**SECURITIES
      AND EXCHANGE COMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





[Mark
      One]





[X]
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
              EXCHANGE
                ACT OF 1934 for the quarterly period ended**June
                30, 2007**





[  
              ]
            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 Small Business Issuer as specified in its
                Charter)




Delaware
            11-3349762State
                of Incorporation
            IRS
                Employer Identification Number2101
                W. Commercial Blvd. Suite 4000, Ft. Lauderdale, FL
            33309Address
                of principal executive offices




954.473.1254Issuer’s
                Telephone Number:





N/A


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








Check
      whether the Issuer: (1) 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 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 August 14, 2007: 56,358,796 common stock $.001 par value.





Transitional
      Small Business Disclosure Format (Check one): Yes [ ] No [X]





1











**TABLE
      OF CONTENTS TO THE QUARTERLY REPORT ON FORM 10-QSB FOR THE SIX MONTHS ENDED
      JUNE
      30, 2007**





**PART
                I. FINANCIAL INFORMATION****Item
                1. Unaudited Consolidated Financial Statements**Consolidated
                Balance Sheets - June 30, 2007 and December 31, 2006Consolidated
                Statements of Operations - Six and Three Months Ended June 30, 2007
                and
                June 30, 2006Consolidated
                Statements of Cash Flows - Six Months Ended June 30, 2007 and June
                30,
                2006Notes
                to Consolidated Unaudited Financial Statements**Item
                2. Management’s Discussion and Analysis or Plan of
                Operation****Item
                3. Controls and Procedures****PART
                II. OTHER INFORMATION****Item
                6. Exhibits****SIGNATURES****Exhibit
                31.1**Certification of Chief Executive Officer Pursuant to Section 302
                of the
                Sarbanes-Oxley Act OF 2002- CEO Cornelis F. Wit**Exhibit
                31.2**Certification of Chief Financial Officer Pursuant to Section 302
                of the
                Sarbanes-Oxley Act OF 2002- CFO Ronald T. Linares**Exhibit
                32.1**Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
                to
                Section 906 of the Sarbanes-Oxley Act OF 2002 - CEO - Cornelis F.
                Wit**Exhibit
                32.2**Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
                to
                Section 906 of the Sarbanes-Oxley Act OF 2002 - CFO - Ronald T.
                Linares











2





**OMNICOMM
                SYSTEMS, INC.****CONSOLIDATED
                BALANCE SHEETS****June
                30****,**
            
            **December
                31,****2007**
            
            **2006****(unaudited)****ASSETS**CURRENT
                ASSETSCash
            
            $
            1,095,143
            
            $
            38,254Accounts
                receivable, net of allowance for doubtful accounts of $58,539 and
                $58,539
                in 2007 and 2006, respectively
            
            
            426,970
            
            
            286,708Prepaid
                expenses
            
            
            27,655
            
            
            42,026Total
                current assets
            
            
            1,549,768
            
            
            366,988PROPERTY
                AND EQUIPMENT, net
            
            
            237,923
            
            
            199,931OTHER
                ASSETSIntangible
                assets
            
            
            2,429
            
            
            2,686Other
                assets
            
            
            13,102
            
            
            12,937TOTAL
                ASSETS
            
            $
            1,803,222
            
            $
            582,542**LIABILITIES
                AND SHAREHOLDERS’ EQUITY****(DEFICIT)**CURRENT
                LIABILITIESAccounts
                payable and accrued expenses
            
            $
            484,429
            
            $
            645,375Accrued
                payroll taxes
            
            
            87,477
            
            
            74,76610%
                Convertible Notes
            
            
            87,500
            
            
            100,000Notes
                payable - current portion
            
            
            -0-
            
            
            350,000Deferred
                revenue
            
            
            1,655,202
            
            
            1,643,566Total
                current liabilities
            
            
            2,314,608
            
            
            2,813,707NOTES
                PAYABLE, net of current portion
            
            
            111,800
            
            
            415,000NOTES
                PAYABLE RELATED PARTY, net of current portion
            
            
            185,000
            
            
            185,000TOTAL
                LIABILITIES
            
            
            2,611,408
            
            
            3,413,707COMMITMENTS
                AND CONTINGENCIES (see Note 5)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, 50,000 and 50,000 issued and outstanding, respectively;
                liquidation preference $500,000 and $500,000, respectively
            
            
            50
            
            
            50Series
                C convertible preferred stock, - $.001 par value. 747,500 shares
                authorized, 337,150 and 337,150 issued and outstanding, respectively;
                liquidation preference $3,371,500 and $3,371,500,
                respectively
            
            
            337
            
            
            3375%
                Series A convertible preferred stock - $0.001 par value, 5,000,000
                shares
                authorized; 4,215,224 and 4,215,224 issued and outstanding, respectively;
                liquidation preference $4,215,224 and $4,215,224,
                respectively
            
            
            4,215
            
            
            4,215Common
                stock - 150,000,000 shares authorized, 56,358,796 and 47,972,091
                issued
                and outstanding, after deducting 802,612 and 773,878 shares of treasury
                stock, at $.001 par value, respectively
            
            
            57,113
            
            
            48,697Additional
                paid in capital - preferred
            
            
            7,703,502
            
            
            7,703,502Additional
                paid in capital - common
            
            
            25,819,323
            
            
            21,719,097Stock
                subscription receivable
            
            
            -0-
            
            
            (1,250
            )Less:
                Treasury stock, cost method, 802,612 and 773,878 shares, respectively
            
            
            (369,389
            )
            
            (351,861
            )Accumulated
                other comprehensive income
            
            
            (15,430
            )
            
            (2,041
            )Accumulated
                deficit
            
            
            (34,007,907
            )
            
            (31,951,911
            )TOTAL
                SHAREHOLDERS’ EQUITY (DEFICIT)
            
            
            (808,186
            )
            
            (2,831,165
            )TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
            
            $
            1,803,222
            
            $
            582,542**See
                accompanying summary of accounting policies and notes to financial
                statements.**




3




**OMNICOMM
      SYSTEMS, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(unaudited)**




**For
                the six months ended**
            
            **For
                the three months ended****June
                30,**
            
            **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006****Revenues**Net
                sales
            
            $
            1,898,822
            
            $
            1,222,263
            
            $
            1,076,571
            
            $
            702,752**Cost
                of sales**
            
            
            476,021
            
            
            459,814
            
            
            261,935
            
            
            275,853**Gross
                margin**
            
            
            1,422,801
            
            
            762,449
            
            
            814,636
            
            
            426,899**Operating
                expenses**Salaries,
                benefits and related taxes
            
            
            2,554,387
            
            
            1,470,734
            
            
            1,258,342
            
            
            744,616Rent
                & occupancy expenses
            
            
            152,180
            
            
            80,049
            
            
            79,367
            
            
            33,493Consulting
            
            
            163,694
            
            
            150,625
            
            
            38,394
            
            
            54,375Legal
                and professional fees
            
            
            152,429
            
            
            106,432
            
            
            85,580
            
            
            83,717Travel
            
            
            103,801
            
            
            97,116
            
            
            63,878
            
            
            70,504Telephone
                and internet
            
            
            48,359
            
            
            40,618
            
            
            26,583
            
            
            24,093Selling,
                general and administrative
            
            
            242,438
            
            
            139,745
            
            
            94,458
            
            
            84,387Depreciation
                and amortization
            
            
            42,129
            
            
            22,205
            
            
            22,555
            
            
            15,250**Total
                operating expenses**
            
            
            3,459,417
            
            
            2,107,524
            
            
            1,669,157
            
            
            1,110,435**Operating
                income (loss)**
            
            
            (2,036,616
            )
            
            (1,345,075
            )
            
            (854,521
            )
            
            (683,536
            )**Other
                income (expense)**Interest
                expense
            
            
            (32,400
            )
            
            (152,164
            )
            
            (8,792
            )
            
            (76,409
            )Interest
                income
            
            
            13,020
            
            
            -0-
            
            
            10,210
            
            
            -0-**(Loss)
                before taxes and preferred dividends**
            
            
            (2,055,996
            )
            
            (1,497,239
            )
            
            (853,103
            )
            
            (759,945
            )**Net
                income (loss)**
            
            
            (2,055,996
            )
            
            (1,497,239
            )
            
            (853,103
            )
            
            (759,945
            )Preferred
                stock dividends in arrears Series A Preferred
            
            
            (101,837
            )
            
            (101,837
            )
            
            (51,200
            )
            
            (51,200
            )Preferred
                stock dividends in arrears Series B Preferred
            
            
            (19,836
            )
            
            (22,499
            )
            
            (9,973
            )
            
            (9,973
            )Preferred
                stock dividends in arrears Series C Preferred
            
            
            (133,751
            )
            
            (133,751
            )
            
            (67,245
            )
            
            (67,245
            )Total
                preferred stock dividends
            
            
            (255,424
            )
            
            (258,087
            )
            
            (128,418
            )
            
            (128,418
            )**Net
                income (loss) attributable to common stockholders**
            
            
            (2,311,420
            )
            
            (1,755,326
            )
            
            (981,521
            )
            
            (888,363
            )**Net
                (loss) per share, basic and diluted**
            
            
            ($0.04
            )
            
            ($0.06
            )
            
            ($0.02
            )
            
            ($0.03
            )**Weighted
                average number of shares outstanding**
            
            
            53,636,872
            
            
            30,844,522
            
            
            56,250,109
            
            
            33,224,741








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




4





**OMNICOMM
                SYSTEMS, INC.**
              **CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FOR
                THE SIX MONTHS ENDED JUNE 30, 2007 AND JUNE 30,
                2006****(unaudited)****2007**
            
            **2006**CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                income (loss)
            
            $
            (2,055,996
            )
            $
            (1,497,239
            )Adjustment
                to reconcile net income to net cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            42,129
            
            
            22,205Employee
                stock option wage expense
            
            
            306,018
            
            
            163,545Common
                stock issued for accrued interest
            
            
            68,552
            
            
            -0-Common
                stock issued in cashless exercise of stock options
            
            
            (6,989
            )
            
            -0-Change
                in assets and liabilities:Accounts
                receivable
            
            
            (140,262
            )
            
            (401,085
            )Prepaid
                expenses
            
            
            14,371
            
            
            (33,879
            )Other
                assets
            
            
            (165
            )
            
            (16,809
            )Accounts
                payable and accrued expenses
            
            
            (148,368
            )
            
            145,574Deferred
                revenue
            
            
            11,636
            
            
            716,768Net
                cash provided by (used in) operating activities
            
            
            (1,908,074
            )
            
            (900,920
            )CASH
                FLOWS FROM INVESTING ACTIVITIESInvestment
                in intangible assets
            
            
            -0-
            
            
            (3,065
            )Sales
                of property and equipment
            
            
            -0-
            
            
            2,500Purchase
                of property and equipment
            
            
            (79,731
            )
            
            (177,371
            )NET
                Net cash provided by (used in) investing activities
            
            
            (79,731
            )
            
            (177,936
            )CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from issuance of common stock, net of issuance costs
            
            
            2,839,966
            
            
            1,189,909Proceeds
                from stock option exercise
            
            
            5,067
            
            
            1,500Proceeds
                from stock subscription receivable
            
            
            1,250
            
            
            -0-Proceeds
                from notes payable
            
            
            211,800
            
            
            100,000Repayments
                of notes payable
            
            
            -0-
            
            
            (20,300
            )Net
                cash provided by (used in) financing activities
            
            
            3,058,083
            
            
            1,271,109Effect
                of exchange rate change on cash and cash equivalents
            
            
            (13,389
            )
            
            -0-Net
                increase (decrease) in cash and cash equivalents
            
            
            1,056,889
            
            
            192,253Cash
                and cash equivalents at beginning of period
            
            
            38,254
            
            
            9,931Cash
                and cash equivalents at end of period
            
            $
            1,095,143
            
            $
            202,184






**For
                the six months ended****June
                30,********2007**
            
            
            ******2006****Supplemental
                Disclosure of Cash Flow Information:****Cash
                paid during the period for:**Income
                tax
            
            
            
            
            $
            -0-
            
            $
            -0-Interest
            
            
            
            
            $
            9,775
            
            $
            5,494**Non-cash
                Transactions**Common
                stock issued in exchange for Notes Payable
            $
            865,001
            
            $
            -0-Common
                stock issued for accrued interest
            $
            68,552
            
            $
            -0-Conversion
                of Series B common stock warrants on a cashless basis
            $
            -0-
            
            $
            150,000Exercise
                of Series B Placement Agent Unit Option on a cashless
                basis
            $
            -0-
            
            $
            557,013Conversion
                of 10% Convertible Notes Payable into common stock
            $
            12,500
            
            $
            -0-Common
                stock tendered in exercise of incentive stock options
            $
            28,734
            
            $
            -0-Conversion
                of Series B Preferred Stock into common stock
            $
            -0-
            
            $
            150,000





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





5


**OMNICOMM
        SYSTEMS, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**





**NOTE
              1:**
            **ORGANIZATION
                AND NATURE OF
                OPERATIONS**





OmniComm
      Systems, Inc. (“OmniComm” or “Company”) is a healthcare technology company that
      provides Web-based electronic data capture (“EDC”) solutions and related
      value-added services to pharmaceutical and biotech companies, CRO (“CRO”), and
      other clinical trial sponsors. TrialMaster ® ,
      the
      Company’s EDC software application, 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 (“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 the first six months of fiscal 2007, we spent approximately $435,000
      on R
& D activities, the majority of which represented salaries to our
      developers. During the first six months of fiscal 2006 we spent approximately
      $308,000 on R & D 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 of 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 six-month period ended June 30, 2007 are not
      necessarily indicative of the results that may be expected for the year ended
      December 31, 2007. 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-KSB for the year
      ended December 31, 2006.





**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.





6


**OMNICOMM
          SYSTEMS, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**




**RECLASSIFICATIONS**





Certain
      reclassifications have been made in the 2006 financial statements to conform
      to
      the 2007 presentation. These reclassifications did not have any effect on net
      income (loss) or shareholders’ equity.





**SEGMENT
      INFORMATION**





The
      Company operates in one reportable segment.





**CASH
      AND CASH EQUIVALENTS**





Cash
      equivalents consist of highly liquid, short-term investments with maturities
      of
      90 days or less. The carrying amount reported in the accompanying 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 $58,539 and $58,539 as of June 30, 2007
      and
      December 31, 2006, respectively.





**CONCENTRATION
      OF CREDIT RISK**





Accounts
      receivable subject the Company to its highest potential concentration of credit
      risk. The Company reserves for credit losses. The Company does not require
      collateral on trade accounts receivables. Our top five customers accounted
      for
      approximately 60% of our revenues during the six months ended June
      30,
      2007 and approximately 49% of our revenues during the six months ended June
      30,
      2006. Three customers accounted individually for 10% or more of our revenues
      during the first six months of fiscal 2007.





**PROPERTY
      AND EQUIPMENT**





Property
      and equipment are recorded at cost. Additions and betterments are capitalized;
      maintenance and repairs are expensed as incurred. Depreciation is calculated
      using the straight-line method over the asset’s estimated useful life, which is
      5 years for leasehold improvements, equipment and furniture and 3 years for
      software. Gains or losses on disposal are charged to operations.





**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 June 30, 2007,
      the
      Company had $1,655,202 in
      deferred revenues relating to contracts for services to be performed over
      periods ranging from 1 month to 5 years.





7


**OMNICOMM
          SYSTEMS, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**


**REVENUE
      RECOGNITION POLICY**





OmniComm’s
      revenue model is transaction-based and can be implemented either as an ASP
      (application service provider) or licensed for implementation by a customer
      such
      as a pharmaceutical company. Revenues are derived from the set-up of clinical
      trial engagements; on-going maintenance fees incurred throughout the duration
      of
      an engagement; fees for report writing and project change orders. The clinical
      trials that are conducted using TrialMaster can last from one month 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,
      corrected copy” and 101 “Revenue Recognition in Financial Statements (SAB 101)”.
      SAB 101 and 104 require that revenues be recognized ratably over the life of
      a
      contract. The Company will periodically record deferred revenues relating to
      advance payments in contracts.





**ADVERTISING**





Advertising
      costs are expensed as incurred. Advertising costs were $93,679 and $47,723
      for
      the six months ended June 30, 2007 and June 30, 2006, respectively. Advertising
      costs consist primarily of amounts we spend in industry trade publications,
      in
      attending or presenting at industry conferences and in developing our public
      relations and marketing materials.





**RESEARCH
      AND DEVELOPMENT EXPENSES**





Software
      development costs are included in R & D 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. R & D expense was
      approximately $435,000 and $308,000 for the six months ended June 30, 2007
      and
      June 30, 2006 respectively.





**EMPLOYEE
      EQUITY INCENTIVE PLANS**





The
      Company has an employee equity incentive plan, which is more fully described
      below. Until December 31, 2005, the Company accounted for its equity incentive
      plan under the intrinsic value recognition and measurement principles of
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees” and
      related interpretations. Effective with the quarter ended March 31, 2006, the
      Company began accounting for employee stock options using the fair-value method.
      The exercise price of options granted is equal to the market price of OmniComm
      Systems common stock (defined as the closing bid price reported on the NASD
      OTC
      Bulletin-Board) on the date of grant. Th e
      value
      of the granted options is estimated using a Binomial option pricing model.
      Because the estimated value is determined as of the date of grant, the actual
      value ultimately realized by the employee may be significantly different.





8


**OMNICOMM
          SYSTEMS, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**





SFAS
      No.
      123R requires the use of option pricing models that were not developed for
      use
      in valuing employee stock options. Binomial option pricing models were developed
      for use in estimating the fair value of short-lived exchange-traded options
      that
      have no vesting restrictions and are fully transferable. The Company’s employee
      stock options have characteristics significantly different from those of traded
      options. In addition, option pricing models require the input of highly
      subjective assumptions, including the option’s expected life and the price
      volatility of the underlying stock, and changes in the subjective input
      assumptions can materially affect the fair value estimate of employee stock
      options.





The
      estimated value of employee stock options granted during the six months ended
      June 30, 2007 was $310,880 ($163,545 for the
      six months ended June 30, 2006). The value of options granted in 2007 and 2006
      was estimated at the date of grant using the following assumptions:





**2007**
            
            **2006**Risk-free
                interest rate
            
            
            4.86
            %
            
            4.55
            %Expected
                years until exercise
            
            
            6
                Years
            
            
            6
                YearsExpected
                stock volatility
            
            
            93.6
            %
            
            100.1
            %Dividend
                yield
            
            
            0
            %
            
            0
            %





An
      analysis of historical information is used to determine the Company’s
      assumptions, to the extent historical information is relevant based on the
      terms
      of the grants being issued in any given period.





**Description
      of Stock Option Plan**





In
      1998,
      the Company’s Board of Directors approved the 1998 Stock Incentive Plan of
      OmniComm Systems, (the “1998 Plan”). The 1998 Plan provides for granting
      Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights,
      Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units.
      Pursuant to the 1998 Plan, the Company may grant options to purchase up to
      12,500,000 shares of the Company’s common stock. The term of each option may not
      exceed ten years from the date of grant, and options vest in accordance with
      a
      vesting schedule established by the Plan administrator. As of June 30, 2007,
      substantially all of the company’s employees were participating in the 1998 Plan
      and approximately 8,528,270 options were outstanding. Options granted under
      the
      1998 Plan will generally expire seven years from the date of grant for most
      employees and seven years from the date of grant for officers and directors
      of
      the Company.





**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.





9
 
 **OMNICOMM
            SYSTEMS, INC.**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**


Basic
      earnings per share were calculated using the weighted average number of shares
      outstanding of 53,636,872 and 30,844,522 for
      the
      six month periods ended June 30, 2007 and June 30, 2006, respectively. Basic
      earnings per share were calculated using the weighted average number of shares
      outstanding of 56,250,109 and 33,224,741 for the three month periods ended
      June
      30, 2007 and June 30, 2006, respectively. There were no differences between
      basic and diluted earnings per share. Options to purchase 8,528,270 shares
      of
      common stock at prices ranging from $.15 to $2.75 per share were outstanding
      at
      June 30, 2007. Warrants to purchase 1,366,756 shares of common stock at prices
      ranging from $0.25 to $0.50 per share were outstanding at June 30, 2007.





The
      Company granted a Unit Purchase Option (“Agent Option”) to the Placement Agent
      of its Series C Convertible Preferred Stock that provides the Placement Agent
      the ability to purchase 24,848 Series C Preferred Shares with 496,950 detachable
      common stock warrants. The exercise of the Agent Option would result in the
      issuance of an aggregate of 1,490,850 shares of common stock at an exercise
      price of $0.25 per share. The warrants and Agent Options were not included
      in
      the computation of diluted earnings per share because they have an anti-dilutive
      effect on net loss per share.





The
      Company’s convertible debt and convertible preferred stock have an anti-dilutive
      effect on net loss per share 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
      September 2006, the FASB issued Statement No. 157, “Fair Value
      Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
      for measuring fair value in accordance with generally accepted accounting
      principles, and expands disclosures about fair value measurements. Subsequently,
      in February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
      entities to choose to measure many financial assets and financial liabilities
      at
      fair value. Unrealized gains and losses on items for which the fair value option
      has been elected are reported in earnings. We expect to adopt both SFAS 157
      and
      SFAS 159 as of January 1, 2008. We are currently assessing the impact of the
      adoption of these statements.





**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 R & D 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 R & D 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.





10
 
 **OMNICOMM
            SYSTEMS, INC.**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**


Estimates
      about the adequacy of funding for our activities are based upon certain
      assumptions, including assumptions that the R & D 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 R & D plans, acquisitions or other events
      will not result in accelerated or unexpected expenditures.





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 its significant losses, negative cash
      flows from operations, and accumulated deficits for the period ending June
      30,
      2007 there is doubt about the Company’s ability to continue as a going
      concern.





**NOTE
              4:**
            **NOTES
                PAYABLE**





At
      June
      30, 2007, the Company owed $296,800 in notes payable. The table below provides
      details as to the terms and conditions of the notes payable.





11
 
 **OMNICOMM
            SYSTEMS, INC.**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**


**Origination**
            
            **Due**
            
            **Interest**
            
            
            
            **Short**
            
            **Long****Date**
            
            **Date**
            
            **Rate**
            
            **Amount**
            
            **Term**
            
            **Term**01/16/07
            
            
            01/01/09
            
            
            9.00
            %
            $
            51,800
            
            $
            -0-
            
            $
            51,80001/16/07
            
            
            01/01/09
            
            
            9.00
            %
            
            60,000
            
            
            -0-
            
            
            60,00012/31/06
            
            
            01/01/09
            
            
            9.00
            %
            
            185,000
            
            
            -0-
            
            
            185,000$
            296,800
            
            $
            -0-
            
            $
            296,800








**NOTE
              5:**
            **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 June 30,
      2007 are as follows:





2007
            
            $
            125,1932008
            
            
            253,2422009
            
            
            225,3692010
            
            
            229,9022011
            
            
            77,143Total
            
            $
            910,849





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
      $152,180 and $80,049 for the six months ended June 30, 2007 and June 30, 2006,
      respectively.





12





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





**Overview**


We
      are a
      healthcare technology company that provides 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 support of TrialMaster and its related
      products.





During
      fiscal 2007, the Company will seek to execute its operating strategy. The
      primary focus of our strategy includes:





·
            Expanding
                our business model by offering our software solution, TrialMaster,
                on a
                licensed basis in addition to our existing hosted-services solutions;


·
            Expanding
                our sales and marketing efforts to include larger pharmaceutical,
                CRO and
                governmental clinical trial sponsors who will be attracted to our
                licensed, technology-transfer business
                model;


·
            Stimulating
                demand by providing clinical trial Sponsors with high value
                EDC;


·
            Emphasizing
                low operating costs;


·
            Continuing
                to provide EDC services to small and midsize Pharma, Bio-Tech, Medical
                Device Companies and CROs; and


·
            Differentiation
                through service.





A
      crucial
      success factor in the EDC industry is the overall penetration of our industry
      into the domestic and international clinical trial market. CenterWatch, an
      industry publication, estimates that as of 2004 approximately 25% of clinical
      trials are conducted with the use of EDC. CenterWatch estimates that U.S.
      clinical R & D was at $31.5 billion in 2005. Based on a 2002 CenterWatch
      report approximately 8.5% of total R & D costs are spent on data management.
      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.





13


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 the first six months of fiscal
      2007 and 2006, we spent approximately $435,000 and $308,000 respectively, on
      R
& D activities, the majority of which represented salaries to our developers
      which include costs associated with customization of the TrialMaster software
      for our client’s projects.








***The
      Six Months ended June 30, 2007 Compared with the Six-Months ended June 30,
      2006***





**Results
      of Operations**





A
      summarized version of our results of operations for the six-months ended June
      30, 2007 and June 30, 2006 is included in the table below.





**Summarized
        Statement of Operations**


**For
                the six months ended****June
                30,****%
                of**
            
            
            
            **%
                of**
            
            **$**
            
            **%****2007**
            
            **Revenues**
            
            **2006**
            
            **Revenues**
            
            **Change**
            
            **Change**Total
                revenues
            
            $
            1,898,822
            
            
            
            
            $
            1,222,263
            
            
            
            
            $
            676,559
            
            
            55.4
            %Cost
                of sales
            
            
            476,021
            
            
            25.1
            %
            
            459,814
            
            
            37.6
            %
            
            16,207
            
            
            3.5
            %Gross
                margin
            
            
            1,422,801
            
            
            74.9
            %
            
            762,449
            
            
            62.4
            %
            
            660,352
            
            
            86.6
            %Salaries,
                benefits and related taxes
            
            
            2,554,387
            
            
            134.5
            %
            
            1,470,734
            
            
            120.3
            %
            
            1,083,653
            
            
            73.7
            %Rent
            
            
            152,180
            
            
            8.0
            %
            
            80,049
            
            
            6.5
            %
            
            72,131
            
            
            90.1
            %Consulting
            
            
            163,694
            
            
            8.6
            %
            
            150,625
            
            
            12.3
            %
            
            13,069
            
            
            8.7
            %Selling,
                general and administrative
            
            
            242,438
            
            
            12.8
            %
            
            139,745
            
            
            11.4
            %
            
            102,693
            
            
            73.5
            %Total
                Operating Expenses
            
            
            3,459,417
            
            
            182.2
            %
            
            2,107,524
            
            
            172.4
            %
            
            1,351,893
            
            
            64.1
            %Operating
                income (loss)
            
            
            (2,036,616
            )
            
            -107.3
            %
            
            (1,345,075
            )
            
            -110.0
            %
            
            (691,541
            )
            
            51.4
            %Interest
                Expense
            
            
            32,400
            
            
            1.7
            %
            
            152,164
            
            
            12.4
            %
            
            (119,764
            )
            
            -78.7
            %Interest
                income
            
            
            13,020
            
            
            0.7
            %
            
            -
            
            
            0.0
            %
            
            13,020
            
            
            0.0
            %Net
                (loss)
            
            
            (2,055,996
            )
            
            -108.3
            %
            
            (1,497,239
            )
            
            -122.5
            %
            
            (558,757
            )
            
            37.3
            %Total
                preferred stock dividends
            
            
            (255,424
            )
            
            -13.5
            %
            
            (258,087
            )
            
            -21.1
            %
            
            2,663
            
            
            -1.0
            %Net
                (loss) attributable to common stockholders
            
            $
            (2,311,420
            )
            
            -121.7
            %
            $
            (1,755,326
            )
            
            -143.6
            %
            $
            (556,094
            )
            
            31.7
            %








14





**Results
      of Operations**





Revenues
      for the six-months ended June 30, 2007 were $1,898,822 compared to $1,222,263
      for the six-months ended June 30, 2006, an increase of 55.4%. The revenue
      increase can be attributed to a 60% increase in projects under management.
      Industry acceptance of EDC continues to increase and CenterWatch, an industry
      trade group, estimates that EDC use in 2004 was an estimated 25% of clinical
      trials. 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 six-month period ended June 30, 2007 approximately 64.7%
      of
      revenues was generated by trial setup activities, 27.4% was generated from
      on-going maintenance fees and approximately 7.9% was generated from fees charged
      for changes to on-going clinical trial engagements. During the six-month period
      ended June 30, 2006 we generated 72.2% of revenues from setup fees, 17.7% from
      on-going maintenance fees and 9.8% from project change orders. Generally, our
      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. 101 “Revenue
      Recognition” and No. 104 “Revenue Recognition, corrected copy” which require
      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 60% of our revenues during the
      six-month period ended June 30, 2007 and approximately 49% of our revenues
      during the six-month period ended June 30, 2006. Three customers accounted
      individually for 10% or more of our revenues during the six-month period ended
      June 30, 2007. 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 $476,021 for the six month period ended June 30, 2007
      compared to $459,814 for the six month period ended June 30, 2006, an increase
      of 3.5%. Cost of goods sold were approximately 25.1% of sales for the six-month
      period ended June 30, 2007 compared to 37.6% for the six-month period ended
      June
      30, 2006. 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. Salaries increased during 2007 due
      to
      the addition of one additional programmer and a training specialist as part
      of
      our trial operations.





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 for the remainder of fiscal 2007. We expect to continue to increase
      follow-on engagements from existing clients and expect to increase the CRO
      portion of our client base. In addition, we expect the cost of service for
      our
      licensing business model to approximate 25% of revenues when we begin our
      licensing operations during the second half of fiscal 2007. We expect the
      current version of TrialMaster, (V4.0), to increase the efficiency of trial
      building operations by 20 to 25%. V4.0 of TrialMaster is being designed using
      Microsoft’s .Net framework. Microsoft ® .NET is
      described by Microsoft as a set of software technologies for connecting
      information, people, systems, and devices. This new generation of technology
      is
      based on Web services—small building-block applications that can connect to each
      other as well as to other, larger applications over the Internet.





15


Salaries
      and related expenses are our biggest expense at 73.8% of total Operating
      Expenses for the six month period ended June 30, 2007 compared with 69.8% of
      total Operating Expenses for the six month period ended June 30, 2006. Salaries
      and related expenses totaled $2,554,387 for the six month period ended June
      30,
      2007 compared to $1,470,734 for the six month period ended June 30, 2006, an
      increase of 73.7%. During the six months ended June 30, 2007 and June 30, 2006
      we incurred approximately $306,018 and $163,545, in salary expense,
      respectively, 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. We currently employ approximately 47
      employees out of our Fort Lauderdale, Florida corporate office, nine
      out-of-state employees and we have two employees working for our wholly-owned
      German subsidiary. We expect to increase personnel within our production,
      project management and quality analysis functions in concert with anticipated
      increases in TrialMaster clients during fiscal 2007. We anticipate that the
      commercialization of our licensed TrialMaster product will require the addition
      of employees who will provide installation, implementation, training and other
      consulting services associated with the transfer of our TrialMaster technology
      on a licensed basis. We expect that the costs incurred related to the technology
      transfers of TrialMaster on a licensed basis will be offset by the revenues
      generated from these sales. We will look to selectively add experienced sales
      and marketing personnel in fiscal 2007 in an effort to increase our market
      penetration and to continue broadening our client base.





Rent
      and
      related expenses increased by $72,131 during the six month period ended June
      30,
      2007 when compared to the six-month period ended June 30, 2006. We entered
      into
      a corporate office lease in May 2006 that runs through April 2011. In December
      2001, we established a disaster recovery site at an IBM owned Co-Location
      facility in Atlanta, Georgia 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. In August 2006, we entered into a lease with
      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 2008.





Legal
      and
      professional fees totaled $152,429 for the six month period ended June 30,
      2007
      compared with $106,432 for the six month period ended June 30, 2006, an increase
      of approximately $45,997 .
      We
      recorded $45,000 in financial advisory fees during the six months ended June
      30,
      2007 compared with $30,000 for the six months ended June 30, 2006. 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. We
      expect
      legal and professional fees to increase during fiscal 2007 in connection with
      our project aimed at ensuring timely compliance with Section 404 of the
      Sarbanes-Oxley Act of 2002.





Selling,
      general and administrative expenses (“SGA”) were $242,438 for the six month
      period ended June 30, 2007 compared to $139,745 for the six month period ended
      June 30, 2006, an increase of 73.5%. These expenses relate primarily to costs
      incurred in running our office day-to-day and other costs not directly related
      to other captioned items in our income statement, and include the cost of office
      equipment and supplies, the costs of attending conferences and seminars and
      other expenses incurred in the normal course of business. The Company increased
      its marketing, sales and advertising expenditures by $47,960 for the six month
      period ended June 30, 2007 from $45,719 for the six month period ended June
      30,
      2006 to $93,679 for the six month period ended June 30, 2007, an increase of
      approximately 104.9%. We expect SGA expenses to continue increasing as we
      intensify and extend our selling and marketing efforts.





Interest
      expense was $32,400 during the six month period ended June 30, 2007 compared
      to
      $152,164 for the six-month period ended June 30, 2006, a decrease of $119,764
      or
      78.7%. The
      decrease can be attributed to the conversion of long-term debt in the aggregate
      amount of $3,851,042 we effected in December 2006 and March 2007.





We
      evaluate the cost of capital available to us in combination with our overall
      capital structure in deciding what financing best fulfills our short and
      long-term capital needs. During the six-month period ended June 30, 2007 we
      issued $211,800 in promissory notes. During the six-month period ended June
      30,
      2006 we issued $100,000 in promissory notes.





There
      were arrearages of $101,837 in 5% Series A Preferred Stock dividends, $19,836
      in
      Series B Preferred Stock dividends and $133,751 in Series C Preferred Stock
      dividends for the six month period ended June 30, 2007, compared with arrearages
      of $101,837 in 5% Series A Preferred Stock dividends, $22,499 in Series B
      Preferred Stock dividends and $133,751 in Series C Preferred Stock dividends
      for
      the six month period ended June 30, 2006. We deducted $255,424 and $258,087
      to
      calculate Net
      Income (Loss) Attributable to Common Stockholders for
      the
      six-month periods ended June 30, 2007 and June 30, 2006, respectively, relating
      to undeclared Series A, B and C Convertible Preferred Stock dividends.





16


***The
      Three Months ended June 30, 2007 Compared with the Three-Months ended June
      30,
      2006***





**Results
      of Operations**





A
      summarized version of our results of operations for the three-months ended
      June
      30, 2007 and June 30, 2006 is included in the table below.


**Summarized
        Statement of Operations**


**For
                the three months ended****June
                30,****%
                of**
            
            
            
            **%
                of**
            
            **$**
            
            **%****2007**
            
            **Revenues**
            
            **2006**
            
            **Revenues**
            
            **Change**
            
            **Change**Total
                revenues
            
            $
            1,076,571
            
            
            
            
            $
            702,752
            
            
            
            
            $
            373,819
            
            
            53.2
            %Cost
                of sales
            
            
            261,935
            
            
            24.3
            %
            
            275,853
            
            
            39.3
            %
            
            (13,918
            )
            
            -5.0
            %Gross
                margin
            
            
            814,636
            
            
            75.7
            %
            
            426,899
            
            
            60.7
            %
            
            387,737
            
            
            90.8
            %Salaries,
                benefits and related taxes
            
            
            1,258,342
            
            
            116.9
            %
            
            744,616
            
            
            106.0
            %
            
            513,726
            
            
            69.0
            %Travel
            
            
            63,878
            
            
            5.9
            %
            
            70,504
            
            
            10.0
            %
            
            (6,626
            )
            
            -9.4
            %Selling,
                general and administrative
            
            
            94,458
            
            
            8.8
            %
            
            84,387
            
            
            12.0
            %
            
            10,071
            
            
            11.9
            %Bad
                debt expense
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            -
            
            
            N/MDepreciation
                and amortization
            
            
            22,555
            
            
            2.1
            %
            
            15,250
            
            
            2.2
            %
            
            7,305
            
            
            47.9
            %Total
                Operating Expenses
            
            
            1,669,157
            
            
            155.0
            %
            
            1,110,435
            
            
            158.0
            %
            
            558,722
            
            
            50.3
            %Operating
                income (loss)
            
            
            (854,521
            )
            
            -79.4
            %
            
            (683,536
            )
            
            -97.3
            %
            
            (170,985
            )
            
            25.0
            %Interest
                Expense
            
            
            8,792
            
            
            0.8
            %
            
            76,409
            
            
            10.9
            %
            
            (67,617
            )
            
            -88.5
            %Interest
                income
            
            
            10,210
            
            
            0.9
            %
            
            -
            
            
            0.0
            %
            
            10,210
            
            
            N/M(Loss)
                before income taxes and dividends
            
            
            (853,103
            )
            
            -79.2
            %
            
            (759,945
            )
            
            -108.1
            %
            
            (93,158
            )
            
            12.3
            %Income
                tax expense (benefit)
            
            
            -0-
            
            
            0.0
            %
            
            -0-
            
            
            0.0
            %
            
            -0-
            
            
            N/MNet
                (loss)
            
            
            (853,103
            )
            
            -79.2
            %
            
            (759,945
            )
            
            -108.1
            %
            
            (93,158
            )
            
            12.3
            %Total
                preferred stock dividends
            
            
            (128,418
            )
            
            -11.9
            %
            
            (128,418
            )
            
            -18.3
            %
            
            -
            
            
            0.0
            %Net
                (loss) attributable to common stockholders
            
            $
            (981,521
            )
            
            -91.2
            %
            $
            (888,363
            )
            
            -126.4
            %
            $
            (93,158
            )
            
            10.5
            %






17




**Results
      of Operations**





Revenues
      for the three-months ended June 30, 2007 were $1,076,571 compared to $702,752
      for the three-months ended June 30, 2006, an increase of 53.2%. The revenue
      increase can be attributed to a 60% increase in projects under management.
      Industry acceptance of EDC continues to increase and CenterWatch, an industry
      trade group, estimates that EDC use in 2004 was an estimated 25% of clinical
      trials. 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 June 30, 2007 approximately 63.9%
      of
      revenues was generated by trial setup activities, 27.5% was generated from
      on-going maintenance fees and approximately 8.6% was generated from fees charged
      for changes to on-going clinical trial engagements. During the three-month
      period ended June 30, 2006 we generated 72.9% of revenues from setup fees,
      16.5%
      from on-going maintenance fees and 10.6% from project change orders. Generally,
      our 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, correct copy” and No. 101 “Revenue Recognition” which
      require that the revenues be recognized ratably over the life of the contract.
      The maintenance fee revenues are earned and recognized monthly. Costs associated
      with contract revenues are recognized as incurred.





Cost
      of
      goods sold decreased to $261,935 for the three month period ended June 30,
      2007
      compared to $275,853 for the three month period ended June 30, 2006, a decrease
      of 5.0%. Cost of goods sold were approximately 24.3% of sales for the
      three-month period ended June 30, 2007 compared to 39.3% for the three-month
      period ended June 30, 2006. 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. Salaries increased
      during 2007 due to the addition of one additional programmer and a training
      specialist as part of our trial operations.





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 the remainder of fiscal 2007. We expect to continue to increase
      follow-on engagements from existing clients and expect to increase the CRO
      portion of our client base. In addition, we expect the cost of service for
      our
      licensing business model to approximate 25% of revenues when we begin our
      licensing operations during the second half of fiscal 2007. We expect the
      current version of TrialMaster, (V4.0), to increase the efficiency of trial
      building operations by 20 to 25%. V4.0 of TrialMaster is being designed using
      Microsoft’s .Net framework. Microsoft ® .NET is
      described by Microsoft as a set of software technologies for connecting
      information, people, systems, and devices. This new generation of technology
      is
      based on Web services—small building-block applications that can connect to each
      other as well as to other, larger applications over the Internet.  .





Salaries
      and related expenses are our biggest expense at 75.3% of total Operating
      Expenses for the three month period ended June 30, 2007 compared with 67.1%
      of
      total Operating Expenses for the three month period ended June 30, 2006.
      Salaries and related expenses totaled $1,258,342 for the three month period
      ended June 30, 2007 compared to $744,616 for the three month period ended June
      30, 2006, an increase of 69.0%. During the three months ended June 30, 2007
      and
      June 30, 2006 we incurred approximately $132,918 and $-0-, in
      salary
      expense, respectively, 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. We currently employ
      approximately 47 employees out of our Fort Lauderdale, Florida corporate office,
      nine out-of-state employees and we have two employees working for our
      wholly-owned German subsidiary. We expect to increase personnel within our
      production, project management and quality analysis functions in concert with
      anticipated increases in TrialMaster clients during fiscal 2007. We anticipate
      that the commercialization of our licensed TrialMaster product will require
      the
      addition of employees who will provide installation, implementation, training
      and other consulting services associated with the transfer of our TrialMaster
      technology on a licensed basis. We expect that the costs incurred related to
      the
      technology transfers of TrialMaster on a licensed basis will be offset by the
      revenues generated from these sales. We will look to selectively add experienced
      sales and marketing personnel in fiscal 2007 in an effort to increase our market
      penetration and to continue broadening our client base.





18


Rent
      and
      related expenses increased by $45,874 during the three month period ended June
      30, 2007 when compared to the three-month period ended June 30, 2006. We entered
      into a corporate office lease in May 2006 that runs through April 2011. In
      December 2001, we established a disaster recovery site at an IBM owned
      Co-Location facility in Atlanta, Georgia 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. In August 2006,
      we
      entered into a lease with 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.





Legal
      and
      professional fees totaled $85,580 for the three month period ended June 30,
      2007
      compared with $83,717 for the three month period ended June 30, 2006, an
      increase of approximately $1,863. We recorded $22,500 in financial advisory
      fees
      during the three months ended June 30, 2007 compared with $30,000 for the three
      months ended June 30, 2006. 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. We
      expect
      legal and professional fees to increase during fiscal 2007 in connection with
      our project aimed at ensuring timely compliance with Section 404 of the
      Sarbanes-Oxley Act of 2002.





Selling,
      general and administrative expenses (“SGA”) were $94,458 for the three month
      period ended June 30, 2007 compared to $84,387 for the three month period ended
      June 30, 2006, an increase of 11.9%. These expenses relate primarily to costs
      incurred in running our office day-to-day and other costs not directly related
      to other captioned items in our income statement, and include the cost of office
      equipment and supplies, the costs of attending conferences and seminars and
      other expenses incurred in the normal course of business. The Company decreased
      its marketing, sales and advertising expenditures by $16,672 for the three
      month
      period ended June 30, 2007 from $32,772 for the three month period ended June
      30, 2006 to $16,100 for the three month period ended June 30, 2007, a decrease
      of approximately 50.9%. We expect SGA expenses to continue increasing as we
      intensify and extend our selling and marketing efforts.





Interest
      expense was $8,792 during the three month period ended June 30, 2007 compared
      to
      $76,409 for the three-month period ended June 30, 2006, a decrease of $67,617
      or
      88.5%. The decrease can be attributed to the conversion of long-term debt in
      the
      aggregate amount of $3,851,042 we effected in December 2006 and March 2007.








There
      were arrearages of $51,200 in 5% Series A Preferred Stock dividends, $9,973
      in
      Series B Preferred Stock dividends and $67,245 in Series C Preferred Stock
      dividends for the three month period ended June 30, 2007, compared with
      arrearages of $51,200 in 5% Series A Preferred Stock dividends, $9,973 in Series
      B Preferred Stock dividends and $67,245 in Series C Preferred Stock dividends
      for the three month period ended June 30, 2006. We deducted $128,418 and
      $128,418 to calculate Net
      Income (Loss) Attributable to Common Stockholders for the three-month periods
      ended June 30, 2007 and June 30, 2006, respectively, relating to undeclared
      Series A, B and C Convertible Preferred Stock dividends.








19


**Liquidity
      and Capital Resources**





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.





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





**June
                30,**
            
            **December
                31,****2007**
            
            **2006**
            
            **Change**Cash
            
            
            1,095,143
            
            
            38,254
            
            
            1,056,889Accounts
                Receivable, net of allowance for doubtful accounts
            
            
            426,970
            
            
            286,708
            
            
            140,262Current
                Assets
            
            
            1,549,768
            
            
            366,988
            
            
            1,182,780Accounts
                Payable and accrued expenses
            
            
            484,429
            
            
            645,375
            
            
            (160,945
            )Accrued
                payroll taxes
            
            
            87,477
            
            
            74,766
            
            
            12,711Deferred
                revenue
            
            
            1,655,202
            
            
            1,643,566
            
            
            11,636Convertible
                notes payable
            
            
            87,500
            
            
            100,000
            
            
            (12,500
            )Current
                Liabilities
            
            
            2,314,608
            
            
            2,813,707
            
            
            (499,098
            )Working
                Capital (Deficit)
            
            
            (764,840
            )
            
            (2,446,719
            )
            
            1,681,878




**Disclosure
                for the****six
                months ended****June
                30, 2007**
            
            **June
                30, 2006**Net
                cash provided by (used in) operating activities
            
            
            (1,908,074
            )
            
            (900,920
            )Net
                cash provided by (used in) investing activities
            
            
            (79,731
            )
            
            (177,936
            )Net
                cash provided by financing activities
            
            
            3,058,083
            
            
            1,271,109Net
                increase (decrease) in cash and cash equivalents
            
            
            1,056,888
            
            
            192,253








Cash
      and
      cash equivalents increased by $1,056,888 from $38,254 to $1,095,142 at June
      30,
      2007. This was the result of cash provided by financing activities of $3,058,083
      offset by cash used in operating activities of approximately $1,908,074 and
      $79,731 used in investing activities. The significant components of the activity
      include a loss from operations of approximately $2,055,996 offset by non-cash
      transactions of $410,710 and approximately $3,058,083 we raised through the
      issuance of debt and equity securities offset by $79,731 used in investing
      activities and decreases in cash of $262,788 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 $250,000
      planned for capital expenditures to further the Company’s growth through the end
      of 2007, which will be funded through cash from operations.





20


*Contractual
      Obligations*





The
      following table sets forth our contractual obligations as of June 30,
      2007:




**Contractual
                Obligations**
            
            
            **Payments
                Due by Period****Total**
            
            **Less**
              **than
                1 year**
            
            
            **1-2**
              **Years**
            
            
            **2-3**
              **Years**
            
            
            **3-5**
              **Years**Long
                Term Debt (1)
            
            
            384,300
            
            
            87,500
            (2)
            
            
            296,800
            (3)
            
            
            0
            
            
            0Operating
                Lease Obligations
            
            
            910,850
            
            
            251,100
            
            
            
            239,281
            
            
            
            227,611
            
            
            192,858Financial
                Advisory Agreement
            
            
            225,000
            
            
            90,000
            
            
            
            90,000
            
            
            
            45,000
            
            
            0Total
            
            
            1,520,150
            
            
            428,600
            
            
            
            626,081
            
            
            
            272,611
            
            
            192,858





1.
            Amounts
                do not include interest to be paid.


2.
            Includes
                $87,500 of 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.


3.
            Includes
                $296,800 in promissory notes bearing interest at 9% annually that
                mature
                on January 1, 2009.





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 $148,442
      on our 10% Convertible Notes. We were in default effective January 30,
      2002.





We
      have
      been operating with a cash burn rate since beginning our EDC operations. In
      order to manage cash flows, we have issued preferred stock, common stock, and
      debt to satisfy operating expenses and obligations. From January 2006 to
      December 2006, an aggregate of 7,240,000 common stock warrants originally issued
      in connection with private placements of our Series B and Series C Preferred
      stock were exercised. The gross proceeds of the warrant exercises were
      $1,810,000 and we incurred no transaction fees in connection with the warrant
      exercise transactions. From January 2007 to March 2007, an aggregate of
      1,310,000 common stock warrants originally issued in connection with private
      placements of our common stock and Series C Preferred stock were exercised.
      The
      gross proceeds of the warrant exercises were $327,500 and we incurred no
      transaction fees in connection with the warrant exercise transactions. From
      February 2007 to March 2007, an aggregate of 5,000,000 shares of common stock
      were sold in connection with a private placement of our common stock. The gross
      proceeds of the private placement were $2,500,000 and we incurred no transaction
      fees in connection with the private placement.





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 should also increase the
      credibility of the Company to the clinical trial market.





21


We
      experienced increased success in marketing TrialMaster during fiscal 2006 and
      the first six months of fiscal 2007. During the last six fiscal quarters we
      have
      entered into approximately $9.3 million in contracts for trials to be serviced
      over the next five years. These contracts included 36 clinical trial engagements
      with eighteen 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 2007, we began commercializing
      our
      products on a licensed basis. 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 Technology Transition
      (partial transfer with some services performed by OmniComm) or Technology
      Transfer, should 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. According to Contract Pharma
      there is an industry-wide emphasis in establishing strategic relationships
      with
      CROs. We believe these relationships will 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 should increase our ability
      to
      provide rapidly developed, cost effective solutions for our clients.





We
      believe 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 2007. We expect to continue increasing the level
      of
      resources deployed in our sales and marketing efforts. We believe that a
      combination of our lean operating environment and increased success in new
      client acquisition, coupled with our ability to retain our existing clients
      will
      allow us to compete effectively within the EDC market.





Because
      of the losses experienced since we began the commercialization of our
      TrialMaster application we have needed to continue utilizing the proceeds from
      the sale of debt and equity securities to fund our working capital needs. When
      available, capital has been expensive relative to the valuations that were
      afforded during the expansion of the Internet sector in 1999 and 2000. The
      softness in the capital markets earlier this decade coupled with the losses
      experienced have caused working capital shortfalls. We have used a combination
      of equity financing and short-term bridge loans to fund our working capital
      needs. Other than our current capital and capital we may raise from future
      debt
      or equity offerings or short-term bridge loans, we do not have any additional
      sources of working capital.





We
      may
      continue to require substantial funds to continue our R & D 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 R & D 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, 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 R & D 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 R & D plans or other events will not result in accelerated or
      unexpected expenditures.





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.





22


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
      significant losses, negative cash flows from operations, and accumulated
      deficits for the six months
      ending June 30, 2007, 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 10, 2007.





**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
      or
      licensed for implementation by a customer such as a pharmaceutical company.
      Revenues are derived from the set-up of clinical trial engagements; on-going
      maintenance fees incurred throughout the duration of an engagement; fees for
      report writing and change orders. The clinical trials that are conducted using
      TrialMaster can last from one
      month
      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 payroll 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,
      corrected copy” and No. 101 “Revenue Recognition in Financial Statements” (“SAB
      101”). SAB 101 and 104 require that revenues be recognized ratably over the life
      of a contract. In accordance with SAB 101 the Company will record revenues
      over
      the estimated lives of the contracts.





23


*Stock
      Based Compensation.*





Options
      granted to employees under our Stock Option Plan were accounted for by using
      the
      intrinsic value method under APB Opinion No. 25, Accounting for Stock Issued
      to
      Employees (APB 25) until December 31, 2005. In October 1995, the Financial
      Accounting Standards Board (“FASB”) issued Statement No.123, Accounting for
      Stock-Based Compensation (“SFAS No. 123”), which defines a fair value based
      method of accounting for stock options. All stock based compensation issued
      to
      individuals, other than employees and directors such compensation which is
      accounted for in accordance with APB Opinion No. 25, are accounted for in
      accordance with SFAS No. 123, as amended by SFAS No.148. Effective with the
      quarter ended March 31, 2006 ,
      the
      Company stopped using the intrinsic value method to value employee stock
      options. The Company began accounting for employee stock options using the
      fair
      value method effective January 1, 2006.





**EFFECT
      OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**





In
      September 2006, the FASB issued Statement No. 157, “Fair Value
      Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
      for measuring fair value in accordance with generally accepted accounting
      principles, and expands disclosures about fair value measurements. Subsequently,
      in February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
      entities to choose to measure many financial assets and financial liabilities
      at
      fair value. Unrealized gains and losses on items for which the fair value option
      has been elected are reported in earnings. We expect to adopt both SFAS 157
      and
      SFAS 159 as of January 1, 2008. We are currently assessing the impact of the
      adoption of these statements.





**ITEM
      3.**  **CONTROLS AND PROCEDURES**





Based
      on
      their evaluation as of the end of the period covered by this Quarterly Report
      on
      Form 10-QSB, being June 30, 2007, the Company’s principal executive officer and
      principal financial officer have concluded that the Company’s disclosure
      controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the
      Securities Exchange Act of 1934 (the “Exchange Act”) are effective to ensure (i)
      that information required to be disclosed by the Company in reports that it
      files or submits under the Exchange Act is recorded, processed, summarized
      and
      reported within the time periods specified in Securities and Exchange Commission
      rules and forms, and (ii) that information required to be disclosed in the
      reports that we file or submit under the Exchange Act is accumulated and
      communicated to our management, including our principal executive officer and
      principal financial officer, to allow timely decisions regarding required
      disclosure.





There
      were no significant changes in the Company’s internal controls over financial
      reporting or in other factors that could significantly affect these controls
      subsequent to the date of their evaluation and up to the filing date of this
      Quarterly Report on Form 10-QSB. 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.





24


**PART
      II OTHER INFORMATION**





**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 Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002, promulgated under the Securities and Exchange Act of
                1934, as
                amended.31.2
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002, promulgated under the Securities and Exchange Act of
                1934, as
                amended.32.1
            Certification
                of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
                adopted
                Pursuant to Section 906 of the Sarbanes Oxley Act of
                2002.32.2
            Certification
                of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                adopted
                Pursuant to Section 906 of the Sarbanes Oxley Act of
                2002.







25




**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. WitCornelis F. Wit, Director, Chief
              Executive
              Officer and PresidentDate:
            August 14, 2007By:
            /s/Ronald
              T. LinaresRonald T. Linares, Vice President
              of
              Finance, Chief Financial and Accounting OfficerDate:
            August 14,
              2007








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