##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
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 SEPTEMBER 30, 2002
| 
|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 employer Ident. No.)

|                                             |  |           
|-------------------------------------------- |  | ----------
|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 September 30, 2002: 8,323,697 common stock $.001 par value,
4,215,224 5% Series A Preferred stock, $.001 par value, 200,000 Series B
Preferred Stock, $.001 par value, 126,150 Series C Preferred Stock, $.001
par value.





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TABLE OF CONTENTS



|                                                                                                   |                                                                    |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|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
|PART II OTHER INFORMATION                                                                         
|                                                                                                   | ITEM 3. CONTROLS AND PROCEDURES                                   
|                                                                                                   | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS       
|                                                                                                   | ITEM 5. OTHER INFORMATION                                         
|                                                                                                   | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                          
|SIGNATURES                                                                                        
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|CEO CERTIFICATION                                                                                 
|CFO CERTIFICATION                                                                                 



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##### Table of Contents



Table of Contents

|                                                             |  |      |    | 
|------------------------------------------------------------ |  | ---- | -- | 
|                                                             |  | Page
|                                                             |  |     
|Balance Sheet                                                |  |      | 3  | 
|                                                            
|Income Statement                                             |  |      | 4  | 
|                                                            
|Statement of Cash Flows                                      |  |      | 5  | 
|                                                            
|Notes to Unaudited Consolidated Interim Financial Statements |  |      | 7  | 
|                                                            
|Managements Discussion and Analysis or Plan of Operations   |  |      | 26 | 
|                                                            
|Other Information                                            |  |      | 33 | 
|                                                            
|Exhibit Index                                                |  |      | 35 | 
|                                                            
|Signatures                                                   |  |      | 36 | 
|                                                            
|Exhibit 99.1                                                 |  |      | 39 | 
|                                                            
|Exhibit 99.2                                                 |  |      | 40 | 

2



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##### Table of Contents



OMNICOMM SYSTEMS, INC.




CONSOLIDATED BALANCE SHEETS


|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |             |   |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ---------- | ----------- | ------------- | - | ------------ | ----------- | - |  | 
|                                                     |                                                                                                                                                                                                                       |                                      |            |             | September 30, |   | December 31,
|                                                     |                                                                                                                                                                                                                       |                                      |            |             | 2002          |   | 2001        
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |             
|                                                     |                                                                                                                                                                                                                       |                                      |            |             | (unaudited)   |   |              |             |  
|                                                     |                                                                                                                                                                                                                       |                                      | ASSETS     |             |               |   |              |             |   |  | 
|CURRENT ASSETS                                       |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|                                                     | Cash                                                                                                                                                                                                                  |                                      | $          | 15,467      |               |   | $            | 142,826     |  
|                                                     | Accounts receivable                                                                                                                                                                                                   |                                      |            | 180,102     |               |   |              | 65,705      |  
|                                                     | Prepaid expenses                                                                                                                                                                                                      |                                      |            | 9,320       |               |   |              | 2,095       |  
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|                                                     | Total current assets                                                                                                                                                                                                  |                                      |            | 204,889     |               |   |              | 210,626     |  
|PROPERTY AND EQUIPMENT, net                          |                                                                                                                                                                                                                       |                                      | 301,655    |             |               |   | 421,512      |            
|OTHER ASSETS                                         |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|                                                     | Intangible assets, net                                                                                                                                                                                                |                                      |            | -0-         |               |   |              | 48,452      |  
|                                                     | Other assets                                                                                                                                                                                                          |                                      |            | 12,997      |               |   |              | 5,500       |  
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|TOTAL ASSETS                                         |                                                                                                                                                                                                                       | $                                    | 519,541    |             |               | $ | 686,090      |            
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|                                                     |                                                                                                                                                                                                                       | LIABILITIES AND SHAREHOLDERS EQUITY |            |             |               |   |              |             |   | 
|CURRENT LIABILITIES                                  |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|                                                     | Accounts payable and accrued expenses                                                                                                                                                                                 |                                      | $          | 2,063,753   |               |   | $            | 1,026,919   |  
|                                                     | Notes payable  current                                                                                                                                                                                               |                                      |            | 262,963     |               |   |              | 242,963     |  
|                                                     | Notes payable related party- current                                                                                                                                                                                  |                                      |            | 98,322      |               |   |              | 98,322      |  
|                                                     | Deferred revenue                                                                                                                                                                                                      |                                      |            | 155,023     |               |   |              | 83,085      |  
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|                                                     | Total current liabilities                                                                                                                                                                                             |                                      |            | 2,580,061   |               |   |              | 1,451,289   |  
|CONVERTIBLE DEBT                                     |                                                                                                                                                                                                                       |                                      | 2,065,000  |             |               |   | 2,065,000    |            
|NOTES PAYABLE, net of current portion                |                                                                                                                                                                                                                       |                                      | 242,963    |             |               |   | 242,963      |            
|NOTES PAYABLE RELATED PARTY, net of current portion  |                                                                                                                                                                                                                       |                                      | 98,322     |             |               |   | 98,322       |            
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|TOTAL LIABILITIES                                    |                                                                                                                                                                                                                       |                                      | 4,986,346  |             |               |   | 3,857,574    |            
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|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, 126,150 and 0- issued and outstanding, respectively;
liquidation preference $1,261,500 and $-0-, respectively                    |                                      |            | 126         |               |   |              | -0-         |  
|                                                    
|                                                     | 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, 8,323,697 issued and
outstanding, after deducting 620,951 shares of treasury stock, at $.001 par
value                                                                  |                                      |            | 8,944       |               |   |              | 8,944       |  
|                                                     | Additional paid in capital  preferred                                                                                                                                                                                |                                      |            | 6,487,299   |               |   |              | 5,519,282   |  
|                                                     | Additional paid in capital  common                                                                                                                                                                                   |                                      |            | 9,192,567   |               |   |              | 8,613,635   |  
|                                                     | Less: Treasury stock, cost method, 620,951 and 620,951  shares, respectively                                                                                                                                         |                                      |            | (293,912    | )             |   |              | (293,912    | )
|                                                     | Accumulated deficit                                                                                                                                                                                                   |                                      |            | (19,786,606 | )             |   |              | (16,932,609 | )
|                                                     | Deferred compensation                                                                                                                                                                                                 |                                      |            | (78,498     | )             |   |              | (90,099     | )
|                                                     | Subscriptions receivable                                                                                                                                                                                              |                                      |            | (1,140      | )             |   |              | (1,140      | )
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                 |                                                                                                                                                                                                                       |                                      | (4,466,805 | )           |               |   | (3,171,484   | )          
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |                                                                                                                                                                                                                       | $                                    | 519,541    |             |               | $ | 686,090      |            
|                                                     |                                                                                                                                                                                                                       |                                      |            |             |               |   |              |            

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

3



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##### Table of Contents



OMNICOMM SYSTEMS, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | -------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | --------- | -
|                                                                                                                                                                                                                                                                                                                                                                                              |  | For the nine months ended |            | For the three months ended
|                                                                                                                                                                                                                                                                                                                                                                                              |  | September 30,             |            | September 30,             
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                           
|                                                                                                                                                                                                                                                                                                                                                                                              |  | 2002                      |            | 2001                       |  | 2002 |            | 2001
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |     
|Revenues                                                                                                                                                                                                                                                                                                                                                                                      |  | $                         | 319,351    |                            |  | $    | 102,740    |      |  | $ | 93,378     |   |  | $ | 45,561    |  
|Cost of sales                                                                                                                                                                                                                                                                                                                                                                                 |  |                           | 249,104    |                            |  |      | 89,810     |      |  |   | 46,170     |   |  |   | 51,613    |  
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Gross margin                                                                                                                                                                                                                                                                                                                                                                                  |  |                           | 70,247     |                            |  |      | 12,930     |      |  |   | 47,208     |   |  |   | (6,052    | )
|Other expenses                                                                                                                                                                                                                                                                                                                                                                                |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Salaries, benefits and related taxes                                                                                                                                                                                                                                                                                                                                                          |  |                           | 1,299,588  |                            |  |      | 1,406,637  |      |  |   | 423,023    |   |  |   | 411,541   |  
|Rent & occupancy expenses                                                                                                                                                                                                                                                                                                                                                                     |  |                           | 119,391    |                            |  |      | 146,115    |      |  |   | 40,827     |   |  |   | 68,128    |  
|Consulting  medical advisory                                                                                                                                                                                                                                                                                                                                                                 |  |                           | 81,731     |                            |  |      | -0-        |      |  |   | 67,308     |   |  |   | -0-       |  
|Consulting  marketing sales                                                                                                                                                                                                                                                                                                                                                                  |  |                           | 582        |                            |  |      | 11,984     |      |  |   | -0-        |   |  |   | 11,984    |  
|Consulting  product development                                                                                                                                                                                                                                                                                                                                                              |  |                           | -0-        |                            |  |      | 21,125     |      |  |   | -0-        |   |  |   | 21,125    |  
|Legal and professional fees                                                                                                                                                                                                                                                                                                                                                                   |  |                           | 153,567    |                            |  |      | 134,696    |      |  |   | 34,772     |   |  |   | 33,779    |  
|Travel                                                                                                                                                                                                                                                                                                                                                                                        |  |                           | 29,486     |                            |  |      | 48,739     |      |  |   | 9,226      |   |  |   | 6,529     |  
|Telephone and internet                                                                                                                                                                                                                                                                                                                                                                        |  |                           | 56,868     |                            |  |      | 78,032     |      |  |   | 16,812     |   |  |   | 20,776    |  
|Selling, general and administrative                                                                                                                                                                                                                                                                                                                                                           |  |                           | 96,767     |                            |  |      | 83,858     |      |  |   | 43,283     |   |  |   | 31,983    |  
|Asset impairment                                                                                                                                                                                                                                                                                                                                                                              |  |                           | -0-        |                            |  |      | 9,127      |      |  |   | -0-        |   |  |   | 9,127     |  
|Interest expense, net                                                                                                                                                                                                                                                                                                                                                                         |  |                           | 218,781    |                            |  |      | 848,199    |      |  |   | 73,755     |   |  |   | 94,549    |  
|Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                 |  |                           | 168,313    |                            |  |      | 250,220    |      |  |   | 39,919     |   |  |   | 67,287    |  
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Total other expenses                                                                                                                                                                                                                                                                                                                                                                          |  |                           | 2,225,074  |                            |  |      | 3,038,732  |      |  |   | 748,924    |   |  |   | 776,808   |  
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|(Loss) before taxes and preferred dividends                                                                                                                                                                                                                                                                                                                                                   |  |                           | (2,154,827 | )                          |  |      | (3,025,802 | )    |  |   | (701,716   | ) |  |   | (782,860  | )
|                                                                                                                                                                                                                                                                                                                                                                                             
|Income tax expense (benefit)                                                                                                                                                                                                                                                                                                                                                                  |  |                           | -0-        |                            |  |      | -0-        |      |  |   | -0-        |   |  |   | -0-       |  
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Net income (loss)                                                                                                                                                                                                                                                                                                                                                                             |  |                           | (2,154,827 | )                          |  |      | (3,025,802 | )    |  |   | (701,716   | ) |  |   | (782,860  | )
|                                                                                                                                                                                                                                                                                                                                                                                             
|Preferred stock dividends, including deemed
dividends of $578,767 and $200,492 for the
nine and three months ended September 30,
2002, and dividends in arrears of $119,671
and $40,329 on the Series B Preferred Stock
for the nine and three months ended
September 30, 2002 and $30,392 and $18,298
on the Series C Preferred Stock for the nine
and three months ended September 30, 2002 |  |                           | (870,961   | )                          |  |      | (164,859   | )    |  |   | (310,882   | ) |  |   | (62,801   | )
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Net income (loss) attributable to common
stockholders                                                                                                                                                                                                                                                                                                                                         |  | $                         | (3,025,787 | )                          |  | $    | (3,190,661 | )    |  | $ | (1,012,598 | ) |  | $ | (845,661  | )
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Net (loss) per share                                                                                                                                                                                                                                                                                                                                                                          |  | $                         | (0.36      | )                          |  | $    | (0.41      | )    |  | $ | (0.12      | ) |  | $ | (0.10     | )
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  
|Weighted average number of shares outstanding                                                                                                                                                                                                                                                                                                                                                 |  |                           | 8,323,697  |                            |  |      | 7,857,571  |      |  |   | 8,323,697  |   |  |   | 8,082,386 |  
|                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |            |                            |  |      |            |      |  |   |            |   |  |   |           |  

See accompanying summary of accounting policies and notes to financial statements

4



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##### Table of Contents



OMNICOMM SYSTEMS, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


|                                                                        |                                                                                            |   |                           |            |      |   |            |            |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | - | ------------------------- | ---------- | ---- | - | ---------- | ---------- | -
|                                                                        |                                                                                            |   | For the nine months ended
|                                                                        |                                                                                            |   | September 30,            
|                                                                        |                                                                                            |   |                          
|                                                                        |                                                                                            |   | 2002                      |            | 2001
|                                                                        |                                                                                            |   |                           |            |     
|CASH FLOWS FROM OPERATING ACTIVITIES                                    |                                                                                            |   |                           |            |      |   |            |           
|                                                                        | Net income (loss)                                                                          |   | $                         | (2,154,827 | )    |   | $          | (3,025,802 | )
|                                                                        | Adjustment to reconcile net income to net cash provided by (used in)
operating activities: |   |                           |            |      |   |            |            |  
|                                                                        | Depreciation and amortization                                                              |   |                           | 168,313    |      |   |            | 250,220    |  
|                                                                        | Common stock issued for services                                                           |   |                           | -0-        |      |   |            | 118,221    |  
|                                                                        | Interest expense from beneficial conversion feature on 12% convertible note                |   |                           | -0-        |      |   |            | 508,835    |  
|                                                                        | Amortization of deferred compensation                                                      |   |                           | 11,601     |      |   |            | 3,038      |  
|                                                                        | Interest expense on detachable warrants                                                    |   |                           | 165        |      |   |            | 128,726    |  
|                                                                        | Asset impairment                                                                           |   |                           | -0-        |      |   |            | 9,127      |  
|                                                                        | Change in assets and liabilities:                                                          |   |                           |            |      |   |            |            |  
|                                                                        | Accounts receivable                                                                        |   |                           | (114,397   | )    |   |            | (15,294    | )
|                                                                        | Prepaid expenses                                                                           |   |                           | (7,225     | )    |   |            | (8,323     | )
|                                                                        | Intangible assets                                                                          |   |                           | -0-        |      |   |            | (70,250    | )
|                                                                        | Other assets                                                                               |   |                           | (7,500     | )    |   |            | -0-        |  
|                                                                        | Accounts payable and accrued expenses                                                      |   |                           | 916,429    |      |   |            | (59,381    | )
|                                                                        | Deferred revenue                                                                           |   |                           | 71,938     |      |   |            | 14,152     |  
|                                                                        |                                                                                            |   |                           |            |      |   |            |           
|Net cash provided by (used in) operating activities                     |                                                                                            |   | (1,115,503                | )          |      |   | (2,146,731 | )         
|                                                                       
|CASH FLOWS FROM INVESTING ACTIVITIES                                    |                                                                                            |   |                           |            |      |   |            |           
|                                                                        | Purchase of property and equipment                                                         |   |                           | -0-        |      |   |            | (79,085    | )
|                                                                        |                                                                                            |   |                           |            |      |   |            |           
|Net cash provided by (used in) operating activities                     |                                                                                            |   | -0-                       |            |      |   | (79,085    | )         
|                                                                       
|CASH FLOWS FROM FINANCING ACTIVITIES                                    |                                                                                            |   |                           |            |      |   |            |           
|Net proceeds from convertible notes, net of issuance costs              |                                                                                            |   | -0-                       |            |      |   | 794,900    |           
|Payments on notes payable                                               |                                                                                            |   | (3,841                    | )          |      |   | (50,000    | )         
|Proceeds from notes payable                                             |                                                                                            |   | 23,841                    |            |      |   | 490,000    |           
|Proceeds from issuance of common stock                                  |                                                                                            |   | -0-                       |            |      |   | 4,200      |           
|Issuance of Series C convertible preferred stock, net of issuance costs |                                                                                            |   | 968,144                   |            |      |   | 1,737,018  |           
|Proceeds from stock option exercise                                     |                                                                                            |   | -0-                       |            |      |   | 16,000     |           
|                                                                        |                                                                                            |   |                           |            |      |   |            |           
|Net cash provided by (used in) financing activities                     |                                                                                            |   | 988,144                   |            |      |   | 2,992,118  |           
|                                                                        |                                                                                            |   |                           |            |      |   |            |           
|Net increase (decrease) in cash and cash equivalents                    |                                                                                            |   | (127,539                  | )          |      |   | 766,302    |           
|Cash and cash equivalents at beginning of period                        |                                                                                            |   | 142,826                   |            |      |   | 90,958     |           
|                                                                        |                                                                                            |   |                           |            |      |   |            |           
|Cash and cash equivalents at end of period                              |                                                                                            | $ | 15,467                    |            |      | $ | 857,260    |           
|                                                                        |                                                                                            |   |                           |            |      |   |            |           

5



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##### Table of Contents



OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)

|                                                                       |  |                           |        |      |  |   |         | 
|---------------------------------------------------------------------- |  | ------------------------- | ------ | ---- |  | - | ------- | 
|                                                                       |  | For the nine months ended
|                                                                       |  | September 30,            
|                                                                       |  |                          
|                                                                       |  | 2002                      |        | 2001
|                                                                       |  |                           |        |     
|Supplemental Disclosure of Cash Flow Information:                      |  |                           |        |      |  |   |         | 
|Cash paid during the period for:                                       |  |                           |        |      |  |   |         | 
|Income tax                                                             |  | $                         | -0-    |      |  | $ | -0-     | 
|                                                                       |  |                           |        |      |  |   |         | 
|Interest                                                               |  | $                         | 22,560 |      |  | $ | 23,657  | 
|                                                                       |  |                           |        |      |  |   |         | 
|Non-cash Transactions                                                  |  |                           |        |      |  |   |         | 
|Conversion of convertible notes payable into shares of common stock    |  | $                         | -0-    |      |  | $ | 37,500  | 
|Common stock issued in exchange for notes payable and accrued interest |  | $                         | -0-    |      |  | $ | 313,436 | 
|Conversion of notes payable into 12% convertible notes                 |  | $                         | -0-    |      |  | $ | 760,000 | 
|Shares issued as collateral for a note payable                         |  | $                         | -0-    |      |  | $ | 75,000  | 
|Conversion of Series A preferred stock into shares of common stock     |  | $                         | -0-    |      |  | $ | 45,000  | 

See accompanying summary of accounting policies and notes to financial statements

6



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##### Table of Contents



OMNICOMM SYSTEMS, INC.




NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS


September 30, 2002
(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.

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 2001 financial
statements to conform to the 2002 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.

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.

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

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 September 30, 2002, 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
$155,024 in deferred revenues relating to contracts for services to
be performed over periods ranging from 4 months to 4 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 4 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 $155,024 in deferred revenue relating to contracts
for services to be performed over periods ranging from 4 months to 4
years.

ADVERTISING

Advertising costs are expenses as incurred. Advertising costs were
$9,983 and $7,650 for the periods ended September 30, 2002 and 2001,
respectively.

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 $366,615 in 2002 and $287,468 in 2001 for
the nine months ended September 30.

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

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 15 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 8,323,697 and 7,857,571 for the nine
months ended September 30, 2002 and 2001 and 8,323,697 and 8,082,386
for the three months ended September 30, 2002 and 2001,
respectively. There were no differences between basic and diluted
earnings per share. Options to purchase 2,543,539 shares of common
stock at prices ranging from $.25 to $5.50 per share were
outstanding at September 30, 2002. Stock warrants to purchase
14,118,428 shares of common stock at prices ranging from $0.25 to
$10.00 per share were outstanding at September 30, 2002. 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.

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.

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##### Table of Contents



OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

IMPACT OF NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141 Accounting for
Derivative Instruments and Hedging Activities (SFAS 141), and
Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS 142). They also issued Statement of
Financial Accounting Standards No. 143, Accounting for Obligations
Associated with the Retirement of Long Lived Assets (SFAS 143),
and Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS 144),
in August and October 2001, respectively.

SFAS 141 requires all business combinations initiated after
September 30, 2001 be accounted for under the purchase method. SFAS
141 supersedes APB Opinion No. 16, Business Combinations", and
Statement of Financial Accounting Standards No. 38, Accounting for
Preacquisition Contingencies of purchased Enterprises, and is
effective for all business combinations initiated after September
30, 2001.

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.

NOTE 3: RESTATEMENT

Management determined that warrants issued during 2001 by the
Company should have been valued in accordance with Statement of
Financial Accounting Standards No. 123 Accounting for Stock
Compensation (SFAS 123).SFAS 123 requires businesses to value
stock based compensation utilizing a fair value approach. Upon
review, management determined that the Black-Scholes option pricing
model should have been used to estimate the respective fair value of
warrants that had been issued in connection with certain bridge
loans the Company entered into in 2001.

As a result, the financial statements of OmniComm Systems as of
September 30, 2001 and for the period then ended have been restated
to reflect the utilization of the Black-Scholes pricing model where
applicable. The effect of the restatement was to increase
additional paid in capital by $690,563, increase deferred
compensation by $49,964 and increase accumulated deficit by $640,599
resulting in no change to the total stockholders equity as of
September 30, 2001; and to increase the net loss attributable to
common stockholders by $640,599, a non-cash charge, for the nine
months ended September 30, 2001.

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

The Company issued $1,550,000 in 12% Convertible Notes during the
first six months of 2001. A portion of the notes were issued at
prices below market value. EITF 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios, requires the recording of 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.

During 2001 we issued 230,700 detachable common stock warrants as
additional compensation in connection with short-term bridge loans
that were used for working capital purposes. We valued the warrants
utilizing the Black-Scholes model and recorded $128,726 as interest
expense.

A summary of the effects of the restatement is as follows;

|                                       |  |                        |             |             |  |   |             |  
|-------------------------------------- |  | ---------------------- | ----------- | ----------- |  | - | ----------- | -
|At September 30, 2001                  |  | As Previously Reported |             | As Restated
|                                       |  |                        |             |            
|Series A preferred stock               |  | $                      | 4,215       |             |  | $ | 4,215       |  
|Common stock                           |  |                        | 8,965       |             |  |   | 8,965       |  
|Additional paid in
capital  common    |  |                        | 3,866,935   |             |  |   | 4,557,498   |  
|Additional paid in
capital  preferred |  |                        | 5,544,782   |             |  |   | 5,544,782   |  
|Accumulated deficit                    |  |                        | (11,477,757 | )           |  |   | (12,118,356 | )
|Treasury stock                         |  |                        | (293,912    | )           |  |   | (293,912    | )
|Deferred compensation                  |  |                        | -0-         |             |  |   | (49,964     | )
|Subscriptions receivable               |  |                        | (1,140      | )           |  |   | (1,140      | )
|                                       |  |                        |             |             |  |   |             |  
|Stockholders equity                   |  | $                      | (2,347,712  | )           |  | $ | (2,347,712  | )
|                                       |  |                        |             |             |  |   |             |  

|                                             |  |                        |            |             |  |   |            |  
|-------------------------------------------- |  | ---------------------- | ---------- | ----------- |  | - | ---------- | -
|For the nine months ended September 30, 2001 |  | As Previously Reported |            | As Restated
|                                             |  |                        |            |            
|Salaries, benefits and related taxes         |  | $                      | 1,403,599  |             |  | $ | 1,406,637  |  
|Interest expense                             |  |                        | 215,034    |             |  |   | 848,199    |  
|Rent                                         |  |                        | 141,719    |             |  |   | 146,115    |  
|Net loss                                     |  |                        | (2,385,203 | )           |  |   | (3,025,802 | )
|Net loss attributable to common stockholders |  | $                      | (2,550,062 | )           |  | $ | (3,190,661 | )
|Basic and diluted net loss per common share  |  | $                      | (0.32      | )           |  | $ | (0.41      | )

|                                              |  |                        |          |             |  |   |          |  
|--------------------------------------------- |  | ---------------------- | -------- | ----------- |  | - | -------- | -
|For the three months ended September 30, 2001 |  | As Previously Reported |          | As Restated
|                                              |  |                        |          |            
|Salaries, benefits and related taxes          |  | $                      | 410,484  |             |  | $ | 411,541  |  
|Interest expense                              |  |                        | 79,356   |             |  |   | 94,548   |  
|Rent                                          |  |                        | 63,732   |             |  |   | 68,128   |  
|Net loss                                      |  |                        | (762,214 | )           |  |   | (776,808 | )
|Net loss attributable to common stockholders  |  | $                      | (825,015 | )           |  | $ | (845,661 | )
|Basic and diluted net loss per common share   |  | $                      | (0.10    | )           |  | $ | (0.10    | )

NOTE 4: 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

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

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 fundings 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 September 30, 2002,
there is doubt about the Companys ability to continue as a going
concern.

NOTE 5: INTANGIBLE ASSETS AND GOODWILL

Included in Intangible Assets are the following assets:

|                           |  |                    |         |              |  |             |         | 
|-------------------------- |  | ------------------ | ------- | ------------ |  | ----------- | ------- | 
|                           |  | September 30, 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 | 
|                           |  |                    |         |              |  |             |         | 

|                           |  |                   |         |              |  |             |         | 
|-------------------------- |  | ----------------- | ------- | ------------ |  | ----------- | ------- | 
|                           |  | December 31, 2001
|                           |  |                  
|                           |  |                   |         |              |  | 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 |              |  |             | 253,436 | 
|                           |  |                   |         |              |  |             |         | 
|                           |  | $                 | 509,927 |              |  | $           | 461,475 | 
|                           |  |                   |         |              |  |             |         | 

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.

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

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 nine months ended September 30, 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 6: PROPERTY AND EQUIPMENT, AT COST

Property and equipment consists of the following:

|                              |  |                    |         |                   |  |             |         |              |  |              |         |             |  |           |         |  |  |         |  | 
|----------------------------- |  | ------------------ | ------- | ----------------- |  | ----------- | ------- | ------------ |  | ------------ | ------- | ----------- |  | --------- | ------- |  |  | ------- |  | 
|                              |  | September 30, 2002 |         | December 31, 2001 |  |             |         |             
|                              |  |                    |         |                   |  |             |         |             
|                              |  |                    |         |                   |  | Accumulated |         |              |  |              |         | Accumulated |  | Estimated
|                              |  | Cost               |         | Depreciation      |  | Cost        |         | Depreciation |  | Useful Lives
|                              |  |                    |         |                   |  |             |         |              |  |             
|Computer and office
equipment |  | $                  | 420,298 |                   |  | $           | 232,401 |              |  | $            | 420,298 |             |  | $         | 169,408 |  |  | 5 years
|Leasehold
improvements        |  |                    | 3,299   |                   |  |             | 1,227   |              |  |              | 3,299   |             |  |           | 734     |  |  | 5 years
|Computer software             |  |                    | 260,287 |                   |  |             | 167,367 |              |  |              | 260,287 |             |  |           | 117,349 |  |  | 3 years
|Office furniture              |  |                    | 42,350  |                   |  |             | 23,584  |              |  |              | 42,350  |             |  |           | 17,231  |  |  | 5 years
|                              |  |                    |         |                   |  |             |         |              |  |              |         |             |  |           |         |  |  |         |  | 
|                              |  | $                  | 726,234 |                   |  | $           | 424,579 |              |  | $            | 726,234 |             |  | $         | 304,722 |  |  |         |  | 
|                              |  |                    |         |                   |  |             |         |              |  |              |         |             |  |           |         |  |  |         |  | 

Depreciation expense for the periods ended September 30, 2002 and
2001 was $119,859 and $107,193 respectively.

NOTE 7: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at
September 30, 2002 and December 31, 2001:

|                                  |                                             |   |         |           |          |   |         |           | 
|--------------------------------- | ------------------------------------------- | - | ------- | --------- | -------- | - | ------- | --------- | 
|                                  |                                             |   | 9/30/02 |           | 12/31/01
|                                  |                                             |   |         |           |         
|Accounts payable                  |                                             | $ | 322,941 |           |          | $ | 155,531 |          
|Accrued payroll and related costs |                                             |   | 398,481 |           |          |   | 41,818  |          
|Other accrued expenses            |                                             |   | 273,234 |           |          |   | 77,083  |          
|Accrued interest                  |                                             |   | 408,296 |           |          |   | 212,089 |          
|Accrued dividends                 |                                             |   | 533,283 |           |          |   | 412,879 |          
|Accrued expenses of OmniTrial BV  |                                             |   | 127,519 |           |          |   | 127,519 |          
|                                  |                                             |   |         |           |          |   |         |          
|                                  | Total accounts payable and accrued expenses |   | $       | 2,063,753 |          |   | $       | 1,026,919 | 
|                                  |                                             |   |         |           |          |   |         |          

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 $342,251 in
past due payroll taxes accrued during the first and second quarter
that the Company has not yet paid, but are considered legal
obligations of the Company.

NOTE 8: 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 36,482,116 have been omitted from the calculation of
dilutive EPS for the period ended September 30, 2002. A
reconciliation between numerators and denominators of the basic and
diluted earnings per shares is as follows:

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

|                                   |  |                                  |            |                                      |  |           |           |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|---------------------------------- |  | -------------------------------- | ---------- | ------------------------------------ |  | --------- | --------- | --------- |  | ----------- | ----- | --------- |  | - | ---------- | - |  |  | --------- |  |  | - | ----- | -
|                                   |  | Nine Months Ended September 2002 |            | Nine Months Ended September 30, 2001
|                                   |  |                                  |            |                                     
|                                   |  | Income                           |            | Shares                               |  | Per-Share |           | Income    |  | Shares      |       | Per-Share
|                                   |  | Numerator                        |            | Denominator                          |  | Amount    |           | Numerator |  | Denominator |       | Amount   
|                                   |  |                                  |            |                                      |  |           |           |           |  |             |       |          
|Basic EPS                          |  | $                                | (3,025,787 | )                                    |  |           | 8,323,697 |           |  | $           | (0.36 | )         |  | $ | (3,190,661 | ) |  |  | 7,857,571 |  |  | $ | (0.41 | )
|Effect of Dilutive
Securities
None |  |                                  | -0-        |                                      |  |           | -0-       |           |  |             | -0-   |           |  |   | -0-        |   |  |  | -0-       |  |  |   | -0-   |  
|                                   |  |                                  |            |                                      |  |           |           |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|Diluted EPS                        |  | $                                | (3,025,787 | )                                    |  |           | 8,323,697 |           |  | $           | (0.36 | )         |  | $ | (3,190,661 | ) |  |  | 7,857,571 |  |  | $ | (0.41 | )
|                                   |  |                                  |            |                                      |  |           |           |           |  |             |       |           |  |   |            |   |  |  |           |  |  |   |       |  

|                                   |  |                                       |            |                                       |  |           |           |           |  |             |       |           |  |   |          |   |  |  |           |  |  |   |       |  
|---------------------------------- |  | ------------------------------------- | ---------- | ------------------------------------- |  | --------- | --------- | --------- |  | ----------- | ----- | --------- |  | - | -------- | - |  |  | --------- |  |  | - | ----- | -
|                                   |  | Three Months Ended September 30, 2002 |            | Three Months Ended September 30, 2001
|                                   |  |                                       |            |                                      
|                                   |  | Income                                |            | Shares                                |  | Per-Share |           | Income    |  | Shares      |       | Per-Share
|                                   |  | Numerator                             |            | Denominator                           |  | Amount    |           | Numerator |  | Denominator |       | Amount   
|                                   |  |                                       |            |                                       |  |           |           |           |  |             |       |          
|Basic EPS                          |  | $                                     | (1,012,598 | )                                     |  |           | 8,323,697 |           |  | $           | (0.12 | )         |  | $ | (825,015 | ) |  |  | 8,082,386 |  |  | $ | (0.10 | )
|Effect of Dilutive
Securities
None |  |                                       | -0-        |                                       |  |           | -0-       |           |  |             | -0-   |           |  |   | -0-      |   |  |  | -0-       |  |  |   | -0-   |  
|                                   |  |                                       |            |                                       |  |           |           |           |  |             |       |           |  |   |          |   |  |  |           |  |  |   |       |  
|Diluted EPS                        |  | $                                     | (1,012,598 | )                                     |  |           | 8,323,697 |           |  | $           | (0.12 | )         |  | $ | (825,015 | ) |  |  | 8,082,386 |  |  | $ | (0.10 | )
|                                   |  |                                       |            |                                       |  |           |           |           |  |             |       |           |  |   |          |   |  |  |           |  |  |   |       |  

NOTE 9: EQUITY INVESTMENTS

European Medical Network (EMN) Investment, at cost

On March 20, 2000 the Company entered into a stock purchase
agreement under which it agreed to purchase a 25% interest in
Medical Network AG EMN, a Swiss company (EMN). The agreement, set
to close on April 20, 2000, provided that the purchase price for 25%
of EMNs stock equity was $838,500 to be paid partly in cash and
stock. Two cash payments totaling US $645,000 were to be paid in
installments as follows: $335,000 on March 20, 2000, upon which EMN
would deliver 10% of its stock equity, and $310,000 on April 20,
2000, upon which EMN would deliver the remaining 15% of its stock
equity. In addition, the Company was to provide 41,883 shares of
restricted common stock to EMN. Pursuant to the terms of the stock
purchase agreement, on March 20, 2000, EMNs shareholders entered
into an agreement that provided for the Company to have one seat on
EMNs board of directors and the right to veto any sale of equity in
excess of 49% of the total issued and outstanding equity of EMN.

On March 20, 2000, the Company paid EMN $335,000, received 10% of
EMNs equity and a seat on EMNs board. On April 20, 2000, the
Company did not make the second payment of $310,000 or the stock
payment of 41,883 shares to EMN and the stock purchase agreement did
not close. On July 11, 2000, the Company and EMN agreed to
renegotiate the terms of their agreement subject to the Companys
success in finding adequate financing. As part of the renegotiation
the Company resigned its seat on EMNs board and offered to sell its
10% interest back to EMN. The Company accounts for its investment
in EMN under the cost method of accounting. The Company has
established a valuation allowance of $335,000 against its investment
in EMN to reflect the uncertainty of the fair market value of the
investment as of September 30, 2002 and 2001.

14



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##### Table of Contents



OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

NOTE 10: NOTES PAYBLE

Long-Term Borrowings

At September 30, 2002, the Company owed $505,926 in long-term notes
payable, of which $262,963 was classified as the current portion due
of notes payable. Promissory notes totaling $485,926 were amended
and restated on August 31, 2001, in connection with the private
placement of the Companys 8% Series B Preferred Stock, with new
terms which include an interest rate of 8% per annum, and 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, and
the balance of the principal together with accrued interest payable
no later than August 31, 2003.

Related Party Notes Payable

At September 30, 2002, the Company owed $196,644 in related party
notes payable. These promissory notes were amended and restated on
August 31, 2001 with new terms which include an interest rate of 8%
per annum, and 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, and the balance of the principal together
with accrued interest payable no later than August 31, 2003.

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.

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.

NOTE 11: 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 September 30, 2002 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 $33,573 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 September 30, 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.

15



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##### Table of Contents



OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

The Company is currently in default in the repayment of principal
and interest due on its 12% Convertible Notes. The terms of the
notes provides a payment grace period of thirty days in which to
make any required monetary payments. Principal of $1,615,000
together with accrued interest of $184,236 was in default effective
March 3, 2002. Accrued interest totaled $312,728 on September 30,
2002.

NOTE 12: 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 September 30, 2002 are as follows:

|      |  |   |        | 
|----- |  | - | ------ | 
|2002  |  | $ | 16,725 | 
|2003  |  |   | 44,600 | 
|2004  |  |   | 0      | 
|2005  |  |   | 0      | 
|2006  |  |   | 0      | 
|      |  |   |        | 
|Total |  | $ | 61,325 | 
|      |  |   |        | 

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 $119,391 and $146,115
for the nine months ended September 30, 2002 and 2001.

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.

On February 2, 2001, an advertising firm, Wray Ward Laseter filed a
lawsuit in the Superior Court of North Carolina against the Company.
The plaintiff alleged claims totaling approximately $84,160 against
the Company for fees associated with advertising, marketing and
public relations services provided between March and September 2000.
On or about April 27, 2001, the Company and Wray Ward Laseter
entered into a settlement agreement which provided that the
plaintiff dismiss the lawsuit with prejudice and release its claims
against the Company in return for a series of payments totaling
$66,000. The Company made all required payments under the
settlement agreement. Wray Ward Laseter filed and the Superior
Court accepted on November 30, 2001 a Stipulation of Dismissal.

16



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##### Table of Contents



OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

On February 16, 2001, a staffing agency, Temp Art, Inc. filed a
lawsuit in the County Court in and for Miami-Dade County, Florida.
The plaintiff alleged the Company breached its contract and owed
approximately $13,126 for back payment of services rendered plus
interest and costs. On September 25, 2001, the Company and Temp Art
entered into a settlement agreement that provided that the plaintiff
dismiss the lawsuit with prejudice and release its claims against
the Company in return for a payment of $15,700. The Company made
the required payment on September 25, 2001 and a Voluntary Dismissal
was entered by the County Court on October 5, 2001.

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.

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.

NOTE 13: RELATED PARTY TRANSACTIONS

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.

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.

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 were closed between September 1999 and January
2001. Guus van Kesteren, a member of our Board of Directors, is a
consultant for 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
September 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 the Company 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.

17



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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

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.

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.

From time to time we have borrowed funds from Mr. van Kesteren,
including:



| |  |  | 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.                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.
|
| |  |  | 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.                                                                                                                                                                                                                                                                                                                         

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

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., an affiliate of Noesis
N.V., and remains a consultant to the firm. 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.

NOTE 14: 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.

18



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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

NOTE 15: 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 September 30, 2002 the Company had the following outstanding
securities:



| |  |  | 8,323,697 shares of Common Stock issued and outstanding;                                   
| | - |  | -------------------------------------------------------------------------------------------
|
| |  |  | 14,274,428 warrants issued and outstanding to purchase shares of our common stock;         
|
| |  |  | 4,215,224 shares of our 5% Series A Convertible Preferred Stock issued and outstanding, and
|
| |  |  | 200,000 shares of our 8% Series B Convertible Preferred Stock issued and outstanding       
|
| |  |  | 126,150 shares of our Series C Convertible Preferred Stock issued and outstanding          

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 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:



| |  |  | the shares are not redeemable,
| | - |  | ------------------------------

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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)



| |  |  | 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,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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,                                                                                                                                                                                                                                                                             
|
| |  |  | in the event of our liquidation or winding up, each
share of Series A Preferred carries a liquidation preference
equal to $1.50 per share,                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | 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.                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | 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.                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | 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 $533,283 and $361,117 of accrued and unpaid dividends on
the Series A Preferred at September 30, 2002 and 2001, respectively.
In addition, there was an arrearage of $33,196 on the Series A
Preferred for undeclared dividends on September 30, 2002.

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:



| |  |  | the stated value of each share is $10.00 per share,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the shares are not redeemable,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | 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,

20



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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)



| |  |  | 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,                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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,
|
| |  |  | each share of Series B Preferred will rank senior to
our Series A Preferred and Pari Passu with our Series C
Preferred Stock,                                                                                                                                                                                                   
|
| |  |  | 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                                                                                                                                               
|
| |  |  | 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,                                                                                                      
|
| |  |  | 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,                                                                                                                                                  
|
| |  |  | 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 $170,927 and $-0- on the Series B Preferred
for undeclared dividends as of September 30, 2002 and 2001.

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 126,150
shares of the Series C Preferred Stock with net proceeds of
approximately $968,144. At September 30 2002 the Company was still
actively marketing the Series C Preferred Private Placement to
accredited investors.

The designations, rights and preferences of the Series C Preferred
include:



| |  |  | the stated value of each share is $10.00 per share,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the shares are not redeemable,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | 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,

21



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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)



| |  |  | 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,                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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,
|
| |  |  | 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,                                                                                                                                                                     
|
| |  |  | 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                                                                                                                                         
|
| |  |  | 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,                                                                                                      
|
| |  |  | 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,                                                                                                                                            
|
| |  |  | 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 $30,392 and $-0- on the Series C
Convertible Preferred Stock for undeclared dividends as of September
30, 2002 and 2001.

Warrants

We have issued and outstanding warrants to purchase a total of
14,118,428 shares of our Common Stock, including:



| |  |  | 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 December 2002 which were issued
by us in connection with the offering of the Series A
Preferred Stock offering.                                                                                                                                         
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.                                                                                                                     
|
| |  |  | 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.

22



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OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)



| |  |  | warrants to purchase 2,523,000 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The Company has adopted Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, (SFAS No. 123)
and as permitted under SFAS 123 applies Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, (APB
25) and related interpretations in accounting for stock-based
compensation plans. If the Company had elected to adopt optional
recognition provisions of SFAS 123 for its stock option plans, net
loss and net loss per share would have been changed to the pro forma
amounts indicated below:

|                                          |             |      |   |        |   |  |   |        |  
|----------------------------------------- | ----------- | ---- | - | ------ | - |  | - | ------ | -
|(in thousands, except for per share data) |             | 2002 |   | 2001  
|                                          |             |      |   |       
|Net loss available to common stockholders |             |      |   |        |   |  |   |       
|                                          | As reported |      | $ | (2,993 | ) |  | $ | (3,191 | )
|                                          | Pro forma   |      | $ | (3,068 | ) |  | $ | (3,413 | )
|Basic and diluted net loss per share      |             |      |   |        |   |  |   |       
|                                          | As reported |      | $ | (0.36  | ) |  | $ | (0.41  | )
|                                          | Pro forma   |      | $ | (0.37  | ) |  | $ | (0.44  | )

These pro forma amounts may not be representative of future
disclosures since the estimated fair value of stock options is
amortized to expense over the vesting period, and additional options
may be granted in future years.

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:

|                              |  |         |       |         |  |  |       |  
|----------------------------- |  | ------- | ----- | ------- |  |  | ----- | -
|                              |  | 2002    |       | 2001   
|                              |  |         |       |        
|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.

23



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##### Table of Contents



OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2002
(unaudited)

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

|                                   |           |  |                    |           |                   |   |          |      |       |  |           |           |          |   |      |      | 
|---------------------------------- | --------- |  | ------------------ | --------- | ----------------- | - | -------- | ---- | ----- |  | --------- | --------- | -------- | - | ---- | ---- | 
|                                   |           |  | Period ended       |           | Year ended       
|                                   |           |  | September 30, 2002 |           | December 31, 2001
|                                   |           |  |                    |           |                  
|                                   |           |  |                    |           |                   |   | Weighted |      |       |  |           |           | Weighted
|                                   |           |  |                    |           |                   |   | Average  |      |       |  |           |           | Average 
|                                   |           |  |                    |           |                   |   | Exercise |      |       |  |           |           | Exercise
|                                   |           |  | Options            |           | Price             |   | Options  |      | Price
|                                   |           |  |                    |           |                   |   |          |      |      
|Outstanding at beginning of period |           |  | 3,584,039          |           |                   | $ | 1.33     |      |       |  | 3,316,006 |           |          | $ | 2.28 |     
|                                   | Granted   |  |                    | 316,000   |                   |   | $        | 0.26 |       |  |           | 2,089,500 |          |   | $    | 0.48 | 
|                                   | Exercised |  |                    | -0-       |                   |   | $        | 0.00 |       |  |           | 20,000    |          |   | $    | 0.80 | 
|                                   | Cancelled |  |                    | 1,356,500 |                   |   | $        | 1.47 |       |  |           | 1,801,467 |          |   | $    | 2.09 | 
|                                   |           |  |                    |           |                   |   |          |      |       |  |           |           |          |   |      |     
|Outstanding at end of period       |           |  | 2,543,539          |           |                   | $ | 0.89     |      |       |  | 3,584,039 |           |          | $ | 1.33 |     
|                                   |           |  |                    |           |                   |   |          |      |       |  |           |           |          |   |      |     
|Exercisable at end of period       |           |  | 2,136,870          |           |                   | $ | 1.02     |      |       |  | 2,636,372 |           |          | $ | 1.47 |     
|                                   |           |  |                    |           |                   |   |          |      |       |  |           |           |          |   |      |     

The following table summarizes information about stock options
outstanding at September 30, 2002:

|                |  |             |           |             |  |           |      |             |  |          |      |  |  |          |         |  |  |  |   |      |  |  |  | 
|--------------- |  | ----------- | --------- | ----------- |  | --------- | ---- | ----------- |  | -------- | ---- |  |  | -------- | ------- |  |  |  | - | ---- |  |  |  | 
|                |  | 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   |  |             | 1,285,000 |             |  |           | 4.81 |             |  | $        | 0.38 |  |  |          | 964,998 |  |  |  | $ | 0.36 | 
|$0.50 - $0.80   |  |             | 467,333   |             |  |           | 7.10 |             |  | $        | 0.55 |  |  |          | 380,666 |  |  |  | $ | 0.56 | 
|$1.00 - $2.75   |  |             | 791,206   |             |  |           | 3.54 |             |  | $        | 1.72 |  |  |          | 791,206 |  |  |  | $ | 1.73 | 

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 $7,384
during the nine months ended September 30, 2002 in connection with
the warrant grants.

NOTE 16: 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
September 30, 2002
(unaudited)

NOTE 17: INCOME TAXES

Income taxes are accrued at statutory US and state income tax rates.
Income tax expense is as follows:

|                                |                                       |   |          |          |         |   |          |          |  
|------------------------------- | ------------------------------------- | - | -------- | -------- | ------- | - | -------- | -------- | -
|                                |                                       |   | 9/30/02  |          | 9/30/01
|                                |                                       |   |          |          |        
|Current tax expense (benefit):  |                                       |   |          |          |         |   |          |         
|                                | Income tax at statutory rates         |   | $        | -0-      |         |   | $        | -0-      |  
|                                |                                       |   |          |          |         |   |          |         
|Deferred tax expense (benefit): |                                       |   |          |          |         |   |          |         
|                                | Amortization
of goodwill and covenant |   |          | -0-      |         |   |          | (35,320  | )
|                                | Operating loss carryforward           |   |          | (810,861 | )       |   |          | (862,232 | )
|                                |                                       |   |          |          |         |   |          |         
|                                |                                       |   | (810,861 | )        |         |   | (897,522 | )       
|Valuation allowance             |                                       |   | 810,861  |          |         |   | 897,522  |         
|                                |                                       |   |          |          |         |   |          |         
|Total tax expense (benefit)     |                                       | $ | -0-      |          |         | $ | -0-      |         
|                                |                                       |   |          |          |         |   |          |         

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

|                             |                           |   |           |            |          |   |           |            |  
|---------------------------- | ------------------------- | - | --------- | ---------- | -------- | - | --------- | ---------- | -
|                             |                           |   | 9/30/02   |            | 12/31/01
|                             |                           |   |           |            |         
|Deferred tax assets:         |                           |   |           |            |          |   |           |           
|Amortization of intangibles  |                           | $ | 283,698   |            |          | $ | 283,698   |           
|Operating loss carryforwards |                           |   | 5,352,427 |            |          |   | 4,257,868 |           
|                             |                           |   |           |            |          |   |           |           
|                             | Gross deferred tax assets |   |           | 5,636,125  |          |   |           | 4,541,566  |  
|                             | Valuation allowance       |   |           | (5,636,125 | )        |   |           | (4,541,566 | )
|                             |                           |   |           |            |          |   |           |           
|                             | Net deferred tax asset    |   | $         | -0-        |          |   | $         | -0-        |  
|                             |                           |   |           |            |          |   |           |           

The Company has net operating loss carryforwards (NOL) for income
tax purposes of approximately $12,114,000. This loss is allowed to
be offset against future income until the year 2021 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 2002.

NOTE 18: INTERIM FINANCIAL REPORTING

The unaudited financial statements of the Company for the period
from January 1, 2002 to September 30, 2002 have been prepared by
Management from the books and records of the Company, and reflect,
in the opinion of Management, all adjustments necessary for a fair
presentation of the financial position and operations of the Company
as of the period indicated herein.

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##### Table of Contents






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 a 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 software, TrialMaster®, 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.

The Nine Months Ended September 30, 2002 Compared With the Nine Months Ended September 30, 2001

Results of Operations

Revenues

Revenues for the period ended September 30, 2002 were $319,351 compared to
$102,740 for the same period in 2001. The increase can be attributed to the
increased success we have experienced in marketing TrialMaster. In particular,
we found the markets increasingly receptive to utilizing EDC services during
the second half of 2001 and we have continued building upon this momentum both
through the acquisition of new clients and more importantly via repeat
engagements with existing clients. This is consistent with our expectation
that the market will begin adopting EDC services more rapidly as early adopters
bring increased credibility to the market. The general weakness exhibited in
the economy has not diminished the level of activity in new drug therapy
research since the drug and medical device manufacturers are continuously
forced to find replacements for therapies coming under the pressures exerted by
the loss of patent protection. We do believe however that the broad perception
that small, high-
26Table of Contents

technology firms are operating under severe financial constraints has caused
slower adoption of EDC. We anticipate increasing the personnel dedicated to
sales during the fourth quarter of 2002 and have begun targeting clinical
research organizations (CROs) and academic institutions on a more concentrated
basis in an effort to broaden our exposure in the marketplace. CROs have
become more receptive to the EDC process during 2002 and we expect their
adoption rate to continue increasing. We believe that the adoption of EDC by
CROs is a significant factor to the overall success of EDC as a data
collection tool. While industry growth estimates vary, most predictions
indicate that EDC is anticipated to become widely accepted. For example,
Forrester Research and Frost & Sullivan each predict annual double-digit growth
in the use of EDC technologies between 2001 and 2006. 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. Revenues associated with our Internet-based clinical trial
products were approximately $319,351 and $79,542 for 2002 and 2001
respectively. Systems integration revenues in 2001 were approximately $23,198
compared to $0 in 2002. We do not expect any systems integration revenues in
2002.

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 increased to $249,104 in 2002 compared to $89,810.
Approximately 18% of the expenses incurred in 2001 relate to our systems
integration business and these expenses were eliminated in 2002 as we continued
phasing out that line of our business. Cost of goods sold now relates
primarily to salaries and related benefits associated with the programmers,
developers and systems analysts producing clinical trials on behalf of our
clients.

We expect to increase development programming labor costs on an absolute basis
as our trial revenues increase. We expect labor costs to decrease on a
relative percentage basis as we increase our trial base and develop economies
of scale with regard to trial production. In addition, we expect that use of
TrialMaster V3.0, the latest release of our trial-building software will
exponentially improve our ability to reduce our trial production related costs.

Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses are our biggest expense at 58% of total Other
Expenses for the first quarter of 2002. Salaries and related expenses totaled
$1,299,588 in 2002 compared to $1,406,637 in 2001. Total salaries increased by
approximately 4.6% versus 2001 since a portion of total payroll is now
accounted for in cost of goods sold. We currently employ approximately 14
employees out of our Davie, Florida corporate office. We expect to increase
headcount within our technology and sales and marketing functions in concert
with anticipated increases in TrialMaster clients during the second-half of
fiscal 2002.

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Rent & Occupancy Expenses

Rent expense was $119,391 for fiscal 2002 compared with $146,115 for fiscal
2001. We have diminished our rent expense by closing our development office in
Tampa in March 2001 and relocating that function to the corporate office to
provide a more effective synthesis of workflows 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 is designed to ensure
100% system up-time.

Legal and Professional Fees

Legal and professional fees totaled $153,567 in 2002 compared with $134,696
during fiscal 2001. Key components of the 2002 amounts include $67,500 paid to
our placement agent for financial advisory services, $51,308 to our accountants
for audit and tax related services, $10,214 in legal expenses related to
various matters and $24,545 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 2001.

Travel

We incurred $29,486 in travel expenses during fiscal 2002 compared to $48,739
during 2001. We began reducing travel expenses during mid-2000 as a result of
the on-going working capital difficulties that we have been experiencing.
Those cost-cutting measures continued in 2001 and during the first quarter of
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 $21,164 due to decreased
telephone and Internet access costs associated with the closing of our office
in Tampa, Florida, and a decrease in overall long-distance charges associated
with the closed facilities. We anticipate reducing our total
telecommunications expenses by approximately 40% starting in late 2002 by
virtue of our change in long-distance and data line providers. We expect our
annualized savings to approximate $30,000.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SGA) were $96,767 during 2002.
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 made a concerted effort during the second half
of 2000 to eliminate or reduce SGA expenses not crucial to the efficient
operation of our company. This effort continued during 2001 and is now
culturally ingrained. We do expect to increase the overall dollar volume spent
on SGA as we increase our revenue base and step-up our overall activity.

Interest Expense

Interest expense was $218,781 during 2002 versus $848,199 in fiscal 2001.
During 2001 we entered into a private placement of 12% Convertible Notes. We
recorded interest expense of $508,835 in connection with a beneficial
conversion feature that was deemed to exist when the conversion price of some
of the 12% Notes was issued at a discount to the prevailing market price of the
stock. This expense is non-cash and we recorded a corresponding increase to
our additional paid-in capital.

28



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During 2001 we issued 230,700 detachable common stock warrants as additional
compensation in connection with short-term bridge loans that were used for
working capital purposes. We valued the warrants utilizing the Black-Scholes
model and recorded $128,726 as interest expense.

Preferred Stock Dividends

During 2002 we issued 2,523,000 warrants to investors in a private placement of
our Series C Convertible Preferred Stock. The warrants were valued at $578,767
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
$578,767 resulting in a charge to retained earnings and a credit to additional
paid-in capital within our stockholders equity as of September 30, 2002.
Dividends on our Series A Preferred Stock totaled $120,404 in 2002 compared to
$151,513 for the comparable period in 2001. There were arrearages of $33,196
in 5% Series A Preferred Stock dividends, $170,927 in Series B Preferred Stock
dividends and $30,392 in Series C Preferred Stock dividends at September 30,
2002. We deducted $183,260 from Net Income (Loss) Attributable to Common
Stockholders for the nine months ended September 30, 2002 relating to
undeclared Series A, B and C Preferred Stock dividends.

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 increased by $50,279 to $193,105 at September 30,
2002. This was the result of cash provided by financing activities of $988,144
offset by cash used in operating activities of approximately $937,865. The
significant components of the activity include a loss from operations of
approximately $2,154,827 offset by non-cash expenses of 180,079, increases in
cash of $1,036,883 from changes in working capital accounts and approximately
$968,144 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 $33,573
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 is currently in default in the repayment of principal and interest
due on its 12% Convertible Notes. The terms of the notes provides a payment
grace period of thirty days in which to make any required monetary payments.
Principal of $1,615,000 together with accrued interest of $199,103 was in
default effective March 3, 2002. Total accrued interest was $312,728 at
September 30, 2002.

The Company has incurred approximately $342,252 in payroll taxes during the
first and second quarters of fiscal 2002 that had not been paid as of September
30, 2002. Those payroll taxes became legal responsibilities when incurred and
will be required to be paid beginning in the fourth quarter of 2002.

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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 Series C Convertible Preferred Stock. Gross proceeds to date
have totaled $1,261,500 and we have accrued $293,356 in transaction related
fees leaving net proceeds of approximately $968,144. In September 2001 we
completed a private placement of our Series B Preferred Stock that resulted in
$2,000,000 in gross proceeds.

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 the raising of capital because of the decline in value of
publicly held technology stocks and the corresponding 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 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 fundings
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.

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
September 30, 2002, there is doubt about the Companys ability to continue as a
going concern.

The Three Months Ended September 30, 2002 Compared With the Three Months Ended
September 30, 2001

Results of Operations

Revenues

Revenues for the three months ended September 30, 2002 were $93,378 compared to
$45,561 for the same period in 2001. Revenues associated with our
Internet-based clinical trial products were approximately $93,378 and $45,561
for 2002 and 2001 respectively. We did not record any systems integration
revenues during either period and we do not expect any systems integration
revenues on an on-going basis.

30



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Cost of Goods Sold

Cost of goods sold decreased to $46,170 in 2002 compared to $51,613. Cost of
goods sold for both periods was attributable to salaries and benefits
associated with the programmers, developers and systems analysts producing
clinical trials on behalf of our clients.

Cost of goods sold should remain constant from the levels experienced during
the second quarter of 2002 for the short-term. We expect that increases in
production related costs will be offset by the use of our new trial-building
software. In the long-term we expect cost of goods sold to decrease on a
percentage basis as we achieve higher levels of productivity in our production
department.

Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses are our biggest expense at 56.5% of total Other
Expenses for the first quarter of 2002. Salaries and related expenses totaled
$423,023 in 2002 compared to $411,541 in 2001. Total salaries was flat when
compared to fiscal 2001 when comparing both the salaries and related costs from
cost of goods sold and from general corporate sources for both periods.

Rent & Occupancy Expenses

Rent expense was $40,827 for fiscal 2002 compared with $68,128 for fiscal 2001.
Rent expense has been diminished by closing our development office in Tampa
during March 2001 and relocating that function to the corporate office to
provide a more effective synthesis of workflows 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 is designed to ensure
100% system up-time.

Legal and Professional Fees

Legal and professional fees totaled $34,772 in 2002 compared with $33,779
during fiscal 2001. Key components of the 2002 amounts include $22,500 paid to
our placement agent for financial advisory services, $8,925 to our accountants
for audit and tax related services, $561 in legal expenses related to various
matters and $2,786 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 2001.

Travel

We incurred $9,226 in travel expenses during fiscal 2002 compared to $6,529
during 2001. We began reducing travel expenses during mid-2000 as a result of
the on-going working capital difficulties that we have been experiencing.
Those cost-cutting measures continued in 2001 and during the first quarter of
2002. We expect travel expenses 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 $3,964 due to decreased
telephone and Internet access costs associated with the closing of our office
in Tampa, Florida, and a decrease in overall long-distance charges associated
with the closed facilities. We do not anticipate increases in access charges
during fiscal 2002 based on our own existing communications infrastructure and
our projected 2002 clinical trial workload.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses (SGA) were $43,283 during the
second quarter of 2002. 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 $73,755 during 2002 versus $94,548 in fiscal 2001.

Preferred Stock Dividends

During the third quarter of 2002 we issued 1,150,000 warrants to investors in a
private placement of our Series C Convertible Preferred Stock. The warrants
were valued at $200,492 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 $200,492 resulting in a charge to retained earnings and a
credit to additional paid-in capital within our stockholders equity as of
September 30, 2002. Dividends on our Series A Preferred Stock totaled $18,567
in 2002 compared to $49,454 for the comparable period in 2001. There were
dividend arrearages incurred during the third quarter of 2002 of $33,196 on our
5% Series A Preferred Stock, $40,329 on our Series B Preferred Stock and
$18,298 on our Series C Preferred Stock dividends and we therefore deducted
$91,823 from Net Income (Loss) Attributable to Common Stockholders for the
three months ended September 30, 2002.

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PART II OTHER INFORMATION




ITEM 3. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934, as amended. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Companys disclosure controls and procedures are effective in bringing to their
attention on a timely basis material information relating to the Company
required to be included in the Companys periodic filings under the Exchange
Act.

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.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On August 2, 2002 the Company held its Annual Meeting of Shareholders in Davie
Florida. The following matters were presented to the Shareholders for
approval:

|    |  |                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------
|(1) |  | To elect four directors                                                                                                       
|   
|(2) |  | To ratify the appointment of Greenberg & Company as
independent auditors for the Company for the year ended December 31,
2002.
|   
|(3) |  | To approve an increase in the number of authorized shares of
common stock of the Company.                                     
|   
|(4) |  | To approve an amendment to the dividend terms of the
Companys 5% Series A Convertible Preferred Stock.                       

Matter No. 1

At the meeting, four directors were elected to serve until the next annual
meeting of stockholders or until the election and qualification of their
successors. The four directors nominated for election were elected for
one-year terms as proposed in the Companys Schedule 14A.

Matter No. 2

Subject to the ratification of the Companys Stockholders, the Board of
Directors, acting upon the recommendation of the Audit Committee, appointed the
firm of Greenberg & Company, certified public accountants, as independent
accountants to examine the financial statements of the Company for fiscal 2002.
The results of the vote on this matter were:

|           |  |         |       |            |  |  |     | 
|---------- |  | ------- | ----- | ---------- |  |  | --- | 
|           |  | Votes   |       |            |  | 
|For        |  | Against |       | Abstention
|           |  |         |       |           
|12,553,626 |  |         | 1,068 |            |  |  | 216 | 

Matter No. 3

On March 27, 2002, the Board of Directors adopted a resolution setting forth a
proposed amendment to the Companys Certificate of Incorporation to increase
the authorized number of shares of common stock.

The Board of Directors believes that an increase in the number of authorized
shares is desirable since it makes additional unreserved shares of common stock
available for issuance or reservation without further stockholder
authorization, except as may be required by applicable law or by stock exchange
rules.

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Having such additional shares authorized and available for issuance or
reservation provides the Company with the flexibility to issue shares of common
stock in possible future financings, stock dividends or distributions,
acquisitions, equity incentive plans or other proper corporate purposes which
may be identified in the future by the Board of Directors, without the expense
and delay of a special stockholders meeting. Other than with respect to the
reservation of shares of common stock in connection with the Companys 1998
Stock Incentive Plan, and in connection with any equity financings the Company
may undertake, or as publicly announced, the Company has no plans or other
existing or proposed agreements or understandings to issue, or reserve for
future issuance, any of the additional shares of common stock which would be
authorized by the proposed amendment.

The results of the vote on this matter were:

|           |  |         |       |            |  |  |       | 
|---------- |  | ------- | ----- | ---------- |  |  | ----- | 
|           |  | Votes   |       |            |  | 
|For        |  | Against |       | Abstention
|           |  |         |       |           
|12,548,799 |  |         | 4,691 |            |  |  | 1,420 | 

Matter No. 4

Under the designations of the 5% Series A Convertible Preferred Stock prior to
the Annual Meeting of Shareholders, the Company was required to declare and pay
dividends at the rate of 5% per annum, payable semi-annually on January 1 and
July 1 of each year while these securities remain outstanding. The Management
of the Company believes that the required accrual of these dividends adversely
affects the Companys financial results. The Company does not have sufficient
working capital both to pay these dividends and continue to implement its
business plan. The primary purpose of the amendment is to change how dividends
are accrued and paid on the 5% Series A Convertible Preferred Stock so that
these terms mirror the dividend provisions of the Series B Convertible
Preferred Stock. These changes include:



| |  |  | rather than the mandatory accrual of the dividends, Board of
Directors will have the latitude to decide when dividends are to be
declared and paid (which will be out of funds legally available
therefore, i.e., earnings), and dividends will also accrue upon the
conversion of the 5% Series A Convertible Preferred Stock to common
stock or upon the Companys liquidation, dissolution or winding up.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | dividends, when declared, will be payable at the discretion of the
Board of Directors either in cash or shares of common stock which will
provide more flexibility for the Company. The dividends are currently
payable only in cash.                                                                                                                                                                       

The results of the vote on this matter were:

|           |  |         |       |            |  |  |       | 
|---------- |  | ------- | ----- | ---------- |  |  | ----- | 
|           |  | Votes   |       |            |  | 
|For        |  | Against |       | Abstention
|           |  |         |       |           
|10,126,038 |  |         | 4,116 |            |  |  | 1,320 | 




ITEM 5. OTHER INFORMATION

None.

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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                                                                         
|            |  |                                                                                     
|99.1        |  | Section 906 of the Sarbanes-Oxley Act of 2002 Certification of Cornelis F. Wit, CEO 
|           
|99.2        |  | Section 906 of the Sarbanes-Oxley Act of 2002 Certification of
Ronald T Linares, CFO

(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                                                              
|                        |  |                                                                                     
|                        |  | Cornelis F. Wit, Director, Chief Executive Officer and President                    
|                       
|Date: November 12, 2002 |  |                                                                                     
|                        |  | By: /s/Ronald T. Linares                                                            
|                        |  |                                                                                     
|                        |  | Ronald T. Linares, Vice President of Finance, Chief Financial and Accounting Officer
|Date: November 12, 2002 |  |                                                                                     

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Cornelis F. Wit certify that:

1.     I have reviewed this quarterly report on Form 10-QSB of OmniComm Systems,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant and
have:



| |                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is prepared;



| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|                        |  |                                        
|----------------------- |  | ---------------------------------------
|Date: November 12, 2002 |  |                                        
|                        |  | /s/ Cornelis F. Wit                    
|                        |  |                                        
|                        |  | Cornelis F. Wit
Chief Executive Officer

37



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CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald T. Linares certify that:

1.     I have reviewed this quarterly report on Form 10-QSB of OmniComm Systems,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant and
have:



| |                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is prepared;



| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|                        |  |                                          
|----------------------- |  | -----------------------------------------
|Date: November 12, 2002 |  |                                          
|                       
|                        |  | /s/ Ronald T. Linares                    
|                        |  |                                          
|                        |  | Ronald T. Linares
Chief Financial Officer

38