##### Table of Contents





SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549





FORM 10-Q





[Mark One]

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

for the quarterly period ended March 31, 2010



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

for the transition period from              to

Commission File Number: 0-25203





OmniComm Systems, Inc.

(Exact name of registrant as specified in its Charter)

No Changes

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







|                                                             |  |                                   
|------------------------------------------------------------ |  | ----------------------------------
|Delaware                                                     |  | 11-3349762                        
|State or other jurisdiction of
Incorporation or organization |  | IRS Employer
Identification Number
|                                                             | 
|2101 W. Commercial Blvd. Suite 4000, Ft. Lauderdale, FL      |  | 33309                             
|Address of principal executive offices                       |  | Zip Code                          

954.473.1254

Registrants Telephone Number (including area code)





Indicate by check mark whether the Issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x     NO   ̈

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

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



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

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

The number of shares outstanding of each of the issuers classes of common equity as of May 12, 2010: 85,507,699 common stock $.001 par value.









---

##### Table of Contents

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

THREE MONTH PERIOD ENDED MARCH 31, 2010



|                                                                                                                                                                                  |  |                                                                                        |  |         
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- |  | --------
|                                                                                                                                                                                  |  |                                                                                        |  | Page No.
|PART I - FINANCIAL INFORMATION                                                                                                                                                   
|Item 1.                                                                                                                                                                           |  | Financial Statements (unaudited)                                                       |  | 3       
|Item 2.                                                                                                                                                                           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations. |  | 21      
|Item 3.                                                                                                                                                                           |  | Quantitative and Qualitative Disclosures About Market Risk.                            |  | 36      
|Item 4T                                                                                                                                                                           |  | Controls and Procedures.                                                               |  | 36      
|PART II - OTHER INFORMATION                                                                                                                                                      
|Item 1.                                                                                                                                                                           |  | Legal Proceedings.                                                                     |  | 37      
|Item 1A.                                                                                                                                                                          |  | Risk Factors.                                                                          |  | 37      
|Item 2.                                                                                                                                                                           |  | Unregistered Sales of Equity Securities and Use of Proceeds.                           |  | 37      
|Item 3.                                                                                                                                                                           |  | Defaults Upon Senior Securities.                                                       |  | 37      
|Item 4.                                                                                                                                                                           |  | Removed and Reserved.                                                                  |  | 37      
|Item 5.                                                                                                                                                                           |  | Other Information.                                                                     |  | 37      
|Item 6.                                                                                                                                                                           |  | Exhibits.                                                                              |  | 37      
|SIGNATURES                                                                                                                                                                        |  | 38                                                                                    
|Exhibit 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002CEO
Cornelis F. Wit                                          
|                                                                                                                                                                                 
|Exhibit 31.2 Certification of Principal 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Principal Executive Officer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Principal Financial OfficerRonald T. Linares
|                                                                                                                                                                                 



2



---

##### Table of Contents

PART I - FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS (unaudited)
|------- | --------------------------------

OMNICOMM SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                    |  |               |            |                  |   |           
|------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | ---------------- | - | ----------
|                                                                                                                    |  | March 31,2010 |            | December 31,2009
|                                                                                                                    |  | (unaudited)   |            |                 
|ASSETS                                                                                                              |  |               |            |                  |   |           
|CURRENT ASSETS                                                                                                      |  |               |            |                  |   |           
|Cash                                                                                                                |  | $             | 138,565    |                  | $ | 60,352    
|Accounts receivable, net of allowance for doubtful accounts of $281,480 and $267,526 in 2010 and 2009,
respectively |  |               | 2,033,573  |                  |   | 3,121,183 
|Prepaid expenses                                                                                                    |  |               | 271,954    |                  |   | 239,064   
|                                                                                                                    |  |               |            |                  |   |           
|Total current assets                                                                                                |  |               | 2,444,092  |                  |   | 3,420,599 
|                                                                                                                    |  |               |            |                  |   |           
|                                                                                                                    |  |              
|PROPERTY AND EQUIPMENT, net                                                                                         |  |               | 1,272,331  |                  |   | 1,240,697 
|                                                                                                                    |  |               |            |                  |   |           
|                                                                                                                    |  |              
|OTHER ASSETS                                                                                                        |  |               |            |                  |   |           
|Intangible assets, net                                                                                              |  |               | 1,044,523  |                  |   | 1,160,581 
|Other assets                                                                                                        |  |               | 34,334     |                  |   | 25,882    
|                                                                                                                    |  |               |            |                  |   |           
|                                                                                                                    |  |              
|TOTAL ASSETS                                                                                                        |  | $             | 4,795,280  |                  | $ | 5,847,759 
|                                                                                                                    |  |               |            |                  |   |           
|                                                                                                                    |  |              
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                      |  |               |            |                  |   |           
|CURRENT LIABILITIES                                                                                                 |  |               |            |                  |   |           
|Accounts payable and accrued expenses                                                                               |  | $             | 1,594,137  |                  | $ | 1,548,215 
|Notes payable, current portion                                                                                      |  |               | 111,800    |                  |   | 111,800   
|Notes payable related parties, current portion                                                                      |  |               | 137,500    |                  |   | -0-       
|Deferred revenue, current portion                                                                                   |  |               | 5,241,474  |                  |   | 4,582,369 
|Conversion feature liability, related parties, current portion                                                      |  |               | 162,800    |                  |   | -0-       
|Conversion feature liability, current portion                                                                       |  |               | 90,358     |                  |   | 64,622    
|Convertible notes payable, current portion                                                                          |  |               | 670,333    |                  |   | 402,777   
|Convertible notes payable, related parties, current portion                                                         |  |               | 824,267    |                  |   | -0-       
|Patent settlement liability, current portion                                                                        |  |               | 680,654    |                  |   | 627,810   
|                                                                                                                    |  |               |            |                  |   |           
|Total current liabilities                                                                                           |  |               | 9,513,323  |                  |   | 7,337,593 
|                                                                                                                    |  |               |            |                  |   |           
|                                                                                                                    |  |              
|Notes payable related parties, long term                                                                            |  |               | -0-        |                  |   | 137,500   
|Deferred revenue, long term                                                                                         |  |               | 992,243    |                  |   | 980,642   
|Convertible notes payable, related parties, net of current portion                                                  |  |               | 6,776,599  |                  |   | 6,996,178 
|Convertible notes payable, net of current portion                                                                   |  |               | 23,833     |                  |   | 224,600   
|Conversion feature liability, related parties, net of current portion                                               |  |               | 1,025,438  |                  |   | 1,809,418 
|Conversion feature liability, net of current portion                                                                |  |               | 8,600      |                  |   | 71,400    
|Patent settlement liability  long term                                                                             |  |               | 1,823,892  |                  |   | 1,835,463 
|Warrant liability, related parties                                                                                  |  |               | 1,658,994  |                  |   | 1,977,402 
|Warrant liability                                                                                                   |  |               | 661,449    |                  |   | 760,791   
|                                                                                                                    |  |               |            |                  |   |           
|TOTAL LIABILITIES                                                                                                   |  |               | 22,484,371 |                  |   | 22,130,987
|                                                                                                                    |  |               |            |                  |   |           



3



---

##### Table of Contents

|                                                                                                                               |  |               |             |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                               |  | March 31,2010 |             |   | December 31,2009 |  
|                                                                                                                               |  | (unaudited)   |             |   |                  |  
|COMMITMENTS AND CONTINGENCIES (See Note 11)                                                                                    |  |               |             |   |                  |   |             |  
|                                                                                                                               |  |              
|SHAREHOLDERS EQUITY (DEFICIT)                                                                                                 |  |               |             |   |                  |   |             |  
|Series A preferred stock5,000,000 shares authorized, 4,125,224 and 4,125,224 issued and outstanding, respectively at par      |  |               | 4,125       |   |                  |   | 4,125       |  
|                                                                                                                               |  |              
|Series B preferred stock230,000 shares authorized, -0- and -0- issued and outstanding, respectively at par                    |  |               | -0-         |   |                  |   | -0-         |  
|                                                                                                                               |  |              
|Series C preferred stock747,500 shares authorized, -0- and -0- issued and outstanding, respectively at par                    |  |               | -0-         |   |                  |   | -0-         |  
|                                                                                                                               |  |              
|Common stock250,000,000 shares authorized, 85,507,699 and 85,507,699 issued and outstanding, respectively, at $.001 par
value |  |               | 86,474      |   |                  |   | 86,474      |  
|Additional paid in capitalpreferred                                                                                           |  |               | 3,718,054   |   |                  |   | 3,718,054   |  
|Additional paid in capitalcommon                                                                                              |  |               | 36,408,585  |   |                  |   | 36,278,798  |  
|Less cost of treasury stock: Common1,014,830 and 1,014,830shares, respectively                                               |  |               | (503,086    | ) |                  |   | (503,086    | )
|Accumulated other comprehensive income                                                                                         |  |               | (12,602     | ) |                  |   | 2,934       |  
|Accumulated deficit                                                                                                            |  |               | (57,390,641 | ) |                  |   | (55,870,527 | )
|                                                                                                                               |  |               |             |   |                  |   |             |  
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                                                                                           |  |               | (17,689,091 | ) |                  |   | (16,283,228 | )
|                                                                                                                               |  |               |             |   |                  |   |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                           |  | $             | 4,795,280   |   |                  | $ | 5,847,759   |  
|                                                                                                                               |  |               |             |   |                  |   |             |  

The accompanying notes are an integral part of these financial statements.



4



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                                 |  |                                     |            |   |      |   |            |  
|---------------------------------------------------------------- |  | ----------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | For the three months endedMarch 31, |           
|                                                                 |  | 2010                                |            |   | 2009 |  
|Total revenues                                                   |  | $                                   | 2,697,363  |   |      | $ | 2,416,657  |  
|                                                                 |  |                                    
|Cost of sales                                                    |  |                                     | 434,871    |   |      |   | 494,820    |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Gross margin                                                     |  |                                     | 2,262,492  |   |      |   | 1,921,837  |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Salaries, benefits and related taxes                             |  |                                     | 2,685,750  |   |      |   | 2,191,509  |  
|                                                                 |  |                                    
|Rent                                                             |  |                                     | 200,734    |   |      |   | 138,587    |  
|                                                                 |  |                                    
|Consulting services                                              |  |                                     | 210,724    |   |      |   | 38,709     |  
|                                                                 |  |                                    
|Legal and professional fees                                      |  |                                     | 85,516     |   |      |   | 112,663    |  
|                                                                 |  |                                    
|Travel                                                           |  |                                     | 125,254    |   |      |   | 60,898     |  
|                                                                 |  |                                    
|Telephone and internet                                           |  |                                     | 83,204     |   |      |   | 30,306     |  
|                                                                 |  |                                    
|Selling, general and administrative                              |  |                                     | 241,017    |   |      |   | 248,198    |  
|                                                                 |  |                                    
|Bad debt expense                                                 |  |                                     | 13,954     |   |      |   | 7,553      |  
|                                                                 |  |                                    
|Depreciation expense                                             |  |                                     | 125,928    |   |      |   | 65,699     |  
|                                                                 |  |                                    
|Amortization expense                                             |  |                                     | 116,058    |   |      |   | -0-        |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Total operating expenses                                         |  |                                     | 3,888,139  |   |      |   | 2,894,122  |  
|                                                                 |  |                                    
|Operating income (loss)                                          |  |                                     | (1,625,647 | ) |      |   | (972,285   | )
|                                                                 |  |                                    
|Interest expense                                                 |  |                                     | (697,265   | ) |      |   | (449,998   | )
|                                                                 |  |                                    
|Interest expense, related parties                                |  |                                     | (273,243   | ) |      |   | (198,591   | )
|                                                                 |  |                                    
|Interest income                                                  |  |                                     | 47         |   |      |   | 3,461      |  
|                                                                 |  |                                    
|Gain on extinguishment of debt                                   |  |                                     | -0-        |   |      |   | 432        |  
|                                                                 |  |                                    
|Unrealized gain on derivative liabilities                        |  |                                     | 1,075,994  |   |      |   | 1,714,074  |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Income (loss) before income taxes and preferred dividends        |  |                                     | (1,520,114 | ) |      |   | 97,093     |  
|                                                                 |  |                                    
|Net income (loss)                                                |  |                                     | (1,520,114 | ) |      |   | 97,093     |  
|                                                                 |  |                                    
|Preferred stock dividends                                        |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Preferred stock dividends in arrears Series A                    |  |                                     | (50,720    | ) |      |   | (49,531    | )
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Total preferred stock dividends                                  |  |                                     | (50,720    | ) |      |   | (49,531    | )
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Net income (loss) attributable to common stockholders            |  | $                                   | (1,570,834 | ) |      | $ | 47,562     |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Net income (loss) per share, basic and diluted                   |  | $                                   | (0.02      | ) |      | $ | 0.00       |  
|                                                                 |  |                                     |            |   |      |   |            |  
|                                                                 |  |                                    
|Weighted average number of shares outstanding, basic and diluted |  |                                     | 85,507,699 |   |      |   | 76,581,518 |  
|                                                                 |  |                                     |            |   |      |   |            |  

The accompanying notes are an integral part of these financial statements



5



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                        |  |                                     |            |   |      |   |            |  
|--------------------------------------------------------------------------------------- |  | ----------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                        |  | For the three months endedMarch 31, |           
|                                                                                        |  | 2010                                |            |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                    |  |                                     |            |   |      |   |            |  
|Net income (loss)                                                                       |  | $                                   | (1,520,114 | ) |      | $ | 97,093     |  
|Adjustment to reconcile net loss to net cash provided by (used in) operating activities |  |                                     |            |   |      |   |            |  
|Gain on extinguishment of debt                                                          |  |                                     | -0-        |   |      |   | (432       | )
|Common stock issued in lieu of salary                                                   |  |                                     | -0-        |   |      |   | 42,310     |  
|Unrealized gain on derivatives                                                          |  |                                     | (1,075,994 | ) |      |   | (1,714,074 | )
|Interest expense from derivative instruments                                            |  |                                     | 671,477    |   |      |   | 431,248    |  
|Employee stock option expense                                                           |  |                                     | 129,787    |   |      |   | 214,415    |  
|Depreciation and amortization                                                           |  |                                     | 241,987    |   |      |   | 65,699     |  
|Changes in operating assets and liabilities                                             |  |                                     |            |   |      |   |            |  
|Accounts receivable                                                                     |  |                                     | 1,087,611  |   |      |   | 1,400,552  |  
|Prepaid expenses                                                                        |  |                                     | (32,890    | ) |      |   | 6,701      |  
|Other assets                                                                            |  |                                     | (8,453     | ) |      |   | (4,425     | )
|Accounts payable and accrued expenses                                                   |  |                                     | 45,923     |   |      |   | 24,772     |  
|Patent settlement liability                                                             |  |                                     | 41,272     |   |      |   | 54,178     |  
|Deferred revenue                                                                        |  |                                     | 670,705    |   |      |   | (167,225   | )
|                                                                                        |  |                                     |            |   |      |   |            |  
|Net cash provided by (used in) operating activities                                     |  |                                     | 251,311    |   |      |   | 450,812    |  
|                                                                                        |  |                                     |            |   |      |   |            |  
|                                                                                        |  |                                    
|CASH FLOWS FROM INVESTING ACTIVITIES                                                    |  |                                     |            |   |      |   |            |  
|Purchase of property and equipment                                                      |  |                                     | (164,055   | ) |      |   | (55,488    | )
|                                                                                        |  |                                     |            |   |      |   |            |  
|Net cash provided by (used in) investing activities                                     |  |                                     | (164,055   | ) |      |   | (55,488    | )
|                                                                                        |  |                                    
|CASH FLOWS FROM FINANCING ACTIVITIES                                                    |  |                                     |            |   |      |   |            |  
|Repayments of notes payable                                                             |  |                                     | -0-        |   |      |   | (360,000   | )
|Repayments of convertible notes payable                                                 |  |                                     | -0-        |   |      |   | (12,500    | )
|                                                                                        |  |                                     |            |   |      |   |            |  
|Net cash provided by financing activities                                               |  |                                     | -0-        |   |      |   | (372,500   | )
|                                                                                        |  |                                     |            |   |      |   |            |  
|                                                                                        |  |                                    
|Effect of exchange rate changes on cash and cash equivalents                            |  |                                     | (9,043     | ) |      |   | 2,232      |  
|Net increase (decrease) in cash and cash equivalents                                    |  |                                     | 78,213     |   |      |   | 25,056     |  
|Cash and cash equivalents at beginning of period                                        |  |                                     | 60,352     |   |      |   | 2,035,818  |  
|                                                                                        |  |                                     |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                              |  | $                                   | 138,565    |   |      | $ | 2,060,874  |  
|                                                                                        |  |                                     |            |   |      |   |            |  
|                                                                                        |  |                                    
|Supplemental disclosures of cash flow information:                                      |  |                                     |            |   |      |   |            |  
|Cash paid during the period for:                                                        |  |                                     |            |   |      |   |            |  
|Income taxes                                                                            |  | $                                   | -0-        |   |      | $ | -0-        |  
|                                                                                        |  |                                     |            |   |      |   |            |  
|Interest                                                                                |  | $                                   | 279,218    |   |      | $ | 192,034    |  
|                                                                                        |  |                                     |            |   |      |   |            |  
|Non-cash transactions                                                                   |  |                                     |            |   |      |   |            |  
|Common stock issued in lieu of salary                                                   |  | $                                   | -0-        |   |      | $ | 42,310     |  

See accompanying
summary of accounting policies and notes to financial statements



6



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1: | ORGANIZATION AND NATURE OF OPERATIONS
|------- | -------------------------------------

OmniComm Systems, Inc. is a healthcare technology company that provides Web-based electronic data capture
(EDC) solutions and related value-added services to pharmaceutical and biotech companies, clinical research organizations, and other clinical trial sponsors worldwide. Our proprietary EDC software applications:
TrialMaster®; TrialOne; and eClinical Suite, allow 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 our EDC software applications and services. Our research and development efforts are focused on developing new, complementary software solutions,
as well as enhancing our existing software solutions through the addition of increased functionality. The majority of our research and development activities represent salaries to our software developers. During the period ended March 31, 2010
and March 31, 2009 we spent approximately $991,009 and $239,468 respectively, on research and development activities, which include costs associated with customization of our software products.



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



BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The Companys accounts include those of all its wholly owned subsidiaries and have been prepared in conformity with
(i) accounting principles generally accepted in the United States of America; and (ii) the rules and regulations of the United States Securities and Exchange Commission. All significant intercompany accounts and transactions between the
Company and its subsidiaries have been eliminated in consolidation.

UNAUDITED FINANCIAL STATEMENTS

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

The operating results for the three-month period ended March 31, 2010 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2010. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form
10-K for the year ended December 31, 2009.

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.



7



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



RECLASSIFICATIONS

Certain reclassifications have been made in the 2009 financial statements to conform to the 2010 presentation. These reclassifications
did not have any effect on our net loss or shareholders deficit.

SEGMENT INFORMATION

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



| |  |  | the initial setup activities associated with building, implementing and initiating clinical trial projects by our clinical development team;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | the sale and transfer of our software products on a licensed basis and the associated installation, validation and training, professional and
consulting services we provide licensees; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the hosting and subscription fees paid by our customers for hosting our ASP application in our servers and also for hosting their data collected during
their clinical trial projects.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fees associated with each business activity for the periods ended
March 31, 2010 and March 31, 2009, respectively are:



|                          |  |                    |           |  |          |   |  |   |           |  |       |  
|------------------------- |  | ------------------ | --------- |  | -------- | - |  | - | --------- |  | ----- | -
|                          |  | Three Months Ended |          
|Business Activity         |  | 03/31/10           |           |  | 03/31/09 |  
|Set-up Fees               |  | $                  | 1,087,010 |  | 40.3     | % |  | $ | 1,269,870 |  | 52.5  | %
|Change Orders             |  |                    | 27,960    |  | 1.0      | % |  |   | 142,674   |  | 5.9   | %
|Maintenance               |  |                    | 1,062,834 |  | 39.4     | % |  |   | 404,150   |  | 16.7  | %
|Software Licenses         |  |                    | 148,740   |  | 5.5      | % |  |   | 431,891   |  | 17.9  | %
|Professional Services     |  |                    | 35,800    |  | 1.3      | % |  |   | 168,072   |  | 7.0   | %
|Hosting and Subscriptions |  |                    | 335,019   |  | 12.4     | % |  |   | -0-       |  | 0.0   | %
|                          |  |                    |           |  |          |   |  |   |           |  |       |  
|Totals                    |  | $                  | 2,697,363 |  | 100.0    | % |  | $ | 2,416,657 |  | 100.0 | %
|                          |  |                    |           |  |          |   |  |   |           |  |       |  

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 collectability by management and an allowance for bad debts is established as necessary. The Company
had recorded an allowance for uncollectible accounts receivable of $267,526 and $281,480 as of December 31, 2009 and March 31, 2010, respectively.



8



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



CONCENTRATION OF CREDIT RISK

Except as follows, the Company has no significant off-balance-sheet risk or credit risk concentrations. Financial instruments that
subject the Company to potential credit risks are principally cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with credit worthy financial institutions, however, the Company does maintain cash in its
accounts from time-to-time that exceed the maximum federally insured limits. Concentrated credit risk with respect to accounts receivable is limited to creditworthy customers. The Company's customers are principally located in the United States and
Europe. The Company is directly affected by the overall financial condition of the pharmaceutical, biotechnology and medical device industries and management believes that credit risk exists and that any credit risk the Company faces has been
adequately reserved for as of March 31, 2010. Prior to 2008, the Company had not historically experienced significant losses related to receivables from individual customers or groups of customers in any specific industry or geographic area.
Beginning in the second half of fiscal 2008 and continuing through the first quarter of 2010, the biotechnology industry experienced liquidity and funding difficulties. Several of the Companys clients operate in this segment. The Company
maintains an allowance for doubtful accounts based on accounts past due according to contractual terms and historical collection experience. Actual losses when incurred are charged to the allowance. The Company's losses related to collection of
accounts receivable prior to fiscal 2008 were consistently within management's expectations. The overall downturn in the Global economy impacted several of the Companys clients beginning in late 2008. Due to these factors, the Company believes
no additional credit risk beyond the amounts provided for in our allowance for uncollectible accounts. The Company reevaluates the allowance on a monthly basis based on a specific review of receivable agings and the period that any receivables are
beyond the standard payment terms. The Company does not require collateral from its customers in order to mitigate credit risk.

One customer accounted for 19% of our revenues during the period ended March 31, 2010 or approximately $524,000. One customer
accounted for 24% of our revenues during the period ended March 31, 2009 or approximately $570,000 and a second client accounted for 20% of our revenues or approximately $482,000. The following table summarizes the number of customers who
individually comprise greater than 10% of total revenue and/or total accounts receivable and their aggregate percentage of the Company's total revenue and gross accounts receivable for the periods presented.



|                     |  |               |  |                            |                     |  |               |  |                                      |  
|-------------------- |  | ------------- |  | -------------------------- | ------------------- |  | ------------- |  | ------------------------------------ | -
|                     |  | Revenues      |  |                            | Accounts Receivable | 
|For the Period ended |  | # ofCustomers |  | Percentageof TotalRevenues |                     |  | # ofCustomers |  | Percentageof TotalAccountsReceivable |  
|03/31/2010           |  | 1             |  | 19                         | %                   |  | 2             |  | 29                                   | %
|12/31/2009           |  | 1             |  | 26                         | %                   |  | 2             |  | 54                                   | %
|03/31/2009           |  | 2             |  | 44                         | %                   |  | 1             |  | 35                                   | %



9



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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



|                    |  |                       |         |                  |   |          |  
|------------------- |  | --------------------- | ------- | ---------------- | - | -------- | -
|                    |  | For the periods ended |        
|                    |  | March 31,2010         |         | December 31,2009 |  
|Beginning of period |  | $                     | 267,526 |                  | $ | 150,933  |  
|Bad debt expense    |  |                       | 13,954  |                  |   | 235,160  |  
|Write-offs          |  |                       | -0-     |                  |   | (118,567 | )
|                    |  |                       |         |                  |   |          |  
|End of period       |  | $                     | 281,480 |                  | $ | 267,526  |  
|                    |  |                       |         |                  |   |          |  

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

PROPERTY AND EQUIPMENT

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

ASSET IMPAIRMENT

Asset Acquisitions and Intangible Assets

We account for asset acquisitions in accordance with ASC 350, Intangibles- Goodwill and Other. The acquisition method of
accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of an asset acquisition.

The judgments that we make in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as
well as asset lives, can materially impact net income in periods following an asset acquisition. We generally use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The income approach presumes
that the value of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or
reproduction cost. The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately
selected is based on the characteristics of the asset and the availability of information.

Long Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying
amounts may not be recoverable. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over
which cash flows will occur, their amount and the assets residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We use quoted market prices
when available and independent appraisals, as appropriate, to determine fair value.

DEFERRED REVENUE



10



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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 generally entitled to payment for all work performed through the point of cancellation. As of March 31, 2010, the Company had $6,233,717 in deferred revenues relating to contracts for services to be
performed over periods ranging from 1 month to 5 years. The Company had $5,241,474 in deferred revenues that are expected to be recognized in the next twelve fiscal months.

REVENUE RECOGNITION POLICY

OmniComms revenue model is transaction-based and can be implemented either as an ASP (application service provider) or licensed for
implementation by a customer such as a pharmaceutical company. Revenues are derived from the set-up of clinical trial engagements; licensing arrangements, fees earned for hosting our clients data and projects, 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 our EDC applications can last from a few months to several years. Most of the fees associated with our
product including post-setup customer support in the form of maintenance charges are recognized ratably over the term of clinical trial projects. Cost of sales is primarily comprised of programmer salaries and taxes and is expensed as incurred.

The Company recognizes sales, for both financial statement and tax purposes in accordance with SEC Staff Accounting
Bulletin No. 104 Revenue Recognition in Financial Statements (SAB 104)(Codified within Accounting Standards Codification (ASC) Revenue Recognition, ASC 605) and AICPA Statement of Position 97-2 (SOP 97-2) Software
Revenue Recognition as amended by SOP 98-9 (Codified within ASC 605.985, Software Industry Revenue Recognition).SAB 104 requires that revenues be recognized ratably over the life of a contract. The Company will periodically record
deferred revenues relating to advance payments in contracts. Under its licensing arrangement the Company recognizes revenue pursuant to SOP 97-2. Under these arrangements, the Company recognizes revenue when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer and/or delivery has occurred; (3) the collection of fees is probable; and (4) the fee is fixed or determinable. SOP
97-2, as amended, requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. We have analyzed each element in our multiple element arrangements and
determined that we have sufficient vendor-specific objective evidence (VSOE) to allocate revenues to license updates and product support. License revenues are recognized on delivery if the other conditions of SOP 97-2 are satisfied.
License updates and product support revenue is recognized ratably over the term of the arrangement. In arrangements where term licenses are bundled with license updates and product support and such revenue is recognized ratably over the term of the
arrangement, we allocate the revenue to license revenue and to license updates and product support revenue based on the VSOE of fair value for license updates and product support revenue on perpetual licenses of similar products.

ADVERTISING

Advertising costs are expensed as incurred. Advertising costs were $65,716 and $37,400 for the periods ended March 31, 2010 and
March 31, 2009, respectively.

RESEARCH AND DEVELOPMENT EXPENSES

Software development costs are included in research and development and are expensed as incurred. Statement of Financial Accounting
Standards No. 86 Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, (SFAS 86) (Codified within ASC 985.20, Software Industry Costs of Software to Be Sold, Leased or
Marketed), 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



11



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



technological feasibility and the general availability of such software has been short and software development costs qualifying for capitalization have been immaterial. Accordingly, the Company
has not capitalized any software development costs under SFAS 86. During the quarter ended March 31, 2010 and March 31, 2009 we spent approximately $991,009 and $239,468 respectively, on research and development activities, which include
costs associated with customization of our software products and services for our clients projects and which are primarily comprised of salaries and related expenses for our software developers.

EMPLOYEE EQUITY INCENTIVE PLANS

The company has an employee equity incentive plan, the OmniComm Systems, Inc. 2009 Equity Incentive Plan (the 2009 Plan),
which was approved at our Annual Meeting of Shareholders on July 10, 2009. The 2009 Plan provides for the issuance of up to 7.5 million shares to employees under the terms of the plan documents. The predecessor plan, the OmniComm Systems,
1998 Stock Incentive Plan (the 1998 Plan) expired on December 31, 2008. The 1998 Plan provided for the issuance of up to 12.5 million shares in accordance with the terms of the plan document. On January 1, 2006, the
Company adopted SFAS No. 123 (revised 2004), Share-Based Payment, (Codified within ASC 718, Compensation  Stock Compensation) which addresses the accounting for transactions in which an entity exchanges its equity
instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) is a revision to SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123(R) requires measurement of the
cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the
grant date must be recognized.

The Company adopted SFAS No. 123(R) using the modified prospective transition method,
which requires the application of the accounting standard as of January 1, 2006, the first day of the Companys fiscal year. The Companys Consolidated Financial Statements as of and for the periods ended March 31, 2010 and
March 31, 2009, respectively, reflect the impact of SFAS No. 123(R).

SFAS No. 123(R) requires companies to
estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the
Companys Consolidated Statements of Income. Stock-based compensation recognized in the Companys Consolidated Statements of Income for the periods ended March 31, 2010 and March 31, 2009 includes compensation expense for
share-based awards granted prior to, but not fully vested as of January 1, 2006 based on the grant date fair value estimated in accordance with SFAS No. 123 as well as compensation expense for share-based awards granted from
January 1, 2006 to March 31, 2010 in accordance with SFAS No. 123(R). The Company currently uses the American Binomial option pricing model to determine grant date fair value.

EARNINGS PER SHARE

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128,
Earnings per Share, (SFAS 128) (Codified with ASC 260, Earnings Per Share).SFAS 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. The diluted earnings per share calculation is very similar to the previously utilized fully diluted earnings per share
calculation method.

Basic earnings per share were calculated using the weighted average number of shares outstanding of
85,507,699 and 76,581,518 for the periods ended March 31, 2010 and March 31, 2009, respectively. There were no differences between basic and diluted earnings per share. Options to purchase



12



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



12,286,500 shares of common stock at prices ranging from $0.20 to $0.70 per share were outstanding at March 31, 2010. Stock warrants to purchase 40,808,241 shares of common stock at exercise
prices ranging from $0.25 to $0.60 per share were outstanding at March 31, 2010.

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.

IMPACT OF NEW ACCOUNTING STANDARDS

In the first quarter of 2010, we adopted the following new accounting pronouncements:

On January 1, 2010, the Company implemented certain provisions of Financial Accounting Standards Board Accounting Standards
Codification (FASB ASC) Topic 810, Consolidation. The new provisions (a) require a qualitative rather than a quantitative approach to determining the primary beneficiary of a variable interest entity (VIE);
(b) amend certain guidance pertaining to the determination of the primary beneficiary when related parties are involved; (c) amend certain guidance for determining whether an entity is a VIE; and (d) require continuous assessments of
whether an enterprise is the primary beneficiary of a VIE. The implementation of this standard did not have an impact on the Companys results of operations or financial condition.

On January 1, 2010, the Company implemented certain provisions of Accounting Standards Update No. 2010-06, Fair Value
Measurements and Disclosures (Topic 820)Improving Disclosures about Fair Value Measurements (Update 2010-06). Update 2010-06 requires the Company to (a) provide information about movements of assets among Levels 1 and 2
of the three-tier fair value hierarchy; (b) provide a reconciliation of purchases, sales, issuance, and settlements of financial instruments valued with a Level 3 method; and (c) provide fair value measurement disclosures for each class of
financial assets and liabilities. The implementation did not have an impact on the Companys results of operations or financial condition. Required disclosures for the reconciliation of purchases, sales, issuance and settlements of financial
instruments valued with a Level 3 method are effective for the Company beginning on January 1, 2011 and the Company does not expect the implementation to have a material impact on the Companys results of operations or financial condition.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, (SFAS 109) (Codified within ASC 740, Income Taxes). SFAS 109 has as its basic objective the recognition of current and deferred income tax assets and liabilities based upon all events that have been recognized
in the financial statements as measured by the provisions of the enacted tax laws.

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



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

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



13



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Estimates about the adequacy of funding for our activities are based upon certain
assumptions, including assumptions that the research and development programs relating to our technology can be conducted at projected costs and that progress towards the commercialization of our technology will be timely and successful. There can
be no assurance that changes in our research and development plans, acquisitions or other events will not result in accelerated or unexpected expenditures.

To satisfy our capital requirements, we 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 or result in increased interest
expense in future periods.

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 our historical operating losses, negative cash flows and accumulated deficits for the period ending March 31, 2010 there is substantial
doubt about the Companys ability to continue as a going concern.



|NOTE 4 | EARNINGS PER SHARE
|------ | ------------------

Basic earnings per share (EPS) is computed by dividing income available to common shareholders (which for the Company equals
its net loss) by the weighted average number of common shares outstanding and dilutive EPS adds the dilutive effect of stock options and other common stock equivalents. Antidilutive shares aggregating 83,671,746 and 51,319,582 have been omitted from
the calculation of dilutive EPS for the quarters ended March 31, 2010 and March 31, 2009, respectively. Provided below is reconciliation between numerators and denominators of the basic and diluted earnings per shares:



|                              |  |                       |            |   |                   |            |                 |   |       |                 |  |                   |        |                 |            |  |   |     
|----------------------------- |  | --------------------- | ---------- | - | ----------------- | ---------- | --------------- | - | ----- | --------------- |  | ----------------- | ------ | --------------- | ---------- |  | - | ----
|                              |  | For the Quarter Ended
|                              |  | March 31, 2010        |            |   | March 31, 2009   
|                              |  | IncomeNumerator       |            |   | SharesDenominator |            | Per-ShareAmount |   |       | IncomeNumerator |  | SharesDenominator |        | Per-ShareAmount
|Basic EPS                     |  | $                     | (1,570,834 | ) |                   | 85,507,699 |                 | $ | (0.02 | )               |  | $                 | 47,562 |                 | 76,581,518 |  | $ | 0.00
|Effect of Dilutive Securities |  |                       |            |   |                   |            |                 |   |       |                 |  |                   |        |                 |            |  |   |     
|None                          |  |                       | -0-        |   |                   | -0-        |                 |   | -0-   |                 |  |                   | -0-    |                 | -0-        |  |   | -0- 
|                              |  |                       |            |   |                   |            |                 |   |       |                 |  |                   |        |                 |            |  |   |     
|Diluted EPS                   |  | $                     | (1,570,834 | ) |                   | 85,507,699 |                 | $ | (0.02 | )               |  | $                 | 47,562 |                 | 76,581,518 |  | $ | 0.00
|                              |  |                       |            |   |                   |            |                 |   |       |                 |  |                   |        |                 |            |  |   |     



14



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 5: | PROPERTY AND EQUIPMENT, AT COST
|------- | -------------------------------

Property and equipment consists of the following:



|                              |  |                |           |                         |   |           |  |                         |           |                       |   |           |  |        
|----------------------------- |  | -------------- | --------- | ----------------------- | - | --------- |  | ----------------------- | --------- | --------------------- | - | --------- |  | -------
|                              |  | March 31, 2010 |           | December 31, 2009       |   |          
|                              |  | Cost           |           | AccumulatedDepreciation |   | Cost      |  | AccumulatedDepreciation |           | EstimatedUseful Lives
|Computer and office equipment |  | $              | 1,390,290 |                         | $ | 768,269   |  | $                       | 1,309,329 |                       | $ | 719,222   |  | 5 years
|Leasehold improvements        |  |                | 64,110    |                         |   | 40,633    |  |                         | 64,110    |                       |   | 37,592    |  | 5 years
|Computer software             |  |                | 1,305,693 |                         |   | 711,849   |  |                         | 1,230,989 |                       |   | 642,042   |  | 3 years
|Office furniture              |  |                | 102,159   |                         |   | 69,170    |  |                         | 102,159   |                       |   | 67,034    |  | 5 years
|                              |  |                |           |                         |   |           |  |                         |           |                       |   |           |  |        
|                              |  | $              | 2,862,252 |                         | $ | 1,589,921 |  | $                       | 2,706,587 |                       | $ | 1,465,890 |  |        
|                              |  |                |           |                         |   |           |  |                         |           |                       |   |           |  |        

Depreciation expense for the periods ended March 31, 2010 and March 31, 2009 was
$125,928 and $65,699 respectively.



|NOTE 6: | INTANGIBLE ASSETS, AT COST
|------- | --------------------------

Intangible assets consists of the following:



|               |  |                |           |                         |   |               |  |      |           |                         |   |               |  |                      |         |  |   |           |  |        
|-------------- |  | -------------- | --------- | ----------------------- | - | ------------- |  | ---- | --------- | ----------------------- | - | ------------- |  | -------------------- | ------- |  | - | --------- |  | -------
|               |  | March 31, 2010 |           | December 31, 2009      
|               |  | Cost           |           | AccumulatedAmortization |   | ResidualValue |  | Cost |           | AccumulatedAmortization |   | ResidualValue |  | EstimatedUsefulLives
|Customer lists |  | $              | 1,392,701 |                         | $ | 348,175       |  | $    | 1,044,526 |                         | $ | 1,392,701     |  | $                    | 232,116 |  | $ | 1,160,585 |  | 3 years
|               |  |                |           |                         |   |               |  |      |           |                         |   |               |  |                      |         |  |   |           |  |        
|               |  | $              | 1,392,701 |                         | $ | 348,175       |  | $    | 1,044,526 |                         | $ | 1,392,701     |  | $                    | 232,116 |  | $ | 1,160,585 |  |        
|               |  |                |           |                         |   |               |  |      |           |                         |   |               |  |                      |         |  |   |           |  |        

Amortization expense for the periods ended March 31, 2010 and March 31,
2009 was $116,058 and $-0- respectively.

Annual amortization expense for the Companys intangible assets is as follows:



|      |  |   |          
|----- |  | - | ---------
|2010  |  | $ | 348,175  
|2011  |  |   | 464,234  
|2012  |  |   | 232,117  
|2013  |  |   | -0-      
|2014  |  |   | -0-      
|      |  |   |          
|Total |  | $ | 1,044,526
|      |  |   |          



|NOTE 7: | ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|------- | -------------------------------------

Accounts payable and accrued expenses consist of the following:



|                                            |  |                |           |                   |   |          
|------------------------------------------- |  | -------------- | --------- | ----------------- | - | ---------
|                                            |  | March 31, 2010 |           | December 31, 2009
|Accounts payable                            |  | $              | 1,194,912 |                   | $ | 1,200,674
|Accrued payroll and related costs           |  |                | 158,284   |                   |   | 119,137  
|Other accrued expenses                      |  |                | 4,844     |                   |   | 11,821   
|Accrued interest                            |  |                | 236,097   |                   |   | 216,583  
|                                            |  |                |           |                   |   |          
|Total accounts payable and accrued expenses |  | $              | 1,594,137 |                   | $ | 1,548,215
|                                            |  |                |           |                   |   |          



15



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 8: | NOTES PAYABLE
|------- | -------------

At
March 31, 2010, the Company owed $249,300 in notes payable. The table below provides details as to the terms and conditions of the notes payable.



OriginationDate

Due Date

InterestRate


Amount

ShortTerm

LongTerm12/31/08

01/31/11

9.00
%

$
137,500

$
137,500

$
-0-01/01/09

10/01/10

9.00
%


51,800


51,800


-0-01/01/09

10/01/10

9.00
%


60,000


60,000


-0-$
249,300

$
249,300

$
-0-




|NOTE 9: | CONVERTIBLE DEBT
|------- | ----------------

The following table summarizes the convertible debt activity the Company undertook during fiscal 2008 and 2009 and which is still
outstanding as of March 31, 2010.



OriginationDate

InterestRate


OriginalPrincipal

AllocatedDiscount

TotalDiscountAmortized

Discount at3/31/108/29/08

10
%

$
2,270,000

$
2,052,080

$
1,624,563

$
427,51712/16/08

12
%


5,075,000


1,370,250


913,500


456,7509/30/09

12
%


1,400,000


526,400


175,467


350,93312/31/09

12
%


1,490,000


935,720


155,953


779,767Totals




$
10,235,000

$
4,884,450

$
2,869,483

$
2,014,967




On September 30, 2009, we sold an aggregate of $1,400,000 principal amount 12% Secured Convertible Debentures (the
Debentures) and common stock purchase warrants to three accredited investors, including our Chief Executive Officer. We granted the holders a security interest in all of our assets to secure performance of our obligations under the
Debentures and the other transaction agreements.

The payments required at maturity under the Companys outstanding
convertible debt at March 31, 2010 are as follows:



|      |  |   |           
|----- |  | - | ----------
|2010  |  | $ | 520,000   
|2011  |  |   | 2,890,000 
|2012  |  |   | -0-       
|2013  |  |   | 6,900,000 
|2014  |  |   | -0-       
|      |  |   |           
|Total |  | $ | 10,310,000
|      |  |   |           



16



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 10: | FAIR VALUE MEASUREMENT
|-------- | ----------------------

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (Codified
within ASC 820, Fair Value Measurements and Disclosures), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS No. 157 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 was effective for the Companys
fiscal year beginning January 1, 2008 and for interim periods within that year. In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157 (Codified within ASC 820,
Fair Value Measurements and Disclosures), which delayed for one year the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). As required, the Company adopted ASC 820 for its financial assets on January 1, 2008. Adoption did not have a material impact on the Companys financial position or results of
operations.

ASC 820 clarifies that fair value is an exit price, representing the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions
that market participants would use in pricing an asset or liability. ASC 820 requires the Company to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs
are prioritized as follows:



| |  |  | Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly such as quoted prices for
similar assets or liabilities or market-corroborated inputs; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions
about how market participants would price the assets or liabilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The valuation techniques that may be
used to measure fair value are as follows:



| | A. | Market approachUses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Income approachUses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts,
including present value techniques, option-pricing models and excess earnings method
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | C. | Cost approachBased on the amount that currently would be required to replace the service capacity of an asset (replacement cost)
| | -- | ---------------------------------------------------------------------------------------------------------------------------------

The Company also adopted the provisions of Statement of Financial Accounting Standards No. 159 (SFAS 159) (Codified
within ASC 825, Financial Instruments) in the first quarter of 2008. SFAS No. 159 allows companies to choose to measure eligible assets and liabilities at fair value with changes in value recognized in earnings. Fair value treatment may be
elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to re-measure any of its existing financial assets or
liabilities under the provisions of this Statement and did not elect the



17



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



fair value option for any financial assets and liabilities transacted in the periods ended March 31, 2010 and March 31, 2009, respectively.

The Companys financial assets or liabilities subject to ASC 820 as of March 31, 2010 include the conversion feature and
warrant liability associated with convertible debentures issued during fiscal 2008 and 2009. The conversion feature and warrants were deemed to be derivatives (the Derivative Instruments) since a fixed conversion price cannot be
determined for either of the Derivative Instruments due to anti-dilution provisions embedded in the offering documents for the convertible debentures. The derivative instruments were not issued for risk management purposes and as such are not
designated as hedging instruments under the provisions of ASC 815.

Following is a description of the valuation methodologies
used to determine the fair value of the Companys financial assets including the general classification of such instruments pursuant to the valuation hierarchy.

A summary of the fair value of assets and liabilities measured at fair value on a recurring basis follows: (1)



|                             |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |    
|---------------------------- |  | ------------------------- | --------- | ------------------------- | - | ----------------------------------------------------------------------- |  | ------------------------------------------- | --- | -------------------------------------- | - | --------- |  | - | ---
|                             |  | CarryingAmount at12/31/09 |           | CarryingAmount at03/31/10 |   | Quoted prices inactive marketsfor identicalassets/ liabilities(Level
1) |  | Significant OtherObservable Inputs(Level 2) |     | SignificantUnobservableInputs(Level 3)
|Derivatives: (2)             |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |    
|Conversion feature liability |  |                           | 1,945,440 |                           |   | 1,287,196                                                               |  |                                             | -0- |                                        |   | 1,287,196 |  |   | -0-
|Warrant liability            |  |                           | 2,738,193 |                           |   | 2,320,443                                                               |  |                                             | -0- |                                        |   | 2,320,443 |  |   | -0-
|                             |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |    
|Total of Derivatives         |  | $                         | 4,683,633 |                           | $ | 3,607,639                                                               |  | $                                           | -0- |                                        | $ | 3,607,639 |  | $ | -0-
|                             |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |    



|(1) | The Income approach was used as a valuation technique.
|--- | ------------------------------------------------------

|(2) | The fair value of the Derivative Instruments was estimated using the American Binomial option pricing model with the following assumptions for the period ended
March 31, 2010.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                            |  |             
|----------------------------------------------------------- |  | ------------
|Significant Valuation Assumptions of Derivative Instruments
|                                                            | 
|Risk free interest rate                                     |  | 1.59%       
|Dividend yield                                              |  | 0.00%       
|Expected Volatility                                         |  | 72.5%       
|Expected life (range in years)                              |  |             
|Conversion feature liability                                |  | 0.41 to 3.72
|Warrant liability                                           |  | 1.92 to 3.76



18



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                                                                                |  |                                        |           |                |   |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | --------- | -------------- | - | ---------
|                                                                                                                                                                                                                |  | For the three months endedOther
Income
|                                                                                                                                                                                                                |  | March 31, 2010                         |           | March 31, 2009
|The net amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in
unrealized gains relating to derivative liabilities still held at the reporting date |  | $                                      | 1,075,994 |                | $ | 1,714,074
|                                                                                                                                                                                                                |  |                                        |           |                |   |          
|Total gains included in earnings                                                                                                                                                                                |  | $                                      | 1,075,994 |                | $ | 1,714,074
|                                                                                                                                                                                                                |  |                                        |           |                |   |          



|NOTE 11: | COMMITMENTS AND CONTINGENCIES
|-------- | -----------------------------

The Company currently leases office space under an operating lease. The minimum future lease payments required under the Companys
operating leases at March 31, 2010 are as follows:



|      |  |   |          
|----- |  | - | ---------
|2010  |  | $ | 663,819  
|2011  |  |   | 591,379  
|2012  |  |   | 133,612  
|2013  |  |   | 12,277   
|2014  |  |   | -0-      
|      |  |   |          
|Total |  | $ | 1,401,087
|      |  |   |          

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 $200,734 and $138,587 for the periods ended March 31, 2010 and
March 31, 2009, respectively.

The Companys corporate office lease expires in July 2011. The Companys lease
on its New Jersey field office expires in February 2013. The Company currently operates its wholly-owned subsidiary, OmniComm Ltd., in the United Kingdom under the terms of a lease that expires in October 2012. The Company currently operates its
wholly-owned subsidiary, OmniComm Europe, GmbH, in Bonn, Germany under the terms of a lease that expires in June 2011.

PATENT LITIGATION SETTLEMENT

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



19



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|          |  |   |          
|--------- |  | - | ---------
|2010      |  | $ | 358,954  
|2011      |  |   | 700,000  
|2012      |  |   | 450,000  
|2013      |  |   | 450,000  
|2014-2017 |  |   | 1,800,000
|          |  |   |          
|Total     |  | $ | 3,758,954
|          |  |   |          

In conjunction with the acquisition of the eResearch
Technology, Inc. EDC assets, the Company entered into the First Amendment to Settlement and Licensing Agreement with DataSci, LLC in June 2009 to provide for license payments totaling $300,000 to DataSci over the next three years for the EDC assets
acquired in that transaction. The Company began making annual payments of $100,000 to DataSci in July 2009.

During the period
ended March 31, 2010, the Company recorded a charge to earnings in the amount of $41,272 which amount represents (1) the amount of additional license expense incurred above the stipulated minimum in the DataSci License Agreement during the
three month period ended March 31, 2010 and (2) the accretion of the difference between the total stipulated annual minimum royalty payments and the recorded present value accrual of the annual minimum royalty payments



|NOTE 12: | RELATED PARTY TRANSACTIONS
|-------- | --------------------------

For the period ended March 31, 2010 we have incurred $273,242 in interest expense payable to related parties, and we incurred
$198,591 in interest expense to related parties for the period ended March 31, 2009.



|NOTE 13: | SUBSEQUENT EVENT
|-------- | ----------------

Subsequent events have been evaluated through May 17, 2010, which is the date the financial statements were issued. On
April 13, 2010, the Company issued a promissory note in the amount of $450,000 to our President and Chief Executive Officer, Cornelis F. Wit. The promissory note bears interest at a rate of 12% per annum with interest paid monthly. The
maturity date of the promissory note is December 31, 2011.



20



---

##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

General

The following information should
be read in conjunction with the information contained in our unaudited consolidated financial statements and notes thereto appearing elsewhere herein and other information set forth in this report.

Forward-Looking Statements

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

Overview

We are healthcare technology company that provides Web-based electronic data capture (EDC) solutions and related
value-added services to pharmaceutical and biotech companies, clinical research organizations, and other clinical trial sponsors worldwide. Our proprietary EDC software applications:
TrialMaster®; TrialOne; and eClinical suite, allow clinical trial sponsors and investigative sites to
securely collect, validate, transmit, and analyze clinical trial data.

During the first quarter of fiscal 2010 we have sought to build and
expand on our strategic efforts. The primary focus of our strategy includes:



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



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



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



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



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



| |  |  | Providing our services to small and midsize pharmaceutical, biotechnology, medical device companies and CROs ; and
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding our penetration of the large pharmaceutical sponsor market by leveraging the client contracts we assumed in our acquisitions of the EDC
assets of eResearch Technology and Logos Technologies, Ltd. during 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21



---

##### Table of Contents

Our operating focus is first, to increase our sales and marketing capabilities, and penetration rate and
secondly, to continue developing and improving our software solutions and services to ensure our services and products remain an attractive, high-value EDC choice. During the first quarter of 2010, we increased our marketing and sales personnel both
in the U.S. and European markets and aggressively expanded the scope of our CRO Preferred Program in order to increase our penetration of the domestic CRO market. The CRO Preferred Program offers fixed pricing and pay-as-you-go hosted services.
Additionally, we believe we have established an effective presence in the European clinical trial market by expanding the number of clients we service in the European market after the acquisition of the eResearch Technology (eRT) and
Logos Technologies EDC assets and will seek to aggressively expand the scope of our sales and marketing operations there.

Our ability to
compete within the EDC and eClinical industries is predicated on our ability to continue enhancing and broadening the scope of solutions we offer. 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. We have spent approximately $991,009 and $239,468, on R & D activities during the periods ended March 31, 2010 and March 31, 2009, respectively.
The majority of these expenses represent salaries to our developers which include costs associated with customization of our EDC software applications for our clients projects.

Our selling efforts include marketing our products to several Fortune 1000 pharmaceutical and medical device manufacturers and several of the largest
CROs. We have experienced, both via organic growth and through our 2009 acquisitions, success in broadening our client roster over the past seven fiscal years. Continued success in broadening our existing client relationships and forging new
relationships should provide us the opportunity to limit our need for funding our operations via debt and equity capital. Continuing to obtain contracts with clients of this size and reputation will also increase the credibility of the Company to
the clinical trial market.

Our business development 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 of our solutions including the solutions provided by
our recently acquired EDC assets from Logos Technologies. We believe we have the ability to produce trials more quickly and economically than our competitors for this specialized and large market. During the remainder of fiscal 2010, we will
continue commercializing our products on a licensed basis and expect to experience increased success in penetrating the market for larger pharmaceutical, biotechnology and medical device clinical trial sponsors. Our clients will be able to partially
or completely license our EDC solutions. This business model provides our clients a more cost effective means of deploying our EDC solutions on a large-scale basis. Our licensed products, falling under the auspices of either a Tech Transition
(partial transfer with some services performed by OmniComm) or Tech Transfer, allows 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. The acquisitions completed during fiscal 2009 (the eResearch EDC Assets and the Logos Technologies, Ltd. EDC Assets) have historically been sold on a licensed basis and allow us to broaden our base of licensed customers. Additionally, we
continue to focus on adding CROs as strategic and marketing partners. There is an industry-wide emphasis in establishing strategic relationships with CROs. These relationships provide marketing leverage in the form of joint marketing and sales
efforts and provide an installed base of trained users for our EDC and eClinical software applications. This installed base of users increases our ability to provide rapidly developed, cost effective solutions for our clients. Additionally, we
believe we have established an effective presence in the European clinical trial market and will seek to aggressively expand the scope of our sales and marketing operations there.

We feel that the momentum established from new client acquisitions and our ability to retain clients for repeat engagements provide a good operating base
from which to build during the remainder of fiscal 2010. We expect to continue increasing the level of resources deployed in our sales and marketing efforts. We feel that a combination of our lean operating environment and increased success in new
client acquisition, coupled with our ability to retain our existing clients will allow us to compete effectively within the EDC market.



22



---

##### Table of Contents

Fiscal 2009 Acquisitions

eResearch Technology Asset Acquisition:

On June 23, 2009, we acquired certain tangible and intangible EDC assets, formerly owned by eResearch Technology, Inc. (eResearch
Technology) (eResearch EDC Assets), pursuant to an Asset Purchase Agreement. Our purpose in acquiring these assets, which included employment rights to eResearch Technologys EDC operating and business development team, was to
increase our presence in the EDC industry through the eResearch Technology client list and increase our revenues in order to leverage our existing administrative and technical corporate infrastructure.

The Company purchased from eResearch Technology, the eResearch EDC Assets including equipment, devices, computer hardware and other computer systems,
certain intellectual property, contracts, customer lists, and other assets specifically identified in schedules to the Agreement, and $1,150,000 in cash. The Company also assumed certain liabilities associated with these assets, including deferred
revenues under certain assumed contracts in the amount of approximately $954,000, and concurrent with the consummation of the transactions entered into the First Amendment to Settlement and Licensing Agreement with DataSci, LLC to provide for
license payments of $300,000 to DataSci over the next three years for the EDC assets acquired in the Agreement. Consideration for the acquisition consisted of 8,100,000 shares of our common stock.

Logos Technologies, Ltd. (In Administration)

On August 3, 2009, we acquired certain tangible and intangible EDC assets, formerly owned by Logos Technologies, Ltd. (Logos
Technologies) (Logos EDC Assets), pursuant to a Sale Agreement related to the Administration process in the United Kingdom. Our purpose in acquiring these assets, which included employment rights to the research and development
personnel of Logos Technologies, was to increase our presence in the EDC industry through the Logos Technologies client list and the acquisition of the intellectual property associated with the Logos EDC Assets which we view as a strategically
important facet of our software and service portfolio since it can allow us increase our revenues in order to leverage our existing administrative and technical corporate infrastructure by competing in what we view as an under-serviced segment of
the EDC industry.

The Company purchased from Logos Technologies (in Administration), the Logos EDC Assets including equipment, devices,
computer hardware and other computer systems, certain intellectual property, contracts, customer lists and other assets specifically identified in schedules to the Sale Agreement. We also assumed certain liabilities associated with these assets
which includes a short-term office lease obligation. Consideration for the acquisition consisted of £92,000, which approximated $152,628.



23



---

##### Table of Contents

The Three-Month Period-ended March 31, 2010 Compared with the Three-Month Period ended
March 31, 2009

Results of Operations

A summarized version of our results of operations for the three-month periods ended March 31, 2010 and March 31, 2009 is included in the table
below.

Summarized Statement of Operations



|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|----------------------------------------------------- |  | ------------------------------------------ | ---------- | - | ------------ | ----- | - | ---- | - | ---------- | ------------ |  | ----- | ------- |  | - | ---------- | - |  | ------- | -
|                                                      |  | For the three-month periods endedMarch 31, |            |   |              |       |   |      |  
|                                                      |  | 2010                                       |            |   | % ofRevenues |       |   | 2009 |   |            | % ofRevenues |  |       | $Change |  |   | %Change    |  
|Total revenues                                        |  | $                                          | 2,697,363  |   |              |       |   |      | $ | 2,416,657  |              |  |       |         |  | $ | 280,706    |   |  | 11.6    | %
|                                                      |  |                                            |            |   |              |      
|Cost of sales                                         |  |                                            | 434,871    |   |              | 16.1  | % |      |   | 494,820    |              |  | 20.5  | %       |  |   | (59,949    | ) |  | -12.1   | %
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|Gross margin                                          |  |                                            | 2,262,492  |   |              | 83.9  | % |      |   | 1,921,837  |              |  | 79.5  | %       |  |   | 340,655    |   |  | 17.7    | %
|                                                      |  |                                            |            |   |              |      
|Salaries, benefits and related taxes                  |  |                                            | 2,685,750  |   |              | 99.6  | % |      |   | 2,191,509  |              |  | 90.7  | %       |  |   | 494,241    |   |  | 22.6    | %
|Rent                                                  |  |                                            | 200,734    |   |              | 7.4   | % |      |   | 138,587    |              |  | 5.7   | %       |  |   | 62,147     |   |  | 44.8    | %
|Consulting                                            |  |                                            | 210,724    |   |              | 7.8   | % |      |   | 38,709     |              |  | 1.6   | %       |  |   | 172,015    |   |  | 444.4   | %
|Legal and professional fees                           |  |                                            | 85,516     |   |              | 3.2   | % |      |   | 112,663    |              |  | 4.7   | %       |  |   | (27,147    | ) |  | -24.1   | %
|                                                      |  |                                            |            |   |              |      
|Selling, general and administrative                   |  |                                            | 241,017    |   |              | 8.9   | % |      |   | 248,198    |              |  | 10.3  | %       |  |   | (7,181     | ) |  | -2.9    | %
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |      
|Total operating expenses                              |  |                                            | 3,888,139  |   |              | 144.1 | % |      |   | 2,894,122  |              |  | 119.8 | %       |  |   | 994,017    |   |  | 34.3    | %
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |      
|Operating income (loss)                               |  |                                            | (1,625,647 | ) |              | -60.3 | % |      |   | (972,285   | )            |  | -40.2 | %       |  |   | (653,362   | ) |  | 67.2    | %
|                                                      |  |                                            |            |   |              |      
|Interest expense                                      |  |                                            | (970,508   | ) |              | 36.0  | % |      |   | (648,589   | )            |  | 26.8  | %       |  |   | (321,919   | ) |  | 49.6    | %
|Interest income                                       |  |                                            | 47         |   |              | 0.0   | % |      |   | 3,461      |              |  | 0.1   | %       |  |   | (3,414     | ) |  | -98.6   | %
|                                                      |  |                                            |            |   |              |      
|Gain (Loss) on Extinguishment of Debt                 |  |                                            |           |   |              | 0.0   | % |      |   | 432        |              |  | 0.0   | %       |  |   | (432       | ) |  | -100.0  | %
|                                                      |  |                                            |            |   |              |      
|Unrealized gain on derivatives                        |  |                                            | 1,075,994  |   |              | 39.9  | % |      |   | 1,714,074  |              |  | 70.9  | %       |  |   | (638,080   | ) |  | -37.2   | %
|                                                      |  |                                            |            |   |              |      
|Net income (loss)                                     |  |                                            | (1,520,114 | ) |              | -56.4 | % |      |   | 97,093     |              |  | 4.0   | %       |  |   | (1,617,207 | ) |  | -1665.6 | %
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |      
|Total preferred stock dividends                       |  |                                            | (50,720    | ) |              | -1.9  | % |      |   | (49,531    | )            |  | -2.0  | %       |  |   | (1,189     | ) |  | 2.4     | %
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |      
|Net income (loss) attributable to common stockholders |  | $                                          | (1,570,834 | ) |              | -58.2 | % |      | $ | 47,562     |              |  | 2.0   | %       |  | $ | (1,618,396 | ) |  | -3402.7 | %
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |      
|Net income (loss) per share                           |  | $                                          | (0.02      | ) |              |       |   |      | $ | 0.00       |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |      
|Weighted average number of shares outstanding         |  |                                            | 85,507,699 |   |              |       |   |      |   | 76,581,518 |              |  |       |         |  |   |            |   |  |         |  
|                                                      |  |                                            |            |   |              |       |   |      |   |            |              |  |       |         |  |   |            |   |  |         |  



24



---

##### Table of Contents

Revenues for the quarter ended March 31, 2010 increased approximately 11.6% from the quarter ended
March 31, 2009. The table below provides a comparison of our recognized revenues for the quarters ended March 31, 2010 and March 31, 2009.



|                          |  |                    |           |  |          |   |  |            |           |  |            |   |  |   |          |   |  |       |  
|------------------------- |  | ------------------ | --------- |  | -------- | - |  | ---------- | --------- |  | ---------- | - |  | - | -------- | - |  | ----- | -
|                          |  | Three Months Ended |           |  |          |   |  |            |          
|Business Activity         |  | 03/31/10           |           |  | 03/31/09 |   |  | Increase $ |           |  | Increase % |  
|Set-up Fees               |  | $                  | 1,087,010 |  | 40.3     | % |  | $          | 1,269,870 |  | 52.5       | % |  | $ | (182,860 | ) |  | -14.4 | %
|Change Orders             |  |                    | 27,960    |  | 1.0      | % |  |            | 142,674   |  | 5.9        | % |  |   | (114,714 | ) |  | -80.4 | %
|Maintenance               |  |                    | 1,062,835 |  | 39.4     | % |  |            | 404,150   |  | 16.7       | % |  |   | 658,685  |   |  | 163.0 | %
|Software Licenses         |  |                    | 148,740   |  | 5.5      | % |  |            | 431,891   |  | 17.9       | % |  |   | (283,151 | ) |  | -65.6 | %
|Professional Services     |  |                    | 35,800    |  | 1.3      | % |  |            | 168,072   |  | 7.0        | % |  |   | (132,272 | ) |  | -78.7 | %
|Hosting and Subscriptions |  |                    | 335,019   |  | 12.4     | % |  |            | -0-       |  | 0.0        | % |  |   | 335,019  |   |  | n/a   |  
|                          |  |                    |           |  |          |   |  |            |           |  |            |   |  |   |          |   |  |       |  
|                          |  |                    |           |  |          |  
|Totals                    |  | $                  | 2,697,363 |  | 100.0    | % |  | $          | 2,416,657 |  | 100.0      | % |  | $ | 280,706  |   |  | 11.6  | %
|                          |  |                    |           |  |          |   |  |            |           |  |            |   |  |   |          |   |  |       |  

We recorded $1,254,068 in revenues associated with clients with our acquisition of the eResearch Technology eClinical
software application suite (eClinical) during the quarter ended March 31, 2010. We expect our 2010 full-year revenues for these clients to range from approximately $4,400,000 to $5,200,000 for the eClinical portion of our business.

We recorded $71,353 in revenues associated with clients with our acquisition of the Logos Technologies EDC assets during the quarter ended
March 31, 2010. We have rebranded these assets under the TrialOne tradename. We are still in the process of commercializing and developing our sales and marketing campaign for the TrialOne application.

Revenues from our TrialMaster ASP service fees and maintenance from existing TrialMaster clients decreased by $394,424 or 21.7%. During 2009 our primary
customer base prior to our acquisitions, which consisted primarily of small, U.S.-based biotechnology firms, dramatically reduced the level of clinical trials they were conducting. Many of these firms are pre-revenue and as we understand are reliant
on the capital markets for working capital and R & D funding. With the difficult economic climate experienced during 2009 we believe that many of these firms either reduced or completely curtailed their R & D activities either because of a
lack of capital or in order to conserve their cash reserves. We saw evidence during late 2009 and during the first quarter of 2010 of increased activity from these clients.

We recorded $132,669 in revenues from our licensing activity and $35,800 from professional services associated with TrialMaster suite during the quarter
ended March 31, 2010 compared with $431,891 and $168,072, respectively, during the quarter ended March 31, 2009. The amounts relating to fiscal 2009 activity are associated with the sale and installation of the TrialMaster application
suite to one client. We expect revenues from both activities to increase for several reasons. First, we see significant activity in the CRO market relating to infrastructure investing. Second, we have entered into a contract with Kendle
International for them to license our TrialMaster application. Third, new sales of our eClinical application and we expect all future sales of the TrialOne application will be consummated on a licensed basis.

We recorded $335,019 in revenues from hosting and subscriptions activities and $189,517 in consulting services associated with the eClinical suite.
Generally, these revenues are paid quarterly and are connected to hosting, maintenance and client support for clients licensing that application.



25



---

##### Table of Contents

Our TrialMaster EDC application has historically been sold on an application service provider
(ASP) basis that provides EDC and other services such as an enterprise management suite which assists our clients in the pharmaceutical, biotechnology and medical device industries in accelerating the completion of clinical trials.
During 2009, as discussed earlier, we completed the acquisition of the eResearch EDC Assets and the Logos EDC Assets (the Acquired Software). Both software applications have historically been sold on a licensed or technology transfer
basis. As we continue developing our software applications and our client relationships mature, we expect some of our clients to deploy TrialMaster on a licensed, rather than ASP hosted basis. We expect both Acquired Software applications to
continue to be sold primarily on a licensed basis.

TrialMaster contracts for ASP services 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.

Generally, ASP contracts will range in duration from one month to several years. ASP Setup fees are generally earned prior to the inception of a trial,
however, the revenues will be recognized in accordance with Accounting Standards Codification 605 (ASC 605) Revenue Recognition, which requires that the revenues be recognized ratably over the life of the contract. ASP
maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized as incurred.

Beginning in
late 2008 we began selling our core TrialMaster product on a licensed basis. Beginning with the third fiscal quarter of 2009 we have experienced greater success in selling that product on a licensed basis. The EDC assets acquired from eResearch
Technology and Logos Technologies are primarily sold on a licensed basis. License contracts are typically sold on a subscription basis that takes into account system usage both on a data volume and system user basis. Pricing includes additional
charges for deployment of our eClincial software and solutions. Licensed contracts of the eClinical suite have historically been sold on a perpetual license basis with hosting and maintenance charges being paid annually. The Company expects any
licenses it sells of its software products to be sold in three to five year term licenses.

Our top five customers accounted for approximately
38.9% of our revenues during the quarter ended March 31, 2010 and approximately 61.6% of our revenues during the quarter ended March 31, 2009. One customer accounted for 19.4% of our revenues during quarter ended March 31, 2010. One
customer accounted for 23.6% of our revenues during quarter ended March 31, 2009 and a second client accounted for 20.0% of our revenues during that period. The loss of any of these contracts or these customers in the future could adversely
affect our results of operations.

Cost of goods sold decreased approximately 12.1% or $59,949 for the fiscal quarter ended March 31,
2010 as compared to quarter ended March 31, 2009. Cost of goods sold were approximately 16.1% of revenues for the quarter ended March 31, 2010 compared to approximately 20.5% for the quarter ended March 31, 2009. Cost of goods sold
relates primarily to salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Cost of goods sold decreased during the quarter ended March 31, 2010 due to
a decrease in salary related costs associated with the delivery of TrialMaster ASP projects of $168,301 offset by an increase of approximately $124,827 for costs associated with salary and related costs associated with the delivery and support of
our eClinical suite and an increase of $16,474 in costs associated with third-party services associated with the delivery of our application to customers. Although our experience to-date in licensing and deploying TrialMaster on a technology
transfer or licensed basis has been limited, we expect our cost of goods sold related to these types of engagements to approximate 20% of revenues associated with those engagements.

We expect to increase development programming and support labor costs on an absolute basis as our trial revenues increase. We expect our cost of goods
sold to stabilize to the 20% to 22% range as we expand the number of licenses we deploy and service since we expect cost of sales from licensed engagements to fall in the 20% range as that business model matures. We expect to continue to increase
follow-on engagements from existing clients and expect to increase the phase I and CRO portions of our client base. TrialMaster (V4.0) increased the efficiency of our trial



26



---

##### Table of Contents

building operations by approximately 20% through the use of additional automated tools, the ability to use our library of pre-existing CRFs and through the use of our drag and drop
clinical trial building tool. We have begun our business development efforts in commercializing the Acquired Software. We expect to primarily sell those products as licensed products providing further basis to our cost of goods sold estimates.

Overall, total operating expenses increased approximately 34.3% for the quarter ended March 31, 2010 when compared to the quarter ended
March 31, 2009. Total operating expenses were approximately 144.1% of revenues during the quarter ended March 31, 2010 compared to approximately 119.8% of revenues for the quarter ended March 31, 2009.

Salaries and related expenses were our biggest expense at 69.1% of total operating expenses for the quarter ended March 31, 2010 and 75.7% of total
operating expenses for the quarter ended March 31, 2009. Salaries and related expenses increased approximately 22.6% for the quarter ended March 31, 2010 when compared to the quarter ended March 31, 2009. The table below provides a
summary of the significant components of salary and related expenses by primary cost category.



|                                    |  |                        |           |                |   |           |  |   |          |   |  |       |  
|----------------------------------- |  | ---------------------- | --------- | -------------- | - | --------- |  | - | -------- | - |  | ----- | -
|                                    |  | For the quarters ended |          
|                                    |  | March 31, 2010         |           | March 31, 2009 |   | Change    |  |   | % Change |  
|OmniComm Corporate Operations       |  | $                      | 1,731,379 |                | $ | 1,799,404 |  | $ | (68,025  | ) |  | -3.8  | %
|New Jersey Operations Office        |  |                        | 362,941   |                |   | -0-       |  |   | 362,941  |   |  | n/c   |  
|OmniComm Europe, GmbH               |  |                        | 336,501   |                |   | 177,690   |  |   | 158,811  |   |  | 89.4  | %
|OmniComm Ltd.                       |  |                        | 125,142   |                |   | -0-       |  |   | 125,142  |   |  | n/c   |  
|Employee Stock Option Expense       |  |                        | 129,787   |                |   | 214,415   |  |   | (84,628  | ) |  | -39.5 | %
|                                    |  |                        |           |                |   |           |  |   |          |   |  |       |  
|                                    |  |                        |           |               
|Total Salaries and related expenses |  | $                      | 2,685,750 |                | $ | 2,191,509 |  | $ | 494,241  |   |  | 22.6  | %
|                                    |  |                        |           |                |   |           |  |   |          |   |  |       |  

We currently employ approximately 65 employees out of our Ft. Lauderdale, Florida corporate office, 15 employees out of our
New Jersey field office, seven out-of-state employees, five employees out of a wholly-owned subsidiary in the United Kingdom and 14 employees out of a wholly-owned subsidiary in Bonn, Germany. We expect to continue to selectively add, experienced
sales and marketing personnel during fiscal 2010 in an effort to increase our market penetration, particularly as it relates to the largest pharmaceutical, biotechnology and CRO customers and to continue broadening our client base domestically as
well as in Europe. In addition we expect to increase R & D personnel as we continue our efforts to integrate an end-to-end solution comprised of our three primary eClinical solutions: TrialMaster; TrialOne; and eClinical Suite.

During the quarter ended March 31, 2009 and quarter ended March 31, 2010 we incurred $214,415 and $129,787, respectively, in salary expense in
connection with our adoption of SFAS No. 123(R), Share-Based Payment as codified in Accounting Standard Codification 718 Compensation  Stock Compensation, 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.

Rent and related expenses increased by approximately 44.8% during the quarter ended March 31, 2010 when compared to the quarter ended March 31,
2009. We established a disaster recovery site at a Cincinnati Bell owned Co-Location facility in Cincinnati, Ohio and will continue utilizing this facility for the foreseeable future since it is designed to ensure 100% production system up-time and
to provide system redundancy. We lease a co-location and disaster recovery space in the Ft. Lauderdale, Florida area. This facility provides us with disaster recovery and business continuity services for our operations. This lease expires in August
2011. We currently lease office space in Bonn, Germany for our European subsidiary, OmniComm Europe, GmbH. That lease expires in June 2011. We entered into a lease for office space in New Jersey in order to integrate our acquisition of the eResearch
Assets during the third quarter of fiscal 2009. That office lease expires in February 2013. Our OmniComm Ltd. subsidiary



27



---

##### Table of Contents

entered into a lease for office space during the fourth quarter of 2009. That office lease expires in October 2012. The table below provides the significant components of our rent related
expenses by location or subsidiary.



|                                             |  |                        |         |                |   |         |  |    |          |   |  |       |  
|-------------------------------------------- |  | ---------------------- | ------- | -------------- | - | ------- |  | -- | -------- | - |  | ----- | -
|                                             |  | For the quarters ended |        
|                                             |  | March 31, 2010         |         | March 31, 2009 |   | Change  |  |    | % Change |  
|Corporate Office                             |  | $                      | 53,434  |                | $ | 74,189  |  | ($ | 20,755   | ) |  | -28.0 | %
|Co location and disaster recovery facilities |  |                        | 96,148  |                |   | 54,036  |  | $  | 42,112   |   |  | 77.9  | %
|New Jersey Operations Office                 |  |                        | 15,551  |                |   | 0       |  | $  | 15,551   |   |  | n/m   |  
|OmniComm Europe, GmbH                        |  |                        | 22,419  |                |   | 10,362  |  | $  | 12,057   |   |  | 116.4 | %
|OmniComm Ltd.                                |  |                        | 13,182  |                |   | 0       |  | $  | 13,182   |   |  | n/m   |  
|                                             |  |                        |         |                |   |         |  |    |          |   |  |       |  
|                                             |  |                        |         |               
|Total                                        |  | $                      | 200,734 |                | $ | 138,587 |  | $  | 62,147   |   |  | 44.8  | %
|                                             |  |                        |         |                |   |         |  |    |          |   |  |       |  

Consulting services expense increased to $210,724 for the quarter ended March 31, 2010 compared with $38,709 for the
quarter ended March 31, 2009. Consulting services were comprised of fees paid to consultants for help with developing our computer applications, fees incurred as part of our employee recruiting programs and for services related to our sales and
marketing efforts. The table provided below provides the significant components of the expenses incurred related to consulting services.



|                     |  |          |        |          |   |         |  |          |         |  |       |  
|-------------------- |  | -------- | ------ | -------- | - | ------- |  | -------- | ------- |  | ----- | -
|Expense Category     |  | 03/31/09 |        | 03/31/10 |   | Change  |  | % Change |        
|Employee Recruitment |  | $        | 21,000 |          | $ | 30,000  |  | $        | 9,000   |  | 42.9  | %
|Sales & Marketing    |  |          | -0-    |          |   | 70,425  |  |          | 70,425  |  | n/m   |  
|Product Development  |  |          | 17,709 |          |   | 110,299 |  |          | 92,590  |  | 422.8 | %
|                     |  |          |        |          |   |         |  |          |         |  |       |  
|                     |  |          |        |         
|                     |  | $        | 38,709 |          | $ | 210,724 |  | $        | 172,015 |  | 344.4 | %
|                     |  |          |        |          |   |         |  |          |         |  |       |  

Legal and professional fees decreased approximately 24.1% for the quarter ended March 31, 2010 compared with the
quarter ended March 31, 2009. 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. The table below compares the significant components of our legal and professional fees for the years ended March 31, 2010 and
March 31, 2009, respectively.



|                    |  |          |         |          |   |        |  |   |          |   |  |       |  
|------------------- |  | -------- | ------- | -------- | - | ------ |  | - | -------- | - |  | ----- | -
|Expense Category    |  | 03/31/09 |         | 03/31/10 |   | Change |  |   | % Change |  
|Financial Advisory  |  | $        | 22,500  |          | $ | 37,957 |  | $ | 15,457   |   |  | 68.7  | %
|Audit and Related   |  |          | 10,500  |          |   | 7,832  |  |   | (2,668   | ) |  | -25.4 | %
|Accounting Services |  |          | 15,441  |          |   | 20,363 |  |   | 4,923    |   |  | 31.9  | %
|Patent Litigation   |  |          | 5,997   |          |   | -0-    |  |   | (5,997   | ) |  | n/m   |  
|Miscellaneous       |  |          | 2,878   |          |   | 3,183  |  |   | 305      |   |  | 10.6  | %
|General Legal       |  |          | 55,348  |          |   | 16,180 |  |   | (39,168  | ) |  | -70.8 | %
|                    |  |          |         |          |   |        |  |   |          |   |  |       |  
|                    |  |          |         |         
|                    |  | $        | 112,664 |          | $ | 85,515 |  | $ | (27,148  | ) |  | -24.1 | %
|                    |  |          |         |          |   |        |  |   |          |   |  |       |  

Selling, general and administrative expenses (SGA) decreased approximately 2.9% for the quarter ended
March 31, 2010 compared to the quarter ended March 31, 2009. During the quarter ended March 31, 2010 we recorded $41,272 in license fees associated with our license agreement with Datasci, LLC compared to $54,178 during the quarter
ended March 31, 2009. In addition, SGA expenses relate primarily to costs incurred in running our offices in Fort Lauderdale, New Jersey, Lymington, England and Bonn, Germany on a day-to-day basis and other costs not



28



---

##### Table of Contents

directly related to other captioned items in our income statement. SGA 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 approximately 75.7% for the quarter ended March 31, 2010 compared to the quarter ended March 31, 2009. The increases
related primarily to amounts spent on our participation in industry trade shows and conferences. During 2010 we expect to increase the aggregate amount spent on general corporate marketing as compared to fiscal 2009. We expect to have expenditures
related to our corporate website, customer marketing materials, branding related activities and for materials related to the commercialization of our TrialOne software application.

During the quarter ended March 31, 2010 we incurred $13,954 in bad debt expense compared to $7,553 for the quarter ended March 31, 2009. We
understand that during 2009, our existing base of TrialMaster clients, which is primarily comprised of small, U.S.-based biotechnology firms, experienced significant problems in obtaining working capital and R & D funding. During the year ended
December 31, 2009 seven of our clients either ceased operations or severely curtailed their work with us. We have seen evidence during late 2009 of increased activity in general and believe that our current allowance for uncollectable accounts
accurately reflects any accounts which may prove uncollectable during fiscal 2010.

Interest expense was $970,508 during the quarter ended
March 31, 2010 compared to $648,589 for the quarter ended March 31, 2009, an increase of $321,919. Interest incurred to related parties was $273,242 during the quarter ended March 31, 2010 and $198,591 for the quarter ended
March 31, 2009. Included in interest expense for both periods is the accretion of discounts recorded related to financial instrument derivatives that were deemed a part of the financings we undertook in fiscal 2008 and 2009. The table below
provides detail on the significant components of interest expense.



|                                         |  |                       |         |                       |   |                      |  |   |         |  
|---------------------------------------- |  | --------------------- | ------- | --------------------- | - | -------------------- |  | - | ------- | -
|Debt Description                         |  | 2010 Interest Expense |         | 2009 Interest Expense |   | Change 2010 vs. 2009 | 
|Accretion of Discount from Derivatives   |  | $                     | 671,477 |                       | $ | 431,248              |  | $ | 240,229 |  
|Harborview Extension                     |  |                       | -0-     |                       |   | 2,959                |  |   | (2,959  | )
|August 2008 Convertible Notes            |  |                       | 55,973  |                       |   | 55,973               |  |   | -0-     |  
|December 2008 Convertible Notes          |  |                       | 150,164 |                       |   | 150,164              |  |   | -0-     |  
|Sept 2009 Secured Convertible Debentures |  |                       | 41,425  |                       |   | -0-                  |  |   | 41,425  |  
|Dec 2009 Convertible Debentures          |  |                       | 44,088  |                       |   | -0-                  |  |   | 44,088  |  
|                                         |  |                       |         |                       |   |                      |  |   |         |  
|Total                                    |  | $                     | 963,127 |                       | $ | 640,344              |  | $ | 322,783 |  
|                                         |  |                       |         |                       |   |                      |  |   |         |  

We evaluate the cost of capital available to us in combination with our overall capital structure and the prevailing market
conditions in deciding what financing best fulfills our short and long-term capital needs. Given the difficult overall economic climate and in particular the difficulties nano-cap companies have experienced in obtaining financing, we believe the
structure and terms of the transactions we entered into during 2008 and 2009 were obtained at the best terms available to the Company. We did not enter into any capital transactions during either the quarter ended March 31, 2009 or the quarter
ended March 31, 2010.

We recorded unrealized gains on derivative liabilities associated with the issuance of convertible debt that
occurred during fiscal 2008 and 2009. We recorded a net unrealized gain of $1,075,994 during the quarter ended March 31, 2010 compared with a net unrealized gain of $1,714,074 during the quarter ended March 31, 2009. The unrealized gains
can be attributed to fair value calculations undertaken periodically on the warrant and conversion feature liabilities (discounts) recorded by us at the time the convertible debt was issued. Accordingly the warrant and conversion feature liabilities
are increased or decreased based on the fair value calculations made at each balance sheet date. These non-cash gains have materially impacted our results of operations during the quarter ended March 31, 2010 and during fiscal 2009 and 2008 and
can be reasonably anticipated to materially affect our net loss or net income in future periods. We are, however, unable to estimate the amount of such income/expense in future periods as the income/expense is partly based on the market price of our
common stock at the end of a future measurement date. In



29



---

##### Table of Contents

addition, in the future if we issue securities which are classified as derivatives we will incur expense and income items in future periods. Investors are cautioned to consider the impact of this
non-cash accounting treatment on our financial statements.

There were arrearages of $50,720 in 5% Series A Preferred Stock dividends for the
quarter ended March 31, 2010, compared with arrearages of $49,531 in 5% Series A Preferred Stock dividends for the quarter ended March 31, 2009. We deducted $50,720 and $49,531 from Net Income (Loss) Attributable to Common
Stockholders for the quarters ended March 31, 2010 and March 31, 2009, respectively, relating to undeclared Series A Convertible Preferred Stock dividends.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. We have historically experienced negative cash
flows and have relied on the proceeds from the sale of debt and equity securities to fund our operations. In addition, we have utilized stock-based compensation as a means of paying for consulting and salary related expenses.

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

Liquidity and Capital Resources

(all amounts in USD $)



|                                                            |  |                                  |            |   |                  |   |            |        |  |   |            |  
|----------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---------------- | - | ---------- | ------ |  | - | ---------- | -
|                                                            |  | March 31,2010                    |            |   | December 31,2009 |   |            | Change | 
|Cash                                                        |  | $                                | 138,565    |   |                  | $ | 60,352     |        |  | $ | 78,213     |  
|Accounts Receivable, net of allowance for doubtful accounts |  |                                  | 2,033,573  |   |                  |   | 3,121,183  |        |  |   | (1,087,610 | )
|Current Assets                                              |  |                                  | 2,444,092  |   |                  |   | 3,420,599  |        |  |   | (976,507   | )
|                                                            |  |                                  |           
|Accounts Payable and accrued expenses                       |  |                                  | 1,594,137  |   |                  |   | 1,548,215  |        |  |   | 45,922     |  
|Notes payable, current portion                              |  |                                  | 111,800    |   |                  |   | 111,800    |        |  |   | -0-        |  
|Notes payable, related parties, current portion             |  |                                  | 137,500    |   |                  |   | -0-        |        |  |   | 137,500    |  
|Patent litigation settlement liability, current portion     |  |                                  | 680,654    |   |                  |   | 627,810    |        |  |   | 52,844     |  
|Deferred revenue, current portion                           |  |                                  | 5,241,474  |   |                  |   | 4,582,369  |        |  |   | 659,105    |  
|Convertible notes payable, current portion                  |  |                                  | 670,333    |   |                  |   | 402,777    |        |  |   | 267,556    |  
|Convertible notes payable, related parties current portion  |  |                                  | 824,267    |   |                  |   | -0-        |        |  |   | 824,267    |  
|Current Liabilities                                         |  |                                  | 9,513,323  |   |                  |   | 7,337,593  |        |  |   | 2,175,730  |  
|                                                            |  |                                  |           
|Working Capital (Deficit)                                   |  | $                                | (7,069,232 | ) |                  | $ | (3,916,995 | )      |  | $ | (3,152,237 | )
|                                                            |  |                                 
|                                                            |  | Disclosure for the quartersended |            |   |                  |  
|                                                            |  | March 31,2010                    |            |   | March 31,2009    |   |            |        | 
|Net cash provided by (used in) operating activities         |  | $                                | 251,311    |   |                  | $ | 450,812    |        |  |   |            |  
|Net cash provided by (used in) investing activities         |  |                                  | (164,055   | ) |                  |   | (55,488    | )      |  |   |            |  
|Net cash provided by financing activities                   |  |                                  | -0-        |   |                  |   | (372,500   | )      |  |   |            |  
|                                                            |  |                                  |           
|Net increase (decrease) in cash and cash equivalents        |  | $                                | 78,213     |   |                  | $ | 25,056     |        |  |   |            |  

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



30



---

##### Table of Contents

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 $400,000 planned for capital expenditures to further develop the Companys
infrastructure to allow for growth in our operations over the next 12 months. We expect to fund these capital expenditure needs through a combination of vendor-provided financing, the use of operating or capital equipment leases and cash provided
from operations.

Contractual Obligations

The following table sets forth our contractual obligations during the next five years as of March 31, 2010:



|                                |  |                        |  |                 |     |  |           |     |  |           |  |           |    
|------------------------------- |  | ---------------------- |  | --------------- | --- |  | --------- | --- |  | --------- |  | --------- | ---
|Contractual Obligations         |  | Payments Due by Period | 
|                                |  | Total                  |  | Less than1 year |     |  | 1-2 Years |     |  | 2-3 Years |  | 3-5 Years |    
|Long Term Debt (1)              |  | 249,300                |  | 249,300         | (2) |  | -0-       |     |  | -0-       |  | 0         |    
|Convertible Notes               |  | 10,310,000             |  | 520,000         | (3) |  | 2,890,000 | (4) |  | -0-       |  | 6,900,000 | (5)
|Operating Lease Obligations (6) |  | 1,401,087              |  | 663,819         |     |  | 591,379   |     |  | 133,612   |  | 12,277    |    
|Patent Licensing Fees (7)       |  | 2,521,454              |  | 733,954         |     |  | 437,500   |     |  | 450,000   |  | 900,000   |    
|                                |  |                        |  |                 |     |  |           |     |  |           |  |           |    
|                                |  |                        |  |                 |    
|Total                           |  | 14,481,841             |  | 2,167,073       |     |  | 3,918,879 |     |  | 583,612   |  | 7,812,277 |    
|                                |  |                        |  |                 |     |  |           |     |  |           |  |           |    





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

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

|3. | Includes $75,000 of 10% convertible notes currently in default and due that are convertible into shares of common stock at the option of the debenture holder at a
conversion rate of $1.25 per share; $350,000 in 10% Convertible Notes that matures in August 2010 and $95,000 in 12% Convertible Notes that mature in December 2010.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | Includes $1,400,000 in 12% Secured Convertible Notes that mature in March 2011 and $1,490,000 in Convertible Notes that mature in June 2011.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------

|5. | Includes $1,920,000 in 10% Convertible Notes that mature in August 2013 and $4,980,000 in 12% Convertible Notes that mature in December 2013.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------

|6. | Includes office lease obligations for our headquarters in Fort Lauderdale, for our regional operating office in New Jersey, and R & D office in England and our
European headquarters in Bonn, Germany and lease obligations for co-location and disaster recovery computer service centers in Cincinnati, Ohio and Fort Lauderdale, Florida.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | Relates to guaranteed minimum payments owed in connection with our settlement of a patent infringement lawsuit brought against the Company by Datasci, LLC.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

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 $156,577 on our 10% Convertible Notes. We were in default effective
January 30, 2002.

Because of the losses we have experienced from operations we have needed to continue utilizing the proceeds from the
sale of debt and equity securities to fund our working capital needs. We have used a combination of equity financing, short-term bridge loans and long-term loans to fund our working capital needs, if any. Other than our



31



---

##### Table of Contents

current capital and capital we may raise from future debt or equity offerings or short-term bridge loans, we do not have any additional sources of working capital.

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

We did not enter into any capital transactions during the quarter ended March 31, 2010. While several of our
directors have historically, either personally or through funds with which they are affiliated, provided substantial capital either in the form of debt or equity financing there can be no assurance that they will continue to provide any such funding
to us on favorable terms or at all.

To satisfy our capital requirements, including ongoing future operations, we may seek to raise additional
financing through debt and equity financings. During fiscal 2010, $111,800 in promissory notes and $445,000 in convertible notes originally issued in fiscal 2008 and 2009 will mature. The convertible notes are held by two long-term investors of the
Company and by several officers or ex-senior managers of the Company. We expect to satisfy the convertible notes from working capital or will attempt to find funding at terms favorable to the Company to satisfy the convertible notes. 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 or
result in increased interest expense in future periods. 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.

Our ability to continue in existence is dependent on our having sufficient financial resources to bring
products and services to market. As a result of our historical operating losses, negative cash flows and accumulated deficits for the periods ending March 31, 2010, there is doubt about our ability to continue as a going concern. In addition,
our auditors Greenberg & Company, LLC, included language which qualified their opinion regarding our ability to continue as a going concern in their report dated February 12, 2010 regarding our audited financial statements for the year
ended December 31, 2009.

CRITICAL ACCOUNTING POLICIES

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

A critical
accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our



32



---

##### Table of Contents

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:

ASSET IMPAIRMENT

Asset Acquisitions
and Intangible Assets

We account for asset acquisitions in accordance with ASC 350, Intangibles- Goodwill and Other. The
acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of an asset acquisition.

The judgments that we make in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset
lives, can materially impact net income in periods following an asset acquisition. We generally use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The income approach presumes that the value
of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or reproduction cost.
The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately selected is based on
the characteristics of the asset and the availability of information.

Long Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur,
their amount and the assets residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We use quoted market prices when available and independent
appraisals, as appropriate, to determine fair value.

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 generally entitled to
payment for all work performed through the point of cancellation.



33



---

##### Table of Contents

REVENUE RECOGNITION POLICY

OmniComms revenue model is transaction-based and can be implemented either as an ASP (application service provider) or licensed for implementation
by a customer such as a pharmaceutical company. Revenues are derived from the set-up of clinical trial engagements; licensing arrangements, fees earned for hosting our clients data and projects, 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 our EDC Applications can last from a few months to several years. Most of the fees associated with our product including
post-setup customer support in the form of maintenance charges are recognized ratably over the term of clinical trial projects. Cost of sales is primarily comprised of programmer salaries and taxes and is expensed as incurred.

The Company recognizes sales, for both financial statement and tax purposes in accordance with SEC Staff Accounting Bulletin No. 104
Revenue Recognition in Financial Statements (SAB 104)(Codified within Accounting Standards Codification (ASC) Revenue Recognition ASC 605) and AICPA Statement of Position 97-2 (SOP 97-2) Software Revenue Recognition
as amended by SOP 98-9 (Codified within ASC 605.985, Software Industry Revenue Recognition).SAB 104 requires that revenues be recognized ratably over the life of a contract. The Company will periodically record deferred revenues relating to
advance payments in contracts. Under its licensing arrangement the Company recognizes revenue pursuant to SOP 97-2. Under these arrangements the Company recognizes revenue when all of the following conditions are satisfied: (1) there is
persuasive evidence of an arrangement; (2) the service has been provided to the customer and/or delivery has occurred; (3) the collection of fees is probable; and (4) the fee is fixed or determinable. SOP 97-2, as amended, requires
revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. We have analyzed each element in our multiple element arrangements and determined that we have
sufficient vendor-specific objective evidence (VSOE) to allocate revenues to license updates and product support. License revenues are recognized on delivery if the other conditions of SOP 97-2 are satisfied. License updates and product
support revenue is recognized ratably over the term of the arrangement. In arrangements where term licenses are bundled with license updates and product support and such revenue is recognized ratably over the term of the arrangement, we allocate the
revenue to license revenue and to license updates and product support revenue based on the VSOE of fair value for license updates and product support revenue on perpetual licenses of similar products.

STOCK BASED COMPENSATION.

Beginning on January 1, 2006 we began accounting for stock options under the provisions of Statement of Financial Accounting Standards (SFAS)
No. 123(R), Share-Based Payments (SFAS 123(R)), (Codified within ASC 718, Compensation  Stock Compensation) which requires the recognition of the fair value of equity-based compensation. The fair value of stock options
on the date of grant was estimated using a Binomial option valuation model. This model requires the input of subjective assumptions in implementing SFAS 123(R), including expected stock price volatility, estimated life and estimated forfeitures of
each award. The fair value of equity-based awards is amortized over the vesting period of the award, and we have elected to use the straight-line method of amortization. Prior to the implementation of SFAS 123(R), we accounted for stock options and
ESPP shares under the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In the first quarter of 2010, we adopted the following new accounting pronouncements:

On January 1, 2010, the Company implemented certain provisions of Financial Accounting Standards Board Accounting Standards Codification (FASB
ASC) Topic 810, Consolidation. The new provisions (a) require a qualitative rather than a quantitative approach to determining the primary beneficiary of a variable interest entity (VIE); (b) amend certain
guidance pertaining to the determination of the primary beneficiary when related parties are involved; (c) amend certain guidance for determining whether an entity is a VIE; and (d) require continuous



34



---

##### Table of Contents

assessments of whether an enterprise is the primary beneficiary of a VIE. The implementation of this standard did not have an impact on the Companys results of operations or financial
condition.

On January 1, 2010, the Company implemented certain provisions of Accounting Standards Update No. 2010-06, Fair
Value Measurements and Disclosures (Topic 820)Improving Disclosures about Fair Value Measurements (Update 2010-06). Update 2010-06 requires the Company to (a) provide information about movements of assets among Levels 1
and 2 of the three-tier fair value hierarchy; (b) provide a reconciliation of purchases, sales, issuance, and settlements of financial instruments valued with a Level 3 method; and (c) provide fair value measurement disclosures for each
class of financial assets and liabilities. The implementation did not have an impact on the Companys results of operations or financial condition. Required disclosures for the reconciliation of purchases, sales, issuance and settlements of
financial instruments valued with a Level 3 method are effective for the Company beginning on January 1, 2011 and the Company does not expect the implementation to have a material impact on the Companys results of operations or financial
condition.



35



---

##### Table of Contents

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

Not applicable to smaller reporting companies.



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

Evaluation of
Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q,
being March 31, 2010, the Companys principal executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the Exchange Act) are effective such that the information relating to OmniComm, including our consolidating subsidiaries, required to be disclosed by the Company in reports that it files or submits under the
Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in
Internal Controls over Financial Reporting

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

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



36



---

##### Table of Contents

PART II OTHER INFORMATION



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

None.



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

Not
applicable for a smaller reporting company.



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

On December 31, 2009, we sold, $1,490,000 principal amount Convertible Debentures and common stock purchase warrants to purchase an aggregate of
5,960,000 shares of our common stock to four accredited investors including Mr. Cornelis F. Wit, our Chief Executive Officer and a Director. The Convertible Debentures and warrants were issued pursuant to an exemption from registration
under the Securities Act of 1933 in reliance on the exemptions provided by Section 4(2) and Rule 506 of Regulation D of that act.

During
the year ended December 31, 2009, the Company issued 405,055 shares of common stock to our Chairman and Chief Technology Officer, Randall G. Smith, in lieu of salary for the year ended December 31, 2009 totaling $109,182. The shares were
issued pursuant to an exemption from registration under the Securities Act of 1933 in reliance on the exemptions provided by Section 4(2) of that act.



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

None.



|ITEM 4. | REMOVED AND RESERVED.
|------- | ---------------------

None.



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

None.



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

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



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



37



---

##### Table of Contents

SIGNATURES

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



|                       |  |                                                                                                                                            
|---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|OmniComm Systems, Inc.
|                       | 
|By:                    |  | /s/ Cornelis F. Wit                                                                                                                        
|                       |  | Cornelis F. Wit, Director, Chief Executive Officer and President (Principal Executive Officer)                                             
|Date:                  |  | May 17, 2010                                                                                                                               
|                       | 
|By:                    |  | /s/ Ronald T. Linares                                                                                                                      
|                       |  | Ronald T. Linares, Executive Vice President of Finance, Chief Financial and Accounting Officer (Principal Financial and Accounting Officer)
|Date:                  |  | May 17, 2010                                                                                                                               



38



---

##### Table of Contents

Exhibit Index



|               |  |                                                                                                                                                                                              
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                  
|31.1           |  | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.               
|               | 
|31.2           |  | Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934,
as amended.
|               | 
|32.1           |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                                       
|               | 
|32.2           |  | Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of
2002.