This increase was attributed to an increase in amortization of customers’ relationships of $106,000 to $246,000 (2010 - $140,000) and an increase in depreciation of our network system, automobiles, software and office equipment of $223,000 to $400,000 (2010 - $177,000).

Other Income and Expense

Interest expense for 2011 increased by $155,000 to $283,000 (2010 - $128,000). The increase was a result of increased short-term and long-term debt levels. The Company may selectively issue short-term and long-term notes as part consideration of planned acquisitions.

Financing expenses are costs associated with consultants hired to secure additional debt and/or equity financing for the Company. Once equity financing is secured the related cost will reduce the proceeds of the equity instrument issued. Financing expense for 2011 increased by $24,000 to $24,000 (2010 - $nil). The increase was a result of the Company relying more upon financial consultants to assist the Company in raising capital.

Net Loss

The net loss for 2011 decreased by $500,000 to $878,000 (2010 - $1,278,000). This decrease in loss was due to the 90% increase in revenues while expenses increased at a lower rate and will continue to increase at an incrementally lower rate, as a percentage of revenue, as we expand through acquisitions and organic growth. To highlight this trend our first quarter earnings before interest, income taxes, depreciation and amortization (“EBITDA”) was positive $40,000 and our 2^nd quarter was $30,000 while our 4^th quarter of 2010 was negative $17,000.

Liquidity and Capital Resources

The Company completed its acquisition of Omnicity, Incorporated on February 17, 2009. Prior to this the Company was a dormant early exploration stage company with no operations. Since then, the Company's acquisition and transition teams have acquired and folded in ten WISP's increasing its subscriber base from 1,800 to 11,700 as at January 31, 2011. See discussion under “Revenues” above for our increase in cash flow from our customers.  

Cash to Operating Activities

During the six months ended January 31, 2011, operating activities generated cash of $123,000 (2010 – used cash of $1,020,000). Our loss for 2011 was $878,000 (2010 - $1,278,000), which included: a non-cash outlay for interest expense accreted of $54,000 (2010 - $nil); expenses settled with equity or debt $115,000 (2010 - $nil); depreciation and amortization of $646,000 (2010 - $317,000); for a net cash outflow of $63,000 (2010 – net cash outflow of $950,000) before changes in working capital items. Our accounts receivable have increased by $41,000 (20109 – $7,000) due to our increase in customer base in Indiana during 2010 and Indiana and Ohio during 2011. Prepaid expenses increased by $14,000 (2010 – decreased by $69,000). Our accounts payable and accrued liabilities have increased by $241,000 (2010 – decreased by $131,000) due to our operations being partially financed by our creditors. We plan to decrease our reliance on creditor support as we secure additional financing. 

Cash to Investing Activities

Our business is a capital intensive business. Since inception, the Company has expended funds to lease or otherwise acquire transmission site rights in various locations and markets, to construct the existing network tower infrastructures and house drops to the customers’ premises and to finance initial operating losses. The Company intends to expand the existing systems and launch additional wireless systems and will require additional funds. The Company estimates that a launch by it of a wireless internet provider system in a typical new tower location will involve the expenditures for wireless internet system transmission equipment and incremental installation costs per subscriber for customer premise equipment. As a result of these costs, operating losses are likely to be incurred by a system during the roll-out period.

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During 2011, investing activities used net cash of $506,000 (2010 - $863,000). We acquired tower and customers’ premises equipment totalling $461,000 (2010 - $859,000). We increased our cost of customers’ relationships by $51,000 (2010 - $nil). 

Cash from Financing Activities

During the six months ended January 31, 2011, financing activities provided cash of $376,000 (2010 - $2,307,000). Proceeds of $nil (2010 - $1,020,000) was received from the issuance of common stock. During 2011, net proceeds of $500,000 (2010 - $102,000) were received from short-term loans, net of repayments and $62,000 (2010 - $1,543,000) from long-term debt. We repaid $186,000 (2010 - $358,000) of long-term debt and capital lease obligations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not required because we are a smaller reporting company.

Item 4. Controls and Procedures.

Greg Jarman our principal executive officer and Don Prest, our principal financial officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of the end of the period covered by this report, based on their evaluation of these controls and procedures required by paragraph (b) of Rules 13a-15 and 15d-15, due to the deficiencies in our internal control over financial reporting as described below. 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) under the Exchange Act.

Management believes that the material weaknesses set forth in items 1 and 2 above did not have an affect on the Company’s financial results.

The Company and its management will endeavor to correct the above noted weaknesses in internal control once it has adequate funds to do so. 

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended January 31, 2011 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 1. Legal Proceedings.

Current as of March 10, 2011:

The Company has been served with a Complaint filed with the Rush Circuit Court in the State of Indiana dated August 25, 2010. The plaintiff has made claims against the Company for failure to make required instalment payments that were due pursuant to promissory notes. The Company has recorded all debt relating to this claim as a current liability. On September 14, 2010 the Company filed an Appearance and Notice of Extension of Time to answer the Complaint. The Company filed and Answer and Counterclaim to this complaint.  This Answer denied certain allegations due to breach by the vendor of the Asset Purchase Agreement entered into. On February 23, 2011 the Company filed a revised Counterclaim with the Rush County Court. This Counterclaim includes counterclaims of breach, fraud, and conversion for various damages, including punitive damages, suffered by the Company. The Company expects to receive a favourable outcome. 

The Company has been served with a Complaint filed with the Rush Circuit Court in the State of Indiana dated September 1, 2010. The plaintiff has made claims against the Company for failure to make required instalment payments that were due pursuant to promissory notes. The Company has recorded all debt relating to this claim as a current liability. On September 14, 2010 the Company filed an Appearance and Notice of Extension of Time to answer the Complaints. The Company has filed an answer to this complaint and expects to receive a favourable outcome.

The Company has been served with a Complaint filed with the Holmes County Court in the State of Ohio dated September 16, 2010.  The plaintiff has made claims against the Company for failure to make required instalment payments that were due pursuant to promissory notes. The Company has recorded all debt relating to this claim as a current liability. On November 8, 2010 the Company filed an Answer and Counterclaim with the Holmes County Court. This Answer and Counterclaim includes counterclaims for various damages, including punitive damages, suffered by the Company and also seeks an injunction. The Company expects to receive a favourable outcome. 

Item 1A. Risk Factors.

Not required because we are a smaller reporting company.

Item 2.   Unregistered Sales of Equity Securities.

None.

Item 3.  Defaults Upon Senior Securities

Not required because we are a smaller reporting company.

Item 4.  (Removed and Reserved).

Item 5.  Other Information.

None.

Item 6.  Exhibits

The following exhibits are included with this Quarterly Report on Form 10-Q:

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SIGNATURES

In accordance with the requirements 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.

OMNICITY CORP.