##### Table of Contents





SECURITIES AND EXCHANGE COMISSION

Washington, D.C. 20549





FORM 10-Q





[Mark One]

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

for the quarterly period ended March 31, 2009



| ̈ | 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.

(Exact name of registrant as specified in its Charter)





No Changes

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



|                                                             |  |                                   
|------------------------------------------------------------ |  | ----------------------------------
|Delaware                                                     |  | 11-3349762                        
|State or other jurisdiction of Incorporation or organization |  | IRS Employer Identification Number



|                                                        |  |         
|------------------------------------------------------- |  | --------
|2101 W. Commercial Blvd. Suite 4000, Ft. Lauderdale, FL |  | 33309   
|Address of principal executive offices                  |  | Zip Code

954.473.1254

Registrants Telephone Number (including area code)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈ (Not required)

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 under the Securities Exchange Act of 1934. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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

The number of shares outstanding of each of the issuers classes of common equity as of May 12, 2009: 76,720,982 common stock $.001 par value.









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##### Table of Contents

TABLE OF CONTENTS TO THE QUARTERLY REPORT ON FORM 10-Q FOR THE THREE

MONTH PERIOD ENDED MARCH 31, 2009



|                                                                                                                                                                                      |  |                                                                                        |  |         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- |  | --------
|                                                                                                                                                                                      |  |                                                                                        |  | Page No.
|PART I. - FINANCIAL INFORMATION                                                                                                                                                       |  |                                                                                       
|                                                                                                                                                                                      |  |                                                                                       
|Item 1.                                                                                                                                                                               |  | Financial Statements (unaudited)                                                       |  | 3       
|                                                                                                                                                                                      |  |                                                                                       
|Item 2.                                                                                                                                                                               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations. |  | 25      
|                                                                                                                                                                                      |  |                                                                                       
|Item 3.                                                                                                                                                                               |  | Quantitative and Qualitative Disclosures About Market Risk.                            |  | 37      
|                                                                                                                                                                                      |  |                                                                                       
|Item 4T                                                                                                                                                                               |  | Controls and Procedures.                                                               |  | 37      
|                                                                                                                                                                                      | 
|PART II - OTHER INFORMATION                                                                                                                                                           |  |                                                                                       
|                                                                                                                                                                                      |  |                                                                                       
|Item 1.                                                                                                                                                                               |  | Legal Proceedings.                                                                     |  | 38      
|                                                                                                                                                                                      |  |                                                                                       
|Item 1A.                                                                                                                                                                              |  | Risk Factors.                                                                          |  | 38      
|                                                                                                                                                                                      |  |                                                                                       
|Item 2.                                                                                                                                                                               |  | Unregistered Sales of Equity Securities and Use of Proceeds.                           |  | 38      
|                                                                                                                                                                                      |  |                                                                                       
|Item 3.                                                                                                                                                                               |  | Defaults Upon Senior Securities.                                                       |  | 38      
|                                                                                                                                                                                      |  |                                                                                       
|Item 4.                                                                                                                                                                               |  | Submission of Matters to a Vote of Security Holders.                                   |  | 38      
|                                                                                                                                                                                      |  |                                                                                       
|Item 5.                                                                                                                                                                               |  | Other Information.                                                                     |  | 38      
|                                                                                                                                                                                      |  |                                                                                       
|Item 6.                                                                                                                                                                               |  | Exhibits.                                                                              |  | 39      
|                                                                                                                                                                                      | 
|SIGNATURES                                                                                                                                                                            |  | 40                                                                                    
|                                                                                                                                                                                     
|Exhibit 31.1Certification of Principal Executive Officer Pursuant to Section 
302 of the Sarbanes-Oxley Act of 2002 CEO Cornelis F. Wit                                             
|                                                                                                                                                                                     
|Exhibit 31.2Certification of Principal Financial Officer Pursuant to Section 
302 of the Sarbanes-Oxley Act of 2002 CFO Ronald T. Linares                                           
|                                                                                                                                                                                     
|Exhibit 32.1Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 
906 of the Sarbanes-Oxley Act of 2002  Principal Executive Officer - Cornelis F. Wit  
|                                                                                                                                                                                     
|Exhibit 32.2Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 
906 of the Sarbanes-Oxley Act of 2002  Principal Financial Officer - Ronald T. Linares



2



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OMNICOMM SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                                                      |  | March 31,2009 |             |   | December 31,2008 |  
|                                                                                                                                                                                                                      |  | (unaudited)   |             |   |                  |  
|ASSETS                                                                                                                                                                                                                |  |               |             |   |                  |   |             |  
|CURRENT ASSETS                                                                                                                                                                                                        |  |               |             |   |                  |   |             |  
|Cash                                                                                                                                                                                                                  |  | $             | 2,060,874   |   |                  | $ | 2,035,818   |  
|Accounts receivable, net of allowance for doubtful accounts of $158,486 and $150,933 in 2009 and 2008, respectively                                                                                                   |  |               | 1,207,341   |   |                  |   | 2,607,893   |  
|Prepaid expenses                                                                                                                                                                                                      |  |               | 91,861      |   |                  |   | 98,562      |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|Total current assets                                                                                                                                                                                                  |  |               | 3,360,076   |   |                  |   | 4,742,273   |  
|                                                                                                                                                                                                                      |  |              
|PROPERTY AND EQUIPMENT, net                                                                                                                                                                                           |  |               | 759,017     |   |                  |   | 769,228     |  
|                                                                                                                                                                                                                      |  |              
|OTHER ASSETS                                                                                                                                                                                                          |  |               |             |   |                  |   |             |  
|Other assets                                                                                                                                                                                                          |  |               | 22,066      |   |                  |   | 17,641      |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |              
|TOTAL ASSETS                                                                                                                                                                                                          |  | $             | 4,141,159   |   |                  | $ | 5,529,142   |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |              
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                        |  |               |             |   |                  |   |             |  
|CURRENT LIABILITIES                                                                                                                                                                                                   |  |               |             |   |                  |   |             |  
|Accounts payable and accrued expenses                                                                                                                                                                                 |  | $             | 1,110,470   |   |                  | $ | 1,085,700   |  
|Notes payable, current portion                                                                                                                                                                                        |  |               | -0-         |   |                  |   | 111,800     |  
|Deferred revenue, current portion                                                                                                                                                                                     |  |               | 3,345,653   |   |                  |   | 3,549,058   |  
|Patent litigation settlement liability, current portion                                                                                                                                                               |  |               | 308,904     |   |                  |   | 241,464     |  
|Convertible notes payable, current portion                                                                                                                                                                            |  |               | 75,000      |   |                  |   | 384,043     |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|Total current liabilities                                                                                                                                                                                             |  |               | 4,840,027   |   |                  |   | 5,372,065   |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |              
|Notes payable - long term                                                                                                                                                                                             |  |               | 111,800     |   |                  |   | -0-         |  
|Notes payable related parties - long term                                                                                                                                                                             |  |               | 137,500     |   |                  |   | 197,500     |  
|Deferred revenue - long term                                                                                                                                                                                          |  |               | 921,381     |   |                  |   | 885,200     |  
|Convertible notes payable, related parties, net of current portion                                                                                                                                                    |  |               | 4,550,060   |   |                  |   | 4,165,025   |  
|Convertible notes payable, net of current portion                                                                                                                                                                     |  |               | 199,508     |   |                  |   | 156,752     |  
|Patent litigation settlement liability                                                                                                                                                                                |  |               | 1,915,757   |   |                  |   | 1,929,019   |  
|Conversion feature liability, related parties, net of current portion                                                                                                                                                 |  |               | 576,480     |   |                  |   | 1,185,960   |  
|Conversion feature liability, net of current portion                                                                                                                                                                  |  |               | 33,560      |   |                  |   | 71,942      |  
|Warrant liability, related parties                                                                                                                                                                                    |  |               | 1,212,106   |   |                  |   | 2,017,160   |  
|Warrant liability                                                                                                                                                                                                     |  |               | 359,212     |   |                  |   | 620,801     |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|TOTAL LIABILITIES                                                                                                                                                                                                     |  |               | 14,857,391  |   |                  |   | 16,601,424  |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |              
|COMMITMENTS AND CONTINGENCIES (See Note 10)                                                                                                                                                                           |  |               |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |              
|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, -0- and -0- issued and outstanding, respectively;
liquidation preference $-0- and $-0-, respectively                              |  |               | -0-         |   |                  |   | -0-         |  
|                                                                                                                                                                                                                      |  |              
|Series C convertible preferred stock, - $.001 par value. 747,500 shares authorized, -0- and -0- issued and outstanding, respectively;
liquidation preference $-0- and $-0-, respectively                              |  |               | -0-         |   |                  |   | -0-         |  
|                                                                                                                                                                                                                      |  |              
|5% Series A convertible preferred stock - $0.001 par value, 5,000,000 shares authorized; 4,125,224 and 4,125,224 issued and outstanding,
respectively; liquidation preference $4,125,224 and $4,125,224, respectively |  |               | 4,125       |   |                  |   | 4,125       |  
|                                                                                                                                                                                                                      |  |              
|Common stock  150,000,000 shares authorized, 76,720,982 and 76,579,951 issued and outstanding, respectively, at $.001 par
value                                                                                      |  |               | 77,687      |   |                  |   | 77,546      |  
|Additional paid in capital  preferred                                                                                                                                                                                |  |               | 3,718,054   |   |                  |   | 3,718,054   |  
|Additional paid in capital  common                                                                                                                                                                                   |  |               | 33,686,854  |   |                  |   | 33,430,270  |  
|Accumulated other comprehensive income/(loss)                                                                                                                                                                         |  |               | 3,221       |   |                  |   | 989         |  
|Less: Treasury stock, cost method, 1,014,830 and 1,014,830 shares, respectively                                                                                                                                       |  |               | (503,086    | ) |                  |   | (503,086    | )
|Accumulated deficit                                                                                                                                                                                                   |  |               | (47,703,087 | ) |                  |   | (47,800,180 | )
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                  |  |               | (10,716,232 | ) |                  |   | (11,072,282 | )
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                  |  | $             | 4,141,159   |   |                  | $ | 5,529,142   |  
|                                                                                                                                                                                                                      |  |               |             |   |                  |   |             |  

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



3



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OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                                 |  |                                     |            |   |      |   |            |  
|---------------------------------------------------------------- |  | ----------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | For the three months endedMarch 31, |           
|                                                                 |  | 2009                                |            |   | 2008 |  
|Total revenues                                                   |  | $                                   | 2,416,657  |   |      | $ | 1,012,044  |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Cost of sales                                                    |  |                                     | 494,820    |   |      |   | 318,566    |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Gross margin                                                     |  |                                     | 1,921,837  |   |      |   | 693,478    |  
|                                                                 |  |                                    
|Operating expenses                                               |  |                                     |            |   |      |   |            |  
|Salaries, benefits and related taxes                             |  |                                     | 2,191,509  |   |      |   | 2,136,415  |  
|Rent & occupancy expenses                                        |  |                                     | 138,587    |   |      |   | 126,395    |  
|Consulting services                                              |  |                                     | 38,709     |   |      |   | 123,665    |  
|Legal and professional fees                                      |  |                                     | 112,663    |   |      |   | 56,898     |  
|Travel                                                           |  |                                     | 60,898     |   |      |   | 117,819    |  
|Telephone and internet                                           |  |                                     | 30,306     |   |      |   | 38,508     |  
|Selling, general and administrative                              |  |                                     | 248,198    |   |      |   | 122,827    |  
|Bad Debt Expense                                                 |  |                                     | 7,553      |   |      |   | -0-        |  
|Depreciation and amortization                                    |  |                                     | 65,699     |   |      |   | 67,076     |  
|                                                                 |  |                                     |            |   |      |   |            |  
|Total operating expenses                                         |  |                                     | 2,894,122  |   |      |   | 2,789,603  |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Operating income (loss)                                          |  |                                     | (972,285   | ) |      |   | (2,096,125 | )
|                                                                 |  |                                    
|Other income (expense)                                           |  |                                     |            |   |      |   |            |  
|Interest expense                                                 |  |                                     | (648,589   | ) |      |   | (304,057   | )
|Interest income                                                  |  |                                     | 3,461      |   |      |   | 5,339      |  
|Gain on Extinguishment of Debt                                   |  |                                     | 432        |   |      |   | -0-        |  
|Unrealized Gain on Derivative Liabilities                        |  |                                     | 1,714,074  |   |      |   | 272,553    |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Income (loss) before taxes and preferred dividends               |  |                                     | 97,093     |   |      |   | (2,122,290 | )
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Net income (loss)                                                |  |                                     | 97,093     |   |      |   | (2,122,290 | )
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Preferred stock dividends in arrears Series A Preferred          |  |                                     | (49,531    | ) |      |   | (49,957    | )
|Preferred stock dividends in arrears Series B Preferred          |  |                                     | -0-        |   |      |   | (9,753     | )
|Preferred stock dividends in arrears Series C Preferred          |  |                                     | -0-        |   |      |   | (67,245    | )
|                                                                 |  |                                     |            |   |      |   |            |  
|Total preferred stock dividends                                  |  |                                     | (49,531    | ) |      |   | (126,955   | )
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Net income (loss) attributable to common stockholders            |  | $                                   | 47,562     |   |      | $ | (2,249,245 | )
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Net income (loss) per share, basic and diluted                   |  | $                                   | 0.00       |   |      | $ | (0.04      | )
|                                                                 |  |                                     |            |   |      |   |            |  
|Weighted average number of shares outstanding, basic and diluted |  |                                     | 76,581,518 |   |      |   | 59,294,171 |  
|                                                                 |  |                                     |            |   |      |   |            |  

See accompanying summary of accounting policies and notes to financial statements



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OMNICOMM SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND MARCH 31, 2008

(unaudited)



|                                                                                           |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                           |  | 2009 |            |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                       |  |      |            |   |      |   |            |  
|Net income (loss)                                                                          |  | $    | 97,093     |   |      | $ | (2,122,290 | )
|Adjustment to reconcile net income to net cash provided by (used in) operating activities: |  |      |            |   |      |   |            |  
|Common stock issued in lieu of salary                                                      |  |      | 42,310     |   |      |   | -0-        |  
|Gain on extinguishment of debt                                                             |  |      | (432       | ) |      |   | -0-        |  
|Unrealized gain on derivatives                                                             |  |      | (1,714,074 | ) |      |   | (272,553   | )
|Interest expense from derivative instruments                                               |  |      | 431,248    |   |      |   | 274,833    |  
|Employee stock option expense                                                              |  |      | 214,415    |   |      |   | 326,207    |  
|Depreciation and amortization                                                              |  |      | 65,699     |   |      |   | 67,076     |  
|Change in assets and liabilities:                                                          |  |      |            |   |      |   |            |  
|Accounts receivable                                                                        |  |      | 1,400,552  |   |      |   | 292,491    |  
|Prepaid expenses                                                                           |  |      | 6,701      |   |      |   | (123,701   | )
|Other assets                                                                               |  |      | (4,425     | ) |      |   | 32         |  
|Accounts payable and accrued expenses                                                      |  |      | 24,772     |   |      |   | 36,997     |  
|Patent settlement liability                                                                |  |      | 54,178     |   |      |   | -0-        |  
|Deferred revenue                                                                           |  |      | (167,225   | ) |      |   | 115,226    |  
|                                                                                           |  |      |            |   |      |   |            |  
|Net cash provided by (used in) operating activities                                        |  |      | 450,812    |   |      |   | (1,405,682 | )
|                                                                                           |  |      |            |   |      |   |            |  
|                                                                                           |  |     
|CASH FLOWS FROM INVESTING ACTIVITIES                                                       |  |      |            |   |      |   |            |  
|Purchase of property and equipment                                                         |  |      | (55,488    | ) |      |   | (168,121   | )
|                                                                                           |  |      |            |   |      |   |            |  
|NET Net cash provided by (used in) investing activities                                    |  |      | (55,488    | ) |      |   | (168,121   | )
|                                                                                           |  |      |            |   |      |   |            |  
|                                                                                           |  |     
|CASH FLOWS FROM FINANCING ACTIVITIES                                                       |  |      |            |   |      |   |            |  
|Proceeds from issuance of common stock, net of issuance costs                              |  |      | -0-        |   |      |   | 2,166,220  |  
|Repayments of notes payable                                                                |  |      | (360,000   | ) |      |   | -0-        |  
|Payments on convertible notes payable                                                      |  |      | (12,500    | ) |      |   | -0-        |  
|                                                                                           |  |      |            |   |      |   |            |  
|Net cash provided by (used in) financing activities                                        |  |      | (372,500   | ) |      |   | 2,166,220  |  
|                                                                                           |  |      |            |   |      |   |            |  
|                                                                                           |  |     
|Effect of exchange rate change on cash and cash equivalents                                |  |      | 2,232      |   |      |   | (702       | )
|                                                                                           |  |      |            |   |      |   |            |  
|                                                                                           |  |     
|Net increase (decrease) in cash and cash equivalents                                       |  |      | 25,056     |   |      |   | 591,715    |  
|Cash and cash equivalents at beginning of period                                           |  |      | 2,035,818  |   |      |   | 481,961    |  
|                                                                                           |  |      |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                                 |  | $    | 2,060,874  |   |      | $ | 1,073,676  |  
|                                                                                           |  |      |            |   |      |   |            |  



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##### Table of Contents

OMNICOMM SYSTEM, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND MARCH 31, 2008

(continued)

(unaudited)



|                                                                   |  |                                     |         |      |   |          
|------------------------------------------------------------------ |  | ----------------------------------- | ------- | ---- | - | ---------
|                                                                   |  | For the three months endedMarch 31,
|                                                                   |  | 2009                                |         | 2008
|Supplemental Disclosure of Cash Flow Information:                  |  |                                     |         |      |   |          
|Cash paid during the period for:                                   |  |                                     |         |      |   |          
|                                                                   |  |                                    
|Income tax                                                         |  | $                                   | -0-     |      | $ | -0-      
|                                                                   |  |                                     |         |      |   |          
|Interest                                                           |  | $                                   | 192,034 |      | $ | 7,149    
|                                                                   |  |                                     |         |      |   |          
|                                                                   |  |                                    
|Non-cash Transactions                                              |  |                                     |         |      |   |          
|Conversion of Series B Preferred Stock into common stock           |  | $                                   | -0-     |      | $ | 191,518  
|Common stock issued pursuant to anti-dilution provision            |  | $                                   | -0-     |      | $ | 157,445  
|Conversion of series C preferred stock into shares of common stock |  | $                                   | -0-     |      | $ | 3,684,407
|Common stock issued in lieu of salary                              |  | $                                   | 42,310  |      | $ | -0-      

See accompanying summary of accounting policies and notes to financial statements



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(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 located in the United States. TrialMaster allows clinical trial sponsors and investigative sites to securely collect, validate, transmit, and analyze clinical trial data.

Our ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through
TrialMaster. Our research and development efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality. During fiscal 2008, we spent
approximately $897,000 on research and development activities, the majority of which represented salaries to our developers. During the first quarter of fiscal 2009 and fiscal 2008 we spent approximately $239,000 and $211,000, respectively, on
research and development activities, which include costs associated with customization of the TrialMaster software for our clients projects.



|NOTE 2: | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|------- | ------------------------------------------

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The Companys accounts include those of all its wholly
owned subsidiaries and have been prepared in conformity with (i) accounting principles generally accepted in the United States of America; 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.

UNAUDITED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements of OmniComm Systems,
Inc. and its Subsidiaries (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and
Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the consolidated financial statements have been condensed or omitted. The results for the periods indicated are
unaudited, but reflect all adjustments (consisting only of normally recurring adjustments) which management considers necessary for a fair presentation of operating results.

The operating results for the three-month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year
ended December 31, 2009. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2008.

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of the consolidated 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 2008 financial statements to conform to the 2009
presentation. These reclassifications did not have any effect on net income (loss) or shareholders equity.

SEGMENT
INFORMATION

The Company operates in one reportable segment which is the delivery of EDC services and products to clinical trial
sponsors. The Company segregates its revenues based on the activity cycle used to generate its revenues. Accordingly, revenues are currently generated through three main activities. These activities include:



| |  |  | the initial setup activities associated with building, implementing and inititiating clinical trial projects;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | change orders or change requests made by the clinical trial sponsor that require changes to the scope of the clinical trial project; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the maintenance fees paid by our customers for clinical trial projects that have been implemented. The services provided include application hosting and related
support services. Services for this offering are charged monthly as a fixed fee. Revenues are recognized ratably over the period of the service.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



The fees associated with each business activity for the three month periods ended March 31, 2009
and March 31, 2008, respectively are:



|                      |  |                    |           |               |   |          
|--------------------- |  | ------------------ | --------- | ------------- | - | ---------
|                      |  | Three months ended
|Business Activity     |  | March 31,2008      |           | March 31,2009
|Clinical Trial Setup  |  |                    | 643,618   |               | $ | 1,269,870
|Change Orders         |  |                    | 74,135    |               |   | 142,674  
|Maintenance Fees      |  |                    | 294,291   |               |   | 404,150  
|License Transfers     |  |                    | -0-       |               |   | 431,891  
|Professional Services |  |                    | -0-       |               |   | 168,072  
|                      |  |                    |           |               |   |          
|Total Revenues        |  | $                  | 1,012,044 |               | $ | 2,416,657
|                      |  |                    |           |               |   |          

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
consolidated 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. The Company had recorded an
allowance for uncollectible accounts receivable of $150,933 and $158,486 as of December 31, 2008 and March 31, 2009, respectively.



8



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



CONCENTRATION OF CREDIT RISK

Except as follows, the Company has no significant off-balance-sheet risk or credit risk concentrations. Financial instruments that subject the Company to
potential credit risks are principally cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with credit worthy financial institutions, however, the Company does maintain cash in its accounts from time-to-time
that exceed the maximum federally insured limits. Concentrated credit risk with respect to accounts receivable is limited to creditworthy customers. The Companys customers are principally located in the United States. The Company is directly
affected by the overall financial condition of the pharmaceutical, biotechnology and medical device industries and management believes that credit risk exists and that any credit risk the Company faces has been adequately reserved for as of
March 31, 2009. Prior to 2008 the Company has not historically experienced significant losses related to receivables from individual customers or groups of customers in any specific industry or geographic area. During fiscal 2008 and continuing
during the first quarter of 2009, the biotechnology industry experienced liquidity and funding difficulties. Several of the Companys clients operate in this segment. The Company maintains an allowance for doubtful accounts based on accounts
past due according to contractual terms and historical collection experience. Actual losses when incurred are charged to the allowance. The Companys losses related to collection of accounts receivable prior to fiscal 2008 were consistently
within managements expectations. The overall downturn in the U.S. economy impacted several of the Companys clients beginning in late 2008. Due to these factors, no additional credit risk beyond amounts provided for collection losses,
which the Company reevaluates on a monthly basis based on specific review of receivable agings and the period that any receivables are beyond the standard payment terms, is believed by management to be probable in the Companys accounts
receivable. The Company does not require collateral from its customers in order to mitigate credit risk.

One customer accounted for 24% and
another customer accounted for 20% of our revenues during the first three months of 2009 or approximately $570,000 and $482,000, respectively. One customer accounted for 11% and another customer accounted for 10% of our revenues during the
three-month period ended March 31, 2008 or approximately $107,000 and $102,000, respectively. One customer accounted for 36% of our revenues for the year ended December 31, 2008, or approximately $2,238,000. The following table summarizes the
number of customers who individually comprise greater than 10% of total revenue and/or total accounts receivable and their aggregate percentage of the Companys total revenue and gross accounts receivable.



|                      |  |               |  |                            |                     |  |               |  |                                      |  
|--------------------- |  | ------------- |  | -------------------------- | ------------------- |  | ------------- |  | ------------------------------------ | -
|                      |  | Revenues      |  |                            | Accounts Receivable | 
|For the periods ended |  | # ofCustomers |  | Percentageof TotalRevenues |                     |  | # ofCustomers |  | Percentageof TotalAccountsReceivable |  
|12/31/2008            |  | 1             |  | 36                         | %                   |  | 2             |  | 71                                   | %
|3/31/2008             |  | 2             |  | 21                         | %                   |  | 4             |  | 70                                   | %
|3/31/2009             |  | 2             |  | 44                         | %                   |  | 1             |  | 35                                   | %

The following table summarizes activity in the Companys allowance for doubtful accounts.



|                    |  |                       |         |               |   |        
|------------------- |  | --------------------- | ------- | ------------- | - | -------
|                    |  | For the periods ended
|                    |  | December 31,2008      |         | March 31,2009
|Beginning of period |  | $                     | 2,586   |               | $ | 150,933
|Bad debt expense    |  |                       | 148,347 |               |   | 7,553  
|Write-offs          |  |                       | -0-     |               |   | -0-    
|                    |  |                       |         |               |   |        
|End of period       |  | $                     | 150,933 |               | $ | 158,486
|                    |  |                       |         |               |   |        



9



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



The Company serves all of its hosting customers from third-party web hosting facilities located in
the United States. The Company does not control the operation of these facilities, and they are vulnerable to damage or interruption. The Company maintains redundant systems that can be used to provide service in the event third-party web hosting
facilities become unavailable, although in such circumstances, the Companys service may be interrupted during the transition.

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, computers, equipment and furniture and 3 years for
software. Gains or losses on disposal are charged to operations.

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. As of March 31 2009, the Company had $4,267,034 in deferred revenues relating to contracts for services to be performed over periods ranging from 1 month to 5 years. The Company had $3,345,653
in deferred revenues that are expected to be recognized in the next twelve fiscal months.

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; licensing arrangements, on-going maintenance fees incurred throughout the duration of an engagement; fees for
report writing and project change orders. The clinical trials that are conducted using TrialMaster can last from a few months to several years. Most of the fees associated with our product including post-setup customer support in the form of
maintenance charges are recognized ratably over the term of the clinical trial. Cost of sales is primarily comprised of programmer salaries and taxes and is expensed as incurred.

The Company recognizes sales, for both financial statement and tax purposes in accordance with SEC Staff Accounting Bulletin No. 104 Revenue
Recognition in Financial Statements (SAB 104) and AICPA Statement of Position 97-2 (SOP 97-2) Software Revenue Recognition as amended by SOP 98-9. SAB 104 requires that revenues be recognized ratably over the life of a contract.
The Company will periodically record deferred revenues relating to advance payments in contracts. Under its licensing arrangement the Company recognizes revenue pursuant to SOP 97-2. Under these arrangements the Company recognizes revenue when all
of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer and/or delivery has occurred; (3) the collection of fees is probable; and (4) the
fee is fixed or determinable. SOP 97-2, as amended, requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. We have analyzed each element in our
multiple element arrangements and determined that we have sufficient vendor-specific objective evidence (VSOE) to allocate revenues to license updates and product support. License revenues are recognized on delivery if the other
conditions of SOP 97-2 are satisfied. License updates and product support revenue is recognized ratably over the term of the arrangement. In arrangements where term licenses are bundled with license updates and product support and such revenue is
recognized ratably over the term of the arrangement, we allocate the revenue to license revenue and to license updates and product support revenue based on the VSOE of fair value for license updates and product support revenue on perpetual licenses
of similar products.



10



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



ADVERTISING

Advertising costs are expensed as incurred. Advertising costs were $20,301 and $43,864 for the first quarter ended March 31, 2009 and March 31,
2008, 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
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, (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. During fiscal
2008, we spent approximately $897,000 on research and development activities, the majority of which represented salaries to our developers. During the first three months of fiscal 2009 and fiscal 2008 we spent approximately $239,000 and $211,000,
respectively, on research and development activities, which include costs associated with customization of the TrialMaster software for our clients projects.

EMPLOYEE EQUITY INCENTIVE PLANS

The company has an employee equity incentive plan, which is
more fully described in Note 13: Employee Equity Incentive Plans. On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment, which addresses the accounting for transactions in which an
entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) is a revision to SFAS No. 123,
Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS
No. 123(R) requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from
subsequent modifications of awards after the grant date must be recognized.

The Company adopted SFAS No. 123(R) using the modified
prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of the Companys fiscal year. The Companys Consolidated Financial Statements as of and for the three months
ended March 31, 2008 and March 31, 2009, respectively, reflect the impact of SFAS No. 123(R).

SFAS No. 123(R) requires
companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service
periods in the Companys Consolidated Statements of Income. Stock-based compensation recognized in the Companys Consolidated Statements of Income for the three month periods ended March 31, 2009 and March 31, 2008 includes
compensation expense for share-based awards granted prior to, but not fully vested as of January 1, 2006 based on the grant date fair value estimated in accordance with SFAS No. 123 as well as compensation expense for share-based awards
granted from January 1, 2006 to March 31, 2009 in accordance with SFAS No. 123(R). The Company currently uses the American Binomial option pricing model to determine grant date fair value.



11



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



EARNINGS PER SHARE

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128, Earnings per
Share, (SFAS 128). 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 76,581,518 and 59,294,171 for the three month periods
ended March 31, 2009 and March 31, 2008, respectively. There were no differences between basic and diluted earnings per share. Options to purchase 11,042,770 shares of common stock at prices ranging from $.25 to $2.75 per share were
outstanding at March 31, 2009. Stock warrants to purchase 22,717,757 shares of common stock at exercise prices ranging from $0.25 to $0.60 per share were outstanding at March 31, 2009.

The Companys convertible debt and convertible preferred stock have an anti-dilutive effect on net loss per share and were not included in the
computation of diluted earnings 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). SFAS 109 has as its basic objective the recognition of current and deferred income tax assets and liabilities based upon all events that have been recognized in the financial statements as measured by the
provisions of the enacted tax laws.

Valuation allowances are established when necessary to reduce deferred tax assets to the estimated
amount to be realized. Income tax expense represents the tax payable for the current period and the change during the period in the deferred tax assets and liabilities.

IMPACT OF NEW ACCOUNTING STANDARDS

In April 2009, FASB issued Financial Accounting Standards
Board, or FASB, Staff Position, or FSP, SFAS No. 107-1 and Accounting Principles Board Opinions, or APB, No. 28-1 Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about
Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The FSP also amends APB No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP applies to all financial instruments within the scope of SFAS No. 107 held by publicly traded companies, as defined by
APB No. 28. A publicly traded company is required to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. Such entity is required to disclose in
the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to
estimate that value, whether recognized or not recognized in the statement of financial position, as required by SFAS No. 107. Fair value information disclosed in the notes must be presented together with the related carrying amount in a form
that makes it clear whether the fair value and carrying amount represent assets or liabilities and how the carrying amount relates to what is reported in the statement of



12



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



financial position. Such entity also must disclose the methods and significant assumptions used to estimate the fair value of financial instruments and
describe changes in methods and significant assumptions during the period. This FSP will be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The
Company plans to adopt this FSP for the quarter ended June 30, 2009 and anticipates that the adoption of SFAS No. 107-1 and APB No. 28-1 will not have a material impact on the Companys consolidated results of operations and
financial position.

In April 2009, FASB issued FSP SFAS No. 115-2 and No. 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on
debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This FSP will be effective for interim and annual
reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company plans to adopt this FSP for the quarter ended June 30, 2009 and anticipates that adoption of SFAS
No. 115-2 and SFAS No. 124-2 will not have a material impact on the Companys consolidated results of operations and financial position.

In April 2009, FASB issued FSP SFAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly. This FSP provides additional guidance for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also
includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the
valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or
distressed sale) between market participants at the measurement date under current market conditions. This FSP will be effective for interim and annual reporting periods ending after June 15, 2009, and will be applied prospectively. The Company
plans to adopt this FSP for the quarter ended June 30, 2009 and anticipates that adoption of SFAS No. 157-4 will not have a material impact on the Companys consolidated results of operations and financial position.



|NOTE 3: | OPERATIONS AND LIQUIDITY
|------- | ------------------------

We have
experienced negative cash flow from operations 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 may need to raise substantial additional capital to fund our future operations. Our capital requirements will depend on many factors, including the problems, delays, expenses and complications frequently
encountered by companies developing and commercializing new technologies; the progress of our research and development activities; the rate of technological advances; determinations as to the commercial potential of our technology under development;
the status of competitive technology; the establishment of collaborative relationships; the success of our sales and marketing programs; and other changes in economic, regulatory or competitive conditions in our planned business.

Estimates about the adequacy of funding for our activities are based upon certain assumptions, including assumptions that the research and development
programs relating to our technology can be conducted at projected costs and that progress

towards the commercialization of our technology
will be timely and successful. There can be no assurance that changes in our research and development plans, acquisitions or other events will not result in accelerated or unexpected expenditures.



13



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



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

The ability of the Company to continue in existence is dependent on its having sufficient financial resources to bring
products and services to market for marketplace acceptance. As a result of historical operating losses, and accumulated deficits for the three month period ending March 31, 2009 there is doubt about the Companys ability to continue as a
going concern.



|NOTE 4: | PROPERTY AND EQUIPMENT, AT COST
|------- | -------------------------------

Property
and equipment consists of the following:



|                              |  |                |           |                         |   |           |  |                         |           |                       |   |           |  |        
|----------------------------- |  | -------------- | --------- | ----------------------- | - | --------- |  | ----------------------- | --------- | --------------------- | - | --------- |  | -------
|                              |  | March 31, 2009 |           | December 31, 2008       |   |          
|                              |  | Cost           |           | AccumulatedDepreciation |   | Cost      |  | AccumulatedDepreciation |           | EstimatedUseful Lives
|Computer and office equipment |  | $              | 1,100,105 |                         | $ | 604,380   |  | $                       | 1,053,805 |                       | $ | 574,963   |  | 5 years
|Leasehold improvements        |  |                | 55,751    |                         |   | 29,321    |  |                         | 55,751    |                       |   | 26,698    |  | 5 years
|Computer software             |  |                | 677,263   |                         |   | 480,403   |  |                         | 675,392   |                       |   | 449,123   |  | 3 years
|Office furniture              |  |                | 100,659   |                         |   | 60,657    |  |                         | 93,342    |                       |   | 58,278    |  | 5 years
|                              |  |                |           |                         |   |           |  |                         |           |                       |   |           |  |        
|                              |  | $              | 1,933,778 |                         | $ | 1,174,761 |  | $                       | 1,878,290 |                       | $ | 1,109,062 |  |        
|                              |  |                |           |                         |   |           |  |                         |           |                       |   |           |  |        

Depreciation expense for the three month periods ended March 31, 2009 and March 31, 2008
was $65,699 and $67,076 respectively.



|NOTE 5: | ACCOUNTS PAYABLE, ACCRUED EXPENSES AND ACCRUED PAYROLL TAXES
|------- | ------------------------------------------------------------

Accounts payable and accrued expenses consist of the following:



|                                            |  |                |           |                   |   |          
|------------------------------------------- |  | -------------- | --------- | ----------------- | - | ---------
|                                            |  | March 31, 2009 |           | December 31, 2008
|Accounts payable                            |  | $              | 692,541   |                   | $ | 652,124  
|Accrued payroll and related costs           |  |                | 243,673   |                   |   | 148,748  
|Other accrued expenses                      |  |                | 18,097    |                   |   | 19,470   
|Accrued interest                            |  |                | 156,159   |                   |   | 265,358  
|                                            |  |                |           |                   |   |          
|Total accounts payable and accrued expenses |  | $              | 1,110,470 |                   | $ | 1,085,700
|                                            |  |                |           |                   |   |          



14



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



|NOTE 6: | EARNINGS PER SHARE
|------- | ------------------

Basic earnings per share
(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 24,878,153 and 51,319,582 have been omitted from the calculation of dilutive EPS for the three month periods ended March 31, 2008 and March 31, 2009, respectively. Provided
below is reconciliation between numerators and denominators of the basic and diluted earnings per shares:



|                                    |  |                           |            |   |                                 |            |                 |   |       |                 |  |                                 |        |                 |            |  |   |     
|----------------------------------- |  | ------------------------- | ---------- | - | ------------------------------- | ---------- | --------------- | - | ----- | --------------- |  | ------------------------------- | ------ | --------------- | ---------- |  | - | ----
|                                    |  | Three Month Periods Ended
|                                    |  | IncomeNumerator           |            |   | March 31, 2008SharesDenominator |            | Per-ShareAmount |   |       | IncomeNumerator |  | March 31, 2008SharesDenominator |        | Per-ShareAmount
|Basic EPS                           |  | $                         | (2,249,245 | ) |                                 | 59,294,171 |                 | $ | (0.04 | )               |  | $                               | 47,562 |                 | 76,581,518 |  | $ | 0.00
|Effect of Dilutive Securities None. |  |                           | -0-        |   |                                 | -0-        |                 |   | -0-   |                 |  |                                 | -0-    |                 | -0-        |  |   | -0- 
|                                    |  |                           |            |   |                                 |            |                 |   |       |                 |  |                                 |        |                 |            |  |   |     
|Diluted EPS                         |  | $                         | (2,249,245 | ) |                                 | 59,294,171 |                 | $ | (0.04 | )               |  | $                               | 47,562 |                 | 76,581,518 |  | $ | 0.00



|NOTE 7: | NOTES PAYABLE
|------- | -------------

At March 31, 2009, the
Company owed $249,300 in notes payable. The table below provides details as to the terms and conditions of the notes payable.



|                 |  |          |  |              |   |  |        |         |           |   |          |  |   |        
|---------------- |  | -------- |  | ------------ | - |  | ------ | ------- | --------- | - | -------- |  | - | -------
|Origination Date |  | Due Date |  | InterestRate |   |  | Amount |         | ShortTerm |   | LongTerm
|12/31/08         |  | 01/31/11 |  | 9.00         | % |  | $      | 137,500 |           | $ | -0-      |  | $ | 137,500
|01/01/09         |  | 10/01/10 |  | 9.00         | % |  |        | 51,800  |           |   | -0-      |  |   | 51,800 
|01/01/09         |  | 10/01/10 |  | 9.00         | % |  |        | 60,000  |           |   | -0-      |  |   | 60,000 
|                 |  |          |  |              |   |  |        |         |           |   |          |  |   |        
|                 |  |          |  |              |   |  | $      | 249,300 |           | $ | -0-      |  | $ | 249,300
|                 |  |          |  |              |   |  |        |         |           |   |          |  |   |        



|NOTE 8: | 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 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 was June 30, 2004, into shares of common stock of the Company at $1.25 per share. As of December 31, 2008,
approximately $787,500 of the Convertible Notes had been converted into 1,495,179 shares of common stock of the Company leaving an outstanding principal balance of $75,000.



15



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



As of March 31, 2009 the Company is in default on interest payments owed totaling $74,077 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 has been in default since January 30, 2002. At the option of the note holders the
full amount of the convertible notes could be declared in default. For the three month period ended March 31, 2009, we incurred and recorded $1,869 in interest expense on the 10% Convertible Notes.

The following table summarizes the convertible debt activity the Company has undertaken during fiscal 2008 and 2009.



|                 |  |              |   |  |                   |            |                   |   |                   |  |                    |           |                     |   |           |  |   |          
|---------------- |  | ------------ | - |  | ----------------- | ---------- | ----------------- | - | ----------------- |  | ------------------ | --------- | ------------------- | - | --------- |  | - | ---------
|Origination Date |  | InterestRate |   |  | OriginalPrincipal |            | AllocatedDiscount |   | DiscountAmortized |  | Discountat 3/31/09 |           | Principalat 3/31/09
|2/29/2008        |  | 10           | % |  | $                 | 2,325,000  |                   | $ | 1,648,993         |  | $                  | 1,648,993 |                     | $ |          |  | $ |         
|6/10/2008        |  | 10           | % |  |                   | 210,000    |                   |   | 162,352           |  |                    | 40,588    |                     |   |          |  |   |         
|8/29/2008        |  | 10           | % |  |                   | 1,325,000  |                   |   | 845,350           |  |                    | 845,350   |                     |   |          |  |   |         
|8/29/2008        |  | 10           | % |  |                   | 2,270,000  |                   |   | 2,052,080         |  |                    | 598,523   |                     |   | 1,453,557 |  |   | 2,270,000
|12/1/2008        |  | 12           | % |  |                   | 300,000    |                   |   | 6,914             |  |                    | 6,914     |                     |   |          |  |   |         
|12/16/2008       |  | 12           | % |  |                   | 5,075,000  |                   |   | 1,370,250         |  |                    | 228,375   |                     |   | 1,141,875 |  |   | 5,075,000
|                 |  |              |   |  |                   |            |                   |   |                   |  |                    |           |                     |   |           |  |   |          
|                 |  |              |   |  | $                 | 11,505,000 |                   | $ | 6,085,939         |  | $                  | 3,368,743 |                     | $ | 2,595,432 |  | $ | 7,345,000
|                 |  |              |   |  |                   |            |                   |   |                   |  |                    |           |                     |   |           |  |   |          

The convertible note dated June 10, 2008 was voluntarily converted by the holder of the convertible note into
the private placement of convertible notes totaling $2,270,000 completed by the Company on August 29, 2008. The full amount of the discount originally allocated, $162,352, was only partially amortized in the amount of $40,588 due to the
premature conversion of the convertible note.



|NOTE 9: | FAIR VALUE MEASUREMENT
|------- | ----------------------

A summary of the fair value of assets and
liabilities measured at fair value on a recurring basis follows:



|                             |  |         |           |                                                                    |   |          
|---------------------------- |  | ------- | --------- | ------------------------------------------------------------------ | - | ---------
|                             |  | 3/31/09 |           | Quoted prices in active marketsfor identical
liabilities (Level 1)
|Derivatives:                 |  |         |           |                                                                    |   |          
|Conversion feature liability |  | $       | 610,040   |                                                                    | $ | 610,040  
|Warrant liability            |  |         | 1,571,318 |                                                                    |   | 1,571,318
|                             |  |         |           |                                                                    |   |          
|Total of Derivatives         |  | $       | 2,181,358 |                                                                    | $ | 2,181,358
|                             |  |         |           |                                                                    |   |          

The Income approach was used as a valuation technique.



|                                                                                                                                                                                            |  |                                              |           |                |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | --------- | -------------- | - | -------
|                                                                                                                                                                                            |  | Other IncomeFor the three month period ended
|                                                                                                                                                                                            |  | March 31, 2009                               |           | March 31, 2008
|The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains
relating to assets still held at the reporting date |  | $                                            | 1,714,074 |                | $ | 272,553
|                                                                                                                                                                                            |  |                                              |           |                |   |        
|                                                                                                                                                                                            |  |                                             
|Total gains included in earnings                                                                                                                                                            |  | $                                            | 1,714,074 |                | $ | 272,553
|                                                                                                                                                                                            |  |                                              |           |                |   |        



16



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



|NOTE 10: | COMMITMENTS AND CONTINGENCIES
|-------- | -----------------------------

The
Company currently leases office space under an operating lease. The minimum future lease payments required under the Companys operating leases at March 31, 2009 are as follows:



|      |  |   |          
|----- |  | - | ---------
|2009  |  | $ | 338,656  
|2010  |  |   | 463,471  
|2011  |  |   | 248,100  
|2012  |  |   | -0-      
|2013  |  |   | -0-      
|      |  |   |          
|Total |  | $ | 1,050,227
|      |  |   |          

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. Rent expense was $138,587 and $126,395 for the three month periods ended March 31, 2009 and March 31, 2008, respectively.

The Companys corporate office lease expires in July 2011.

PATENT LITIGATION SETTLEMENT

On
April 9, 2009, we entered into a Settlement and License Agreement with DataSci, LLC (DataSci) which relates to a lawsuit filed on June 18, 2008 in the United States District Court for the District of Maryland by DataSci against
OmniComm alleging infringement of a U.S. Patent No. 6,496,827 B2 entitled Methods and Apparatus for the Centralized Collection and Validation of Geographically Distributed Clinical Study Data with Verification of Input Data to the
Distributed System (Licensed Patent) claimed to be owned by DataSci. Pursuant to the agreement, the parties entered into a Stipulated Order of Dismissal of the lawsuit filed by DataSci and DataSci granted us a worldwide,
non-exclusive non-transferable right and license under the Licensed Patent the subject of the claim and the right to sublicense TrialMaster on a technology Transfer and Technology Transition basis. The license expressly excludes the right to make,
use, sell, import, market, distribute, oversee the operation of, or service systems covered by a claim (if any) of the Licensed Patent to the extent such systems are used for creating and managing source documentation and conducting remote data
validation in clinical trial studies using a tablet PC with stylus, touch screen device, digitizing tablet, digitizer pen, or similar mobile processing device (Digitizing Device), wherein the source documentation is electronic and is
completed using a Digitizing Device. Under the terms of the license, we are obligated to pay royalties quarterly for sales of Licensed Products, as defined therein, from January 1, 2009 until the expiration of the Licensed Patent equal to two
percent (2%) of OmniComms annual Gross Revenues or, alternatively, the annual minimum royalty payment(s), whichever is greater. The annual minimum royalty payments per year are as follows:



|          |  |   |          
|--------- |  | - | ---------
|2009      |  | $ | 255,392  
|2010      |  |   | 500,000  
|2011      |  |   | 300,000  
|2012      |  |   | 450,000  
|2013      |  |   | 450,000  
|2014-2017 |  |   | 1,800,000
|          |  |   |          
|Total     |  | $ | 3,755,392
|          |  |   |          



17



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



During the three month period ended March 31, 2009 the Company recorded a charge to earnings in
the amount of $54,178 which amount represents (1) the amount of additional license expense incurred above the stipulated minimum in the DataSci License Agreement during the three month period ended March 31, 2009 and (2) the accretion
of the difference between the total stipulated annual minimum royalty payments and the recorded present value accrual of the annual minimum royalty payments



|         |  |                           
|-------- |  | --------------------------
|NOTE 11: |  | RELATED PARTY TRANSACTIONS

Guus van Kesteren, a member of our Board of Directors, is a consultant to Noesis Capital Corp.
Noesis Capital Corp. has acted as a placement agent for the sale of our securities in various offerings since 1999.

In December 2008, the
Company issued a promissory note for $197,500 that included $112,500 in accrued expenses associated with financial services provided by Noesis Capital Corp., the Companys Placement Agent for several equity and debt transactions since 1999. The
amount was borrowed under a promissory note bearing interest at 9% per annum payable with a maturity date of January 31, 2011. Included in the principal amount due under this promissory note is $85,000 that was originally owed under a
$185,000 principal amount promissory note with a maturity date of January 1, 2009. The remaining $100,000 in principal amount owed was converted into a Convertible Note dated December 16, 2008. The Company repaid $60,000 in principal on
this promissory note during the quarter ended March 31, 2009.

We incurred $4,151 in interest expense on a note payable to Noesis Capital
Corp., the Placement Agent for the Company during the quarter ended March 31, 2008 and $3,895 for the three month period ended March 31, 2009.

On February 29, 2008, we sold an aggregate of $2,325,000 principal amount 10% Secured Convertible Debentures and common stock purchase warrants to purchase an aggregate of 2,930,675 shares of our common stock to 12 accredited
investors. As part of the transaction Cornelis Wit, Chief Executive Officer and Director, Guus van Kesteren, Director, Ronald T. Linares, Chief Financial Officer, and Atlantic Balanced Fund, a fund managed by Mentor Capital of which Fernando
Montero, a director of OmniComm, is president, director and sole shareholder, purchased $150,000, $150,000, $25,000 and $200,000, respectively, principal amount of debentures and received 189,076, 189,076, 31,513 and 252,101 warrants, respectively.
Interest expense incurred and payable to Directors and Officers of the Company in connection with the Secured Convertible Debenture totaled $42,000 through December 31, 2008. The Debentures matured originally on August 29, 2008. On
August 29 2008, the Company repaid $1,000,000 of the Debentures. The remaining $1,325,000 in principal was extended pursuant to an Extension Agreement that included: an extension of the maturity date to December 1, 2008; reduced the
conversion price of the Debenture from $0.595 per share to $0.50 per share; reduced the exercise price of the warrants attached to the Debenture from $0.75 per share to $0.60 per share; and resulted in the issuance of 2,650,000 warrants to the
investors agreeing to the extension of the Debentures including warrants to our officers and directors as follows: Cornelis F. Wit, 300,000 warrants, Guus van Kesteren, 300,000 warrants, Ronald T. Linares, 50,000 warrants and .Atlantic Balanced
Fund, 400,000 warrants.



18



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



As of December 31, 2008, we have an aggregate of $6,120,000 principal amount of convertible
debentures and promissory notes outstanding to Cornelis Wit, our Chief Executive Officer and a director, and have issued certain warrants to Mr. Wit, as follows:



| |  |  | On February 14, 2008, $150,000 principal amount promissory note. This note was convertible at the option of the holder into any New Securities we issue before
maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 10% per annum and was due on December 31, 2009. On December 16, 2008 Mr. Wit
agreed to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on December 16, 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 10, 2008, $210,000 principal amount Convertible Note and common stock purchase warrants (the Warrants) to purchase an aggregate of 264,706
shares of our common stock. We received net proceeds of $210,000. This note was convertible at the option of the holder into any securities we issue (New Securities) before maturity of the Convertible Debenture on the same terms and
conditions of the sale of the New Securities. This Convertible Debenture, which carried an interest rate of 10% per annum, was due on June 10, 2009. On August 29, 2008 Mr. Wit agreed to convert this Convertible Debenture into a
private placement of Convertible Debentures that expire on August 29, 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 10, 2008, $300,000 principal amount Convertible Note. This note was convertible at the option of the holder into any New Securities we issue before
maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 10% per annum and was due on June 30, 2010. On August 29, 2008 Mr. Wit agreed
to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on August 29, 2010.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 27, 2008, $300,000 principal amount Convertible Note. This note is convertible at the option of the holder into any New Securities we issue before
maturity of this Convertible Note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 10% per annum and was due on June 30, 2010. This note was repaid on July 8, 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During August 2008, $1,260,000 principal amount Convertible Note that is part of a private placement of Convertible Debentures that expire on August 29, 2010.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On September 17, 2008, $150,000 principal amount Convertible Note. This note was convertible at the option of the holder into any New Securities we issue
before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 16, 2008
Mr. Wit agreed to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on December 16, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



| |  |  | On September 29, 2008, $400,000 principal amount Convertible Note. This note was convertible at the option of the holder into any New Securities we issue
before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 16, 2008
Mr. Wit agreed to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on December 16, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On October 17, 2008, $1,000,000 principal amount Convertible Note. This note was convertible at the option of the holder into any New Securities we issue
before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 16, 2008
Mr. Wit agreed to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on December 16, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On November 17, 2008, $1,450,000 principal amount Convertible Note. This note was convertible at the option of the holder into any New Securities we issue
before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 16, 2008
Mr. Wit agreed to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on December 16, 2010.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 8, 2008, $1,200,000 principal amount Convertible Note. This note was convertible at the option of the holder into any New Securities we issue
before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This Convertible Note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 16, 2008
Mr. Wit agreed to convert this Convertible Note into a private placement of Convertible Debentures, which Convertible Debentures are due on December 16, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On August 29, 2008, we sold, $2,270,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants
(the Convertible Note Warrants) to purchase an aggregate of 4,540,000 shares of our common stock to four accredited investors including Mr. Wit our Chief Executive Officer as discussed above, and one of our Directors. The
Convertible Notes bear interest at 10% and are due on August 29, 2010. As part of the transaction Cornelis Wit, Chief Executive Officer and Director and Guus van Kesteren, Director, purchased $1,770,000 and $150,000, respectively, principal
amount of notes, which are convertible into 3,540,000 shares and 300,000 shares, respectively, and received 3,540,000 and 300,000 warrants, respectively. Interest expense incurred and payable to Directors and Officers of the Company in connection
with the Convertible Note totaled $65,753 through December 31, 2008.

On December 16, 2008, we sold, $5,075,000 principal amount
Convertible Debentures (the Convertible Debentures) and common stock purchase warrants (the Convertible Debenture Warrants) to purchase an aggregate of 10,150,000 shares of our common stock to eleven accredited investors
including Mr. Wit our Chief Executive Officer, as discussed above,



20



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



and Mr. Smith our Chairman and Chief Technology Officer, Mr. Johnson our Chief Operating Officer, Mr. Linares our Chief Financial Officer and
two members of our Board of Directors, Mr. Veatch and Mr. van Kesteren. The Convertible Debentures bear interest at 12% and are due on December 16, 2010. As part of the transaction Cornelis Wit, Chief Executive Officer and Director
and Guus van Kesteren, Director, purchased $4,350,000 and $160,000, respectively, principal amount of Debentures, which are convertible into 8,700,000 shares and 320,000 shares, respectively, and received 8,700,000 and 320,000 warrants,
respectively. As a result, Mr. Wit and Mr. van Kesteren are considered to be beneficial owners of approximately 30% and 5%, respectively, of our issued and outstanding and issuable upon conversion shares of common stock. Noesis Capital
Corp. placement agent for the sale of our securities in various offerings since 1999 converted $100,000 in promissory notes and received 200,000 warrants to purchase common stock of the Company. Atlantic Balanced Fund, a fund managed by Mentor
Capital of which Fernando Montero, a director of OmniComm, is president, director and sole shareholder, converted $200,000 that was originally invested into a round of financing of Secured Convertible Debentures in February 2008 and received 400,000
warrants to purchase common stock of the Company. Mr. Montero is considered to be the beneficial owner of approximately 10% of our issued and outstanding and issuable upon conversion shares of our common stock. Additionally the following
officers and directors invested in the Convertible Debentures: Mr. Smith $5,000, Mr. Johnson, $25,000, Mr. Veatch $15,000 and Mr. Linares $125,000. The officers and directors received 10,000, 50,000, 30,000 and 250,000 warrants
to purchase shares of our common stock, respectively Interest expense incurred and payable to Directors and Officers of the Company in connection with the Convertible Note totaled $26,196 through December 31, 2008.

During the three month period ended March 31, 2009, the Company issued 141,032 shares of common stock to our Chairman and Chief Technology Officer
Randall G. Smith. The share were valued at $0.30 per share and were issued in lieu of salary for the three month period ended March 31, 2009.

During the three month period ended March 31, 2009 we have incurred $198,591 in interest expense payable to related parties and $4,603 for the three month period ended March 31, 2008.



|NOTE 12: STOCKHOLDERS | EQUITY (DEFICIT)
|---------------------- | ----------------

Our authorized capital
stock 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 5% Series A Preferred, 230,000 shares have been
designated as Series B Preferred Stock and 747,500 shares have been designated as Series C Preferred Stock.

As of March 31, 2009 we
had the following outstanding securities:



| |  |  | 76,720,982 shares of common stock issued and outstanding;
| | - |  | ---------------------------------------------------------



| |  |  | 22,717,757 warrants issued and outstanding to purchase shares of our common stock;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | 4,125,224 shares of our Series A Preferred Stock issued and outstanding,
| | - |  | ------------------------------------------------------------------------



| |  |  | -0- shares of our Series B Preferred Stock issued and outstanding;
| | - |  | ------------------------------------------------------------------



| |  |  | -0- shares of our Series C Preferred Stock issued and outstanding;
| | - |  | ------------------------------------------------------------------



| |  |  | 12% Convertible Debentures; and
| | - |  | -------------------------------



| |  |  | 10% Convertible Notes.
| | - |  | ----------------------



21



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



Common Stock

Holders of common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of our voting securities do not
have cumulative voting rights. Holders of common stock are entitled to share in all dividends that the Board of Directors, in its discretion, declares from legally available funds. In the event of our liquidation, dissolution or winding up, subject
to the preferences of the Series A Preferred Stockholders, Series B Preferred Stock holders and Series C Preferred Stockholders, each outstanding share of common stock entitles its holder to participate in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having preference over the common stock.

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.

Warrants

We have issued and outstanding warrants to purchase a total of 22,717,757 shares of our common stock,
including:



| |  |  | warrants to purchase 393,000 shares of our common stock at an exercise price of $.25 per share expiring May 2009 which were issued by us in connection with the
Series C Preferred Stock offering, which warrants contain a cashless exercise provision. The holders of the warrants were granted certain mandatory and piggy-back registration rights covering the shares of our common stock issuable upon the exercise
of the warrants.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | warrants to purchase 328,400 shares of our common stock at an exercise price of $.25 per share expiring on dates ranging from May 2009 to September 2010 which were
issued by us to the placement agent of two offerings of our common stock that were conducted during 2003.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | warrants to purchase 270,000 shares of our common stock at an exercise price of $.25 per share expiring December 2009 which were issued by us in connection with a
private placement of common stock that occurred during 2004, which warrants contain a cashless exercise provision and piggyback registration rights.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 185,356 shares of our common stock at an exercise price of $0.50 per share expiring in March 2014 which were issued in connection with a
private placement of common stock that was conducted in 2007.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 100,707 shares of our common stock at an exercise price of $0.50 per share expiring in December 2012 which were issued in connection with a
private placement of common stock that was conducted in 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 222,458 shares of our common stock at an exercise price of $0.60 per share expiring in February 2012 which were issued by us to the placement
agent of an offering of our Secured Convertible Debentures in February 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 264,706 shares of our common stock at an exercise price of $0.60 per share expiring in June 2012 which were by us in connection with a private
placement of our Convertible Notes in June 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 3,563,130 shares of our common stock at an exercise price of $0.60 per share expiring in February 2012 which were issued by us in connection
with a private placement of our Secured Convertible Debentures in February 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 2,650,000 shares of our common stock at an exercise price of $0.60 per share expiring in August 2012 which were issued by us in connection with
an extension of Secured Convertible Debentures which occurred in August 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



22



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



| |  |  | Warrants to purchase 4,540,000 shares of our common stock at an exercise price of $0.60 per share expiring in August 2012 which were issued by us in connection with
a private placement of our Convertible Debentures in August 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 10,200,000 shares of our common stock at an exercise price of $0.60 per share expiring in December 2012 which were issued by us in connection
with a private placement of our Secured Convertible Debentures in December 2008.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10% Convertible Notes

From February 1999 to May 1999, we issued 10% convertible notes (10% Convertible Notes) in the aggregate principal amount of
$862,500. The 10% Convertible Notes pay 10% interest and were due and payable on June 2004. The holders have the right to convert the principal and interest amount into shares of our common stock at a rate of $1.25 per share. From 2000 to 2007,
certain of the note holders converted an aggregate of $775,000 principal amount of the notes according to their terms into 1,456,638 shares of our common stock. In addition, the holders of the 10% Convertible Notes were granted certain demand and
piggy-back registration rights for the shares of our common stock issuable upon the conversion of the 10% Convertible Notes.

Secured
Convertible Debentures

On February 29, 2008, we sold an aggregate of $2,325,000 principal amount 10% Secured Convertible
Debentures (the Debentures) and common stock purchase warrants (the Warrants) to purchase an aggregate of 2,930,675 shares of our common stock exercisable at a price of $0.75 per share for four years subsequent to the closing
of the transaction to 12 accredited investors. After paying certain fees and expenses of $181,280 in the aggregate (including payment to Emerging Growth Equities, Ltd., a broker dealer and member of FINRA who acted as the placement agent for this
offering, of a commission and expense reimbursement aggregating $143,750), we received net proceeds of $2,156,220. We recorded debt acquisition costs of $261,365. The Debentures, which bear interest at 10% per annum, were due 6 months from
their issuance date. The Debentures were convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.595 per share.

On August 29, 2008 the Company repaid $1,000,000 of the Debentures. The remaining $1,325,000 was extended pursuant to an Extension Agreement (the
Extension). The maturity date was changed to December 1, 2008. The Debentures continued to bear interest at a rate of 10% per annum. In accordance with the Extension the conversion price of the Debentures was changed from $0.595 per
share to $0.50 per share. Additionally, the exercise price on the Warrants was lowered from $0.75 per share to $0.60 per share. In conjunction with the lowering of the exercise price and the Extension the investors received an additional 3,282,455
warrants to purchase shares of our common stock at an exercise price of $0.60 per share for a period of four years after their extension. On December 1, 2008 the Company repaid $500,000 of the Debentures. Four investors agreed to convert the
principal amounts due under the Debentures into a round of financing that was consummated on December 16, 2008. The principal amount converted by these four investors was $525,000. The remaining six investors agreed to extend the maturity date
of their Debentures to January 31, 2009. The principal amount extended to January 31, 2009 was $300,000. The Debentures will bear interest at a rate of 12% per annum until their January 31, 2009 maturity date. The six investors
received an additional 50,000 warrants to purchase shares of our common stock at an exercise price of $0.60 per share for a period of four years after their extension.



23



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)



Convertible Debentures

On August 29, 2008, we sold, $2,270,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants
(the Convertible Note Warrants) to purchase an aggregate of 4,540,000 shares of our common stock at an exercise price of $0.60 per share before August 31, 2012 to four accredited investors including our Chief Executive Officer and
one of our Directors. We received net proceeds of $2,270,000. The Convertible Notes, which bear interest at 10% per annum, are due on August 29, 2010. The Convertible Notes are convertible at any time at the option of the holder into
shares of our common stock based upon a conversion rate of $0.50 per share

On December 16, 2008, we sold, $5,075,000 principal amount
Convertible Notes (the Convertible Notes) and common stock purchase warrants (the Convertible Note Warrants) to purchase an aggregate of 10,150,000 shares of our common stock at an exercise price of $0.60 per share before
August 31, 2012 to eleven accredited investors including our Chief Executive Officer, Chief Operating Officer, Chief Technology Officer, Chief Financial Officer and four of our Directors. We received net proceeds of $5,075,000. The Convertible
Notes, which bear interest at 12% per annum, are due on December 16, 2010. The Convertible Notes are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share.

Other Comprehensive Gain (Loss)

Due to the availability of net operating losses and related deferred tax valuations, there is no tax effect associated with any component of other comprehensive gain (loss). The following table lists the beginning
balance, yearly activity and ending balance of the components of accumulated other comprehensive gain (loss).



|                          |  |                            |        |   |                                           |   |        |  
|------------------------- |  | -------------------------- | ------ | - | ----------------------------------------- | - | ------ | -
|                          |  | ForeignCurrencyTranslation |        |   | Accumulated OtherComprehensiveGain (Loss) |  
|Balance December 31, 2007 |  | $                          | 7,957  |   |                                           | $ | 7,957  |  
|2008 Activity             |  |                            | (6,968 | ) |                                           |   | (6,968 | )
|                          |  |                            |        |   |                                           |   |        |  
|Balance December 31, 2008 |  |                            | 989    |   |                                           |   | 989    |  
|2009 Activity             |  |                            | 2,232  |   |                                           |   | 2,232  |  
|                          |  |                            |        |   |                                           |   |        |  
|Balance March 31, 2009    |  | $                          | 3,221  |   |                                           | $ | 3,221  |  
|                          |  |                            |        |   |                                           |   |        |  



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

General

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

Forward-Looking Statements

Statements contained in this Form 10-Q 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, contained in this Form 10-Q 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-Q. 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 Electronic Data Capture (EDC) solutions and related value-added services to pharmaceutical and
biotechnology companies, Clinical Research Organizations (CRO), and other clinical trial sponsors via our Web-based software, TrialMaster. 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. All of our personnel are involved in the development, marketing or provide support services for customers of
TrialMaster and its related products and services.

During fiscal 2009 we will seek to build and expand on our strategic efforts. The primary focus of our
strategy includes:



| |  |  | Stimulating demand by providing clinical trial Sponsors with high value eClinical applications and services;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | Emphasizing low operating costs;
| | - |  | --------------------------------



| |  |  | Continued emphasis on expanding our business model by offering our software solution, TrialMaster, on a licensed basis in addition to our existing hosted-services
solutions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Broadening our eClinical suite of services and software applications on an organic R & D basis, and on a selective basis via the acquisition or licensing of
complementary solutions;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding our business development efforts in Europe to capitalize on our operational and clinical capabilities vis-à-vis our competition in that geographic
market;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Providing EDC services to small and midsize Pharma, Bio-Tech, Medical Device Companies and CROs (Clinical Research Organizations); and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Differentiation through service.
| | - |  | --------------------------------

According to a
2008 EvaluatePharma report, global R & D expenditures by the pharmaceutical and BioTech industries were approximately $120 billion in 2008, with approximately 50% of that amount spent by North American-based pharmaceutical,



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biotechnology and medical device companies. A 2007 report by Health Industry Insights states that by the end of 2007, approximately 45% of all new Phase
I-III studies were initiated using EDC. The report also states that the total addressable market for EDC and eClinical services is expected to grow from approximately $600MM currently to $1.8B in 2010. Our operating focus is first to increase our
sales and marketing capabilities and penetration rate and secondly, to continue developing and improving TrialMaster to ensure our services and products remain an attractive, high-value EDC choice. During early 2009 we have increased our marketing
and sales personnel both in the U.S. and European markets and will look to aggressively expand the scope of our CRO Preferred Program in order to increase our penetration of the domestic CRO market. Additionally, we believe we have established an
effective presence in the European clinical trial market and will seek to aggressively expand the scope of our sales and marketing operations there.

Our
ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through TrialMaster. Our R & D efforts are focused on developing new, complementary software solutions,
as well as enhancing our existing software solutions through the addition of increased functionality. During fiscal 2008, we spent approximately $897,000, on R & D activities and have spent approximately $239,000 during the first fiscal quarter
of 2009. We spent approximately $211,000 on R & D activities during the first fiscal quarter of 2008. The majority of these expenses represent salaries to our developers which include costs associated with customization of the
TrialMaster software for our clients projects.



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##### Table of Contents

The Three-Month period-ended March 31, 2009 Compared With the Three-Month period ended March 31, 2008

Results of Operations

A summarized version of
our results of operations for the first quarter ended March 31, 2009 and March 31, 2008 is included in the table below.

Summarized Statement of Operations



|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|----------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------ | ----- | - | ---- | - | ---------- | ------------ |  | ------ | ------- |  | - | --------- | - |  | ------ | -
|                                                      |  | For the quarters ended March 31, |            |   |              |       |   |      |  
|                                                      |  | 2009                             |            |   | % ofRevenues |       |   | 2008 |   |            | % ofRevenues |  |        | $Change |  |   | %Change   |  
|Total revenues                                        |  | $                                | 2,416,657  |   |              |       |   |      | $ | 1,012,044  |              |  |        |         |  | $ | 1,404,613 |   |  | 138.8  | %
|                                                      |  |                                  |            |   |              |      
|Cost of sales                                         |  |                                  | 494,820    |   |              | 20.5  | % |      |   | 318,566    |              |  | 31.5   | %       |  |   | 176,254   |   |  | 55.3   | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Gross margin                                          |  |                                  | 1,921,837  |   |              | 79.5  | % |      |   | 693,478    |              |  | 68.5   | %       |  |   | 1,228,359 |   |  | 177.1  | %
|                                                      |  |                                  |            |   |              |      
|Salaries, benefits and related taxes                  |  |                                  | 2,191,509  |   |              | 90.7  | % |      |   | 2,136,415  |              |  | 211.1  | %       |  |   | 55,094    |   |  | 2.6    | %
|Rent                                                  |  |                                  | 138,587    |   |              | 5.7   | % |      |   | 126,395    |              |  | 12.5   | %       |  |   | 12,192    |   |  | 9.6    | %
|Consulting                                            |  |                                  | 38,709     |   |              | 1.6   | % |      |   | 123,665    |              |  | 12.2   | %       |  |   | (84,956   | ) |  | -68.7  | %
|Legal and professional fees                           |  |                                  | 112,663    |   |              | 4.7   | % |      |   | 56,898     |              |  | 5.6    | %       |  |   | 55,765    |   |  | 98.0   | %
|Selling, general and administrative                   |  |                                  | 248,198    |   |              | 10.3  | % |      |   | 122,827    |              |  | 12.1   | %       |  |   | 125,371   |   |  | 102.1  | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|Total Operating Expenses                              |  |                                  | 2,894,122  |   |              | 119.8 | % |      |   | 2,789,603  |              |  | 275.6  | %       |  |   | 104,519   |   |  | 3.7    | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Operating income (loss)                               |  |                                  | (972,285   | ) |              | -40.2 | % |      |   | (2,096,125 | )            |  | -207.1 | %       |  |   | 1,123,840 |   |  | -53.6  | %
|                                                      |  |                                  |            |   |              |      
|Interest Expense                                      |  |                                  | (648,589   | ) |              | -26.8 | % |      |   | (304,057   | )            |  | -30.0  | %       |  |   | (344,532  | ) |  | 113.3  | %
|Interest income                                       |  |                                  | 3,461      |   |              | 0.1   | % |      |   | 5,339      |              |  | 0.5    | %       |  |   | (1,878    | ) |  | -35.2  | %
|Unrealized Gain on Derivatives                        |  |                                  | 1,714,074  |   |              | 70.9  | % |      |   | 272,553    |              |  | 26.9   | %       |  |   | 1,441,521 |   |  | 528.9  | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Net income (loss)                                     |  |                                  | 97,093     |   |              | 4.0   | % |      |   | (2,122,290 | )            |  | -209.7 | %       |  |   | 2,219,383 |   |  | -104.6 | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|Total preferred stock dividends                       |  |                                  | (49,531    | ) |              | -2.0  | % |      |   | (126,955   | )            |  | -12.5  | %       |  |   | 77,424    |   |  | -61.0  | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Net income (loss) attributable to common stockholders |  | $                                | 47,562     |   |              | 2.0   | % |      | $ | (2,249,245 | )            |  | -222.2 | %       |  | $ | 2,296,807 |   |  | -102.1 | %
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|Net income (loss) per share                           |  | $                                | 0.00       |   |              |       |   |      | $ | (0.04      | )            |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Weighted average number of shares outstanding         |  |                                  | 76,581,518 |   |              |       |   |      |   | 59,294,171 |              |  |        |         |  |   |           |   |  |        |  
|                                                      |  |                                  |            |   |              |       |   |      |   |            |              |  |        |         |  |   |           |   |  |        |  



27



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Results of Operations

Revenues for the three-month period ended March 31, 2009 were $2,416,657 compared to $1,012,044 for the three-month period ended March 31, 2008, an increase of 138.8%. Industry acceptance of EDC continues to increase. Industry
estimates from Health Industry Insights are that EDC was a $500 million market in 2008, with an annualized 15% growth rate for the next three-to-five years. TrialMaster is currently sold primarily 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. As we continue developing
TrialMaster and our client relationships mature we expect some of our clients to deploy TrialMaster on a licensed, rather than ASP hosted basis. TrialMaster contracts provide for pricing that is based on both the size and duration of the clinical
trial. Size parameters include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. 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. During the three-month period ended March 31, 2008 approximately 63.6% of revenues were generated by trial setup activities, 29.1%
were generated from on-going maintenance fees and approximately 7.3% was generated from fees charged for changes to on-going clinical trial engagements. During the three-month period ended March 31, 2009 we generated 52.5% of revenues from
setup fees, 16.7% from on-going maintenance fees, 17.9% of revenues from licensing TrialMaster, 7.0% of revenues from consulting and professional services and 5.9% of revenues from project change orders. Generally, these contracts will range in
duration from one month 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. 104 Revenue Recognition 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.

Our top five customers accounted for approximately 40% of our revenues during the three-month period ended March 31, 2008 and approximately 62% of our revenues
during the three-month period ended March 31, 2009. One customer accounted for 11% and another accounted for 10% of our revenues during three-month period ended March 31, 2008. One customer accounted individually for 24% of our revenues
during three-month period ended March 31, 2009 and another for 20% of revenues during that period. The loss of any of these contracts or these customers in the future could adversely affect our results of operations.

Cost of goods sold increased to $494,820 for the three-month period ended March 31, 2009 from $318,566 for the three-month period ended March 31, 2008, an
increase of 55.3%. Cost of goods sold were approximately 31.5% of sales for the three-month period ended March 31, 2008 compared to 20.5% for the three-month period ended March 31, 2009. Cost of goods sold relates primarily to salaries and
related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Cost of goods sold increased during the three-month period ended March 31, 2009 due to an increase of
approximately $31,000 for costs associated with delivery of training and implementation of TrialMaster, an increase of $19,000 in costs associated with third-party services associated with the delivery of our application to customers and the
addition of four additional programmers and two additional quality analysts as part of our clinical trial operations. Additionally, although our experience to-date in licensing and deploying TrialMaster on a technology transfer basis has been
limited, we expect our cost of goods sold related to these types of engagements to approximate 25% of revenues associated with those engagements.

We
expect to increase development programming labor costs on an absolute basis as our trial revenues increase. We expect our cost of goods sold to approximate 25% of sales during fiscal 2009. We expect to continue to increase follow-on engagements from
existing clients and expect to increase the phase I and CRO portions of our client base. TrialMaster, (V4.0) increased the efficiency of our trial building operations by approximately 20% through the use of additional automated tools, the ability to
use our library of pre-existing CRFs and through the use of our drag and drop clinical trial building tool.

Salaries and related expenses are
our biggest expense at 76.6% of total Operating Expenses for the three-month period ended March 31, 2008 and 75.7% of total Operating Expenses for the three-month period ended March 31, 2009 . Salaries and related



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expenses totaled $2,136,415 for the three-month period ended March 31, 2008 compared to $2,191,509 for the three-month period ended March 31, 2009,
an increase of 2.6%. We currently employ approximately 49 employees out of our Ft. Lauderdale, Florida corporate office, 12 out-of-state employees and 14 employees out of a wholly-owned subsidiary in Bonn, Germany. We have selectively added and
expect to continue to selectively add experienced sales and marketing personnel in fiscal 2009 in an effort to increase our market penetration, particularly in Europe, and to continue broadening our client base domestically. During the three-month
period ended March 31, 2008 and three-month period ended March 31, 2009 we incurred $326,207 and $214,415, respectively, in salary expense in connection with our adoption of SFAS No. 123(R), Share-Based Payment, which establishes
standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on
the grant-date fair value of the award. We expect that the adoption of SFAS 123R will continue to have an impact on our results of operations in the future.

Rent and related expenses increased by $12,192 during the three-month period ended March 31, 2009 when compared to the three-month period ended March 31, 2008. We expanded our corporate office lease that runs through July 2011 to
include a total of approximately 10,000 square feet. We established a disaster recovery site at a Cincinnati Bell owned Co-Location facility in Cincinnati, Ohio and will continue utilizing this facility for the foreseeable future since it is
designed to ensure 100% production system up-time and to provide system redundancy. We lease co-location and disaster recovery space and services from Gold Coast 1-Vault in the Ft. Lauderdale, Florida area. This facility provides us with disaster
recovery and business continuity services for our operations. This lease expires in August 2011. We currently lease office space in Bonn, Germany for our European subsidiary, OmniComm Europe, GmbH. That lease expires in December 2010.

Consulting services expense was $38,709 for the three-month period ended March 31, 2009 compared with $123,665 for the three-month period ended March 31, 2008.
Consulting services were comprised of fees paid to consultants for help with developing our computer applications and for fees incurred as part of our employee recruiting programs.

Legal and professional fees totaled $56,898 for the three-month period ended March 31, 2008 compared with $112,663 for the three-month period ended March 31, 2009, an increase of approximately $55,765.
Professional fees include fees paid to our auditors for services rendered on a quarterly and annual basis in connection with our SEC filings and fees paid to our attorneys in connection with representation in matters involving litigation or for
services rendered to us related to securities and SEC related matters. During three-month period ended March 31, 2009, we spent approximately $29,700 on legal fees associated with our defense in an alleged patent infringement lawsuit compared
with $0 during the three-month period ended March 31, 2008. That lawsuit was settled in April 2009. Because of the lawsuit settlement the Company does not expect to incur any ongoing fees associated with the matter.

Selling, general and administrative expenses (SGA) were $122,827 for the three-month period ended March 31, 2008 compared to $248,198 for the
three-month period ended March 31, 2009, an increase of 102.1%. SGA expenses relate primarily to costs incurred in running our offices in Fort Lauderdale and Bonn, Germany on a day-to-day basis 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. The Company decreased its marketing, sales
and advertising expenditures by $23,563 from $43,864 for the three-month period ended March 31, 2008 to $20,301 for the three-month period ended March 31, 2009, a decrease of approximately 53.7%. We expect SGA, and more specifically sales
and marketing expenses, to increase as we intensify and extend our selling and marketing efforts during the second half of fiscal 2009. We have budgeted approximately $400,000 for marketing expenditures for the balance of 2009. Our SGA expenses are
typically directly tied to the level of industry conference participation we experience. Our volume and level of industry conferences and general sales and marketing expenses are expected to increase during the second and third quarters of fiscal
2009. Included in SGA for the first quarter of fiscal 2009 is $54,177 in expense pertaining to our patent license with Data Sci, LLC.

Interest expense was
$648,589 during the three-month period ended March 31, 2009 compared to $304,057 for the three-month period ended March 31, 2008, an increase of $344,532. Interest incurred to related parties was $198,591 during the three-month period
ended March 31, 2009 and $8,754 for the three-month period ended March 31, 2008. The increase in interest expense can be



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attributed to debt financings that were completed during fiscal 2008. Included in interest expense for both periods is the accretion of discounts recorded
related to financial instrument derivatives that were deemed a part of those financings. The table below provides detail on the amounts of interest attributed to each of the financings.



|                                         |  |                       |         |                       |   |                     |  |   |        
|---------------------------------------- |  | --------------------- | ------- | --------------------- | - | ------------------- |  | - | -------
|Debt Description                         |  | 2009 Interest Expense |         | 2008 Interest Expense |   | Change 2009 vs.2008
|Accretion of Discount from Derivatives   |  | $                     | 431,248 |                       | $ | 274,833             |  | $ | 156,415
|Feb. 2008 Secured Convertible Debentures |  |                       | 0       |                       |   | 20,384              |  |   | -20,384
|August 2008 Convertible Notes            |  |                       | 55,973  |                       |   | 0                   |  |   | 55,973 
|December 2008 Convertible Notes          |  |                       | 150,165 |                       |   | 0                   |  |   | 150,165
|                                         |  |                       |         |                       |   |                     |  |   |        
|Total                                    |  | $                     | 637,386 |                       | $ | 295,217             |  | $ | 342,169
|                                         |  |                       |         |                       |   |                     |  |   |        

We evaluate the cost of capital available to us in combination with our overall capital structure and the
prevailing market conditions in deciding what financing best fulfills our short and long-term capital needs. Given the difficult overall economic climate and in particular the difficulties micro-cap firms have experienced in obtaining financing, we
believe the structure and terms of the transactions we entered into during 2008 were obtained at the best terms available to the Company. During the three-month period ended March 31, 2008 we issued $2,325,000 in Secured Convertible Debt,
including $525,000 to members of our Board of Directors and Officers of the Company. During the three-month period ended March 31, 2009, we did not enter into any capital raising transactions.

We recorded unrealized gains on derivative liabilities associated with the issuance of convertible debt that occurred during fiscal 2008. We recorded an unrealized gain
of $1,714,074 during the three-month period ended March 31, 2009 compared with an unrealized gain of $272,553 during the three-month period ended March 31, 2008. The unrealized gains can be attributed to fair value calculations undertaken
periodically on the warrant and conversion feature liabilities (discounts) recorded by us at the time the convertible debt was issued. Accordingly the warrant and conversion feature liabilities are increased or decreased based on the fair value
calculations made at each balance sheet date.

There were arrearages of $49,957 in 5% Series A Preferred Stock dividends, $9,753 in Series B Preferred
Stock dividends and $67,245 in Series C Preferred Stock dividends for the three-month period ended March 31, 2008, compared with arrearages of $49,531 in 5% Series A Preferred Stock dividends for the three-month period ended March 31,
2009. We deducted $126,955 and $49,531 from Net Income (Loss) Attributable to Common Stockholders for the three-month periods ended March 31, 2008 and March 31, 2009, respectively, relating to undeclared Series A, B and C Convertible
Preferred Stock dividends.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. We have historically experienced negative cash flows and have relied 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.

The table provided below summarizes key measures of our liquidity and capital resources:

Liquidity and Capital Resources



|                                                            |  |               |   |  |                  |   |  |            |  
|----------------------------------------------------------- |  | ------------- | - |  | ---------------- | - |  | ---------- | -
|                                                            |  | March 31,2009 |   |  | December 31,2008 |   |  | Change     |  
|Cash                                                        |  | 2,060,874     |   |  | 2,035,818        |   |  | 25,056     |  
|                                                            |  |               |  
|Accounts Receivable, net of allowance for doubtful accounts |  | 1,207,341     |   |  | 2,607,893        |   |  | (1,400,552 | )
|                                                            |  |               |  
|Current Assets                                              |  | 3,360,076     |   |  | 4,742,273        |   |  | (1,382,197 | )
|                                                            |  |               |  
|Accounts Payable and accrued expenses                       |  | 1,110,470     |   |  | 1,085,700        |   |  | 24,770     |  
|                                                            |  |               |  
|Notes payable, current portion                              |  |              |   |  | 111,800          |   |  | (111,800   | )
|                                                            |  |               |  
|Patent litigation settlement liability, current portion     |  | 308,904       |   |  | 241,464          |   |  | 67,440     |  
|                                                            |  |               |  
|Deferred revenue, current portion                           |  | 3,345,653     |   |  | 3,549,058        |   |  | (203,405   | )
|                                                            |  |               |  
|Convertible notes payable, current portion                  |  | 75,000        |   |  | 384,043          |   |  | (309,043   | )
|                                                            |  |               |  
|Current Liabilities                                         |  | 4,840,027     |   |  | 5,372,065        |   |  | (532,038   | )
|                                                            |  |               |  
|Working Capital (Deficit)                                   |  | (1,479,951    | ) |  | (629,792         | ) |  | (850,159   | )



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|                                                     |  |                                             |   |  |               |  
|---------------------------------------------------- |  | ------------------------------------------- | - |  | ------------- | -
|                                                     |  | Disclosure for the threemonth periods ended |  
|                                                     |  | March 31,2009                               |   |  | March 30,2008 |  
|Net cash provided by (used in) operating activities  |  | 450,812                                     |   |  | (1,405,682    | )
|                                                     |  |                                            
|Net cash provided by (used in) investing activities  |  | (55,488                                     | ) |  | (168,121      | )
|                                                     |  |                                            
|Net cash provided by financing activities            |  | (372,500                                    | ) |  | 2,166,220     |  
|                                                     |  |                                            
|Net increase (decrease) in cash and cash equivalents |  | 25,056                                      |   |  | 591,715       |  

Cash and cash equivalents increased by $25,056 from $2,035,818 at December 31, 2008 to $2,060,874 at
March 31, 2009. This was the result of cash used in financing activities of $372,500 offset by cash provided by operating activities of approximately $450,812 and $55,488 used in investing activities. The significant components of the activity
include income from operations of approximately $97,093, non-cash items in the amount of $960,834 and increases in cash of $1,314,554 from changes in working capital accounts.

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.

Presently, we have approximately $350,000 planned for capital expenditures to further the Companys growth during fiscal 2009 which we expect to fund through a
combination of vendor-provided financing, the use of operating or capital equipment leases and cash provided from operations.



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Contractual Obligations

The following table sets forth our contractual obligations during the next five years as of March 31, 2009:



|                                 |  |                        |  |                 |     |  |           |     |  |          |  |         
|-------------------------------- |  | ---------------------- |  | --------------- | --- |  | --------- | --- |  | -------- |  | --------
|Contractual Obligations          |  | Payments Due by Period
|                                 |  | Total                  |  | Less than1 year |     |  | 1-2Years  |     |  | 2-3Years |  | 3-5Years
|Long Term Debt (1)               |  | 249,300                |  | 0               |     |  | 249,300   | (2) |  | 0        |  | 0       
|Convertible Notes                |  | 7,420,000              |  | 75,000          | (3) |  | 7,345,000 | (4) |  |          |  |         
|                                 |  |                        |  |                 |    
|Operating Lease Obligations      |  | 1,050,227              |  | 453,057         |     |  | 457,725   |     |  | 139,445  |  |        
|                                 |  |                        |  |                 |    
|Patent Litigation Settlement (5) |  | 2,087,207              |  | 324,707         |     |  | 525,000   |     |  | 337,500  |  | 900,000 
|Financial Advisory Agreement     |  | 67,500                 |  | 67,500          | (6) |  | 0         |     |  | 0        |  | 0       
|                                 |  |                        |  |                 |     |  |           |     |  |          |  |         
|Total                            |  | 10,874,234             |  | 920,264         |     |  | 8,577,025 |     |  | 476,945  |  | 900,000 
|                                 |  |                        |  |                 |     |  |           |     |  |          |  |         



| | 1. | Amounts do not include interest to be paid.
| | -- | -------------------------------------------

| | 2. | Includes $111,800 of 9% notes payable that mature in October 2010 and $137,500 of 9% notes payable that mature in January 2011.
| | -- | -------------------------------------------------------------------------------------------------------------------------------

| | 3. | Includes $75,000 of 10% convertible notes currently in default and due that are convertible into shares of common stock at the option of the debenture holder at a conversion rate of
$1.25 per share.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Includes $2,270,000 in 10% Convertible Notes that mature in August 2010 and $5,075,000 in 12% Convertible Notes that mature in December 2010.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | Relates to guaranteed minimum payments owed in connection with our settlement of a patent infringement lawsuit brought against the Company by Datasci, LLC.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | Relates to Financial Advisory fees paid to Noesis Capital Corp., our Placement Agent and a 5% shareholder in our Company.
| | -- | -------------------------------------------------------------------------------------------------------------------------

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

We are
currently in arrears on principal and interest payments owed totaling $149,077 on our 10% Convertible Notes. We were in default effective January 30, 2002.

On February 29, 2008, we sold an aggregate of $2,325,000 principal amount 10% Secured Convertible Debentures and common stock purchase warrants to purchase an aggregate of 2,930,675 shares of our common stock, which debentures bear
interest at 10% per annum, and matured on August 29, 2008. On August 29, 2008, the Company repaid $1,000,000 of the Debentures. The remaining $1,325,000 was extended pursuant to an Extension Agreement (the Extension). The
maturity date was changed to December 1, 2008. In accordance with the Extension, the conversion price of the Debentures was changed from $0.595 per share to $0.50 per share. Additionally, the investors who agreed to the Extension were granted
one warrant (the Extension Warrants) for each share of stock issuable upon conversion of the Debentures at $0.50 per share conversion price. The exercise price of the Warrants was changed from $0.75 per share to $0.60 per share pursuant
to the Extension. The exercise price of the Extension Warrants is $0.60 per share. On December 1, 2008 we repaid $500,000 of Debentures and on December 16, 2008 $525,000 of the Debentures were converted by four investors including two of
our directors and one of our officers into a private placement of Convertible Notes. The remaining $300,000 was extended and the maturity date was changed to January 31, 2009. The Convertible Notes were satisfied on their maturity date in
January 2009.



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In May, 2008, we sold an aggregate of $210,000 principal amount Convertible Note and Common Stock Purchase Warrants to
purchase an aggregate of 264,706 shares of our Common Stock, which note carried interest at 10% per year and was due on September 30, 2010. This note was convertible at the option of the holder into any securities we issue (New
Securities) before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. On June 10, 2008, we issued a promissory note with a principal amount of $300,000 to Cornelis Wit, our Chief Executive
Officer and a Director. This note was convertible at the option of the holder into any securities we issue (New Securities) before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. The
promissory note carried interest at 10% per annum and was due on September 30, 2010. On August 29, 2008 the Convertible Note and promissory notes were converted as part of a private placement of Convertible Notes that was closed on
August 29, 2008.

On June 27, 2008, we issued a promissory note with a principal amount of $300,000 to Cornelis Wit, our Chief Executive Officer
and a Director. This note was convertible at the option of the holder into any securities we issue (New Securities) before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. The
promissory note carried interest at 10% per annum and was due on September 30, 2010. The promissory note dated June 27, 2008 was repaid on July 8, 2008.

On August 29, 2008, we sold, $2,270,000 in principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants (the Convertible Note Warrants) to purchase an
aggregate of 4,540,000 shares of our common stock to four accredited investors including our Chief Executive Officer and one of our Directors. We received net proceeds of $2,270,000. The Convertible Notes, which bear interest at 10% per annum,
are due on August 29, 2010. The Convertible Notes are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share (the Conversion Price), subject to adjustment
as provided in the transaction documents (the Conversion Feature). Interest is convertible as provided in the Convertible Notes. We are not permitted to prepay the Convertible Notes without the prior written consent of the holders.

On December 16, 2008, we sold, $5,075,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants
(the Convertible Note Warrants) to purchase an aggregate of 10,150,000 shares of our common stock to eleven accredited investors including our Chief Executive Officer, Chief Operation Officer, Chief Technology Officer, Chief Financial
Officer and four of our Directors. We received net proceeds of $5,075,000. The Convertible Notes, which bear interest at 12% per annum, are due on December 16, 2010. The Convertible Notes are convertible at any time at the option of the
holder into shares of our common stock based upon a conversion rate of $0.50 per share (the Conversion Price), subject to adjustment as provided in the transaction documents (the Conversion Feature). Interest is convertible
as provided in the Convertible Notes.

Our selling efforts include marketing our products to several Fortune 1000 pharmaceutical and medical device
manufacturers and several of the largest CROs. We began providing services to some of these entities during 2003 and we have experienced success in broadening our client roster over the past three fiscal years. Continued success in broadening our
existing client relationships and forging new relationships should provide us the opportunity to limit our need for funding our operations via debt and equity capital. Continuing to obtain contracts with clients of this size and reputation will also
increase the credibility of the Company to the clinical trial market.

We experienced increased success in marketing TrialMaster during fiscal 2008 and
early fiscal 2009. We entered into approximately $20 million in contracts during the year for trials to be serviced over the next five years. These contracts included 63 clinical trial engagements with 20 new clients. These contracts may however, be
terminated by our clients at any time. Our focus continues to include increasing our penetration of all phases of the clinical trial market with a continued emphasis on becoming the market leader in Phase I EDC services. We believe this market is an
operating and strategic strength of the Company due to the inherent flexibility that our Phase I TrialMaster product provides us. We believe we have the ability to produce trials more quickly and economically than our competitors for this
specialized and large market. During fiscal 2009, we will continue commercializing our products on a licensed basis and expect to experience increased success in penetrating the market for larger pharmaceutical, bio-technology and medical device
clinical trial sponsors. Our clients will be able to partially or completely license TrialMaster. This business model provides our clients a more cost efficient means of deploying our EDC solutions on a large-scale basis. Our licensed products,
falling under the auspices of either a Tech Transition (partial transfer with some services performed by OmniComm) or Tech Transfer, will



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allow us to broaden our potential client base, provides us with a high-margin revenue source and affords us the ability to improve our competitive position
within the EDC industry. Additionally, we continue to focus on adding CROs as strategic and marketing partners. There is an industry-wide emphasis in establishing strategic relationships with CROs. These relationships provide marketing leverage in
the form of joint marketing and sales efforts and provide an installed base of trained TrialMaster users. This installed base of users increases our ability to provide rapidly developed, cost effective solutions for our clients. Additionally, we
believe we have established an effective presence in the European clinical trial market and will seek to aggressively expand the scope of our sales and marketing operations there.

We feel that the momentum established from new client acquisitions and our ability to retain clients for repeat engagements provide a good operating base from which to build during 2009. We expect to continue
increasing the level of resources deployed in our sales and marketing efforts. We feel that a combination of our lean operating environment and increased success in new client acquisition, coupled with our ability to retain our existing clients will
allow us to compete effectively within the EDC market.

Because of the losses we have experienced from operations we have needed to continue utilizing the
proceeds from the sale of debt and equity securities to fund our working capital needs. 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 may continue to
require substantial funds to continue our research and development activities and to market, sell and commercialize our technology. We may 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 intellectual property rights; and other changes in economic, regulatory or competitive conditions in our planned business. Estimates about the adequacy of funding for our activities are based
upon certain assumptions, including assumptions that the research and development programs relating to our technology can be conducted at projected costs and that progress towards broader commercialization of our technology will be timely and
successful. There can be no assurance that changes in our research and development plans or other events will not result in accelerated or unexpected expenditures.

During the year ended December 31, 2008, we raised an aggregate of $6,420,000 in principal amount of convertible debentures from Cornelis Wit, our Chief Executive Officer and a director of which $6,120,000 is outstanding as of
March 31, 2009. Additionally, Guus van Kesteren, Director, and Atlantic Balanced Fund, a fund managed by Mentor Capital of which Fernando Montero, a director of OmniComm, is president, director and sole shareholder, purchased $160,000 and
$200,000, respectively in principal amounts of convertible debentures during the fiscal year ended December 31, 2008. While several of our directors have historically, either personally or through funds with which they are affiliated, provided
substantial capital either in the form of debt or equity financing there can be no assurance that they will continue to provide any such funding to us on favorable term or at all.

To satisfy our capital requirements, including ongoing future operations, we may seek to raise additional financing through debt and equity financings. There can be no assurance that any such funding will be available
to us on favorable terms or at all. If adequate funds are not available when needed, we may be required to delay, scale back or eliminate some or all of our research and product development programs, and our business operations. 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. Further, there can be no assurance that even if such
additional capital is obtained or the planned cost reductions are implemented, that we will achieve positive cash flow or profitability or be able to continue as a business.



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Our ability to continue in existence is dependent on our having sufficient financial resources to bring products and
services to market. As a result of our historical operating losses and accumulated deficits for the periods ending March 31, 2009, there is doubt about our ability to continue as a going concern. In addition, our auditors Greenberg and Company, LLC,
included language which qualified their opinion regarding our ability to continue as a going concern in their report dated February 12, 2009.

CRITICAL ACCOUNTING POLICIES

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

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

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

Our Management believes that the following are our critical accounting policies:

Deferred Revenue

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

Revenue Recognition Policy

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

The
Company recognizes sales, for both financial statement and tax purposes in accordance with SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB 101) and AICPA Statement of Position 97-2 (SOP 97-2)
Software Revenue Recognition as amended by SOP 98-9. SAB 101 requires that revenues be recognized ratably over the life of a contract. The Company will periodically record deferred revenues relating to advance payments in contracts.
Under its licensing arrangement



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the Company recognizes revenue pursuant to SOP 97-2. Under these arrangements the Company recognizes revenue when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer and/or delivery has occurred; (3) the collection of fees is probable; and (4) the fee is fixed or determinable. SOP
97-2, as amended, requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. We have analyzed each element in our multiple element arrangements and
determined that we have sufficient vendor-specific objective evidence (VSOE) to allocate revenues to license updates and product support. License revenues are recognized on delivery if the other conditions of SOP 97-2 are satisfied.
License updates and product support revenue is recognized ratably over the term of the arrangement. In arrangements where term licenses are bundled with license updates and product support and such revenue is recognized ratably over the term of the
arrangement, we allocate the revenue to license revenue and to license updates and product support revenue based on the VSOE of fair value for license updates and product support revenue on perpetual licenses of similar products.

Stock Based Compensation.

Beginning on January 1, 2006 we began
accounting for stock options under the provisions of Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payments (SFAS 123(R)), which requires the recognition of the fair value of equity-based compensation.
The fair value of stock options on the date of grant was estimated using a Binomial option valuation model. This model requires the input of subjective assumptions in implementing SFAS 123(R), including expected stock price volatility, estimated
life and estimated forfeitures of each award. The fair value of equity-based awards is amortized over the vesting period of the award, and we have elected to use the straight-line method of amortization. Prior to the implementation of SFAS 123(R),
we accounted for stock options and ESPP shares under the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2009, FASB issued Financial Accounting Standards
Board, or FASB, Staff Position, or FSP, SFAS No. 107-1 and Accounting Principles Board Opinions, or APB, No. 28-1 Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about
Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The FSP also amends APB No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP applies to all financial instruments within the scope of SFAS No. 107 held by publicly traded companies, as defined by
APB No. 28. A publicly traded company is required to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. Such entity is required to disclose in
the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to
estimate that value, whether recognized or not recognized in the statement of financial position, as required by SFAS No. 107. Fair value information disclosed in the notes must be presented together with the related carrying amount in a form
that makes it clear whether the fair value and carrying amount represent assets or liabilities and how the carrying amount relates to what is reported in the statement of financial position. Such entity also must disclose the methods and significant
assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions during the period. This FSP will be effective for interim reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The Company plans to adopt this FSP for the quarter ended June 30, 2009 and anticipates that the adoption of SFAS No. 107-1 and APB No. 28-1 will not have a material
impact on the Companys consolidated results of operations and financial position.

In April 2009, FASB issued FSP SFAS No. 115-2 and
No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This
FSP will be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company plans to adopt this FSP for the quarter ended June 30, 2009
and anticipates that adoption of SFAS No. 115-2 and SFAS No. 124-2 will not have a material impact on the Companys consolidated results of operations and financial position.



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In April 2009, FASB issued FSP SFAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume and
level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant
decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. This FSP will be effective for interim and annual
reporting periods ending after June 15, 2009, and will be applied prospectively. The Company plans to adopt this FSP for the quarter ended June 30, 2009 and anticipates that adoption of SFAS No. 157-4 will not have a material impact
on the Companys consolidated results of operations and financial position.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------

Not applicable to smaller reporting companies.



|ITEM 4T. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on
Form 10-Q, being March 31, 2009, the Companys principal executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the under the
Securities Exchange Act of 1934 (the Exchange Act) are effective such that the information relating to OmniComm, including our consolidating subsidiaries, required to be disclosed by the Company in reports that it files or submits under
the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Managements Report on
Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of OmniComms internal control over financial reporting as of March 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on the assessment using those criteria, management concluded that the internal control over financial reporting was effective as of March 31,
2009.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial
reporting. Our managements report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only managements report in this
quarterly report.

Changes in Internal Controls over Financial Reporting

There were no significant changes in the Companys internal controls over financial reporting or in other factors that could significantly affect these controls over financial reporting that occurred subsequent
to the ate of their evaluation and up to the filing date of this annual report on Form 10-Q. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the
system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.



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PART II OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------

In connection with the lawsuit filed on
June 18, 2008 in the United States District Court for the District of Maryland (the Court) by DataSci, LLC (DataSci) against Omnicomm alleging infringement of a U.S. patent no. 6,496,827 b2 entitled methods and
apparatus for the centralized collection and validation of geographically distributed clinical study data with verification of input data to the distributed system (licensed patent) claimed to be owned by DataSci. On April 20,
2009, DateSci and Omnicomm entered into and filed a Stipulated Order of Dismissal (the Dismissal) of the lawsuit and on April 22, 2009 the Court approved the Dismissal.



|ITEM 1A. | RISK FACTORS.
|-------- | -------------

Not applicable for a smaller
reporting company.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|------- | ------------------------------------------------------------

In
connection with the lawsuit filed by DataSci, on April 9, 2009 we entered into a Settlement and License Agreement pursuant to which and in consideration for the agreement, we issued DataSci a warrant to purchase 1,000,000 shares of our common
stock with an exercise price of $.01 per share. The warrant can be exercised by DataSci on April 9, 2011 into 1,000,000 shares of our common stock or upon its sole discretion DataSci may elect to require us to redeem the warrant for $300,000 in
cash in lieu of exercising the warrant. The warrants were issued pursuant to an exemption from registration under the Securities Act of 1933 in reliance on the exemptions provided by Section 4(2) and Rule 506 of Regulation D of that act.

On March 31, 2009, the Company issued 141,032 shares of common stock to our Chairman and Chief Technology Officer Randall G. Smith. The share were
valued at $0.30 per share and were issued in lieu of salary for the three month period ended March 31, 2009. The shares were issued pursuant to an exemption from registration under the Securities Act of 1933 in reliance on the exemptions
provided by Section 4(2) and Rule 506 of Regulation D of that act.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------

None.



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

None.



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------

None.



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|ITEM 6. | EXHIBITS
|------- | --------

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



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



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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.
|                       | 
|By:                    |  | /s/ Cornelis F. Wit                                                                                                                        
|                       |  | Cornelis F. Wit, Director, Chief Executive Officer and President (Principal Executive Officer)                                             
|Date:                  |  | May 14, 2009                                                                                                                               
|                       | 
|By:                    |  | /s/ Ronald T. Linares                                                                                                                      
|                       |  | Ronald T. Linares, Executive Vice President of Finance, Chief Financial and Accounting Officer (Principal Financial and Accounting Officer)
|Date:                  |  | May 14, 2009                                                                                                                               



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##### Table of Contents

Exhibit Index



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



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