##### Table of Contents



SECURITIES AND EXCHANGE COMISSION

Washington, D.C. 20549


FORM 10-QSB

[Mark One]

|  |  |                                                                                                                                     
|- |  | ------------------------------------------------------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended June 30, 2003

|  |  |                                                                                                                            
|- |  | ---------------------------------------------------------------------------------------------------------------------------
|o |  | 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: 0-25203

|                                              
|----------------------------------------------
|OmniComm Systems, Inc.                        
|(Name of Small Business Issuer in its Charter)

|                                             |  |                                           
|-------------------------------------------- |  | ------------------------------------------
|Delaware                                     |  | 11-3349762                                
|                                             |  |                                           
|State of Incorporation                       |  | IRS Federal Employer Identification Number
|                                             |  |                                           
|2555 Davie Road, Suite 110-B, Davie, Florida |  | 33317                                     
|                                             |  |                                           
|Address of Principal Office                  |  | Zip Code                                  

|                                           
|-------------------------------------------
|Registrants Telephone Number: 954.473.1254

Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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

The number of shares outstanding of each of the issuers classes of
equity as of June 30, 2003: 13,414,618 common stock $.001 par value,
4,215,224 Series A Preferred stock, $.001 par value, 200,000 Series B
Preferred Stock, $.001 par value, 337,150 Series C Preferred Stock, $.001
par value.

1



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TABLE OF CONTENTS



|                                    |                                                                    |                                                        |  |  |  |  |  | 
|----------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION      
|                                    | Item 1. Unaudited Consolidated Financial Statements               
|                                    |                                                                    | CONSOLIDATED BALANCE SHEETS                           
|                                    |                                                                    | CONSOLIDATED STATEMENTS OF OPERATIONS                 
|                                    |                                                                    | CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                                    |                                                                    | NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|                                    | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|                                    | ITEM 3. CONTROLS AND PROCEDURES                                   
|PART II OTHER INFORMATION          
|                                    | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                          
|SIGNATURES                         
|Certification of C.E.O.            
|Certification of C.F.O.            
|Section 906 Certification of C.E.O.
|Section 906 Certification of C.F.O.



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##### Table of Contents



FINANCIAL STATEMENTS

Table of Contents

|                                                                                                                |  |  |  | 
|--------------------------------------------------------------------------------------------------------------- |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                                   |  |  |  | 
|Item 1. Unaudited Consolidated Financial Statements                                                             |  |  |  | 
|Consolidated Balance Sheets                                                                                     |  |  |  | 
|Consolidated Income Statements                                                                                  |  |  |  | 
|Consolidated Statement of Cash Flows                                                                            |  |  |  | 
|Notes to Consolidated Financial Statements                                                                      |  |  |  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                   |  |  |  | 
|Item 3. Controls and Procedures                                                                                 |  |  |  | 
|PART II. OTHER INFORMATION                                                                                      |  |  |  | 
|Item 6. Exhibits and Reports on Form 8-K                                                                        |  |  |  | 
|SIGNATURES                                                                                                      |  |  |  | 
|CERTIFICATIONS                                                                                                  |  |  |  | 
|Exhibit 31.1 Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-oxley Act of 2002 |  |  |  | 
|Exhibit 31.2 Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-oxley Act of 2002 |  |  |  | 
|Exhibit 99.1 Certification Under Section 906 of Sarbanes-Oxley  CEO Cornelis F. Wit                            |  |  |  | 
|Exhibit 99.2 Certification Under Section 906 of Sarbanes-Oxley  CFO Ronald T. Linares                          |  |  |  | 

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##### Table of Contents












OMNICOMM SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |             |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | ----------- | ------------ | - | ---------- | ----------- | -
|                                                     |                                                                                                                                                                                                                       |   | June 30,    |             | December 31,
|                                                     |                                                                                                                                                                                                                       |   | 2003        |             | 2002        
|                                                     |                                                                                                                                                                                                                       |   |             |             |             
|                                                     |                                                                                                                                                                                                                       |   | (unaudited) |             |              |   |           
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |           
|ASSETS                                              
|CURRENT ASSETS                                       |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|                                                     | Cash                                                                                                                                                                                                                  |   | $           | 65,587      |              |   | $          | 194,677     |  
|                                                     | Accounts receivable                                                                                                                                                                                                   |   |             | 55,195      |              |   |            | 274,540     |  
|                                                     | Prepaid expenses                                                                                                                                                                                                      |   |             | 35,375      |              |   |            | 8,959       |  
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|                                                     | Total current assets                                                                                                                                                                                                  |   |             | 156,157     |              |   |            | 478,176     |  
|PROPERTY AND EQUIPMENT, net                          |                                                                                                                                                                                                                       |   | 199,856     |             |              |   | 261,736    |            
|OTHER ASSETS                                         |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|                                                     | Intangible assets, net                                                                                                                                                                                                |   |             | -0-         |              |   |            | -0-         |  
|                                                     | Other assets                                                                                                                                                                                                          |   |             | 12,997      |              |   |            | 12,997      |  
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|TOTAL ASSETS                                         |                                                                                                                                                                                                                       | $ | 369,010     |             |              | $ | 752,909    |            
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|LIABILITIES AND SHAREHOLDERS EQUITY                
|CURRENT LIABILITIES                                  |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|                                                     | Accounts payable and accrued expenses                                                                                                                                                                                 |   | $           | 1,096,423   |              |   | $          | 1,446,450   |  
|                                                     | Notes payable  current                                                                                                                                                                                               |   |             | 100,000     |              |   |            | 120,000     |  
|                                                     | Notes payable related party- current                                                                                                                                                                                  |   |             | 6,000       |              |   |            | 106,000     |  
|                                                     | Deferred revenue                                                                                                                                                                                                      |   |             | 342,932     |              |   |            | 322,520     |  
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|                                                     | Total current liabilities                                                                                                                                                                                             |   |             | 1,545,355   |              |   |            | 1,994,970   |  
|CONVERTIBLE DEBT                                     |                                                                                                                                                                                                                       |   | 450,000     |             |              |   | 450,000    |            
|NOTES PAYABLE, net of current portion                |                                                                                                                                                                                                                       |   | 755,926     |             |              |   | 485,926    |            
|NOTES PAYABLE RELATED PARTY, net of current portion  |                                                                                                                                                                                                                       |   | 396,644     |             |              |   | 196,644    |            
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|TOTAL LIABILITIES                                    |                                                                                                                                                                                                                       |   | 3,147,925   |             |              |   | 3,127,540  |            
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|COMMITMENTS AND CONTINGENCIES                        |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|SHAREHOLDERS EQUITY (DEFICIT)                       |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|                                                     | Undesignated preferred stock  $.001 par value. 4,022,500 shares
authorized, no shares issued and outstanding                                                                                                         |   |             | -0-         |              |   |            | -0-         |  
|                                                     | Series B convertible preferred stock,  $.001 par value. 230,000 shares
authorized, 200,000 and 200,000 issued and outstanding, respectively;
liquidation preference $2,000,000 and $2,000,000, respectively          |   |             | 200         |              |   |            | 200         |  
|                                                     | Series C convertible preferred stock,  $.001 par value. 747,500 shares
authorized, 337,150 and 307,650 issued and outstanding, respectively;
liquidation preference $3,371,500 and $3,076,500, respectively          |   |             | 337         |              |   |            | 308         |  
|                                                     | 5% Series A convertible preferred stock  $0.001 par value, 5,000,000
shares authorized; 4,215,224 and 4,215,224 issued and outstanding,
respectively; liquidation preference $4,215,224 and $4,215,224,
respectively |   |             | 4,215       |              |   |            | 4,215       |  
|                                                     | Common stock - 150,000,000 shares authorized, 13,414,618 and 12,018,719
issued and outstanding, after deducting 673,878 and 669,777 shares of
treasury stock, at $.001 par value, respectively                        |   |             | 14,040      |              |   |            | 12,640      |  
|                                                     | Additional paid in capital  preferred                                                                                                                                                                                |   |             | 9,203,352   |              |   |            | 8,938,117   |  
|                                                     | Additional paid in capital  common                                                                                                                                                                                   |   |             | 11,548,983  |              |   |            | 10,939,462  |  
|                                                     | Less: Treasury stock, cost method, 673,878 and 669,777 shares, respectively                                                                                                                                           |   |             | (299,861    | )            |   |            | (298,794    | )
|                                                     | Accumulated deficit                                                                                                                                                                                                   |   |             | (23,191,271 | )            |   |            | (21,897,111 | )
|                                                     | Deferred compensation                                                                                                                                                                                                 |   |             | (57,770     | )            |   |            | (72,528     | )
|                                                     | Subscriptions receivable                                                                                                                                                                                              |   |             | (1,140      | )            |   |            | (1,140      | )
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                 |                                                                                                                                                                                                                       |   | (2,778,915  | )           |              |   | (2,374,631 | )          
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |                                                                                                                                                                                                                       | $ | 369,010     |             |              | $ | 752,909    |            
|                                                     |                                                                                                                                                                                                                       |   |             |             |              |   |            |            

See accompanying summary of accounting policies and notes to financial statements.

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OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | ------------------------ | ---------- | -------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                        |  | For the six months ended |            | For the three months ended
|                                                        |  | June 30,                 |            | June 30,                  
|                                                        |  | 2003                     |            | 2002                       |  | 2003 |            | 2002
|                                                        |  |                          |            |                            |  |      |            |     
|Revenues                                                |  | $                        | 333,550    |                            |  | $    | 225,973    |      |  | $ | 132,420    |   |  | $ | 121,951    |  
|Cost of sales                                           |  |                          | 95,334     |                            |  |      | 202,934    |      |  |   | 48,227     |   |  |   | 78,225     |  
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Gross margin                                            |  |                          | 238,216    |                            |  |      | 23,039     |      |  |   | 84,193     |   |  |   | 43,726     |  
|Other expenses                                          |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Salaries, benefits and related taxes                    |  |                          | 916,943    |                            |  |      | 876,565    |      |  |   | 465,856    |   |  |   | 438,952    |  
|Rent & occupancy expenses                               |  |                          | 75,282     |                            |  |      | 78,565     |      |  |   | 38,524     |   |  |   | 38,345     |  
|Consulting  medical advisory                           |  |                          | (53,385    | )                          |  |      | 14,423     |      |  |   | (120,692   | ) |  |   | 14,423     |  
|Consulting  marketing sales                            |  |                          | 2,239      |                            |  |      | 582        |      |  |   | 2,239      |   |  |   | 582        |  
|Legal and professional fees                             |  |                          | 31,517     |                            |  |      | 118,795    |      |  |   | 6,764      |   |  |   | 36,869     |  
|Travel                                                  |  |                          | 28,857     |                            |  |      | 20,260     |      |  |   | 19,102     |   |  |   | 5,814      |  
|Telephone and internet                                  |  |                          | 35,417     |                            |  |      | 40,056     |      |  |   | 19,809     |   |  |   | 16,531     |  
|Selling, general and administrative                     |  |                          | 67,463     |                            |  |      | 53,484     |      |  |   | 34,272     |   |  |   | 34,739     |  
|Interest expense, net                                   |  |                          | 58,421     |                            |  |      | 145,026    |      |  |   | 29,310     |   |  |   | 72,982     |  
|Depreciation and amortization                           |  |                          | 73,701     |                            |  |      | 128,394    |      |  |   | 33,782     |   |  |   | 45,612     |  
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Total other expenses                                    |  |                          | 1,236,455  |                            |  |      | 1,476,150  |      |  |   | 528,966    |   |  |   | 704,849    |  
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|(Loss) before taxes and preferred dividends             |  |                          | (998,239   | )                          |  |      | (1,453,111 | )    |  |   | (444,773   | ) |  |   | (661,123   | )
|Income tax expense (benefit)                            |  |                          | -0-        |                            |  |      | -0-        |      |  |   | -0-        |   |  |   | -0-        |  
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Net income (loss)                                       |  |                          | (998,239   | )                          |  |      | (1,453,111 | )    |  |   | (444,773   | ) |  |   | (661,123   | )
|Preferred stock dividends Series A Preferred            |  |                          | -0-        |                            |  |      | (101,837   | )    |  |   | -0-        |   |  |   | (51,202    | )
|Preferred stock dividends in arrears Series
A Preferred |  |                          | (101,837   | )                          |  |      | -0-        |      |  |   | (51,200    | ) |  |   | -0-        |  
|Preferred stock dividends in arrears Series
B Preferred |  |                          | (79,342    | )                          |  |      | (79,342    | )    |  |   | (39,890    | ) |  |   | (39,890    | )
|Preferred stock dividends in arrears Series
C Preferred |  |                          | (129,956   | )                          |  |      | (12,094    | )    |  |   | (67,245    | ) |  |   | (10,063    | )
|Preferred stock dividends  deemed dividends            |  |                          | (295,921   | )                          |  |      | (366,805   | )    |  |   | (160,577   | ) |  |   | (263,805   | )
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Total preferred stock dividends                         |  |                          | (607,056   | )                          |  |      | (560,078   | )    |  |   | (318,912   | ) |  |   | (364,960   | )
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Net income (loss) attributable to common
stockholders   |  | $                        | (1,605,295 | )                          |  | $    | (2,013,189 | )    |  | $ | (763,685   | ) |  | $ | (1,026,083 | )
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Net (loss) per share                                    |  | $                        | (0.13      | )                          |  | $    | (0.24      | )    |  | $ | (0.06      | ) |  | $ | (0.12      | )
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  
|Weighted average number of shares outstanding           |  |                          | 12,420,836 |                            |  |      | 8,323,697  |      |  |   | 12,822,953 |   |  |   | 8,323,697  |  
|                                                        |  |                          |            |                            |  |      |            |      |  |   |            |   |  |   |            |  

See accompanying summary of accounting policies and notes to financial statements

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OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002
(unaudited)

|                                                                                      |                                                                                            |   |          |          |      |   |          |            |  
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | - | -------- | -------- | ---- | - | -------- | ---------- | -
|                                                                                      |                                                                                            |   | 2003     |          | 2002
|                                                                                      |                                                                                            |   |          |          |     
|CASH FLOWS FROM OPERATING ACTIVITIES                                                  |                                                                                            |   |          |          |      |   |          |           
|                                                                                      | Net income (loss)                                                                          |   | $        | (998,239 | )    |   | $        | (1,453,111 | )
|                                                                                      | Adjustment to reconcile net income to net cash provided by (used in)
operating activities: |   |          |          |      |   |          |            |  
|                                                                                      | Depreciation and amortization                                                              |   |          | 73,701   |      |   |          | 128,394    |  
|                                                                                      | Amortization of deferred compensation                                                      |   |          | 14,758   |      |   |          | 7,384      |  
|                                                                                      | Interest expense on detachable warrants                                                    |   |          | -0-      |      |   |          | 165        |  
|                                                                                      | Change in assets and liabilities:                                                          |   |          |          |      |   |          |            |  
|                                                                                      | Accounts receivable                                                                        |   |          | 218,278  |      |   |          | 43,032     |  
|                                                                                      | Prepaid expenses                                                                           |   |          | (26,416  | )    |   |          | (12,584    | )
|                                                                                      | Accounts payable and accrued expenses                                                      |   |          | (100,027 | )    |   |          | 712,750    |  
|                                                                                      | Deferred revenue                                                                           |   |          | 20,412   |      |   |          | (61,444    | )
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|Net cash provided by (used in) operating activities                                   |                                                                                            |   | (797,533 | )        |      |   | (635,414 | )         
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                                  |                                                                                            |   |          |          |      |   |          |           
|                                                                                      | Purchase of property and equipment                                                         |   |          | (11,822  | )    |   |          | -0-        |  
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|Net cash provided by (used in) investing activities                                   |                                                                                            |   | (11,822  | )        |      |   | -0-      |           
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                                  |                                                                                            |   |          |          |      |   |          |           
|Proceeds from notes payable                                                           |                                                                                            |   | 102,600  |          |      |   | 3,841    |           
|Payments on notes payable                                                             |                                                                                            |   | (2,600   | )        |      |   | (3,841   | )         
|Proceeds from issuance of common stock, net of issuance costs                         |                                                                                            |   | 315,000  |          |      |   | -0-      |           
|Proceeds from issuance of Series C convertible preferred stock, net of issuance costs |                                                                                            |   | 265,265  |          |      |   | 552,944  |           
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|Net cash provided by (used in) financing activities                                   |                                                                                            |   | 680,265  |          |      |   | 552,944  |           
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|Net increase (decrease) in cash and cash equivalents                                  |                                                                                            |   | (129,090 | )        |      |   | (82,470  | )         
|Cash and cash equivalents at beginning of period                                      |                                                                                            |   | 194,677  |          |      |   | 142,826  |           
|                                                                                      |                                                                                            |   |          |          |      |   |          |           
|Cash and cash equivalents at end of period                                            |                                                                                            | $ | 65,587   |          |      | $ | 60,356   |           
|                                                                                      |                                                                                            |   |          |          |      |   |          |           

|                                                                 |  |                          |       |      |  |   |        | 
|---------------------------------------------------------------- |  | ------------------------ | ----- | ---- |  | - | ------ | 
|                                                                 |  | For the six months ended
|                                                                 |  | June 30,                
|                                                                 |  | 2003                     |       | 2002
|                                                                 |  |                          |       |     
|Supplemental Disclosure of Cash Flow Information:                |  |                          |       |      |  |   |        | 
|Cash paid during the period for:                                 |  |                          |       |      |  |   |        | 
|Income tax                                                       |  | $                        | -0-   |      |  | $ | -0-    | 
|                                                                 |  |                          |       |      |  |   |        | 
|Interest                                                         |  | $                        | -0-   |      |  | $ | 22,560 | 
|                                                                 |  |                          |       |      |  |   |        | 
|Non-cash Transactions                                            |  |                          |       |      |  |   |        | 
|Treasury stock repurchase of stock for trade accounts receivable |  | $                        | 1,067 |      |  | $ | -0-    | 

See accompanying summary of accounting policies and notes to financial statements

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OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)



|NOTE 1: |  | ORGANIZATION AND NATURE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | OmniComm Systems, Inc. is a healthcare technology company that
provides Web-based electronic data capture (EDC) solutions and
related value-added services to pharmaceutical and biotech
companies, clinical research organizations, and other clinical
trial sponsors. Our Internet-based TrialMaster® software allows
clinical trial sponsors and investigative sites to securely
collect, validate, transmit, and analyze clinical study data. The
Medical Event Reporting System (MERS-TH) is an event reporting
system developed for hospitals and medical centers to collect,
classify, and analyze events that could potentially compromise
patient safety. MERS-TH provides the opportunity to study and
monitor both actual and near-miss events to facilitate process
improvement efforts. MERS-TH was developed in conjunction with
Columbia University and will be marketed by both of us to hospital
and medical centers in the U.S. and Europe initially.
|       
|NOTE 2: |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        |  | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        |  | The Companys accounts include those of its two wholly owned
subsidiaries, OmniCommerce and OmniTrial B.V and have been prepared
in conformity with (i) generally accepted accounting principles;
and (ii) the rules and regulations of the United States Securities
and Exchange Commission. All significant intercompany accounts and
transactions between the Company and its subsidiaries have been
eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        |  | ESTIMATES IN FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        |  | The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and footnotes thereto. Actual results may
differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        |  | RECLASSIFICATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        |  | Certain reclassifications have been made in the 2002 financial
statements to conform to the 2003 presentation. These
reclassifications did not have any effect on net income (loss) or
shareholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        |  | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        |  | The Company operates in one reportable segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        |  | CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       
|        |  | Cash equivalents consist of highly liquid, short-term investments
with maturities of 90 days or less. The carrying amount reported
in the accompanying balance sheets approximates fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        |  | ACCOUNTS RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        |  | Accounts receivable are judged as to collectibility by management
and an allowance for bad debts is established as necessary. As of
each balance sheet date, no reserve was considered necessary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        |  | CONCENTRATION OF CREDIT RISK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        |  | Accounts receivable subject the Company to its highest potential
concentration of credit risk. The Company reserves for credit
losses. The Company does not require collateral on trade accounts
receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

6



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | PROPERTY AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Property and equipment are recorded at cost. Additions and
betterments are capitalized; maintenance and repairs are expensed
as incurred. Depreciation is calculated using the straight-line
method over the assets estimated useful life, which is 5 years for
leasehold improvements, equipment and furniture and 3 years for
software. Gains or losses on disposal are charged to operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | INTANGIBLE AND OTHER ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Intangible assets are amortized on a straight-line basis over
periods ranging from one to five years. The Company continually
reviews the recoverability of the carrying value of these assets
using the methodology prescribed in SFAS 121. The Company also
reviews long-lived assets and the related intangible assets for
impairment whenever events or changes in circumstances indicate the
carrying amounts of such assets may not be recoverable. If it is
determined the carrying amount of the assets is permanently
impaired then intangible assets are written down to fair value and
the useful life of the asset may be changed prospectively. Fair
value is determined based on discounted cash flows, appraised
values or managements estimates, depending upon the nature of the
assets. As of June 30, 2003, management believes no revision to
the remaining useful lives or write-down of intangible assets is
required.
|
| |  | DEFERRED REVENUE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Deferred revenue represents cash advances received in excess of
revenue earned on on-going contracts. Payment terms vary with each
contract but may include an initial payment at the time the
contract is executed, with future payments dependent upon the
completion of certain contract phases or targeted milestones. In
the event of contract cancellation, the Company is entitled to
payment for all work performed through the point of cancellation.
The Company had $342,932 in deferred revenues relating to contracts
for services to be performed over periods ranging from 4 months to
5 years.                                                                                                                                                                                                                                                                                                                               
|
| |  | REVENUE RECOGNITION POLICY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | OmniComms revenue model is transaction-based and can be
implemented either as an ASP (application service provider) or
licensed for implementation by a customer such as a pharmaceutical
company. Revenues are derived from the set-up of clinical trial
engagements; on-going maintenance fees incurred throughout the
duration of an engagement; fees for report writing and change
orders. The clinical trials that are conducted using TrialMaster
can last from a few months to several years. Most of the fees
associated with our product including post-setup customer support
in the form of maintenance charges are recognized ratably over the
term of the clinical trial. Cost of sales is primarily comprised
of programmer salaries and taxes and is expensed as incurred.                                                                                                                                                   
|
| |  | The Company recognizes sales, for both financial statement and tax
purposes in accordance with SEC Staff Accounting Bulletin No. 101
Revenue Recognition in Financial Statements (SAB 101). SAB 101
requires that revenues be recognized ratably over the life of a
contract. In accordance with SAB 101 the Company will periodically
record deferred revenues relating to advance payments in contracts.
The Company had $342,932 in deferred revenue relating to contracts
for services to be performed over periods ranging from 4 months to
4 years.                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | ADVERTISING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Advertising costs are expensed as incurred. Advertising costs were
$3,301 and $4,050 for the six months ended June 30, 2003 and 2002,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

7



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | RESEARCH AND DEVELOPMENT EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Software development costs are included in research and development
and are expensed as incurred. Statement of Financial Accounting
Standards No. 86 (SFAS 86) requires the capitalization of certain
development costs of software to be sold once technological
feasibility is established, which the Company defines as completion
to the point of marketability. The capitalized cost is then
amortized on a straight-line basis over the estimated product life.
To date, the period between achieving technological feasibility
and the general availability of such software has been short and
software development costs qualifying for capitalization have been
immaterial. Accordingly, the Company has not capitalized any
software development costs under SFAS 86. Research and development
expense was approximately $288,517 in 2003 and $239,120 in 2002 for
the six months ended June 30, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The Company uses the intrinsic-value method of accounting for
stock-based awards granted to employees and, accordingly, does not
recognize compensation expense for its stock-based awards to
employees in the Consolidated Statements of Income. See Note 13
for pro forma information on the impact of the fair-value method of
accounting for stock options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | STOCK BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Stock-based compensation is recognized using the intrinsic value
method in accordance with the provisions of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees.
For disclosure purposes, pro forma net loss and loss per common
share are provided in accordance with Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based
Compensation, as if the fair value method had been applied.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | EARNINGS PER SHARE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings per
Share. SFAS 128 replaced the previously reported primary and
fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per
share excludes any dilutive effects of options, warrants, and
convertible securities. The diluted earnings per share calculation
is very similar to the previously utilized fully diluted earnings
per share calculation method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Basic earnings per share were calculated using the weighted average
number of shares outstanding of 12,420,836 and 8,323,697 for the
six-months ended June 30, 2003 and 2002, respectively; and
12,822,953 and 8,323,697 for the three-months ended June 30, 2003
and 2002 respectively. There were no differences between basic and
diluted earnings per share. Options to purchase 2,795,039 shares
of common stock at prices ranging from $.15 to $5.50 per share were
outstanding at June 30, 2003. Stock warrants to purchase
19,038,428 shares of common stock at prices ranging from $0.25 to
$10.00 per share were outstanding at June 30 2003. The Company
granted a Unit Purchase Option (Agent Option) to the Placement
Agent of its Series B Convertible Preferred Stock that provides the
Placement Agent the ability to purchase 27,000 Series B Preferred
Shares with 1,080,000 detachable common stock warrants. The
exercise of the Agent Option would result in the issuance of an
aggregate of 2,160,000 shares of common stock at an exercise price
of $0.25 per share. The options, warrants and Agent Options were
not included in the computation of diluted earnings per share
because they have an anti-dilutive effect on net loss per share.
The Companys convertible debt and convertible preferred stock have
an anti-dilutive effect on net loss per share.

8



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, Accounting for Income
Taxes. SFAS 109 has as its basic objective the recognition of
current and deferred income tax assets and liabilities based upon
all events that have been recognized in the financial statements as
measured by the provisions of the enacted tax laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Valuation allowances are established when necessary to reduce
deferred tax assets to the estimated amount to be realized. Income
tax expense represents the tax payable for the current period and
the change during the period in the deferred tax assets and
liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | IMPACT OF NEW ACCOUNTING STANDARDS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | SFAS 142 addresses the financial accounting and reporting for
acquired goodwill and other intangible assets. Under the new
rules, the Company is no longer required to amortize goodwill and
other intangible assets with indefinite lives, but will be subject
to periodic testing for impairment. SFAS 142 supercedes APB
Opinion No. 17, Intangible Assets. The Company expects that
SFAS 142 will not have a material impact on its consolidated
results of operations and financial position upon adoption. The
Company adopted SFAS 142 on January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated
asset retirement cost. It also provides accounting guidance for
legal obligations associated with the retirement of tangible
long-lived assets. SFAS 143 is effective in fiscal years beginning
after September 15, 2002, with early adoption permitted. The
Company expects that the provisions of SFAS 143 will not have a
material impact on its consolidated results of operations and
financial position upon adoption. The Company adopted SFAS 143
effective January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | SFAS 144 establishes a single accounting model for the impairment
or disposal of long-lived assets, including discontinued
operations. SFAS 144, supersedes Statement of Financial Accounting
Standards No. 121, Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of (SFAS 121), and APB
Opinion No. 30, Reporting the Results of Operations  Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. The provisions of SFAS 144 are effective in fiscal
years beginning after December 15, 2001, with early adoption
permitted, and in general are to be applied prospectively. The
Company adopted SFAS 144 effective January 1, 2002 and does not
expect that the adoption will have a material impact on its
consolidated results of operations and financial position.                                                                                                                            
|
| |  | In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. SFAS No. 145 eliminates SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt, which
required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item.
Under SFAS No. 145, such gains and losses should be classified as
extraordinary only if they meet the criteria of APB Opinion No. 30.
In addition, SFAS No. 145 amends SFAS No. 13, Accounting for
Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The
Company does not expect the adoption of SFAS No. 145, which will
become effective after May 2002 to have a material effect on its
financial condition or results of operations.

9



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. The standard requires
companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Previous accounting
guidance was provided by EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs incurred in a
Restructuring). SFAS No. 146 replaces Issue 94-3. The provisions
of SFAS No. 146 are to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company does not
expect the adoption of this pronouncement to have a material effect
on the earnings or financial position of the Company.                                                                                                                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On December 31, 2002, the FASB issued SFAS No.148, Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment of
FAS 123. This statement amends SFAS 123, Accounting for
Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation and amends the
disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about
the method of accounting for stock-based employee compensation and
the effect of the method used on reported results. The transition
and annual disclosure provisions of FAS 148 are effective for
fiscal years ending after December 15, 2002. The Company does not
expect the adoption to have a material effect on the earnings or
financial position of the Company.                                                                                                                                                               
|
| |  | In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities(FIN 46). The
interpretation provides guidance for determining when a primary
beneficiary should consolidate a variable interest entity or
equivalent structure, that functions to support the activities of
the primary beneficiary. The interpretation is effective as of the
beginning of the Companys third quarter of 2003 for variable
interest entities created before February 1, 2003. The Company
holds no interest in any variable interest entities. Accordingly,
the adoption of this statement is currently not expected to have a
material impact on the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                 
|
| |  | In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 149 (SFAS 149), Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 is intended
to result in more consistent reporting of contracts as either
freestanding derivative instruments subject to Statement 133 in its
entirely, or as hybrid instruments with debt host contracts and
embedded derivative features. SFAS 149 is effective for contracts
entered into or modified after June 30, 2003. The adoption of SFAS
149 is not expected to have a material effect on the Companys
results of operations, liquidity, or financial condition.                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150 (SFAS 150), Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.
SFAS 150 requires certain financial instruments that embody
obligations of the issuer and have characteristics of both
liabilities and equity to be classified as liabilities. Many of
these instruments previously were classified as equity or temporary
equity and as such, SFAS 150 represents a significant change in
practice in the accounting for a number of mandatorily redeemable
equity instruments and certain equity derivatives that frequently
are used in connection with share repurchase programs. SFAS 150 is
effective for all financial instruments created or modified after
May 31, 2003, and to other instruments at the beginning of the
first interim period beginning after June 15, 2003. The adoption of
SFAS 150 is not expected to have a material effect on the Companys
results of operations, liquidity, or financial condition.

10



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|NOTE 3: |  | OPERATIONS AND LIQUIDITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | We have experienced negative cash flow from operations since 1999
and have funded our activities to date primarily from debt and
equity financings. We will continue to require substantial funds
to continue our research and development activities and to market,
sell and commercialize our technology. We will need to raise
substantial additional capital to fund our future operations. Our
capital requirements will depend on many factors, including the
problems, delays, expenses and complications frequently encountered
by companies developing and commercializing new technologies; the
progress of our research and development activities; the rate of
technological advances; determinations as to the commercial
potential of our technology under development; the status of
competitive technology; the establishment of collaborative
relationships; the success of our sales and marketing programs; and
other changes in economic, regulatory or competitive conditions in
our planned business.
|       
|        |  | Estimates about the adequacy of funding for our activities are
based upon certain assumptions, including assumptions that the
research and development programs relating to our technology can be
conducted at projected costs and that progress towards the
commercialization of our technology will be timely and successful.
There can be no assurance that changes in our research and
development plans, acquisitions or other events will not result in
accelerated or unexpected expenditures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        |  | To satisfy our capital requirements, we will seek additional
financing through debt and equity financings. There can be no
assurance that any such funding will be available to us on
favorable terms or at all. If adequate funds are not available
when needed, we may be required to delay, scale back or eliminate
some or all of our research and product development and marketing
programs. If we are successful in obtaining additional financings,
the terms of such financings may have the effect of diluting or
adversely affecting the holdings or the rights of the holders of
our common and preferred stock.                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        |  | The ability of the Company to continue in existence is dependent on
its having sufficient financial resources to bring products and
services to market for marketplace acceptance. As a result of its
significant losses, negative cash flows from operations, and
accumulated deficits for the periods ending June 30, 2003 there is
doubt about the Companys ability to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|NOTE 4: |  | INTANGIBLE ASSETS AND GOODWILL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        |  | Included in Intangible Assets are the following assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                           |  |               |         |              |  |             |         | 
|-------------------------- |  | ------------- | ------- | ------------ |  | ----------- | ------- | 
|                           |  | June 30, 2003
|                           |  |               |         |              |  | Accumulated
|                           |  | Cost          |         | Amortization
|                           |  |               |         |             
|Covenant not to compete    |  | $             | 120,000 |              |  | $           | 120,000 | 
|Software development costs |  |               | 87,500  |              |  |             | 87,500  | 
|Organization costs         |  |               | 539     |              |  |             | 539     | 
|Debt acquisition costs     |  |               | 301,888 |              |  |             | 301,888 | 
|                           |  |               |         |              |  |             |         | 
|                           |  | $             | 509,927 |              |  | $           | 509,927 | 
|                           |  |               |         |              |  |             |         | 

|                           |  |                   |         |              |  |             |         | 
|-------------------------- |  | ----------------- | ------- | ------------ |  | ----------- | ------- | 
|                           |  | December 31, 2002
|                           |  |                   |         |              |  | Accumulated
|                           |  | Cost              |         | Amortization
|                           |  |                   |         |             
|Covenant not to compete    |  | $                 | 120,000 |              |  | $           | 120,000 | 
|Software development costs |  |                   | 87,500  |              |  |             | 87,500  | 
|Organization costs         |  |                   | 539     |              |  |             | 539     | 
|Debt acquisition costs     |  |                   | 301,888 |              |  |             | 301,888 | 
|                           |  |                   |         |              |  |             |         | 
|                           |  | $                 | 509,927 |              |  | $           | 509,927 | 
|                           |  |                   |         |              |  |             |         | 

11



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|        |  | The covenant not to compete and the software development costs were
acquired as a result of the acquisition of Education Navigator,
Inc. (EdNav) on September 26, 1998. The covenant was for a
two-year period and was being amortized ratably over that time.
The software development costs were capitalized and were amortized
ratably over a three-year period, as that was the expected life of
the various products.                                                                                                                                                                                                                                                                                                                                                                         
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | During the year ended December 31, 2001, the Company issued
Convertible Notes with gross proceeds totaling $1,615,000. The
Company recorded total debt acquisition fees of $218,440 of which
$70,250 were to be paid in cash and $148,190 were deemed additional
compensation derived from 323,000 stock warrants issued to the
placement agent as additional compensation. The debt acquisition
costs were amortized ratably over the term of the notes.
Amortization expense of the debt acquisition costs totaled $48,552
for the year ended December 31, 2002. Approximately $2,890 of the
debt acquisition costs were reclassified as stock issuance costs in
connection with the conversion of $12,500 (original cost) of the
convertible notes into common stock of the Company during 2001.
|       
|NOTE 5: |  | PROPERTY AND EQUIPMENT, AT COST                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        |  | Property and equipment consists of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                              |  |               |         |                   |  |             |         |              |  |              |         |             |  |           |         |  |  |         |  | 
|----------------------------- |  | ------------- | ------- | ----------------- |  | ----------- | ------- | ------------ |  | ------------ | ------- | ----------- |  | --------- | ------- |  |  | ------- |  | 
|                              |  | June 30, 2003 |         | December 31, 2002
|                              |  |               |         |                  
|                              |  |               |         |                   |  | Accumulated |         |              |  |              |         | Accumulated |  | Estimated
|                              |  | Cost          |         | Depreciation      |  | Cost        |         | Depreciation |  | Useful Lives
|                              |  |               |         |                   |  |             |         |              |  |             
|Computer and office
equipment |  | $             | 420,298 |                   |  | $           | 295,446 |              |  | $            | 420,298 |             |  | $         | 253,416 |  |  | 5 years
|Leasehold
improvements        |  |               | 3,299   |                   |  |             | 1,722   |              |  |              | 3,299   |             |  |           | 1,392   |  |  | 5 years
|Computer software             |  |               | 272,108 |                   |  |             | 211,095 |              |  |              | 260,287 |             |  |           | 183,989 |  |  | 3 years
|Office furniture              |  |               | 42,350  |                   |  |             | 29,936  |              |  |              | 42,350  |             |  |           | 25,701  |  |  | 5 years
|                              |  |               |         |                   |  |             |         |              |  |              |         |             |  |           |         |  |  |         |  | 
|                              |  | $             | 738,055 |                   |  | $           | 538,199 |              |  | $            | 726,234 |             |  | $         | 464,498 |  |  |         |  | 
|                              |  |               |         |                   |  |             |         |              |  |              |         |             |  |           |         |  |  |         |  | 



|        |  | Depreciation expense for the periods ended June 30, 2003 and 2002
was $73,701 and $79,940 respectively.
|------- |  | -------------------------------------------------------------------------------------------------------
|       
|NOTE 6: |  | ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                                  
|       
|        |  | Accounts payable and accrued expenses consist of the following at
June 30, 2003 and December 31, 2002: 

|                                  |                                             |   |         |           |          |   |         |           | 
|--------------------------------- | ------------------------------------------- | - | ------- | --------- | -------- | - | ------- | --------- | 
|                                  |                                             |   | 6/30/03 |           | 12/31/02
|                                  |                                             |   |         |           |         
|Accounts payable                  |                                             | $ | 374,131 |           |          | $ | 431,736 |          
|Accrued payroll and related costs |                                             |   | 220,774 |           |          |   | 473,384 |          
|Other accrued expenses            |                                             |   | 195,000 |           |          |   | 293,233 |          
|Accrued interest                  |                                             |   | 178,999 |           |          |   | 120,578 |          
|Accrued expenses of OmniTrial BV  |                                             |   | 127,519 |           |          |   | 127,519 |          
|                                  |                                             |   |         |           |          |   |         |          
|                                  | Total accounts payable and accrued expenses |   | $       | 1,096,423 |          |   | $       | 1,446,450 | 
|                                  |                                             |   |         |           |          |   |         |          



| |  | Other accrued expenses consist primarily of placement agent fees
and expenses due on private placements of our debt and equity
securities that occurred during 2000, 2001 and 2002 and accrued
legal fees associated with the sale of Series C Convertible
Preferred Stock. Accrued payroll and related costs includes
approximately $145,711 in past due payroll taxes accrued during
fiscal 2003 that the Company had not paid as of June 30, 2003, but
are considered legal obligations of the Company. See Note 16
Subsequent Events for further information regarding the past due
employment taxes.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12



---



##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|NOTE 7: |  | EARNINGS PER SHARE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | Basic earnings per shares (EPS) is computed by dividing income
available to common shareholders (which for the Company equals its
net loss) by the weighted average number of common shares
outstanding, and dilutive EPS adds the dilutive effect of stock
options and other common stock equivalents. Antidilutive shares
aggregating 48,649,616 have been omitted from the calculation of
dilutive EPS for the period ended June 30, 2003. A reconciliation
between numerators and denominators of the basic and diluted
earnings per shares is as follows:

|                                   |  |                              |            |                              |  |           |            |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|---------------------------------- |  | ---------------------------- | ---------- | ---------------------------- |  | --------- | ---------- | --------- |  | ----------- | ----- | --------- |  | - | ---------- | - |  |  | --------- |  |  | - | ----- | -
|                                   |  | 6 Months Ended June 30, 2003 |            | 6 Months Ended June 30, 2002
|                                   |  |                              |            |                             
|                                   |  | Income                       |            | Shares                       |  | Per-Share |            | Income    |  | Shares      |       | Per-Share
|                                   |  | Numerator                    |            | Denominator                  |  | Amount    |            | Numerator |  | Denominator |       | Amount   
|                                   |  |                              |            |                              |  |           |            |           |  |             |       |          
|Basic EPS                          |  | $                            | (1,605,295 | )                            |  |           | 12,420,836 |           |  | $           | (0.12 | )         |  | $ | (2,013,189 | ) |  |  | 8,323,697 |  |  | $ | (0.24 | )
|Effect of Dilutive
Securities
None |  |                              | -0-        |                              |  |           | -0-        |           |  |             | -0-   |           |  |   | -0-        |   |  |  | -0-       |  |  |   | -0-   |  
|                                   |  |                              |            |                              |  |           |            |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|Diluted EPS                        |  | $                            | (1,605,295 | )                            |  |           | 12,420,836 |           |  | $           | (0.12 | )         |  | $ | (2,013,189 | ) |  |  | 8,323,697 |  |  | $ | (0.24 | )

|                                   |  |                              |          |                              |  |           |            |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|---------------------------------- |  | ---------------------------- | -------- | ---------------------------- |  | --------- | ---------- | --------- |  | ----------- | ----- | --------- |  | - | ---------- | - |  |  | --------- |  |  | - | ----- | -
|                                   |  | 3 Months Ended June 30, 2003 |          | 3 Months Ended June 30, 2002
|                                   |  |                              |          |                             
|                                   |  | Income                       |          | Shares                       |  | Per-Share |            | Income    |  | Shares      |       | Per-Share
|                                   |  | Numerator                    |          | Denominator                  |  | Amount    |            | Numerator |  | Denominator |       | Amount   
|                                   |  |                              |          |                              |  |           |            |           |  |             |       |          
|Basic EPS                          |  | $                            | (763,685 | )                            |  |           | 12,822,953 |           |  | $           | (0.06 | )         |  | $ | (1,026,083 | ) |  |  | 8,323,697 |  |  | $ | (0.12 | )
|Effect of Dilutive
Securities
None |  |                              | -0-      |                              |  |           | -0-        |           |  |             | -0-   |           |  |   | -0-        |   |  |  | -0-       |  |  |   | -0-   |  
|                                   |  |                              |          |                              |  |           |            |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|Diluted EPS                        |  | $                            | (763,685 | )                            |  |           | 12,822,953 |           |  | $           | (0.06 | )         |  | $ | (1,026,083 | ) |  |  | 8,323,697 |  |  | $ | (0.12 | )



|NOTE 8: |  | NOTES PAYBLE                                                                                                                                        
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | At June 30 2003, the Company owed $1,258,571 in notes payable. The
table below provides details as to the terms and conditions of the
notes payable.

13



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

|                     |  |             |            |      |  |          |            |        |  |      |     |       |  |      |           |  |  |   |         |  |  |   |           | 
|-------------------- |  | ----------- | ---------- | ---- |  | -------- | ---------- | ------ |  | ---- | --- | ----- |  | ---- | --------- |  |  | - | ------- |  |  | - | --------- | 
|                     |  | Origination |            | Due  |  | Interest |            |        |  |      |     | Short |  | Long
|Note Holder          |  | Date        |            | Date |  | Rate     |            | Amount |  | Term |     | Term 
|                     |  |             |            |      |  |          |            |        |  |      |     |      
|Guus van Kesteren    |  |             | 8/30/2001  |      |  |          | 10/31/2004 |        |  |      | 8.0 | %     |  | $    | 196,644   |  |  | $ | 0       |  |  | $ | 196,644   | 
|Magnolia Private Fnd |  |             | 8/30/2001  |      |  |          | 10/31/2004 |        |  |      | 8.0 | %     |  |      | 209,534   |  |  |   | 0       |  |  |   | 209,534   | 
|Magnolia Private Fnd |  |             | 8/30/2001  |      |  |          | 10/31/2004 |        |  |      | 8.0 | %     |  |      | 276,393   |  |  |   | 0       |  |  |   | 276,393   | 
|Nico Letschert       |  |             | 7/31/2002  |      |  |          | 10/31/2004 |        |  |      | 0.0 | %     |  |      | 10,000    |  |  |   | 0       |  |  |   | 10,000    | 
|Nico Letschert       |  |             | 9/3/2002   |      |  |          | 10/31/2004 |        |  |      | 0.0 | %     |  |      | 10,000    |  |  |   | 0       |  |  |   | 10,000    | 
|Randy Smith          |  |             | 11/25/2002 |      |  |          | 3/25/2003  |        |  |      | 0.0 | %     |  |      | 6,000     |  |  |   | 6,000   |  |  |   | 0         | 
|Guus van Kesteren    |  |             | 12/26/2002 |      |  |          | 10/31/2004 |        |  |      | 9.0 | %     |  |      | 50,000    |  |  |   | 0       |  |  |   | 50,000    | 
|Cornelis Wit         |  |             | 12/30/2002 |      |  |          | 10/31/2004 |        |  |      | 9.0 | %     |  |      | 50,000    |  |  |   | 0       |  |  |   | 50,000    | 
|Cornelis Wit         |  |             | 6/30/2003  |      |  |          | 1/31/2005  |        |  |      | 9.0 | %     |  |      | 100,000   |  |  |   | 0       |  |  |   | 100,000   | 
|Noesis Capital       |  |             | 6/30/2003  |      |  |          | 1/31/2005  |        |  |      | 9.0 | %     |  |      | 250,000   |  |  |   |         |  |  |   | 250,000   | 
|Guy Brissette        |  |             | 12/30/2002 |      |  |          | 3/30/2003  |        |  |      | 9.0 | %     |  |      | 100,000   |  |  |   | 100,000 |  |  |   | 0         | 
|                     |  |             |            |      |  |          |            |        |  |      |     |       |  |      |           |  |  |   |         |  |  |   |           | 
|                     |  |             |            |      |  |          |            |        |  |      |     |       |  | $    | 1,258,571 |  |  | $ | 106,000 |  |  | $ | 1,152,571 | 
|                     |  |             |            |      |  |          |            |        |  |      |     |       |  |      |           |  |  |   |         |  |  |   |           | 



| |  | Promissory notes totaling $682,571 were amended and restated on
December 31, 2002, with new terms which included an extension of
the maturity date to October 31, 2004 with one half of the
principal payable upon the closing of any financing by the Company
resulting in gross proceeds in excess of $2,000,000.                                                                
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Promissory notes totaling $120,000 were amended and restated on
March 31, 2003, with new terms which included an extension of the
maturity date to October 31, 2004.                                                                                                                                                                                                               
|
| |  | A promissory note in the amount of $250,000 was issued to Noesis
Capital Corp. on June 30, 2003 in exchange for accounts payable and
accrued expenses owed in connection with financial advisory
services rendered and for placement agent fees earned in three
different private placements of the Companys debt and equity
securities.                                          
|
| |  | Related Party Notes Payable                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Included in related party notes payables is a $196,644 promissory
note that was amended and restated on December 31, 2002 with new
terms which include an extension of the maturity date to October
31, 2004 with one half of the principal payable upon the closing of
any financing by the Company resulting in gross proceeds in excess
of $2,000,000.                          
|
| |  | During March 2002, the Company borrowed $2,341 from Randall Smith,
the Companys Chairman and Chief Technology Officer. This amount
was repaid without interest on April 12, 2002. In addition, the
Company borrowed $6,000 from Mr. Smith on November 25, 2002 and
this amount remained outstanding as of June 30, 2003.                                                          
|
| |  | During April 2002, the Company borrowed $1,500 from Ronald Linares,
the Companys Chief Financial Officer. This amount was repaid
without interest on May 1, 2002.                                                                                                                                                                                                                 
|
| |  | During December 2002, the Company borrowed $50,000 from Cornelis
Wit, the Companys President and Chief Executive Officer and a
Director. This amount was borrowed under a promissory note bearing
interest at a rate of 9% per annum, payable on March 31, 2003.
This note was amended and restated on March 31, 2003 extending the
maturity date of the note to October 31, 2004.

14



---



##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|        |  | During December 2002, the Company borrowed $50,000 from Guus van
Kesteren, a Director of the Company. This amount was borrowed
under a promissory note bearing interest at a rate of 9% per annum,
payable on March 31, 2003. This note was amended and restated on
March 31, 2003 extending the maturity date of the note to October
31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | During March 2003, the Company borrowed $2,600 from Cornelis Wit,
the Companys President and Chief Executive Officer and a Director.
This amount was repaid without interest on April 3, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        |  | During June 2003, the Company borrowed $100,000 from Cornelis Wit,
the Companys President and Chief Executive Officer and a Director.
This amount was borrowed under a promissory note bearing interest
at a rate of 9% per annum, payable on January 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|NOTE 9: |  | CONVERTIBLE NOTES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        |  | During the first quarter of 1999, the Company issued 10%
Convertible Notes Payable in the amount of $862,500 pursuant to a
Confidential Private Placement Memorandum. There were costs of
$119,625 associated with this offering. The Company also granted
the agent the option to purchase 250,000 common shares at $.001 per
share. The agent exercised the option. The net proceeds to the
Company were $742,875. The notes bear interest at ten percent
annually, payable semi-annually. The notes are convertible after
maturity, which is five years, into shares of common stock of the
Company at $1.25 per share. As of March 31, 2003 approximately
$412,500 of the Convertible Notes had been converted into 330,000
shares of common stock of the Company leaving an outstanding
balance of $450,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        |  | The Company is currently in default on interest payments owed
totaling $55,733 on its 10% Convertible Notes. The terms of the
notes provide a payment grace period of thirty days in which to
make required semi-annual interest payments. The company was in
default effective January 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        |  | During the first six months of 2001, the Company issued 12%
Convertible Notes Payable in the amount of $1,615,000 pursuant to a
Confidential Private Placement Memorandum. There were costs of
$218,440 associated with the offering of which $148,190 is
attributable to warrants issued to the placement agent as
additional compensation that were valued using the Black-Scholes
method. The net proceeds to the Company were $1,484,750 with the
cash compensation costs of $70,250 accrued at December 31, 2002,
and $60,000 of accrued expenses due to the placement agent
converted as part of the private placement of the 12% Convertible
Notes Payable. The notes bear interest at twelve percent annually,
payable at maturity. The notes are convertible after maturity,
which is January 31, 2002, into shares of common stock of the
Company at $0.50 per share. EITF 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios, requires Companys to record
interest expense on convertible debt that is issued with an
embedded beneficial conversion feature, or in the money at the date
the investor is committed to purchase the convertible securities.
The Company valued the 12% Convertible Notes Payable utilizing the
intrinsic value method and recorded $508,835 in interest expense
with a corresponding credit to additional paid-in capital.
|       
|        |  | The Company completed a conversion of its 12% Convertible Notes on
December 31, 2002. The Company converted the principal amount
outstanding of $1,615,000 into Units of its Series C Convertible
Preferred Stock resulting in the issuance of 161,500 shares of the
Series C Preferred with 3,230,000 attached common stock warrants
providing the shareholder the right to purchase additional shares
at $0.25 per share. In addition, the outstanding accrued interest
on the 12% Convertible Notes, which totaled $361,576 on December
31, 2002, resulted in the issuance of 1,446,306 shares of common
stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

15



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|NOTE 10: |  | COMMITMENTS AND CONTINGENCIES                                                                                                                                                     
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|         |  | The Company currently leases office space under operating leases.
The minimum future lease payments required under the Companys
operating leases at June 30, 2003 are as follows:

|      |  |   |        | 
|----- |  | - | ------ | 
|2003  |  | $ | 37,880 | 
|2004  |  |   | 44,550 | 
|2005  |  |   | 0      | 
|2006  |  |   | 0      | 
|2007  |  |   | 0      | 
|      |  |   |        | 
|Total |  | $ | 82,430 | 
|      |  |   |        | 



| |  | In addition, to annual base rental payments, the Company pays for
the operating expenses associated with its leased office space and
is responsible for any escalation in operating expenses as
determined in the lease. Rental expense was $75,282 and $78,565
for the six months ended June 30, 2003 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | CONTINGENT LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | On or about September 6, 2000, the Companys wholly owned
subsidiary, OmniTrial B.V. (OmniTrial) submitted a petition for
bankruptcy protection from the bankruptcy court of the Netherlands.
The court appointed a liquidating trustee. The Company claimed
that certain assets in the possession of OmniTrial were paid for by
the Company and therefore should not be part of the liquidating
assets of OmniTrial. The bankruptcy trustee rejected that claim
and told the Company that as part of the OmniTrial bankruptcy
estate the assets would be sold to diminish any deficiency of the
estate. On July 5, 2001 the Company signed a settlement agreement
providing for the return of the assets to the Company in exchange
for a payment of $10,000 that was made on or about July 5, 2001.
The Company does not expect to incur any additional liability in
this bankruptcy proceeding.
|
| |  | In January 2001, a former employee, Eugene A. Gordon, filed a
lawsuit in Dade County, Florida alleging breach of his employment
contract with us. The plaintiff alleged we owed him more than
$100,000 for back payment of salary according to the terms of his
employment contract. We disputed Mr. Gordons allegations and
vigorously defended this lawsuit. As part of its defense, the
Company filed a counterclaim against Mr. Gordon and a counter-suit
against his wife. The parties entered into a settlement agreement
on August 19, 2002. The parties subsequently filed and the court
accepted a Joint Stipulation for Dismissal With Prejudice on
September 6, 2002.                                                                                                                                                                                                                   
|
| |  | EMPLOYMENT AGREEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | During 2001, the Company entered into three-year employment
agreements with its Chairman/Chief Technology Officer and Chief
Financial Officer with compensation for up to six months if
terminated under certain conditions. Under separate stock option
agreements entered into concurrently with their employment
agreements, the Chairman/Chief Technology Officer and Chief
Financial Officer were granted incentive stock options to purchase
210,000 shares of common stock at the market price per share
respectively.                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | During June 2002, the Company entered into a one-year employment
agreement with its President and Chief Executive Officer. The
Company concurrently entered into stock options agreements that
provide for 50,000 options to be issued at the time of execution
with additional options issued based on the achievement of certain
operating parameters that include revenue and operating cash flow
performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

16



---



##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|         |  | In January 2003, we entered into a three year employment agreement
with Mr. Charles Beardsley to serve as our Senior Vice President
for Sales and Marketing. Under the terms of this agreement, Mr.
Beardsley receives an annual salary of $150,000 to be paid in the
form of cash and/or stock and he is eligible to receive additional
incentive compensation based upon achieving financial milestones.
Mr. Beardsley is eligible for a commission, payable on a quarterly
basis, equal to 2% of the Companys Net Operating Income as defined
in an exhibit to his employment contract. Mr. Beardsley was
granted an aggregate of 150,000 options under our 1998 Stock
Incentive Plan. The three year options, which vest 50,000 annually
beginning with January 2, 2004, are exercisable at a price of $0.25
per share. Mr. Beardsley received a grant of 100,000 shares of
restricted common stock upon execution of his employment agreement.
The agreement also provides, among other things, for participation
in employee benefit plans or programs applicable to employees and
executives. Under the terms of the agreement, we may terminate the
employment of Mr. Beardsley upon 30 days notice of a material
breach and Mr. Beardsley may terminate the agreement under the same
terms and conditions. If Mr. Beardsley is terminated by us for any
reason other than for cause, we must pay him severance benefits
equal to twelve months salary. The employment agreement contains
customary non-disclosure provisions.
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|         |  | FINANCIAL ADVISORY AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        
|         |  | During March 2002, the Company entered into a one-year financial
advisory agreement with Noesis Capital to assist the Company in
performing certain financial advisory services including the sale
of securities, and the possible sale, merger or other business
combination involving the Company. Pursuant to this agreement, the
Company is obligated to pay $90,000 in professional fees during the
one-year term of the agreement. The advisory agreement was
extended for a twelve month term effective June 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        
|NOTE 11: |  | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        
|         |  | Cornelis F. Wit, our President and Chief Executive Officer and a
member of our Board of Directors, is a consultant to Noesis Capital
Corp. and served as President of Corporate Finance of Noesis
Capital Corp. from March 1995 to September 2000. Noesis Capital
Corp. has served as placement agent for us in three private
placements of securities which occurred between September 1999 and
December 2002. Guus van Kesteren, a member of our Board of
Directors, is an advisor to Noesis Capital Corp.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        
|         |  | In December 1999, we entered into a consulting agreement with
Messrs. van Kesteren and Wit, each of whom is a member of our Board
of Directors, providing that we will compensate each of these
individuals for sales leads or contacts developed by them in
connection with our TrialMaster® system. For the periods ended
December 30, 2001 and 2002, no compensation was earned by either
Mr. van Kesteren or Mr. Wit under this agreement. This agreement
was terminated upon mutual agreement of OmniComm and Messrs. Wit
and van Kesteren effective June 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        
|         |  | On April 5, 2002, Cornelis F. Wit, President and Chief Executive
Officer and a Director of the Company, invested $10,000 in a
private placement of our Series C Convertible Preferred Stock. The
Series C Convertible Preferred Stock is convertible into shares of
the Companys common stock at a conversion price of $0.25 per share
and carries a stated dividend rate of 8% per annum and included
20,000 common stock warrants for the purchase of common stock at an
exercise price of $0.25 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

17



---



##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | On April 5, 2002, Guus van Kesteren a Director of the Company,
invested $10,000 in a private placement of our Series C Convertible
Preferred Stock. The Series C Convertible Preferred Stock is
convertible into shares of the Companys common stock at a
conversion price of $0.25 per share and carries a stated dividend
rate of 8% per annum and included 20,000 common stock warrants for
the purchase of common stock at an exercise price of $0.25 per
share.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On January 30 2002, Noesis N.V., one of our stockholders, invested
$90,000 in a private placement of our Series C Convertible
Preferred Stock. The Series C Convertible Preferred Stock is
convertible into shares of the Companys common stock at a
conversion price of $0.25 per share and carries a stated dividend
rate of 8% per annum and included 180,000 common stock warrants for
the purchase of common stock at an exercise price of $0.25 per
share.    
|
| |  | From time to time we have borrowed funds from Mr. van Kesteren,
including:                                                                                                                                                                                                                                                                                                                                                                                           



| | o |  | between July 2000 and December 2000,
we borrowed an aggregate of $110,000 from him under two
promissory notes, one of which bore interest at a rate
of 12% per annum and the other at 5% per annum. These
notes were converted into debt issued as part of a
private placement of our debt in January 2000. The
private placement debt accrues interest at 12% per annum
and is convertible into shares of our Common Stock at
the holders option at a rate of $0.50 per share
commencing on January 31, 2002. This series of
Convertible Notes was converted on December 31, 2002
into shares of the Companys Series C Convertible
Preferred Stock resulting in the issuance of 11,000
shares of Series C Convertible Preferred Stock.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | between February 2001 and July 2001,
we borrowed an aggregate of $190,000 from him under
promissory notes which bore interest of 12% per annum.
These promissory notes were amended and restated on
August 30, 2001 with new terms which included an
interest rate of 8% per annum, and with one half of the
principal payable upon the closing of any financing by
us resulting in gross proceeds in excess of $2,000,000,
and the balance of the principal together with accrued
interest payable no later than August 30, 2003. These
notes were amended and restated on December 31, 2002
extending the maturity date of the notes to October 31,
2004.                                                                              
|
| | o |  | in September 2001, we borrowed an
aggregate of $25,000 from him under promissory notes
which bore interest at a rate of 12% per annum and had a
maturity date of December 22, 2001. These notes were
converted into the Units sold in our private placement
of Series B Convertible Preferred Stock in August 2001.                                                                                                                                                                                                                                                                                                                                                                                                                      



| |  | In conjunction with these various loans, we have granted Mr. van
Kesteren warrants to purchase an aggregate of 70,700 shares of our
Common Stock at exercise prices ranging from $.30 to $2.25 per
share.                                                                                                                                                                                                
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In July 2001, Noesis Capital, the Placement Agent for our 12%
Convertible Notes, assigned $60,000 of accrued fees owed to
Cornelis Wit, a Director at the time. Mr. Wit converted that
accrued expense into the Private Placement of our 12% Convertible
Notes. The 12% Convertible Notes were subsequently converted on
December 31, 2002 into 6,000 shares of our Series C Convertible
Preferred Stock.
|
| |  | The Company granted Randall G. Smith, Chairman of the Board and
Chief Technology Officer, warrants to purchase 20,000 shares of our
Common stock at an exercise price of $0.41 per share in connection
with a pledge of real property he made in securing a loan made to
the Company by Mr. van Kesteren in July 2001, in the amount of
$100,000                                                         

18



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|         |  | On August 17, 2000, we borrowed $100,000 from Noesis N.V., one of
our stockholders. One of our Directors, Mr. Wit, was President of
Corporate Finance of Noesis Capital Corp. and remains a consultant
to the Noesis. The promissory note bore interest rate at a rate of
8% per annum and had a maturity date of January 1, 2001. At our
request, Noesis N.V. agreed to convert this promissory note into
debt issued as part of a private placement of our debt in January
2001. The private placement debt accrues interest at 12% per annum
and is convertible into shares of our Common Stock at the holders
option at a rate of $0.50 per share commencing on January 31, 2002.
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|         |  | During March 2002, the Company borrowed $2,341 from Randall Smith,
the Companys Chairman and Chief Technology Officer. This amount
was repaid without interest on April 12, 2002. In addition, the
Company borrowed $6,000 from Mr. Smith on November 25, 2002 and
this amount remained outstanding as of June 30, 2003.                                                                                                                                                                                                                                                                                                                                                             
|        
|         |  | During April 2002, the Company borrowed $1,500 from Ronald Linares,
the Companys Chief Financial Officer. This amount was repaid
without interest on May 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        
|         |  | During December 2002, the Company borrowed $50,000 from Cornelis
Wit, the Companys President and Chief Executive Officer and a
Director. This amount was borrowed under a promissory note bearing
interest at a rate of 9% per annum, payable on March 31, 2003.
This note was amended and restated on March 31, 2003 extending the
maturity date of the note to October 31, 2004.                                                                                                                                                                                                                                                                                                   
|        
|         |  | During December 2002, the Company borrowed $50,000 from Guus van
Kesteren a Director. This amount was borrowed under a promissory
note bearing interest at a rate of 9% per annum, payable on March
31, 2003. This note was amended and restated on March 31, 2003
extending the maturity date of the note to October 31, 2004.                                                                                                                                                                                                                                                                                                                                                       
|        
|         |  | During March 2003, the Company borrowed $2,600 from Cornelis Wit,
the Companys Chief Executive Officer. This amount was repaid
without interest on April 3, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        
|         |  | During June 2003, the Company borrowed $100,000 from Cornelis Wit,
the Companys President and Chief Executive Officer and a Director.
This amount was borrowed under a promissory note bearing interest
at a rate of 9% per annum, payable on January 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                      
|        
|NOTE 12: |  | POST-RETIREMENT EMPLOYEE BENEFITS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        
|         |  | The Company does not have a policy to cover employees for any
health care or other welfare benefits that are incurred after
employment (post-retirement). Therefore, no provision is required
under SFASs 106 or 112.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        
|NOTE 13: |  | STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        
|         |  | The authorized capital stock of the Company consists of 150,000,000
shares of Common Stock, $.001 par value per share, and 10,000,000
shares of preferred stock, par value $.001 per share, of which
5,000,000 shares have been designated as Series A Convertible
Preferred Stock, 230,000 shares have been designated as Series B
Convertible Preferred Stock and 747,500 shares have been designated
as Series C Convertible Preferred Stock.                                                                                                                                                                                                                                      
|        
|         |  | As of June 30, 2003 the Company had the following outstanding
securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



| | o |  | 13,314,618 shares of Common Stock issued and outstanding;                                  
| | - |  | -------------------------------------------------------------------------------------------
| | o |  | 19,038,428 warrants issued and outstanding to purchase shares of our common stock;         
| | o |  | 4,215,224 shares of our 5% Series A Convertible
Preferred Stock issued and outstanding, and
| | o |  | 200,000 shares of our 8% Series B Convertible Preferred Stock issued and outstanding       
| | o |  | 337,150 shares of our Series C Convertible Preferred Stock issued and outstanding          

19



---



##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Holders of Common Stock are entitled to one vote for each share on
all matters submitted to a stockholder vote. Holders of our voting
securities do not have cumulative voting rights and holders of a
majority of our voting securities voting for the election of
directors can elect all of the directors. Holders of Common Stock
are entitled to share in all dividends that the Board of Directors,
in its discretion, declares from legally available funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Holders of Common Stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions for the
Common Stock. The rights of the holders of Common Stock are
subject to any rights that may be fixed for holders of preferred
stock, when and if any preferred stock is outstanding. All
outstanding shares of Common Stock, other than with regard to an
outstanding balance of $1,140 for subscriptions receivable, are
duly authorized, validly issued, fully paid and non-assessable.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Our Board of Directors, without further stockholder approval, may
issue preferred stock in one or more series from time to time and
fix or alter the designations, relative rights, priorities,
preferences, qualifications, limitations and restrictions of the
shares of each series. The rights, preferences, limitations and
restrictions of different series of preferred stock may differ with
respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund
provisions and other matters. Our Board of Directors may authorize
the issuance of preferred stock which ranks senior to our Common
Stock for the payment of dividends and the distribution of assets
on liquidation. In addition, our Board of Directors can fix
limitations and restrictions, if any, upon the payment of dividends
on our Common Stock to be effective while any shares of preferred
stock are outstanding.
|
| |  | 5% Series A Convertible Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | In 1999, our Board of Directors designated 5,000,000 shares of our
preferred stock as 5% Series A Convertible Preferred Stock (Series
A Preferred). The Series A Preferred was created pursuant to a
Certificate of Designations filed with the Delaware Secretary of
State on July 19, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Between September 1999 and January 2000 the Company issued
4,263,500 shares of the Series A Preferred with net proceeds of
$4,018,843.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The designations, rights and preferences of the Series A Preferred
include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



| | o |  | the shares are not redeemable,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | each share of Series A Preferred is
convertible into shares of our Common Stock at any time at
the option of the holder at a conversion price of $1.50 per
share. The conversion price will be further adjusted for
any stock splits, stock dividends, and corporate
reorganizations, and certain other corporate transactions
and issuances of securities at below the applicable
conversion price per share. The Series A Preferred
Stockholders have waived their rights to an anti-dilution
adjustment reducing their conversion price as a result of
the issuance of the Series B Convertible Preferred Stock,
|
| | o |  | the shares of Series A Preferred pay a
dividend at a rate of 5% per annum, payable when and as
declared by the Board of Directors, or upon conversion or
liquidation. At our option, dividends can be paid in cash
or shares of Common Stock valued at the conversion price of
the Series A Preferred Stock. Dividends are cumulative,                                                                                                                                                                                                                                                                             

20



---



##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| | o |  | in the event of our liquidation or winding
up, each share of Series A Preferred carries a liquidation
preference equal to $1.00 per share,                                                                                                        
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | each share of Series A Preferred has full
voting rights, share for share, with the then outstanding
Common Stock on the basis of one vote for each share of
Common Stock issuable upon the conversion of the Series A
Convertible Preferred Stock.
|
| | o |  | the holders of the Series A Preferred were
granted certain demand and piggy-back registration rights
covering the shares of our Common Stock issuable upon the
conversion of the Series A Preferred into Common Stock of
the Company.             
|
| | o |  | the holders of the 5% Series A Preferred
are entitled to vote two of the five members of the
Companys Board of Directors.                                                                                                                        



| |  | There were $0 and $514,716 of accrued and unpaid dividends on the
Series A Preferred at June 30, 2003 and 2002, respectively. In
addition, there was an arrearage of $186,796 on the Series A
Preferred for undeclared dividends as of June 30, 2003.                                                                                                                                                                                                                                                                                                                                                         
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Series B Convertible Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | In August 2001, our Board of Directors designated 200,000 shares of
our preferred stock as Series B Convertible Preferred Stock
(Series B Preferred). The Series B Preferred was created
pursuant to a Certificate of Designations filed with the Delaware
Secretary of State on August 31, 2001. A Corrected Certificate of
Designations was filed on February 7, 2002 with the Delaware
Secretary of State increasing the number of shares authorized as
Series B Preferred to 230,000. During September 2001 the Company
issued 200,000 shares of the Series B Preferred with net proceeds
of $1,711,518.
|
| |  | The designations, rights and preferences of the Series B Preferred
include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| | o |  | the stated value of each share is $10.00 per share,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | the shares are not redeemable,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | o |  | each share of Series B Preferred is
convertible into shares of our Common Stock at the option
of the holder at any time commencing January 31, 2002 at
the option of the holder at $0.25 per share, as adjusted,
and the shares automatically convert into shares of our
Common Stock at $0.25 per share at such time as we complete
a public offering raising proceeds in excess of $25 million
at an offering price of at least $0.75 per share. We may
require all outstanding shares of the Series B Preferred to
convert in the event the closing bid price of our Common
Stock exceeds $0.50 for 20 consecutive trading days, and
our Common Stock has been listed on The Nasdaq Stock Market
or other comparable national stock exchange or the OTC
Bulletin Board and a registration statement registering the
shares of Common Stock issuable upon conversion of the
Series B Preferred has been declared effective,
|
| | o |  | The conversion price will be further
adjusted for any stock splits, stock dividends, and
corporate reorganizations, and certain other corporate
transactions and issuances of securities at below the
applicable conversion price per share or market value of
the Common Stock,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | o |  | the shares of Series B Preferred pay a
dividend at a rate of 8% per annum, payable when and as
declared by the Board of Directors, or upon conversion or
liquidation. At our option, dividends can be paid in cash
or shares of Common Stock valued at the conversion price of
the Series B Preferred. Dividends are cumulative,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

21



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| | o |  | each share of Series B Preferred will rank
senior to our Series A Preferred and Pari Passu with our
Series C Preferred Stock,                                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | in the event of our liquidation or winding
up, each share of Series B Preferred carries a liquidation
preference equal to $10.00 per share plus accrued and
unpaid dividends, and                                         
|
| | o |  | the holders of the Series B Preferred are
entitled to vote, together with the holders of our Common
Stock, on the basis of one vote for each share of Common
Stock issuable upon the conversion of the Series B
Preferred,
|
| | o |  | the holders of the Series B Preferred were
granted certain registration rights covering the shares of
our Common Stock issuable upon the conversion of the Series
B Preferred,                                            
|
| | o |  | the holders of the Series B Preferred are
entitled to vote one of the five members of the Companys
Board of Directors.                                                                                                   



| |  | There were arrearages of $239,342 and $79,342 on the Series B
Preferred for undeclared dividends as of June 30, 2003 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Series C Convertible Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | In March 2002, our Board of Directors designated 747,500 shares of
our preferred stock as Series C Convertible Preferred Stock
(Series C Preferred). The Series C Preferred was created
pursuant to a Certificate of Designations filed with the Delaware
Secretary of State on March 31, 2002. To date, the Company has
issued 337,150 shares of the Series C Preferred Stock, including
161,500 shares issued in connection with the conversion of the
Companys 12% Convertible Notes on December 31, 2002 and 10,000
shares issued pursuant to the conversion of $100,000 in accrued
expenses owed to Noesis Capital, the Placement Agent for this
private placement. Net proceeds were approximately $1,423,423.
The Company closed the placement on March 31, 2003.
|
| |  | The designations, rights and preferences of the Series C Preferred
include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



| | o |  | the stated value of each share is $10.00 per share,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | the shares are not redeemable,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | o |  | each share of Series C Preferred is
convertible at any time, at the option of the holder, into
a number of shares of Common Stock determined by dividing
the stated value per share of the Series C Preferred by
$0.25, which is the Series C Conversion Price. The Series C
Preferred will automatically convert into shares of our
Common Stock upon a public offering of our securities
raising gross proceeds in excess of $25,000,000 at a per
share price greater than 2.5 times the Series C Conversion
Price per share, as adjusted for any stock split, stock
dividend, recapitalization, or other similar transaction.
In addition, the Series C Preferred will automatically
convert into shares of our Common Stock at the Series C
Conversion Price at such time as the closing bid price for
our Common Stock has traded at two times the then
prevailing Series C Conversion Price for a period of 20
consecutive trading days, provided that (i) a public
trading market exists for our Common Stock on a national
securities exchange, the Nasdaq Stock Market, or the over
the counter market; and (ii) the Conversion Shares have
been registered for resale and are not subject to any
lock-up and the number of shares of the Series C Preferred
which can be converted in any 30-day period will be limited
to the number of shares of Common Stock underlying the
Series C Preferred equal to 10 times the average daily
trading volume during the 20-day look-back period set forth
above,

22



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| | o |  | the conversion price will be further
adjusted for any stock splits, stock dividends, and
corporate reorganizations, and certain other corporate
transactions and issuances of securities at below the
applicable conversion price per share or market value of
the Common Stock,                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | the shares of Series C Preferred pay a
dividend at a rate of 8% per annum, payable when and as
declared by the Board of Directors, or upon conversion or
liquidation. At our option, dividends can be paid in cash
or shares of Common Stock valued at the conversion price of
the Series C Preferred. Dividends are cumulative,
|
| | o |  | each share of Series C Preferred will rank
pari passu with our Series B Convertible Preferred Stock
and senior to our Series A Convertible Preferred Stock,                                                                                                                                                                     
|
| | o |  | in the event of our liquidation or winding
up, each share of Series C Preferred Stock carries a
liquidation preference equal to $10.00 per share plus
accrued and unpaid dividends, and                                                                                                                                         
|
| | o |  | the holders of the Series C Preferred are
entitled to vote, together with the holders of our Common
Stock, on the basis of one vote for each share of Common
Stock issuable upon the conversion of the Series C
Preferred,                                                                                                      
|
| | o |  | the holders of the Series C Preferred were
granted certain registration rights covering the shares of
our Common Stock issuable upon the conversion of the Series
C Preferred Stock,                                                                                                                                            
|
| | o |  | the holders of the Series C Preferred are
entitled to vote two of the seven members of the Companys
Board of Directors.                                                                                                                                                                                                        



| |  | There were arrearages of $186,761
and $12,094 on the Series C
Convertible Preferred Stock for undeclared dividends as of June 30,
2003 and 2002.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Warrants                                                                                                                                        
|
| |  | We have issued and outstanding warrants to purchase a total of
19,038,428 shares of our Common Stock, including:                                



| | o |  | warrants to purchase 2,359,832 shares of
our 5% Series A Convertible Preferred Stock at an exercise
price of $2.00 per share expiring in June 2003 which were
issued by us in connection with the offering of the Series
A Preferred Stock offering.                                                                                                                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | o |  | warrants to purchase 8,000,000 shares of
our Common Stock at an exercise price of $.25 per share
expiring September 2006 which were issued by us in
connection with the Series B Convertible Preferred Stock
offering, which warrants contain a cashless exercise
provision.                                                                                                                     
|
| | o |  | warrants to purchase 1,235,596 shares of
our Common Stock at exercise prices ranging from $.30 to
$10.00 per share expiring periodically through July 2006
which were issued by us to various individuals for a
variety of reasons including consulting services, advisory
services, settlement of a long-term lease obligation, and
in connection with the issuance of certain promissory
notes.
|
| | o |  | warrants to purchase 6,743,000 shares of
our Common Stock at an exercise price of $.25 per share
expiring May 2007 which were issued by us in connection
with the Series C Convertible Preferred Stock offering,
which warrants contain a cashless exercise provision.                                                                                                                           

23



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| | o |  | warrants to purchase 700,000 shares of our
Common Stock at an exercise price of $.25 per share
expiring May 2008 which were issued by us in connection
with a private placement of common stock, which warrants
contain a cashless exercise provision.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Series B Placement Agents Unit Purchase Option                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Commonwealth Associates, L.P. acted as our placement agent in
connection with the September 2001 private placement of units which
included our Series B Convertible Preferred Stock. We issued
Commonwealth Associates a seven year option to purchase 2.7 units,
each unit consisting of 10,000 shares of Series B Convertible
Preferred Stock and warrants to purchase 400,000 shares of Common
Stock, exercisable at $100,000 per unit, as additional
compensation.                                                                                                                                                                                                                                                                                                                    
|
| |  | Accounting for Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | At June 30, 2003, the Company has one stock-based compensation plan
which is described more fully below. The Company accounts for its
plan under the recognition and measurement principles of APB
Opinion No 25, Accounting for Stock Issued to Employees, (APB
25) and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options
granted under the plan had an exercise price equal to or above the
market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and
earnings per share if the company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensationto stock-based employee compensation.

|                                                                                                                                            |             |      |         |       |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ---- | ------- | ----- | - | - | ------- | ----- | -
|(in thousands, except for per share data)                                                                                                   |             | 2003 |         | 2002 
|                                                                                                                                            |             |      |         |      
|Net loss available to common stockholders                                                                                                   |             |      |         |       |   |   |         |      
|As reported                                                                                                                                 |             | $    | (1,605  | )     |   | $ | (2,013  | )    
|Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects |             | $    | (9,110  | )     |   | $ | (8,965  | )    
|Pro forma net loss available to common stockholders                                                                                         |             | $    | (10,715 | )     |   | $ | (10,978 | )    
|Basic and diluted net loss per share                                                                                                        |             |      |         |       |   |   |         |      
|                                                                                                                                            | As reported |      | $       | (0.13 | ) |   | $       | (0.24 | )
|                                                                                                                                            | Pro forma   |      | $       | (0.86 | ) |   | $       | (1.32 | )



| |  | The estimated fair value of each OmniComm option granted is
calculated using the Black-Scholes pricing model. The weighted
average assumptions used in the model were as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              |  |         |       |         |  |  |       |  
|----------------------------- |  | ------- | ----- | ------- |  |  | ----- | -
|                              |  | 2003    |       | 2002   
|                              |  |         |       |        
|Risk-free interest rate       |  |         | 5.00  | %       |  |  | 5.00  | %
|Expected years until exercise |  | 6 Years |       | 6 Years
|Expected stock volatility     |  |         | 137.2 | %       |  |  | 150.0 | %
|Dividend yield                |  |         | 0     | %       |  |  | 0     | %



| |  | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In 1998, the Companys Board of Directors approved the OmniComm
Systems 1998 Stock Option Plan, (the 1998 Plan). The 1998 Plan
provides for granting Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted Stock Awards,
Phantom Stock Unit Awards and Performance Share Units. Pursuant to
the 1998 Plan the Company may grant options to purchase up to
5,000,000 shares of the Companys common stock. The term of each
option may not exceed ten years from the date of grant, and options
vest in accordance with a vesting schedule established by the Plan
administrator.

24



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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



| |  | The Companys share option activity and related information is
summarized below:
| |  | --------------------------------------------------------------------------------

|                                   |           |  |                         |           |                         |   |          |      |       |  |           |        |          |   |      |      | 
|---------------------------------- | --------- |  | ----------------------- | --------- | ----------------------- | - | -------- | ---- | ----- |  | --------- | ------ | -------- | - | ---- | ---- | 
|                                   |           |  | Year ended December 31, |           | 6 Months ended June 30,
|                                   |           |  | 2002                    |           | 2003                   
|                                   |           |  |                         |           |                        
|                                   |           |  |                         |           |                         |   | Weighted |      |       |  |           |        | Weighted
|                                   |           |  |                         |           |                         |   | Average  |      |       |  |           |        | Average 
|                                   |           |  |                         |           |                         |   | Exercise |      |       |  |           |        | Exercise
|                                   |           |  | Options                 |           | Price                   |   | Options  |      | Price
|                                   |           |  |                         |           |                         |   |          |      |      
|Outstanding at beginning of period |           |  | 3,584,039               |           |                         | $ | 1.33     |      |       |  | 2,785,039 |        |          | $ | 1.00 |     
|                                   | Granted   |  |                         | 811,000   |                         |   | $        | 0.25 |       |  |           | 40,000 |          |   | $    | 0.25 | 
|                                   | Exercised |  |                         | -0-       |                         |   | $        | 0.00 |       |  |           | -0-    |          |   | $    | 0.00 | 
|                                   | Cancelled |  |                         | 1,610,000 |                         |   | $        | 1.36 |       |  |           | 30,000 |          |   | $    | 0.25 | 
|                                   |           |  |                         |           |                         |   |          |      |       |  |           |        |          |   |      |     
|Outstanding at end of period       |           |  | 2,785,039               |           |                         | $ | 1.00     |      |       |  | 2,795,039 |        |          | $ | 1.00 |     
|                                   |           |  |                         |           |                         |   |          |      |       |  |           |        |          |   |      |     
|Exercisable at end of period       |           |  | 2,761,705               |           |                         | $ | 0.82     |      |       |  | 2,771,705 |        |          | $ | 0.82 |     
|                                   |           |  |                         |           |                         |   |          |      |       |  |           |        |          |   |      |     



| |  | The following table summarizes information about stock options
outstanding at June 30, 2003:
| |  | --------------------------------------------------------------------------------------------

|                |  |             |           |             |  |           |      |           |  |          |      |  |  |          |           |  |  |   |      | 
|--------------- |  | ----------- | --------- | ----------- |  | --------- | ---- | --------- |  | -------- | ---- |  |  | -------- | --------- |  |  | - | ---- | 
|                |  | Outstanding |           | Exercisable
|                |  |             |           |            
|                |  |             |           |             |  | Weighted  |      |           |  |          |      |  |  |          |           |  |  |  
|                |  |             |           |             |  | Average   |      |           |  |          |      |  |  |          |           |  |  |  
|                |  |             |           |             |  | Remaining |      | Weighted  |  |          |      |  |  | Weighted
|                |  |             |           |             |  | Years of  |      | Average   |  |          |      |  |  | Average 
|Range of        |  | Number of   |           | Contractual |  | Exercise  |      | Number of |  | Exercise
|Exercise Prices |  | Options     |           | Life        |  | Price     |      | Options   |  | Price   
|                |  |             |           |             |  |           |      |           |  |         
|$0.25 - $0.47   |  |             | 1,662,500 |             |  |           | 4.01 |           |  | $        | 0.34 |  |  |          | 1,662,500 |  |  | $ | 0.34 | 
|$0.50 - $0.80   |  |             | 392,000   |             |  |           | 6.10 |           |  | $        | 0.54 |  |  |          | 378,666   |  |  | $ | 0.54 | 
|$1.00 - $2.75   |  |             | 730,539   |             |  |           | 2.26 |           |  | $        | 1.74 |  |  |          | 730,539   |  |  | $ | 1.74 | 



|         |  | Other Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|         |  | During 2001, the Company issued an aggregate of 126,340 shares of
common stock to employees and advisors with a fair market value of
$97,858 for services rendered under employment and consulting
agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        
|         |  | During 2001, the Company issued 50,000 warrants to advisors as
compensation for services to be rendered over periods ranging from
3 to 5 years. The Company valued the warrants in accordance with
SFAS 123 utilizing the Black-Scholes Model. The Company recorded
$95,689 in deferred compensation and is amortizing the amounts over
the expected life of the consulting services to be rendered. The
Company recognized non-cash compensation expense totaling $17,571
during the year ended December 31, 2002 in connection with the
warrant grants.                                                                                                                                                                                                       
|        
|         |  | During 2002, the Company issued an aggregate of 113,100 shares of
restricted common stock to employees including three of its
officers. The stock issued had a fair market value of $22,288 and
was issued for employment services rendered in lieu of cash
payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        
|NOTE 14: |  | OMNITRIAL B.V. BANKRUPTCY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        
|         |  | On or about September 6, 2000, the Companys wholly owned
subsidiary, OmniTrial B.V. (OmniTrial) submitted a petition for
bankruptcy protection from the bankruptcy court of the Netherlands.
The court appointed a liquidating trustee. The Company claimed
that certain assets in the possession of OmniTrial were paid for by
the Company and therefore should not be part of the liquidating
assets of OmniTrial. The bankruptcy trustee rejected that claim
and told the Company that as part of the OmniTrial bankruptcy
estate the assets would be sold to diminish any deficiency of the
estate. On July 5, 2001 the Company signed a settlement agreement
providing for the return of the assets to the Company in exchange
for a payment of $10,000.

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##### Table of Contents



OmniComm Systems, Inc.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)



|NOTE 15: |  | INCOME TAXES
Income taxes are accrued at statutory US and state income tax
rates. Income tax expense is as follows:
|-------- |  | -------------------------------------------------------------------------------------------------------------------

|                                |                                       |   |          |          |         |   |          |          |  
|------------------------------- | ------------------------------------- | - | -------- | -------- | ------- | - | -------- | -------- | -
|                                |                                       |   | 6/30/03  |          | 6/30/02
|                                |                                       |   |          |          |        
|Current tax expense (benefit):  |                                       |   |          |          |         |   |          |         
|                                | Income tax at statutory rates         |   | $        | -0-      |         |   | $        | -0-      |  
|                                |                                       |   |          |          |         |   |          |         
|Deferred tax expense (benefit): |                                       |   |          |          |         |   |          |         
|                                | Amortization of goodwill and
covenant |   |          | -0-      |         |   |          | -0-      |  
|                                | Operating loss carryforward           |   |          | (375,637 | )       |   |          | (546,806 | )
|                                |                                       |   |          |          |         |   |          |         
|                                |                                       |   | (375,637 | )        |         |   | (546,806 | )       
|Valuation allowance             |                                       |   | 375,637  |          |         |   | 546,806  |         
|                                |                                       |   |          |          |         |   |          |         
|Total tax expense (benefit)     |                                       | $ | -0-      |          |         | $ | -0-      |         
|                                |                                       |   |          |          |         |   |          |         



| |  | The tax effects of significant temporary differences, which
comprise the deferred tax assets, are as follows:
| |  | -------------------------------------------------------------------------------------------------------------

|                             |                           |   |           |            |          |   |           |            |  
|---------------------------- | ------------------------- | - | --------- | ---------- | -------- | - | --------- | ---------- | -
|                             |                           |   | 6/30/03   |            | 12/31/02
|                             |                           |   |           |            |         
|Deferred tax assets:         |                           |   |           |            |          |   |           |           
|Amortization of intangibles  |                           | $ | 283,698   |            |          | $ | 283,698   |           
|Operating loss carryforwards |                           |   | 5,924,968 |            |          |   | 5,549,331 |           
|                             |                           |   |           |            |          |   |           |           
|                             | Gross deferred tax assets |   |           | 6,208,666  |          |   |           | 5,833,029  |  
|                             | Valuation allowance       |   |           | (6,208,666 | )        |   |           | (5,833,029 | )
|                             |                           |   |           |            |          |   |           |           
|                             | Net deferred tax asset    |   | $         | -0-        |          |   | $         | -0-        |  
|                             |                           |   |           |            |          |   |           |           



|         |  | The Company has net operating loss carryforwards (NOL) for income
tax purposes of approximately $15,733,000. This loss is allowed to
be offset against future income until the year 2023 when the NOLs
will expire. Other timing differences relate to depreciation and
amortization for the stock acquisition of Education Navigator in
1998. The tax benefits relating to all timing differences have
been fully reserved for in the valuation allowance account due to
the lack of operating history and the substantial losses incurred
through June 30, 2003.
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|NOTE 16: |  | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        
|         |  | The Company had a recorded liability of $145,711 at June 30, 2003
for federal employment taxes. The Company had not fully satisfied
the liability as of August 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                           
|        
|         |  | The Company is currently in default on interest payments owed
totaling $66,879 on 10% Convertible Notes. The terms of the notes
provide a payment grace period of thirty days in which to make the
required semi-annual interest payments. The Company has been in
default since January 30, 2002.                                                                                                                                                                                                                                                                 

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

General

The following information should be read in conjunction with the Consolidated
Interim Financial Statements and Notes thereto and other information set forth
in this report.

Forward-Looking Statements

Statements contained in this Form 10-QSB that are not historical fact are
forward looking statements. These statements can often be identified by the
use of forward-looking terminology such as estimate, project, believe,
expect, may, will, should, intends, or anticipates or the negative
thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. We wish to
caution the reader that these forward-looking statements, such as statements
relating to timing, costs and of the acquisition of, or investments in,
existing business, the revenue or profitability levels of such businesses, and
other matters contained in this Form 10-QSB regarding matters that are not
historical facts, are only predictions. No assurance can be given that plans
for the future will be consummated or that the future results indicated,
whether expressed or implied, will be achieved. While sometimes presented with
numerical specificity, these plans and projections and other forward-looking
statements are based upon a variety of assumptions, which we consider
reasonable, but which nevertheless may not be realized. Because of the number
and range of the assumptions underlying our projections and forward-looking
statements, many of which are subject to significant uncertainties and
contingencies that are beyond our reasonable control, some of the assumptions
inevitably will not materialize, and unanticipated events and circumstances may
occur subsequent to the date of this Form 10-QSB. Therefore, our actual
experience and results achieved during the period covered by any particular
projections or forward-looking statements may differ substantially from those
projected. Consequently, the inclusion of projections and other forward-
looking statements should not be regarded as a representation by us or any
other person that these plans will be consummated or that estimates and
projections will be realized, and actual results may vary materially. There
can be no assurance that any of these expectations will be realized or that any
of the forward-looking statements contained herein will prove to be accurate.
The Company does not undertake any obligation to update or revise any
forward-looking statement made by it or on its behalf, whether as a result of
new information, future events or otherwise.

Overview

We are an Internet-based healthcare technology company that provides Web-based
electronic data capture (EDC) solutions and related value-added services to
pharmaceutical and biotechnology companies, clinical research organizations,
and other clinical trial sponsors. Our Internet-based TrialMaster® software
allows clinical trial sponsors and investigative sites to securely collect,
validate, transmit, and analyze clinical study data including patient
histories, patient dosing, adverse events, and other clinical trial
information. We phased out the systems integration segment of our business
during 2001. All of our personnel are involved in the development and
marketing of TrialMaster.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make judgments, assumptions and estimates that affect the amounts
reported. Note 2 of Notes to the Consolidated Interim Financial Statements
describes the significant accounting policies used in the preparation of the
consolidated financial statements. Certain of these significant accounting
policies are considered to be critical accounting policies, as defined below.

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A critical accounting policy is defined as one that is both material to the
presentation of our financial statements and requires management to make
difficult, subjective or complex judgments that could have a material effect on
our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes: 1) we are required to make
assumptions about matters that are highly uncertain at the time of the
estimate; and 2) different estimates we could reasonably have used, or changes
in the estimate that are reasonably likely to occur, would have a material
effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be
determined with certainty. We base our estimates on historical experience and
on various other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as additional
information is obtained and as our operating environment changes. These changes
have historically been minor and have been included in the consolidated
financial statements as soon as they became known. In addition, our Management
is periodically faced with uncertainties, the outcomes of which are not within
our control and will not be known for prolonged periods of time. Based on a
critical assessment of its accounting policies and the underlying judgments and
uncertainties affecting the application of those policies, our Management
believes that our consolidated financial statements are fairly stated in
accordance with accounting principles generally accepted in the United States
(GAAP), and present a meaningful presentation of our financial condition and
results of operations.

We believe that the following are our critical accounting policies:

DEFERRED REVENUE

Deferred revenue represents cash advances received in excess of revenue earned
on on-going contracts. Payment terms vary with each contract but may include
an initial payment at the time the contract is executed, with future payments
dependent upon the completion of certain contract phases or targeted
milestones. In the event of contract cancellation, we are entitled to payment
for all work performed through the point of cancellation.

REVENUE RECOGNITION POLICY

OmniComms revenue model is transaction-based and can be implemented either as
an ASP (application service provider) or licensed for implementation by a
customer such as a pharmaceutical company. Revenues are derived from the
set-up of clinical trial engagements; on-going maintenance fees incurred
throughout the duration of an engagement; fees for report writing and change
orders. The clinical trials that are conducted using TrialMaster can last from
a few months to several years. Most of the fees associated with our product
including post-setup customer support in the form of maintenance charges are
recognized ratably over the term of the clinical trial. Cost of sales is
primarily comprised of programmer salaries and taxes and is expensed as
incurred.

The Company recognizes sales, for both financial statement and tax purposes in
accordance with SEC Staff Accounting Bulletin No. 101 Revenue Recognition in
Financial Statements (SAB 101). SAB 101 requires that revenues be recognized
ratably over the life of a contract. In accordance with SAB 101 the Company
will periodically record deferred revenues relating to advance payments in
contracts.

STOCK BASED COMPENSATION.

Options granted to employees under our Stock Option Plan are accounted for by
using the intrinsic value method under APB Opinion 25, Accounting for Stock
Issued to Employees (APB 25). In October 1995, the Financial Accounting
Standards Board issued Statement No.123, Accounting for Stock-Based
Compensation (SFAS 123), which defines a fair value based method of accounting
for stock options. The accounting standards prescribed by SFAS 123 are
optional and we have continued to account for stock options under the intrinsic
value method specified in APB 25.

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##### Table of Contents



The Six Months Ended June 30, 2003 Compared With the Six Months Ended June 30,
2002

Results of Operations

Revenues

Revenues for the period ended June 30, 2003 were $333,550 compared to $225,973
for the same period in 2002. The increase can be attributed to increased
success we experienced in marketing TrialMaster. While industry growth
estimates vary, most predictions indicate that EDC is anticipated to become
widely accepted within the next three to five years. Web-based EDC has been
around for approximately four years and between 5% and 10% of all clinical
trials are currently conducted using Web-based EDC. Incremental growth within
the industry should continue as competitive pressures mount in the
pharmaceutical industry to replace existing prescription drugs losing their
patent protection.

We changed our marketing focus to include clinical research organizations
(CROs) approximately eight months ago. CROs generally market to and service
a broad range of pharmaceutical and medical device manufacturers and
consequently provide us the opportunity to market to a broader, bigger and more
diverse end-user base. We have recently found CROs to be more receptive to
the use of EDC. This is likely in response to pressure from clinical trial
sponsors for more rapid and cost-efficient clinical trials, a result that EDC
use can impact. We expect to increase the number of CROs using TrialMaster
during the next six months. TrialMaster supplements the traditional CROs
basket of products and services and would be sold as integral part of the
outsource package offered to their trial sponsor clients. This should provide
us the opportunity to leverage their sales force thereby increasing new clients
with only modest increases in our sales and marketing expenditures.

Our TrialMaster product is currently being sold as an application service
provider (ASP) that provides EDC and other services such as an enterprise
management suite which assists its clients in the pharmaceutical, biotechnology
and medical device industries in accelerating the completion of clinical
trials.

TrialMaster contracts provide for pricing that is based on both the size and
duration of the clinical trial. Size parameters include the number of patients
participating in the trial and the number of data points being collected per
patient. The client will pay a trial setup fee based on the previously
mentioned factors, and then pay an on-going maintenance fee for the duration of
the clinical trial that provides software, network and site support during the
trial. Generally, these contracts will range in duration from four months to
several years. Setup fees are generally earned prior to the inception of a
trial, however, the revenues will be recognized in accordance with SEC Staff
Accounting Bulletin No. 101 Revenue Recognition in Financial Statements which
requires that the revenues be recognized ratably over the life of the contract.
The maintenance fee revenues are earned and recognized monthly. Costs
associated with contract revenues are recognized as incurred.

Cost of Goods Sold
Cost of goods sold decreased to $95,334 in 2003 compared to $202,934 during the
comparable period in 2002. Cost of goods sold relates primarily to salaries
and benefits associated with the programmers, developers and systems analysts
producing clinical trials on behalf of our clients. In addition, we have
entered into a strategic alliance with a company based in Holland to provide
help-desk services for our clients located in Europe. We do not expect the
costs associated with this relationship to materially affect our results of
operations.

Our gross margins during the first quarter of 2003 were approximately 71.4%.
TrialMaster V3.0 automated many of the manual programming functions inherent in
earlier versions of the product. This combined with the experience gained from
serving our existing client base has allowed to decrease the time and cost
involved in producing clinical trials. We expect gross margins to contract
during the third quarter as we transition our business to providing TrialMaster
on both an ASP and licensed basis. We expect margins to return to the 70-75%
range during the fourth quarter of 2003 after these design efforts have been
completed.

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Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses are our biggest expense at 74.2% of total Other
Expenses for the first half of 2003. Salaries and related expenses totaled
$916,943 in 2003 compared to $876,565 in 2002. Total salaries declined
relative to 2002 since a portion of total payroll is accounted for in cost of
goods sold. We currently employ approximately 15 employees out of our Davie,
Florida corporate office and two out-of-state sales executives. We expect to
increase headcount within our technology and sales and marketing functions in
concert with anticipated increases in TrialMaster clients during fiscal 2003.

Rent

Rent expense was $75,282 for fiscal 2003 compared with $78,565 for fiscal 2002.
Although rent expense remained relatively constant, the components of the
costs have changed. Our development office in Tampa was closed in March 2001
and that function was relocated to the corporate office to provide a
complementary workflow between our R & D function and our operations and
marketing departments. During November 2001 our corporate offices were
relocated to the Ft. Lauderdale, Florida area. We believe this market provides
a better environment for technical personnel recruiting. We were also able to
reduce our rent obligations by approximately $3,300 per month. In December
2001, we established a disaster recovery site at a Bell South Co-Location
facility in Atlanta, Georgia. This site allows 100% system up-time and
provides us with redundant data storage capabilities.

Legal and Professional Fees

Legal and professional fees totaled $31,517 in 2003 compared with $118,795
during fiscal 2002. Key components of the 2003 amounts include $45,000 paid to
our placement agent for financial advisory services $25,000 in audit related
fees, $(50,018) in legal fees which includes a credit of $(52,023) for a
settlement of accrued legal fees associated with a Private Placement of our
Series C Convertible Preferred Stock and $11,534 that relate to accounting and
legal services associated with our obligations as a public company. We expect
on-going legal and professional fees to fall in-line with what was experienced
during 2002.

Travel

We incurred $28,857 in travel expenses during fiscal 2003 compared to $20,260
during 2002. We expect travel to increase as we experience more success in
penetrating the marketplace with our sales efforts. We expect this increase to
be offset by the increase in accompanying revenues.

Telephone and Internet

Telephone and Internet related costs were reduced by $4,639, or approximately
11.6%, due to decreased telephone and Internet access costs associated with the
change of our telecom provider from MCI to AT&T. We do not anticipate
increases in access charges during fiscal 2003 based on our own existing
communications infrastructure and our projected 2003 clinical trial workload.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SGA) were $67,463 during the
first half of 2003. These expenses relate primarily to costs incurred in
running our office day-to-day and other costs not directly related to other
captioned items in our income statement, and include the cost of office
equipment and supplies, the costs of attending conferences and seminars and
other expenses incurred in the normal course of business. We expect to
increase the overall dollar volume spent on SGA as we increase our revenue base
and step-up our overall activity. The increase of approximately $14,000 is
partially attributable to increased advertising and public relations costs of
approximately $3,000 and increased insurance costs of approximately $11,000.

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Interest Expense

Interest expense was $58,421 during 2003 versus $145,026 in fiscal 2002. The
Company converted its 12% Convertible Notes during December 2002 into shares of
its Series C Convertible Preferred Stock. This conversion reduced annualized
interest expense by approximately $190,000.

Preferred Stock Dividends

In March 2003 we issued 590,000 warrants to investors in a private placement of
our Series C Convertible Preferred Stock. The warrants were valued at $135,344
utilizing the Black-Scholes model. The net proceeds received in the Series C
Convertible Preferred Stock Unit offering were allocated to the Series C
Preferred Stock and we recognized a deemed dividend on preferred stock of
$135,344 resulting in a charge to retained earnings and a credit to additional
paid-in capital within our stockholders equity as of June 30, 2003. In June
2003 we issued 700,000 warrants to investors in a private placement of our
Common Stock. The warrants were valued at $160,577 utilizing the Black-Scholes
model. The net proceeds received in the Common Stock offering were allocated
to the Common Stock and we recognized a deemed dividend on common stock of
$160,577 resulting in a charge to retained earnings and a credit to additional
paid-in capital within our stockholders equity as of June 30, 2003. Dividends
on our Series A Preferred Stock totaled $0 in 2003 compared to $101,837 for the
comparable period in 2002. There were arrearages of $101,837 in Series A
Convertible Preferred Stock $79,342 in Series B Convertible Preferred Stock
dividends and $129,956 in Series C Convertible Preferred Stock dividends at
June 30, 2003 and we therefore deducted $311,135 from Net Income (Loss).

Liquidity and Capital Resources

We changed our primary focus to providing Internet based database applications
to the clinical trial industry in mid-1998. At that time we began phasing out
our systems integration business segment and we effectively completed that
transition during the first half of 2001. Since we made TrialMaster and its
related components our primary business we have experienced negative cash flows
and have relied primarily on the proceeds from the sale of debt and equity
securities to fund our operations. In addition, we have utilized stock-based
compensation as a means of paying for consulting and salary related expenses.

Cash and cash equivalents decreased by $129,090 to $65,787 at June 30, 2003.
This was the result of cash provided by financing activities of $680,265 offset
by cash used in operating activities of approximately $797,533. The
significant components of the activity include a loss from operations of
approximately $998,239 offset by non-cash expenses of 88,459, increases in cash
of $112,247 from changes in working capital accounts and approximately $680,265
we raised through the sale of debt and equity securities.

We are not currently bound by any long or short-term agreements for the
purchase or lease of capital expenditures. Any amounts expended for capital
expenditures would be the result of an increase in the capacity needed to
adequately service any increase in our business. To date we have paid for any
needed additions to our capital equipment infrastructure from working capital
funds and anticipate this being the case in the future.

The Company is currently in default on interest payments owed totaling $66,879
on its 10% Convertible Notes. The terms of the notes provides a payment grace
period of thirty days in which to make required semi-annual interest payments.
The company was in default effective January 30, 2002.

The Company had a recorded liability of $145,711 at June 30, 2003 for federal
employment taxes. The Company had not fully satisfied the liability as of
August 15, 2003.

On March 28, 2002 our Placement Agent, Noesis Capital, began the distribution
of a Confidential Private Placement Memorandum for the sale to accredited
investors of our 8% Series C Convertible Preferred Stock. Gross proceeds
totaled $1,756,500 and we accrued $333,077 in transaction related fees leaving
net proceeds of approximately $1,423,423. This private placement was closed
effective March 31, 2003.

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On April 29, 2003 our Placement Agent, Noesis Capital, began the distribution
of a Confidential Private Placement Memorandum for the sale to accredited
investors of our Common Stock. Gross proceeds totaled $350,000 and we accrued
$35,000 in transaction related fees leaving net proceeds of approximately
$315,000. This private placement remained open as of June 30, 2003.

During the second half of fiscal 2002 and first half of 2003, we entered into
contracts for EDC services worth approximately $1.5 million in value. During
this period we added seven new clients, including two clinical research
organizations (CRO) and an academic research institution. These clients in
particular are deemed vital to our long-term growth since these two areas have
become a point of emphasis for our sales and marketing activities. CROs
provide out-sourced clinical trial services to pharmaceutical and medical
device manufacturers and will typically provide services to numerous clients at
a time. Strategically we feel that CROs will provide us to a wider range of
potential clients and will augment our sales efforts by allowing the CRO to add
our EDC services to the menu of services they can provide. Academic research
institutions will allow us the ability to develop a strong reputation within
the clinical research community and provide exposure to cutting edge
technologies and therapies as they unfold.

Our selling efforts now include marketing our products to several Fortune 500
pharmaceutical and medical device manufacturers and two of the largest CROs.
We began providing services to some of these entities during the first half of
2003. These contracts should provide us the opportunity to limit our need for
funding our operations via debt and equity capital. Obtaining contracts with
clients of this size and reputation would also increase the credibility of the
company.

We feel that the momentum established from new client acquisitions; the
development of a new EDC product  MERS-TH; and our ability to retain clients
for repeat engagements provide a good operating base from which to build during
2003. We improved our sales staff during the latter half of fiscal 2002 and
expect to increase the level of resources utilized in the sales and marketing
areas. We embarked on a cost cutting program during fiscal 2000. That program
became part of our organizations identity and remains ingrained in our culture
today. We feel that a combination of our lean operating environment and
increased success in new client acquisition, coupled with our ability to retain
our existing clients will allow us to compete effectively within the EDC
market.

Because of the losses experienced since 1999 we have needed to continue
utilizing the proceeds from the sale of debt and equity securities to fund our
working capital needs. The capital markets since mid-2000 have provided a
difficult climate for raising capital due to the decline in value of publicly
held technology stocks and the resultant apprehension on the part of investors
to invest in technology oriented firms. In addition, when available, capital
has been expensive relative to the valuations that were afforded during the
expansion of the Internet sector in 1999 and 2000. The softness in the capital
markets coupled with the losses experienced have caused working capital
shortfalls. We have used a combination of equity financing and short-term
bridge loans to fund our working capital needs. Other than our current capital
and capital we may raise from future debt or equity offerings or short-term
bridge loans, we do not have any additional sources of working capital.

We will continue to require substantial funds to continue our research and
development activities and to market, sell and commercialize our technology. We
will need to raise substantial additional capital to fund our future
operations. Our capital requirements will depend on many factors, including
the problems, delays, expenses and complications frequently encountered by
companies developing and commercializing new technologies; the progress of our
research and development activities; the rate of technological advances;
determinations as to the commercial potential of our technology under
development; the status of competitive technology; the establishment of
collaborative relationships; the success of our sales and marketing programs;
the cost of filing, prosecuting and defending and enforcing patents and
intellectual property rights; and other changes in economic, regulatory or
competitive conditions in our planned business. Estimates about the adequacy
of funding for our activities are based upon certain assumptions, including
assumptions that the research and development programs relating to our
technology can be conducted at projected costs and that progress towards
broader commercialization of our technology will be timely and successful.
There can be no assurance that changes in our research and development plans,
acquisitions or other events will not result in accelerated or unexpected
expenditures.

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To satisfy our capital requirements, we will seek additional financing through
debt and equity financings. There can be no assurance that any such findings
will be available to us on favorable terms or at all. If adequate funds are
not available when needed, we may be required to delay, scale back or eliminate
some or all of our research and product development programs. If we are
successful in obtaining additional financings, the terms of such financings may
have the effect of diluting or adversely affecting the holdings or the rights
of the holders of our common and preferred stock.

Our ability to continue in existence is dependent on our having sufficient
financial resources to bring products and services to market. As a result of
its significant losses, negative cash flows from operations, and accumulated
deficits for the periods ending June 30, 2003, there is doubt about the
Companys ability to continue as a going concern.

The Three Months Ended June 30, 2003 Compared With the Three Months Ended June
30, 2002

Results of Operations

Revenues

Revenues for the period ended June 30, 2003 were $132,420 compared to $121,951
for the same period in 2002. The increase can be attributed to increased
success we experienced in marketing TrialMaster. We expect revenues to
increase as we experience continued success in marketing TrialMaster to larger
entities. These clients will afford us a higher likelihood of multiple trial
engagements. In addition, the trials conducted will characteristically
encompass more locations and therefore provide us incremental revenues.

Cost of Goods Sold

Cost of goods sold decreased to $48,227 in 2003 compared to $78,225 during the
comparable period in 2002. Cost of goods sold relates primarily to salaries
and benefits associated with the programmers, developers and systems analysts
producing clinical trials on behalf of our clients. In addition, we have
entered into a strategic alliance with a company based in Holland to provide
help-desk services for our clients located in Europe. We do not expect the
costs associated with this relationship to materially affect our results of
operations.

Our gross margins during the second quarter of 2003 were approximately 63.6%.
The decrease in gross margins versus the first quarter of 2003 is a result of
smaller than expected revenues combined with significant amounts of labor
expended on producing a new version of TrialMaster focused primarily on
companies conducting Phase I clinical trials.

Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses were our biggest expense at 88.1% of total Other
Expenses for the second quarter of 2003. Salaries and related expenses totaled
$465,856 in 2003 compared to $438,952 in 2002. Total salaries declined
relative to 2002 since a portion of total payroll is accounted for in cost of
goods sold. We currently employ approximately 15 employees out of our Davie,
Florida corporate office and two out-of-state sales executives. We expect to
increase headcount within our technology and sales and marketing functions in
concert with anticipated increases in TrialMaster clients during fiscal 2003.

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Rent

Rent expense was $38,524 for fiscal 2003 compared with $38,345 for fiscal 2002.
Rent expense has stabilized subsequent to the move of our corporate offices to
Davie, Florida. In December 2001, we established a disaster recovery site at a
Bell South Co-Location facility in Atlanta, Georgia. This is designed to
ensure 100% system up-time. We do not anticipate significant changes to rent
expense in the next twelve months.

Legal and Professional Fees

Legal and professional fees totaled $6,764 in 2003 compared with $36,867 during
fiscal 2002. Key components of the 2003 amounts include $22,500 paid to our
placement agent for financial advisory services, $25,000 for audit related
fees, $(49,971) in legal fees which includes a credit of $52,023 for a
settlement of accrued legal fees associated with the private placement of our
Series C Preferred Stock, and $11,534 that relate to accounting and legal
services associated with our obligations as a public company. We expect
on-going legal and professional fees to fall in-line with what was experienced
during 2002.

Travel

We incurred $19,102 in travel expenses during fiscal 2003 compared to $5,814
during 2002. We expect travel to increase as we experience more success in
penetrating the marketplace with our sales efforts. We expect this increase to
be offset by the increase in accompanying revenues.

Telephone and Internet

Telephone and Internet related costs increased by $3,278. We do not anticipate
increases in access charges during fiscal 2003 based on our own existing
communications infrastructure and our projected 2003 clinical trial workload.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SGA) were $34,272 during the
second quarter of 2003. These expenses relate primarily to costs incurred in
running our office day-to-day and other costs not directly related to other
captioned items in our income statement, and include the cost of office
equipment and supplies, the costs of attending conferences and seminars and
other expenses incurred in the normal course of business.

Interest Expense

Interest expense was $29,311 during 2003 versus $72,982 in fiscal 2002. The
Company converted its 12% Convertible Notes during December 2002 into shares of
its Series C Convertible Preferred Stock. This conversion reduced annualized
interest expense by approximately $190,000.

Preferred Stock Dividends

In June 2003 we issued 700,000 warrants to investors in a private placement of
our Common Stock. The warrants were valued at $160,577 utilizing the
Black-Scholes model. The net proceeds received in the Series C Convertible
Preferred Stock Unit offering were allocated to the Common Stock and we
recognized a deemed dividend on preferred stock of $160,577 resulting in a
charge to retained earnings and a credit to additional paid-in capital within
our stockholders equity as of June 30, 2003. Dividends on our Series A
Preferred Stock totaled $0 in 2003 compared to $51,200 for the comparable
period in 2002. There were arrearages of $51,200 in Series A Convertible
Preferred Stock of $39,890; in Series B Convertible Preferred Stock dividends
and $67,245 in Series C Convertible Preferred Stock dividends at June 30, 2003
and we therefore deducted $158,335 from Net Income (Loss).

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ITEM 3. CONTROLS AND PROCEDURES

The Companys management, including our Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as
amended) as of the quarter ended June 30, 2003, the end of the period covered
by this report (the Evaluation Date). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded, that our
disclosure controls and procedures are effective for timely gathering,
analyzing and disclosing the information we are required to disclose in our
reports filed under the Securities Exchange Act of 1934, as amended. There
have been no significant changes made in our internal controls or in other
factors that could significantly affect our internal controls subsequent to the
Evaluation Date.

There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the
date we carried out this evaluation.




PART II OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits.

The following documents are filed as a part of this report or are incorporated
by reference to previous filings, if so indicated:

|            |  |                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                                                                               
|            |  |                                                                                                                                                                           
|31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange
Act of 1934, as amended.
|            |  |                                                                                                                                                                           
|31.2        |  | Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange
Act of 1934, as amended.
|            |  |                                                                                                                                                                           
|32.1        |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of
2002.                        
|            |  |                                                                                                                                                                           
|32.2        |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of
2002.                        

(b)    Reports
on Form 8-K.

None.


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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

OmniComm Systems, Inc.

Registrant


|      |  |                                                                                                     
|----- |  | ----------------------------------------------------------------------------------------------------
|By:   |  | /s/Cornelis F. Wit                                                                                  
|      |  |                                                                                                     
|Date: |  | Cornelis F. Wit, Director, Chief Executive Officer and President
August 14, 2003                    
|      |  |                                                                                                     
|By:   |  | /s/Ronald T. Linares                                                                                
|      |  |                                                                                                     
|Date: |  | Ronald T. Linares, Vice President of Finance, Chief Financial and
Accounting Officer
August 14, 2003

36