##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K







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

For the fiscal year ended December 31, 2009



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

Commission File No. 0-25203





OmniComm
Systems, Inc.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-3349762                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

2101 West Commercial Blvd, Suite
4000

Ft. Lauderdale, FL 33309

(Address of principal executive offices)

(954)473-1254

(Registrants telephone number, including area code)





Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value per share

(Title of class)





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or 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.    x  Yes      ̈  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

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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 of the Exchange Act. (Check One):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈ |  | Accelerated Filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

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

State the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrants most recently completed second fiscal
quarter.



|              |  |                                         |  |                       
|------------- |  | --------------------------------------- |  | ----------------------
|Date          |  | Non-Affiliate Voting Shares Outstanding |  | Aggregate Market Value
|June 30, 2009 |  | 59,834,663                              |  | $14,958,666           

Our common stock trades on the
Over-the-Counter Bulletin Board (OTCBB). Shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such person may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination for other purpose. The registrant has no shares of non-voting stock authorized or outstanding.

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.



|               |  |                                          |  |                   
|-------------- |  | ---------------------------------------- |  | ------------------
|Date           |  | Class                                    |  | Outstanding Shares
|March 26, 2010 |  | Common Stock, $0.001 par value per share |  | 85,507,699        

DOCUMENTS
INCORPORATED BY REFERENCE

Portions of the information to be set forth in our Proxy Statement to be filed by us pursuant to Regulation 14A
relating to our 2010 Annual Meeting of Stockholders to be held on June 25, 2010 is incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.









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OMNICOMM SYSTEMS, INC.

ANNUAL REPORT ON

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2009

Table of Contents



|            |  |                                                                                                              |  |     
|----------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|            |  |                                                                                                              |  | Page
|            |  |                                                                                                             
|            |  | Part I                                                                                                       |  |     
|            |  |                                                                                                             
|Item 1.     |  | Business                                                                                                     |  | 3   
|            |  |                                                                                                             
|Item 1A.    |  | Risk Factors                                                                                                 |  | 18  
|            |  |                                                                                                             
|Item 1B.    |  | Unresolved Staff Comments                                                                                    |  | 26  
|            |  |                                                                                                             
|Item 2.     |  | Properties                                                                                                   |  | 26  
|            |  |                                                                                                             
|Item 3.     |  | Legal Proceedings                                                                                            |  | 27  
|            |  |                                                                                                             
|Item 4.     |  | Reserved                                                                                                     |  | 27  
|            |  |                                                                                                             
|            |  | Part II                                                                                                      |  |     
|            |  |                                                                                                             
|Item 5.     |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 28  
|            |  |                                                                                                             
|Item 6.     |  | Selected Financial Data                                                                                      |  | 28  
|            |  |                                                                                                             
|Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 29  
|            |  |                                                                                                             
|Item 7A.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 43  
|            |  |                                                                                                             
|Item 8.     |  | Financial Statements and Supplementary Data                                                                  |  | 43  
|            |  |                                                                                                             
|Item 9.     |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 43  
|            |  |                                                                                                             
|Item 9A(T). |  | Controls and Procedures                                                                                      |  | 43  
|            |  |                                                                                                             
|Item 9B.    |  | Other Information                                                                                            |  | 44  
|            |  |                                                                                                             
|            |  | Part III                                                                                                     |  |     
|            |  |                                                                                                             
|Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                       |  | 44  
|            |  |                                                                                                             
|Item 11.    |  | Executive Compensation                                                                                       |  | 44  
|            |  |                                                                                                             
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 44  
|            |  |                                                                                                             
|Item 13.    |  | Certain Relationships and Related Transactions; and Director Independence                                    |  | 44  
|            |  |                                                                                                             
|Item 14.    |  | Principal Accounting Fees and Services                                                                       |  | 44  
|            |  |                                                                                                             
|            |  | Part IV                                                                                                      |  |     
|            |  |                                                                                                             
|Item 15.    |  | Exhibits, Financial Statement Schedules                                                                      |  | 46  
|            | 
|Signatures  |  | 51                                                                                                          



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PART I



|ITEM 1. | BUSINESS
|------- | --------

This business section and
other parts of this Annual Report on Form 10-K (Annual Report) contain forward-looking statements that involve risk and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not limited to, those set forth in Managements Discussion and Analysis of Financial Condition and Results of Operations  Certain Factors That May Affect Future
Results and elsewhere in this Annual Report. Reference to us we our the Company means OmniComm Systems, Inc®. and our wholly owned subsidiaries OmniComm USA, Inc., OmniComm Ltd., and OmniComm
Europe GmbH.

Overview

OmniComm Systems, Inc. provides Web-based electronic data capture (EDC) and eClinical (eClinical) software and services that streamline the clinical research process. Our eClinical
product offerings include TrialMaster®, TrialOne and eClinical Suite. TrialOne and eClinical Suite
were acquired during 2009 as more fully described herein. Our eClinical products are designed to allow clinical trial sponsors and investigative sites to easily and securely collect, validate, transmit, and analyze clinical study data. Our eClinical
software products are 21 CFR Part 11 compliant solutions and are designed to offer clinical trial sponsors the ability to conduct clinical trials under multiple platforms, with significant flexibility, ease-of-use and with complete control over
collected data.

Our eClinical products offer significant business benefits to our customers and are designed to help clinical trial sponsors
more efficiently conduct their clinical trials. This efficiency translates into more rapid initiation of data collection, less cost incurred in the data collection process and the ability to make more timely Go/No-Go decisions. We also provide
business process consulting services that aim at more effectively integrating EDC and the broader array of eClinical solutions and processes into the clinical trial process. Our goal is to provide our clients a data collection process that is
streamlined, efficient and cost-effective. We believe that our eClinical solutions are significantly more efficient than the traditional paper collection methods employed by the clinical trial industry in the past. TrialMaster has been designed to
make the trial building process more efficient than the technologies deployed by our competitors. We are in the process of integrating the TrialOne and the eClinical Suites with TrialMaster in order to provide an end-to-end eClinical solution for
our clients.

The benefits of managing a clinical trial using our eClinical products include:



| |  |  | Real-Time Access to the Data. Our eClinical products are designed to provide all interested parties with real-time access to study data over the
Internet as it is generated. This allows for the monitoring of patient enrollments and related metrics at the earliest time point.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Faster Study Completion: We believe our eClinical products and services save time at the back-end of a clinical trial by eliminating most of the
time it takes for database clean-up when compared with studies completed by paper-based Case Report Forms (CRFs). This is done by eliminating most incorrect or incomplete entries at the time of entry. A 2008 Clarkston
Consulting report estimates that trial sponsors can experience up to a 70-80% reduction in clinical trial queries through EDC use. This may be critical if there are any unanticipated future delays in either the commencement or conduct of the study.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost Savings: EDC involves fixed upfront system development costs. The use of EDC can be even more cost effective when applied to multiple
studies, which we believe is relatively easy to do in certain therapeutic areas, in which there are a few primary indications and the studies are relatively simple and similar in terms of the type of data captured. A 2009 report by Contemporary
Clinical Trials estimates that EDC users can expect a cost reduction of approximately 55% via the adoption of EDC when compared to traditional paper-based methods.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Improved quality and visibility of results. Our eClincial software applications allow users engaged in clinical trials to enhance the quality
and completeness of their data earlier in the clinical trial process by providing real-time data cleansing and eliminating duplicative manual entry of data. We believe decision making is enhanced through consistent access to reliable data, including
allowing for adaptive trial design, the early identification and termination of unsuccessful trials and timely access to trial data that may identify significant safety concerns.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Comprehensive clinical development solution. We have designed our comprehensive solutions to provide support throughout the clinical development
process, by providing consulting services in the protocol authoring process to preparing data for regulatory analysis and submission. We provide third party technology providers with access to our application programming interface, or API, and
developer tools, which facilitates integration with complementary business systems. Our eClinical applications can be integrated easily with auxiliary clinical and operational data systems, making it the core for a complete end-to-end solution.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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According to a 2008 EvaluatePharma report, global R & D expenditures by the pharmaceutical and BioTech
industries were approximately $120 billion in 2008, with approximately 50% of that amount spent by North American-based pharmaceutical, biotechnology and medical device companies. A 2009 report by William Blair and Company states that the EDC market
is estimated to grow at 15% per year through 2012 with an estimated 80% share by 2011 as paper records are converted to digital and a total estimated market opportunity of $1.4 billion in 2012.

Our Strategy

Our
primary goal is to establish ourselves as a leading EDC and eClinical software and services provider by offering our customers the highest quality service with a differentiated, user-friendly product. Our eClinical solutions and services are priced
to provide a solid value, which we believe will stimulate customer demand. In addition, we believe that through the natural evolution of our products and via the additional functionality we have added through our two recent acquisitions that we have
increased the scope and quality of products and services we offer. We maintain a continuous focus on cost-containment and operating efficiencies. We intend to follow a controlled growth plan designed to take advantage of our competitive strengths.
Historically, our growth has occurred through a combination of continued high-quality service to our existing clients and by adding new clients, often served by higher-cost EDC competitors or less effective home-grown EDC systems. During
2009, we increased the breadth and depth of our products and clients through the acquisition of the EDC assets of eResearch Technology and through the acquisition of Logos Technologies, Ltd EDC assets which included the TrialOne (formerly Alphadas)EDC software application. The key elements of our
strategy are:

Expand our global customer base. We expect EDC adoption to increase, resulting in significant growth in spending
on EDC solutions. We will continue to pursue new relationships with large global pharmaceutical and biotechnology companies by leveraging our support infrastructure, unique language translation capabilities and industry expertise. In addition, we
have marketing, sales and services resources dedicated to small- and middle-market life sciences companies, since we believe this market represents an under-penetrated opportunity for customer expansion.

Stimulate Demand by providing Clinical Trial Sponsors with High Value eClinical Services and Products. Deploying eClinical services and
products can be an expensive proposition. Each trial is considered a stand-alone project and can incur data collection costs that are according to a CenterWatch report approximately 8.5% of total drug development costs. Our eClinical solutions have
been designed to make the trial building process more efficient than the technologies deployed by our competitors and we have been able to provide pricing that is in many cases substantially lower than that of the competition. We believe we provide
a broad array of eClinical solutions, excellent customer service, including full project management and process improvement consultingwhile maintaining significant gross margins. The combination of our cost structure and use of technology
allows us to compete both on quality and price.

Increase Sales to our Existing Customers. We intend to increase the share of
eClinical spending we receive from our existing customers by continuing to increase the scope of services and eClinical products we offer. The two acquisitions completed in 2009 are intended to allow us to add a dedicated Phase One solution,
TrialOne, and a broad set of eClinical solutions including an enhanced reporting tool, a clinical trial management system (CTMS), a clinical data management system (CDMS) and a client portal that provides user dashboard
functionality. By offering end-to-end eClinical solutions to our customers we believe we afford them the opportunity to experience seamless integration of the services and software products needed to bring their therapies to market. We believe a
suite of integrated eClinical products and services will diminish the total cost of ownership, increase the efficiency of the solutions provided to our customers and will allow us to capture revenues that are currently being spent with other
eClinical solution providers.

Emphasize Low Operating Costs. We are committed to keeping our operating and general and
administrative costs low. We have achieved our low operating costs primarily by designing a flexible, customizable EDC product that does not require numerous hours of configuration time. We have also been able to leverage our existing
administrative, selling, consulting and clinical infrastructure in the scope of our two acquisitions. By leveraging our existing corporate infrastructure we have been able to add approximately 45 new clients across the U.S. and in Europe without
adding any personnel aside from those acquired in the two transactions. We believe we use advanced technologies and employ a well incentivized, productive and highly professional workforce. We are continually focused on developing and implementing
improvements that increase our efficiency and we believe that as we continue to integrate our three existing software platforms and services that we will enhance our ability to broaden our product line. We have already derived benefit from economies
of scale by leveraging our current infrastructure over an expanded operation.



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Provide EDC Services to Small and Midsize Pharmaceutical, Bio-Technology and Medical Device
Companies. In considering new markets, we focus on service to markets that we believe are underserved. In determining which markets to select, we have analyzed the size of our potential markets and concluded that providing service to small
and mid-sized firms provides a substantial marketing opportunity. These firms conduct many thousands of clinical trials annually. Most do not have the technological or financial wherewithal to develop a product like TrialMaster and often prefer
working with small companies themselves. Yet, the advantages of eClinical services, such as quick trial deployment, cost-savings and more rapid Go/No-Go decisions are just as crucial to this size firm as to their Fortune 500 competitors.

Continue Expansion of Indirect Sales Through CRO Partnerships. Penetrating the CRO market is an important component of our strategic plan.
By emphasizing CRO partnerships through our CRO Preferred Program we have been able to add a significant number of potential users for our products and services since outsourcing clinical trials in the US market is an established practice.
During 2009, the percentage of revenues from our CRO clients totaled approximately 30%. We initiated the marketing of our CRO Preferred Program in early 2007 and as of December 31, 2009 we had entered into approximately 45 CRO Partner
relationships. CRO partnerships allow us to leverage the selling and marketing capabilities of the CRO itself. Because of our relatively small sales force and limited marketing resources, our CRO strategy has allowed us to augment our selling
efforts in a cost-effective manner by forging long-term strategic relationships with our CRO partners and their existing client base. Our CRO partners gain the ability to manage the EDC decision making process proactively and add an extension to
their line of products. The CRO Preferred Program offers fixed pricing and pay-as-you-go Hosted Services.

Differentiate Through
Service.We believe that a key to our initial and long-term success is that we offer customers a robust EDC product and a distinctive experience that includes highly efficient integration with data imports and exports, quick set-up
times and a growing list of eClinical enhancements. Based on customer feedback, we believe our service is an important reason why our customers choose us over other EDC providers.

Penetrate the Large Pharma Market. As part of the June 2009 eClinical Suite acquisition we acquired the rights to contracts with two of the ten largest pharmaceutical companies. We also
acquired the rights to one of the ten largest pharmaceutical companies in the August 2009 Logos Technologies acquisition. Historically, we have had difficulties penetrating this market due to the size and scope of our operations. Our long-term
success in the eClinical market is predicated on leveraging the R & D, clinical and G & A investments we have made in the last three years over as large a group of clients and projects as possible. It is typically more cost efficient, both
to us and our clients, to deploy EDC and eClinical solutions over a broader array of projects since EDC and eClinical solutions provide significant economies of scale from a human resources perspective when compared with traditional paper-based data
collection methods. The largest pharmaceutical companies have R & D budgets encompassing a significantly larger number of therapies and projects than others in the clinical trial space and are therefore in a position to spend more on EDC and
eClinical solutions. The contracts we assumed in connection with our two fiscal 2009 acquisitions provide us with entrée to this market and may allow us to substantially increase our penetration within this market.

Our Business Model

The scope of client
clinical trial support service needs can vary from trial to trial. Experience with EDC and other eClinical trial management solutions also varies based on such parameters as client size and sophistication. Our approach to satisfying the diverse
needs of our customers is a crawl, walk, run approach to Web-based services adoption. Our TrialMaster EDC application has historically been sold under an Application Service Provider (ASP) model, providing EDC and
complementary services. Beginning in late 2008 we began offering TrialMaster under several business models includingASP, Technology Transition, and Technology Transfer.

We offer a fully hosted ASP model designed to let the client bring study administration and set-up services in-house yet continue to host the solution with us, and a complete Technology Transfer model for
clients that want to bring their eClinical technology solution in-house. This methodology allows our customers to use our services at their own pace, given the logistics of their human resource, infrastructure and capital constraints. This model
allows us the flexibility to deliver eClinical solutions to a broader array of clinical trial sponsors.



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Under our ASP and Technology Transition models, critical data is housed in Cincinnati Bells e-business
center in Cincinnati, Ohio. For Technology Transfer engagements, OmniComm provides an array of implementation services such as installation, configuration, training, and validation support to assist our customers during the migration of the
eClinical software and services to client owned facilities.

ASP contracts provide for flexible pricing that is based on both the size and
duration of the clinical trial. Size parameters for ASP engagements include the number of case report forms (CRF) used to collect data and the number of sites utilizing TrialMaster. The client pays 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 updates, network and site support during the trial. Generally, these contracts will range in duration from three
months to five years. Setup fees are generally earned prior to the inception of a trial, however, the revenues are recognized in accordance with SEC Staff Accounting Bulletin No. 104 Revenue Recognition codified within Accounting
Standards Codification 605  Revenue Recognition which requires that the revenues be recognized ratably over the life of the contract. The maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are
recognized as incurred. In the short-run this method of revenue recognition diminishes the revenues recognized on a periodic basis on our financial statements and obliges us to record a liability. In the long-run, we believe this backlog of
unrecognized revenue, which is recorded as deferred revenues on our balance sheet, will provide our customers and investors revenue visibility and provide meaningful information on the size and scope of our selling efforts.

Pricing for Technology Transition and Technology Transfer (license or licensing) is based on the transfer of a license of our eClinical
solutions either on a perpetual or term license basis. Pricing is determined by the number of named users of the licensee and the volume of CRF pages collected annually. Under our Technology Transition model there is also an annual maintenance
charge incurred for hosting and hosting related services. As part of our licensing model we offer professional and consulting services. The scope of services includes installation, implementation, validation and training services related to the
purchase of an eClinical software application license. In addition, our professional services team provides consulting services aimed at helping our clients adopt best practices related to eClinical use within their existing operations.
Professional and consulting services are generally offered on a time-and-materials basis.

Both the TrialOne software application and
eClinical Suites have historically been, and are expected to be sold in the future, under Technology Transfer arrangements. Technology Transfer and Technology Transition relationships afford our clients with the ability to license eClinical
solutions on a more cost-effective basis. However, these relationships are normally predicated on the client having the internal infrastructure needed to effectively deploy EDC and eClinical products and services. Consequently, we have found and
continue to expect the typical client that licenses our eClinical applications to be a mid-sized or larger CRO, biotechnology and pharmaceutical clients that are testing multiple therapies.

The advantage to us of having the licensing business models is that it allows us to significantly increase our installed base of EDC clients with a
concomitant increase in revenues, however, we are able to make smaller investments in incremental cost of goods sold. We expect our gross margins under licensing arrangements to exceed those we have historically experienced under our ASP model and
are expected to be approximately 80% of revenues.

Our Software Products and Services

TrialMaster EDC Solution

Our core product
is TrialMaster. TrialMaster, allows clinical trial sponsors and investigative sites to easily and securely collect, validate, transmit and analyze clinical study data including patient histories, patient dosing, adverse events and other clinical
trial related information. TrialMaster uses Internet technologies to conduct and manage clinical trial data from geographically dispersed sites. Through TrialMaster, our customers can deploy customized electronic CRFs for on-site clinical data
input, which incorporate automated edit checking and deliver real-time data management capabilities previously unavailable through paper-based clinical trial data collection approaches.

TrialMaster has been designed using Microsofts .NET® architecture. Critical features of the application include: drag and drop trial building that allows us to provide an efficient, easy to use trial building solution
for internal and Technology Transfer or Technology Transition users; an extensive Library of re-usable forms allowing for more efficient and effective follow-on engagements; real-time query management, reporting and resolution; on-demand importing
of data using all of the leading industry standard formats; a robust randomization solution for patient enrollment and inventory tracking solutions for lot and drug shipment; an integrated safety solution that allows for serious adverse event
(SAE) tracking and reporting with MedWatch capabilities; integrated Ad-Hoc reporting is available through LogiXML and automated exports of data to client systems in various formats.



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TrialBuilder. TrialBuilder, our protocol conversion tool, enhances the efficiency of clinical
trial start-up by structuring eCRF development with intuitive tools, guiding clinical research teams through the study design and set-up processes. TrialBuilder facilitates integration with downstream clinical trial processes and systems, including
data capture, management, analysis and electronic data submission. TrialBuilder can automatically configure TrialMaster studies, ensuring quality, consistency and efficiency for customers collaborating through both products.

Hosting. Substantially all of our customers use our hosting services for TrialMaster at our dedicated data center in Cincinnati, Ohio, which
was designed specifically to optimize the delivery of our application services and to ensure the availability and security of our customers research data. Our state of the art facility includes 24 by 7 staffing, enterprise class security,
redundant power and cooling systems, large-scale data back-up capabilities and multiple Internet access points and providers. Our eClinical customers receive similar support and service out of data center in Secaucus, New Jersey. In addition, we
maintain back-up facilities and disaster recovery services out of a location in Fort Lauderdale, Florida. We use Iron Mountain for offsite data storage.

Our hosting operations incorporate industry-standard hardware, databases and application servers in a flexible, scalable architecture. Elements of our applications infrastructure can be replaced or
added with minimal interruption in service in order to reduce the likelihood that the failure of any single device will cause a broad service outage. We can scale to increasing numbers of customers by adding industry-standard computers and servers
and have invested heavily in our data center operations to expand our storage capacity to meet increasing customer demands. Our storage architecture helps to ensure the safe, secure archiving of customers data and to deliver the speed and
performance required to enable customers to access and manage their clinical study data in real-time.

Support. We have a
multi-national organization to support our applications worldwide. We also offer 24 by 7 support to our customers investigator sites through multi-lingual help desks located in Bonn, Germany.

TrialMaster Archive (TMA) allows us to provide client data on a post database lock basis using the same TrialMaster browser view
the client utilizes while their clinical study is in production. TMA is delivered to the client via CD in a read-only format with the ability to export to study specific formats. TMA affords our clients and the FDA the ability to review clinical
trial data by: trial; site; patient; visit and by form parameters. TMA is available in read-only and print-friendly formats and with and without audit trails. The trial sponsor receives a CD with data for all sites, including final data exports in
the formats their TrialMaster study used. Each site is provided with a CD with just their site data. The program is self-contained,so no software is needed to view the CD, there are no minimum system requirements and no internet connection
is required. In 2005, we developed a FDA Submission Module within TMA. This Submission Module creates a casebook containing PDF formatted copies of all CRFs in FDA submission format. This Casebook is fully tabbed and bookmarked making it easy to
find and view particular CRFs. The Submission Module is an optional component used in conjunction with our TMA product.

TrialMaster Safety TrialMaster Safety is our Pharmacovigilance database. Integrated with TrialMaster, TrialMaster Safety accommodates both the MedDRA® and WHO-Drug dictionaries and is HIPAA and 21 CFR Part 11 compliant. TrialMaster Safety features include: the ability to code and store serious adverse event
(SAE) information either in a manually entered mode directly into a web-based form or automatically from event-driven information from a clinical study EDC System such as TrialMaster. The import module is vendor-independent and can be
configured to accept sources of SAE information other than that from a clinical study or TrialMaster; inventory tracking of trial components and automatic notifications when certain trigger events occur; MEDWatch forms for US reporting or
internationally; and electronic reporting of SAEs.

OC Connect

Our OC Connect solution integrates
Oracles industry leading Clinical Data Management System (CDMS), Oracle Clinical, with OmniComms EDC solution, TrialMaster. One of the biggest advantages that Oracle Clinical offers is its ability to scale and store large volumes of
clinical and clinical related data. Many companies continue to use Oracle Clinicals Global Library for storing all of their metadata standards for designing their clinical databases and case report forms. However, when these companies move to
EDC, they typically have to rebuild their global library within their EDC system. With OC Connect, those companies can now load all or part of their global library directly into TrialMaster. Standards can continue to be maintained in Oracle Clinical
and more effectively and efficiently utilized in TrialMaster, thereby maintaining consistency across their clinical applications. Building studies in TrialMaster can now be done using the same global library objects that exist in Oracle Clinical,
simply by importing all or parts of the global library directly into TrialMaster. We believe this allows companies to significantly decrease the amount of time it takes to set up a clinical trial in their TrialMaster EDC system by readily utilizing
those standards that are defined in their Oracle Clinical global library.



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Consulting and Professional Services

Our services include delivery of our hosted solutions and consulting services, customer support and training and the delivery of implementation services for Technology Transfer engagements, including
installation, configuration, validation and training. The primary consulting services we offer for both ASP and Technology Transfer engagements include:



| |  |  | Custom Configuration. Our EDC and eClinical platforms are flexible and allow for major reconfiguration. Each trial can be designed to suit
specific client workflows and trial design. Our eClinical includes a clinical trial management system (CTMS), Drug Supply, Safety and Randomization options that can simplify the trial management experience.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Training. We provide extensive hands-on and eLearning-based EDC training classes. Training classes can be conducted at a sponsor location, at an
investigator meeting or at an investigator site and via Web-cast.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | System Integration. We help our clients integrate our EDC solutions with existing systems or external systems
(Patient Diaries, Medical Devices, and Labs etc). We analyze our clients legacy systems and data management needs in order to decide how to most efficiently integrate EDC.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SOPs and implementation assistance. Our client services and support personnel can be engaged to write an implementation plan designed to
effectively integrate with our EDC solutions. We can also write standard operating procedures (SOPs) to help client staff clearly understand their roles in using TrialMaster to conduct trial activities. We can also analyze and document
business processes to determine where greater operating efficiency may be gained.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Database setup. To get the most out of the our EDC systems, it is necessary to set up basic information such as users, permissions, sites, study
protocol definitions, documents, dictionaries, integration and budgets. We provide personnel who support the implementation of EDC.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Installation. There are various architectures for deploying a secure EDC solution to remote investigator sites. This service explores different
security, performance and system management alternatives and helps the client design and install an optimal solution to meet your their needs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Validation. We offer a validation test kit that includes test cases and documentation to completely validate the installation of our EDC
applications against regulatory requirements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TrialOne Phase I EDC Software Acquisition

On August 3, 2009, we acquired certain tangible and intangible electronic data capture (EDC) assets, formerly owned by Logos Technologies,
Ltd. (Logos Ltd) (Logos EDC Assets), pursuant to a Sale Agreement related to the Administration (similar to a U.S. Chapter 11 bankruptcy proceeding) process in the United Kingdom. Our purpose in acquiring these assets, which
included employment rights to the research and development personnel of Logos Ltd, is to increase our presence in the EDC industry through the Logos Ltd 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 to increase our revenues. Additionally, we believe we can leverage our existing administrative and technical corporate infrastructure
by competing in what we view as an under-serviced segment of the EDC industry, the Phase I market space.

The Company purchased from Logos
Ltd, 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 included a short-term office lease obligation. Consideration for the acquisition consisted of £92,000, which approximates $152,628.



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In January 2010 we rebranded the Logos EDC Assets under the TrialOne trademark. During fiscal 2009 we began
R & D efforts aimed at completely integrating the TrialOne software functionality within an end-to-end solution that utilizes TrialMaster as the core of our eClinical solution.

A 2009 PhRMA report estimates that its members firms, which account for approximately 75% of total R & D spending worldwide, spent approximately $3.5 billion on Phase I clinical trials during 2007.
The majority of EDC vendors can not support the unique way Phase I trials are conducted. Often clinical trial sponsors will conduct numerous small studies that require frequent last minute changes. Those changes can be both time consuming and costly
to implement. Typically, this has caused pharmaceutical companies to continue using traditional paper-based data collection methods. Typically Phase I trials are conducted on small subject populations and often only at one site. Studies can be
broken down into multiple cohorts where the majority of data is collected in the first 48 hours.

TrialOne has been designed for real-time
source-based data collection. Where this is not possible, data is collected through customizable data collection forms that are designed to match the source paper collection forms in order to reduce the errors inherent to data entry.

We believe TrialOne can help dramatically reduce queries through the use of real time edit checks and direct data capture from source medical
instrumentation (e.g., ECG, vital sign monitors). The schedule-driven system, which is automated via the TrialOne application, assists investigators and their staff to collect accurate data at the point of patient collection reducing errors inherent
with manual operations in a clinical trial.

TrialOne is a web-based application which provides secure real-time access to all study
information, in particular trial sponsor and investigators are provided with information that allows for faster decision making. Mid-study data provides trial sponsors with information helpful in determining a drugs safety and efficacy. More
rapid access to clinical trial data will also allow trial sponsors to stop unsuccessful compounds sooner and to bring the successful therapies to market more quickly.

The key benefits of TrialOne for our customers include:



| |  |  | Faster data collection which leads to the ability to get to a quicker database lock allowing for a timelier analysis of study data;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | An ability for clinical trial sponsors to reduce their total cost throughout the entire Phase I process by streamlining the patient recruitment
process, improving error rates through the use of edit queries and through the effective use of integration with medical instrumentation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Access to valid data earlier provides more visibility for Go/No Go decisions;
| | - |  | -------------------------------------------------------------------------------



| |  |  | Increase subject safety-review data (e.g. vital sign trends) in real-time;
| | - |  | --------------------------------------------------------------------------



| |  |  | Manage or run more studies with less human resources; and
| | - |  | ---------------------------------------------------------



| |  |  | The use of bar-coded samples reduces laboratory errors thereby increasing patient safety.
| | - |  | -----------------------------------------------------------------------------------------

TrialOne Phase I Application Suite

TrialOne provides a comprehensive application suite that provides site sponsors, investigators and study monitors with several tools designed at making the overall Phase I operation more efficient. The key components of the TrialOne
application include:

Laboratory. Allows customers to completely automate their sites laboratory. Samples can be tracked and
batched while alarms and information can be configured specific to each sample. Dispatch lists and labels are automatically produced for shipment of samples to the central laboratory. Data is then received back electronically into the TrialOne
database.

Subject Recruitment. The TrialOne subject recruitment module provides essential functionality for automating the collection
and tracking of information involved in finding, screening and scheduling subject candidates for an early phase study. The use of TrialOne for subject recruitment allows customers to access a comprehensive volunteer record management system with
ease and efficiency. The customized database can be searched for volunteers based on specific demographics, medical history and concomitant medications. Trial sponsors can define study-specific screening test panels and record volunteer screening
test results. Outbound communications can be managed allowing for the scheduling of calls, sending e-mail blasts, printing mailing labels or exploring flexible CSV files.



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The process of screening and interviewing study volunteers can be a time-consuming, expensive proposition.
TrialOne provides staff with an easy-to-use, scripted interface for interviewing volunteers that allows staff to automatically evaluate study volunteers based on configurable inclusion and exclusion requirements. Finally, the TrialOne recruitment
module seamlessly integrates data with TrialOne EDC solution when a volunteer is accepted into a study

eClinical Suite Acquisition

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

The Company purchased from ERT, the eClinical Suite 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. We 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 (Shares) of our $0.001 par value common stock. Under the terms of the Agreement, ERT agreed to a covenant not to compete under certain circumstances with us for a period of two years following the closing.

The eClinical Suite was designed to provide a suite of products to address the capture, management and dissemination of clinical trial data. The integrated
eClinical Suite is comprised of the following:



| |  |  | Portal  is an easy to use Web-based portal application enabling clinical trial researchers and staff to gain real-time access to study
metrics, reports, folders and user forums.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | eHealth EducationTMa Web-based training environment enabling clinical research professionals to train and certify on the eClinical
Suite.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | EDC uses the latest technology to provide clinical sites and monitors with a comprehensive electronic data capture (EDC) system to capture
clinical trial data and monitor the sites and data.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Data Management is a clinical data management system (CDMS) for collecting, cleaning and managing clinical trial data. The data management system
also provides sponsors and CROs with the ability to roll-out paper, electronic and hybrid studies in short time frames.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Adverse Event Reporting is an adverse event management system enabling the generation of key regulatory reports, including CIOMS and MedWatch, and
E2B electronic submissions for the EMEA; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Clinical Trial Management System (CTMS) is an integrated system to plan, track, monitor and report on the status of clinical trials from a financial,
planning and regulatory perspective and provide metrics and reports to the users.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The eClinical Suite is available for
license over a renewable term (subscription license) in addition to a traditional perpetual license with annual maintenance. The eClinical suite may be hosted by the customers hosting partner or it may be installed on the customers
computing infrastructure.

The eClinical group provides consulting and professional services to our customers. These services include
providing process management, site set-up, training and clinical trial development consulting.



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Industry Background

The eClinical industry is poised for widespread adoption over the next few years in both the domestic and international clinical trial market. Our research indicates that industry experts anticipate an
enormous transition towards EDC in the next 5 years with estimates from firms such as William Blair and Company placing studies initiated using EDC use above 80% by the end of 2011.

Furthermore, we believe that industry and regulatory trends summarized below have led pharmaceutical, biotechnology and medical device companies to increase R & D for proprietary new drugs and medical
devices. We believe these trends have required companies to conduct increasingly complex clinical trials and develop multinational clinical trial capability, while seeking to control costs. Concurrently, we believe demand for simplified integration
and improved collaboration has driven EDC vendors to develop broader eClinical trial suites to give sponsors shorter, less costly trials and give investigators easier ways to execute and manage them.

Government Health Care Reform. There has been significant pressure in the U.S. to enact health care reform. During 2010 new legislation has
been enacted which is likely to alter the dynamic of how prescription drugs are reimbursed by both private insurers and government-sponsored agencies. These pressures which may mandate significant cost containment measures including government
sponsored health care and regulation over the cost of therapies may increase the pressure on drug and device manufacturers to expedite the approval of their products and services.

Generic Drug Effect. Competition from generic drugs following patent expiration has resulted in increasing market pressure on profit margins.

Increasingly Complex and Stringent Regulation. Increasingly complex and stringent regulatory requirements have increased the volume and
quality of data required for regulatory filings and escalated the demand for real-time, high- accuracy data collection and analysis during the drug development process.

Reducing Drug Development Time Requirements. To reduce costs, maintain market share and speed revenue production, pharmaceutical, medical device and biotechnology companies face increasing
pressure to bring new drugs to market in the shortest possible time.

New Drug Development Pressures. To respond to the demand
for products for an aging population and for the treatment of chronic disorders and life-threatening conditions, research and development expenditures have increased as a result of the constant pressure to develop and patent new therapies.

Expansion of Approved Treatment Indications. There is substantial incentive on the part of the pharmaceutical and biotechnology
drug and therapy owners to expand the scope of FDA approved treatment indications for their already approved therapies. A significant benefit of developing new indications is the ability to extend patent protection for products already approved by
the FDA.

These trends have created even greater competitive demands on the industry to bring products to market efficiently and quickly.

Market Opportunity

Clinical
trials are a critical component in bringing a drug or medical device to market. All prescription drug and medical device therapies must undergo extensive testing as part of the regulatory approval process. We believe many clinical trials continue to
be conducted in an antiquated manner and fail to optimize the resources available for a successful clinical trial. We believe that our solutions significantly reduce costs, improve data quality and expedite results. We believe the data integrity,
system reliability, management control and auditable quality of our eClinical applications will aid clinical trial sponsors that want to improve clinical trial efficiencies, speed-up results and ensure regulatory compliance.

In order for a drug or medical device to be marketed in the United States, Europe or Japan, the drug or device must undergo extensive testing and regulatory
review to determine that it is safe and effective. The regulatory review process for new drugs and devices is time consuming and expensive. For example, a new drug application (NDA) can take up to two years before the FDA approves it.
This is in addition to approximately five to nine years of studies required to provide the data to support the NDA. The amount of money and time currently spent on clinical trials is enormous. The following points are illustrative of clinical trial
industry dynamics:



| |  |  | Drug companies lose as much as $32.9 million in potential revenue for each day a trial is delayed on a blockbuster drug such as Lipitor®. Source:
Pfizer, Inc. website.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Of 5,000 screened chemical compounds approximately 250 enter preclinical testing, 5 enter clinical testing and only one is approved by the FDA to be
marketed to consumers. Source: Congressional Research Service, Library of Congress.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | According to a 2010 Tufts Center for the Study of Drug Development report, the average drug approved for sale by the FDA costs over $1 Billion to bring
to market.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Included in the above cost analysis of bringing a new medicine to market are expenses of project failures and
the impact that long development times have on investment costs. The estimate also accounts for out-of-pocket discovery and preclinical development costs, post-approval marketing studies and the cost of capital. Lengthening development times caused
by complex disease targets and a more intensive regulatory process have more than tripled the cost of developing a drug over the past 15 years. The estimates which were published as part of a 2010 Tufts University study cite that drug companies are
under great pressure to reduce costs and to increase the pace of drug development.

We believe that success in the EDC market is predicated on
several criteria. As the industry grows and matures the ability of participants to fulfill the varied needs of clinical trial sponsors becomes more critical to achieving operational and financial success. We believe these success criteria include:



| |  |  | Deployment options. Successful EDC vendors provide clinical trial sponsors flexibility in choosing whether to deploy EDC on an ASP, Technology
Transfer or Technology Transition basis. The ultimate criteria for selection of the type of technology delivery selected is often predicated on the size of the clinical trial sponsor.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interoperability. Most clinical trial sponsors have invested in other technology platforms to run their trials. These include clinical data
management systems, interactive voice response systems and Central Labs. The ability for an eClinical solution to integrate with existing technology platforms is a key decision making factor.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Scalability. The ability to scale the eClinical solutions to absorb additional projects seamlessly is important to trial sponsors. Scalable
solutions will retain their speed and performance metrics as projects and engagements increase in size.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Migration from hosted to technology transfer solutions. When clinical trial sponsors decide to bring the eClinical services and solutions
in-house it is vital that they do not experience a degradation of speed, performance or system reliability.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Flexibility. The more robust eClinical systems will be designed to provide the ability to increase functionality and guarantee interoperability
with other industry technology solutions. As the industry and technology matures clinical trial sponsors will demand new functionality without loss of performance or reliability.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Vendor stability. eClinical vendors should be able to demonstrate a viable business model and financial structure that can sustain a long-term
relationship with clinical trial sponsors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Systematic adoption of best practices. eClinical vendors will be expected to assimilate best-practice workflows and process tools.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Professional services. The adoption and implementation of eClinical into a clinical trial environment requires significant financial, technical
and human resource investment on the part of clinical trial sponsors. A robust offering of professional services that fully integrate with the technological eClinical offerings will be considered an integral part of any eClinical purchase.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

License Agreement

On April 9, 2009, we entered into a Settlement and License Agreement with DataSci, LLC (DataSci) which relates to a lawsuit filed on June 18, 2008 in the United States District Court for the District of Maryland by
DataSci against OmniComm alleging infringement of 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) owned by DataSci. Pursuant to the Settlement and License Agreement, the parties agreed to enter 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. which we anticipate will approximate the annual minimum royalty payment(s) during any calendar year as follows: 2009$130,000; 2010$200,000; 2011$300,000; and 2012until expiration of the Licensed Patent$450,000
per year. In addition to the cash consideration the Company has issued a warrant for 1,000,000 shares of our common stock with an exercise price of $.01 per share. The warrant has been granted for past use of the Licensed Patent. The warrant can be
exercised by DataSci in month 24 or upon its sole discretion require the Company to pay $300,000 in cash in lieu of exercising the warrant.



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On June 23, 2009 we entered into an agreement to acquire the EDC assets of eResearch Technology.
Concurrent with the consummation of that transaction we 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.

Our Customers

We are committed to developing long-term, partnering relationships with our customers on a global basis and working closely with new customers to configure our systems to meet the unique needs of their
trials. Our customers include leading pharmaceutical, biotechnology, medical device companies, academic institutions, clinical research organizations and other entities engaged in clinical trials. As of December 31, 2009, we had 92 customers,
including 2 of the top 10 global pharmaceutical companies measured by revenue and the second largest biotechnology company. Our representative customers by sponsor type include:



|                              |  |                               
|----------------------------- |  | ------------------------------
|Trial Sponsor                 |  | Sponsor Type                  
|Boston Scientific             |  | Medical Device                
|W. L. Gore                    |  | Medical Device                
|Gilead Sciences               |  | Biopharmaceutical             
|Columbia University (InChoir) |  | Academic                      
|Kendle International          |  | Contract Research Organization
|Johnson & Johnson             |  | Pharmaceutical                
|Wyeth                         |  | Pharmaceutical                

Sales and Marketing

We sell our products through a direct sales force and through our relationships with CROs. Our marketing efforts to-date have focused on
increasing market awareness of our firm and products. These efforts have primarily been comprised of attendance and participation in industry conferences and seminars. A primary focus of our future marketing efforts will be to continue increasing
our market penetration and market awareness. As of December 31, 2009, we had 13 employees in sales and marketing.

Our efforts during
2010 will include: increasing the number of sales personnel employed both in the U.S. and in Europe, which will include the expansion of our inside sales force; increasing our attendance and marketing efforts at industry conferences and increasing
the number of Company sponsored events including webinars, symposiums and other marketing events.

Our marketing strategy is to generate
qualified sales leads, enhance the global recognition of our brand and products and establish OmniComm as a provider of high value eClinical solutions. Our principal marketing initiatives target key executives and decision makers within our existing
and prospective customer base. We sponsor and participate in industry events including user conferences, trade shows and webinars. During 2010 we expect to increase the number of articles authored by OmniComm employees and to increase our efforts at
participating in cooperative marketing efforts with our CRO partners and other providers of complementary services or technology, including joint press announcements, joint trade show activities and joint seminars and webinars.

Clinical trial sponsors have historically outsourced their clinical research activities in an attempt to control costs and expand capacity. Our CRO
relationships help us position our software solutions as the core platform for their outsourced client trial management services. Through our CRO Preferred Program, we partner with CROs to deliver our eClinical technologies along with the CROs
project and data management expertise. We also train, certify and support our CRO and other clinical services partners which enables them to quickly and cost-effectively implement our technology in sponsors studies. A critical aspect of the
program is our ability to deliver our eClinical solutions on a fixed cost basis to our partners. Because of the economics intrinsic to the CRO industry a fixed cost solution affords the partner a stronger ability to manage their costs and deliver
cost-effective solutions to their clinical trial sponsor clients.



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We have been able to obtain valuable insight into our customers needs through the following specific
customer initiatives:

Strategic Advisory Board. (SAB) We sponsor semi-annual meetings of the OmniComm Systems SAB which provides us
with an opportunity to learn from industry experts about the trends and direction of the EDC, eClinical and R & D industries. The SAB is comprised of industry veterans from the biotechnology, medical device, CRO and pharmaceutical sectors.
Members are both current and prospective users of our products. We have found that use of third-party industry experts provides us with useful feedback on our application services, provides a significant barometer for the threats and opportunities
facing our industry in the short and long-run and allows us to forge meaningful relationships within the eClinical industry.

eClinical
webinars. We host periodic web-based seminars for current and prospective customers, which are typically focused on our products or current developments in the eClinical industry.

Research and Development

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 eClinical solutions. 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. Our development of TrialMaster and its subsequent improvements and refinements have been handled by our in-house staff of developers. In the past, our philosophy towards software development
has been to design and implement all of our solutions through in-house development. During 2009 we increased the scope and breadth of our eClinical solutions through the acquisition of the EDC assets of eResearch Technology in June 2009 and the
acquisition of the EDC assets of Logos Technologies in August 2009. Both acquisitions added significant functionality in the form of products and services to our overall eClinical suite of applications. Because of the inherent limitations that exist
in our operations due to manpower constraints and due to the nature of the products acquired we do not believe we could have internally developed either suite of products internally in a strategically feasible timeframe. As of December 31,
2009, we had approximately 35 employees involved in our research and development efforts.

We currently partner with several eClinical
applications in an effort to expand the scope of products and services we offer our customers. In the past, integrating these platforms has required R & D time, effort and expenditures. We anticipate expending R & D funds on these efforts as
we expand these relationships to include more formalized relationships which could include revenue sharing or private label arrangements.

We
expect our R & D efforts over the next two to three years to be aimed at first, effectively integrating the broad array of functionality that exists in our current product base (TrialMaster, TrialOne and eClinical Suite), and second, broadening
the scope of our eClinical functionality and services by selectively developing or acquiring new complementary products and services. These efforts may include select strategic alliances with software and service partners possessing clinical trial
industry experience.

When developing our technical solutions to manage clinical data, industry regulatory requirements also dictate that
substantial documentation be created to demonstrate the integrity of the solution, known in the industry as a validation package. Our software development lifecycle practices include streamlined methodologies for generating and maintaining
validation packages during the software release process. These methodologies include a validated path for upgrading existing installations and data. We currently release major updates to our software applications approximately twice per year. We
believe that the completeness of our validation packages provide our customers with an ability to stay on current technology, allowing us to minimize the number of legacy releases that require maintenance and support.

Our research and development department includes a product management team that works with both internal and customer experts to create new features and
functionality, a technical documentation team, as well as product engineering and software quality assurance functions. We also have a dedicated research and development team building integration software and APIs on top of our platform. During
fiscal 2009, we spent approximately $2,064,000 on R & D activities, the majority of which represented salaries to our programmers and developers. In fiscal 2008 we spent approximately $897,000 on R & D activities, the majority of which
represents salaries to our programmers and developers.



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Intellectual Property

Our success and ability to compete are dependent on our efforts to develop and maintain the proprietary aspects of our technology. We rely upon a combination of trademark, trade secret, copyright and
unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by
requiring our employees and consultants to enter into confidentiality, non-competition and assignment of inventions agreements. We have registered trademarks and service marks in the United States and abroad, and have filed applications for the
registration of additional trademarks and service marks. Our principal trademarks are OmniComm Systems, TrialMaster, TrialBuilder, TrialExplorer and TrialOne. These legal protections afford
only limited protection for our technology. We are in the process of registering several trademarks in the United States and in the United Kingdom. We cannot predict whether these trademark registrations will provide meaningful protection.
Additionally, trademark applications have been filed for various key components of our TrialMaster products and services. Our agreements with employees, consultants and others who participate in development activities could be breached. However, due
to rapid technological change, we believe that factors such as the technological and creative skills of our personnel, new product and service developments and enhancements to existing products and services are more important than the various legal
protections of our technology to establish and maintain a technology leadership position.

We currently hold several domain names, including
the domain names omnicomm.com and trialmaster.com. Additionally, legislative proposals have been made by the U.S. federal government that would afford broad protection to owners of databases of information. The protection of
databases already exists in the European Union. The adoption of legislation protecting database owners could have a material adverse effect on our business, requiring us to develop additional, complex data protection features for our software
products.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our software solutions
or to obtain and use information that we regard as proprietary. The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Litigation may be necessary in the future to enforce our
intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business,
operating results or financial condition. There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology. Any failure to meaningfully protect
our intellectual property and other proprietary rights could have a material adverse effect on our business, operating results or financial condition.

In addition, since the software and Internet-based industries are characterized by the existence of a large number of patents, trademarks and copyrights it also involves frequent litigation based on allegations of infringement or other
violations of intellectual property rights. We, and other companies in our industry, have entered into a settlement and obtained a license from a patent holder to license third-party technology and other intellectual property rights that are
incorporated into some elements of our services and solutions. Our technologies may not be able to withstand third-party claims or rights against their use. Any intellectual property claims against us, with or without merit, could be time-consuming
and expensive to litigate or settle, could divert management attention from executing our business plan or require us to enter into royalty or licensing agreements with third parties. Such royalty or licensing agreements, if required, might not be
available on terms acceptable to us or at all, which would have a material adverse effect upon our business and financial position. There is no assurance that we will not become subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in different industry segments overlaps. An adverse determination on such a claim would increase our costs and could also prevent us from offering our technologies and
services to others.

We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as
trademarks, technology or copyrighted material, to third parties. We generally provide in our customer agreements that we will indemnify our customers against third-party infringement claims relating to our technology provided to the customer.



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Competition

The market for electronic data collection, data management and adverse event reporting systems is highly competitive, rapidly evolving, fragmented and is subject to changing technology, shifting customer
needs and frequent introductions of new products and services. We compete with systems and paper-based processes utilized by existing or prospective customers, as well as other commercial vendors of EDC and eClinical applications, clinical data
management systems and adverse event reporting software, including:



| |  |  | systems developed internally by existing or prospective customers;
| | - |  | ------------------------------------------------------------------



| |  |  | vendors of EDC, eClinical, clinical trial management systems and adverse event reporting product suites, including Oracle Clinical, a business unit of
Oracle Corporation, Medidata Solutions and PhaseForward, Inc.;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | vendors of stand-alone EDC, data management and adverse event reporting products; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | CROs with internally developed EDC, clinical data management systems or adverse event reporting systems.
| | - |  | --------------------------------------------------------------------------------------------------------

Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development, customer support and
service delivery. We believe that the principal competitive factors in our market include the following:



| |  |  | product functionality and breadth of integration among the EDC, eClinical, clinical trial management systems and adverse event reporting solutions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reputation and financial stability of the vendor;
| | - |  | -------------------------------------------------



| |  |  | low total cost of ownership and demonstrable benefits for customers;
| | - |  | --------------------------------------------------------------------



| |  |  | depth of expertise and quality of consulting and training services;
| | - |  | -------------------------------------------------------------------



| |  |  | performance, security, scalability, flexibility and reliability of the solutions;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | speed and ease of implementation and integration; and
| | - |  | -----------------------------------------------------



| |  |  | sales and marketing capabilities, and the quality of customer support.
| | - |  | ----------------------------------------------------------------------

We believe that our technical expertise, the knowledge and experience of our principals in the industry, quality of service, responsiveness to client needs and speed in delivering solutions will allow us
to compete favorably within this market. Many of our competitors and potential competitors have greater name recognition, longer operating histories and significantly greater resources. There can be no assurance that our current or prospective
competitors will not offer or develop products or services that are superior to, or that achieve greater market acceptance than, our products and services.

Government Regulation

The conduct of clinical trials is subject to regulation and
regulatory guidance associated with the approval of new drugs, biological products and medical devices imposed upon the clinical trial process by the U.S. federal government and related regulatory authorities such as the U.S. Food and Drug
Administration, or FDA, and by foreign governments. Use of our software products, services and hosted solutions by entities engaged in clinical trials must be done in a manner that is compliant with these regulations and regulatory guidance. Failure
to do so could have an adverse impact on a clinical trial sponsors ability to obtain regulatory approval of new drugs, biological products or medical devices. If our product and service offerings fail to allow our customers and potential
customers to operate in a manner that is compliant with applicable regulations and regulatory guidance, clinical trial sponsors and other entities conducting clinical research may be unwilling to use our software products, services and hosted
solutions. Accordingly, we design our product and service offerings to allow our customers and potential customers to operate in a manner that is compliant with applicable regulations and regulatory guidance. We also expend considerable time and
effort monitoring regulatory developments that could impact the use of our products and services by our customers and use this information in designing or modifying our product and service offerings.

The following is an overview of some of the regulations that our customers and potential customers are required to comply with in the conduct of clinical
trials.

The clinical testing of drugs, biologics and medical devices is subject to regulation by the FDA and other governmental authorities
worldwide. The use of software during the clinical trial process must adhere to the regulations and regulatory guidance known as Good Clinical Practices, other various codified FDA regulations, the Consolidated Guidance for Industry from the
International Conference on Harmonization regarding Good Clinical Practice for Europe, Japan and the United States and other guidance documents. Our products, services and hosted solutions are developed using our domain expertise and are designed to
allow compliance with applicable rules or regulations.



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In addition to the aforementioned regulations and regulatory guidance, the FDA has developed regulations and
regulatory guidance concerning electronic records and electronic signatures. The regulations, codified as 21 CFR Part 11, are interpreted for clinical trials in a guidance document titled Computerized Systems Used in Clinical Trials. This
regulatory guidance stipulates that computerized systems used to capture or manage clinical trial data must meet certain standards for attributability, accuracy, retrievability, traceability, inspectability, validity, security and dependability.
Other guidance documents have been issued that also help in the interpretation of 21 CFR Part 11.

Regulation of the use and
disclosure of personal medical information is complex and growing. Federal legislation in the United States, known as the Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes a number of requirements on the use and
disclosure of protected health information which is individually identifiable, including standards for the use and disclosure by the health care facilities and providers who are involved in clinical trials. HIPAA also imposes on these
healthcare facilities and providers standards to assure the confidentiality of health information stored or processed electronically, including a series of administrative, technical and physical security procedures. This may affect us in several
ways. Many users of our products and services are directly regulated under HIPAA and, to the extent our products cannot be utilized in a manner that is consistent with the users HIPAA compliance requirements, our products will likely not be
selected. In addition, we may be directly affected by HIPAA and similar state privacy laws. Under HIPAA, to the extent we perform functions or activities on behalf of customers that are directly regulated by such medical privacy laws, such customers
may be required to obtain satisfactory assurance, in the form of a written agreement, that we will comply with a number of the same HIPAA requirements.

Business Segments and Geographic Information

We view our operations and manage our
business as one operating segment. Our sales to date have been generated almost exclusively from U.S. based clients. TrialMaster has been deployed in clinical trials conducted both domestically in the U.S. and internationally in Europe, Asia, Africa
and Australia. We began operations in Europe through our wholly owned subsidiary OmniComm Europe BV which has ceased operations. During 2007, we expanded our European operations by creating a subsidiary in Germany, OmniComm Europe, GmbH and merged
the operations of our other OmniComm Europe BV into that unit. Our European subsidiary, OmniComm Europe, GmbH, operates out of an office in Bonn, Germany. We currently employ 15 employees in that office spanning all areas of our operation including
study development, project management, quality assurance and clinical support and services. Our European sales and business development efforts are managed out of this location as well.

In August 2009 we acquired the EDC assets of Logos Technologies Ltd. out of administration (similar to a U.S. Chapter 11 bankruptcy proceeding) in the U.K. As part of that transaction we opened an R &
D office for our newly acquired phase one product, TrialOne. We currently employ five software developers and engineers out of that office.

During 2009 we also completed the acquisition of the EDC assets of eResearch Technology. The result of our two acquisitions was to increase the number of clients serviced in the European market to approximately 15 clients. We expect the
percentage of revenues generated from our European operations to increase to approximately 10% of total revenues.

Background and History

OmniComm Systems, Inc. was originally organized as Coral Development Corp., under the laws of the State of Delaware, on November 19,
1996, by Modern Technology Corp. (Modern). Modern originally completed a blind pool/blank check offer pursuant to Rule 419 by having Modern distribute Coral Development shares as a dividend to Modern shareholders. On
February 17, 1999, OmniComm Systems, Inc., a company organized under the laws of the State of Florida as the Premisys Group, Inc. on March 4, 1997, merged with Coral Development. Coral Development was the surviving entity post-merger. The
merged entity changed its name to OmniComm Systems, Inc.

Employees

We currently have 104 full time employees of which four are executives, four are administrative, 70 are programmers, engineers or technology specialists, eight work in clinical operations, five are
technology and systems managers and 13 are in sales and marketing. We employ 62 employees out of our headquarters in Fort Lauderdale, Florida, 15 employees out of a field office in Monmouth Junction, New Jersey and seven field sales and marketing
employees in California, Illinois, Georgia, Pennsylvania, New York, Texas and North Carolina. Our wholly-owned subsidiary, OmniComm Europe, GmbH, employs 15 employees in Bonn, Germany. Our wholly-owned subsidiary, OmniComm Ltd., employees five
employees in Lymington, England. We believe that relations with our employees are good. None of our employees is represented by a collective bargaining agreement.



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Available Information

We were incorporated in Delaware in 1997. We currently have operating subsidiaries in Bonn, Germany and Lymington, England and a wholly-owned U.S. subsidiary, OmniComm USA, Inc. Our Internet website
address is http://www.omnicomm.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 are available either via a link on our website or on the Securities and Exchange Commission website, http://www.sec.gov.



|ITEM 1A. | Risk Factors
|-------- | ------------

RISK
FACTORS

An investment in our securities is speculative in nature and involves a high degree of risk. In addition to the other
information contained in this prospectus, the following material risk factors should be considered carefully in evaluating us and our business before purchasing our securities.

WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES. WE MAY NEVER ACHIEVE OR MAINTAIN PROFITABILITY.

We incurred net losses attributable to common stockholders of $8,275,481 and $10,878,521 in fiscal 2009 and 2008, respectively. At December 31, 2009, we had an accumulated deficit of approximately
$55,870,527 and a working capital deficit of approximately $3,916,994. We expect net losses and negative cash flow for the foreseeable future until such time as we can generate sufficient revenues to achieve profitability. We expect our operating
cash flows to improve in fiscal 2010, but we have little control over the timing of contracted projects. We expect our client and contract base to expand and diversify to the point where it meets our on-going operating needs, but this may not happen
in the short-term or at all. While we expect to achieve additional revenue through the growth of our business, we cannot assure you that we will generate sufficient revenue to fund our expenses and achieve and maintain profitability in any period.

IF WE ARE NOT ABLE TO RELIABLY MEET OUR DATA STORAGE AND MANAGEMENT REQUIREMENTS, OR IF WE EXPERIENCE ANY FAILURE OR INTERRUPTION IN THE
DELIVERY OF OUR SERVICES OVER THE INTERNET, CUSTOMER SATISFACTION AND OUR REPUTATION COULD BE HARMED AND CUSTOMER CONTRACTS MAY BE TERMINATED.

As part of our current business model, we store and manage in excess of ten terabytes of data for our customers, resulting in substantial information technology infrastructure and ongoing technological challenges, which we expect to
continue to increase over time. If we do not reliably meet these data storage and management requirements, or if we experience any failure or interruption in the delivery of our services over the Internet, customer satisfaction and our reputation
could be harmed and lead to reduced revenues and increased expenses. Our hosting services are subject to service level agreements and, in the event that we fail to meet guaranteed service or performance levels, we could be subject to customer
credits or termination of these customer contracts. If the cost of meeting these data storage and management requirements increases, our results of operations could be harmed.

A SYSTEM FAILURE COULD RESULT IN SIGNIFICANTLY REDUCED REVENUES.

Any system failure,
including network, software or hardware failure that causes an interruption in our service could affect the performance of our TrialMaster software and result in reduced revenues. The servers that host our software are backed-up by remote servers,
but we cannot be certain that the back-up servers will not fail or cause an interruption in our service. Clinical trial data could also be affected by computer viruses, electronic break-ins or other similar disruptions. Our users will depend on
Internet service providers, online service providers and other web site operators for access to our products. Each of these providers may have experienced significant outages in the past and could experience outages, delays and other difficulties
due to system failures unrelated to our systems. Further, our systems are vulnerable to damage or interruption from fire, flood, power loss, telecommunications and/or power failure, break-ins, hurricanes, earthquake and similar events. Regionalized
power loss caused by hurricanes or other storms if occurring over a long period of time could adversely impact our ability to service our clients. Our insurance policies have low coverage limits and may not adequately compensate us for any such
losses that may occur due to interruptions in our service.



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IN JUNE 2009 WE ACQUIRED THE EDC ASSETS OF ERESEARCH TECHNOLOGY AND IN AUGUST 2009 WE ACQUIRED THE EDC
ASSETS OF LOGOS TECHNOLOGIES, LTD. WE MAY EXPAND OUR BUSINESS FURTHER THROUGH NEW ACQUISITIONS IN THE FUTURE. ANY SUCH ACQUISITIONS, AND OUR FAILURE TO MANAGE OUR GROWTH THEREFROM, COULD DISRUPT OUR BUSINESS, HARM OUR FINANCIAL CONDITION AND DILUTE
CURRENT STOCKHOLDERS OWNERSHIP INTERESTS IN OUR COMPANY.

We intend to pursue potential acquisitions of, and investments in,
businesses, technologies or products complementary to our business and periodically engage in discussions regarding such possible acquisitions. For example, during 2009 we acquired the EDC assets of eResearch Technology and in August 2009 we
acquired the EDC assets of Logos Technologies, Ltd.

Acquisitions involve numerous risks, including some or all of the
following:



| |  |  | difficulties in identifying and acquiring complementary products, technologies or businesses;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | substantial cash expenditures;
| | - |  | ------------------------------



| |  |  | incurrence of debt and contingent liabilities, some of which we may not identify at the time of acquisition;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | difficulties in assimilating the operations and personnel of the acquired companies;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | diversion of managements attention away from other business concerns;
| | - |  | ----------------------------------------------------------------------



| |  |  | risk associated with entering markets in which we have limited or no direct experience;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | potential loss of key employees, customers and strategic alliances from either our current business or the target companys business; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays in customer purchases due to uncertainty and the inability to maintain relationships with customers of the acquired businesses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

If we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of such
acquisitions, we may incur costs in excess of what we anticipate and management resources and attention may be diverted from other necessary or valuable activities. An acquisition may not result in short-term or long-term benefits to us. The failure
to evaluate and execute acquisitions or investments successfully or otherwise adequately address these risks could materially harm our business and financial results. We may incorrectly judge the value or worth of an acquired company or business. In
addition, our future success will depend in part on our ability to manage the growth anticipated with these acquisitions.

Furthermore, the
development or expansion of our business or any acquired business or companies may require a substantial capital investment by us. We may not have these necessary funds or they might not be available to us on acceptable terms or at all. We may also
seek to raise funds for an acquisition by issuing equity securities or convertible debt, as a result of which our existing stockholders may be diluted or the market price of our stock may be adversely affected.

OUR REVENUES DERIVED FROM INTERNATIONAL OPERATIONS ARE SUBJECT TO RISK, INCLUDING RISKS RELATING TO UNFAVORABLE ECONOMIC, POLITICAL, LEGAL, REGULATORY,
TAX, LABOR AND TRADE CONDITIONS IN THE FOREIGN COUNTRIES IN WHICH WE OPERATE, THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

We expect that beginning in fiscal 2010 international customers will begin to account for a substantial percentage of our revenues. International operations are subject to inherent risks. These risks
include:



| |  |  | the economic conditions in these various foreign countries and their trading partners, including conditions resulting from disruptions in the world
credit and equity markets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | political instability;
| | - |  | ----------------------



| |  |  | greater difficulty in accounts receivable collection and enforcement of agreements and longer payment cycles;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | compliance with foreign laws;
| | - |  | -----------------------------



| |  |  | changes in regulatory requirements;
| | - |  | -----------------------------------



| |  |  | fewer legal protections for intellectual property and contract rights;
| | - |  | ----------------------------------------------------------------------



| |  |  | tariffs or other trade barriers;
| | - |  | --------------------------------



| |  |  | staffing and managing foreign operations;
| | - |  | -----------------------------------------



| |  |  | exposure to currency exchange and interest rate fluctuations;
| | - |  | -------------------------------------------------------------



| |  |  | potentially adverse tax consequences; and
| | - |  | -----------------------------------------



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| |  |  | recently proposed changes to taxation of offshore earnings.
| | - |  | -----------------------------------------------------------

EXTENSIVE GOVERNMENTAL REGULATION OF THE CLINICAL TRIAL PROCESS AND OUR PRODUCTS AND SERVICES COULD REQUIRE SIGNIFICANT COMPLIANCE COSTS AND HAVE A MATERIAL ADVERSE EFFECT ON THE DEMAND FOR OUR
SOLUTIONS.

The clinical trial process is subject to extensive and strict regulation by the U.S. Food and Drug Administration and other
regulatory authorities worldwide. Our software products, services and hosted solutions are also subject to state, federal and foreign regulations. Demand for our solutions is largely a function of such government regulation, which is generally
increasing at the state and federal levels in the United States and elsewhere, and subject to change at any time. Changes in the level of regulation, including a relaxation in regulatory requirements or the introduction of simplified drug approval
procedures, could have a material adverse effect on the demand for our solutions. For example, proposals to place caps on drug prices could limit the profitability of existing or planned drug development programs, making investment in new drugs and
therapies less attractive to pharmaceutical companies. Similarly, the requirements in the United States, the European Union and elsewhere to create a detailed registry of all clinical trials could have an impact on customers willingness to
perform certain clinical studies. Likewise, a proposal for government-funded universal health care could subject expenditures for health care to governmental budget constraints and limits on spending. In addition, the uncertainty surrounding the
possible adoption and impact on health care of any Good Clinical Practice reforms could cause our customers to delay planned research and development until some of these uncertainties are resolved. Until the new legislative agenda is finalized and
enacted, it is not possible to determine the impact of any such changes.

Modifying our software products and services to comply with changes
in regulations or regulatory guidance could require us to incur substantial costs. Further, changing regulatory requirements may render our solutions obsolete or make new products or services more costly or time consuming than we currently
anticipate. Failure by us, our customers, or our competitors to comply with applicable regulations could result in increased regulatory scrutiny and enforcement. If our solutions fail to comply with government regulations or guidelines, we could
incur significant liability or be forced to cease offering our applicable products or services. If our solutions fail to allow our customers to comply with applicable regulations or guidelines, customers may be unwilling to use our solutions and any
such non-compliance could result in the termination of or additional costs arising from contracts with our customers.

IF OUR LICENSE TO
USE THIRD-PARTY TECHNOLOGIES IN OUR PRODUCTS IS TERMINATED, WE MAY BE UNABLE TO DEVELOP, MARKET OR SELL OUR PRODUCTS.

We are dependent on
a license agreement relating to our current and possibly proposed products that give us rights under intellectual property rights of a third party. This agreement can be terminated on short notice by the licensor if we default on our obligations
under the license and fail to cure such default after notice is provided. The license imposes commercialization, certain sublicensing, royalty, insurance and other obligations on us. Our failure, or any third partys failure, to comply with the
terms of this license could result in our losing our rights to the license, which could result in our being unable to develop or sell our products.

WE DEPEND PRIMARILY ON THE PHARMACEUTICAL, BIOTECHNOLOGY AND MEDICAL DEVICE INDUSTRIES AND ARE THEREFORE SUBJECT TO RISKS RELATING TO CHANGES IN THESE INDUSTRIES.

Our business depends on the clinical trials conducted or sponsored by pharmaceutical, biotechnology and medical device companies and other entities conducting clinical research. General economic
downturns, increased consolidation or decreased competition in the industries in which these companies operate could result in fewer products under development or decreased pressure to accelerate product approval which, in turn, could materially
adversely impact our revenues. Our operating results may also be adversely impacted by other developments that affect these industries generally, including:



| |  |  | the introduction or adoption of new technologies or products;
| | - |  | -------------------------------------------------------------



| |  |  | changes in third-party reimbursement practices;
| | - |  | -----------------------------------------------



| |  |  | changes in government regulation or governmental price controls;
| | - |  | ----------------------------------------------------------------



| |  |  | changes in medical practices;
| | - |  | -----------------------------



| |  |  | the assertion of product liability claims; and
| | - |  | ----------------------------------------------



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| |  |  | changes in general business conditions.
| | - |  | ---------------------------------------

Any decrease in R & D expenditures or in the size, scope or frequency of clinical trials conducted or sponsored by pharmaceutical, biotechnology or medical device companies or other entities as a
result of the foregoing or other factors could materially adversely affect our operations or financial condition.

OUR OPERATING RESULTS
MAY FLUCTUATE SIGNIFICANTLY AND COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO FALL RAPIDLY AND WITHOUT NOTICE.

Our revenues and
operating results are difficult to predict and may fluctuate significantly from quarter to quarter, particularly because of the rapidly evolving market in which we operate and our term license model. For instance, our quarterly results ranged from
an operating loss of $1,754,301 for the quarter ended September 30, 2009 to an operating loss of $381,590 for the quarter ended March 31, 2005. Our results of operations in any given quarter will be based on a number of factors, including:



| |  |  | the extent to which our EDC and eClinical applications achieve or maintain market acceptance;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | our ability to introduce new products and services and enhancements to our existing products and services on a timely basis;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | the competitive environment in which we operate;
| | - |  | ------------------------------------------------



| |  |  | the timing of our product sales and the length of our sales and implementation cycles;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | changes in our operating expenses;
| | - |  | ----------------------------------



| |  |  | our ability to hire and retain qualified personnel;
| | - |  | ---------------------------------------------------



| |  |  | changes in the regulatory environment related to the clinical trial market;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the financial condition of our current and potential customers.
| | - |  | ---------------------------------------------------------------

A significant portion of our operating expense is relatively fixed in nature and planned expenditures are based in part on expectations regarding future revenues. Accordingly, unexpected revenue
shortfalls may decrease our gross margins and could cause significant changes in our operating results from quarter to quarter. Results of operations in any quarterly period should not be considered indicative of the results to be expected for any
future period. In addition, our future quarterly operating results may fluctuate and may not meet the expectations of securities analysts or investors. If this occurs, the trading price of our common stock could fall substantially either suddenly or
over time.

WE MAY BE REQUIRED TO SPEND SUBSTANTIAL TIME AND EXPENSE BEFORE WE RECOGNIZE A SIGNIFICANT PORTION OF THE REVENUES, IF ANY,
ATTRIBUTABLE TO OUR CUSTOMER CONTRACTS.

The sales cycle for some of our software solutions frequently takes six months to a year or
longer from initial customer contact to contract execution. During this time, we may expend substantial time, effort and financial resources without realizing any revenue with respect to the potential sale. In addition, in the case of our hosted EDC
solutions, we do not begin recognizing revenue until implementation cycles are complete. Moreover, while we begin recognizing revenue upon completion of the scope of work detailed in our contracts, it may be difficult for us to rapidly increase our
revenue through additional sales in any period, as revenue from new customers is recognized over the applicable license term, typically three months to five years. As a result, we may not recognize significant revenues, if any, from some
customers despite incurring considerable expense related to our sales and implementation process. Even if we do realize revenues from a contract, our pricing model may keep us from recognizing a significant portion of these revenues during the same
period in which sales and implementation expenses were incurred. Those timing differences could cause our gross margins and profitability to fluctuate significantly from quarter to quarter. Similarly, a decline in new or renewed client contracts in
any one quarter will not necessarily be fully reflected in the revenue in that quarter and may negatively affect our revenue in future quarters. This could cause our operating results to fluctuate significantly from quarter to quarter.

THE LOSS OF ONE OR MORE MAJOR CUSTOMERS COULD MATERIALLY AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Our top five customers accounted for approximately 46% of our revenues during 2009 and approximately 54% of our revenues during 2008. One customer accounted
for 26% of our revenues during 2009 or approximately $2,443,000. One customer accounted for 36% of our revenues during 2008, or approximately $2,238,198. These customers can terminate our services at any time. The loss of any of our major customers
could have a material adverse effect on our results of operations or financial condition. We may not be able to maintain our customer relationships, and our customers may not renew their agreements with us, which could adversely affect our results
of operations or financial condition. A significant change in the liquidity or financial position of any of these customers could also have a material adverse effect on the collectibility of our accounts receivables, our liquidity and our future
operating results.



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WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS RELATING TO OUR PRODUCTS OR
SERVICES OR OUR CUSTOMERS USE OF OUR PRODUCTS OR SERVICES.

Any failure or errors in a customers clinical trial or adverse
event reporting obligations caused or allegedly caused by our products or services could result in a claim for substantial damages against us by our customers or the clinical trial participants, regardless of our responsibility for the failure.
Although we are entitled to indemnification under our customer contracts against claims brought against us by third parties arising out of our customers use of our products, we might find ourselves entangled in lawsuits against us that, even
if unsuccessful, divert our resources and energy and adversely affect our business. Further, in the event we seek indemnification from a customer, we cannot assure you that a court will enforce our indemnification right if challenged by the customer
obligated to indemnify us or that the customer will be able to fund any amounts for indemnification owed to us. We also cannot assure you that our existing general liability or professional liability insurance coverages will continue to be available
on reasonable terms or will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim.

WE FACE INTENSE COMPETITION AND WILL HAVE TO COMPETE FOR MARKET SHARE.

There can be no
assurance that our products will achieve or maintain a competitive advantage. There are currently a number of companies who market services and products for Web-based clinical trial data collection. Barriers to entry on the Internet are relatively
low, and we expect competition to increase significantly in the future. We face competitive pressures from numerous actual and potential competitors, both online and offline, many of which have longer operating histories, greater brand name
recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. We cannot assure you that the Web-based clinical trials maintained by our existing and potential competitors will not be perceived
by clinical trial sponsors as being superior to ours.

WE MAY BE UNABLE TO PREVENT COMPETITORS FROM USING OUR INTELLECTUAL PROPERTY, AND WE
WOULD FACE POTENTIALLY EXPENSIVE LITIGATION TO ASSERT OUR RIGHTS. IF WE CANNOT PROTECT OUR PROPRIETARY INFORMATION, WE MAY LOSE A COMPETITIVE ADVANTAGE AND SUFFER DECREASED REVENUES AND CASH FLOW.

We are dependent, in part, on proprietary data, analytical computer programs and methods and related know-how for our day-to-day operations. We rely on a
combination of confidentiality agreements, contract provisions, license agreements, trademarks and trade secret laws to protect our proprietary rights. Although we intend to protect our rights vigorously, to the extent that our intellectual property
and other proprietary rights are not adequately protected, third parties might gain access to our proprietary information, develop and market products or services similar to ours, or use trademarks similar to ours, each of which could materially
harm our business. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and
expensive, even if we were to prevail. There can be no assurance we will be successful in protecting our proprietary rights. If we are unable to protect our proprietary rights, or if our proprietary information and methods become widely available,
we may lose any ability to obtain or maintain a competitive advantage within our market niche, which may have a material adverse effect on our business, results of operations or financial condition.



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CLAIMS THAT WE OR OUR TECHNOLOGIES INFRINGE UPON THE INTELLECTUAL PROPERTY OR OTHER PROPRIETARY RIGHTS OF
A THIRD PARTY MAY REQUIRE US TO INCUR SIGNIFICANT COSTS, TO ENTER INTO ROYALTY OR LICENSING AGREEMENTS OR TO DEVELOP OR LICENSE SUBSTITUTE TECHNOLOGY.

We have been, and may in the future be, subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of a third party. For instance, in April 2009, we
settled a lawsuit against us which alleged that we infringed a patent claimed to be owned by the plaintiff. We incurred substantial professional fees in connection with this claim and agreed to enter into a license for the patent pursuant to which
we issued warrants and agreed to pay royalties and future royalties in order to settle this litigation. In addition, this licensor could become subject to similar infringement claims. Although we believe that our software solutions do not infringe
the patents or other intellectual property rights of any third party, we cannot assure you that our technology does not infringe patents or other intellectual property rights held or owned by others or that they will not in the future. Any future
claims of infringement could cause us to incur substantial costs defending against such claims, even if the claims are without merit, and could distract our management from our business. Moreover, any settlement or adverse judgment resulting from
such claims could require us to pay substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be
able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to successfully develop alternative technology on a timely basis, if at all, or that we would be able to obtain a
license from another provider of suitable alternative technology to permit us to continue offering, and our customers to continue using, the applicable technology. In addition, we generally provide in our customer agreements that we will indemnify
our customers against third-party infringement claims relating to our technology provided to the customer, which could obligate us to fund significant amounts. Infringement claims asserted against us or our licensor may have a material adverse
effect on our business, results of operations or financial condition

FAILURE TO ADAPT TO EVOLVING TECHNOLOGIES AND USER DEMANDS COULD
RESULT IN THE LOSS OF USERS.

To be successful, we must adapt to rapidly changing technologies and user demands by continuously enhancing
our products and services and introducing new products and services. If we need to modify our products and services or infrastructure to adapt to changes affecting clinical trials, we could incur substantial development or acquisition costs. As
described below, we will be dependent upon the availability of additional financing to fund these development and acquisition costs. If these funds are not available to us, and if we cannot adapt to these changes, or do not sufficiently increase the
features and functionality of our products and services, our users may switch to the product and service offerings of our competitors.

WE
MAY BE UNABLE TO ADEQUATELY DEVELOP OUR SYSTEMS, PROCESSES AND SUPPORT IN A MANNER THAT WILL ENABLE US TO MEET THE DEMAND FOR OUR SERVICES.

Our future success will depend on our ability to develop effectively the infrastructure, including additional hardware and software, and implement the services, including customer support, necessary to meet the demand for our services. In
the event we are not successful in developing the necessary systems and implementing the necessary services on a timely basis, our revenues could be adversely affected, which would have a material adverse affect on our financial condition.

FAILURE TO MANAGE RAPID GROWTH EFFECTIVELY COULD HARM OUR BUSINESS.

We have been experiencing a period of growth, including through our recent acquisitions, that has placed a significant strain on our operational and financial resources and our personnel. To manage our
growth and anticipated future growth effectively, we must continue to maintain and may need to enhance our information technology infrastructure, financial and accounting systems and controls and manage expanded operations in geographically
distributed locations. Our failure to manage our rapid growth effectively could have a material adverse effect on our business, operating results or financial condition.

IN THE COURSE OF CONDUCTING OUR BUSINESS, WE POSSESS OR COULD BE DEEMED TO POSSESS PERSONAL MEDICAL INFORMATION IN CONNECTION WITH THE CONDUCT OF CLINICAL TRIALS, WHICH IF WE FAIL TO KEEP PROPERLY
PROTECTED, COULD SUBJECT US TO SIGNIFICANT LIABILITY.

Our software solutions are used to collect, manage and report information in
connection with the conduct of clinical trails. This information is or could be considered to be personal medical information of the clinical trial participants. Regulation of the use and disclosure of personal medical information is complex and
growing. Increased focus on individuals rights to confidentiality of their personal information, including personal medical information, could lead to an increase of existing and future legislative or regulatory initiatives giving direct legal
remedies to individuals, including rights to damages, against entities deemed responsible for not adequately securing such personal information. In addition, courts may look to regulatory standards in identifying or applying a common law theory of
liability, whether or not that law affords a private right of action. Since we receive and process personal information of clinical trial participants from our customers, there is a risk that we could be liable if there were a breach of any
obligation to a protected person under contract, standard of practice or regulatory requirement. If we fail to properly protect this personal information that is in our possession or deemed to be in our possession, we could be subjected to
significant liability.



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OUR ABILITY TO CONDUCT OUR BUSINESS WOULD BE MATERIALLY AFFECTED IF WE WERE UNABLE TO PAY OUR OUTSTANDING
INDEBTEDNESS.

At December 31, 2009, we had outstanding borrowings of approximately $10,559,300 of which



| |  |  | approximately $75,000, at 10% interest, was due June 2004. We are in default in the payment of principal and interest;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | approximately $137,500, at 9% interest, is due in January 2011;
| | - |  | ---------------------------------------------------------------



| |  |  | approximately $350,000 at 10% is due in August 2010;
| | - |  | ----------------------------------------------------



| |  |  | approximately $95,000 at 12% is due in December 2010;
| | - |  | -----------------------------------------------------



| |  |  | approximately $111,800 at 9% interest is due in October 2010;
| | - |  | -------------------------------------------------------------



| |  |  | approximately $1,400,000 at 12% interest is due in March 2011;
| | - |  | --------------------------------------------------------------



| |  |  | approximately $1,490,000 at 12% interest is due in June 2011;
| | - |  | -------------------------------------------------------------



| |  |  | approximately $1,920,000 at 10% interest is due in August 2013, and
| | - |  | -------------------------------------------------------------------



| |  |  | approximately $4,980,000 at 12% interest is due in December 2013.
| | - |  | -----------------------------------------------------------------

No assurance can be given that the holders of the $75,000 in principal amount 10% Convertible Notes will not seek immediate collection of the amounts due and owing. Further, no assurance can be given that
faced with future principal repayment and interest obligations, our cash flow from operations or external financing will be available or sufficient to enable us to meet our financial obligations. If we are unable to meet our financial obligations,
the lenders could obtain a judgment against us in the amount of the notes and foreclose on our assets. Such foreclosure would materially and adversely affect our ability to conduct our business.

OUR FINANCIAL STATEMENTS CONTAIN A GOING CONCERN QUALIFICATION.

Because of our significant operating losses, accumulated deficit and the uncertainty as to our ability to secure additional financing, the report of our independent auditors on our consolidated financial
statements for the year ended December 31, 2009 contained an explanatory paragraph indicating there is substantial doubt about our ability to continue as a going concern.

WE WILL LIKELY NEED ADDITIONAL FINANCING, THE TERMS OF WHICH MAY BE UNFAVORABLE TO OUR THEN EXISTING STOCKHOLDERS.

Our plan of operations may require us to raise additional working capital if our revenue projections are not realized, and even if our projections are realized, we may need to raise additional financing
to meet our ongoing obligations. In addition, we may also need to raise additional funds to meet known needs or to respond to future business contingencies, which may include the need to:



| |  |  | fund more rapid expansion;
| | - |  | --------------------------



| |  |  | fund additional capital or marketing expenditures;
| | - |  | --------------------------------------------------



| |  |  | develop new or enhanced features, services and products;
| | - |  | --------------------------------------------------------



| |  |  | enhance our operating infrastructure;
| | - |  | -------------------------------------



| |  |  | respond to competitive pressures; or
| | - |  | ------------------------------------



| |  |  | acquire complementary businesses or necessary technologies.
| | - |  | -----------------------------------------------------------

If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced, and these newly-issued securities may have
rights, preferences or privileges senior to those of existing stockholders or debt holders. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not
available on acceptable terms, our ability to fund our operations, repay our outstanding debt obligations and remain in business may be significantly limited.



24



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FUTURE SALES OF SHARES BY EXISTING STOCKHOLDERS AS WELL AS THE ISSUANCE OF ADDITIONAL SHARES OF OUR
COMMON STOCK COULD RESULT IN A DECLINE IN THE MARKET PRICE OF THE STOCK.

At March 26, 2010 we had 85,507,699 shares of common stock
issued and outstanding and 83,549,895 shares issuable upon the conversion of preferred stock, convertible debt or exercise of warrants or options. Of these shares, 51,590,419 are, or will be upon issuance, eligible for resale pursuant to Rule 144.
In general, Rule 144 permits a shareholder who has owned restricted shares for at least six months, to sell without registration, within a three-month period, up to one percent of our then outstanding common stock. In addition, shareholders other
than our officers, directors or 5% or greater shareholders who have owned their shares for at least two years may sell them without volume limitation or the need for our reports to be current.

We cannot predict the effect, if any, that market sales of common stock or the availability of these shares for sale will have on the market price of the
shares from time to time. Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market could adversely affect market prices for the common stock and could damage our ability to raise capital through the
sale of our equity securities.

THE EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS AND THE CONVERSION OF OUTSTANDING SHARES OF PREFERRED
STOCK AND CONVERTIBLE PROMISSORY NOTES WILL BE DILUTIVE TO OUR EXISTING STOCKHOLDERS.

As of March 26, 2010, we had a total of
80,799,746 shares of our common stock underlying options, warrants and other convertible securities and 2,750,149 shares of common stock underlying convertible preferred stock. The exercise of these warrants and options and/or the conversion of
these convertible securities will have a dilutive effect on our existing stockholders.

THERE IS ONLY A LIMITED TRADING MARKET FOR OUR
COMMON STOCK.

There is a limited trading market for our common stock. We cannot predict the extent to which investor interest in us will
lead to the development of an active trading market or how liquid that trading market might become. If a liquid trading market does not develop or is not sustained, investors may find it difficult to dispose of shares of our common stock and may
suffer a loss of all or a substantial portion of their investment in our common stock.

BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER
SHARE, AND IS QUOTED ON THE OTC BULLETIN BOARD, OUR COMMON STOCK IS CONSIDERED A PENNY STOCK WHICH CAN ADVERSELY EFFECT ITS LIQUIDITY.

If our common stock continues to be quoted on the OTC Bulletin Board, and the trading price of our common stock remains less than $5.00 per share, our common stock is considered a penny stock, and trading in our common stock is
subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales
practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchasers written consent prior to the transaction.

The Securities and Exchange Commission regulations also require additional disclosure in connection with any trades involving a penny stock,
including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few
broker or dealers are likely to undertake these compliance activities. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS MAY DELAY OR PREVENT A TAKE-OVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR
COMMON STOCKHOLDERS.

Provisions of our articles of incorporation and by-laws may be deemed to have anti-takeover effects, which include
when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, our articles of incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights
and preferences as may be determined from time to time by our Board of Directors, of which 4,125,224 shares are currently issued and outstanding. Our board of directors may, without stockholder approval, issue additional series of preferred stock
with dividends, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our common stock.



25



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##### Table of Contents

|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 2. | PROPERTIES
|------- | ----------

Our corporate headquarters
and other material leased real property as of December 31, 2009 are shown in the following table. We do not own any real property.



|                              |  |                                              |  |                    |  |                    
|----------------------------- |  | -------------------------------------------- |  | ------------------ |  | -------------------
|Location                      |  | Use                                          |  | Size               |  | Expiration of Lease
|Fort Lauderdale, Florida      |  | Corporate headquarters                       |  | 10,200 square feet |  | July 2011          
|Monmouth Junction, New Jersey |  | Office Space                                 |  | 3,877 square feet  |  | February 2013      
|Bonn, Germany                 |  | Office space                                 |  | 4,600 square feet  |  | June 2011          
|Lymington, United Kingdom     |  | European headquarters                        |  | 1,500 square feet  |  | October 2012       
|Cincinnati, Ohio              |  | Data Center                                  |  | 1,000 square feet  |  | March 2011         
|Fort Lauderdale, Florida      |  | Data Center / Disaster Recovery Office Space |  | 8,250 square feet  |  | August 2011        
|Secaucus, New Jersey          |  | Data center                                  |  | 2,000 square feet  |  | December 2011      

Our principal executive offices are located in
commercial office space in approximately 10,200 square feet at 2101 West Commercial Blvd, Fort Lauderdale, Florida, and our telephone number is (954) 473-1254. We lease these offices under the terms of a lease expiring in July, 2011. Our annual
rental payment under this lease is $315,000 plus sales tax.

On August 12, 2009, we opened an office located at 1100 Cornwall Road,
Monmouth Junction, New Jersey. This office is located in commercial office space in approximately 3,900 square feet. We lease this office under the terms of a lease expiring in February 2013 and our annual rental payment under this lease is $75,800
plus sales tax.

Our European headquarters are located in commercial office space in approximately 4,600 square feet at Graurheindorfer
Strasse 35-39, Bonn, Germany. We lease these offices under the terms of a lease expiring in June 2011. Our annual rental payment under this lease is 94,500 Euros or approximately $129,516.

On November 4, 2009, we entered into lease agreement in order to open an R & D office in Europe for our TrialOne software application. The new
office is located at The Shipyard, Bath Road, Lymington, Hampshire, UK. The office has an area of approximately 1,500 square feet. We lease these offices under the terms of a lease expiring in October 2012. Our annual rental payment under this lease
is 23,750 British Pounds or approximately $38,500 through April 2010. In May 2010 our annual rental payment becomes 45,000 British Pounds or approximately $72,950.

We currently have two data sites, which serve as our primary network and data hosting locations, one is located in Cincinnati, Ohio and is leased from Cincinnati Bell Technology Solutions. We lease this
space under the terms of a lease expiring in March 2011. We expect our annual lease payment to be approximately $53,000 plus sales tax. The other secondary data site is located in Secaucus, New Jersey and is operated by Equinix, Inc. We lease this
space under the terms of a lease expiring in December 2011 and we expect our annual rental payment under this lease to be approximately $67,968 plus sales tax.

We maintain a business-continuity site for disaster recovery purposes in Ft. Lauderdale, Florida. We lease from our landlord, rack space for our SG & A servers and redundant data hosting, an
office suite and cubicles that will allow us to maintain operations in the event of a disaster. Our annual rental payment is $175,180 plus sales tax. This lease expires in August 2011.

We believe these facilities and additional or alternative space available to us will be adequate to meet our needs for the foreseeable future.



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##### Table of Contents

|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

None.



|ITEM 4. | RESERVED
|------- | --------





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##### Table of Contents

PART II



|ITEM 5. | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | -----------------------------------------------------------------------------------------------

Our common stock is traded on a limited basis on the OTC Bulletin Board under the symbol OMCM. The following table sets forth the range of high and low bid
prices for our common stock as reported by the OTC Bulletin Board for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The quotation of our
common stock on the OTC Bulletin Board does not assure that a meaningful, consistent and liquid market for such securities currently exists.



|            |  |      |      |     |   |     
|----------- |  | ---- | ---- | --- | - | ----
|            |  | HIGH |      | LOW
|Fiscal 2009 |  |      |      |     |   |     
|1stQuarter  |  | $    | 0.32 |     | $ | 0.18
|2ndQuarter  |  | $    | 0.27 |     | $ | 0.17
|3rdQuarter  |  | $    | 0.25 |     | $ | 0.13
|4thQuarter  |  | $    | 0.24 |     | $ | 0.15
|            |  |     
|Fiscal 2008 |  |      |      |     |   |     
|1stQuarter  |  | $    | 0.65 |     | $ | 0.53
|2ndQuarter  |  | $    | 0.63 |     | $ | 0.52
|3rdQuarter  |  | $    | 0.63 |     | $ | 0.35
|4thQuarter  |  | $    | 0.40 |     | $ | 0.24

On March 26, 2010 the closing
price of our common stock as reported on the OTC Bulletin Board was $0.20. At March 26, 2010 we had approximately 400 shareholders of record; however, we believe that we have in excess of approximately 1,000 beneficial owners of our common
stock.

Dividend Policy

Holders of our common stock are entitled to cash dividends when, and as may be declared by the board of directors. We have never declared or paid any cash dividends on our common stock. We currently expect to retain future earnings, if any,
to finance the growth and development of our business and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future payment of dividends will be subject to the discretion of our Board of Directors and will
depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors. We are currently restricted under Delaware corporate law from declaring any cash dividends due to our current working capital and
stockholders deficit. There can be no assurance that cash dividends of any kind will ever be paid.

A special note about penny stock
rules

The Securities and Exchange Commission has adopted regulations which generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to certain exceptions. Our common stock should be considered to be a penny stock. A penny stock is subject to rules that impose additional sales practice requirements on
broker/dealers who sell these securities to persons other than established customers and accredited investors. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of these
securities. In addition, he must receive the purchasers written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the penny stock rules may restrict the ability
of broker-dealers to sell our securities, and may negatively affect the ability of holders of shares of our common stock to sell them.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

Not applicable
to a smaller reporting company.



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##### Table of Contents

|ITEM 7. | 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 audited consolidated financial statements and notes thereto appearing elsewhere herein and conjunction with other information set forth in this report.

Forward-Looking Statements

Statements contained in this Form 10-K 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-K 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 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-K. Therefore,
our actual experience and results achieved during the period covered by any particular forward-looking statement may differ substantially from those projected. Consequently, the inclusion of 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 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. Except as required under Federal securities laws, the Company does not undertake any obligation to update or revise any forward-looking statement made by it or on its behalf,
whether as a result of new information, future events or otherwise.

Overview

We are a healthcare technology company that provides Electronic Data Capture (EDC) and eClinical solutions and related value-added services to
pharmaceutical and biotechnology companies, Clinical Research Organizations (CRO), and other clinical trial sponsors via our Web-based software applications. Our software applications allow clinical trial sponsors and investigative sites
to securely collect, validate, transmit and analyze clinical study data including patient histories, patient dosing, adverse events and other clinical trial information.

During fiscal 2009 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 Technologies and Logos Technologies, Ltd. during 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 2009 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 eRT EDC
Assets and will seek to aggressively expand the scope of our sales and marketing operations there.



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##### Table of Contents

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 $2,064,000 and $897,000, on R & D activities during the years ended December 31, 2009 and December 31, 2008, 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 began providing services to some of these entities during 2003 and we have experienced success in broadening our client roster over
the past six 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 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, 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 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.

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) (eResearch EDC Assets), pursuant to an Asset Purchase Agreement. Our purpose in acquiring these assets, which included employment rights to the operating and business development team of eResearchs EDC team,
to increase our presence in the EDC industry through the eResearch client list and increase our revenues in order to leverage our existing administrative and technical corporate infrastructure.

The Company purchased from eResearch, 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.



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##### Table of Contents

Logos Technologies, Ltd. (In Administration)

On August 3, 2009, we acquired certain tangible and intangible EDC assets, formerly owned by Logos Technologies, Ltd. (Logos Ltd)
(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 Ltd,
to increase our presence in the EDC industry through the Logos Ltd 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 Ltd (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 approximates $152,628.



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##### Table of Contents

The Year-ended December 31, 2009 Compared with the Year ended December 31, 2008

Results of Operations

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

Summarized Statement of Operations



|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|----------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------ | ----- | - | ---- | - | ----------- | ------------ |  | ------ | ------- |  | - | ---------- | - |  | ------ | -
|                                                      |  | For the years ended December 31, |            |   |              |       |   |      |  
|                                                      |  | 2009                             |            |   | % ofRevenues |       |   | 2008 |   |             | % ofRevenues |  |        | $Change |  |   | %Change    |  
|Total revenues                                        |  | $                                | 9,556,366  |   |              |       |   |      | $ | 6,269,614   |              |  |        |         |  | $ | 3,286,752  |   |  | 52.4   | %
|                                                      |  |                                  |            |   |              |      
|Cost of sales                                         |  |                                  | 1,894,248  |   |              | 19.8  | % |      |   | 1,351,564   |              |  | 21.6   | %       |  |   | 542,684    |   |  | 40.2   | %
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Gross margin                                          |  |                                  | 7,662,118  |   |              | 80.2  | % |      |   | 4,918,050   |              |  | 78.4   | %       |  |   | 2,744,068  |   |  | 55.8   | %
|                                                      |  |                                  |            |   |              |      
|Salaries, benefits and related taxes                  |  |                                  | 9,316,101  |   |              | 97.5  | % |      |   | 8,825,032   |              |  | 140.8  | %       |  |   | 491,069    |   |  | 5.6    | %
|Rent                                                  |  |                                  | 775,329    |   |              | 8.1   | % |      |   | 554,475     |              |  | 8.8    | %       |  |   | 220,854    |   |  | 39.8   | %
|Consulting                                            |  |                                  | 274,126    |   |              | 2.9   | % |      |   | 302,502     |              |  | 4.8    | %       |  |   | (28,376    | ) |  | -9.4   | %
|Legal and professional fees                           |  |                                  | 622,227    |   |              | 6.5   | % |      |   | 612,634     |              |  | 9.8    | %       |  |   | 9,593      |   |  | 1.6    | %
|                                                      |  |                                  |            |   |              |      
|Selling, general and administrative                   |  |                                  | 1,193,802  |   |              | 12.5  | % |      |   | 544,012     |              |  | 8.7    | %       |  |   | 649,790    |   |  | 119.4  | %
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Total operating expenses                              |  |                                  | 13,663,915 |   |              | 143.0 | % |      |   | 12,116,899  |              |  | 193.3  | %       |  |   | 1,547,016  |   |  | 12.8   | %
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Operating income (loss)                               |  |                                  | (6,001,798 | ) |              | -62.8 | % |      |   | (7,198,849  | )            |  | -114.8 | %       |  |   | 1,197,051  |   |  | 16.6   | %
|                                                      |  |                                  |            |   |              |      
|Interest expense                                      |  |                                  | (2,747,390 | ) |              | -28.7 | % |      |   | (3,300,654  | )            |  | -52.6  | %       |  |   | (553,264   | ) |  | -16.8  | %
|Interest income                                       |  |                                  | 4,491      |   |              | 0.0   | % |      |   | 7,112       |              |  | 0.1    | %       |  |   | (2,621     | ) |  | -36.8  | %
|                                                      |  |                                  |            |   |              |      
|Gain (Loss) on Extinguishment of Debt                 |  |                                  | 432        |   |              | 0.0   | % |      |   | (45,883     | )            |  | -0.7   | %       |  |   | 46,315     |   |  | -100.9 | %
|                                                      |  |                                  |            |   |              |      
|Unrealized gain on derivatives                        |  |                                  | 673,918    |   |              | 7.1   | % |      |   | 2,114,194   |              |  | 33.7   | %       |  |   | (1,440,276 | ) |  | -68.1  | %
|                                                      |  |                                  |            |   |              |      
|Patent Litigation Settlement                          |  |                                  |           |   |              | 0.0   | % |      |   | (2,170,481  | )            |  | -34.6  | %       |  |   | 2,170,481  |   |  | -100.0 | %
|                                                      |  |                                  |            |   |              |      
|Net income (loss)                                     |  |                                  | (8,070,347 | ) |              | -84.4 | % |      |   | (10,594,561 | )            |  | -169.0 | %       |  |   | 2,524,214  |   |  | 23.8   | %
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Total preferred stock dividends                       |  |                                  | (205,134   | ) |              | -2.1  | % |      |   | (283,960    | )            |  | -4.5   | %       |  |   | (78,826    | ) |  | -27.8  | %
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Net income (loss) attributable to common stockholders |  | $                                | (8,275,481 | ) |              | -86.6 | % |      | $ | (10,878,521 | )            |  | -173.5 | %       |  | $ | 2,603,040  |   |  | 23.9   | %
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Net income (loss) per share                           |  | $                                | (0.10      | ) |              |       |   |      | $ | (0.15       | )            |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |      
|Weighted average number of shares outstanding         |  |                                  | 81,229,605 |   |              |       |   |      |   | 71,789,073  |              |  |        |         |  |   |            |   |  |        |  
|                                                      |  |                                  |            |   |              |       |   |      |   |             |              |  |        |         |  |   |            |   |  |        |  



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Revenues for the year ended December 31, 2009 increased approximately 52.4% from the year ended
December 31, 2008. The table below provides a comparison of our recognized revenues for the years ended December 31, 2009 and December 31, 2008.



|                          |  |                     |           |  |            |   |  |            |           |  |            |   |  |   |           |   |  |       |  
|------------------------- |  | ------------------- | --------- |  | ---------- | - |  | ---------- | --------- |  | ---------- | - |  | - | --------- | - |  | ----- | -
|                          |  | Twelve Months Ended |           |  |            |   |  |            |          
|Business Activity         |  | 12/31/2009          |           |  | 12/31/2008 |   |  | Increase $ |           |  | Increase % |  
|Set-up Fees               |  | $                   | 4,925,205 |  | 51.5       | % |  |            | 4,642,915 |  | 74.1       | % |  | $ | 282,290   |   |  | 6.1   | %
|Change Orders             |  |                     | 385,275   |  | 4.0        | % |  |            | 432,488   |  | 6.9        | % |  |   | (47,213   | ) |  | -10.9 | %
|Maintenance               |  |                     | 2,604,534 |  | 27.3       | % |  |            | 1,194,211 |  | 19.0       | % |  |   | 1,410,323 |   |  | 118.1 | %
|Software Licenses         |  |                     | 575,968   |  | 6.0        | % |  |            | -0-       |  | 0.0        | % |  |   | 575,968   |   |  | n/a   |  
|Professional Services     |  |                     | 362,322   |  | 3.8        | % |  |            | -0-       |  | 0.0        | % |  |   | 362,322   |   |  | n/a   |  
|Hosting and Subscriptions |  |                     | 703,062   |  | 7.4        | % |  |            | -0-       |  | 0.0        | % |  |   | 703,062   |   |  | n/a   |  
|                          |  |                     |           |  |            |   |  |            |           |  |            |   |  |   |           |   |  |       |  
|                          |  |                     |           |  |            |  
|Totals                    |  | $                   | 9,556,366 |  | 100.0      | % |  | $          | 6,269,614 |  | 100.0      | % |  | $ | 3,286,752 |   |  | 52.4  | %
|                          |  |                     |           |  |            |   |  |            |           |  |            |   |  |   |           |   |  |       |  

We recorded $2,262,603 in revenues associated with clients with our eRT Asset acquisition. These revenues represent revenues
recognized from our June 23, 2009 acquisition to December 31, 2009. We expect our 2010 full-year revenues for these clients to be approximately $4,400,000.

We recorded $58,000 in revenues associated with clients with our TrialOne Asset acquisition. These revenues represent revenues recognized from our August 3, 2009 acquisition to December 31,
2009. 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 increased by $513,684 or 8.8%. During 2009 our primary customer base prior to our acquisitions, consisting 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 have seen evidence during late 2009 of
increased activity from these clients but do not expect a return to 2008s spending levels during 2010.

We recorded $575,968 in revenues
from our licensing activity and $362,322 from professional services. These revenues are a result of our efforts at selling our applications on a licensed basis. 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 all
sales of the TrialOne application will be consummated on a licensed basis.

We recorded $703,062 in revenues from hosting and subscriptions
activities. Currently, these activities relate primarily to our services we provide clients of our eClinical suite. Generally, these revenues are paid quarterly and are connected to hosting, maintenance and client support for clients licensing that
application.

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.



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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 3rdfiscal quarter of 2009 we have experienced greater success in
selling that product on a licensed basis. The EDC assets acquired from eResearch and Logos Ltd 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 complementary eClincial software and solutions. Licensed contracts 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 46.0% of our revenues during the year ended December 31, 2009 and approximately 54.0% of our revenues during the year ended December 31, 2008. One customer accounted for 25.6% of our revenues
during year ended December 31, 2009. One customer accounted for 36.0% of our revenues during year ended December 31, 2008. The loss of any of these contracts or these customers in the future could adversely affect our results of
operations.

Cost of goods sold increased approximately 40.2% for the fiscal year ended December 31, 2009 as compared to 2008. Cost of
goods sold were approximately 19.8% of revenues for the year ended December 31, 2009 compared to approximately 21.6% for the year ended December 31, 2008. Cost of goods sold relates primarily to salaries and related benefits associated
with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Cost of goods sold increased during the year ended December 31, 2009 due to an increase of approximately $46,589 for costs associated with
delivery of training and implementation of TrialMaster, an increase of $109,367 in costs associated with third-party services associated with the delivery of our application to customers and the addition of eight additional programmers (four of whom
are part of the eResearch study build team we acquired) and two additional quality analysts as part of our clinical trial operations. Additionally, although our experience to-date in licensing and deploying TrialMaster on a technology transfer 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 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 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 12.7% for the year ended
December 31, 2009 as compared to 2008. Total operating expenses were approximately 143% of revenues in 2009 as compared to approximately 193% of revenues in 2008.

Salaries and related expenses were our biggest expense at 68.2% of total operating expenses for the year ended December 31, 2009 and 72.8% of total operating expenses for the year ended
December 31, 2008. Salaries and related expenses increased approximately 5.6% for the year ended December 31, 2009 from 2008. The table below provides a summary of the significant components of salary and related expenses by primary cost
category.



|                                    |  |                  |           |                  |   |           |  |   |          |   |  |       |  
|----------------------------------- |  | ---------------- | --------- | ---------------- | - | --------- |  | - | -------- | - |  | ----- | -
|                                    |  | Years ended      |          
|                                    |  | December 31,2009 |           | December 31,2008 |   | Change    |  |   | %Change  |  
|OmniComm Corporate Operations       |  | $                | 6,491,783 |                  | $ | 6,714,792 |  | $ | (223,009 | ) |  | -3.3  | %
|New Jersey Operations Office        |  |                  | 656,154   |                  |   | -0-       |  |   | 656,154  |   |  | n/c   |  
|OmniComm Europe, GmbH               |  |                  | 1,020,194 |                  |   | 789,236   |  |   | 230,958  |   |  | 29.3  | %
|OmniComm Ltd.                       |  |                  | 187,946   |                  |   | -0-       |  |   | 187,946  |   |  | n/c   |  
|Employee Stock Option Expense       |  |                  | 960,024   |                  |   | 1,321,004 |  |   | (360,980 | ) |  | -27.3 | %
|                                    |  |                  |           |                  |   |           |  |   |          |   |  |       |  
|                                    |  |                  |           |                 
|Total Salaries and related expenses |  | $                | 9,316,101 |                  | $ | 8,825,032 |  | $ | 491,069  |   |  | 5.6   | %
|                                    |  |                  |           |                  |   |           |  |   |          |   |  |       |  



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We currently employ approximately 65 employees out of our Ft. Lauderdale, Florida corporate office, 15
employees out of our New Jersey field office, six 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 have selectively added, and expect
to continue to selectively add, experienced sales and marketing personnel during fiscal 2010 in an effort to increase our market penetration, particularly in Europe, and to continue broadening our client base domestically. 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 year ended December 31, 2008 and year ended December 31, 2009 we incurred $1,321,004 and $960,024, 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. We expect that the
adoption of SFAS 123R will continue to have an impact on our results of operations in the future.

Rent and related expenses increased by
approximately 39.8% during the year ended December 31, 2009 when compared to the year ended December 31, 2008. 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 entered
into a lease for office space during the fourth quarter of 2009. That office lease expires in October 2012. The table provided below provides the significant components of our rent related expenses by location or subsidiary.



|                                             |  |                  |         |                  |   |         |  |         |         |  |      |  
|-------------------------------------------- |  | ---------------- | ------- | ---------------- | - | ------- |  | ------- | ------- |  | ---- | -
|                                             |  | Years ended      |        
|                                             |  | December 31,2009 |         | December 31,2008 |   | Change  |  | %Change |        
|Corporate Office                             |  | $                | 318,260 |                  | $ | 311,314 |  | $       | 6,946   |  | 2.2  | %
|Co location and disaster recovery facilities |  |                  | 219,970 |                  |   | 197,298 |  |         | 22,672  |  | 11.5 | %
|New Jersey Operations Office                 |  |                  | 138,666 |                  |   | -0-     |  |         | 138,666 |  | n/c  |  
|OmniComm Europe, GmbH                        |  |                  | 73,584  |                  |   | 45,863  |  |         | 27,721  |  | 60.4 | %
|OmniComm Ltd.                                |  |                  | 24,849  |                  |   | -0-     |  |         | 24,849  |  | n/c  |  
|                                             |  |                  |         |                  |   |         |  |         |         |  |      |  
|                                             |  |                  |         |                 
|Total                                        |  | $                | 775,329 |                  | $ | 554,475 |  | $       | 220,854 |  | 39.8 | %
|                                             |  |                  |         |                  |   |         |  |         |         |  |      |  

Consulting services expense decreased approximately 9.4% for the year ended December 31, 2009 compared with the year
ended December 31, 2008. Consulting services were comprised of fees paid to consultants for help with developing our computer applications and for fees incurred as part of our employee recruiting programs. Employee recruiting fees dropped by
$95,501 during the year ended December 31, 2009 compared to the similar period in 2008 as our general hiring levels declined during the 2009 economic slowdown. Fees paid to third-party software developers increased approximately $55,000 during
2009. The increase is primarily comprised of one-time fees paid to third-party consultants in association with the acquisition of the eResearch EDC Assets.

Legal and professional fees increased approximately 1.6% for the year ended December 31, 2009 compared with the year ended December 31, 2008. Professional fees include fees paid to our auditors
for services rendered on a quarterly and annual basis in connection with our SEC filings and fees paid to our attorneys in connection with representation in matters involving litigation or for services rendered to us related to securities and SEC
related matters. During 2009 we incurred legal fees associated with our acquisition of the eResearch EDC Assets in June 2009 and the acquisition of the Logos EDC Assets in August 2009. The table below compares the significant components of our legal
and professional fees for the years ended December 31, 2009 and December 31, 2008, respectively.



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|                           |  |            |         |            |   |         |  |   |          |   |  |       |  
|-------------------------- |  | ---------- | ------- | ---------- | - | ------- |  | - | -------- | - |  | ----- | -
|                           |  | 12/31/2008 |         | 12/31/2009 |   | Change  |  |   | % Change |  
|Financial Advisory         |  | $          | 90,000  |            | $ | 173,897 |  | $ | 83,897   |   |  | 93.2  | %
|Audit and Related          |  |            | 116,324 |            |   | 91,666  |  |   | (24,658  | ) |  | -21.2 | %
|Accounting Services        |  |            | 51,554  |            |   | 49,475  |  |   | (2,079   | ) |  | -4.0  | %
|Human Resources Consulting |  |            | -0-     |            |   | 22,100  |  |   | 22,100   |   |  | 0.0   | %
|Patent Litigation          |  |            | 252,681 |            |   | 29,705  |  |   | (222,975 | ) |  | -88.2 | %
|General Legal              |  |            | 102,075 |            |   | 212,693 |  |   | 110,618  |   |  | 108.4 | %
|Acquisition Related        |  |            | -0-     |            |   | 42,691  |  |   | 42,691   |   |  | 0.0   | %
|                           |  |            |         |            |   |         |  |   |          |   |  |       |  
|                           |  |            |         |           
|                           |  | $          | 612,634 |            | $ | 622,227 |  | $ | 9,593    |   |  | 1.6   | %
|                           |  |            |         |            |   |         |  |   |          |   |  |       |  

Selling, general and administrative expenses (SGA) increased approximately 119.4% for the year ended
December 31, 2009 compared to the year ended December 31, 2008. During the year ended December 31, 2009 we have recorded $383,951 in license fees associated with our license agreement with Datasci, LLC compared to $2,170,483 recorded
as other expense during the year ended December 31, 2008. The decrease in licensing fees in 2009 reflects the fact that license fees were recorded in fiscal 2008 as Other Expense rather than SGA. 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 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 decreased its marketing, sales and advertising expenditures by approximately 10% for the year ended
December 31, 2009 compared to the year ended December 31, 2008. These expenses decreased because we invested significantly during 2008 in marketing materials associated with trade shows. Our marketing and advertising expenses are typically
directly tied to the level of industry conference participation we experience. Our volume and level of industry conferences and general sales and marketing expenses are expected to increase during the fiscal 2010.

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 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 $2,747,390 during the year ended December 31, 2009 compared to $3,300,654 for the year ended December 31, 2008, a decrease of $553,264. Interest incurred to related parties was $867,222 during the year ended
December 31, 2009 and $216,810 for the year ended December 31, 2008. Included in interest expense for both periods is the accretion of discounts recorded related to financial instrument derivatives that were deemed a part of the financings
we undertook in fiscal 2008 and 2009. The table below provides detail on the significant components of interest expense.



|                                         |  |                      |           |                      |   |                     |  |   |            |  
|---------------------------------------- |  | -------------------- | --------- | -------------------- | - | ------------------- |  | - | ---------- | -
|Debt Description                         |  | 2009 InterestExpense |           | 2008 InterestExpense |   | Change 2009vs. 2008 | 
|Accretion of Discount from Derivatives   |  | $                    | 1,802,355 |                      | $ | 2,937,497           |  | $ | (1,135,142 | )
|Feb. 2008 Secured Convertible Debentures |  |                      | 2,959     |                      |   | 155,808             |  |   | (152,849   | )
|                                         |  |                      |          
|August 2008 Convertible Notes            |  |                      | 227,000   |                      |   | 77,117              |  |   | 149,883    |  
|December 2008 Convertible Notes          |  |                      | 609,000   |                      |   | 26,695              |  |   | 582,305    |  
|                                         |  |                      |          
|Sept 2009 Secured Convertible Debentures |  |                      | 42,345    |                      |   | -0-                 |  |   | 42,345     |  
|                                         |  |                      |           |                      |   |                     |  |   |            |  
|Total                                    |  | $                    | 2,683,659 |                      | $ | 3,197,117           |  | $ | (513,453   | )
|                                         |  |                      |           |                      |   |                     |  |   |            |  

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. During the year ended December 31, 2008 we issued $9,445,000 in convertible debt, including $7,200,000 to
members of our Board of Directors and Officers of the Company. During the year ended December 31, 2009, we sold $2,890,000 in convertible debt including $2,540,000 to our President and CEO.



36



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##### Table of Contents

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 $673,918 during the year ended December 31, 2009 compared with a net unrealized gain of $2,114,194 during the year ended December 31, 2008. The unrealized gains can
be attributed to fair value calculations undertaken periodically on the warrant and conversion feature liabilities (discounts) recorded by us at the time the convertible debt was issued. Accordingly the warrant and conversion feature liabilities are
increased or decreased based on the fair value calculations made at each balance sheet date. These non-cash gains have materially impacted our results of operations in 2009 and 2008 and are 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 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 $206,962 in 5% Series A Preferred Stock dividends, $9,753 in Series B Preferred Stock dividends and $ 67,245 in
Series C Preferred Stock dividends for the year ended December 31, 2008, compared with arrearages of $205,134 in 5% Series A Preferred Stock dividends for the year ended December 31, 2009. We deducted $283,960 and $205,134 from Net Income
(Loss) Attributable to Common Stockholders for the years ended December 31, 2008 and December 31, 2009, respectively, relating to undeclared Series A, B and C Convertible Preferred Stock dividends.

Liquidity and Capital Resources

Liquidity
is the ability of a company to generate 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 $)



|                                                            |  |                  |   |  |                  |   |  |            |  
|----------------------------------------------------------- |  | ---------------- | - |  | ---------------- | - |  | ---------- | -
|                                                            |  | December 31,2009 |   |  | December 31,2008 |   |  | Change     |  
|Cash                                                        |  | 60,352           |   |  | 2,035,818        |   |  | (1,975,466 | )
|                                                            |  |                  |  
|Accounts Receivable, net of allowance for doubtful accounts |  | 3,121,183        |   |  | 2,607,893        |   |  | 513,290    |  
|                                                            |  |                  |  
|Current Assets                                              |  | 3,420,599        |   |  | 4,742,273        |   |  | (1,321,674 | )
|                                                            |  |                  |  
|Accounts Payable and accrued expenses                       |  | 1,548,215        |   |  | 1,085,700        |   |  | 462,516    |  
|                                                            |  |                  |  
|Notes payable, current portion                              |  | 111,800          |   |  | 111,800          |   |  |           |  
|                                                            |  |                  |  
|Patent litigation settlement liability, current portion     |  | 627,810          |   |  | 241,464          |   |  | 386,346    |  
|                                                            |  |                  |  
|Deferred revenue, current portion                           |  | 4,582,369        |   |  | 3,549,058        |   |  | 1,033,311  |  
|                                                            |  |                  |  
|Convertible notes payable, current portion                  |  | 402,777          |   |  | 384,043          |   |  | 18,734     |  
|                                                            |  |                  |  
|Current Liabilities                                         |  | 7,337,593        |   |  | 5,372,065        |   |  | 1,965,528  |  
|                                                            |  |                  |  
|Working Capital (Deficit)                                   |  | (3,916,994       | ) |  | (629,793         | ) |  | (3,287,202 | )



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|                                                     |  |                               |   |  |                  |  
|---------------------------------------------------- |  | ----------------------------- | - |  | ---------------- | -
|                                                     |  | Disclosure for theyears
ended |  
|                                                     |  | December 31,2009              |   |  | December 31,2008 |  
|Net cash provided by (used in) operating activities  |  | (5,176,989                    | ) |  | (5,293,720       | )
|                                                     |  |                              
|Net cash provided by (used in) investing activities  |  | 682,079                       |   |  | (539,428         | )
|                                                     |  |                              
|Net cash provided by financing activities            |  | 2,517,500                     |   |  | 7,393,973        |  
|                                                     |  |                              
|Net increase (decrease) in cash and cash equivalents |  | (1,975,466                    | ) |  | 1,553,857        |  

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

Presently, we have approximately $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 December 31, 2009:



|                                |  |                        |  |                 |     |  |           |     |  |           |  |           |    
|------------------------------- |  | ---------------------- |  | --------------- | --- |  | --------- | --- |  | --------- |  | --------- | ---
|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                |  | 111,800         | (2) |  | 137,500   | (3) |  | 0         |  | 0         |    
|                                |  |                        |  |                 |    
|Convertible Notes               |  | 10,310,000             |  | 520,000         | (4) |  | 2,890,000 | (5) |  |          |  | 6,900,000 | (6)
|                                |  |                        |  |                 |    
|Operating Lease Obligations (7) |  | 1,617,576              |  | 869,906         |     |  | 597,053   |     |  | 138,340   |  | 12,277    |    
|                                |  |                        |  |                 |    
|Patent Licensing Fees (8)       |  | 2,406,434              |  | 656,434         |     |  | 400,000   |     |  | 450,000   |  | 900,000   |    
|                                |  |                        |  |                 |     |  |           |     |  |           |  |           |    
|                                |  |                        |  |                 |    
|Total                           |  | 14,583,310             |  | 2,158,140       |     |  | 4,024,553 |     |  | 588,340   |  | 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
|-- | -----------------------------------------------------------------

|3. | Includes $137,500 of 9% notes payable that mature in January 2011.
|-- | ------------------------------------------------------------------

|4. | 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.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | 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.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------

|6. | 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.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------

|7. | 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.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | Relates to guaranteed minimum payments owed in connection with our settlement of a patent infringement lawsuit brought against the Company by Datasci, LLC.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



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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 $154,728 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 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.

During the year ended December 31, 2008, we raised an aggregate of $6,420,000 in principal amount of convertible debentures from Cornelis Wit, our Chief Executive Officer and a director of which
$6,120,000 is outstanding as of December 31, 2009. Additionally, Guus van Kesteren, Director, and Atlantic Balanced Fund, a fund managed by Mentor Capital of which Fernando Montero, a director of OmniComm, is president, director and sole
shareholder, purchased $310,000 and $200,000, respectively in principal amounts of convertible debentures during the fiscal year ended December 31, 2008. During the year ended December 31, 2009, we raised an aggregate of $2,540,000 in
principal amount of convertible debentures from Cornelis Wit, our Chief Executive Officer all of which is outstanding as of December 31, 2009. In addition, we were able to restructure other outstanding convertible debt with an aggregate
principal balance of $7,345,000 due in 2010 to extend the due date of $6,900,000 of this debt to 2013. While several of our directors have historically, either personally or through funds with which they are affiliated, provided substantial capital
either in the form of debt or equity financing there can be no assurance that they will continue to provide any such funding to us on favorable term or at all.

To satisfy our capital requirements, including ongoing future operations, we may seek to raise additional financing through debt and equity financings. During fiscal 2010, $111,800 in promissory notes and
$445,000 in convertible notes originally issued in fiscal 2008 and 2009 mature. We expect to satisfy the promissory notes from working capital sources. The convertible notes are held by senior managers of the Company and two long-tem investors of
the Company. We will seek 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 and accumulated deficits for the periods ending December 31, 2009, 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.



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CRITICAL ACCOUNTING POLICIES

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

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

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

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

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 a business acquisition. Our
consolidated financial statements and results of operations reflect an acquired business from the completion date of an 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.



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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.

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 out 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.

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 2009, we adopted the following new accounting pronouncements:

FASB Staff
Position (FSP) Financial Accounting Standards (FAS) 157-2, Effective Date of FASB Statement 157 (Codified within Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures)  This FSP delayed the effective
date of Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements, for certain nonfinancial assets and nonfinancial liabilities. Adoption of this FSP did not significantly affect how we determine fair value but has
resulted in certain additional disclosures. Please read Note 12  Fair Value Measurement.



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FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities (Codified within ASC 260, Earnings Per Share)  This staff position specifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities
and should be included in the computation of earnings per share pursuant to the two-class method. Adoption of this FSP did not have a significant effect on our earnings per share.

SFAS No. 141(R), Business Combinations (Codified within ASC 805, Business Combinations)  This standard requires most identifiable assets, liabilities, noncontrolling interests and goodwill
acquired in a business combination to be recorded at full fair value. The standard also changes the approach to determining the purchase price, the accounting for acquisition cost and several acquisition related accounting practices. Adoption of
this pronouncement did not have a significant effect on our earnings or financial position.

SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements (Codified within ASC 810, Consolidation)  This standard specifies that noncontrolling interests be reported as a part of equity, not as a liability or other item outside of equity. Adoption of this
pronouncement did not have a significant effect on our earnings or financial position.

SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities-an amendment of FASB Statement No. 133 (Codified within ASC 815, Derivatives and Hedging)  This standard requires enhanced disclosures about derivative instruments including how and why they are used;
how they are accounted for; and how they affect an entitys financial position, financial performance and cash flows. Adoption of this pronouncement did not have a significant effect on our earnings or financial position.

In the second quarter of 2009, we adopted the following new accounting pronouncements:

FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (Codified within ASC
820, Fair Value Measurements and Disclosures)  This FSP provides guidance for estimating fair value when the volume and level of activity for an asset or liability have significantly decreased. Adoption of this FSP affects how we consider
Level 2 inputs in determining fair values but did not have a significant effect on our earnings or financial position.

FSP FAS 107-1 and
Accounting Principles Board (APB) Opinion 28-1, Interim Disclosures about Fair Value of Financial Instruments (Codified within ASC 825, Financial Instruments)  This FSP requires an entity to provide disclosures about fair value of
financial instruments at interim reporting periods. Adoption of this FSP did not significantly affect how we determine fair value but has resulted in certain additional disclosures. Please read Note 12  Fair Value Measurements.

SFAS No. 165, Subsequent Events (Codified within ASC 855, Subsequent Events)  This Statement establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before the financial statements are issued, introduces the concept of financial statements being available to be issued and requires disclosures regarding the date through which
subsequent events were evaluated. Adoption of this standard did not have a significant effect on our earnings or financial position but does affect our disclosures regarding subsequent events.

SEC SAB 112 (Codified within the ASC 805, Business Combinations)This bulletin amends or rescinds guidance included in the SAB Series to make it
consistent with recent FASB pronouncements, namely, SFAS No. 141 (revised 2007), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. Adoption did not have a significant effect on our
earnings or financial position.

In the third quarter of 2009, we adopted the following new accounting pronouncements:

SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (Codified within ASC 105,
Generally Accepted Accounting Principles)  This Statement establishes the FASB Accounting Standards Codification as the single source of authoritative accounting principles to be applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Adoption did not have an impact on our earnings or
financial position but did revise our disclosures regarding accounting guidance references.

Accounting Standards Update (ASU) 2009-05,
Measuring Liabilities at Fair Value  This ASU amends ASC 820, Fair Value Measurements and Disclosures, to provide additional guidance on how to measure the fair value of a liability. Adoption did not have a significant effect on our earnings
or financial position.

In addition, the following pending pronouncements have not yet been adopted, and we are currently evaluating the
effect, if any, on our earnings or financial position:



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SFAS No. 166, Accounting for Transfers of Financial Assets  An amendment of FASB Statement
No. 140 (Codified under ASC 860, Transfers and Servicing)This standard removes the concept of a qualifying special-purpose entity from FIN 46(R) and requires additional disclosures and is effective first quarter 2010.

SFAS No. 167 (Codified under ASC810, Consolidation)Amendments to FASB Interpretation No. 46(R), This standard amends certain requirements of
FIN 46(R) to improve financial reporting related to consolidation of and disclosures about variable interest entities and is effective first quarter 2010.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple
element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (VSOE) if
available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after
June 15, 2010. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|-------- | -----------------------------------------------------------

Not applicable to smaller reporting companies.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Our financial statements are set forth on Pages F-1 through F-50 attached hereto.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|ITEM 9A(T). | CONTROLS AND PROCEDURES
|----------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

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

Managements Report
on Internal Control over Financial Reporting

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

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



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

Changes in Internal Controls over Financial Reporting

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



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information required in response to this item is incorporated by reference from the information contained in the sections Nominees for the Board of Directors, Management,
Compliance with Section 16(a) of the Exchange Act , and Stock Option Plan, in our Proxy Statement for our 2010 Annual Meeting of Stockholders to be held on June 25, 2010 (the Proxy Statement).



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information
required in response to this item is incorporated by reference from the information contained in the section captioned Executive Compensation in the Proxy Statement.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information required in response to this item is incorporated by reference from the information contained in the section captioned Security
Ownership of Certain Beneficial Owners and Management in the Proxy Statement. The information required by Item 201(d) of Regulation S-K is incorporated by reference from the information contained in the section captioned 2009 Equity
Incentive Plan in the Proxy Statement.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information required in response to this item is incorporated by reference from the information contained in the section captioned Certain Relationships and Related Transactions in the
Proxy Statement.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES.
|-------- | ---------------------------------------

Greenberg & Company, LLC has served as our independent auditors for fiscal year 2009 and 2008. Greenberg & Company, LLC has served as our auditors since July 1999. The following table sets forth the fees billed by our
independent auditors for each of our last two fiscal years for the categories of services indicated.



|                   |  |             |         |             |   |        
|------------------ |  | ----------- | ------- | ----------- | - | -------
|                   |  | Fiscal 2009 |         | Fiscal 2008
|Audit Fees         |  | $           | 93,500  |             | $ | 98,500 
|Audit-Related Fees |  | $           | 15,000  |             | $ | 7,500  
|Tax Fees           |  |             | 0       |             |   | 0      
|All Other Fees     |  |             | 0       |             |   | 0      
|                   |  |             |         |             |   |        
|Total              |  | $           | 108,500 |             | $ | 106,000



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Audit Fees

The aggregate audit fees billed by Greenberg & Company, LLC for professional services rendered for the audit of our annual financial statements included in our annual report on Form 10-K during
the fiscal year ended December 31, 2009 were $63,500. The aggregate audit fees billed to us by Greenberg & Company, LLC for professional services rendered for the audit of our annual financial statements included in our annual report
on Form 10-K during the fiscal year ended December 31, 2008 were approximately $66,000. The aggregate audit fees billed to us by Greenberg & Company, LLC for the review of quarterly financial statements included in our quarterly
reports on Form 10-Q for the quarters ending March 31, June 30, and September 30, 2009 were approximately $30,000 and $32,500 for the quarters ending March 31, June 30 and September 30, 2008.

Audit Related Fees

For the fiscal year
ended December 31, 2009 the aggregate fees billed for assurance and related services by Greenberg & Company, LLC relating to the performance of the audit of our financial statements which are not reported under the caption Audit
Fees above was $15,000. For the fiscal year ended December 31, 2008 the aggregate fees billed for assurance and related services by Greenberg & Company, LLC relating to the performance of the audit of our financial statements
which are not reported under the caption Audit Fees above was $7,500 and relates to their services in reviewing the inclusion of our audited financial statements in a registration statement filed on Form S-1 with the Securities and
Exchange Commission.

Tax Fees

For the fiscal year ended December 31, 2009 the aggregate fees bill for tax compliance, tax advice or tax planning was $0. For the fiscal year ended December 31, 2008 the aggregate fees billed for tax related services was $0.

All Other Fees

Other than
fees relating to the services described above under Audit Fees, Audit-Related Fees and Tax Fees, there were no additional fees billed by our principal accountant for services rendered to us for the fiscal years
ended December 31, 2009 or 2008.

Audit Committee Pre-Approval Policies

The charter of our Audit Committee provides that the duties and responsibilities of our Audit Committee include the pre-approval of all audit, audit related,
tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent auditor. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also
require specific pre-approval by the Audit Committee. Unless otherwise specified by the Audit Committee in pre-approving a service, the pre-approval will be effective for the 12-month period following pre-approval. The Audit Committee will not
approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may
not be supported by the Internal Revenue Code and related regulations.

Our Audit Committee requires that our independent auditor, in
conjunction with our Chief Financial Officer, be responsible for seeking pre-approval for providing services to us and that any request for pre-approval must inform the Audit Committee about each service to be provided and must provide detail as to
the particular service to be provided.

All of the services provided by Greenberg & Company, LLC described above under the captions
Audit Fees and Audit-Related Fees were approved by our Audit Committee.

All of the work performed during the course
of this audit was completed by full-time employees of Greenberg & Company, LLC.



45



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PART IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|-------- | ---------------------------------------

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



|(a) | Exhibits
|--- | --------



|            |  |                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                                            
|            | 
|2.1         |  | Agreement and Plan of Reorganization dated July 22, 1998 (1)                                                                           
|            | 
|2.2         |  | Amendment to Agreement and Plan of Reorganization (2)                                                                                  
|            | 
|2.3         |  | Plan of Merger (3)                                                                                                                     
|            | 
|2.4         |  | Agreement and Plan of Acquisition of WebIPA dated January 26, 2000 (4)                                                                 
|            | 
|3.1         |  | Certificate of Incorporation (5)                                                                                                       
|            | 
|3.2         |  | Certificate of Designation  Series A Preferred Stock (6)                                                                              
|            | 
|3.3         |  | Certificate of Increase  Series A Preferred Stock (7)                                                                                 
|            | 
|3.4         |  | Certificate of Designation Series B Preferred Stock (8)                                                                               
|            | 
|3.5         |  | Amendment to Certificate of Incorporation (9)                                                                                          
|            | 
|3.6         |  | By-laws (10)                                                                                                                           
|            | 
|3.7         |  | Certificate of Amendment  Certificate of Designation  Series A Preferred Stock (11)                                                  
|            | 
|3.8         |  | Certificate of Amendment  Certificate of Incorporation (12)                                                                           
|            | 
|3.9         |  | Certificate of Designation  Series C Preferred Stock (13)                                                                             
|            | 
|4.1         |  | Form of Warrant Agreement including the Form of Warrant issued in connection with the Series B Preferred Stock offering (24)           
|            | 
|4.2         |  | Form of Warrant Agreement including the Form of Warrant issued in connection with the Series C Preferred Stock offering (25)           
|            | 
|4.3         |  | Form of 10% Convertible Note (26)                                                                                                      
|            | 
|4.4         |  | Form of Placement Agent Unit Option issued to Commonwealth Associates, LP in connection with the Series B Preferred Stock offering (27)
|            | 
|4.5         |  | Form of Placement Agent Unit Option issued to Noesis Capital Corp. in connection with the Series C Preferred Stock offering (28)       
|            | 
|10.1        |  | Employment Agreement and Stock Option Agreement between the Company and Randall G. Smith (14)                                          
|            | 
|10.2        |  | Employment Agreement and Stock Option Agreement between the Company and Ronald T. Linares (15)                                         



46



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|      |  |                                                                                                                                                                                              
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3  |  | 1998 Stock Incentive Plan (16)                                                                                                                                                               
|      | 
|10.4  |  | Medical Advisory Board Agreement (17)                                                                                                                                                        
|      | 
|10.5  |  | Standard Agreement  Proprietary Protection (18)                                                                                                                                             
|      | 
|10.6  |  | Employment Agreement and Stock Option Agreement between the Company and Cornelis F. Wit (19)                                                                                                 
|      | 
|10.7  |  | Employment Agreement and Stock Option Agreement between the Company and Charles Beardsley (20)                                                                                               
|      | 
|10.8  |  | Amendment to Employment Agreement between the Company and Cornelis F. Wit (21)                                                                                                               
|      | 
|10.9  |  | Amendment to Employment Agreement between the Company and Randall G. Smith (29)                                                                                                              
|      | 
|10.10 |  | Amendment to Employment Agreement between the Company and Ronald T. Linares (30)                                                                                                             
|      | 
|10.11 |  | Promissory Note issued to Guus van Kesteren (31)                                                                                                                                             
|      | 
|10.12 |  | Promissory Note issued to Cornelis F. With (32)                                                                                                                                              
|      | 
|10.13 |  | Amended and Restated Promissory Note between the Company and Cornelis F. Wit, dated March 31, 2005 (33)                                                                                      
|      | 
|10.14 |  | Promissory Note between the Company and Cornelis F. Wit, dated June 30, 2005 (34)                                                                                                            
|      | 
|10.15 |  | Promissory Note between the Company and Guus van Kesteren, dated June 30, 2005 (35)                                                                                                          
|      | 
|10.16 |  | Promissory Note between the Company and Ronald T. Linares, dated June 30, 2005 (36)                                                                                                          
|      | 
|10.17 |  | Amended and Restated Promissory Note between the Company and Cornelis F. Wit, dated December 31, 2005 (43)                                                                                   
|      | 
|10.18 |  | Amended and Restated Promissory Note between the Company and Guus van Kesteren, dated December 31, 2005. (44)                                                                                
|      | 
|10.19 |  | Promissory Note between the Company and Cornelis F. Wit, dated October 11, 2005. (45)                                                                                                        
|      | 
|10.20 |  | Lease Agreement for principal offices dated March 24, 2006 between OmniComm Systems, Inc. and RFP Mainstreet 2101 Commercial, LLC (37)                                                       
|      | 
|10.21 |  | Employment Agreement and Stock Option Agreement between the Company and Stephen E. Johnson dated September 4, 2006 (38)                                                                      
|      | 
|10.22 |  | Securities Purchase Agreement dated February 29, 2008 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page
thereto (39)
|      | 
|10.23 |  | Form of Debenture dated February 29, 2008 (40)                                                                                                                                               
|      | 
|10.24 |  | Form of Warrant February 29, 2008 (41)                                                                                                                                                       
|      | 
|10.25 |  | Security Interest Agreement dated February 29, 2008 by and between OmniComm System, Inc. and the investors set forth on Schedule 1 thereto (42)                                              



47



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##### Table of Contents

|      |  |                                                                                                                                                                                             
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.26 |  | Amendment dated August 29, 2008 by and between OmniComm Systems, Inc. and Gemini Master Fund, Ltd. (49)                                                                                     
|      | 
|10.27 |  | Form of Debenture dated August 29, 2008 (50)                                                                                                                                                
|      | 
|10.28 |  | Form of Warrant dated August 29, 2008(51)                                                                                                                                                   
|      | 
|10.29 |  | Securities Purchase Agreement dated December 16, 2008 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page
thereto(46)
|      | 
|10.30 |  | Form of Debenture dated December 16, 2008(47)                                                                                                                                               
|      | 
|10.31 |  | Form of Warrant December 16, 2008(48)                                                                                                                                                       
|      | 
|14    |  | OmniComm Systems, Inc. Code of Ethics (22)                                                                                                                                                  
|      | 
|21    |  | Subsidiaries of the Company                                                                                                                                                                 
|      | 
|31.1  |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as
amended.*                 
|      | 
|31.2  |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as
amended.*                 
|      | 
|32.1  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002**                                         
|      | 
|32.2  |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002**                                         
|      | 
|99.1  |  | OmniComm Systems, Inc. Audit Committee Charter (23)                                                                                                                                         



|(1) | Incorporated by reference to Exhibit 2 filed with our Report on Form 8-K dated March 3, 1999.
|--- | ---------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 2(c) filed with our Registration Statement on Form 10-SB dated December 22, 1998.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 2(c) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 2 filed with our Report on Form 8-K dated February 9, 2000.
|--- | ------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 3(a) filed with our Registration Statement on Form SB-2 dated February 6, 1997.
|--- | --------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 4(b) filed with our amended Registration Statement on Form 10-SB dated August 25, 1999.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 4(c) filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibit 4(D) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to Exhibit 4(E) filed with our Registration Statement on Form SB-2 dated December 27, 2001.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference to Exhibit 3(b) filed with our Registration Statement on Form SB-2 dated February 6, 1997.
|---- | --------------------------------------------------------------------------------------------------------------------



48



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##### Table of Contents

|(11) | Incorporated by reference to Exhibit 3.7 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to Exhibit 3.8 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated by reference to Exhibit 3.9 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated by reference to Exhibit 10(a)(i) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
|---- | ----------------------------------------------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to Exhibit 10(a)(iii) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
|---- | ------------------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to Exhibit 10(c) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
|---- | ---------------------------------------------------------------------------------------------------------------------------

|(17) | Incorporated by reference to Exhibit 10(e) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
|---- | ---------------------------------------------------------------------------------------------------------------------------

|(18) | Incorporated by reference to Exhibit 10(f) filed with our amended Registration Statement on Form 10-SB dated August 25, 1999.
|---- | -----------------------------------------------------------------------------------------------------------------------------

|(19) | Incorporated by reference to Exhibit 10.7 filed with our Form 10-Q for the period ended June 30, 2002.
|---- | ------------------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to Exhibit 10.8 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|---- | --------------------------------------------------------------------------------------------------------------------------------

|(21) | Incorporated by reference to Exhibit 10.8 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|---- | ---------------------------------------------------------------------------------------------------------------------------

|(22) | Incorporated by reference to our Proxy Statement filed on June 9 2003.
|---- | ----------------------------------------------------------------------

|(23) | Incorporated by reference to our Proxy Statement filed on June 9 2003.
|---- | ----------------------------------------------------------------------

|(24) | Incorporated by reference to Exhibit 4.1 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|---- | --------------------------------------------------------------------------------------------------------------------------

|(25) | Incorporated by reference to Exhibit 4.2 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|---- | --------------------------------------------------------------------------------------------------------------------------

|(26) | Incorporated by reference to Exhibit 4.3 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|---- | --------------------------------------------------------------------------------------------------------------------------

|(27) | Incorporated by reference to Exhibit 4.4 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|---- | --------------------------------------------------------------------------------------------------------------------------

|(28) | Incorporated by reference to Exhibit 4.5 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|---- | --------------------------------------------------------------------------------------------------------------------------

|(29) | Incorporated by reference to Exhibit 10.9 filed with our Form 10-Q for the period ended September 30, 2004.
|---- | -----------------------------------------------------------------------------------------------------------

|(30) | Incorporated by reference to Exhibit 10.10 filed with our Form 10-Q for the period ended September 30, 2004.
|---- | ------------------------------------------------------------------------------------------------------------

|(31) | Incorporated by reference to Exhibit 10.11 filed with our Form 10-Q for the period ended September 30, 2004.
|---- | ------------------------------------------------------------------------------------------------------------

|(32) | Incorporated by reference to Exhibit 10.12 filed with our Form 10-Q for the period ended September 30, 2004.
|---- | ------------------------------------------------------------------------------------------------------------

|(33) | Incorporated by reference to Exhibit 10.13 filed with our Form 10-Q for the period ended March 31, 2005.
|---- | --------------------------------------------------------------------------------------------------------



49



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##### Table of Contents

|(34) | Incorporated by reference to Exhibit 10.14 filed with our Form 10-Q for the period ended June 30, 2005.
|---- | -------------------------------------------------------------------------------------------------------

|(35) | Incorporated by reference to Exhibit 10.15 filed with our Form 10-Q for the period ended June 30, 2005.
|---- | -------------------------------------------------------------------------------------------------------

|(36) | Incorporated by reference to Exhibit 10.16 filed with our Form 10-Q for the period ended September 30, 2005.
|---- | ------------------------------------------------------------------------------------------------------------

|(37) | Incorporated by reference to Exhibit 10.1 filed with our Form 10-Q for the period ended June 30, 2006.
|---- | ------------------------------------------------------------------------------------------------------

|(38) | Incorporated by reference to Exhibit 10.1 filed with our Form 10-Q for the period ended September 30, 2006.
|---- | -----------------------------------------------------------------------------------------------------------

|(39) | Incorporated by reference to Exhibit 10.1 filed with our Form 8-K dated March 5, 2008.
|---- | --------------------------------------------------------------------------------------

|(40) | Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated March 5, 2008.
|---- | --------------------------------------------------------------------------------------

|(41) | Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated March 5, 2008.
|---- | --------------------------------------------------------------------------------------

|(42) | Incorporated by reference to Exhibit 10.4 filed with our Form 8-K dated March 5, 2008.
|---- | --------------------------------------------------------------------------------------

|(43) | Incorporated by reference to Exhibit 10.17 filed with our Form 10-K dated December 31, 2005.
|---- | --------------------------------------------------------------------------------------------

|(44) | Incorporated by reference to Exhibit 10.18 filed with our Form 10-K dated December 31, 2006.
|---- | --------------------------------------------------------------------------------------------

|(45) | Incorporated by reference to Exhibit 10.19 filed with our form 10-K dated December 31, 2007.
|---- | --------------------------------------------------------------------------------------------

|(46) | Incorporated by reference to Exhibit 10.1 filed with our Form 8-K dated December 17, 2008
|---- | -----------------------------------------------------------------------------------------

|(47) | Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated December 17, 2008
|---- | -----------------------------------------------------------------------------------------

|(48) | Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated December 17, 2008
|---- | -----------------------------------------------------------------------------------------

|(49) | Incorporated by reference to Exhibit 10.24 filed with our Form 10-K dated December 31, 2009
|---- | -------------------------------------------------------------------------------------------

|(50) | Incorporated by reference to Exhibit 4.8 filed with our Form 10-K dated December 31, 2009
|---- | -----------------------------------------------------------------------------------------

|(51) | Incorporated by reference to Exhibit 4.9 filed with our Form 10-K dated December 31, 2009
|---- | -----------------------------------------------------------------------------------------

|* | Filed herewith
|- | --------------

|** | Furnished herewith
|-- | ------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 31, 2010



OMNICOMM SYSTEMS, INC.By:

/s/ Cornelis F. WitCornelis F Wit, Chief Executive OfficerBy:

/s/ Ronald T. LinaresRonald T. Linares, Chief Accounting and Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.



|                                        |  |                                                             |  |               
|--------------------------------------- |  | ----------------------------------------------------------- |  | --------------
|Signature                               |  | Title                                                       |  | Date          
|                                        |  |                                                            
|/s/ Cornelis F. Wit Cornelis F. Wit     |  | Chief (Principal) Executive Officer, President and Director |  | March 31, 2010
|                                        |  |                                                            
|/s/ Randall G. Smith Randall G. Smith   |  | Chairman, Chief Technology Officer                          |  | March 31, 2010
|                                        |  |                                                            
|/s/ Ronald T. Linares Ronald T. Linares |  | Chief (Principal) Accounting and Financial Officer          |  | March 31, 2010
|                                        |  |                                                            
|/s/ Guus van Kesteren Guus van Kesteren |  | Director                                                    |  | March 31, 2010
|                                        |  |                                                            
|/s/ Matthew D. Veatch Matthew D. Veatch |  | Director                                                    |  | March 31, 2010
|                                        |  |                                                            
|/s/ Fernando Montero Fernando Montero   |  | Director                                                    |  | March 31, 2010



51



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

OmniComm Systems, Inc.

Fort Lauderdale, Florida

We have audited the accompanying consolidated balance sheets of OmniComm Systems, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in
shareholders equity (deficit) and cash flows for each of the two years in the period ended December 31, 2009. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion
on these financial statements based upon our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis of designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion of the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe
that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of OmniComm Systems, Inc. at December 31, 2009 and 2008, and the results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company has incurred losses and has a net capital deficiency that raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to these matters
are also discussed in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.



|                       
|-----------------------
|GREENBERG & COMPANY LLC
|                       
|Springfield, New Jersey
|                       
|February 12, 2010      



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                                                    |  | December 31,2009 |             |   | December 31,2008 |  
|                                                                                                                                                                                                                    |  |                 
|ASSETS                                                                                                                                                                                                              |  |                  |             |   |                  |   |             |  
|CURRENT ASSETS                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|Cash                                                                                                                                                                                                                |  | $                | 60,352      |   |                  | $ | 2,035,818   |  
|Accounts receivable, net of allowance for doubtful accounts of $267,526 and $150,933 in 2009 and 2008,
respectively                                                                                                 |  |                  | 3,121,183   |   |                  |   | 2,607,893   |  
|Prepaid expenses                                                                                                                                                                                                    |  |                  | 239,064     |   |                  |   | 98,562      |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total current assets                                                                                                                                                                                                |  |                  | 3,420,599   |   |                  |   | 4,742,273   |  
|                                                                                                                                                                                                                    |  |                 
|PROPERTY AND EQUIPMENT, net                                                                                                                                                                                         |  |                  | 1,240,697   |   |                  |   | 769,228     |  
|                                                                                                                                                                                                                    |  |                 
|OTHER ASSETS                                                                                                                                                                                                        |  |                  |             |   |                  |   |             |  
|Intangible assets, net                                                                                                                                                                                              |  |                  | 1,160,581   |   |                  |   | -0-         |  
|Other assets                                                                                                                                                                                                        |  |                  | 25,882      |   |                  |   | 17,641      |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                    |  |                 
|TOTAL ASSETS                                                                                                                                                                                                        |  | $                | 5,847,759   |   |                  | $ | 5,529,142   |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                    |  |                 
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|CURRENT LIABILITIES                                                                                                                                                                                                 |  |                  |             |   |                  |   |             |  
|Accounts payable and accrued expenses                                                                                                                                                                               |  | $                | 1,548,215   |   |                  | $ | 1,085,700   |  
|Notes payable, current portion                                                                                                                                                                                      |  |                  | 111,800     |   |                  |   | 111,800     |  
|Deferred revenue, current portion                                                                                                                                                                                   |  |                  | 4,582,369   |   |                  |   | 3,549,058   |  
|Patent litigation settlement liability, current portion                                                                                                                                                             |  |                  | 627,810     |   |                  |   | 241,464     |  
|Conversion feature liability, current portion                                                                                                                                                                       |  |                  | 64,622      |   |                  |   | -0-         |  
|Convertible notes payable, current portion                                                                                                                                                                          |  |                  | 402,777     |   |                  |   | 384,043     |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total current liabilities                                                                                                                                                                                           |  |                  | 7,337,593   |   |                  |   | 5,372,065   |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                    |  |                 
|Notes payable related parties  long term                                                                                                                                                                           |  |                  | 137,500     |   |                  |   | 197,500     |  
|Deferred revenue  long term                                                                                                                                                                                        |  |                  | 980,642     |   |                  |   | 885,200     |  
|Patent litigation settlement liability  long term                                                                                                                                                                  |  |                  | 1,835,463   |   |                  |   | 1,929,019   |  
|Convertible notes payable, related parties                                                                                                                                                                          |  |                  | 6,996,178   |   |                  |   | 4,165,025   |  
|Convertible notes payable, net of current portion                                                                                                                                                                   |  |                  | 224,600     |   |                  |   | 156,752     |  
|Conversion feature liability, related parties                                                                                                                                                                       |  |                  | 1,809,418   |   |                  |   | 1,185,960   |  
|Conversion feature liability, net of current portion                                                                                                                                                                |  |                  | 71,400      |   |                  |   | 71,942      |  
|Warrant liability, related parties                                                                                                                                                                                  |  |                  | 1,977,402   |   |                  |   | 2,017,160   |  
|Warrant liability                                                                                                                                                                                                   |  |                  | 760,791     |   |                  |   | 620,801     |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|TOTAL LIABILITIES                                                                                                                                                                                                   |  |                  | 22,130,987  |   |                  |   | 16,601,424  |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                    |  |                 
|COMMITMENTS AND CONTINGENCIES (See Note 13)                                                                                                                                                                         |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                    |  |                 
|SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|Undesignated preferred stock$.001 par value. 4,022,500 shares authorized, no shares issued and outstanding                                                                                                         |  |                  | -0-         |   |                  |   | -0-         |  
|                                                                                                                                                                                                                    |  |                 
|Series B convertible preferred stock,$.001 par value. 230,000 shares authorized, -0- and -0- issued and outstanding,
respectively; liquidation preference $-0- and $-0-, respectively                              |  |                  | -0-         |   |                  |   | -0-         |  
|                                                                                                                                                                                                                    |  |                 
|Series C convertible preferred stock,$.001 par value. 747,500 shares authorized, -0- and -0- issued and outstanding,
respectively; liquidation preference $-0- and $-0-, respectively                              |  |                  | -0-         |   |                  |   | -0-         |  
|                                                                                                                                                                                                                    |  |                 
|5% Series A convertible preferred stock$0.001 par value, 5,000,000 shares authorized; 4,125,224 and 4,125,224 issued and
outstanding, respectively; liquidation preference $4,125,224 and $4,125,224, respectively |  |                  | 4,125       |   |                  |   | 4,125       |  
|                                                                                                                                                                                                                    |  |                 
|Common stock  250,000,000 shares authorized, 85,507,699 and 76,579,951 issued and outstanding, respectively, at $.001 par
value                                                                                    |  |                  | 86,474      |   |                  |   | 77,546      |  
|Additional paid in capital  preferred                                                                                                                                                                              |  |                  | 3,718,054   |   |                  |   | 3,718,054   |  
|Additional paid in capital  common                                                                                                                                                                                 |  |                  | 36,278,798  |   |                  |   | 33,430,270  |  
|Accumulated other comprehensive income/(loss)                                                                                                                                                                       |  |                  | 2,934       |   |                  |   | 989         |  
|Less: Treasury stock, cost method, 1,014,830 and 1,014,830 shares, respectively                                                                                                                                     |  |                  | (503,086    | ) |                  |   | (503,086    | )
|Accumulated deficit                                                                                                                                                                                                 |  |                  | (55,870,527 | ) |                  |   | (47,800,180 | )
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                |  |                  | (16,283,228 | ) |                  |   | (11,072,282 | )
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                |  | $                | 5,847,759   |   |                  | $ | 5,529,142   |  
|                                                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  

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



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                 |  |                                 |            |   |      |   |             |  
|---------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                 |  | For the years endedDecember 31, |           
|                                                                 |  | 2009                            |            |   | 2008 |  
|                                                                 |  |                                
|Total revenues                                                   |  | $                               | 9,556,366  |   |      | $ | 6,269,614   |  
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Cost of sales                                                    |  |                                 | 1,894,248  |   |      |   | 1,351,564   |  
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Gross margin                                                     |  |                                 | 7,662,118  |   |      |   | 4,918,050   |  
|                                                                 |  |                                
|Operating expenses                                               |  |                                 |            |   |      |   |             |  
|Salaries, benefits and related taxes                             |  |                                 | 9,316,101  |   |      |   | 8,825,032   |  
|Rent & occupancy expenses                                        |  |                                 | 775,329    |   |      |   | 554,475     |  
|Consulting services                                              |  |                                 | 274,126    |   |      |   | 302,502     |  
|Legal and professional fees                                      |  |                                 | 622,227    |   |      |   | 612,634     |  
|Travel                                                           |  |                                 | 482,131    |   |      |   | 501,816     |  
|Telephone and internet                                           |  |                                 | 176,095    |   |      |   | 161,817     |  
|Selling, general and administrative                              |  |                                 | 1,193,802  |   |      |   | 544,012     |  
|Bad Debt Expense                                                 |  |                                 | 235,160    |   |      |   | 148,347     |  
|Depreciation expense                                             |  |                                 | 356,828    |   |      |   | 204,899     |  
|Amortization expense                                             |  |                                 | 232,117    |   |      |   | 261,365     |  
|                                                                 |  |                                 |            |   |      |   |             |  
|Total operating expenses                                         |  |                                 | 13,663,916 |   |      |   | 12,116,899  |  
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Operating income (loss)                                          |  |                                 | (6,001,798 | ) |      |   | (7,198,849  | )
|                                                                 |  |                                
|Other income (expense)                                           |  |                                 |            |   |      |   |             |  
|Interest expense                                                 |  |                                 | (1,880,168 | ) |      |   | (3,083,844  | )
|Interest expense  related parties                               |  |                                 | (867,222   | ) |      |   | (216,810    | )
|Interest income                                                  |  |                                 | 4,491      |   |      |   | 7,112       |  
|Gain (Loss) on Extinguishment of Debt                            |  |                                 | 432        |   |      |   | (45,883     | )
|Patent litigation settlement                                     |  |                                 | -0-        |   |      |   | (2,170,481  | )
|Unrealized Gain on Derivative Liabilities                        |  |                                 | 673,918    |   |      |   | 2,114,194   |  
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Income (loss) before taxes and preferred dividends               |  |                                 | (8,070,347 | ) |      |   | (10,594,561 | )
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Net income (loss)                                                |  |                                 | (8,070,347 | ) |      |   | (10,594,561 | )
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Preferred stock dividends in arrears Series A Preferred          |  |                                 | (205,134   | ) |      |   | (206,962    | )
|Preferred stock dividends in arrears Series B Preferred          |  |                                 | -0-        |   |      |   | (9,753      | )
|Preferred stock dividends in arrears Series C Preferred          |  |                                 | -0-        |   |      |   | (67,245     | )
|                                                                 |  |                                 |            |   |      |   |             |  
|Total preferred stock dividends                                  |  |                                 | (205,134   | ) |      |   | (283,960    | )
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Net income (loss) attributable to common stockholders            |  | $                               | (8,275,481 | ) |      | $ | (10,878,521 | )
|                                                                 |  |                                 |            |   |      |   |             |  
|                                                                 |  |                                
|Net income (loss) per share, basic and diluted                   |  | $                               | (0.10      | ) |      | $ | (0.15       | )
|                                                                 |  |                                 |            |   |      |   |             |  
|Weighted average number of shares outstanding, basic and diluted |  |                                 | 81,229,605 |   |      |   | 71,789,073  |  
|                                                                 |  |                                 |            |   |      |   |             |  

See accompanying summary of accounting policies and notes to financial statements



F-3



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (DEFICIT)

FOR THE PERIOD JANUARY 1, 2008 TO DECEMBER 31, 2009



|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|-------------------------------------------------------- |  | -------------- | - |  | --------------- | ------ | ------------------------ | - | ---------- | ----------------------- |  | --------- | ----------------------- |  | - | ------------------------ | - |  | -------------- | --------- | - | --------------- | ------- | - | ------------------------ | - | ---- | -------------- |  | - | --------------- | - |  | ------------------------ | - |  | - | ---- | - |  | - | ---------- | -
|                                                         |  |                |   |  |                 |        |                          |   |            | Preferred Stock         | 
|                                                         |  | Common Stock   |   |  |                 |        | 5% Series A Convertible  |   |            | 8% Series B Convertible |  |           | 8% Series C Convertible | 
|                                                         |  | NumberofShares |   |  | $ 0.001ParValue |        | AdditionalPaid InCapital |   |            | NumberofShares          |  |           | $ 0.001ParValue         |  |   | AdditionalPaid InCapital |   |  | NumberofShares |           |   | $ 0.001ParValue |         |   | AdditionalPaid InCapital |   |      | NumberofShares |  |   | $ 0.001ParValue |   |  | AdditionalPaid InCapital |  
|Balances at December 31, 2007                            |  | 59,032,599     |   |  | $               | 59,786 |                          | $ | 27,893,433 |                         |  | 4,170,224 |                         |  | $ | 4,170                    |   |  | $              | 3,763,009 |   |                 | 48,000  |   |                          | $ | 48   |                |  | $ | 191,470         |   |  | 337,150                  |   |  | $ | 337  |   |  | $ | 3,684,070  |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Conversion of Series A Preferred stock into common stock |  | 30,000         |   |  |                 | 30     |                          |   | 44,970     |                         |  | (45,000   | )                       |  |   | (45                      | ) |  |                | (44,955   | ) |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Conversion of Series B Preferred stock into common stock |  | 1,920,000      |   |  |                 | 1,920  |                          |   | 189,598    |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 | (48,000 | ) |                          |   | (48  | )              |  |   | (191,470        | ) |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Conversion of Series C Preferred stock into common stock |  | 13,486,000     |   |  |                 | 13,486 |                          |   | 3,670,921  |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  | (337,150                 | ) |  |   | (337 | ) |  |   | (3,684,070 | )
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Issuance of common stock for antidilution rights         |  | 707,802        |   |  |                 | 708    |                          |   | (708       | )                       |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Foreign currency translation adjustment                  |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Issuance of common stock for services                    |  | 40,000         |   |  |                 | 40     |                          |   | 23,960     |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Issuance of common stock for accrued interest            |  | 50,100         |   |  |                 | 50     |                          |   | 28,080     |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Employee stock option expense                            |  |                |   |  |                 |        |                          |   | 1,321,004  |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Issuance of common stock in warrant exercise             |  | 982,802        |   |  |                 | 983    |                          |   | (983       | )                       |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Adjustment for placement agent fees paid in 2007         |  |                |   |  |                 |        |                          |   | 25,000     |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Placement agent warrant expense                          |  |                |   |  |                 |        |                          |   | 80,085     |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Common stock tendered for stock options                  |  | (212,218       | ) |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Exercise of employee stock options                       |  | 491,570        |   |  |                 | 492    |                          |   | 139,572    |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Common stock issued in lieu of wages                     |  | 51,296         |   |  |                 | 51     |                          |   | 15,338     |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Net loss for the year ended December 31, 2008            |  | -0-            |   |  |                 | -0-    |                          |   | -0-        |                         |  | -0-       |                         |  |   | -0-                      |   |  |                | -0-       |   |                 | -0-     |   |                          |   | -0-  |                |  |   | -0-             |   |  | -0-                      |   |  |   | -0-  |   |  |   | -0-        |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Balances at December 31, 2008                            |  | 76,579,951     |   |  |                 | 77,546 |                          |   | 33,430,270 |                         |  | 4,125,224 |                         |  |   | 4,125                    |   |  |                | 3,718,054 |   |                 | -0-     |   |                          |   | -0-  |                |  |   | -0-             |   |  | -0-                      |   |  |   | -0-  |   |  |   | -0-        |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Common stock issued in lieu of wages                     |  | 405,055        |   |  |                 | 405    |                          |   | 108,777    |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Employee stock option expense                            |  |                |   |  |                 |        |                          |   | 960,024    |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Common stock issued for services                         |  | 415,000        |   |  |                 | 415    |                          |   | 61,835     |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Common stock issued in asset acquisition                 |  | 8,100,000      |   |  |                 | 8,100  |                          |   | 1,717,900  |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Common stock issued for cashless exercise of warrants    |  | 7,693          |   |  |                 | 8      |                          |   | (8         | )                       |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Foreign currency translation adjustment                  |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Net loss for the period ended December 31, 2009          |  | -0-            |   |  |                 | -0-    |                          |   | -0-        |                         |  | -0-       |                         |  |   | -0-                      |   |  |                | -0-       |   |                 | -0-     |   |                          |   | -0-  |                |  |   | -0-             |   |  | -0-                      |   |  |   | -0-  |   |  |   | -0-        |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |          
|Balances at December 31, 2009                            |  | 85,507,699     |   |  | $               | 86,474 |                          | $ | 36,278,798 |                         |  | 4,125,224 |                         |  | $ | 4,125                    |   |  | $              | 3,718,054 |   |                 | -0-     |   |                          | $ | 0.00 |                |  | $ | 0.00            |   |  | -0-                      |   |  | $ | -0-  |   |  | $ | -0-        |  
|                                                         |  |                |   |  |                 |        |                          |   |            |                         |  |           |                         |  |   |                          |   |  |                |           |   |                 |         |   |                          |   |      |                |  |   |                 |   |  |                          |   |  |   |      |   |  |   |            |  



|                                                         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   |             |  
|-------------------------------------------------------- |  | ------------------ | ----------- | - | -------------------- | - | --- | ---------------------- |  | - | ----------------------------------- | - |  | ------------- | ------ | - | --------------------------------- | - | -------- | - |  | - | ----------- | -
|                                                         |  | AccumulatedDeficit |             |   | DeferredCompensation |   |     | SubscriptionReceivable |  |   | AccumulatedOtherComprehensiveIncome |   |  | TreasuryStock |        |   | TotalShareholdersEquity(Deficit) |  
|Balances at December 31, 2007                            |  | $                  | (37,205,619 | ) |                      | $ | (0  | )                      |  | $ | (0                                  | ) |  | $             | 7,957  |   |                                   | $ | (369,389 | ) |  | $ | (1,970,728  | )
|                                                         |  |                    |             |   |                      |  
|Conversion of Series A Preferred stock into common stock |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | -0-         |  
|                                                         |  |                    |             |   |                      |  
|Conversion of Series B Preferred stock into common stock |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | -0-         |  
|                                                         |  |                    |             |   |                      |  
|Conversion of Series C Preferred stock into common stock |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | -0-         |  
|                                                         |  |                    |             |   |                      |  
|Issuance of common stock for antidilution rights         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | -0-         |  
|                                                         |  |                    |             |   |                      |  
|Foreign currency translation adjustment                  |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               | (6,968 | ) |                                   |   |          |   |  |   | (6,968      | )
|                                                         |  |                    |             |   |                      |  
|Issuance of common stock for services                    |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 24,000      |  
|                                                         |  |                    |             |   |                      |  
|Issuance of common stock for accrued interest            |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 28,130      |  
|                                                         |  |                    |             |   |                      |  
|Employee stock option expense                            |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 1,321,004   |  
|                                                         |  |                    |             |   |                      |  
|Issuance of common stock in warrant exercise             |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | -0-         |  
|                                                         |  |                    |             |   |                      |  
|Adjustment for placement agent fees paid in 2007         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 25,000      |  
|                                                         |  |                    |             |   |                      |  
|Placement agent warrant expense                          |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 80,085      |  
|                                                         |  |                    |             |   |                      |  
|Common stock tendered for stock options                  |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   | (133,697 | ) |  |   | (133,697    | )
|                                                         |  |                    |             |   |                      |  
|Exercise of employee stock options                       |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 140,063     |  
|                                                         |  |                    |             |   |                      |  
|Common stock issued in lieu of wages                     |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 15,390      |  
|                                                         |  |                    |             |   |                      |  
|Net loss for the year ended December 31, 2008            |  |                    | (10,594,561 | ) |                      |   | -0- |                        |  |   | -0-                                 |   |  |               | -0-    |   |                                   |   | -0-      |   |  |   | (10,594,561 | )
|                                                         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   |             |  
|                                                         |  |                    |             |   |                      |  
|Balances at December 31, 2008                            |  |                    | (47,800,180 | ) |                      |   | -0- |                        |  |   | -0-                                 |   |  |               | 989    |   |                                   |   | (503,086 | ) |  |   | (11,072,282 | )
|                                                         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   |             |  
|                                                         |  |                    |             |   |                      |  
|Common stock issued in lieu of wages                     |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 109,182     |  
|                                                         |  |                    |             |   |                      |  
|Employee stock option expense                            |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 960,024     |  
|                                                         |  |                    |             |   |                      |  
|Common stock issued for services                         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 62,250      |  
|                                                         |  |                    |             |   |                      |  
|Common stock issued in asset acquisition                 |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | 1,726,000   |  
|                                                         |  |                    |             |   |                      |  
|Common stock issued for cashless exercise of warrants    |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   | -0-         |  
|                                                         |  |                    |             |   |                      |  
|Foreign currency translation adjustment                  |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               | 1,945  |   |                                   |   |          |   |  |   | 1,945       |  
|                                                         |  |                    |             |   |                      |  
|Net loss for the period ended December 31, 2009          |  |                    | (8,070,347  | ) |                      |   | -0- |                        |  |   | -0-                                 |   |  |               | -0-    |   |                                   |   | -0-      |   |  |   | (8,070,347  | )
|                                                         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   |             |  
|                                                         |  |                    |             |   |                      |  
|Balances at December 31, 2009                            |  | $                  | (55,870,527 | ) |                      | $ | -0- |                        |  | $ | -0-                                 |   |  | $             | 2,934  |   |                                   | $ | (503,086 | ) |  | $ | (16,283,227 | )
|                                                         |  |                    |             |   |                      |   |     |                        |  |   |                                     |   |  |               |        |   |                                   |   |          |   |  |   |             |  



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##### Table of Contents

OMNICOMM SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS
ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008



|                                                                                         |  |      |            |   |      |   |             |  
|---------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                                                                         |  | 2009 |            |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                     |  |      |            |   |      |   |             |  
|Net income (loss)                                                                        |  | $    | (8,070,347 | ) |      | $ | (10,594,561 | )
|Adjustment to reconcile net loss to net cash provided by (used in) operating activities: |  |      |            |   |      |   |             |  
|Common stock issued on cashless exercise of options                                      |  |      | -0-        |   |      |   | (1,387      | )
|Common stock issued for services                                                         |  |      | 62,250     |   |      |   | 24,000      |  
|Common stock issued for accrued interest                                                 |  |      | -0-        |   |      |   | 28,130      |  
|Common stock issued in lieu of salary                                                    |  |      | 109,182    |   |      |   | 15,389      |  
|Unrealized loss on conversion of debt                                                    |  |      | (432       | ) |      |   | 45,883      |  
|Patent litigation settlement                                                             |  |      | -0-        |   |      |   | 2,170,481   |  
|Unrealized gain on warranty liability                                                    |  |      | (673,918   | ) |      |   | (2,114,194  | )
|Interest expense from derivative instruments                                             |  |      | 1,802,355  |   |      |   | 2,937,497   |  
|Employee stock option expense                                                            |  |      | 960,024    |   |      |   | 1,321,004   |  
|Depreciation and amortization                                                            |  |      | 588,945    |   |      |   | 466,264     |  
|Change in assets and liabilities:                                                        |  |      |            |   |      |   |             |  
|Accounts receivable                                                                      |  |      | (513,290   | ) |      |   | (1,838,568  | )
|Prepaid expenses                                                                         |  |      | (95,795    | ) |      |   | (60,934     | )
|Other assets                                                                             |  |      | (8,242     | ) |      |   | 873         |  
|Accounts payable and accrued expenses                                                    |  |      | 463,114    |   |      |   | 504,419     |  
|Patent settlement liability                                                              |  |      | 25,000     |   |      |   | 2,170,481   |  
|Deferred revenue                                                                         |  |      | 174,165    |   |      |   | 1,801,984   |  
|                                                                                         |  |      |            |   |      |   |             |  
|Net cash provided by (used in) operating activities                                      |  |      | (5,176,989 | ) |      |   | (5,293,720  | )
|                                                                                         |  |      |            |   |      |   |             |  
|                                                                                         |  |     
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |  |      |            |   |      |   |             |  
|Cash received in acquisition of eResearch Technologies assets                            |  |      | 1,150,000  |   |      |   | -0-         |  
|Acquisition of Logos Technologies, Ltd. assets                                           |  |      | (152,628   | ) |      |   | -0-         |  
|Purchase of property and equipment                                                       |  |      | (315,293   | ) |      |   | (539,428    | )
|                                                                                         |  |      |            |   |      |   |             |  
|Net cash provided by (used in) investing activities                                      |  |      | 682,079    |   |      |   | (539,428    | )
|                                                                                         |  |      |            |   |      |   |             |  
|                                                                                         |  |     
|CASH FLOWS FROM FINANCING ACTIVITIES                                                     |  |      |            |   |      |   |             |  
|Proceeds from exercise of employee stock options                                         |  |      | -0-        |   |      |   | 7,753       |  
|Repayments of notes payable                                                              |  |      | (360,000   | ) |      |   | (300,000    | )
|Proceeds from convertible notes payable                                                  |  |      | 350,000    |   |      |   | 2,245,000   |  
|Proceeds from convertible notes payable, related party                                   |  |      | 2,540,000  |   |      |   | 6,641,220   |  
|Payments on convertible notes payable                                                    |  |      | (12,500    | ) |      |   | (1,500,000  | )
|Proceeds from notes payable                                                              |  |      | -0-        |   |      |   | 300,000     |  
|                                                                                         |  |      |            |   |      |   |             |  
|Net cash provided by (used in) financing activities                                      |  |      | 2,517,500  |   |      |   | 7,393,973   |  
|                                                                                         |  |      |            |   |      |   |             |  
|                                                                                         |  |     
|Effect of exchange rate change on cash and cash equivalents                              |  |      | 1,944      |   |      |   | (6,968      | )
|Net increase (decrease) in cash and cash equivalents                                     |  |      | (1,975,466 | ) |      |   | 1,553,857   |  
|Cash and cash equivalents at beginning of period                                         |  |      | 2,035,818  |   |      |   | 481,961     |  
|                                                                                         |  |      |            |   |      |   |             |  
|Cash and cash equivalents at end of period                                               |  | $    | 60,352     |   |      | $ | 2,035,818   |  
|                                                                                         |  |      |            |   |      |   |             |  



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##### Table of Contents

OMNICOMM SYSTEM, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS
ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008

(continued)



|                                                                           |  |                                 |           |      |   |          
|-------------------------------------------------------------------------- |  | ------------------------------- | --------- | ---- | - | ---------
|                                                                           |  | For the years endedDecember 31,
|                                                                           |  | 2009                            |           | 2008
|                                                                           |  |                                
|Supplemental Disclosure of Cash Flow Information:                          |  |                                 |           |      |   |          
|Cash paid during the period for:                                           |  |                                 |           |      |   |          
|                                                                           |  |                                
|Income tax                                                                 |  | $                               | -0-       |      | $ | -0-      
|                                                                           |  |                                 |           |      |   |          
|Interest                                                                   |  | $                               | 845,894   |      | $ | 151,245  
|                                                                           |  |                                 |           |      |   |          
|                                                                           |  |                                
|Non-cash Transactions                                                      |  |                                 |           |      |   |          
|Common stock issued for accrued interest                                   |  | $                               | -0-       |      | $ | 28,130   
|Common stock issued in exchange on lieu of pay for services                |  | $                               | 62,250    |      | $ | 24,000   
|Conversion of Series B Preferred Stock into common stock                   |  | $                               | -0-       |      | $ | 191,518  
|Common stock tendered in exercise of incentive stock options               |  | $                               | -0-       |      | $ | 133,697  
|Cashless exercise of warrants                                              |  | $                               | 8         |      | $ | 589,681  
|Common stock issued in lieu of salary                                      |  | $                               | 109,182   |      | $ | 15,389   
|Common stock issued pursuant to anti-dilution provision                    |  | $                               | -0-       |      | $ | 344,510  
|Conversion of series C preferred stock into shares of common stock         |  | $                               | -0-       |      | $ | 3,684,407
|Conversion of Series A preferred stock into shares of common stock         |  | $                               | -0-       |      | $ | 45,000   
|Common stock issued for the acquisition of assets and liabilities assumed: |  |                                 |           |      |   |          
|Fixed assets                                                               |  | $                               | 36,006    |      | $ | -0-      
|Prepaid expenses                                                           |  | $                               | 44,707    |      | $ | -0-      
|Customer list                                                              |  | $                               | 1,392,701 |      | $ | -0-      
|Software application code                                                  |  | $                               | 324,964   |      | $ | -0-      
|Present value of assumed liability                                         |  | $                               | 267,790   |      | $ | -0-      
|Deferred revenue                                                           |  | $                               | 954,588   |      | $ | -0-      

See accompanying
summary of accounting policies and notes to financial statements



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##### 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 located in the United States. 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 and services which include TrialMaster. Our research and development efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition
of increased functionality. The majority of our research and development activities represent salaries to our software developers. During the years ended December 31, 2009 and December 31, 2008 we spent approximately $2,064,000 and
$897,000, 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.

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.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



RECLASSIFICATIONS

Certain reclassifications have been made in the 2008 financial statements to conform to the 2009 presentation. These reclassifications did
not have any effect on 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 years ended
December 31, 2009 and December 31, 2008, respectively are:



|                          |  |            |  |       |            |  |   |           |  |       |  
|------------------------- |  | ---------- |  | ----- | ---------- |  | - | --------- |  | ----- | -
|Business Activity         |  | 12/31/2009 |  |       | 12/31/2008 | 
|Set-up Fees               |  | 4,925,205  |  | 51.5  | %          |  |   | 4,642,915 |  | 74.1  | %
|Change Orders             |  | 385,275    |  | 4.0   | %          |  |   | 432,488   |  | 6.9   | %
|Maintenance               |  | 2,604,534  |  | 27.3  | %          |  |   | 1,194,212 |  | 19.0  | %
|Licensing                 |  | 575,968    |  | 6.0   | %          |  |   | -0-       |  | 0.0   | %
|Prof. Services            |  | 362,322    |  | 3.8   | %          |  |   | -0-       |  | 0.0   | %
|Hosting and Subscriptions |  | 703,062    |  | 7.4   | %          |  |   | -0-       |  | 0.0   | %
|                          |  |            |  |       |            |  |   |           |  |       |  
|                          |  |            |  |      
|Totals                    |  | 9,556,366  |  | 100.0 | %          |  | $ | 6,269,615 |  | 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 $150,933 and $267,526 as of December 31, 2008 and December 31, 2009, respectively.



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##### 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 December 31, 2009. 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.
During the second half of fiscal 2008 and continuing during 2009, the biotechnology industry experienced liquidity and funding difficulties. Several of the Companys clients operate in this segment. The Company maintains an allowance for
doubtful accounts based on accounts past due according to contractual terms and historical collection experience. Actual losses when incurred are charged to the allowance. The Companys losses related to collection of accounts receivable prior
to fiscal 2008 were consistently within managements expectations. The overall downturn in the 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, which the Company reevaluates on a monthly basis based on specific review of receivable agings and the period that any receivables are beyond the standard payment
terms, is believed by management to be probable in the Companys accounts receivable. The Company does not require collateral from its customers in order to mitigate credit risk.

One customer accounted for 26% of our revenues during the year ended December 31, 2009 or approximately $2,443,540. One customer
accounted for 36% of our revenues during the year ended December 31, 2008 or approximately $2,238,198. 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 years ended |  | # ofCustomers |  | Percentageof TotalRevenues |                     |  | # ofCustomers |  | Percentageof TotalAccountsReceivable |  
|12/31/2008          |  | 1             |  | 36                         | %                   |  | 2             |  | 71                                   | %
|12/31/2009          |  | 1             |  | 26                         | %                   |  | 2             |  | 54                                   | %



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##### 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 years presented.



|                    |  |                     |         |   |                   |   |          |  
|------------------- |  | ------------------- | ------- | - | ----------------- | - | -------- | -
|                    |  | For the years ended |        
|                    |  | December 31, 2008   |         |   | December 31, 2009 |  
|Beginning of period |  | $                   | 2,586   |   |                   | $ | 150,933  |  
|Bad debt expense    |  |                     | 148,347 |   |                   |   | 235,160  |  
|Write-offs          |  |                     | (-0-    | ) |                   |   | (118,567 | )
|                    |  |                     |         |   |                   |   |          |  
|End of period       |  | $                   | 150,933 |   |                   | $ | 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 a business acquisition. Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an 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.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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. As of December 31, 2009, the Company had $5,563,011 in deferred revenues relating to contracts for services to be performed over periods ranging from 1 month to 5 years. The
Company had $4,582,369 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 out
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 $255,730 and $284,113 for the years ended December 31, 2009 and
December 31, 2008, respectively.

RESEARCH AND DEVELOPMENT EXPENSES

Software development costs are included in research and development and are expensed as incurred. Statement of Financial Accounting
Standards No. 86 Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, (SFAS 86) (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 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 year ended December 31, 2009 and December 31, 2008 we spent approximately $2,063,808 and $897,227
respectively, on research and development activities, which include costs associated with customization of our software products and services for our clients projects and which are primarily comprised of salaries and related expenses for our
software developers.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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 and is more fully described in Note
18. 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
year ended December 31, 2008 and December 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 years ended December 31, 2009 and December 31, 2008
includes compensation expense for share-based awards granted prior to, but not fully vested as of January 1, 2006 based on the grant date fair value estimated in accordance with SFAS No. 123 as well as compensation expense for share-based
awards granted from January 1, 2006 to December 31, 2009 in accordance with SFAS No. 123(R). The Company currently uses the American Binomial option pricing model to determine grant date fair value.

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.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Basic earnings per share were calculated using the weighted average number of shares
outstanding of 81,229,605 and 71,789,073 for the years ended December 31, 2009 and December 31, 2008, respectively. There were no differences between basic and diluted earnings per share. Options to purchase 12,236,500 shares of common
stock at prices ranging from $0.20 to $0.66 per share were outstanding at December 31, 2009. 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
December 31, 2009.

The Companys convertible debt and convertible preferred stock have an anti-dilutive effect on
net loss per share and were not included in the computation of diluted earnings per share.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, (SFAS 109) (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.

IMPACT OF NEW ACCOUNTING STANDARDS

In the first quarter of 2009, we adopted the following new accounting pronouncements:

FASB Staff Position (FSP) Financial Accounting Standards (FAS) 157-2, Effective Date of FASB Statement 157 (Codified within Accounting
Standards Codification (ASC) 820, Fair Value Measurements and Disclosures)  This FSP delayed the effective date of Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements, for certain nonfinancial
assets and nonfinancial liabilities. Adoption of this FSP did not significantly affect how we determine fair value but has resulted in certain additional disclosures. Please read Note 12  Fair Value Measurement.

FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (Codified within
ASC 260, Earnings Per Share)  This staff position specifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and should be included in the computation
of earnings per share pursuant to the two-class method. Adoption of this FSP did not have a significant effect on our earnings per share.

SFAS No. 141(R), Business Combinations (Codified within ASC 805, Business Combinations)  This standard requires most identifiable assets, liabilities, noncontrolling interests and goodwill
acquired in a business combination to be recorded at full fair value. The standard also changes the approach to determining the purchase price, the accounting for acquisition cost and several acquisition related accounting practices. The effects of
the adoption of this pronouncement on our financial statements are discussed in Notes 7 and 8 to these financial statements.

SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (Codified within ASC 810, Consolidation)  This standard specifies that noncontrolling interests be reported as a part of equity, not as a liability or
other item outside of equity. Adoption of this pronouncement did not have a significant effect on our earnings or financial position.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No. 133 (Codified within ASC 815, Derivatives and Hedging)  This standard requires enhanced disclosures about derivative instruments including how and why they are used; how they are accounted for; and how they
affect an entitys financial position, financial performance and cash flows. Adoption of this pronouncement did not have a significant effect on our earnings or financial position.

In the second quarter of 2009, we adopted the following new accounting pronouncements:

FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly (Codified within ASC 820, Fair Value Measurements and Disclosures)  This FSP provides guidance for estimating fair value when the volume and level of activity for an asset or liability have
significantly decreased. Adoption of this FSP affects how we consider Level 2 inputs in determining fair values but did not have a significant effect on our earnings or financial position.

FSP FAS 107-1 and Accounting Principles Board (APB) Opinion 28-1, Interim Disclosures about Fair Value of Financial Instruments
(Codified within ASC 825, Financial Instruments)  This FSP requires an entity to provide disclosures about fair value of financial instruments at interim reporting periods. Adoption of this FSP did not significantly affect how we determine
fair value but has resulted in certain additional disclosures. Please read Note 12  Fair Value Measurements.

SFAS
No. 165, Subsequent Events (Codified within ASC 855, Subsequent Events)  This Statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements
are issued, introduces the concept of financial statements being available to be issued and requires disclosures regarding the date through which subsequent events were evaluated. Adoption of this standard did not have a significant effect on our
earnings or financial position but does affect our disclosures regarding subsequent events.

SEC SAB 112 (Codified within the
ASC 805, Business Combinations)This bulletin amends or rescinds guidance included in the SAB Series to make it consistent with recent FASB pronouncements, namely, SFAS No. 141 (revised 2007), Business Combinations, and SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements. Adoption did not have a significant effect on our earnings or financial position.

In the third quarter of 2009, we adopted the following new accounting pronouncements:

SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (Codified within ASC 105, Generally Accepted Accounting Principles)  This Statement establishes the FASB
Accounting Standards Codification as the single source of authoritative accounting principles to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Adoption did not have an impact on our earnings or financial position but did revise our disclosures regarding accounting guidance references.

Accounting Standards Update (ASU) 2009-05, Measuring Liabilities at Fair Value  This ASU amends ASC 820, Fair Value
Measurements and Disclosures, to provide additional guidance on how to measure the fair value of a liability. Adoption did not have a significant effect on our earnings or financial position.

In addition, the following pending pronouncements have not yet been adopted, and we are currently evaluating the effect, if any, on our
earnings or financial position:

SFAS No. 166, Accounting for Transfers of Financial Assets  An amendment of FASB
Statement No. 140 (Codified under ASC 860, Transfers and Servicing)  This standard removes the concept of a qualifying special-purpose entity from FIN 46(R) and requires additional disclosures and is effective first quarter 2010.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



SFAS No. 167 (Codified under ASC810, Consolidation)Amendments to FASB
Interpretation No. 46(R), This standard amends certain requirements of FIN 46(R) to improve financial reporting related to consolidation of and disclosures about variable interest entities and is effective first quarter 2010.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the
requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is
based on vendor-specific objective evidence (VSOE) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue
arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.

NOTE 3: OPERATIONS AND LIQUIDITY

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

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

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 year ending December 31, 2009 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,,549,895 and 52,040,467 have been omitted from the calculation of dilutive EPS for the quarters ended
December 31, 2009 and December 31, 2008, respectively. Provided below is reconciliation between numerators and denominators of the basic and diluted earnings per shares:



|                              |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  
|----------------------------- |  | ----------------- | ---------- | - | ----------------- | ---------- | --------------- | - | ----- | --------------- |  | - | ----------------- | - | --------------- | ---------- |  | - | ----- | -
|For the Year Ended            | 
|                              |  | December 31, 2009 |            |   | December 31, 2008 |           
|                              |  | IncomeNumerator   |            |   | SharesDenominator |            | Per-ShareAmount |   |       | IncomeNumerator |  |   | SharesDenominator |   | Per-ShareAmount |           
|                              |  |                   |            |   |                   |           
|Basic EPS                     |  | $                 | (8,275,481 | ) |                   | 81,229,605 |                 | $ | (0.10 | )               |  | $ | (10,878,521       | ) |                 | 71,789,073 |  | $ | (0.15 | )
|                              |  |                   |            |   |                   |           
|Effect of Dilutive Securities |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  
|                              |  |                   |            |   |                   |           
|None.                         |  |                   | -0-        |   |                   | -0-        |                 |   | -0-   |                 |  |   | -0-               |   |                 | -0-        |  |   | -0-   |  
|                              |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  
|                              |  |                   |            |   |                   |           
|Diluted EPS                   |  | $                 | (8,275,481 | ) |                   | 81,229,605 |                 | $ | (0.10 | )               |  | $ | (10,878,521       | ) |                 | 71,789,073 |  | $ | (0.15 | )
|                              |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 5: PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:



|                              |  |                   |           |                         |   |           |  |                         |           |                       |   |           |  |        
|----------------------------- |  | ----------------- | --------- | ----------------------- | - | --------- |  | ----------------------- | --------- | --------------------- | - | --------- |  | -------
|                              |  | December 31, 2009 |           | December 31, 2008       |   |          
|                              |  | Cost              |           | AccumulatedDepreciation |   | Cost      |  | AccumulatedDepreciation |           | EstimatedUseful Lives
|Computer and office equipment |  | $                 | 1,309,329 |                         | $ | 719,222   |  | $                       | 1,053,805 |                       | $ | 574,963   |  | 5 years
|Leasehold improvements        |  |                   | 64,110    |                         |   | 37,592    |  |                         | 55,751    |                       |   | 26,698    |  | 5 years
|Computer software             |  |                   | 1,230,989 |                         |   | 642,042   |  |                         | 675,392   |                       |   | 449,123   |  | 3 years
|Office furniture              |  |                   | 102,159   |                         |   | 67,034    |  |                         | 93,342    |                       |   | 58,278    |  | 5 years
|                              |  |                   |           |                         |   |           |  |                         |           |                       |   |           |  |        
|                              |  | $                 | 2,706,587 |                         | $ | 1,465,890 |  | $                       | 1,878,290 |                       | $ | 1,109,062 |  |        
|                              |  |                   |           |                         |   |           |  |                         |           |                       |   |           |  |        

Depreciation expense for the years ended December 31, 2009 and December 31, 2008 was
$356,828 and $204,899 respectively.

NOTE 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:



|                                            |  |                   |           |                   |   |          
|------------------------------------------- |  | ----------------- | --------- | ----------------- | - | ---------
|                                            |  | December 31, 2009 |           | December 31, 2008
|Accounts payable                            |  | $                 | 1,200,674 |                   | $ | 652,124  
|Accrued payroll and related costs           |  |                   | 119,137   |                   |   | 148,748  
|Other accrued expenses                      |  |                   | 11,821    |                   |   | 19,470   
|Accrued interest                            |  |                   | 216,583   |                   |   | 265,358  
|                                            |  |                   |           |                   |   |          
|Total accounts payable and accrued expenses |  | $                 | 1,548,215 |                   | $ | 1,085,700
|                                            |  |                   |           |                   |   |          

NOTE 7: eRESEARCH TECHNOLOGY, INC. ASSET ACQUISITION

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



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Company purchased from eResearch, 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 (Shares) of our $0.001 par value common stock. Under the terms of the Agreement, Seller agreed to a covenant not to compete
under certain circumstances with the Company for a period of two years following the closing. OmniComm and the Seller also entered into a Lock-up and Registration Rights Agreement pursuant to which, among other things, the Shares will be subject to
a complete trading lock-up for twelve months following the closing date (Lock-up Period) and the Company granted registration rights to the Seller pursuant to which the Seller, at any time following the Lock-up Period, may request
OmniComm to file a registration statement to register the Shares within pre-defined periods and circumstances. The Seller also received piggyback registration rights, pursuant to which Seller may require OmniComm to register all or any
part of the Shares then held by Seller when the Company files registration statements for purposes of effecting a public offering of the Companys securities under certain circumstances.

The purchase of the eResearch EDC Assets required us to determine whether the group of assets constituted a business, and accordingly,
required accounting under Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS 141) (Codified within ASC 805, Business Combinations)or whether the group of assets did not constitute a business
and, accordingly, required accounting under other standards, including Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets (SFAS 142) (Codified within ASC 350, Intangibles  Goodwill and
Other).This determination is required to be made by reference (by analogy) to guidance in EITF No. 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or a Business (EITF
98-3), which was superseded by SFAS 141R). It should be noted that the determination of what constitutes a business for reporting purposes under Rules and Regulations of the Securities and Exchange Commission differs from the guidance in EITF
98-3.

We accounted for the acquisition of the eResearch EDC Assets as an acquisition of productive assets and not as a
business. In applying the guidance of EITF 98-3, a business is a self sustaining, integrated set of activities and assets conducted and managed for the purpose of providing a return to investors and, further, must consist of inputs, processes
applied to those inputs, and resulting outputs that are used to generate revenues. Based upon the guidance of EITF 98-3, the eResearch EDC Assets were not self-sustaining since they required significant administrative, technological and operational
input, guidance and assistance from the corporate infrastructure that remained with eResearch subsequent to the purchase. The eResearch EDC Assets when evaluated on a stand-alone basis while containing many of the components of a business lacked a
significant number of the components required to be classified a business and would without the significant contribution of the infrastructure components provided by eResearch on a pre-purchase basis and by the Company on a post-purchase basis which
include sales and marketing support would first likely preclude it from being considered a business under the guidance of EITF 98-3 and second would have difficulty achieving commercial viability without a significant investment of capital,
infrastructure and personnel.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Notwithstanding our conclusion that the eResearch EDC Assets did not constitute a
business, SFAS 142 provides that intangible assets acquired as a group are initially recognized at fair value applying the measurement principles for exchange transactions provided in SFAS 141.5-7. Those measurement principles provide that, when
consideration is not in the form of cash, measurement is based upon the fair value of the consideration given or the fair value of the assets acquired, whichever is more clearly and closely evident and, thus more reliably measureable. We have
concluded that the value of the consideration given, represented by our common stock, is more clearly evident and reliable for this purpose because (i) the exchange resulted from exhaustive negotiations with eResearch, (ii) fair value
measurement of our common stock is based upon market indicators such as the trading price of our stock on the Over the Counter Market (OTC Bulletin Board) and assumptions derived for active markets, and (iii) while ultimately
reasonable, our fair value measurements of the significant tangible and intangible asset relies heavily on subjective estimates and prospective financial information. The following table reflects the components of the consideration paid to effect
the acquisition:



|                                                                         |  |        |          
|------------------------------------------------------------------------ |  | ------ | ---------
|Financial Instrument or Cost:                                            |  | Amount
|Common stock, par value $0.001 per share8,100,000 shares of common stock |  | $      | 1,701,000
|Direct costs                                                             |  | $      | 25,000   
|                                                                         |  |        |          
|Total                                                                    |  | $      | 1,726,000
|                                                                         |  |        |          

We have evaluated the substance of the exchange for
purposes of identifying all assets acquired. The recognition of goodwill is not contemplated in an exchange that is not a business or accounted for as a business combination under SFAS 141. The following table reflects the acquisition date fair
values and the final allocation of the consideration to the assets acquired. The allocation was performed in accordance with SFAS 142, which provides that an excess in consideration over the fair values of the assets acquired is allocated to the
assets subject to depreciation and amortization, based upon their relative fair values, and not to those assets with indefinite lives. A difference in the recognized basis in the value of the consideration between book and income tax gives rise to
the deferred income taxes. The allocation of consideration in this manner contemplates an immediate impairment analysis under Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS 144) (Codified within ASC 360, Property, Plant, and Equipment). Our analysis did not result in impairment, but we are required to continue to perform this analysis as provided in our impairments policy (see Note 2).



|                                        |  |            |           |            |   |          
|--------------------------------------- |  | ---------- | --------- | ---------- | - | ---------
|Asset or Account                        |  | Fair Value |           | Allocation
|Cash                                    |  | $          | 1,150,000 |            | $ | 1,150,000
|Prepaid expenses                        |  |            | 44,707    |            |   | 44,707   
|Computers, equipment and other property |  |            | 36,006    |            |   | 36,006   
|Intangible assets:                      |  |            |           |            |   |          
|Software code                           |  |            | 350,000   |            |   | 324,964  
|Customer list                           |  |            | 1,500,000 |            |   | 1,392,701
|                                        |  |            |           |            |   |          
|Total                                   |  | $          | 3,080,713 |            | $ | 2,948,378
|                                        |  |            |           |            |   |          

See Note 12 for fair value measurement

In connection with the above allocation, we evaluated the presence of in-process research and development that may require
recognition (and immediate write-off). We concluded that in-process research and development was de minimus since the eResearch EDC Assets which include software applications have been in commercialization since 1996. The application is largely
mature and stable and, in fact, no substantive effort and/or costs were found in the records of eResearch. Research and development, if any is incurred, will be expensed as it is incurred.

As previously discussed, the determination of what constitutes a business for reporting purposes under the Rules and Regulations of the
Securities and Exchange Commission differs from the guidance in EITF 98-3. Under standards of the Securities and Exchange Commission, we have concluded that our acquisition of the eResearch EDC Assets is not required to be reported as a business.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8: LOGOS TECHNOLOGIES, LTD. ASSET ACQUISITION

On August 3, 2009, we acquired certain tangible and intangible electronic data capture (EDC) assets, formerly owned by Logos
Technologies, Ltd. (Logos Ltd) (Logos EDC Assets), pursuant to a Sale Agreement related to the Administration process ( Similar to a U.S. based bankruptcy proceeding) in the United Kingdom. Our purpose in acquiring these
assets, which included employment rights to the research and development personnel of Logos Ltd, is to increase our presence in the EDC industry through the Logos Ltd 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 will allow us to increase our revenues and to leverage our existing administrative and technical corporate infrastructure. We believe
the Phase I segment of the clinical trial industry has been under-serviced with regard to EDC and eClinical software applications and services and that the Logos EDC Assets will allow us to successfully penetrate this market segment. We have
rebranded the acquired software and services under the TrialOne brand name.

The Company purchased from Logos Ltd (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.
The Company 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 approximates $152,628.

The purchase of the Logos EDC Assets required us to determine whether the group of assets constituted a business, and accordingly, required
accounting under Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS 141) (Codified within ASC 805, Business Combinations) or whether the group of assets did not constitute a business and,
accordingly, required accounting under other standards, including Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets (SFAS 142) (Codified within ASC 350, Intangibles  Goodwill and Other)
This determination is required to be made by reference (by analogy) to guidance in EITF No. 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or a Business (EITF 98-3),
which was superseded by SFAS 141R). It should be noted that the determination of what constitutes a business for reporting purposes under Rules and Regulations of the Securities and Exchange Commission differs from the guidance in EITF 98-3.

We accounted for the acquisition of the Logos EDC Assets as an acquisition of productive assets and not as a business. In
applying the guidance of EITF 98-3, a business is a self sustaining, integrated set of activities and assets conducted and managed for the purpose of providing a return to investors and, further, must consist of inputs, processes applied to those
inputs, and resulting outputs that are used to generate revenues. Based upon the guidance of EITF 98-3, the Logos EDC Assets were not self-sustaining since they required significant administrative, technological and operational input, guidance and
assistance from the corporate infrastructure which had originally been by Logos Holdings, Ltd. on a pre-Administration basis. Subsequent to the Administration process the firm was essentially left with three full time employees and the
non-commercialized Intellectual Property associated with the Logos EDC Assets. The Logos EDC Assets when evaluated on a stand-alone basis while containing a portion of the components of a business lacked a significant number of the components
required to be classified a business and would without the significant contribution of the infrastructure components provided by Logos Ltd. on a pre-purchase basis and by the Company on a post-purchase basis which include sales and marketing support
would first likely preclude it from being considered a business under the guidance of EITF 98-3 and second would have difficulty achieving commercial viability without a significant investment of capital, infrastructure and personnel.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Notwithstanding our conclusion that the Logos EDC Assets did not constitute a business,
SFAS 142 provides that intangible assets acquired as a group are initially recognized at fair value applying the measurement principles for exchange transactions provided in SFAS 141.5-7. Those measurement principles provide that, when consideration
is in the form of cash, the measurement can, given an authentic arms-length transaction, be based upon amount of cash consideration given or the fair value of the assets acquired, whichever is more clearly and closely evident and, thus more reliably
measureable. We have concluded that the value of the consideration given representing cash, is more clearly evident and reliable for this purpose because (i) the exchange resulted from exhaustive negotiations with the Administrators of Logos
Ltd., and (ii) while ultimately reasonable, our fair value measurements of the significant tangible and intangible asset relies heavily on subjective estimates and prospective financial information. The following table reflects the components
of the consideration paid to effect the acquisition:



|                              |  |        |        
|----------------------------- |  | ------ | -------
|Financial Instrument or Cost: |  | Amount
|                              | 
|Cash                          |  | $      | 152,628
|Direct costs                  |  | $      | 23,441 
|                              |  |        |        
|Total                         |  | $      | 176,069
|                              |  |        |        

We have evaluated the substance of the exchange for
purposes of identifying all assets acquired. The recognition of goodwill is not contemplated in an exchange that is not a business or accounted for as a business combination under SFAS 141. The following table reflects the acquisition date fair
values and the final allocation of the consideration to the assets acquired. The allocation was performed in accordance with SFAS 142, which provides that an excess in consideration over the fair values of the assets acquired is allocated to the
assets subject to depreciation and amortization, based upon their relative fair values, and not to those assets with indefinite lives. A difference in the recognized basis in the value of the consideration between book and income tax gives rise to
the deferred income taxes. The allocation of consideration in this manner contemplates an immediate impairment analysis under SFAS 144. Our analysis did not result in impairment, but we are required to continue to perform this analysis as provided
in our impairments policy (see Note 2).



|                                        |  |            |           |            |   |        
|--------------------------------------- |  | ---------- | --------- | ---------- | - | -------
|Asset or Account                        |  | Fair Value |           | Allocation
|Computers, equipment and other property |  | $          | 35,000    |            | $ | 35,000 
|Intangible assets:                      |  |            |           |            |   |        
|Software code                           |  |            | 1,200,000 |            |   | 117,628
|                                        |  |            |           |            |   |        
|Total                                   |  | $          | 1,235,000 |            | $ | 152,628
|                                        |  |            |           |            |   |        

See Note 12 for fair value measurement

In connection with the above allocation, we evaluated the presence of in-process research and development that may require
recognition (and immediate write-off). We concluded that in-process research and development was de minimus since the Logos EDC Assets which include software applications while not currently in extensive commercialization would have required far
greater capital to acquire in a non-Administration setting, would require significantly more than the allocated fair value to replicate and that we anticipate more widely commercializing the acquired Logos EDC software beginning in January 2010.
Research and development, if any is incurred, will be expensed as it is incurred.

As previously discussed, the determination
of what constitutes a business for reporting purposes under the Rules and Regulations of the Securities and Exchange Commission differs from the guidance in EITF 98-3. Under standards of the Securities and Exchange Commission, we have concluded that
our acquisition of the eResearch EDC Assets is not required to be reported as a business.

NOTE 9: SHORT TERM OBLIGATIONS

The following information summarizes the Companys short-term obligations for the years ended December 31, 2009
and December 31, 2008, respectively.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                    |  |                     |         |   |                   |   |           |  
|--------------------------------------------------- |  | ------------------- | ------- | - | ----------------- | - | --------- | -
|                                                    |  | For the years ended |        
|                                                    |  | December 31, 2009   |         |   | December 31, 2008 |  
|Weighted average interest rate                      |  |                     | 10.12   | % |                   |   | 10.44     | %
|Weighted average short-term borrowings              |  | $                   | 267,467 |   |                   | $ | 1,911,185 |  
|Short-term debt discount amortization               |  | $                   | 378,613 |   |                   | $ | 2,497,800 |  
|Interest expense on short-term debt                 |  | $                   | 27,298  |   |                   | $ | 188,647   |  
|Debt acquisition costs amortized in short-term debt |  | $                   | -0-     |   |                   | $ | 261,365   |  



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 10: NOTES PAYABLE

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



|                |  |          |  |              |   |  |        |         |           |   |          |  |   |        
|--------------- |  | -------- |  | ------------ | - |  | ------ | ------- | --------- | - | -------- |  | - | -------
|OriginationDate |  | DueDate  |  | InterestRate |   |  | Amount |         | ShortTerm |   | LongTerm
|12/31/08        |  | 01/31/11 |  | 9.00         | % |  | $      | 137,500 |           | $ | -0-      |  | $ | 137,500
|01/01/09        |  | 10/01/10 |  | 9.00         | % |  |        | 51,800  |           |   | 51,800   |  |   | -0-    
|01/01/09        |  | 10/01/10 |  | 9.00         | % |  |        | 60,000  |           |   | 60,000   |  |   | -0-    
|                |  |          |  |              |   |  |        |         |           |   |          |  |   |        
|                |  |          |  |              |  
|                |  |          |  |              |   |  | $      | 249,300 |           | $ | 111,800  |  | $ | 137,500
|                |  |          |  |              |   |  |        |         |           |   |          |  |   |        

NOTE 11: CONVERTIBLE DEBT

During the first quarter of 1999, the Company issued 10% Convertible Notes payable in the amount of $862,500 pursuant to a Confidential
Private Placement Memorandum. There were costs of $119,625 associated with this offering. The net proceeds to the Company were $742,875. The notes bear interest at ten percent annually, payable semi-annually. The notes are convertible after
maturity, which was June 30, 2004, into shares of common stock of the Company at $1.25 per share. As of December 31, 2009, approximately $787,500 of the Convertible Notes had been repaid in cash or converted into 1,495,179 shares of common
stock of the Company leaving an outstanding principal balance of $75,000.

As of December 31, 2009, the Company is in
default on interest payments owed totaling $79,728 on its 10% Convertible Notes. The terms of the notes provide a payment grace period of thirty days in which to make required semi-annual interest payments. The Company has been in default since
January 30, 2002. At the option of the note holders the full amount of the convertible notes could be declared in default. For the year ended December 31, 2009, we incurred and recorded $7,520 in interest expense on the 10% Convertible
Notes.

SECURED CONVERTIBLE DEBENTURES

February 2008 Transaction

On February 29, 2008, we sold an aggregate of $2,325,000 principal amount 10% Secured Convertible Debentures (the Debentures) and common stock purchase warrants (the Warrants)
to purchase an aggregate of 2,930,675 shares of our common stock to 12 accredited investors. After paying certain fees and expenses of $181,280 in the aggregate, we received net proceeds of $2,156,220. We recorded debt acquisition costs of $261,365.
We amortized the debt acquisition costs over the six month maturity of the Debentures. Emerging Growth Equities, Ltd. (EGE), a broker dealer and member of FINRA acted as placement agent in the offering and as compensation therefore
received a commission of $143,750. EGE also received a warrant to purchase at $0.75 per share 222,458 shares of our common stock, an estimated fair value of $80,085 was calculated for the warrants granted to EGE using the Binomial option pricing
model.

The Debentures, which bore interest at 10% per annum, were originally due 6 months from their issuance date or on
August 29, 2008. The Debentures were convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.595 per share (the Conversion Price), subject to adjustment as provided in
the transaction documents (the Conversion Feature). Interest was convertible as provided in the Debentures. We were not permitted to prepay the Debentures without the prior written consent of the holders. 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.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Warrants, which have a cashless exercise provision, were exercisable until
approximately four years after the closing at an exercise price of $0.75 per share before they were adjusted as part of the August 29, 2008 Extension Agreement that is more completely described in the disclosure below. The number of shares
covered by the Warrants and the Warrant exercise price are subject to adjustment as provided in the transaction documents. The Warrants carry an anti-dilution provision that is tied to financings the Company conducts at any time prior to the
exercise of the Warrants. That anti-dilution feature has caused the Warrants to be treated as a derivative liability and accounted for in accordance with FAS 133 (codified in ASC 815Derivatives and Hedging). The Warrants were valued using a
Binomial option pricing model. A value of $1,055,043 was calculated and allocated to the Warrants and recorded as a liability to the issuance of the Debentures. The Warrant liability was amortized over the 6 month exercise period of the Debentures.
In addition, a fair value calculation is undertaken periodically on the Warrant liability and accordingly the Warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in
operations as an unrealized gain or loss on derivative liabilities.

In September 2009, the Company completed an offering of
Secured Convertible Debentures with an exercise price of $0.25 per share. Pursuant to the anti-dilution provisions in the Warrant the Company issued additional Warrants to certain Warrant holders. The Company issued Warrants to purchase an
additional 3,885,882 shares of common stock to eight Warrant holders. Five Warrant holders in this round of financing, the Companys Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and two Directors waived their
anti-dilution protection.

The Debentures carried an anti-dilution provision or Conversion Feature that is tied to financings
the Company conducts at any time prior to the satisfaction of the Debentures. In the event the Company issued common stock or any other security that is convertible into the Companys common stock at a price below the Conversion Price of the
Debentures the holders of the Debentures would be entitled to additional shares upon conversion. The additional shares issuable are equal to the ratio of the price of the subsequent financing divided by the Conversion Price. That anti-dilution
feature has caused the Conversion Feature to be treated as a derivative liability and accounted for in accordance with FAS 133 (codified in ASC 815Derivatives and Hedging). The Conversion Feature was valued using a Binomial option pricing
model. A value of $593,950 was calculated and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Debentures. The Conversion Feature liability (discount) was amortized over the six month maturity of
the Debentures. In addition, a fair value calculation was undertaken periodically on the Conversion Feature liability and accordingly the Conversion Feature liability is increased or decreased based on the fair value calculation. The resulting
increase or decrease is reflected in operations as an unrealized gain or loss on derivative liabilities. On the maturity date of August 29, 2008 $398,572 was recorded as unrealized gain and the value of the original conversion feature became
zero. See Note 12 for fair value measurement

On August 29, 2008 the Company repaid $1,000,000 of the Debentures. The
remaining $1,325,000 was extended pursuant to an Extension Agreement (the Extension). The maturity date was changed to December 1, 2008. The Debentures continued to bear interest at a rate of 10% per annum. In accordance with the
Extension the conversion price of the Debentures was changed from $0.595 per share to $0.50 per share. Additionally, the investors who agreed to the Extension were granted one warrant (the Extension Warrants) for each share of stock
issuable upon conversion of the Debentures at the $0.50 per share conversion price stipulated in the Extension. The exercise price of the Warrants was changed from $0.75 per share to $0.60 per share pursuant to the Extension. The change of the
exercise price of the Warrants increased the number of shares issuable upon exercise of the Warrants from 2,930,672 to 3,563,130. The amended exercise price of the Extension Warrants is $0.60 per share. On December 1, 2008 the Company repaid
$500,000 of the Debentures. Four investors agreed to convert the principal amounts due under the Debentures into a round of financing that was consummated on December 16, 2008. The principal amount converted by these four investors was
$525,000. The remaining six investors agreed to extend the maturity date of their Debentures to January 30, 2009. The principal amount extended to January 30, 2009 was $300,000. The Debentures bore interest at a rate of 12% per annum
until their January 30, 2009 maturity date. In exchange for granting the Company the extension to January 30, 2009 the group of six investors were granted a total of 50,000 four-year warrants at an exercise price of $0.60 per share with an
expiration date of December 1, 2012. The security interest we granted the holders in all of our assets to secure our performance of our obligations under the Debentures remained in effect until January 30, 2009 but was deemed satisfied
upon payment of the principal and interest on that date. Accordingly, if we had defaulted under the repayment provisions of these obligations, the holders could have sought to foreclose on all our assets in an effort to seek repayment under the
obligations.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Extension Warrants were valued using a Binomial option pricing model. A value of
$673,100 was calculated and allocated to the Extension Warrants and recorded as a liability associated with the issuance of the Debentures. The Warrant liability was amortized over the remaining three month maturity period of the Debentures. In
addition, a fair value calculation is undertaken periodically on the Warrant liability and accordingly the Warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations
as an unrealized gain or loss on derivative liabilities.

The Conversion Feature pursuant to the Extension was valued using a
Binomial option pricing model. A value of $172,250 was calculated and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Debentures. The Conversion Feature liability (discount) was amortized over the
remaining three month maturity of the Debentures. In addition, a fair value calculation was undertaken periodically on the Conversion Feature liability and accordingly the Conversion Feature liability is increased or decreased based on the fair
value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on derivative liabilities. See Note 12 for fair value measurement

In September 2009, the Company completed a Financing of Secured Convertible Debt with an exercise price of $0.25 per share. In accordance
with the Anti-Dilution Provisions of the Warrants, the conversion price of the Warrants was lowered to $0.25 per share. The reduction in exercise price caused the Company to issue 2,240,000 warrants to purchase common stock to seven non-affiliate
investors.

September 2009 Transaction

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 (the Warrants) to purchase an aggregate of 5,600,000 shares of our common stock to three accredited investors, including our Chief Executive Officer. There were no fees or
expenses incurred thus we received net proceeds of $1,400,000.

The Debentures, which bear interest at 12% per annum with
interest payable monthly, are due 18 months from their issuance date, or on March 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share
(the Conversion Price), subject to adjustment as provided in the transaction documents (the Conversion Feature). Interest is convertible as provided in the Debentures. We are permitted to prepay the Debentures without the
prior written consent of the holders. 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.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Warrants, which have a cashless exercise provision, are exercisable until
approximately four years after the closing at an exercise price of $0.25 per share. The number of shares covered by the Warrants and the Warrant exercise price are subject to adjustment as provided in the transaction documents. The Warrants carry an
anti-dilution provision that is tied to financings the Company conducts at any time prior to the exercise of the Warrants. That anti-dilution feature has caused the Warrants to be treated as a derivative liability and accounted for in accordance
with FAS 133 (codified in ASC 815Derivatives and Hedging). The Warrants were valued using a Binomial option pricing model. A value of $358,400 was calculated and allocated to the Warrants and recorded as a liability to the issuance of the
Debentures. The Warrant liability will be amortized over the 18 month exercise period of the Debentures. In addition, a fair value calculation is undertaken periodically on the Warrant liability and accordingly the Warrant liability is increased or
decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on derivative liabilities.

The Debentures carry an anti-dilution provision or Conversion Feature that is tied to financings the Company conducts at any time prior to the satisfaction of the Debentures. In the event the Company
issues common stock or any other security that is convertible into the Companys common stock at a price below the Conversion Price of the Debentures the holders of the Debentures would be entitled to additional shares upon conversion. The
additional shares issuable are equal to the ratio of the price of the subsequent financing divided by the Conversion Price. That anti-dilution feature has caused the Conversion Feature to be treated as a derivative liability and accounted for in
accordance with FAS 133. The Conversion Feature was valued using a Binomial option pricing model. A value of $168,000 was calculated and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Debentures.
The Conversion Feature liability (discount) will be amortized over the 18 month maturity of the Debentures. In addition, a fair value calculation is undertaken periodically on the Conversion Feature liability and accordingly the Conversion Feature
liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on derivative liabilities. See Note 12 for fair value measurement

CONVERTIBLE DEBENTURES

June 2008 Transaction

On June 10, 2008, we sold, $210,000
principal amount in a Convertible Note (the Convertible Note) and common stock purchase warrants (the Convertible Note Warrants) to purchase an aggregate of 264,706 shares of our common stock to our Chief Executive Officer.
We received net proceeds of $210,000.

The Convertible Note, which carried an interest of 10% per annum, was due on
June 10, 2009. The Convertible Note was convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.595 per share (the Conversion Price), subject to adjustment as provided
in the transaction documents (the Conversion Feature). Interest was convertible as provided in the Convertible Note. On August 29, 2008, the noteholder agreed to convert the Convertible Note (the Conversion) into a
private placement of Convertible Debentures that expire on August 29, 2010. The noteholder agreed to waive anti-dilution rights included as a term of the Debentures and to extend the maturity date of his Convertible Debenture to August 29,
2013 as part of the terms of a financing that was completed in September 2009. Accordingly, the exercise price of the Warrant that was issued in this transaction was not adjusted.

The Warrants, which have a cashless exercise provision, are exercisable until approximately four years after the closing at an exercise price
of $0.75 per share before they were adjusted to $0.60 per share on August 29, 2008. The number of shares covered by the Warrants and the Warrant exercise price are subject to adjustment as provided in the transaction documents. The Warrants
carry an anti-dilution provision that is tied to financings the Company conducts at any time prior to the exercise of the Warrants. That anti-dilution feature has caused the Warrants to be treated as a derivative liability and accounted for in
accordance with FAS 133. The Warrants were valued using a Binomial option pricing model. A value of $91,059 was calculated and allocated to the Warrants and recorded as a liability to the issuance of the Debentures. The Warrant liability (discount)
was originally being amortized over the 12 month exercise period of the Debentures. When the Convertible Note was converted to another Convertible Note on August 29, 2008, a loss on extinguishment of debt was recognized. In addition, a fair
value calculation is undertaken periodically on the Warrant liability and accordingly the Warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized
gain or loss on derivative liabilities.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Convertible Note carried an anti-dilution provision or Conversion Feature that is
tied to financings the Company conducts at any time prior to the satisfaction of the Convertible Note. In the event the Company issued common stock or any other security that is convertible into the Companys common stock at a price below the
Conversion Price of the Convertible Note, the holder of the Convertible Note would be entitled to additional shares upon conversion. The additional shares issuable are equal to the ratio of the price of the subsequent financing divided by the
Conversion Price. That anti-dilution feature has caused the Conversion Feature to be treated as a derivative liability and accounted for in accordance with FAS 133. The Conversion Feature was valued using a Binomial option pricing model. A value of
$71,294 was calculated and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Convertible Note. The Conversion Feature liability (discount) was originally being amortized over the 12 month maturity
of the Convertible Note. When the Convertible Note was converted into a Convertible Debenture on August 29, 2008, a loss on extinguishment of debt was recognized. See Note 12 for fair value measurement.

August 2008 Transaction

On August 29, 2008, we sold, $2,270,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants (the Convertible Note Warrants) to
purchase an aggregate of 4,540,000 shares of our common stock to four accredited investors including our Chief Executive Officer and one of our Directors (the Affiliate Investors). We received net proceeds of $2,270,000.

The Convertible Notes, which bear interest at 10% per annum with interest payable every three months, are due on August 29, 2010.
On September 30, 2009 two Affiliates of the Company extended $1,920,000 of Convertible Notes until August 29, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. The Convertible Notes are convertible
at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share (the Conversion Price), subject to adjustment as provided in the transaction documents (the Conversion
Feature).

In accordance with the terms of the Convertible Notes the Conversion Price of the Convertible Notes was
reduced from $0.50 to $0.25 per share based on the Conversion Price of a round of Convertible Debentures that were issued in September 2009. The Affiliate Investors waived their anti-dilution rights on $1,920,000 of Convertible Notes. Based on the
reduced Conversion Price for the Convertible Notes, and in accordance with the terms of the Convertible Notes the remaining two investors were granted the rights to acquire an additional 700,000 shares upon conversion of the Convertible Notes. We
are not permitted to prepay the Convertible Notes without the prior written consent of the holders.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Warrants, which have a cashless exercise provision, are exercisable until
approximately four years after the closing at an exercise price of $0.60 per share. The number of shares covered by the Warrants and the Warrant exercise price are subject to adjustment as provided in the transaction documents. The Warrants carry an
anti-dilution provision that is tied to financings the Company conducts at any time prior to the exercise of the Warrants. In September 2009, the Company completed a Financing of Secured Convertible Debt with an exercise price of $0.25 per share. In
accordance with Anti-Dilution Provisions of the Warrants, the exercise price of the Warrants was lowered to $0.25 per share. The reduction in exercise price caused the Company to issue 980,000 warrants to purchase common stock to two non-affiliate
investors. That anti-dilution feature has caused the Warrants to be treated as a derivative liability and accounted for in accordance with FAS 133. The Warrants were valued using a Binomial option pricing model. A value of $1,153,160 was calculated
and allocated to the Warrants and recorded as a liability to the issuance of the Convertible Notes. The Warrant liability will be amortized over the 24 month maturity of the Convertible Notes. In addition, a fair value calculation is undertaken
periodically on the Warrant liability and accordingly the Warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on derivative
liabilities.

The Convertible Note carries an anti-dilution provision or Conversion Feature that is tied to financings the
Company conducts at any time prior to the satisfaction of the Convertible Note. In the event the Company issues common stock or any other security that is convertible into the Companys common stock at a price below the Conversion Price of the
Convertible Note the holder of the Convertible Note would be entitled to additional shares upon conversion. The additional shares issuable are equal to the ratio of the price of the subsequent financing divided by the Conversion Price. That
anti-dilution feature has caused the Conversion Feature to be treated as a derivative liability and accounted for in accordance with FAS 133. The Conversion Feature was valued using a Binomial option pricing model. A value of $898,920 was calculated
and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Convertible Note. The Conversion Feature liability (discount) will be amortized over the 24 month maturity of the Convertible Note. In addition,
a fair value calculation is undertaken periodically on the Conversion Feature liability and accordingly the Conversion Feature liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected
in operations as an unrealized gain or loss on derivative liabilities. As of December 31, 2009 the Company has $82,156 in accrued interest for this round of financing. See Notes 12 for fair value measurement.

December 2008 Transaction

On December 16, 2008, we sold, $5,075,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants (the Convertible Note Warrants) to
purchase an aggregate of 10,150,000 shares of our common stock to eleven accredited investors including our Chief Executive Officer, Chief Operation Officer, Chief Technology Officer, Chief Financial Officer and four of our Directors (the
Affiliate Investors). We received net proceeds of $5,075,000.

The Convertible Notes, which bear interest at
12% per annum with interest payable every three months, are due on December 16, 2010. On September 30, 2009 Affiliates of the Company extended $4,980,000 of Convertible Notes until December 16, 2013 in accordance with the terms
of a Secured Convertible Debenture issued on that date The Convertible Notes are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share (the Conversion Price),
subject to adjustment as provided in the transaction documents (the Conversion Feature). In accordance with the terms of the Convertible Notes the Conversion Price of the Convertible Notes was reduced from $0.50 to $0.25 per share based
on the Conversion Price of a round of Convertible Debentures that were issued in September 2009. The Affiliate Investors waived their anti-dilution rights on $4,980,000 of Convertible Notes. Based on the reduced Conversion Price for the Convertible
Notes, and in accordance with the terms of the Convertible Notes the remaining three investors were granted the rights to acquire an additional 190,000 shares upon Conversion of the Convertible Notes. Interest is convertible as provided in the
Convertible Notes. We are not permitted to prepay the Convertible Notes without the prior written consent of the holders.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Warrants, which have a cashless exercise provision, are exercisable until
approximately four years after the closing at an exercise price of $0.60 per share. The number of shares covered by the Warrants and the Warrant exercise price are subject to adjustment as provided in the transaction documents. The Warrants carry an
anti-dilution provision that is tied to financings the Company conducts at any time prior to the exercise of the Warrants. In September 2009, the Company completed a Financing of Secured Convertible Debt with an exercise price of $0.25 per share. In
accordance with Anti-Dilution Provisions of the Warrants, the exercise price of the Warrants was lowered to $0.25 per share. The reduction in exercise price caused the Company to issue 266,000 warrants to purchase common stock to three non-affiliate
investors. That anti-dilution feature has caused the Warrants to be treated as a derivative liability and accounted for in accordance with FAS 133. The Warrants were valued using a Binomial option pricing model. A value of $852,600 was calculated
and allocated to the Warrants and recorded as a liability to the issuance of the Convertible Notes. The Warrant liability will be amortized over the 24 month maturity of the Convertible Notes. In addition, a fair value calculation is undertaken
periodically on the Warrant liability and accordingly the Warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on derivative
liabilities.

The Convertible Note carries an anti-dilution provision or Conversion Feature that is tied to financings the
Company conducts at any time prior to the satisfaction of the Convertible Note. In the event the Company issues common stock or any other security that is convertible into the Companys common stock at a price below the Conversion Price of the
Convertible Note the holder of the Convertible Note would be entitled to additional shares upon conversion. The additional shares issuable are equal to the ratio of the price of the subsequent financing divided by the Conversion Price. That
anti-dilution feature has caused the Conversion Feature to be treated as a derivative liability and accounted for in accordance with FAS 133. The Conversion Feature was valued using a Binomial option pricing model. A value of $517,650 was calculated
and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Convertible Note. The Conversion Feature liability (discount) will be amortized over the 24 month maturity of the Convertible Note. In addition,
a fair value calculation is undertaken periodically on the Conversion Feature liability and accordingly the Conversion Feature liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected
in operations as an unrealized gain or loss on derivative liabilities. See Note 12 for fair value measurement

December
2009 Transaction

On December 31, 2009, we sold, $1,490,000 principal amount Convertible Debentures (the
Convertible Debentures) and common stock purchase warrants (the Convertible Debentures Warrants) to purchase an aggregate of 5,960,000 shares of our common stock to three accredited investors including our Chief Executive
Officer. We received net proceeds of $1,490,000.

The Convertible Notes, which bear interest at 12% per annum with
interest payable monthly, are due on June 30, 2011. The Convertible Notes are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share (the Conversion
Price), subject to adjustment as provided in the transaction documents (the Conversion Feature). Interest is convertible as provided in the Convertible Notes. We are permitted to prepay the Convertible Notes without the prior
written consent of the holders.

The Warrants, which have a cashless exercise provision, are exercisable until approximately
four years after the closing at an exercise price of $0.25 per share. The number of shares covered by the Warrants and the Warrant exercise price are subject to adjustment as provided in the transaction documents. The Warrants carry an anti-dilution
provision that is tied to financings the Company conducts at any time prior to the exercise of the Warrants. That anti-dilution feature has caused the Warrants to be treated as a derivative liability and accounted for in accordance with FAS 133. The
Warrants were valued using a Binomial option pricing model. A value of $596,000 was calculated and allocated to the Warrants and recorded as a liability to the issuance of the Convertible Notes. The Warrant liability will be amortized over the 18
month maturity of the Convertible Notes. In addition, a fair value calculation is undertaken periodically on the Warrant liability and accordingly the Warrant liability is increased or decreased based on the fair value calculation. The resulting
increase or decrease is reflected in operations as an unrealized gain or loss on derivative liabilities.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Convertible Note carries an anti-dilution provision or Conversion Feature that is
tied to financings the Company conducts at any time prior to the satisfaction of the Convertible Note. In the event the Company issues common stock or any other security that is convertible into the Companys common stock at a price below the
Conversion Price of the Convertible Note the holder of the Convertible Note would be entitled to additional shares upon conversion. The additional shares issuable are equal to the ratio of the price of the subsequent financing divided by the
Conversion Price. That anti-dilution feature has caused the Conversion Feature to be treated as a derivative liability and accounted for in accordance with FAS 133. The Conversion Feature was valued using a Binomial option pricing model. A value of
$339,720 was calculated and allocated to the Conversion Feature and recorded as a liability (or discount) to the issuance of the Convertible Note. The Conversion Feature liability (discount) will be amortized over the 18 month maturity of the
Convertible Note. In addition, a fair value calculation is undertaken periodically on the Conversion Feature liability and accordingly the Conversion Feature liability is increased or decreased based on the fair value calculation. The resulting
increase or decrease is reflected in operations as an unrealized gain or loss on derivative liabilities. See Note 12 for fair value measurement.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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



|                 |  |              |   |  |                   |            |                   |   |                        |  |                    |           |  |   |          
|---------------- |  | ------------ | - |  | ----------------- | ---------- | ----------------- | - | ---------------------- |  | ------------------ | --------- |  | - | ---------
|Origination Date |  | InterestRate |   |  | OriginalPrincipal |            | AllocatedDiscount |   | TotalDiscountAmortized |  | Discountat12/31/09
|2/29/2008        |  | 10           | % |  | $                 | 2,325,000  |                   | $ | 1,648,993              |  | $                  | 1,648,993 |  | $ | -0-      
|6/10/2008        |  | 10           | % |  |                   | 210,000    |                   |   | 162,352                |  |                    | 40,588    |  |   | -0-      
|8/29/2008        |  | 10           | % |  |                   | 1,325,000  |                   |   | 845,350                |  |                    | 845,350   |  |   | -0-      
|8/29/2008        |  | 10           | % |  |                   | 2,270,000  |                   |   | 2,052,080              |  |                    | 1,368,053 |  |   | 684,027  
|12/1/2008        |  | 12           | % |  |                   | 300,000    |                   |   | 6,914                  |  |                    | 6,914     |  |   | -0-      
|12/16/2008       |  | 12           | % |  |                   | 5,075,000  |                   |   | 1,370,250              |  |                    | 742,219   |  |   | 628,031  
|9/30/2009        |  | 12           | % |  |                   | 1,400,000  |                   |   | 526,400                |  |                    | 87,733    |  |   | 438,667  
|12/31/2009       |  | 12           | % |  |                   | 1,490,000  |                   |   | 935,720                |  |                    | -0-       |  |   | 935,720  
|                 |  |              |   |  |                   |            |                   |   |                        |  |                    |           |  |   |          
|                 |  | TOTALS       |   |  | $                 | 14,395,000 |                   | $ | 7,548,059              |  | $                  | 4,739,850 |  | $ | 2,686,445
|                 |  |              |   |  |                   |            |                   |   |                        |  |                    |           |  |   |          

The payments required at maturity under the
Companys outstanding convertible debt at December 31, 2009 are as follows:



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

NOTE 12: 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 SFAS No. 157 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.

SFAS No. 157 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. SFAS No. 157 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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 fair value option for any financial assets and liabilities transacted in the years-ended December 31, 2008 and December 31, 2009, respectively.

The Companys financial assets or liabilities subject to SFAS No. 157 as of December 31, 2009 include the conversion feature
and warrant liability associated with convertible debentures issued during fiscal 2008 and 2009 and the value of Intellectual Property associated with software acquired during 2009 as well as a customer list acquired during 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 SFAS No. 133. See Note 11.

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 and non-recurring basis

follows: (1)(2)



|                                                       |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |          
|------------------------------------------------------ |  | ------------------------- | --------- | ------------------------- | - | ----------------------------------------------------------------------- |  | ------------------------------------------- | --- | -------------------------------------- | - | --------- |  | - | ---------
|                                                       |  | CarryingAmount at12/31/08 |           | CarryingAmount at12/31/09 |   | Quoted prices inactive
marketsFor identical assets/liabilities(Level 1) |  | Significant OtherObservable Inputs(Level 2) |     | SignificantUnobservableInputs(Level 3)
|Acquired Assets (3)                                    |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |          
|Software code eResearch Technologies (eRT) transaction |  | $                         | -0-       |                           | $ | 270,803                                                                 |  | $                                           | -0- |                                        | $ | -0-       |  | $ | 350,000  
|                                                       |  |                           |           |                           |  
|Software code Logos Technologies, Ltd. Transaction     |  |                           | -0-       |                           |   | 101,291                                                                 |  |                                             | -0- |                                        |   | -0-       |  |   | 1,200,000
|                                                       |  |                           |           |                           |  
|Customer list (eRT) transaction                        |  |                           | -0-       |                           |   | 1,160,584                                                               |  |                                             | -0- |                                        |   | -0-       |  |   | 1,500,000
|                                                       |  |                           |           |                           |  
|Derivatives: (4)                                       |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |          
|Conversion feature liability                           |  |                           | 1,257,902 |                           |   | 1,945,440                                                               |  |                                             | -0- |                                        |   | 1,945,440 |  |   | -0-      
|Warrant liability                                      |  |                           | 2,637,961 |                           |   | 2,738,193                                                               |  |                                             | -0- |                                        |   | 2,738,193 |  |   | -0-      
|                                                       |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |          
|Total of Derivatives                                   |  | $                         | 3,895,863 |                           | $ | 4,683,633                                                               |  | $                                           | -0- |                                        | $ | 4,683,633 |  | $ | -0-      
|                                                       |  |                           |           |                           |   |                                                                         |  |                                             |     |                                        |   |           |  |   |          



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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

|(2) | The acquired Logos Technologies software code, eResearch software code and customer list are not measured on a recurring basis since their initial fair value has been
deemed to have a finite life and is being amortized periodically. Instead the Company performs an impairment analysis on a quarterly basis in order to determine whether the carrying value of the assets reflects the fair value of the assets in a
market-based transaction.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The fair value of the Acquired Assets was estimated using the Income approach with a discounted cash flow valuation methodology applied.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(4) | The fair value of the Derivative Instruments was estimated using the American Binomial option pricing model with the following assumptions for the period ended
December 31, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                            |  |             |  |                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------- |  | ----------- |  | ---------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Significant Valuation Assumptions of Derivative Instruments |  |             |  | Significant Valuation Assumptions of Acquired Assets
|Risk free interest rate                                     |  | 1.66%       |  |                                                      |  | The Company performs a discounted cash flow (DCF) analysis of the projected revenues and operating cash flows of the Acquired Assets. The DCF analysis compares the
projected value of the Acquired Assets at each quarterly balance sheet date against the DCF value calculated at the respective time of acquisition of the assets. A material reduction in DCF value would be considered an impairment of the Acquired
Assets and would result in a reduction in the carrying value of specific asset with a corresponding charge to earnings.
|Dividend yield                                              |  | 0.00%       |  |                                                      | 
|Expected Volatility                                         |  | 73.7%       |  |                                                      | 
|Expected life (range in years)                              |  |             |  |                                                      | 
|Conversion feature liability                                |  | 0.8 to 4.0  |  |                                                      | 
|Warrant liability                                           |  | 2.16 to 4.0 |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 
|                                                            |  |             |  |                                                      | 



|                                                                                                                                                                                                                |  |                                 |         |                   |   |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | ----------------- | - | ---------
|                                                                                                                                                                                                                |  | For the years endedOther Income
|                                                                                                                                                                                                                |  | December 31, 2009               |         | December 31, 2008
|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 |  | $                               | 673,918 |                   | $ | 2,114,194
|                                                                                                                                                                                                                |  |                                 |         |                   |   |          
|                                                                                                                                                                                                                |  |                                
|Total gains included in earnings                                                                                                                                                                                |  | $                               | 673,918 |                   | $ | 2,114,194
|                                                                                                                                                                                                                |  |                                 |         |                   |   |          

On June 23, 2009, we acquired certain tangible and
intangible EDC assets, formerly owned by eResearch Technology, Inc. as is more fully described in Note 7. As part of our analysis of that transaction and prior to recording the assets and associated liabilities in our financial statements we
performed a fair value analysis of the acquired assets and liabilities. The results of that valuation exercise are presented in Note 7.

On August 3, 2009, we acquired certain tangible and intangible EDC assets, formerly owned by Logos Technologies, Ltd as is more fully described in Note 8. As part of our analysis of that transaction and prior to recording the assets
and associated liabilities in our financial statements we performed a fair value analysis of the acquired assets and liabilities. The results of that valuation exercise are presented in Note 8.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 13: 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 December 31, 2009 are as follows:



|      |  |   |          
|----- |  | - | ---------
|2010  |  | $ | 869,906  
|2011  |  |   | 597,053  
|2012  |  |   | 138,340  
|2013  |  |   | 12,277   
|2014  |  |   | -0-      
|      |  |   |          
|Total |  | $ | 1.617,576
|      |  |   |          

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 $775,329 and $554,475 for the years ended December 31, 2009 and
December 31, 2008, 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:



|          |  |   |          
|--------- |  | - | ---------
|2010      |  | $ | 656,434  
|2011      |  |   | 400,000  
|2012      |  |   | 450,000  
|2013      |  |   | 450,000  
|2014-2017 |  |   | 1,800,000
|          |  |   |          
|Total     |  | $ | 3,756,434
|          |  |   |          

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 beginning in July 2009.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



During the year ended December 31, 2009, the Company recorded a charge to earnings
in the amount of $383,951 which amount represents (1) the amount of additional license expense incurred above the stipulated minimum in the DataSci License Agreement during the nine month period ended December 31, 2009 and (2) the
accretion of the difference between the total stipulated annual minimum royalty payments and the recorded present value accrual of the annual minimum royalty payments

EMPLOYMENT AGREEMENTS

In December 2009, we renewed an employment
agreement with Mr. Cornelis F. Wit to serve as our Chief Executive Officer and President through December 31, 2010. As part of the renewal the employment agreement will renew for successive one-year terms unless the employment
agreement is expressly cancelled by either Mr. Wit or the Company ninety days prior to the end of the term. Mr. Wit receives an annual salary of $306,000 payable in cash and/or stock plus a bonus tied to our operating results. As part of
the agreement incentive options are awardable under the agreement based upon sales and cash flow objectives. In the event that we consummate a transaction with a third party resulting in the sale, merger, consolidation, reorganization or other
business combination involving all or a majority of our business, assets or stock, whether effected in one transaction or a series of transactions due to the initiative of Mr. Wit (whether or not during the term of the agreement), Mr. Wit
will receive a fee equal to 2% of the aggregate consideration. The agreement also provides, among other things, for participation in employee benefits available to employees and executives. Under the terms of the agreement, we may terminate
Mr. Wits employment upon 30 days notice of a material breach and Mr. Wit may terminate the agreement under the same terms and conditions. The employment agreement contains customary non-disclosure provisions, as well as a one year
non-compete clause if Mr. Wit leaves the company voluntarily or a six month non-compete clause following his termination by us.

In December 2009, we renewed our employment agreement with Mr. Randall Smith to serve as our Chief Technology Officer. As part of the renewal the employment agreement will renew for successive one-year terms unless the employment
agreement is expressly cancelled by either Mr. Smith or the Company ninety days prior to the end of the term. Under the terms of the agreement, as compensation for his services, Mr. Smith receives an annual salary of $270,300 to be paid in
the form of cash and/or stock, as agreed upon by the parties, and he is eligible to receive a bonus based upon achieving technology related milestones. The agreement also provides, among other things, for participation in employee benefit plans or
programs applicable to employees and executives. Under the terms of the agreement, we may terminate the employment of Mr. Smith upon 30 days notice of a material breach and Mr. Smith may terminate the agreement under the same terms and
conditions. If Mr. Smith is terminated by us for any reason other than for cause, we must pay him severance benefits equal to six months salary. The employment agreement contains customary non-disclosure provisions, as well as a one year
non-competition restriction following the termination of the agreement. The agreement renews automatically for one-year terms unless expressly cancelled by either Mr. Smith or the Company in writing ninety (90) days prior to termination of
the term.

In December 2009, we renewed our employment agreement with Mr. Ronald Linares to serve as our Chief Financial
Officer. As part of the renewal the employment agreement will renew for successive one-year terms unless the employment agreement is expressly cancelled by either Mr. Linares or the Company ninety days prior to the end of the term. Under the
terms of this agreement, Mr. Linares receives an annual salary of $245,000 to be paid in the form of cash and/or stock, as agreed upon by the parties, and he is eligible to receive additional incentive compensation based upon achieving
financial milestones. The agreement also provides, among other things, for participation in employee benefit plans or programs applicable to employees and executives. Under the terms of the agreement, we may terminate the employment of
Mr. Linares upon 30 days notice of a material breach and Mr. Linares may terminate the agreement under the same terms and conditions. If Mr. Linares is terminated by us for any reason other than for cause, we must pay him severance
benefits equal to twelve months salary. The employment agreement contains customary non-disclosure provisions, as well as a one year non-competition restriction following the termination of the agreement. The agreement renews automatically for
one-year terms unless expressly cancelled by either Mr. Linares or the Company in writing ninety (90) days prior to termination of the term.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



In September 2009, we renewed our employment agreement with Mr. Stephen Johnson to
serve as our Executive Vice President for Sales and Marketing and Chief Operating Officer. As part of the renewal the employment agreement will renew for successive one-year terms unless the employment agreement is expressly cancelled by either
Mr. Johnson or the Company ninety days prior to the end of the term Under the terms of this agreement, Mr. Johnson receives an annual salary of $290,700 subject to annual adjustment for cost of living increases. Mr. Johnson is
eligible for a bonus, payable on an annual basis, equal to 5% of the Companys earnings before interest, taxes, depreciation and amortization (EBITDA). The agreement also provides, among other things, for participation in employee benefit plans
or programs applicable to employees and executives. Under the terms of the agreement, we may terminate the employment of Mr. Johnson upon 30 days notice of a material breach and Mr. Johnson may terminate the agreement under the same terms
and conditions. If Mr. Johnson is terminated by us for any reason other than for cause, we must pay him severance benefits equal to three months salary for every year of service up to a maximum of twelve months salary. The employment agreement
contains customary non-disclosure provisions as well as a one year non-compete clause if Mr. Wit leaves the company voluntarily or a six month non-compete clause following his termination by us.

NOTE 14: RELATED PARTY TRANSACTIONS

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

In June 2008 we issued a $300,000 principal amount Convertible Note to Cornelis Wit, our Chief Executive Officer
and a Director. This note was convertible at the option of the holder into any new securities we issued before the maturity of the Convertible Note on the same terms and conditions of the sale of any new securities. This Convertible Note carried an
interest rate of 10% per annum and was due on December 31, 2010. This note was repaid on July 8, 2008.

In
December 2008, the Company issued a promissory note for $197,500 that included $112,500 in accrued expenses associated with financial services provided by Noesis Capital Corp., the Companys Placement Agent for several equity and debt
transactions since 1999. The amount was borrowed under a promissory note bearing interest at 9% per annum payable with a maturity date of January 31, 2011. Included in the principal amount due under this promissory note is $85,000
that was originally owed under a $185,000 principal amount promissory note with a maturity date of January 1, 2009. The remaining $100,000 in principal amount owed was converted into a Convertible Note dated December 16,
2008. The Company repaid $60,000 in principal on this promissory note during the year ended December 31, 2009. We incurred $13,218 in interest expense on the note payable to Noesis Capital Corp., the Placement Agent for the Company
during the year ended December 31, 2009 and $15,966 for the year ended December 31, 2008.

On February 29, 2008,
we sold an aggregate of $2,325,000 principal amount 10% Secured Convertible Debentures and common stock purchase warrants to purchase an aggregate of 2,930,675 shares of our common stock to 12 accredited investors. As part of the transaction
Cornelis Wit, Chief Executive Officer and Director, Guus van Kesteren, Director, Ronald T. Linares, Chief Financial Officer, and Atlantic Balanced Fund, a fund managed by Mentor Capital of which Fernando Montero, a director of OmniComm, is
president, director and sole shareholder, purchased $150,000, $150,000, $25,000 and $200,000, respectively, principal amount of debentures and received 189,076, 189,076, 31,513 and 252,101 warrants, respectively. Interest expense incurred and
payable to Directors and Officers of the Company in connection with the Secured Convertible Debenture totaled $42,000 through December 31, 2008. The Debentures matured originally on August 29, 2008. On August 29 2008, the
Company repaid $1,000,000 of the Debentures. The remaining $1,325,000 in principal was extended pursuant to an Extension Agreement that included: an extension of the maturity date to December 1, 2008; reduced the conversion price of the
Debenture from $0.595 per share to $0.50 per share; reduced the exercise price of the warrants attached to the Debenture from $0.75 per share to $0.60 per share; and resulted in the issuance of 2,650,000 warrants to the investors agreeing to the
extension of the Debentures including warrants to our officers and directors (the Officers and Directors) as follows: Cornelis F. Wit, 300,000 warrants, Guus van Kesteren, 300,000 warrants, Ronald T. Linares, 50,000 warrants and Atlantic
Balanced Fund, 400,000 warrants. The Officers and Directors waived their anti-dilution rights relating to the outstanding warrants issued in this transaction as part of the terms and conditions of a Secured Convertible Debenture round of financing
the Company completed in September 2009.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



As of December 31, 2009, we have an aggregate of $8,660,000 principal amount of
convertible debentures and promissory notes outstanding to Cornelis Wit, our Chief Executive Officer and a director, and have issued certain warrants to Mr. Wit, as follows:



| |  |  | On February 14, 2008, $150,000 principal amount promissory note. This note was convertible at the option of the holder into any New Securities
(New Securities) we issue before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This convertible note carried an interest rate of 10% per annum and was due on December 31,
2009. On December 16, 2008 Mr. Wit agreed to convert this convertible note into a private placement of convertible debentures, which convertible debentures was due on December 16, 2010. Mr. Wit waived his anti-dilution
rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. In addition, Mr. Wit agreed to extend
the maturity date of convertible debenture he was issued by three years to December 16, 2013.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 10, 2008, $210,000 principal amount convertible note and common stock purchase warrants to purchase an aggregate of 264,706 shares of our
common stock. We received net proceeds of $210,000. This note was convertible at the option of the holder into any securities we issue (New Securities) before maturity of the convertible debenture on the same terms and conditions of
the sale of the New Securities. This convertible debenture, which carried an interest rate of 10% per annum, was due on June 10, 2009. On August 29, 2008 Mr. Wit agreed to convert this convertible debenture into a
private placement of convertible debentures that mature on August 29, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a
secured convertible debenture financing the Company completed in September 2009. In addition, Mr. Wit agreed to extend the maturity date of convertible debenture he was issued by three years to August 29, 2013.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 10, 2008, $300,000 principal amount convertible note. This note was convertible at the option of the holder into any New Securities
(New Securities) we issue before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This convertible note carried an interest rate of 10% per annum and was due on June 30,
2010. On August 29, 2008 Mr. Wit agreed to convert this convertible note into a private placement of convertible debentures, which convertible debentures are due on August 29, 2010. Mr. Wit waived his anti-dilution rights
relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. In addition, Mr. Wit agreed to extend the
maturity date of convertible debenture he was issued by three years to August 29, 2013.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During August 2008, $1,260,000 principal amount convertible note that is part of a private placement of Convertible Debentures that matures in
August 29, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a Secured Convertible Debenture financing the Company completed
in September 2009. In addition, Mr. Wit agreed to extend the maturity date of convertible debenture he was issued by three years to August 29, 2013.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



| |  |  | From September 2008 to December 2008, $4,200,000 principal amount convertible notes. These notes were convertible at the option of the holder into any
New Securities (New Securities) we issue before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. These convertible notes carried an interest rate of 12% per annum and were due on
December 31, 2009. On December 16, 2008 Mr. Wit agreed to convert these convertible notes into a private placement of convertible debentures, which convertible debentures are due on December 16, 2010. Mr. Wit waived his
anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. In addition, Mr. Wit
agreed to extend the maturity date of convertible debenture he was issued by three years to December 16, 2013.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | From July to September 2009, Mr. Wit invested $1,100,000 which amount was aggregated under the terms of one convertible note dated
September 30, 2009. This note was convertible at the option of the holder into any new securities we issue before maturity of this promissory note on the same terms and conditions of the sale of any new securities issued. This convertible
note carried an interest rate of 12% per annum and was due on December 31, 2009. On September 30, 2009 Mr. Wit agreed to convert this Convertible Note into a private placement of secured convertible debentures bearing
interest at a rate of 12% per annum, which Secured Convertible Debentures are due on March 30, 2011 which are convertible into 4,400,000 shares of common stock and received 4,400,000 warrants to purchase common stock of the Company.
Interest Expense incurred and payable in connection with the secured convertible debentures totaled $33,271 for the year ended December 31, 2009.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | From October to December 2009, Mr. Wit invested $1,440,000 which amount was aggregated under the terms of one convertible note dated
December 31, 2009. This note was convertible at the option of the holder into any new securities we issued before the maturity of this promissory note on the same terms and conditions of the sale of any new securities issued. This convertible
note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 31, 2009 Mr. Wit agreed to convert this Convertible Note into a private placement of unsecured convertible debentures bearing interest
at a rate of 12% per annum, which Convertible Debentures are due on June 30, 2011.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As discussed in
Note 11, Convertible Notes, on August 29, 2008, we sold, $2,270,000 principal amount convertible notes (the Convertible Notes) and common stock purchase warrants (the Convertible Note Warrants) to purchase an aggregate
of 4,540,000 shares of our common stock to four accredited investors including Mr. Wit our Chief Executive Officer as discussed above, and one of our Directors (the Affiliate Investors). The Convertible Notes bear interest at
10% and are due on August 29, 2010. As part of the transaction Cornelis Wit, Chief Executive Officer and Director and Guus van Kesteren, Director, purchased $1,770,000 and $150,000, respectively, principal amount of notes, which are
convertible into 3,540,000 shares and 300,000 shares, respectively, and received 3,540,000 and 300,000 warrants, respectively. Interest expense incurred and payable to Directors and Officers of the Company in connection with the Convertible Note
totaled $192,000 for the year ended December 31, 2009. The Affiliate Investors waived their anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a Secured
Convertible Debenture financing the Company completed in September 2009. In addition, the Affiliate Investors agreed to extend the maturity date of convertible debenture they were issued by three years to December 16, 2013.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



As discussed in Note 11, Convertible Notes, on December 16, 2008, we sold,
$5,075,000 principal amount Convertible Debentures (the Convertible Debentures) and common stock purchase warrants (the Convertible Debenture Warrants) to purchase an aggregate of 10,150,000 shares of our common stock to
eleven accredited investors including Mr. Wit our Chief Executive Officer, as discussed above, and Mr. Smith our Chairman and Chief Technology Officer, Mr. Johnson our Chief Operating Officer, Mr. Linares our Chief Financial
Officer and two members of our Board of Directors, Mr. Veatch and Mr. van Kesteren (the Affiliate Investors). The Convertible Debentures bear interest at 12% and are due on December 16, 2010. As part of the
transaction Cornelis Wit, Chief Executive Officer and Director and Guus van Kesteren, Director, purchased $4,350,000 and $160,000, respectively, principal amount of Debentures, which are convertible into 8,700,000 shares and 320,000 shares,
respectively, and received 8,700,000 and 320,000 warrants, respectively. As a result, at the time, Mr. Wit and Mr. van Kesteren were considered to be beneficial owners of approximately 30% and 5%, respectively, of our issued and
outstanding and issuable upon conversion shares of common stock. Noesis Capital Corp. placement agent for the sale of our securities in various offerings since 1999 converted $100,000 in promissory notes and received 200,000 warrants to
purchase common stock of the Company. Atlantic Balanced Fund, a fund managed by Mentor Capital of which Fernando Montero, a director of OmniComm, is president, director and sole shareholder, converted $200,000 that was originally invested into a
round of financing of Secured Convertible Debentures in February 2008 and received 400,000 warrants to purchase common stock of the Company. Mr. Montero is considered to be the beneficial owner of approximately 9% of our issued and
outstanding and issuable upon conversion shares of our common stock. Additionally the following officers and directors invested in the Convertible Debentures: Mr. Smith $5,000, Mr. Johnson, $25,000, Mr. Veatch $15,000 and
Mr. Linares $125,000. The officers and directors received 10,000, 50,000, 30,000 and 250,000 warrants to purchase shares of our common stock, respectively. Interest expense incurred and payable to the Affiliate Investors of the Company in
connection with the Convertible Note totaled $597,600 for the year ended December 31, 2009. The Affiliate Investors waived their anti-dilution rights relating to the outstanding Convertible Debentures and warrants issued in this transaction as
part of the terms and conditions of a Secured Convertible Debenture financing the Company completed in September 2009. In addition, the Affiliate Investors extended the maturity date of their Convertible Debentures by three years to
December 16, 2013.

On December 31, 2009, we sold, $1,490,000 principal amount Convertible Debentures (the
Convertible Debentures) and common stock purchase warrants (the Convertible Debenture Warrants) to purchase an aggregate of 5,960,000 shares of our common stock to three accredited investors including Mr. Wit our Chief
Executive Officer and a Director. The Convertible Debentures bear interest at 12% and are due on June 30, 2011. As part of the transaction Mr. Wit purchased $1,440,000 principal amount of Convertible Debentures, which are
convertible into 5,760,000 shares and received 5,760,000 warrants to purchase common stock of the Company. As a result, Mr. Wit is considered to be beneficial owner of approximately 38% of our issued and outstanding and issuable upon conversion
shares of common stock. Interest expense incurred and payable to Mr. Wit in connection with the Debenture totaled $-0- for the year ended December 31, 2009.

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. The shares were valued at prices ranging
from $0.19 to $0.30 per share based on the closing share price of our common stock on the OTC Bulletin Board on the date of each payroll. The shares of common stock were issued in lieu of salary for the year ended December 31, 2009 for
salary totaling $109,182.

For the year ended December 31, 2009 we have incurred $867,222 in interest expense payable to
related parties, and we incurred $216,810 in interest expense for the year ended December 31, 2008.

During 2008 and 2009
we had an agreement with Noesis Capital under which they assisted the Company in performing certain financial advisory services including the sale of securities, and the possible sale, merger or other business combination involving the Company.
Pursuant to this agreement, the Company was obligated to pay $90,000 in professional fees annually. The termination date of the agreement was December 31, 2009.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 16: POST-RETIREMENT EMPLOYEE BENEFITS

The Company does not have a policy to cover employees for any health care or other welfare benefits that are incurred after employment
(post-retirement). Therefore, no provision is required under Statement of Financial Accounting Standards No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions or Statement of Financial Accounting
Standards No. 112, Employers Accounting for Post-employment Benefits  an Amendment of FASB Statements No. 5 and 43 which were codified under ASC 715  Compensation  Retirement Benefits and ASC 712
Compensation  Nonretirement Postemployment Benefits.

NOTE 17: STOCKHOLDERS EQUITY (DEFICIT)

Our authorized capital stock consists of 250,000,000 shares of common stock, $.001 par value per share, and 10,000,000 shares of preferred
stock, par value $.001 per share, of which 5,000,000 shares have been designated as 5% Series A Preferred, 230,000 shares have been designated as Series B Preferred Stock and 747,500 shares have been designated as Series C Preferred Stock.

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



| |  |  | 85,507,699 shares of common stock issued and outstanding;
| | - |  | ---------------------------------------------------------



| |  |  | 40,808,240 warrants issued and outstanding to purchase shares of our common stock;
| | - |  | ----------------------------------------------------------------------------------



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



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



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



| |  |  | $10,310,000 principal amount Convertible Debentures convertible into 27,200,000 shares of common stock.
| | - |  | -------------------------------------------------------------------------------------------------------

Common Stock

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

Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions for the common
stock. The rights of the holders of common stock are subject to any rights that may be fixed for holders of preferred stock, when and if any preferred stock is outstanding. All outstanding shares of common stock are duly authorized, validly issued,
fully paid and non-assessable.

Preferred stock

Our Board of Directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or
alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. In addition, the Board of Directors may fix and determine all privileges and rights of the authorized
preferred stock series including:



| |  |  | dividend and liquidation preferences,
| | - |  | -------------------------------------



| |  |  | voting rights,
| | - |  | --------------



| |  |  | conversion privileges, and
| | - |  | --------------------------



| |  |  | redemption terms.
| | - |  | -----------------

Our Board of Directors may authorize the issuance of preferred stock which ranks senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our Board of Directors can fix limitations
and restrictions, if any, upon the payment of dividends on our common stock to be effective while any shares of preferred stock are outstanding.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Series A Preferred Stock

In 1999, our Board of Directors designated 5,000,000 shares of our preferred stock as 5% Series A Convertible Preferred Stock (Series A
Preferred Stock), of which 4,125,224 shares are issued and outstanding.

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



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



| |  |  | each share of Series A Preferred Stock is convertible into shares of our common stock at any time at the option of the holder at a conversion price of
$1.50 per share, or if not so converted after one year from issuance, at any time at our option if the closing bid price of our common stock has exceeded $3.00 for 20 consecutive trading days, our common stock is listed on The NASDAQ Stock Market or
other national stock exchange, and the shares of common stock issuable upon conversion of the Series A Preferred Stock are registered under a registration statement,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the conversion price has certain anti-dilution protections for any stock splits, stock dividends, and corporate reorganizations, and certain other
corporate transactions and issuances of securities at below the applicable conversion price per share. The Series A Preferred Stockholders have waived their rights to an anti-dilution adjustment reducing their conversion price as a result of the
issuance of the Series B Preferred Stock and Series C Preferred Stock,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the shares of Series A Preferred Stock pay a cumulative dividend at a rate of 5% per annum based on the stated value of $1.00 per share, payable
when and as declared by the Board of Directors, or upon conversion or liquidation. Dividends on the Series A Preferred Stock have priority to our common stock and are junior to Series B Preferred Stock and Series C Preferred Stock. At our option,
dividends can be paid in cash or shares of common stock valued at the conversion price of the Series A Preferred Stock,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event of our liquidation or winding up, each share of Series A Preferred Stock has a liquidation preference equal to $1.00 per share,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Series A Preferred Stock are entitled to vote together with the holders of our common stock, on the basis of one vote for each share
of common stock issuable upon the conversion of the Series A Preferred Stock.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There were cumulative
arrearages of $1,329,906 and $1,535,040, or $0.31 and $0.37 per share, on the Series A Preferred Stock for undeclared dividends as of December 31, 2008 and December 31, 2009, respectively.

The Company has 135,000 shares of its 5% Series A Preferred stock that have been converted by the shareholders into shares of our common
stock. Pursuant to Delaware General Corporate Law, once the Company has a positive net worth, the cumulative dividends would be payable in either cash or in shares of our common stock upon the declaration of dividends by our board of directors.

In addition, the holders of the Series A Preferred Stock were granted certain demand and piggy-back registration rights for
the shares of our common stock issuable upon the conversion of the Series A Preferred Stock.

Series B Preferred
Stock

In August 2001, our Board of Directors designated 200,000 shares of our preferred stock as Series B Convertible
Preferred Stock (Series B Preferred Stock). A Corrected Certificate of Designations was filed on February 7, 2002 with the Delaware Secretary of State increasing the number of shares authorized as Series B Preferred Stock to 230,000
shares, of which -0- shares are issued and outstanding.

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



| |  |  | the stated value of each share is $10.00 per share,
| | - |  | ---------------------------------------------------



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



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



| |  |  | each share of Series B Preferred Stock is convertible into shares of our common stock at the option of the holder at any time commencing
January 31, 2002 at the option of the holder at $0.25 per share, as adjusted, and the shares automatically convert, subject to limitations based on trading volume, into shares of our common stock at $0.25 per share at such time as we complete a
public offering raising proceeds in excess of $25 million at an offering price of at least $0.75 per share. We may require all outstanding shares of the Series B Preferred Stock to convert in the event the closing bid price of our common stock
exceeds $0.50 for 20 consecutive trading days, and our common stock has been listed on The NASDAQ Stock Market or other comparable national stock exchange or the OTC Bulletin board and a registration statement registering the shares of common stock
issuable upon conversion of the Series B Preferred Stock has been declared effective,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the conversion price has certain anti-dilution protections for any stock splits, stock dividends, and corporate reorganizations, and certain other
corporate transactions and issuances of securities at below the applicable conversion price per share or market value of the common stock,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the shares of Series B Preferred Stock pay a cumulative dividend at a rate of 8% per annum based on the stated value of $10.00 per share, payable
when and as declared by the Board of Directors, or upon conversion or liquidation. At our option, dividends can be paid in cash or shares of common stock valued at the conversion price of the Series B Preferred Stock,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each share of Series B Preferred Stock will rank senior to our Series A Preferred and pari passu with our Series C Preferred Stock,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event of our liquidation or winding up, each share of Series B Preferred Stock has a liquidation preference equal to $10.00 per share plus
accrued and unpaid dividends, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Series B Preferred Stock are entitled to vote, together with the holders of our common stock, on the basis of one vote for each
share of common stock issuable upon the conversion of the Series B Preferred Stock,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There were cumulative
arrearages of $609,904 and $609,904, or $3.05 and $3.05 per share, on the Series B Preferred Stock dividends as of December 31, 2008 and December 31, 2009, respectively.

The Company has 200,000 shares of its Series B Preferred stock that have been converted by the shareholders into shares of our common stock.
Pursuant to Delaware General Corporate Law, once the Company has a positive net worth, the cumulative dividends would be payable in either cash or in shares of our common stock upon the declaration of dividends by our board of directors.

In addition, the holders of the Series B Preferred Stock were granted certain mandatory and piggy-back registration rights for the shares
of our common stock issuable upon the conversion of the Series B Preferred Stock and are entitled to vote one member to our Board of Directors.

Series C Preferred Stock

In March 2002, our Board of Directors
designated 747,500 shares of our preferred stock as Series C Convertible Preferred Stock of which -0- shares are issued and outstanding.

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



| |  |  | the stated value of each share is $10.00 per share,
| | - |  | ---------------------------------------------------



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



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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



| |  |  | the conversion price has certain anti-dilution protections for any stock splits, stock dividends, and corporate reorganizations, and certain other
corporate transactions and issuances of securities at below the applicable conversion price per share or market value of the common stock,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the shares of Series C Preferred Stock pay a cumulative dividend at a rate of 8% per annum based on the stated value of $10.00 per share, payable
when and as declared by the Board of Directors, or upon conversion or liquidation. At our option, dividends can be paid in cash or shares of common stock valued at the conversion price of the Series C Preferred Stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each share of Series C Preferred Stock will rank pari passu with our Series B Preferred Stock and senior to our Series A Preferred Stock,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event of our liquidation or winding up, each share of Series C Preferred Stock has a liquidation preference equal to $10.00 per share plus
accrued and unpaid dividends, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Series C Preferred Stock are entitled to vote, together with the holders of our common stock, on the basis of one vote for each
share of common stock issuable upon the conversion of the Series C Preferred Stock.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There were cumulative
arrearages of $1,469,593 and $1,469,593, or $4.36 and $4.36 per share, on the Series C Preferred Stock for undeclared dividends as of December 31, 2008 and December 31, 2009, respectively.

The Company has 337,150 shares of its Series C Preferred stock that have been converted by the shareholders into shares of our common stock.
Pursuant to Delaware General Corporate Law, once the Company has a positive net worth, the cumulative dividends would be payable in either cash or in shares of our common stock upon the declaration of dividends by our board of directors.

In addition, the holders of the Series C Preferred Stock were granted certain mandatory and piggy-back registration rights covering the
shares of our common stock issuable upon the conversion of the Series C Preferred Stock and are entitled to vote two members to our Board of Directors.

The following table presents preferred dividends accreted for the years ended December 31, 2008 and December 31, 2009, respectively, and the per share effect of the preferred dividends if their
effect was not anti-dilutive.



|                                              |  |                                                        |         |                                             |   |         |  |      |      |  |   |     
|--------------------------------------------- |  | ------------------------------------------------------ | ------- | ------------------------------------------- | - | ------- |  | ---- | ---- |  | - | ----
|                                              |  | Dividends Accreted in(dollars)Years ended December 31, |         | Dividends per shareYears ended December 31,
|                                              |  | 2009                                                   |         | 2008                                        |   | 2009    |  | 2008
|                                              |  |                                                        |         |                                            
|Preferred stock dividends in arrears Series A |  | $                                                      | 205,134 |                                             | $ | 206,962 |  | $    | 0.05 |  | $ | 0.05
|                                              |  |                                                        |         |                                            
|Preferred stock dividends in arrears Series B |  | $                                                      | -0-     |                                             | $ | 9,753   |  | $    | 0.00 |  | $ | 0.81
|Preferred stock dividends in arrears Series C |  | $                                                      | -0-     |                                             | $ | 67,245  |  | $    | 0.00 |  | $ | 0.79



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Warrants

We have issued and outstanding warrants to purchase a total of 40,808,240 shares of our common stock, including:



| |  |  | Warrants to purchase 80,000 shares of our common stock at an exercise price of $.25 per share expiring in September 2010 which was issued by us to the
placement agent of two offerings of our common stock that were conducted during 2003.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



| |  |  | Warrants to purchase 7,449,012 shares of our common stock at exercise prices ranging from $0.25 to $0.60 per share expiring in February 2012 which were
issued by us in connection with a private placement of our Secured Convertible Debentures in February 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 4,890,000 shares of our common stock at exercise prices ranging from $0.25 to $0.60 per share expiring in August 2012 which were
issued by us in connection with an extension of Secured Convertible Debentures which occurred in August 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 5,520,000 shares of our common stock at exercise prices ranging from $0.25 to $0.60 per share expiring in August 2012 which were
issued by us in connection with a private placement of our Convertible Debentures in August 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 10,536,001 shares of our common stock at exercise prices from to $0.25 to $0.60 per share expiring in December 2012 which were
issued by us in connection with a private placement of our Convertible Debentures in December 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 5,600,000 shares of our common stock at an exercise price of $0.25 per share expiring in September 2013 which were issued by us in
connection with a private placement our Secured Convertible Debentures in September 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to purchase 5,960,000 shares of our common stock at an exercise price of $0.25 per share expiring in December 2013 which were issued by us in
connection with a private placement our Convertible Debentures in December 2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10% Convertible
Notes

During 1999, the Company issued 10% Convertible Notes payable in the amount of $862,500 pursuant to a
Confidential Private Placement Memorandum. There were costs of $119,625 associated with this offering. The net proceeds to the Company were $742,875. The notes bear interest at ten percent annually, payable semi-annually. The notes are convertible
after maturity, which was June 30, 2004, into shares of common stock of the Company at $1.25 per share. As of December 31, 2009, approximately $787,500 of the Convertible Notes had been repaid in cash or converted into 1,495,179 shares of
common stock of the Company leaving an outstanding principal balance of $75,000.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Secured Convertible Debentures

As discussed in Note 11, Convertible Debt, on February 29, 2008, we sold an aggregate of $2,325,000 principal amount 10% Secured
Convertible Debentures (the Debentures) and common stock purchase warrants (the Warrants) to purchase an aggregate of 2,930,675 shares of our common stock exercisable at a price of $0.75 per share for four years subsequent to
the closing of the transaction to 12 accredited investors. After paying certain fees and expenses of $181,280 in the aggregate (including payment to Emerging Growth Equities, Ltd., a broker dealer and member of FINRA who acted as the placement agent
for this offering, of a commission and expense reimbursement aggregating $143,750), we received net proceeds of $2,156,220. We recorded debt acquisition costs of $261,365. The Debentures, which bear interest at 10% per annum, were due 6 months
from their issuance date and as of December 31, 2009 this debenture has been satisfied. On September 30, 2009 the Company sold an aggregate of $1,400,000 of Secured Convertible Debentures with convertible Common Stock Warrants with an
exercise price of $0.25. In conjunction with that Private Placement the exercise price of the Warrants was lowered from $0.60 to $0.25 per share. The non-affiliate investors received an additional 6,125,882 warrants to purchase shares of our common
stock at an exercise price of $0.25 per share

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 (the Warrants) to purchase an aggregate of 5,600,000 shares of our common stock exercisable at a price of $0.25 per share for four years
subsequent to the closing of the transaction to four accredited investors including our President and Chief Executive Officer. We received net proceeds of $1,400,000. The Debentures, which bear interest at 12% per annum, are due 18 months from
their issuance date on March 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share.

Convertible Debentures

As discussed in Note 11, Convertible Notes, on August 29, 2008, we sold, $2,270,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants (the
Convertible Note Warrants) to purchase an aggregate of 4,540,000 shares of our common stock at an exercise price of $0.60 per share before August 31, 2012 to four accredited investors including our Chief Executive Officer and one of
our Directors. We received net proceeds of $2,270,000. The Convertible Notes, which bear interest at 10% per annum, are due on August 29, 2010. The Convertible Notes were convertible at any time at the option of the holder into shares of
our common stock based upon a conversion rate of $0.50 per share and contained certain antidilution rights. Pursuant to those antidilution rights and in connection with a Private Placement of Secured Convertible Debentures of the Company on
September 30, 2009, the Company lowered the conversion rate on the Convertible Notes for non-Related Party noteholders to $0.25 per share. The lowering of the conversion rate resulted in the possible issuance of an additional 700,000 shares of
common stock upon conversion of the Convertible Notes. In addition, as part of the issuance of the Secured Convertible Debentures two Related Parties of the Company, Cornelis F. Wit, our President and Chief Executive Officer and a Director and Guus
van Kesteren, a Director, waived their antidilution rights. and agreed to extend the maturity of the Convertible Notes they hold by three years to August 29, 2013. In addition, convertible Common Stock Warrants with an exercise price of $0.25
were issued. In conjunction with the Private Placement the exercise price of the Warrants was lowered from $0.60 to $0.25 per share pursuant to Warrants anti-dilution provisions. The non-affiliate investors received an additional 980,000 warrants to
purchase shares of our common stock at an exercise price of $0.25 per share

As discussed in Note 11, Convertible Notes, on
December 16, 2008, we sold, $5,075,000 principal amount Convertible Notes (the Convertible Notes) and common stock purchase warrants (the Convertible Note Warrants) to purchase an aggregate of 10,150,000 shares of our
common stock at an exercise price of $0.60 per share before December 16, 2012 to eleven accredited investors including our Chief Executive Officer, Chief Operating Officer, Chief Technology Officer, Chief Financial Officer and four of our
Directors. We received net proceeds of $5,075,000. The Convertible Notes, which bear interest at 12% per annum, are due on December 16, 2010. The Convertible Notes are convertible at any time at the option of the holder into shares of our
common stock based upon a conversion rate of $0.50 per share and contained certain antidilution rights. Pursuant to those antidilution rights and in connection with a Private Placement of Secured Convertible Debentures of the Company on
December 31 2009, the Company lowered the conversion rate on the Convertible Notes for non-Related Party noteholders to $0.25 per share. The lowering of the conversion rate resulted in the possible issuance of an additional 190,000 shares of
common stock upon conversion of the Convertible Notes. In addition convertible Common Stock Warrants with an exercise price of $0.25 were issued. In conjunction with the Private Placement the exercise price of the Warrants was lowered from $0.60 to
$0.25 per share pursuant to the Warrants anti-dilution provisions. Certain non-related party investors received an additional 266,000 warrants to purchase shares of our common stock at an exercise price of $0.25 per share. In addition, as part of
the issuance of the Secured Convertible Debentures nine Related Parties of the Company, including four directors of the Company, Cornelis F. Wit, our President and Chief Executive Officer and a Director, Stephen E. Johnson, our Chief Operating
Officer and Ronald T. Linares, our Chief Financial Officer, waived their antidilution rights and agreed to extend the maturity of the Convertible Notes they hold by three years to December 16, 2013.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



On December 31, 2009, we sold an aggregate of $1,490,000 principal amount 12%
Convertible Debentures (the Debentures) and common stock purchase warrants (the Warrants) to purchase an aggregate of 5,960,000 shares of our common stock exercisable at a price of $0.25 per share for four years subsequent to
the closing of the transaction to three accredited investors including our President and Chief Executive Officer. We received net proceeds of $1,490,000. The Debentures, which bear interest at 12% per annum, are due 18 months from their
issuance date on June 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share.

Other Comprehensive Gain (Loss)

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



|                          |  |                             |        |   |                                            |   |        |  
|------------------------- |  | --------------------------- | ------ | - | ------------------------------------------ | - | ------ | -
|                          |  | Foreign CurrencyTranslation |        |   | Accumulated OtherComprehensive Gain (Loss) |  
|Balance December 31, 2007 |  | $                           | 7,957  |   |                                            | $ | 7,957  |  
|2008 Activity             |  |                             | (6,968 | ) |                                            |   | (6,968 | )
|                          |  |                             |        |   |                                            |   |        |  
|Balance December 31, 2008 |  |                             | 989    |   |                                            |   | 989    |  
|2009 Activity             |  |                             | 1,945  |   |                                            |   | 1,945  |  
|                          |  |                             |        |   |                                            |   |        |  
|Balance December 31, 2009 |  | $                           | 2,934  |   |                                            | $ | 2,934  |  
|                          |  |                             |        |   |                                            |   |        |  

NOTE 18: EMPLOYEE EQUITY INCENTIVE PLANS

Stock Option Plan

Description of 1998 Stock Incentive Plan

In 1998, the Companys Board
of Directors and shareholders approved the 1998 Stock Incentive Plan of OmniComm Systems, Inc. (the 1998 Plan). The 1998 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units. Pursuant to the 1998 Plan, the Company may grant options to purchase up to 12,500,000 shares of the Companys common stock. The 1998 Plan expired as of
December 31, 2008. As of December 31, 2009 there were 9,216,500 outstanding options that had been granted under the 1998 Plan.

Description of 2009 Equity Incentive Plan

In 2009, the Companys
Board of Directors and shareholders approved the 2009 Equity Incentive Plan of OmniComm Systems, Inc. (the 2009 Plan). The 2009 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units. Pursuant to the 2009 Plan, the Company may grant options to purchase up to 7,500,000 shares of the Companys common stock. The term of each option may not exceed
ten years from the date of grant, and options vest in accordance with a vesting schedule established by the Plan administrator. As of December 31, 2009, substantially all of the Companys employees were participating in the 2009 Plan.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The maximum term for any option grant under the 2009 Plan is ten years from the date of
the grant; however, options granted under the 2009 Plan will generally expire five years from the date of grant for most employees, officers and directors of the company. Options granted to employees generally vest either upon grant or in two
installments with the first installment vesting 50% upon completion of one full year from date of grant and on an annual basis over the next year of the employees employment. The vesting period typically begins on the date of hire for new
employees and on the date of grant for existing employees.

At December 31, 2009, there were 4,655,000 shares available
for grant as options or other forms of share-based compensation under the 2009 Plan.

The following table summarizes the stock
option activity for the 2009 Plan:



|                                            |  |                  |   |  |                                           |       |   |                                                      |      |                                     |    
|------------------------------------------- |  | ---------------- | - |  | ----------------------------------------- | ----- | - | ---------------------------------------------------- | ---- | ----------------------------------- | ---
|                                            |  | Number of Shares |   |  | Weighted AverageExercise Price(per share) |       |   | Weighted AverageRemaining ContractualTerm (in Years) |      | Aggregate IntrinsicValue in (000s)
|Outstanding at December 31, 2008            |  | 10,997,770       |   |  | $                                         | 0.46  |   |                                                      |      |                                     |    
|Granted                                     |  | 2,890,000        |   |  |                                           | 0.22  |   |                                                      |      |                                     |    
|Exercised                                   |  |                 |   |  |                                           |      |   |                                                      |      |                                     |    
|Forfeited/Cancelled/Expired                 |  | (1,826,270       | ) |  |                                           | (0.43 | ) |                                                      |      |                                     |    
|                                            |  |                  |   |  |                                           |       |   |                                                      |      |                                     |    
|                                            |  |                  |   | 
|Outstanding at December 31, 2009            |  | 12,061,500       |   |  |                                           | 0.40  |   |                                                      | 3.62 |                                     | -0-
|                                            |  |                  |   |  |                                           |       |   |                                                      |      |                                     |    
|                                            |  |                  |   | 
|Vested and Exercisable at December 31, 2009 |  | 9,791,916        |   |  | $                                         | 0.39  |   |                                                      | 3.59 |                                     | -0-
|                                            |  |                  |   |  |                                           |       |   |                                                      |      |                                     |    

The aggregate intrinsic value in the table above represents the total intrinsic value (the
difference between the Companys closing stock price at fiscal year end and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options
on December 31, 2009. The total intrinsic value of stock options exercised, the difference between the closing stock price on the date of exercise and the exercise price, for the years ended December 31, 2008 and December 31, 2009
were $165,350 and $0, respectively.

The total fair value of shares vested for the years ended December 31, 2008 and
December 31, 2009 were:



|                                                                     |  |   |          
|-------------------------------------------------------------------- |  | - | ---------
|Fair value of options vested during the year ended December 31, 2009 |  | $ | 741,545  
|Fair value of options vested during the year ended December 31, 2008 |  | $ | 1,035,664

Cash received
from stock option exercises for the years ended December 31, 2008 and December 31, 2009 was $7,753 and $0, respectively. Due to the Companys net loss position, no windfall tax benefit has been realized during the years ended
December 31, 2008 and December 31, 2009.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The following table summarizes information concerning options outstanding at
December 31, 2009:



|                                 |  |                              |  |                                           |      |                                                      |      |                              |      
|-------------------------------- |  | ---------------------------- |  | ----------------------------------------- | ---- | ---------------------------------------------------- | ---- | ---------------------------- | -----
|                                 |  | OptionsOutstanding(in 000s) |  | Weighted AverageExercise Price(per share) |      | Weighted AverageRemaining ContractualLife (in Years) |      | OptionsExercisable(in 000s)
|Exercise Price Range (per share) |  |                              |  |                                           |      |                                                      |      |                              |      
|$ 0.00 - $ 0.20                  |  | 1,630                        |  | $                                         | 0.20 |                                                      | 4.96 |                              | 1,330
|$ 0.25 - $ 0.29                  |  | 4,495                        |  |                                           | 0.26 |                                                      | 2.82 |                              | 3,917
|$ 0.31 - $ 0.49                  |  | 1,250                        |  |                                           | 0.45 |                                                      | 4.18 |                              | 1,210
|$ 0.50 - $ 0.70                  |  | 4,687                        |  |                                           | 0.60 |                                                      | 3.77 |                              | 3,335
|                                 |  |                              |  |                                           |      |                                                      |      |                              |      
|                                 |  |                              |  |                                          
|                                 |  | 12,062                       |  | $                                         | 0.35 |                                                      | 3.62 |                              | 9,792
|                                 |  |                              |  |                                           |      |                                                      |      |                              |      

The weighted average fair value (per share) of options
granted during the years ended December 31, 2008, and December 31, 2009 using the American Binomial option-pricing model was $0.35 and $0.11, respectively.

Stock-Based Compensation

For the year ended December 31, 2008, the
Company recognized total stock-based compensation expense of $1,360,393 related to stock option and other share-based awards made from its equity compensation plan, including $24,000 of stock-based compensation related to restricted stock grants.

For the year ended December 31, 2009, the Company recognized total stock-based compensation expense of $960,024 related
to stock option and other share-based awards made from its equity compensation plan.

Prior to January 1, 2006, the
Company accounted for those plans under the recognition and measurement provisions of APB No. 25. Accordingly, the Company generally recognized compensation expense only when it granted options with an exercise price below the estimated fair
value of the Companys common stock.

Prior to the adoption of SFAS No. 123(R) on January 1, 2006, the Company
applied the intrinsic value-based method of accounting prescribed by APB Opinion No. 25 and related interpretations including Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation: An Interpretation of APB Opinion No. 25 (issued in March 2000), to account for its fixed plan stock options. Under this method, compensation expense was recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. SFAS No. 123 and SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure (an amendment to SFAS No. 123), established
accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As permitted by the accounting standards, the Company had elected to continue to apply the intrinsic value-based method
of accounting described above, and had adopted the disclosure requirements of SFAS No. 123, as amended by SFAS No. 148. The Company amortized deferred compensation on a graded vesting methodology in accordance with FASB Interpretation
No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Award Plans.

As a result of
adopting SFAS No. 123(R), the impact to the Companys net loss for the years ended December 31, 2008 and December 31, 2009, was $1,321,004 and $960,024 greater, respectively, than if the Company had continued to account for its
stock options under APB No. 25. The table below gives effect to the impact of SFAS No. 123(R) on the Companys Statement of Operations.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                                    |  |                         |            |   |      |   |             |  
|------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                    |  | Year ended December 31, |           
|                                                                    |  | 2009                    |            |   | 2008 |  
|Net income (loss) attributable to common stockholders (as reported) |  | $                       | (8,275,481 | ) |      | $ | (10,878,521 | )
|Salary expense recorded in accordance with SFAS No. 123(R)          |  |                         | (960,024   | ) |      |   | (1,321,004  | )
|                                                                    |  |                         |            |   |      |   |             |  
|Net income (loss) attributable to common stockholders (adjusted)    |  |                         | (7,315,457 | ) |      |   | (9,557,517  | )
|                                                                    |  |                         |            |   |      |   |             |  
|Net (loss) per share, basic and diluted (as reported)               |  | $                       | (0.10      | ) |      | $ | (0.15       | )
|                                                                    |  |                         |            |   |      |   |             |  
|Net (loss) per share, basic and diluted (adjusted)                  |  | $                       | (0.09      | ) |      | $ | (0.13       | )
|                                                                    |  |                         |            |   |      |   |             |  
|Weighted average number of shares outstanding, basic and diluted    |  |                         | 81,229,605 |   |      |   | 71,789,073  |  

Basis for Fair
Value Estimate of Share-Based Payments

Based on analysis of its historical volatility, the Company expects that the future
volatility of its share price is likely to be similar to the historical volatility the Company experienced since the Companys commercialization activities were initiated during the second half of 2000. The Company used a volatility calculation
utilizing the Companys own historical volatility to estimate its future volatility for purposes of valuing the share-based payments granted during fiscal 2009 and 2008. Actual volatility, and future changes in estimated volatility, may differ
substantially from the Companys current estimates.

The Company utilizes the historical data available regarding employee
and director exercise activity to calculate an expected life of the options. The table below presents the weighted average expected life in years of options granted under the Plan as described above. The risk-free rate of the stock options is based
on the U.S. Treasury yield curve in effect at the time of grant, which corresponds with the expected term of the option granted.

The following table summarizes weighted average grant date fair value activity for the 2009 Plan:



|                                                           |  |                                      |      |      |   |     
|---------------------------------------------------------- |  | ------------------------------------ | ---- | ---- | - | ----
|                                                           |  | WeightedAverage Grant-DateFair Value
|                                                           |  | 2009                                 |      | 2008
|Stock options granted during the year ended December 31,   |  | $                                    | 0.11 |      | $ | 0.35
|Stock options vested during the year ended December 31,    |  | $                                    | 0.21 |      | $ | 0.43
|Stock options forfeited during the year ended December 31, |  | $                                    | 0.33 |      | $ | 0.45

During the years ended
December 31, 2008 and December 31, 2009 2,388,333 and 3,537,916 stock options vested, respectively. The aggregate fair value of the vested options was $1,035,664 and $741,545, respectively.

The fair value of share-based payments was estimated using the American Binomial option pricing model with the following assumptions and
weighted average fair values for grants made during the periods indicated.



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                   |  |                                                     |      |   |      |   |      |  
|-------------------------------------------------- |  | --------------------------------------------------- | ---- | - | ---- | - | ---- | -
|                                                   |  | Stock Option Assumptions forYear Ended December 31, |     
|                                                   |  | 2008                                                |      |   | 2009 |  
|Risk-free interest rate                            |  |                                                     | 1.37 | % |      |   | 2.40 | %
|Dividend yield                                     |  |                                                     | 0    | % |      |   | 0    | %
|Expected volatility                                |  |                                                     | 81.7 | % |      |   | 73.6 | %
|Expected life of options (years)                   |  |                                                     | 5.0  |   |      |   | 5.0  |  
|                                                   |  |                                                    
|Weighted average fair value of grants (per option) |  | $                                                   | 0.35 |   |      | $ | 0.11 |  

A summary of the
status of the Companys nonvested shares as of December 31, 2009, and changes during the year ended December 31, 2009 is as follows:



|                                      |  |           |  |                                     |     
|------------------------------------- |  | --------- |  | ----------------------------------- | ----
|                                      |  | Shares    |  | WeightedAverageGrant-DateFair Value
|Nonvested Shares at January 1, 2009   |  | 4,088,500 |  | $                                   | 0.38
|                                      |  |          
|Nonvested Shares at December 31, 2009 |  | 2,269,584 |  | $                                   | 0.27
|                                      |  |           |  |                                     |     

As of December 31, 2009, approximately $621,127 of
total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted-average period of 0.92 years.

NOTE 19: INCOME TAXES

The tax expense (benefit) for income taxes differs from the amount computed by
applying the statutory federal income tax rate of 34% to income (loss) before provision (benefit) for income taxes as follows:



|                                |  |          |            |   |          |   |            |  
|------------------------------- |  | -------- | ---------- | - | -------- | - | ---------- | -
|                                |  | 12/31/09 |            |   | 12/31/08 |  
|Current tax expense (benefit):  |  |          |            |   |          |   |            |  
|Income tax at statutory rates   |  | $        | -0-        |   |          | $ | -0-        |  
|                                |  |          |            |   |          |   |            |  
|Deferred tax expense (benefit): |  |          |            |   |          |   |            |  
|Bad debt allowance              |  |          | (43,874    | ) |          |   | (55,823    | )
|Operating loss carryforward     |  |          | (2,207,272 | ) |          |   | (2,289,991 | )
|Patent litigation settlement    |  |          | 144,481    |   |          |   | (816,753   | )
|                                |  |          |            |   |          |   |            |  
|                                |  |          | (2,106,665 | ) |          |   | (3,162,567 | )
|                                |  |          |            |   |          |   |            |  
|Valuation allowance             |  |          | 2,106,665  |   |          |   | 3,162,567  |  
|                                |  |          |            |   |          |   |            |  
|Total tax expense (benefit)     |  | $        | -0-        |   |          | $ | -0-        |  
|                                |  |          |            |   |          |   |            |  

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:



|                                    |  |          |             |   |          |   |             |  
|----------------------------------- |  | -------- | ----------- | - | -------- | - | ----------- | -
|                                    |  | 12/31/09 |             |   | 12/31/08 |  
|Deferred tax assets:                |  |          |             |   |          |   |             |  
|Amortization of intangibles         |  | $        | 283,698     |   |          | $ | 283,698     |  
|Bad debt allowance                  |  |          | 99,697      |   |          |   | 55,823      |  
|Patent litigation liability accrual |  |          | 672,272     |   |          |   | 816,753     |  
|Operating loss carryforwards        |  |          | 15,501,373  |   |          |   | 12,137,829  |  
|                                    |  |          |             |   |          |   |             |  
|Gross deferred tax assets           |  |          | 16,557,040  |   |          |   | 13,294,103  |  
|                                    |  |          |             |   |          |   |             |  
|Valuation allowance                 |  |          | (16,557,040 | ) |          |   | (13,294,103 | )
|                                    |  |          |             |   |          |   |             |  
|Net deferred tax asset              |  | $        | -0-         |   |          | $ | -0-         |  
|                                    |  |          |             |   |          |   |             |  



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OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Company has net operating loss carryforwards (NOL) for income tax purposes of
approximately $40,367,549. This loss is allowed to be offset against future income until the year 2029 when the NOLs will expire. Other timing differences relate to depreciation and amortization for the stock acquisition of Education Navigator
in 1998. The tax benefits relating to all timing differences have been fully reserved for in the valuation allowance account due to the lack of operating history and the substantial losses incurred through December 31, 2009.

NOTE 20: INTANGIBLE ASSETS, NET

Intangible assets consists of the following:



|               |  |                   |           |                         |   |                   |  |      |           |                         |   |               |  |                       |     |  |   |     |  |        
|-------------- |  | ----------------- | --------- | ----------------------- | - | ----------------- |  | ---- | --------- | ----------------------- | - | ------------- |  | --------------------- | --- |  | - | --- |  | -------
|               |  | December 31, 2009 |           |                         |   | December 31, 2008 |  |     
|               |  | Cost              |           | AccumulatedAmortization |   | ResidualValue     |  | Cost |           | AccumulatedAmortization |   | ResidualValue |  | EstimatedUseful Lives
|               |  |                   |           |                         |   |                   | 
|Customer lists |  | $                 | 1,392,698 |                         | $ | 232,117           |  | $    | 1,160,581 |                         | $ | -0-           |  | $                     | -0- |  | $ | -0- |  | 3 years
|               |  |                   |           |                         |   |                   |  |      |           |                         |   |               |  |                       |     |  |   |     |  |        
|               |  | $                 | 1,392,698 |                         | $ | 232,117           |  | $    | 1,160,581 |                         | $ | -0-           |  | $                     | -0- |  | $ | -0- |  |        
|               |  |                   |           |                         |   |                   |  |      |           |                         |   |               |  |                       |     |  |   |     |  |        

Amortization expense for the years ended December 31, 2009 and December 31, 2008 was $232,117 and
$-0- respectively.

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



|      |  |   |          
|----- |  | - | ---------
|2010  |  | $ | 464,233  
|2011  |  |   | 464,233  
|2012  |  |   | 232,118  
|2013  |  |   | -0-      
|2014  |  |   | -0-      
|      |  |   |          
|Total |  | $ | 1,160,584
|      |  |   |          



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##### Table of Contents

Exhibit Index



|            |  |                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                               
|            | 
|21          |  | Subsidiaries of the Company                                                                                                                                               
|            | 
|31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as
amended.
|            | 
|31.2        |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as
amended.
|            | 
|32.1        |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002                         
|            | 
|32.2        |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002