##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-KSB







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

For the fiscal year ended December 31, 2007



| ̈ | 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





Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.   ̈

Check 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

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained herein, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.    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 issuers revenues for its most recent fiscal year: $3,723,841 for the 12 months ended December 31, 2007.

State the aggregate market value of the voting stock held by non-affiliates of the registrant.



|               |  |                                         |  |                       
|-------------- |  | --------------------------------------- |  | ----------------------
|Date           |  | Non-Affiliate Voting Shares Outstanding |  | Aggregate Market Value
|March 19, 2008 |  | 61,481,490                              |  | $35,659,264           

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 19, 2008 |  | Common Stock, $0.001 par value per share |  | 59,295,006        

DOCUMENTS INCORPORATED BY REFERENCE

Information to be set forth in our Proxy Statement to be filed by us pursuant to Regulation 14A relating to our 2008 Annual Meeting of Stockholders to be held on
July 25, 2008 is incorporated by reference in Items 9, 10, 11, 12 and 14 of Part III of this Form 10-KSB.

Transitional Small Business Disclosure Form
(check one):     ̈  Yes    x  No









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OMNICOMM SYSTEMS, INC.

ANNUAL REPORT ON

FORM 10-KSB

FOR THE YEAR ENDED DECEMBER 31, 2007

Table of Contents



|           |  |                                                                                                                                        |  |     
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                                        |  | Page
|Part I    
|           |  |                                                                                                                                       
|Item 1.    |  | Business.                                                                                                                              |  | 3   
|           |  |                                                                                                                                       
|Item 2.    |  | Description of Property.                                                                                                               |  | 23  
|           |  |                                                                                                                                       
|Item 3.    |  | Legal Proceedings.                                                                                                                     |  | 23  
|           |  |                                                                                                                                       
|Item 4.    |  | Submission of Matters to a Vote of Security Holders.                                                                                   |  | 23  
|          
|Part II   
|           |  |                                                                                                                                       
|Item 5.    |  | Market for Common Equity and Related Stockholder Matters.                                                                              |  | 24  
|           |  |                                                                                                                                       
|Item 6.    |  | Managements Discussion and Analysis or Plan of Operation.                                                                             |  | 25  
|           |  |                                                                                                                                       
|Item 7.    |  | Financial Statements.                                                                                                                  |  | 34  
|           |  |                                                                                                                                       
|Item 8.    |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.                                                  |  | 34  
|           |  |                                                                                                                                       
|Item 8A.   |  | Controls and Procedures.                                                                                                               |  | 34  
|           |  |                                                                                                                                       
|Item 8B.   |  | Other Information.                                                                                                                     |  | 35  
|          
|Part III  
|           |  |                                                                                                                                       
|Item 9.    |  | Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act. |  | 35  
|           |  |                                                                                                                                       
|Item 10.   |  | Executive Compensation.                                                                                                                |  | 35  
|           |  |                                                                                                                                       
|Item 11.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.                                        |  | 35  
|           |  |                                                                                                                                       
|Item 12.   |  | Certain Relationships and Related Transactions; and Director Independence.                                                             |  | 35  
|           |  |                                                                                                                                       
|Item 13.   |  | Exhibits.                                                                                                                              |  | 36  
|           |  |                                                                                                                                       
|Item 14.   |  | Principal Accountant Fees and Services.                                                                                                |  | 40  
|           | 
|Signatures |  | 41                                                                                                                                    



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|Item 1. | Business
|------- | --------

This business section and other parts of this Annual
Report on Form 10-KSB (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 its wholly owned subsidiaries OmniComm Europe B.V. and OmniComm Europe GmbH. .

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.

Overview

OmniComm Systems, Inc. provides Web-based Electronic Data Capture
(EDC) software and services that streamline the clinical research process. TrialMaster is the core of OmniComms unique EDC product offering. Trial Master is designed to allow 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 is a 21 CFR Part 11 compliant solution and
designed to offer clinical trial sponsors the freedom to conduct clinical trials under multiple platforms, with significant flexibility, ease-of-use and complete control over collected data. Developed using forward-looking technology based on
Microsoft® .NET architecture, TrialMaster provides a simple drag and drop design tool and a straightforward, logical build process that allows easy and rapid trial development.
The systems GUI (user interface) has been designed to be clean, user friendly and intuitive. Sponsors have access to on-demand importing of various industry import standards including CDISC, core labs and patient diary data. In addition, Trial
Masters export feature allows output to client systems in various formats including SAS, CDISC, CSV, TAB and XML formats.

TrialMaster offers
significant business benefits to its customers and is 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 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 TrialMaster is significantly more efficient than the traditional paper collection methods employed in the past. TrialMaster has been designed to make the trial
building process more efficient than the technologies deployed by our competitors. The benefits of managing a clinical trial using TrialMaster for EDC include:



| |  |  | Real-Time Access to the Data: All interested parties will have real-time access to study data over the Internet as it is generated. This allows for the monitoring
of patient enrollments and related metrics, by site, at the earliest time point.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Faster Study Completion: TrialMaster saves time at the back-end of a study by eliminating most of the time it takes for database clean-up in studies
involving paper-based Case Report Forms (CRFs). This is done by eliminating most incorrect or incomplete entries at the time of entry. Queries for non-automatic items can be handled shortly thereafter through electronic data review by the clinical
study monitors. A 2005 Life Science Insights report estimates that trial sponsors have experienced a 53.3% 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 cost of TrialMaster is comparable to paper. The use of EDC can be even more cost effective
when applied to multiple studies, which 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 data captured. A 2005 report by Life Science
Insights estimates that EDC users can expect a cost reduction of approximately 17.5% via the adoption of EDC.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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According to a 2005 Goldman Sachs report, global R & D expenditures by the pharmaceutical and BioTech industries were
approximately $102.6 billion in 2006, with approximately 53% of that amount spent by North American-based pharmaceutical, biotechnology and medical device companies. Based on a 2002 CenterWatch report approximately 8.5% of total R & D costs are
spent on data management. A recent 2007 report by Health Industry Insights states that by the end of 2007, nearly 45% of all new Phase I-III studies will be initiated using EDC. The report also states that the total addressable market for EDC and
eClinical services is expected to grow from approximately $600MM currently to $1.8B in 2010.

Our Strategy

Our primary goal is to establish OmniComm Systems as a leading EDC software and services provider by offering our customers the highest quality service with a
differentiated, user-friendly product. TrialMaster is priced to provide a solid value, which stimulates market demand, while maintaining 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. 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. The key elements of our strategy are:

Stimulate Demand by providing Clinical Trial Sponsors with High Value EDC.Deploying EDC 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. Because
TrialMaster has been designed to make the trial building process more efficient than the technologies deployed by our competitors, we have been able to provide pricing that is in many cases substantially lower than that of the competition. We
provide faster trial start-up times, 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.

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. TrialMaster has been developed in order to take advantage of
several automated software tools. These tools make the trial building process more efficient and automate many tasks our competitors complete manually. We use advanced technologies and employ a well incentivized, productive and highly professional
workforce. We are continually focused on improvements in efficiency, and we believe that the newest version of TrialMaster will enhance our ability to broaden our product line. As we grow, we expect some benefit from economies of scale by leveraging
our current infrastructure over an expanded operation.

Provide EDC Services to Small and Midsize Pharmaceutical, Bio-Technology, Medical Device
Companies and CROs (Clinical Research Organizations). In considering new markets, we focus on service to markets that are underserved. In determining which markets to select, we analyzed the size of the potential market 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 EDC, 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.

Penetrating the CRO market is an important component of our strategic plan. By emphasizing CRO partnerships we are 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. From 2005 to 2007 we increased the percentage of our revenues coming from CROs by approximately 131%. There
is an industry-wide emphasis in establishing strategic relationships with CROs. In addition, CRO partnerships allow us to leverage the selling and marketing capabilities of the CRO itself. Because of our relatively small sales force and limited
resources, this strategy allowed us to augment our selling efforts in a cost-effective manner by forging long-term strategic relationships. Our CRO partners gain the ability to manage the EDC decision making process proactively and add an extension
to their line of products. We initiated the marketing of our CRO Preferred Program in early 2007. The CRO Preferred Program offers fixed pricing and pay-as-you-go Hosted Services. To date we have entered into approximately 20 marketing partnerships
with CROs as part of the CRO Preferred Program.



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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 TrialMaster
enhancements. We strive to communicate openly and honestly with customers about their projects, especially when we believe that process improvements can be implemented to improve the overall EDC experience. Unlike most EDC providers, we have a
policy of not charging clients for small, incidental changes that should be part of the EDC service in the first place. Based on customer feedback, we believe our service is an important reason why our customers choose us over other EDC providers.
In 2004, we continued to improve our customers EDC experience by adding a Phase I version of TrialMaster. In 2005 we added TrialMaster Archive, a self-contained program that allows our client to view all of its trial data in the format that it
was captured in, and TrialMaster Safety, our pharmacovigilance database which accommodates both the MedDRA® dictionary and customized client dictionaries and is HIPAA and 21 CFR Part 11
compliant. During 2007, we began offering TrialMaster under a technology transfer (or licensed) model. This type of business model allows our clients to license our technology and more effectively leverage their internal technology infrastructure.
We believe that this model will allow us to more effectively address the EDC needs of the largest pharmaceutical, bio-technology and CROs in the clinical trial industry. Also in 2007 we also released our OC Connect TM solution (OC
Connect). OC Connect integrates Oracles industry leading Clinical Data Management System (CDMS), Oracle Clinical, with TrialMaster. Most of the industry leading pharmaceutical, bio-technology and CROs use Oracle Clinicals Global
Library for storing all of their metadata standards for designing their clinical databases and case report forms. We believe our OC Connect product will allow us to penetrate the market of firms using Oracle Clinical who are seeking a more
robust, flexible and integratable EDC product.

Competitive Strengths

Low Operating Costs.Our low intrinsic costs allow us to offer prices low enough to stimulate new demand and to attract customers away from higher-priced competitors.

Some of the factors that contribute to our low costs are:



| |  |  | Our employees are productive. Because our employees are so productive, we are able to spread our fixed costs over a greater number of clinical trials.
We achieve high employee productivity in several ways. Many of our employees are cross-trained to provide help in other functions when needed; our staff is tenured therefore avoiding the growing pains associated with new employment and as discussed,
our software has been designed to be flexible and customizable thereby reducing our COGS.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We emphasize our recruiting and training programs. We take great care to hire and train employees who are enthusiastic and committed to serving our
customers and we incentivize them to be productive. Our employee productivity is created through the effective use of advanced technology. For example, we have automated many of the trial building components that our competitors must still hard code
for each project. Our compensation packages are designed to align the interests of our employees with our stockholders.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TrialMaster is the Core of our product offerings. Our competitors have often added functionality to their products via acquisition or by merger. We
feel strongly that our core product and programming methodology provide a flexible, customizable base for product and company expansion without the issues inherent in integrating products or software designed by other companies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Strong Company Culture.We believe that we have created a strong and vibrant service-oriented company culture, which is
built around our key values: caring, integrity, innovation and passion. The first step is hiring people who are team-oriented and customer-focused. We reinforce our culture by communicating actively, on a regular basis, with all of our employees,
keeping them informed about events at the Company and soliciting feedback for ways to improve teamwork and their working environment.

Experienced
Management Team.We are led by a management team with significant experience, including experience at international pharmaceutical companies and other EDC providers. Our President and Chief Executive Officer, Cornelis F. Wit, brings
extensive worldwide pharmaceutical and general management experience to the Company. Randall G. Smith our Chairman and Chief Technology Officer is the primary architect of TrialMaster. Our Chief Financial Officer, Ronald T. Linares, has worked for
publicly held companies as a Chief Financial Officer since 1994. Stephen E. Johnson, Executive Vice President of Marketing and Sales brings more than 18 years of clinical trials experience in sales management and business development to OmniComm. A.
Kenneth Light, our Senior Vice President for Professional Services, has significant experience in implementing and managing large-scale software implementation and consulting engagements. Jesus. J. Rojas comes to OmniComm from the clinical trial
development



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arena with over 11 years of experience in clinical trial research. Mr. Rojas is our Senior Vice President of Clinical Services and Support. We believe
our management team provides us with a diversity of experience and talents with significant cross-functional industry experience. In addition to our management team, two of our board members, Matthew Veatch and Guus van Kesteren, have extensive
worldwide pharmaceutical, EDC and CRO industry experience.

Our Business Model

We understand that each customers clinical trial support service needs can be very different from trial to trial and that each clinical teams comfort level with EDC and trial management is unique. Our
approach to satisfying the diverse needs of our customers is a crawl, walk, run approach to web-based services adoption. TrialMaster has historically been sold under an Application Service Provider (ASP) model, providing EDC
and complementary services. However, with the release of TrialMaster V4.0 during 2007, our customers now have several business models available to them  ASP, Technology Transition, and Technology Transfer.

We continue to offer a fully hosted ASP model, but now also offer a Technology Transition 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 all the technology in-house. This methodology allows our customers to use our services at their own pace, allowing
us the flexibility to deliver eClinical solutions to a broader array of clinical trial sponsors.

Under our ASP and Technology Transition models, mission
critical data is housed in Cincinnati Bells e-business center, built within a hardened data center environment 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 in-house.

TrialMaster contracts provide for
flexible pricing that is based on both the size and duration of the clinical trial. Size parameters for Hosted Services include the number of case report forms 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, 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 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 are 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 is based on the transfer of a perpetual license and is based on the number of internal named users of the licensee and the volume of CRF pages collected
annually. Under our Technology Transfer model there is also an annually maintenance charge incurred for hosting and hosting related services. As part of our Technology Transition and Technology Transfer model we will offer Professional and
Consulting services. The scope of services includes installation, implementation, validation and training services related to the purchase of a TrialMaster license. In addition, our professional services team will provide consulting services aimed
at helping our clients adopt best practices related to EDC use within their existing operations. Professional and consulting services will generally be offered on a time-an-billing basis.

Our Software Products and Services

TrialMaster EDC Solution

The heart of OmniComms unique product offering begins with 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. We provide EDC solutions and related value-added services to pharmaceutical and biotechnology companies, medical device companies, clinical research organizations (CROs), academic
research institutions and other clinical trial sponsors. TrialMaster helps reduce the inefficiencies, inaccuracies and costs associated with paper-based clinical data collection methodologies that are traditionally employed at the remote sites where
clinical trial participants are



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monitored. Through TrialMaster, our customers can deploy customized electronic case report forms 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 Features:



| |  |  | Designed using Microsofts .NET® architecture
| | - |  | ---------------------------------------------



| |  |  | Drag and drop trial building that allows OmniComm 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
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Encoded SSL Connection that provides for patient and clinical trial data security
| | - |  | ---------------------------------------------------------------------------------



| |  |  | A robust communications/administration system that includes powerful query resolution, trial participant notification and an integrated e-mail system
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pre-trial management and tracking of Institutional Review Board (IRB), U.S. Food and Drug Administration (FDA) and laboratory
documentation
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Real-time query management, reporting and resolution
| | - |  | ----------------------------------------------------



| |  |  | On-demand importingof CDISC, HL7, eDiary, Central/Core labs, IVRs, device, CTMS and dictionary data
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Randomization solutions for patient enrollment and inventory tracking solutions for lot and drug shipment
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Safety solutions to allow for serious adverse event (SAE) tracking and reporting with MedWatch capabilities
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Integrated Ad-Hoc reporting is available through LogiXML with Wizard-driven report generation
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Automated exports of data to client systems in various formats including SAS, CDISC, CSV, TAB, XML formats and Oracle Clinical formats
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | FDA Archive Submission ready casebook containing PDF formatted copies of all CRFs in FDA submission format
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Comprehensive Servicesincluding a dedicated 21 CFR Part 11 compliant hosting environment at our secure hosting facility, on-site, Web-driven and eLearning
training and 24 X 7 X 365 support
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | OmniComm offers a crawl, walk, run approach to EDC adoption. We offer complete ASP hosting, Technology Transition or a complete Technology Transfer to allow
for a smooth adoption of EDC.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TrialMaster includes an adverse event reporting solution that helps customers comply with the complex
global safety regulations and reporting deadlines associated with clinical research, post-approval marketing and drug surveillance by expediting the clinical evaluation and tracking of adverse events. Our customers can enter adverse event data from
multiple sources, code, reconcile and analyze the data reports, and then submit required adverse event reports to regulatory authorities via electronic or paper-based methods. TrialMaster provides customers with near real-time visibility of adverse
event data, thereby facilitating compliance with regulatory reporting deadlines and more timely identification of therapeutics that may pose risks to patients or not warrant further investment in research and development.

TrialMaster Phase ITrialMaster Phase I was designed during 2004 in order to address the unique data capture requirements of Phase I
clinical trials. The TrialMaster Phase I application allows the client to capitalize on the benefits of EDC without overhauling and disrupting their Phase I clinic work flow processes. Unlike other applications, TrialMaster Phase I adapts to
existing processes allowing clients to increase productivity, reduce trial time, and improve data quality while reducing overall costs.



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TrialMaster Phase I Application Features:



| |  |  | A flexible EDC application for Phase I Trial implementation that would allow you to implement EDC locally (bedside) without modifying work flow processes.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provides direct data entry (bedside) creating its own source documentation verification.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Provides Simultaneous Data Entry (multiple form entries at the same time) capability, thus eliminating potential confusion/errors at bedside.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Easily configurable to meet specific work flow process requirements within required timeframes.
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | Provides data extracts and reports available on demand without vendor involvement.
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Provides a built in email communication and notification system so participants and sponsors are always in touch real time with the trials important
events.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provides remote Data Monitoring capability for expedited query resolution, real time AE review and improved site relationships.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

TrialMaster Phase I can be integrated into existing Phase I clinical work flows or can be used as a catalyst for change. TrialMaster Phase I benefits include:

Improved productivity



| |  |  | Monitors have access to the data in real time from any location via the Internet.
| | - |  | ---------------------------------------------------------------------------------



| |  |  | All data entered into the system has been checked by the system Edit Checks, no gross errors will be included in the data.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Any data that is outside the normal range is been flagged by the system and the study staff will be asked to validate and explain the data.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The monitor can raise queries very quickly and these can be responded to by study staff in a rapid time frame using the EDC system.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Less time should be spent by the monitor on sites.
| | - |  | --------------------------------------------------



| |  |  | The time spent on sites will be more productive as routine queries have been raised and resolved before the visit.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Improved responsiveness



| |  |  | Data available in close to real-time to all Sponsor staff.
| | - |  | ----------------------------------------------------------



| |  |  | Better ability to report on and act on safety data during the trial.
| | - |  | --------------------------------------------------------------------



| |  |  | Data Managers can be checking data as the study progresses and working closely with Monitors to ensure data integrity at all times.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------

Improved data accuracy



| |  |  | Edit checks prevent gross errors.
| | - |  | ---------------------------------



| |  |  | Monitors can raise questions quickly, while the study staff is still available.
| | - |  | -------------------------------------------------------------------------------

Reduced end-to-end study time line



| |  |  | Reuse of standard components and enforced data standards will enable studies to be set up with fewer resources (and less time).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | Decisions during a study can be made on the basis of more accurate up-to-date information.
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Data base lock can be made within hours of last patient out.
| | - |  | ------------------------------------------------------------

TrialMaster Phase I has enjoyed a significant amount of commercial success. We believe we are well positioned to bring value to our clients Phase I clinical trials. Because of the tight production cycles involved in Phase I clinical trials
only flexible software solutions will be able to provide software solutions on an affordable, efficient basis. TrialMaster Phase I has been successfully deployed into this market.



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TrialMaster Archive (TMA) presents client data (post database lock) in TrialMaster browser view (tree
configuration) delivered to the client via CD in a read-only format with the ability to export to study specific formats. TMA does not require any software installation and affords our clients and the FDA the ability to review clinical trial data
by: trial, site, patient, visit, and form parameters. Formats available are read-only and print-friendly, with and without audit trails. A PDF version of the above data is also available. All completed forms are delivered on CD, sorted by site,
subject, and visit, in the same configuration as the Browse tab within TrialMaster. The form status icons are displayed in the same manner as a live EDC study.

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 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 TrialMaster Archive product.

TrialMaster
Safety. As part of our clinical suite of clinical trial solutions, we offer TrialMaster Safety as our Pharmacovigilance database. Linked to TrialMaster, TrialMaster Safety accommodates both the MedDRA® and WHO-Drug dictionaries and is HIPAA and 21 CFR Part 11 compliant.

TrialMaster Safety features include:



| |  |  | Provides for the coding and storing of 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provides inventory tracking of trial components and automatic notifications when certain trigger events occur.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Generates electronic Data Clarification Forms (DCFs) / queries to assist faster case closure.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Generates client-requested reports, including investigator notification of expedited safety reports.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Generates and pre-fills MEDWatch forms for US reporting or CIOMS form for reporting in the rest of the world.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Allows electronic reporting of SUSARs and generates listing for annual safety reports in compliance with the European Union Clinical Trials Directive.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Allows for optional use of TrialMasters powerful Ad Hoc reporting tool that offers end-users the ability to develop custom analysis and reports. Ad Hoc can be
integrated into the TrialMaster Safety application, providing a powerful analysis tool for clinicians and or sponsors. By providing this functionality, the end-user is able to query any data variable or group of data contained in the database
and can generate and save custom reports, including charts and graphs, with little knowledge of the underlying databases.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TrialMaster
Version 4.0

TrialMaster V4.0, which was introduced in early 2007, enables us to provide EDC on both an ASP and licensed basis. Version 4.0 incorporates
TrialBuilder which is a more user friendly way to build studies. TrialBuilder which uses drag and drop features and enables us to offer TrialMaster on a Tech Transfer basis since the trial building process does not require software developers or use
complex software coding. Version 4.0 is also built with the Microsoft .Net architecture making it easier to integrate with external applications, such as Oracle Clinical. With V4.0, we now have the ability to offer larger pharmaceutical, CRO,
medical device and governmental clients a migration strategy that will allow them to implement a Technology Transfer model in which they bring the data servers, along with the study set-up and administration in-house.

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



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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 leveraged 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. Companies can therefore significantly decrease the amount of time it takes to set up a clinical trial in their TrialMaster EDC system by leveraging those standards that are defined in their Oracle Clinical global
library.

Services

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



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



| |  |  | System Integration. We help our clients integrate TrialMaster with existing systems or external systems (Patient Diaries, Medical Devices, and Labs etc). We
analyze their 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 TrialMaster. We can also write standard operating procedures (SOPs) 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 TrialMaster system, 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 TrialMaster.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Training.OmniComm provides extensive hands-on TrialMaster training classes. Training classes can be conducted at a sponsor location, at an investigator
meeting, or at an investigator site. OmniComm also offers eLearning and web-driven learning programs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The primary consulting services we
offer for Technology Transfers include:

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.

Configuration and Study Setup.We ensure that the Trial Master set-up is configured optimally to handle the design, capture, and management of site based data. We help our clients design their initial EDC
trial(s) so that common standards and business rules are in place to support the unique challenges that apply to site based data capture and electronicCRF. Ultimately, we believe this will promote reuse of forms and clinical trial procedures and
shorten study setup time for future engagements.

Validation.We offer a validation test kit that includes test cases and documentation to
completely validate the installation of TrialMaster against regulatory requirements.

Industry Background

The EDC industry is poised for widespread adoption over the next few years in both the domestic and international clinical trial market. Industry experts anticipate an
enormous transition towards EDC in the next 5 years with estimates from firms such as CenterWatch and Covance placing EDC use above 60% by the year 2010.



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Furthermore, industry and regulatory trends have led pharmaceutical, biotechnology and medical device companies to
increase R & D for proprietary new drugs and medical devices. These trends have required companies to conduct increasingly complex clinical trials, and develop multinational clinical trial capability, while seeking to control costs.
Concurrently, 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.

In the past two years, the US Food and Drug Administrations (FDA) critical path initiative, the emergence of interoperability standards, and
proliferation of Web-based architectures have made the value of eClinical trials more tangible to trial sponsors and investigators. We believe the pace of eClinical trial adoption will increase because:



| |  | Web-based eClinical products and services provide demonstrable benefits to clinical trial sponsors.
|- |  | ---------------------------------------------------------------------------------------------------



| |  | CROs and vendors pass on cost savings to make electronic trials more attractive.
|- |  | --------------------------------------------------------------------------------



| |  | Real-time Clinical trial metrics and data visibility help streamline clinical studies and can help shorten project timelines.
|- |  | -----------------------------------------------------------------------------------------------------------------------------



| |  | More accurate clinical data improves safety monitoring, and helps improve the decision making process.
|- |  | ------------------------------------------------------------------------------------------------------

We believe that certain 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. These trends have required companies to conduct increasingly complex clinical trials, and develop multinational clinical trial capability, while seeking to control costs.

Increasing Cost Containment Pressures. The increasing pressure to control rising health care costs, and the penetration of managed health care and health
care reform, have caused changes in the pharmaceutical, medical device and biotechnology industries.

Managed Care. Managed care providers
and insurance carriers have become major participants in the delivery of pharmaceuticals along with pharmacy benefits organizations. These companies are seeking to lower and control the prices of drugs and devices.

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.

Growth of Biotechnology Industry. The biotechnology industry and the number of drugs produced by it which require FDA approval have grown substantially
over the past decade.

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

Market Opportunity

Clinical trials are the 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. 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. The data integrity, system reliability, management control and
auditable quality of TrialMaster will aid clinical trial sponsors that want to improve clinical trial efficiencies, speed-up results and ensure regulatory compliance.



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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. A new drug application (NDA) can take up to two years
before the FDA approves it. This is in addition to 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®.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | According to a 2004 Thompson CenterWatch report, the average drug approved for sale by the FDA cost approximately $1.13 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 2001 Tufts University study cite that many factors are driving up
development costs, including a greater emphasis on developing treatments for chronic diseases, the increasing size of trials and the rising cost of recruiting subjects.

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. 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 means of technology delivery 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 EDC solution to integrate with existing technology platforms is a key decision making factor.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Scalability. The ability to scale the EDC 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 EDC 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 EDC 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. EDC 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. EDC vendors will be expected to assimilate best-practice workflows and process tools.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Professional services. The adoption and implementation of EDC 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 EDC offerings will be considered an integral part of any EDC purchase.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market Trends

Industry analysts, including Health
Industry Insights, have identified several important issues driving the EDC marketplace. These trends include:



| |  |  | Spending on EDC solutions is expected to increase at a 14.7% compound annual growth rate (CAGR) and total more than $6.0 billion from 2006  2010.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 2007 was expected to mark a tipping point, as the market we expected to experience a burst in acceleration, from 6.5% to 13.3% in the EDC adoption growth rate.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | By the end of 2007, nearly half (45%) of all new Phase I-III studies will be initiated using EDC.
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | In 2009, EDC spending is expected to exceed $1.5 Billion.
| | - |  | ---------------------------------------------------------



| |  |  | Starting in 2007, enterprise licensing and EDC subscription delivery models, as well as the rise of fierce competition enabled by data interchange standards such as
CDISC, will significantly decrease pricing in large Phase II and Phase III studies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our Customers

As of December 31, 2007, we had approximately 50 customers, including several Fortune 1000 companies and had entered into 55 new business
transactions during fiscal 2007. Our representative customers include pharmaceutical, biotechnology, medical device, academic research institutions, CROs and other clinical trial sponsors. A sample of our customers includes:



|                              |  |                               
|----------------------------- |  | ------------------------------
|Trial Sponsor                 |  | Sponsor Type                  
|Anacor Pharmaceuticals        |  | Pharmaceutical                
|W. L. Gore                    |  | Medical Device                
|Optimer Pharmaceuticals       |  | Biopharmaceutical             
|Columbia University (InChoir) |  | Academic                      
|Catalyst Pharmaceuticals      |  | Contract Research Organization
|Ventracor                     |  | International Medical Device  

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. Our efforts during 2008 will include: increasing the
number of sales personnel employed; increasing our attendance and marketing efforts at industry conferences and increasing our direct sales force in Europe. As of December 31, 2007 our sales and marketing function consisted of eight field sales
personnel and product marketing specialists. In addition, the efforts of our CEO and Chairman are directed at both business development and strategic planning issues.

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 TrialMaster. Our R & D efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of
increased functionality. Our development of TrialMaster and its subsequent improvements and refinements have been handled by our in-house staff of developers. Our philosophy towards software development has been to design and implement all of our
solutions through in-house development. We expect future R & D efforts to be aimed at broadening the scope of TrialMaster functionality. These efforts may include select strategic alliances with best-in-class software and service partners
possessing clinical trial industry experience. During fiscal 2007, we spent approximately $917,000 on R & D activities, the majority of which represented salaries to our developers. In fiscal 2006 we spent approximately $742,000 on R & D
activities, the majority of which represents salaries to our programmers and developers.

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 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. These legal protections afford only limited protection for our technology. We are in the process of
registering several trademarks in the United States. 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



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agreements with employees, consultants and others who participate in development activities could be breached. We may not have adequate remedies for any
breach, and our trade secrets may otherwise become known or independently developed by our competitors or other third parties. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the
United States, and effective copyright, patent, trademark and trade secret protection may not be available in those jurisdictions.

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, such as stock quotes. 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.



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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 applications, clinical data management systems and adverse event reporting software, including:



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



| |  |  | vendors of EDC, clinical trial management systems and adverse event reporting product suites, including Oracle Clinical, a business unit of Oracle Corporation 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, 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. Further, we believe that none of the aforementioned companies have developed an approach to the clinical trial process that is as flexible and customizable as TrialMaster. However, 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.



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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.

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 have entered into a strategic
alliance with a Clinical Research Organization in the Pacific Rim and began operations in Europe through our wholly owned subsidiary OmniComm Europe BV. During 2007, we expanded our European operations by creating a subsidiary in Germany, OmniComm
Europe, GmbH.

Employees

We currently have 82 full
time employees of which four are executives, three are administrative, 67 are programmers, engineers or technology specialists, four are technology and systems managers and eight are in sales and marketing. We employ 65 employees out of our
headquarters in Fort Lauderdale, Florida and seven field sales and marketing employees in California, Pennsylvania, New York, Texas and North Carolina. We also employ a technology specialist in New Jersey. Our wholly-owned subsidiary, OmniComm
Europe, GmbH, employs nine employees in Bonn, Germany. We believe that relations with our employees are good. None of our employees is represented by a collective bargaining agreement.

Available Information

We were incorporated in Delaware in 1997. We currently have an operating subsidiary in Bonn,
Germany and a non-operating subsidiary located in the Netherlands. Our Internet website address is http://www.omnicomm.com. Our Annual Report on Form 10-KSB, Quarterly Reports on Form 10-QSB, 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.



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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 $5,773,469 and $4,764,498 in fiscal 2007 and 2006, respectively.
At December 31, 2007, we had an accumulated deficit of approximately $37,205,619 and a working capital deficit of approximately $2,127,141. 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 2008, 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.

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
| | - |  | ----------------------------------------------



| |  |  | 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.

CHANGES IN REGULATIONS AND REGULATORY GUIDANCE APPLICABLE TO OUR CUSTOMERS OR
POTENTIAL CUSTOMERS AND THE APPROVAL PROCESS FOR THEIR PRODUCTS MAY RESULT IN OUR INABILITY TO CONTINUE TO DO BUSINESS.

Demand for our software
products, services and hosted solutions is largely a function of 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 FDA, and by foreign governments. In recent years, efforts have been made to streamline the FDA approval process and coordinate U.S. standards with those of other developed countries. Any
change in the scope of applicable regulations and regulatory guidance could alter the type or amount of clinical trial spending or negatively impact interest in our software products, services and hosted solutions. Any regulatory reform that limits
or reduces the research and development spending of entities conducting clinical research upon which our business depends could have a material adverse effect on our revenues or gross margins.

In addition, any failure to conform our software products, services and hosted solutions to domestic or international changes in regulations and regulatory guidance
applicable to our customers or potential customers and the approval process for their products may result in our inability to continue to do business. Changing our software products, services and hosted solutions to allow our customers to comply
with future changes in regulation or regulatory guidance, either domestically or internationally, could cause us to incur substantial costs. We cannot assure you that our product and service offerings will allow our customers and potential customers
to stay in compliance with regulations and regulatory guidance as they develop. 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.



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IF ENTITIES ENGAGED IN CLINICAL TRIALS DO NOT SHIFT FROM TRADITIONAL PAPER-BASED METHODS OF COLLECTING CLINICAL TRIAL
DATA TO ELECTRONIC SYSTEMS, WE MAY NOT ACHIEVE THE MARKET PENETRATION NECESSARY TO OBTAIN OR MAINTAIN PROFITABILITY.

If entities engaged in clinical
trials are unwilling to use our EDC solutions or to change the way of collecting clinical trial data, our future growth and market share may be limited. Most clinical trials today rely on pre-printed, three-part paper case report forms for data
collection. Our efforts to establish an electronic process to capture clinical trial data are a significant departure from the traditional paper-based methods of collecting clinical trial data. As is typical for new and rapidly evolving industries,
customer demand for recently introduced technology is highly uncertain. We may not be successful in persuading entities engaged in clinical trials to change the manner in which they have traditionally collected clinical trial data and to accept our
software products, services and hosted solutions. If we fail to convince entities engaged in clinical trials to use our methods of capturing clinical trial data, our revenues may be limited and we may fail to be profitable.

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 $1,676,584 for the quarter ended December 31, 2007 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 TrialMaster achieves or maintains 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.



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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 45% of our revenues during 2007 and approximately 53% of our revenues during 2006. One
customer accounted for 13% and another customer accounted for 10% of our revenues during 2007 or approximately $470,000 and $373,000, respectively. One customer accounted for 24% of our revenues during 2006, or approximately $477,000. 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.

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 insurance coverage 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 AND OUR PRODUCTS AND SERVICES COULD BE SUBJECTED TO GOVERNMENTAL REGULATION, REQUIRING US TO INCUR SIGNIFICANT COMPLIANCE COSTS OR TO CEASE OFFERING OUR PRODUCTS
AND SERVICES.

The clinical trial process is subject to extensive and strict regulation by the FDA, as well as other regulatory authorities worldwide.
Our electronic data capture, management and adverse event reporting products and services could be subjected to state, federal and foreign regulations. We cannot assure you that our products and service offerings will comply with applicable
regulations and regulatory guidelines as they develop. If our products or services fail to comply with any applicable government regulations or guidelines, we could incur significant liability or be forced to cease offering our applicable products
or services. Also, conforming our products and services to any applicable regulations and guidelines could substantially increase our operating expenses.

IF WE ARE UNABLE TO RETAIN OUR PERSONNEL AND HIRE ADDITIONAL SKILLED PERSONNEL, WE MAY BE UNABLE TO ACHIEVE OUR GOALS.

Our future success
depends upon our ability to attract, train and retain highly skilled employees and contract workers, particularly our management team, sales and marketing personnel, professional services personnel and software engineers. Each of our executive
officers and other employees could terminate his or her relationship with us at any time. The loss of any member of our management team might significantly delay or prevent the achievement of our business or development objectives and could
materially harm our business. In addition, because of the technical nature of our software products, services and hosted solutions and the dynamic market in which we compete, any failure to attract and retain qualified direct sales, professional
services and product development personnel, as well as our contract workers, could have a material adverse affect on our ability to generate sales or successfully develop new software products, services and hosted solutions or software enhancements.

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



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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 AND TO DEFEND OURSELVES AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS ASSERTED BY
OTHERS. 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 and trade secret laws to protect our
proprietary rights. Although we intend to protect our rights vigorously, 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.

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.

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.

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 that has placed a significant strain on our operational and financial resources
and our personnel. To manage our 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. We also must attract, integrate, train and retain a significant number of qualified sales and marketing personnel, professional services personnel, software engineers and other management personnel. Our failure
to manage our rapid growth effectively could have a material adverse effect on our business, operating results or financial condition.



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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.

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, 2007 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 will 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.
| | - |  | -----------------------------------------------------------



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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.

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 18, 2008, we had 59,295,066 shares of common stock issued and outstanding and 30,473,460 shares issuable upon the conversion of
preferred stock or exercise of warrants or options. Of these shares, 33,543,713 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 one
year, 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 18, 2008, we had a total of 12,287,310 shares of our common stock underlying options, warrants and other convertible securities and 18,186,149 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.



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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 4,555,374 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.



|ITEM 2. | DESCRIPTION OF PROPERTY
|------- | -----------------------

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 sublease is $271,344 plus sales tax.

Our secondary data site, which serves as our primary disaster recovery location,
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 February 2010. We expect our annual lease payment to be approximately $32,000 plus sales tax.

We maintain a business-continuity site for disaster recovery purposes in Ft. Lauderdale, Florida. We lease from our landlord, Gold Coast 1-Vault, an
office suite and cubicles that will allow us to maintain operations in the event of a disaster. Our annual rental payment is $27,000 plus sales tax. This lease expires in July 2010.

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



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

OmniComm Systems is not currently a party to any
legal proceedings.



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

None.



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PART II



|ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- | --------------------------------------------------------

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 2007 |  |      |      |     |   |     
|1stQuarter  |  | $    | 0.61 |     | $ | 0.48
|2ndQuarter  |  | $    | 0.66 |     | $ | 0.57
|3rdQuarter  |  | $    | 0.71 |     | $ | 0.66
|4thQuarter  |  | $    | 0.71 |     | $ | 0.64
|            |  |     
|Fiscal 2006 |  |      |      |     |   |     
|1stQuarter  |  | $    | 0.54 |     | $ | 0.40
|2ndQuarter  |  | $    | 0.59 |     | $ | 0.54
|3rdQuarter  |  | $    | 0.56 |     | $ | 0.50
|4thQuarter  |  | $    | 0.52 |     | $ | 0.48

On March 19, 2008, the closing price of our common stock as reported on the OTC Bulletin Board was $0.58. At
March 19, 2008 we had approximately 400 shareholders of record; however, we believe that we have in excess of 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.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth securities authorized for issuance under equity compensation plans, including individual compensation arrangements, under our 1998 Incentive Stock Plan as of December 31, 2007.



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|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                         |          
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------- | ---- | --------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                          |  | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a) |  | Weighted averageexercise price ofoutstanding options,warrants and rights(b) |      | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in column(a))(c)
|Equity Compensation plans approved by stockholders:    |  |                                                                                            |  |                                                                             |      |                                                                                                                                         |          
|1998 Stock Incentive Plan                              |  | 9,320,270                                                                                  |  | $                                                                           | 0.52 |                                                                                                                                         | 3,179,730
|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                         |          
|Equity compensation plans not approved by stockholders |  | None                                                                                       |  |                                                                             | n/a  |                                                                                                                                         | None     
|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                         |          
|Total                                                  |  | 9,320,270                                                                                  |  | $                                                                           | 0.52 |                                                                                                                                         | 3,179,730
|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                         |          

Recent Sales of Unregistered Securities

From September 2007 through December 2007, we sold an aggregate of 2,081,773 shares of our common stock to accredited investors resulting in gross proceeds of $1,394,788. This private placement was exempt from
registration under the Securities Act in reliance on Section 4(2) and/or the rules and regulations thereunder including, Rule 506 of Regulation D and or Section 3(a)(9) under the Securities Act. No general solicitation or advertising was
used in connection with this transaction, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption
therefrom. Each purchaser represented that he/she was an accredited investor and was acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. The
investors had full access to, or were otherwise provided with, all relevant information reasonably necessary to evaluate us. Other than Cornelis Wit, our President and Chief Executive Officer and a Director, and Noesis Capital Corp., placement agent
for various offerings of our common stock since 1999, none of the investors were our affiliates. Noesis Capital Corp. converted financial advisory fees of $37,500 and placement agent fees totaling $160,748 into shares of our common stock as part of
this private placement. Noesis Capital Corp., an NASD member firm, acted as placement agent in the offering and as compensation therefore received a commission equal to 8% of the sales made by it, or an aggregate of $95,873. Noesis also received a
warrant to purchase at $0.67 per share, 5% of the shares sold, or 89,434 shares of our common stock, an estimated fair value of $40,749 was calculated for the warrants granted to Noesis Capital Corp. using the Binomial option pricing model.



|ITEM 6. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|------- | ----------------------------------------------------------

General

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

Forward-Looking Statements

Statements contained in this Form 10-KSB 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-KSB regarding matters that are not historical facts, are only
predictions. No assurance can be given that plans for the future will be consummated or that the future results indicated, whether expressed or implied, will be achieved. While sometimes presented with numerical specificity, these plans and
projections and other forward-looking statements are based upon a variety of assumptions, which we consider reasonable, but which nevertheless may not be realized. Because of the number and range of the assumptions underlying our projections and
forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond our reasonable control, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may
occur subsequent to the date of this Form 10-KSB. Therefore, our actual experience and results achieved



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during the period covered by any particular projections or forward-looking statements may differ substantially from those projected. Consequently, the
inclusion of projections and other forward-looking statements should not be regarded as a representation by us or any other person that these plans will be consummated or that estimates and projections will be realized, and actual results may vary
materially. There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate. The Company does not undertake any obligation to update or revise any
forward-looking statement made by it or on its behalf, whether as a result of new information, future events or otherwise.

Overview

We are a healthcare technology company that provides Electronic Data Capture (EDC) solutions and related value-added services to pharmaceutical and
biotechnology companies, Clinical Research Organizations (CRO), and other clinical trial sponsors via our Web-based software, TrialMaster. TrialMaster allows clinical trial sponsors and investigative sites to securely collect, validate,
transmit, and analyze clinical study data including patient histories, patient dosing, adverse events, and other clinical trial information. All of our personnel are involved in the development and marketing of TrialMaster and its related products.

During fiscal 2007 the Company has continued its efforts in executing its strategy. The primary focus of our strategy includes:



| |  |  | Stimulating demand by providing clinical trial Sponsors with high value EDC;
| | - |  | ----------------------------------------------------------------------------



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



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



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



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

According to a
2005 Goldman Sachs report, global R & D expenditures by the pharmaceutical and BioTech industries were approximately $102.6 billion in 2006, with approximately 53% of that amount spent by North American-based pharmaceutical, biotechnology and
medical device companies. Based on a 2002 CenterWatch report approximately 8.5% of total R & D costs are spent on data management. A recent 2007 report by Health Industry Insights states that by the end of 2007, nearly 45% of all new Phase I-III
studies will be initiated using EDC. The report also states that the total addressable market for EDC and eClinical services is expected to grow from approximately $600MM currently to $1.8B in 2010. Our operating focus is first to increase our sales
and marketing capabilities and penetration rate and secondly, to continue developing and improving TrialMaster to ensure our services and products remain an attractive, high-value EDC choice. From 2005 to 2007 we expanded our sales and marketing
team. During 2008 we anticipate continuing to increasing our marketing and sales personnel and will look to aggressively expand the scope of our CRO Preferred Program in order to increase our penetration of the domestic CRO market. During the second
half of fiscal 2007 we established an operation in Germany under a wholly-owned subsidiary. During 2008 we expect to increase our overall marketing and sales presence in Europe as part of our strategic plan.

Our ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through TrialMaster. Our
R & D efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality. During fiscal 2007 and 2006, we spent approximately $917,000 and
$742,000 respectively, on R & D activities, the majority of which represented salaries to our developers which include costs associated with customization of the TrialMaster software for our clients projects.

The Year-ended December 31, 2007 Compared With the Year-ended December 31, 2006

Results of Operations

A summarized version of our results of operations for the years ended December 31, 2007
and December 31, 2006 is included in the table below.



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Summarized Statement of Operations



|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  
|---------------------------------------------- |  | -------------------------------- | ---------- | - | ------------ | ------ | - | ---- | - | ---------- | ------------ |  | ------ | ------- |  | - | ---------- | - |  | ----- | -
|                                               |  | For the years ended December 31, |            |   |              |        |   |      |  
|                                               |  | 2007                             |            |   | % ofRevenues |        |   | 2006 |   |            | % ofRevenues |  |        | $Change |  |   | %Change    |  
|Total revenues                                 |  | $                                | 3,723,841  |   |              |        |   |      | $ | 2,763,039  |              |  |        |         |  | $ | 960,802    |   |  | 34.8  | %
|Cost of sales                                  |  |                                  | 1,033,824  |   |              | 27.8   | % |      |   | 969,323    |              |  | 35.1   | %       |  |   | 64,501     |   |  | 6.7   | %
|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  
|Gross margin                                   |  |                                  | 2,690,017  |   |              | 72.2   | % |      |   | 1,793,716  |              |  | 64.9   | %       |  |   | 896,301    |   |  | 50.0  | %
|Salaries, benefits and related taxes           |  |                                  | 5,886,663  |   |              | 158.1  | % |      |   | 3,986,311  |              |  | 144.3  | %       |  |   | 1,900,352  |   |  | 47.7  | %
|Rent                                           |  |                                  | 342,255    |   |              | 9.2    | % |      |   | 221,817    |              |  | 8.0    | %       |  |   | 120,438    |   |  | 54.3  | %
|Consulting                                     |  |                                  | 320,360    |   |              | 8.6    | % |      |   | 376,152    |              |  | 13.6   | %       |  |   | (55,792    | ) |  | -14.8 | %
|Selling, general and administrative            |  |                                  | 522,565    |   |              | 14.0   | % |      |   | 338,761    |              |  | 12.3   | %       |  |   | 183,804    |   |  | 54.3  | %
|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  
|Total Operating Expenses                       |  |                                  | 7,906,033  |   |              | 212.3  | % |      |   | 5,525,422  |              |  | 200.0  | %       |  |   | 2,380,611  |   |  | 43.1  | %
|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  
|Operating income (loss)                        |  |                                  | (5,216,016 | ) |              | -140.1 | % |      |   | (3,731,706 | )            |  | -135.1 | %       |  |   | (1,484,310 | ) |  | 39.8  | %
|Interest Expense                               |  |                                  | 57,777     |   |              | 1.6    | % |      |   | 509,648    |              |  | 18.4   | %       |  |   | (451,871   | ) |  | -88.7 | %
|Interest income                                |  |                                  | 20,085     |   |              | 0.5    | % |      |   |           |              |  | 0.0    | %       |  |   | 20,085     |   |  | 0.0   | %
|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  
|Net (loss)                                     |  |                                  | (5,253,708 | ) |              | -141.1 | % |      |   | (4,241,354 | )            |  | -153.5 | %       |  |   | (1,012,354 | ) |  | 23.9  | %
|Total preferred stock dividends                |  |                                  | (519,761   | ) |              | -14.0  | % |      |   | (523,144   | )            |  | -18.9  | %       |  |   | 3,383      |   |  | -0.6  | %
|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  
|Net (loss) attributable to common stockholders |  | $                                | (5,773,469 | ) |              | -155.0 | % |      | $ | (4,764,498 | )            |  | -172.4 | %       |  | $ | (1,008,971 | ) |  | 21.2  | %
|                                               |  |                                  |            |   |              |        |   |      |   |            |              |  |        |         |  |   |            |   |  |       |  

Results of Operations

Revenues for the year-ended December 31, 2007 were $3,723,841 compared to $2,763,039 for the year-ended December 31, 2006, an increase of 34.8%. Industry acceptance of EDC continues to increase. Industry estimates from Health
Industry Insights are that EDC was a $300 million market in 2006, with a 20-25% growth rate for the next three-to-five years. TrialMaster is currently sold primarily as an application service provider (ASP) that provides EDC and other
services such as an enterprise management suite which assists its clients in the pharmaceutical, biotechnology and medical device industries in accelerating the completion of clinical trials. As we continue developing TrialMaster and our client
relationships mature we expect some of our clients to deploy TrialMaster on a licensed, rather than ASP hosted basis. TrialMaster contracts provide for pricing that is based on both the size and duration of the clinical trial. Size parameters
include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee based on the previously mentioned factors, and then pay an on-going maintenance fee for the duration of
the clinical trial that provides software, network and site support during the trial. During the year-ended 2007 approximately 63.2% of revenues was generated by trial setup activities, 27.9% was generated from on-going maintenance fees and
approximately 8.9% was generated from fees charged for changes to on-going clinical trial engagements. During the year-ended 2006 we generated 69.6% of revenues from setup fees, 21.3% from on-going maintenance fees and 9.1% from project change
orders. Generally, these contracts will range in duration from one month to several years. Setup fees are generally earned prior to the inception of a trial, however, the revenues will be recognized in accordance with SEC Staff Accounting Bulletin
No. 104 Revenue Recognition which requires that the revenues be recognized ratably over the life of the contract. The maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized
as incurred.

Our top five customers accounted for approximately 45% of our revenues during the year-ended December 31, 2007 and approximately 53% of
our revenues during the year-ended December 31, 2006. One customer accounted for 13% and another accounted for 10% of our revenues during fiscal 2007. One customer accounted individually for 24% of our revenues during fiscal 2006. The loss of
any of these contracts or these customers in the future could adversely affect our results of operations.



27



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Cost of goods sold increased to $1,033,824 for the year-ended December 31, 2007 compared to $969,323 for the
year-ended December 31, 2006, an increase of 6.7%. Cost of goods sold were approximately 27.8% of sales for the year-ended December 31, 2007 compared to 35.1% for the year-ended December 31, 2006. Cost of goods sold relates primarily
to salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Salaries increased during 2007 due to the addition of four additional programmers and two
additional quality analysts as part of our clinical trial operations.

We expect to increase
development programming labor costs on an absolute basis as our trial revenues increase. We expect our cost of goods sold to return to the 25% of sales range during fiscal 2008. 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. In addition, we expect the cost of service for our licensing business to approximate 25% of revenues. TrialMaster V3.0, the current release of our trial-building
software has improved our ability to reduce trial production related costs since it automates many of the trial building functions that were manually performed in prior releases of our software. We expect the release of TrialMaster, (V4.0), which is
available for commercialization, to increase the efficiency of trial building operations by 20 to 25%. V4.0 is being designed using Microsofts .NET framework. Microsoft® .NET is
described by Microsoft as a set of software technologies for connecting information, people, systems, and devices. This new generation of technology is based on Web servicessmall building-block applications that can connect to each other as
well as to other, larger applications over the Internet.

Salaries and related expenses are our biggest expense at 74.5% of total Operating Expenses for
the year-ended December 31, 2007 compared with 72.1% of total Operating Expenses for the year-ended December 31, 2006. Salaries and related expenses totaled $5,886,663 for the year-ended December 31, 2007 compared to $3,986,311 for
the year-ended December 31, 2006, an increase of 47.7%. We currently employ approximately 65 employees out of our Ft. Lauderdale, Florida corporate office, eight out-of-state employees and 9 employees out of a wholly-owned subsidiary in Bonn,
Germany. We expect to increase personnel within our production, project management and quality analysis functions in concert with anticipated increases in TrialMaster clients during fiscal 2008. We will look to selectively add experienced sales and
marketing personnel in fiscal 2008 in an effort to increase our market penetration and to continue broadening our client base. During the years ended December 31, 2007 and December 31, 2006 we incurred $980,823 and $786,703, respectively,
in salary expense in connection with our adoption of SFAS No. 123(R), Share-Based Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires a public
entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. We expect that the adoption of SFAS 123R will continue to have an impact on our results of
operations in the future.

Rent and related expenses increased by $120,438 during the year-ended December 31, 2007 when compared to the year-ended
December 31, 2006. We expanded our corporate office lease that runs through July 2011 to include a total of approximately 10,000 square feet. We established a disaster recovery site at a Cincinnati Bell owned Co-Location facility in Cincinnati,
Ohio and will continue utilizing this facility for the foreseeable future since it is designed to ensure 100% production system up-time and to provide system redundancy. In August 2006, we entered into a lease with Gold Coast 1-Vault in the Ft.
Lauderdale, Florida area. This facility provides us with disaster recovery and business continuity services for our operations. This lease expires in July 2010.

Consulting services expense was $320,360 for the year ended December 31, 2007 compared with $376,152 for the year ended December 31, 2006. Consulting services were comprised of fees paid to consultants for help with developing our
R & D and sales and marketing recruiting programs and in helping us recruit employees in those two functions.

Legal and professional fees totaled
$291,959 for the year-ended December 31, 2007 compared with $233,035 for the year-ended December 31, 2006, an increase of approximately $58,924. Professional fees represent fees paid to our auditors for services rendered on a quarterly and
annual basis in connection with our SEC filings and fees paid to our attorneys in connection with representation in matters involving litigation or for services rendered to us related to securities and SEC related matters. We expect legal and
professional fees to increase during fiscal 2008 in connection with our project aimed at ensuring timely compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Selling, general and administrative expenses (SGA) were $522,565 for the year-ended December 31, 2007 compared to $338,761 for the year-ended December 31, 2006, an increase of 54.3%. These
expenses relate primarily to costs incurred in running our



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office day-to-day and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and
supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. The Company increased its marketing, sales and advertising expenditures by $16,411 for the year-ended December 31, 2007 from
$133,728 for the year-ended December 31, 2006 to $150,139, an increase of approximately 12.3%. We expect SGA expenses to continue increasing as we intensify and extend our selling and marketing efforts.

Interest expense was $57,777 during the year-ended December 31, 2007, including $7,500 in interest expense related to the conversion of our 10% Convertible Notes
that were converted during 2007 compared to $509,648 for the year-ended December 31, 2006, including $195,880 in interest expense related to the conversion of our 10% convertible notes that were converted in 2006, a decrease of $451,871 or
88.7%. Interest paid to related parties was $16,650 during the year ended December 31, 2007 and $328,709 for the year ended December 31, 2006. The decrease in interest expense can be attributed to the conversion in December 2006 of notes
payable totaling $2,924,260 and the conversion in March 2007 of notes payable totaling $865,000. By converting these notes payable the company was able to reduce its annualized interest expense by approximately $341,000 annually offset by the
additional interest expense incurred associated with conversions of the 10% Notes in both years. We evaluate the cost of capital available to us in combination with our overall capital structure in deciding what financing best fulfills our short and
long-term capital needs. During the year-ended December 31, 2006 we issued $700,000 in promissory notes, including $185,000 to our Placement Agent Noesis Capital. The note for $185,000 issue to Noesis Capital included $125,000 in accrued
expenses associated with financial services provided. During the year-ended December 31, 2007, we issued $211,800 in promissory notes.

An aggregate
of $2,924,260 in promissory notes were converted into shares of our common stock in December 2006. Included were notes converted by Cornelis F. Wit, our President and CEO in the amount of $691,501, by Guus van Kesteren, a Director, in the amount of
$439,136 and by Noesis Capital, our Placement Agent and a 5% or greater shareholder, in the amount of $511,910. The interest expense savings associated with these conversions was approximately $263,000 in fiscal 2007.

There were arrearages of $210,574 in 5% Series A Preferred Stock dividends, $39,467 in Series B Preferred Stock dividends and $269,720 in Series C Preferred Stock
dividends for the year-ended December 31, 2007, compared with arrearages of $210,761 in 5% Series A Preferred Stock dividends, $42,663 in Series B Preferred Stock dividends and $269,720 in Series C Preferred Stock dividends for the year-ended
December 31, 2006. We deducted $519,761 and $523,144 from Net Income (Loss) Attributable to Common Stockholders for the year-ended December 31, 2007 and December 31, 2006, respectively, relating to undeclared Series A, B and C
Convertible Preferred Stock dividends.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. We have historically experienced negative cash
flows and have relied on the proceeds from the sale of debt and equity securities to fund our operations. In addition, we have utilized stock-based compensation as a means of paying for consulting and salary related expenses.



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

Liquidity and Capital Resources



|                                                            |  |                  |   |  |                  |   |  |         |  
|----------------------------------------------------------- |  | ---------------- | - |  | ---------------- | - |  | ------- | -
|                                                            |  | December 31,2007 |   |  | December 31,2006 |   |  | Change  |  
|Cash                                                        |  | 481,961          |   |  | 38,254           |   |  | 443,707 |  
|Accounts Receivable, net of allowance for doubtful accounts |  | 769,325          |   |  | 286,708          |   |  | 482,617 |  
|Current Assets                                              |  | 1,288,914        |   |  | 366,988          |   |  | 921,926 |  
|Accounts Payable and accrued expenses                       |  | 681,731          |   |  | 645,375          |   |  | 36,356  |  
|Accrued payroll taxes                                       |  | 14,550           |   |  | 74,766           |   |  | (60,216 | )
|Deferred revenue                                            |  | 2,632,274        |   |  | 1,643,566        |   |  | 988,708 |  
|Convertible notes payable                                   |  | 87,500           |   |  | 100,000          |   |  | (12,500 | )
|Current Liabilities                                         |  | 3,416,055        |   |  | 2,813,707        |   |  | 602,348 |  
|Working Capital (Deficit)                                   |  | (2,127,141       | ) |  | (2,446,719       | ) |  | 319,578 |  



|                                                     |  |                              |   |  |                   |  
|---------------------------------------------------- |  | ---------------------------- | - |  | ----------------- | -
|                                                     |  | Disclosure for theyear ended |  
|                                                     |  | December 31, 2007            |   |  | December 31, 2006 |  
|Net cash provided by (used in) operating activities  |  | (3,594,090                   | ) |  | (2,264,664        | )
|Net cash provided by (used in) investing activities  |  | (322,483                     | ) |  | (228,642          | )
|Net cash provided by financing activities            |  | 4,350,282                    |   |  | 2,523,670         |  
|Net increase (decrease) in cash and cash equivalents |  | 443,707                      |   |  | 28,323            |  

Cash and cash equivalents increased by $443,707 from $38,254 to $481,961 at December 31, 2007. This was the
result of cash provided by financing activities of $4,350,282 offset by cash used in operating activities of approximately $3,594,090 and $322,483 used in investing activities. The significant components of the activity include a loss from
operations of approximately $5,253,708 offset by non-cash transactions of $1,181,332 and approximately $4,350,282 we raised through the issuance of debt and equity securities offset by $322,483 used in investing activities and increases in cash of
$478,286 from changes in working capital accounts.

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

Presently, we have approximately $450,000 planned for capital
expenditures to further the Companys growth during fiscal 2008 which will be funded through cash from operations.

Contractual Obligations

The following table sets forth our contractual obligations during the next five years as of December 31, 2007:



|                                 |  |                        |  |                 |     |  |          |     |  |          |  |         
|-------------------------------- |  | ---------------------- |  | --------------- | --- |  | -------- | --- |  | -------- |  | --------
|                                 |  | Payments Due by Period
|Contractual Obligations          |  | Total                  |  | Less than1 year |     |  | 1-2Years |     |  | 2-3Years |  | 3-5Years
|Long Term Debt (1)               |  | 384,300                |  | 87,500          | (2) |  | 296,800  | (3) |  | 0        |  | 0       
|Operating Lease Obligations      |  | 1,016,625              |  | 294,623         |     |  | 274,396  |     |  | 280,086  |  | 167,520 
|Financial Advisory Agreement (4) |  | 180,000                |  | 90,000          |     |  | 90,000   |     |  | 0        |  | 0       
|                                 |  |                        |  |                 |     |  |          |     |  |          |  |         
|Total                            |  | 1,580,925              |  | 472,123         |     |  | 661,196  |     |  | 280,086  |  | 167,520 
|                                 |  |                        |  |                 |     |  |          |     |  |          |  |         



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

|2. | Includes $87,500 of convertible notes currently in default and due that are convertible into shares of common stock at the option of the debenture holder at a conversion rate of
$1.25 per share.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. | Relates to Financial Advisory fees paid to Noesis Capital Corp., our Placement Agent and a 5% shareholder in our Company.
|-- | -------------------------------------------------------------------------------------------------------------------------

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

We are
currently in arrears on principal and interest payments owed totaling $152,330 on our 10% Convertible Notes. We were in default effective January 30, 2002.

We have been operating with a cash burn rate since beginning our EDC operations. From January 2006 to December 2007, an aggregate of 8,650,000 common stock warrants originally issued in connection with private placements of our Series B and
Series C Preferred stock and with a round of financing involving our common stock that occurred in 2005 were exercised on a cash basis. An additional 6.4 million warrants issued in the private placement of our Series B Preferred Stock were
exercised on a cashless basis providing us with no cash proceeds. The gross proceeds of the warrant exercises were $2,162,500 and we incurred no transaction fees in connection with the warrant exercise transactions. From March 2006 to December 2006
an aggregate of 834,500 shares of common stock were issued in connection with the exercise of employee stock options resulting in gross proceeds of $223,375. From January 2007 to December 2007 an aggregate of 595,364 shares of common stock were
issued in connection with the exercise of employee stock options resulting in gross proceeds of $113,267. From February 2007 to March 2007, an aggregate of 5,000,000 shares of common stock were sold in connection with a private placement of our
common stock. The gross proceeds of the private placement were $2,500,000 and we incurred no transaction fees in connection with the private placement. From September 2007 to December 2007, an aggregate of 2,081,773 shares of our common stock were
sold in connection with a private placement of our common stock to accredited investors resulting in gross proceeds of $1,394,788. We incurred approximately $95,873 in fees in connection with the private placement.

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

We experienced increased success in marketing TrialMaster between fiscal 2005 and 2007. We entered into approximately $21.0
million in contracts during those fiscal years for trials to be serviced over the next five years. These contracts included 74 clinical trial engagements with 24 new clients. These contracts may however, be terminated by our clients at any time. Our
focus continues to include increasing our penetration of all phases of the clinical trial market with a continued emphasis on becoming the market leader in Phase I EDC services. We believe this market is an operating and strategic strength of the
Company due to the inherent flexibility that our Phase I TrialMaster product provides us. We believe we have the ability to produce trials more quickly and economically than our competitors for this specialized and large market. During fiscal 2008,
we will continue commercializing our products on a licensed basis and expect to experience increased success in penetrating the market for larger pharmaceutical, bio-technology and medical device clinical trial sponsors. Our clients will be able to
partially or completely license TrialMaster. This business model provides our clients a more cost efficient means of deploying our EDC solutions on a large-scale basis. Our licensed products, falling under the auspices of either a Tech Transition
(partial transfer with some services performed by OmniComm) or Tech Transfer, will allow us to broaden our potential client base, provides us with a high-margin revenue source and affords us the ability to improve our competitive position within the
EDC industry. Additionally, we continue to focus on adding CROs as strategic and marketing



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partners. There is an industry-wide emphasis in establishing strategic relationships with CROs. These relationships provide marketing leverage in the form of
joint marketing and sales efforts and provide an installed base of trained TrialMaster users. This installed base of users increases our ability to provide rapidly developed, cost effective solutions for our clients.

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 2008. We expect to continue increasing the level of resources deployed in our sales and marketing efforts. We feel that a combination of our lean operating environment and increased success in new client acquisition, coupled with our
ability to retain our existing clients will allow us to compete effectively within the EDC market.

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

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

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

Our ability to continue in existence is dependent on our having sufficient financial resources to bring products and services to market. As a result of
our significant losses, negative cash flows from operations, and accumulated deficits for the periods ending December 31, 2007, there is doubt about our ability to continue as a going concern. In addition, our auditors Greenberg and Company,
LLC, included language which qualified their opinion regarding our ability to continue as a going concern in their report dated February 8, 2008.

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.



32



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

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

Deferred Revenue

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

Revenue Recognition Policy

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

The Company recognizes sales, for both financial statement and tax purposes in
accordance with SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB 101). SAB 101 requires that revenues be recognized ratably over the life of a contract. In accordance with SAB 101
the Company will record revenues over the estimated lives of the contracts.

Stock Based Compensation.

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

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No (SFAS) 141 (revised 2007),
Business Combinations, which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and the goodwill
acquired. SFAS 141R also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of the business combination. SFAS 141R is effective as of the beginning of an entitys fiscal year that begins
after December 15, 2008 and will be adopted by the Company in the first quarter of fiscal 2009. While the Company expects that SFAS 141R may have an impact on accounting for business combinations once adopted, the effect is dependent upon
acquisitions occurring.



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In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS
159 was issued to allow entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, SFAS 159 specifies that unrealized gains and losses for that instrument shall be reported in earnings at each subsequent reporting date. SFAS 159 is effective
January 1, 2008. The Company does not believe the adoption of SFAS 159 will have a material impact on the consolidated financial statements.

In
September 2006, the FASB issued SFAS 157, Fair Value Measurements, 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 157 is effective January 1, 2008. The Company does not believe the adoption of SFAS 157 will have a material impact on the consolidated financial statements.



|ITEM 7. | FINANCIAL STATEMENTS
|------- | --------------------

Our financial statements are set forth on
Pages F-1 through F-30 attached hereto.



|ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|ITEM 8A(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-KSB, being December 31, 2007, the
Companys principal executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange
Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.

Managements Report on Internal Control over Financial Reporting

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

Management assessed the effectiveness of
OmniComms internal control over financial reporting as of December 31, 2007. 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, 2007.

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-KSB. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.



34



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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 8B. | OTHER INFORMATION
|-------- | -----------------

None.

PART III



|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|------- | -------------------------------------------------------------------------------------------------------------------------------------

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 2008 Annual Meeting of Stockholders to be held on June 27, 2008 (the
Proxy Statement).



|ITEM 10. | 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 11. | 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-B is incorporated by reference from the information contained in the section captioned 1998 Stock Incentive Plan in the Proxy Statement.



|ITEM 12. | 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.



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##### Table of Contents

|ITEM 13. | EXHIBITS
|-------- | --------

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)                                         
|            | 
|10.3        |  | 1998 Stock Incentive Plan (16)                                                                                                         
|            | 
|10.4        |  | Medical Advisory Board Agreement (17)                                                                                                  
|            | 
|10.5        |  | Standard Agreement  Proprietary Protection (18)                                                                                       



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##### Table of Contents

|      |  |                                                                                                                                                                                              
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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)                                              
|      | 
|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.                   



37



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##### Table of Contents

|     |  |                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|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-KSB 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.
|---- | --------------------------------------------------------------------------------------------------------------------

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

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

|(13) | Incorporated by reference to Exhibit 3.9 filed with our Annual Report on Form 10-KSB 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.
|---- | ---------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(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-QSB for the period ended June 30, 2002.
|---- | --------------------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to Exhibit 10.8 filed with our Annual Report on Form 10-KSB 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-QSB for the period ended September 30, 2004.
|---- | -------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

|(38) | Incorporated by reference to Exhibit 10.1 filed with our Form 10-QSB 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-KSB dated December 31, 2005.
|---- | ----------------------------------------------------------------------------------------------

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

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



39



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##### Table of Contents

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

The information required
in response to this item is incorporated by reference from the information contained in the section captioned Ratification of the Appointment of Greenberg & Co., LLC as Independent Auditors for OmniComm Systems in the Proxy
Statement.



40



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##### Table of Contents

SIGNATURES

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



OMNICOMM SYSTEMS, INC.By:

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

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


In accordance with the Exchange Act, 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, 2008
|                                        |  |                                                            
|/s/ Randall G. Smith Randall G. Smith   |  | Chairman, Chief Technology Officer                          |  | March 31, 2008
|                                        |  |                                                            
|/s/ Ronald T. Linares Ronald T. Linares |  | Chief (Principal) Accounting and Financial Officer          |  | March 31, 2008
|                                        |  |                                                            
|/s/ Guus van Kesteren Guus van Kesteren |  | Director                                                    |  | March 31, 2008
|                                        |  |                                                            
|/s/ Matthew D. Veatch Matthew D. Veatch |  | Director                                                    |  | March 31, 2008
|                                        |  |                                                            
|/s/ Fernando Montero Fernando Montero   |  | Director                                                    |  | March 31, 2008



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##### Table of Contents

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, 2007 and 2006, 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, 2007. 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, 2007 and 2006, 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 8, 2008, except for Note 15, as to
which the date is March 4, 2008



F-1



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                                                      |  | December 31,2007 |             |   | December 31,2006 |  
|ASSETS                                                                                                                                                                                                                |  |                  |             |   |                  |   |             |  
|CURRENT ASSETS                                                                                                                                                                                                        |  |                  |             |   |                  |   |             |  
|Cash                                                                                                                                                                                                                  |  | $                | 481,961     |   |                  | $ | 38,254      |  
|Accounts receivable, net of allowance for doubtful accounts of $2,586 and $58,539 in 2007 and 2006, respectively                                                                                                      |  |                  | 769,325     |   |                  |   | 286,708     |  
|Prepaid expenses                                                                                                                                                                                                      |  |                  | 37,628      |   |                  |   | 42,026      |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|Total current assets                                                                                                                                                                                                  |  |                  | 1,288,914   |   |                  |   | 366,988     |  
|PROPERTY AND EQUIPMENT, net                                                                                                                                                                                           |  |                  | 434,699     |   |                  |   | 199,931     |  
|                                                                                                                                                                                                                      |  |                 
|OTHER ASSETS                                                                                                                                                                                                          |  |                  |             |   |                  |   |             |  
|Intangible assets                                                                                                                                                                                                     |  |                  | 2,285       |   |                  |   | 2,686       |  
|Other assets                                                                                                                                                                                                          |  |                  | 16,229      |   |                  |   | 12,937      |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL ASSETS                                                                                                                                                                                                          |  | $                | 1,742,127   |   |                  | $ | 582,542     |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |                 
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                        |  |                  |             |   |                  |   |             |  
|CURRENT LIABILITIES                                                                                                                                                                                                   |  |                  |             |   |                  |   |             |  
|Accounts payable and accrued expenses                                                                                                                                                                                 |  | $                | 681,731     |   |                  | $ | 645,375     |  
|Accrued payroll taxes                                                                                                                                                                                                 |  |                  | 14,550      |   |                  |   | 74,766      |  
|10% Convertible Notes                                                                                                                                                                                                 |  |                  | 87,500      |   |                  |   | 100,000     |  
|Notes payable  current portion                                                                                                                                                                                       |  |                  | -0-         |   |                  |   | 350,000     |  
|Deferred revenue                                                                                                                                                                                                      |  |                  | 2,632,274   |   |                  |   | 1,643,566   |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|Total current liabilities                                                                                                                                                                                             |  |                  | 3,416,055   |   |                  |   | 2,813,707   |  
|NOTES PAYABLE, net of current portion                                                                                                                                                                                 |  |                  | 111,800     |   |                  |   | 415,000     |  
|NOTES PAYABLE RELATED PARTY, net of current portion                                                                                                                                                                   |  |                  | 185,000     |   |                  |   | 185,000     |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL LIABILITIES                                                                                                                                                                                                     |  |                  | 3,712,855   |   |                  |   | 3,413,707   |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|COMMITMENTS AND CONTINGENCIES (See Note 9)                                                                                                                                                                            |  |                  |             |   |                  |   |             |  
|                                                                                                                                                                                                                      |  |                 
|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, 48,000 and 50,000 issued and outstanding, respectively;
liquidation preference $480,000 and $500,000, respectively                |  |                  | 48          |   |                  |   | 50          |  
|Series C convertible preferred stock, - $.001 par value. 747,500 shares authorized, 337,150 and 337,150 issued and outstanding, respectively;
liquidation preference $3,371,500 and $3,371,500, respectively          |  |                  | 337         |   |                  |   | 337         |  
|5% Series A convertible preferred stock - $0.001 par value, 5,000,000 shares authorized; 4,170,224 and 4,215,224 issued and outstanding,
respectively; liquidation preference $4,170,224 and $4,215,224, respectively |  |                  | 4,170       |   |                  |   | 4,215       |  
|Common stock  150,000,000 shares authorized, 59,032,598 and 47,972,091 issued and outstanding, after deducting 802,612 and 773,878
shares of treasury stock, at $.001 par value, respectively                        |  |                  | 59,786      |   |                  |   | 48,697      |  
|Additional paid in capital  preferred                                                                                                                                                                                |  |                  | 7,638,549   |   |                  |   | 7,703,502   |  
|Additional paid in capital  common                                                                                                                                                                                   |  |                  | 27,893,433  |   |                  |   | 21,719,097  |  
|Stock subscription receivable                                                                                                                                                                                         |  |                  | -0-         |   |                  |   | (1,250      | )
|Accumulated other comprehensive loss                                                                                                                                                                                  |  |                  | 7,957       |   |                  |   | (2,041      | )
|Less: Treasury stock, cost method, 802,612 and 773,878 shares, respectively                                                                                                                                           |  |                  | (369,389    | ) |                  |   | (351,861    | )
|Accumulated deficit                                                                                                                                                                                                   |  |                  | (37,205,619 | ) |                  |   | (31,951,911 | )
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                  |  |                  | (1,970,728  | ) |                  |   | (2,831,165  | )
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                                  |  | $                | 1,742,127   |   |                  | $ | 582,542     |  
|                                                                                                                                                                                                                      |  |                  |             |   |                  |   |             |  

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



F-2



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                 |  |                                 |            |   |      |   |            |  
|---------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | For the years endedDecember 31, |           
|                                                                 |  | 2007                            |            |   | 2006 |  
|Total revenues                                                   |  | $                               | 3,723,841  |   |      | $ | 2,763,039  |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Cost of sales                                                    |  |                                 | 1,033,824  |   |      |   | 969,323    |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Gross margin                                                     |  |                                 | 2,690,017  |   |      |   | 1,793,716  |  
|                                                                 |  |                                
|Operating expenses                                               |  |                                 |            |   |      |   |            |  
|Salaries, benefits and related taxes                             |  |                                 | 5,886,663  |   |      |   | 3,986,311  |  
|Rent & occupancy expenses                                        |  |                                 | 342,255    |   |      |   | 221,817    |  
|Consulting services                                              |  |                                 | 320,360    |   |      |   | 376,152    |  
|Legal and professional fees                                      |  |                                 | 291,959    |   |      |   | 233,035    |  
|Travel                                                           |  |                                 | 324,676    |   |      |   | 222,419    |  
|Telephone and internet                                           |  |                                 | 131,786    |   |      |   | 91,027     |  
|Selling, general and administrative                              |  |                                 | 522,565    |   |      |   | 338,761    |  
|Depreciation and amortization                                    |  |                                 | 85,769     |   |      |   | 55,900     |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Total operating expenses                                         |  |                                 | 7,906,033  |   |      |   | 5,525,422  |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Operating income (loss)                                          |  |                                 | (5,216,016 | ) |      |   | (3,731,706 | )
|                                                                 |  |                                
|Other income (expense)                                           |  |                                 |            |   |      |   |            |  
|Interest expense                                                 |  |                                 | (57,777    | ) |      |   | (509,648   | )
|Interest income                                                  |  |                                 | 20,085     |   |      |   | -0-        |  
|                                                                 |  |                                 |            |   |      |   |            |  
|(Loss) before taxes and preferred dividends                      |  |                                 | (5,253,708 | ) |      |   | (4,241,354 | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Net income (loss)                                                |  |                                 | (5,253,708 | ) |      |   | (4,241,354 | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Preferred stock dividends in arrears Series A Preferred          |  |                                 | (210,574   | ) |      |   | (210,761   | )
|Preferred stock dividends in arrears Series B Preferred          |  |                                 | (39,467    | ) |      |   | (42,663    | )
|Preferred stock dividends in arrears Series C Preferred          |  |                                 | (269,720   | ) |      |   | (269,720   | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Total preferred stock dividends                                  |  |                                 | (519,761   | ) |      |   | (523,144   | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Net income (loss) attributable to common stockholders            |  | $                               | (5,773,469 | ) |      | $ | (4,764,498 | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Net (loss) per share, basic and diluted                          |  | $                               | (0.10      | ) |      | $ | (0.14      | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Weighted average number of shares outstanding, basic and diluted |  |                                 | 55,545,968 |   |      |   | 34,936,930 |  
|                                                                 |  |                                 |            |   |      |   |            |  

See accompanying summary of accounting policies and notes to financial statements



F-3



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##### Table of Contents

OMNICOMM SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND DECEMBER 31, 2006



|                                                                                           |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                           |  | 2007 |            |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                       |  |      |            |   |      |   |            |  
|Net income (loss)                                                                          |  | $    | (5,253,708 | ) |      | $ | (4,241,354 | )
|Adjustment to reconcile net income to net cash provided by (used in) operating activities: |  |      |            |   |      |   |            |  
|Common stock issued on cashless exercise of options                                        |  |      | (6,311     | ) |      |   | (26,914    | )
|Common stock issued for services                                                           |  |      | 37,500     |   |      |   | 40,000     |  
|Common stock issued for accrued interest                                                   |  |      | 76,051     |   |      |   | 280,438    |  
|Note payable issued for accrued expenses                                                   |  |      | -0-        |   |      |   | 185,000    |  
|Employee stock option expense                                                              |  |      | 980,823    |   |      |   | 786,703    |  
|Warrants exercised in exchange for accrued expense                                         |  |      | -0-        |   |      |   | 80,750     |  
|Depreciation and amortization                                                              |  |      | 85,769     |   |      |   | 55,900     |  
|Interest expense from beneficial conversion of 10% Convertible Notes                       |  |      | 7,500      |   |      |   | 195,880    |  
|Change in assets and liabilities:                                                          |  |      |            |   |      |   |            |  
|Accounts receivable                                                                        |  |      | (482,617   | ) |      |   | (50,626    | )
|Prepaid expenses                                                                           |  |      | 4,398      |   |      |   | (39,632    | )
|Other assets                                                                               |  |      | (2,891     | ) |      |   | (7,440     | )
|Accounts payable and accrued expenses                                                      |  |      | (29,312    | ) |      |   | (118,228   | )
|Deferred revenue                                                                           |  |      | 988,708    |   |      |   | 594,859    |  
|                                                                                           |  |      |            |   |      |   |            |  
|Net cash provided by (used in) operating activities                                        |  |      | (3,594,090 | ) |      |   | (2,264,664 | )
|                                                                                           |  |      |            |   |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                       |  |      |            |   |      |   |            |  
|Sale of property and equipment                                                             |  |      | -0-        |   |      |   | 2,500      |  
|Investment in intangible assets                                                            |  |      | -0-        |   |      |   | (3,065     | )
|Purchase of property and equipment                                                         |  |      | (322,483   | ) |      |   | (228,077   | )
|                                                                                           |  |      |            |   |      |   |            |  
|Net cash provided by (used in) investing activities                                        |  |      | (322,483   | ) |      |   | (228,642   | )
|                                                                                           |  |      |            |   |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                       |  |      |            |   |      |   |            |  
|Proceeds from issuance of common stock, net of issuance costs                              |  |      | 4,023,965  |   |      |   | 1,806,845  |  
|Proceeds from exercise of employee stock options                                           |  |      | 113,267    |   |      |   | 223,375    |  
|Stock subscription receivable                                                              |  |      | 1,250      |   |      |   | (1,250     | )
|Repayments of notes payable                                                                |  |      | -0-        |   |      |   | (20,300    | )
|Proceeds from notes payable                                                                |  |      | 211,800    |   |      |   | 515,000    |  
|                                                                                           |  |      |            |   |      |   |            |  
|Net cash provided by (used in) financing activities                                        |  |      | 4,350,282  |   |      |   | 2,523,670  |  
|                                                                                           |  |      |            |   |      |   |            |  
|Effect of exchange rate change on cash and cash equivalents                                |  |      | 9,998      |   |      |   | (2,041     | )
|Net increase (decrease) in cash and cash equivalents                                       |  |      | 443,707    |   |      |   | 28,323     |  
|Cash and cash equivalents at beginning of period                                           |  |      | 38,254     |   |      |   | 9,931      |  
|                                                                                           |  |      |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                                 |  | $    | 481,961    |   |      | $ | 38,254     |  
|                                                                                           |  |      |            |   |      |   |            |  



F-4



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##### Table of Contents

OMNICOMM SYSTEM, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND DECEMBER 31, 2006

(continued)



|                                                                     |  |                                 |         |      |   |          
|-------------------------------------------------------------------- |  | ------------------------------- | ------- | ---- | - | ---------
|                                                                     |  | For the years endedDecember 31,
|                                                                     |  | 2007                            |         | 2006
|Supplemental Disclosure of Cash Flow Information:                    |  |                                 |         |      |   |          
|Cash paid during the period for:                                     |  |                                 |         |      |   |          
|Income tax                                                           |  | $                               | -0-     |      | $ | -0-      
|                                                                     |  |                                 |         |      |   |          
|Interest                                                             |  | $                               | 10,400  |      | $ | 13,130   
|                                                                     |  |                                 |         |      |   |          
|Non-cash Transactions                                                |  |                                 |         |      |   |          
|Conversion of 10% Notes Payable into common stock                    |  | $                               | 12,500  |      | $ | 25,000   
|Accrued interest converted into common stock                         |  | $                               | 68,552  |      | $ | 280,438  
|Common stock issued in exchange for notes payable                    |  | $                               | 926,782 |      | $ | 2,924,260
|Conversion of Series B Preferred Stock into common stock             |  | $                               | 20,000  |      | $ | 150,000  
|Common stock tendered in exercise of incentive stock options         |  | $                               | 17,528  |      | $ | 52,000   
|Notes payable issued for accrued expenses                            |  | $                               | -0-     |      | $ | 185,000  
|Common stock issued for services in lieu of pay                      |  | $                               | 205,747 |      | $ | 40,000   
|Conversion of series B common stock warrants on a cashless basis     |  | $                               | -0-     |      | $ | 1,600,000
|Exercise of series B placement agent unit option on a cashless basis |  | $                               | -0-     |      | $ | 557,013  
|Conversion of Series A preferred stock into shares of common stock   |  | $                               | 45,000  |      | $ | -0-      

See accompanying summary of accounting policies and notes to financial statements



F-5



---

##### Table of Contents

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (DEFICIT)

FOR THE PERIOD JANUARY 1, 2006 TO
DECEMBER 31, 2007



|                                                                                |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|------------------------------------------------------------------------------- |  | --------------- | - | ------------------------ | ---------------- |  | --------------- | - |  | ----------------------- | - |  | ------------------------ | - |  | --------------- | - |  | ---------------- | - |  | ------------------------ | - |  | -------- | -
|                                                                                |  |                 |   |                          |                  |  |                 |   |  | Preferred Stock         |  
|                                                                                |  |                 |   |                          |                  |  |                 |   |  | 5% Series A Convertible |   |  | 8% Series B Convertible  |  
|                                                                                |  | Common Stock    |   | AdditionalPaid InCapital |                  |  | Numberof Shares |   |  | $ 0.001Par Value        |   |  | AdditionalPaid InCapital |   |  | Numberof Shares |   |  | $ 0.001Par Value |   |  | AdditionalPaid InCapital |  
|                                                                                |  | Numberof Shares |   |                          | $ 0.001Par Value |  |                 |   |  |                         |   | 
|Balances at December 31, 2005                                                   |  | 27,425,915      |   |                          | 28,051           |  | 15,201,406      |   |  | 4,215,224               |   |  | 4,215                    |   |  | 3,807,964       |   |  | 65,000           |   |  | 65                       |   |  | 361,453  |  
|                                                                                |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Conversion of Warrants                                                          |  | 7,240,000       |   |                          | 7,240            |  | 1,800,079       |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Conversion of Series B Preferred Stock                                          |  | 600,000         |   |                          | 600              |  | 149,400         |   |  |                         |   |  |                          |   |  |                 |   |  | (15,000          | ) |  | (15                      | ) |  | (149,985 | )
|Conversion of Placement Agent Unit Options                                      |  | 1,138,139       |   |                          | 1,138            |  | (1,138          | ) |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Conversion of warrants - cashless exercise                                      |  | 3,537,232       |   |                          | 3,537            |  | (3,537          | ) |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Exercise of employee stock options                                              |  | 1,248,410       |   |                          | 1,248            |  | 246,739         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock issued for notes payable and accrued interest                      |  | 6,409,395       |   |                          | 6,410            |  | 3,198,288       |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock tendered in exercise of incentive stock options                    |  | (100,000        | ) |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock issued in conversion of 10% Convertible Notes Payable              |  | 50,000          |   |                          | 50               |  | 24,950          |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock warrants exercised for accrued expenses                            |  | 323,000         |   |                          | 323              |  | 80,427          |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock issued in lieu of wages                                            |  | 100,000         |   |                          | 100              |  | 39,900          |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Beneficial conversion of 10% Convertible Note Payable and common stock warrants |  |                 |   |                          |                  |  | 195,880         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Employee stock option expense                                                   |  |                 |   |                          |                  |  | 786,703         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Foreign currency translation adjustment                                         |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Net loss for the period ended December 31, 2006                                 |  |                |   |                          |                 |  |                |   |  |                        |   |  |                         |   |  |                |   |  |                 |   |  |                         |   |  |         |  
|                                                                                |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Balances at December 31, 2006                                                   |  | 47,972,091      |   |                          | 48,697           |  | 21,719,097      |   |  | 4,215,224               |   |  | 4,215                    |   |  | 3,807,964       |   |  | 50,000           |   |  | 50                       |   |  | 211,468  |  
|                                                                                |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Conversion of Warrants                                                          |  | 1,410,000       |   |                          | 1,410            |  | 351,056         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Issuance of common stock                                                        |  | 6,785,881       |   |                          | 6,786            |  | 3,729,589       |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Exercise of employee stock options                                              |  | 595,364         |   |                          | 595              |  | 123,989         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock issued for notes payable and accrued interest                      |  | 1,853,563       |   |                          | 1,853            |  | 860,053         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock tendered in exercise of incentive stock options                    |  | (28,734         | ) |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Common stock issued in conversion of 10% Convertible Notes Payable              |  | 38,541          |   |                          | 39               |  | 26,732          |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Beneficial conversion of 10% Convertible Note Payable and common stock warrants |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Employee stock option expense                                                   |  |                 |   |                          |                  |  | 980,823         |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Foreign currency translation adjustment                                         |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Collection on subscription receivable                                           |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Conversion of Series B Preferred Stock                                          |  | 80,000          |   |                          | 80               |  | 19,920          |   |  |                         |   |  |                          |   |  |                 |   |  | (2,000           | ) |  | (2                       | ) |  | (19,998  | )
|Common stock issued for accrued expenses                                        |  | 295,892         |   |                          | 296              |  | 37,204          |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Conversion of Series A Preferred stock into common stock                        |  | 30,000          |   |                          | 30               |  | 44,970          |   |  | (45,000                 | ) |  | (45                      | ) |  | (44,955         | ) |  |                  |   |  |                          |   |  |          |  
|Net loss for the period ended December 31, 2007                                 |  |                 |   |                          |                  |  |                 |   |  |                         |   |  |                          |   |  |                 |   |  |                  |   |  |                          |   |  |          |  
|Balances at December 31, 2007                                                   |  | 59,032,598      |   |                          | 59,786           |  | 27,893,433      |   |  | 4,170,224               |   |  | 4,170                    |   |  | 3,763,009       |   |  | 48,000           |   |  | 48                       |   |  | 191,470  |  





|                                                                                |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  
|------------------------------------------------------------------------------- |  | ----------------------- |  | ---------------- | --- | ------------------------ | - | ------------------ |  | - | -------------------- | - |  | ---------------------- | -- | - | ----------------------------------- | - | ------ | ------------- |  | - | --------------------------------- | - |  | - | -------- | - |  | - | ---------- | -
|                                                                                |  | Preferred Stock         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |              
|                                                                                |  | 8% Series C Convertible |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |              
|                                                                                |  | NumberofShares          |  | $ 0.001Par Value |     | AdditionalPaid InCapital |   | AccumulatedDeficit |  |   | DeferredCompensation |   |  | SubscriptionReceivable |    |   | AccumulatedOtherComprehensiveIncome |   |        | TreasuryStock |  |   | TotalShareholdersEquity(Deficit) |  
|                                                                                |  |                         |  |                  |     |                          |   |                    | 
|Balances at December 31, 2005                                                   |  | 337,150                 |  |                  | 337 |                          |   | 3,684,070.49       |  |   | (27,710,557          | ) |  |                        | (0 | ) |                                     |   | (0     | )             |  |   |                                  |   |  |   | (299,861 | ) |  |   | (4,922,856 | )
|                                                                                |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  
|Conversion of Warrants                                                          |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |       |               |  |   |                                   |   |  |   |          |   |  |   | 1,807,319  |  
|Conversion of Series B Preferred Stock                                          |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |           |  
|Conversion of Placement Agent Unit Options                                      |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |           |  
|Conversion of warrants - cashless exercise                                      |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |           |  
|Exercise of employee stock options                                              |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   | (1,250 | )             |  |   |                                   |   |  |   |          |   |  |   | 246,737    |  
|Common stock issued for notes payable and accrued interest                      |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 3,204,697  |  
|Common stock tendered in exercise of incentive stock options                    |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   | (52,000  | ) |  |   | (52,000    | )
|Common stock issued in conversion of 10% Convertible Notes Payable              |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 25,000     |  
|Common stock warrants exercised for accrued expenses                            |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 80,750     |  
|Common stock issued in lieu of wages                                            |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 40,000     |  
|Beneficial conversion of 10% Convertible Note Payable and common stock warrants |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 195,880    |  
|Employee stock option expense                                                   |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 786,703    |  
|Foreign currency translation adjustment                                         |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   | (2,041                            | ) |  |   |          |   |  |   | (2,041     | )
|Net loss for the period ended December 31, 2006                                 |  |                        |  |                  |    |                          |   |                   |  |   | (4,241,354           | ) |  |                        |   |   |                                     |   |       |               |  |   |                                  |   |  |   |         |   |  |   | (4,241,354 | )
|                                                                                |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  
|Balances at December 31, 2006                                                   |  | 337,150                 |  |                  | 337 |                          |   | 3,684,070          |  |   | (31,951,911          | ) |  |                        | (0 | ) |                                     |   | (1,250 | )             |  |   | (2,041                            | ) |  |   | (351,861 | ) |  |   | (2,831,165 | )
|                                                                                |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  
|Conversion of Warrants                                                          |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 352,466    |  
|Issuance of common stock                                                        |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   | 0      |               |  |   |                                   |   |  |   |          |   |  |   | 3,736,374  |  
|Exercise of employee stock options                                              |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 124,584    |  
|Common stock issued for notes payable and accrued interest                      |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 861,907    |  
|Common stock tendered in exercise of incentive stock options                    |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   | (17,528  | ) |  |   | (17,528    | )
|Common stock issued in conversion of 10% Convertible Notes Payable              |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 26,771     |  
|Beneficial conversion of 10% Convertible Note Payable and common stock warrants |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |           |  
|Employee stock option expense                                                   |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 980,823    |  
|Foreign currency translation adjustment                                         |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   | 9,998                             |   |  |   |          |   |  |   | 9,998      |  
|Collection on subscription receivable                                           |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   | 1,250  |               |  |   |                                   |   |  |   |          |   |  |   | 1,250      |  
|Conversion of Series B Preferred Stock                                          |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |           |  
|Common stock issued for accrued expenses                                        |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | 37,500     |  
|Conversion of Series A Preferred stock into common stock                        |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  
|Net loss for the period ended December 31, 2007                                 |  |                         |  |                  |     |                          |   |                    |  |   | (5,253,708           | ) |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   | (5,253,708 | )
|                                                                                |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  
|Balances at December 31, 2007                                                   |  | 337,150                 |  | $                | 337 |                          | $ | 3,684,070          |  | $ | (37,205,619          | ) |  | $                      | (0 | ) |                                     | $ | (0     | )             |  | $ | 7,957                             |   |  | $ | (369,389 | ) |  | $ | (1,970,728 | )
|                                                                                |  |                         |  |                  |     |                          |   |                    |  |   |                      |   |  |                        |    |   |                                     |   |        |               |  |   |                                   |   |  |   |          |   |  |   |            |  

The accompanying notes are an integral part of these 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. TrialMasterTMallows clinical trial sponsors and investigative sites to securely collect, validate, transmit, and analyze clinical trial data.

Our ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through
TrialMaster. Our research and development efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality. During fiscal 2007, we spent
approximately $917,000 on research and development activities, the majority of which represented salaries to our developers. In fiscal 2006 we spent approximately $742,000 on research and development activities, which include costs associated with
customization of the TrialMaster software for our clients projects.



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

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates.

RECLASSIFICATIONS

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

SEGMENT INFORMATION

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



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



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



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



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The fees associated with each business activity for
the years ended December 31, 2007 and December 31, 2006, respectively are:



|                     |  |      |           |      |   |          
|-------------------- |  | ---- | --------- | ---- | - | ---------
|Business Activity    |  | 2007 |           | 2006
|Clinical Trial Setup |  | $    | 2,352,719 |      | $ | 1,921,847
|Change Orders        |  |      | 332,511   |      |   | 253,355  
|Maintenance Fees     |  |      | 1,038,611 |      |   | 587,837  
|                     |  |      |           |      |   |          
|Total Revenues       |  | $    | 3,723,841 |      | $ | 2,763,039
|                     |  |      |           |      |   |          

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid, short-term investments with maturities of 90 days or less. The carrying amount reported in the accompanying
consolidated balance sheets approximates fair value.

ACCOUNTS RECEIVABLE

Accounts receivable are judged as to collectibility by management and an allowance for bad debts is established as necessary. The Company had recorded an
allowance for uncollectible accounts receivable of $2,586 and $58,539 as of December 31, 2007 and December 31, 2006, respectively.



F-8



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



CONCENTRATION OF CREDIT RISK

Except as follows, the Company has no significant off-balance-sheet risk or credit risk concentrations. Financial instruments that subject the Company to
potential credit risks are principally cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with credit worthy financial institutions, however, the Company does maintain cash in its accounts from time-to-time
that exceed the maximum federally insured limits. Concentrated credit risk with respect to accounts receivable is limited to creditworthy customers. The Company's customers are principally located in the United States. Although the Company is
directly affected by the overall financial condition of the pharmaceutical, biotechnology and medical device industries, management does not believe significant credit risk exists as of December 31, 2007. The Company has not experienced
significant losses related to receivables from individual customers or groups of customers in any specific industry or geographic area. 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 have consistently been within management's expectations. Due to these factors, no
additional credit risk beyond amounts provided for collection losses, which the Company reevaluates on a monthly basis based on specific review of receivable agings and the period that any receivables are beyond the standard payment terms, is
believed by management to be probable in the Company's accounts receivable. The Company does not require collateral to mitigate credit risk.

One customer accounted for 13% and another customer accounted for 10% of our revenues during 2007 or approximately $470,000 and $373,000, respectively. One customer accounted for 24% of our revenues during 2006, or approximately $477,000.
The following table summarizes the number of customers who individually comprise greater than 10% of total revenue and/or total accounts receivable and their aggregate percentage of the Company's total revenue and gross accounts receivable.



|                        |  |               |  |                            |                     |  |               |  |                                      |  
|----------------------- |  | ------------- |  | -------------------------- | ------------------- |  | ------------- |  | ------------------------------------ | -
|Year ended December 31, |  | Revenues      |  |                            | Accounts Receivable | 
|                        |  | # ofCustomers |  | Percentageof TotalRevenues |                     |  | # ofCustomers |  | Percentageof TotalAccountsReceivable |  
|2006                    |  | 1             |  | 24                         | %                   |  | 2             |  | 48                                   | %
|2007                    |  | 2             |  | 23                         | %                   |  | 3             |  | 64                                   | %

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.

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



|                    |  |                        |        |      |   |       
|------------------- |  | ---------------------- | ------ | ---- | - | ------
|                    |  | Year endedDecember 31,
|                    |  | 2006                   |        | 2007
|Beginning of period |  | $                      | 58,539 |      | $ | 58,539
|Bad debt expense    |  |                        | -0-    |      |   | -0-   
|Write-offs          |  |                        | -0-    |      |   | 55,953
|                    |  |                        |        |      |   |       
|End of period       |  | $                      | 58,539 |      | $ | 2,586 
|                    |  |                        |        |      |   |       



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



PROPERTY AND EQUIPMENT

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

DEFERRED REVENUE

Deferred revenue represents cash advances received in excess of revenue earned on on-going contracts. Payment terms vary with each contract but may include an initial payment at the time the contract is executed, with future payments
dependent upon the completion of certain contract phases or targeted milestones. In the event of contract cancellation, the Company is entitled to payment for all work performed through the point of cancellation. As of December 31, 2007, the
Company had $2,632,274 in deferred revenues relating to contracts for services to be performed over periods ranging from 1 month to 5 years.

REVENUE RECOGNITION POLICY

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

The Company recognizes sales, for both financial statement and tax purposes in accordance with SEC Staff Accounting Bulletin No. 101 Revenue
Recognition in Financial Statements (SAB 101). SAB 101 requires that revenues be recognized ratably over the life of a contract. The Company will periodically record deferred revenues relating to advance payments in contracts.

ADVERTISING

Advertising
costs are expensed as incurred. Advertising costs were $46,155 and $26,203 for the years ended December 31, 2007 and 2006, respectively.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



RESEARCH AND DEVELOPMENT EXPENSES

Software development costs are included in research and development and are expensed as incurred. Statement of Financial Accounting Standards No. 86
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, (SFAS 86), requires the capitalization of certain development costs of software to be sold once technological feasibility is
established, which the Company defines as completion to the point of marketability. The capitalized cost is then amortized on a straight-line basis over the estimated product life. To date, the period between achieving technological feasibility and
the general availability of such software has been short and software development costs qualifying for capitalization have been immaterial. Accordingly, the Company has not capitalized any software development costs under SFAS 86. Research and
development expense was approximately $917,000 and $742,000 for the years ended December 31, 2007 and 2006 respectively.

EMPLOYEE EQUITY INCENTIVE PLANS

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

The Company adopted SFAS No. 123(R) using the modified prospective transition method,
which requires the application of the accounting standard as of January 1, 2006, the first day of the Companys fiscal year. The Companys Consolidated Financial Statements as of and for the years ended December 31, 2006 and
December 31, 2007 reflect the impact of SFAS No. 123(R). In accordance with the modified prospective transition method, the Companys Consolidated Financial Statements for prior periods have not been restated to reflect, and do not
include, 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 Statement of Income for the years ended December 31, 2006 and December 31, 2007 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, 2007 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). 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

(continued)



Basic earnings per share were calculated using the weighted average number of shares outstanding of
55,545,968 and 34,936,930 for the years ended December 31, 2007 and 2006, respectively. There were no differences between basic and diluted earnings per share. Options to purchase 9,320,270 shares of common stock at prices ranging from $.25 to
$2.75 per share were outstanding at December 31, 2007. Stock warrants to purchase 1,903,140 shares of common stock at an exercise price of $0.25 per share were outstanding at December 31, 2007.

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

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

INCOME TAXES

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

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

IMPACT OF NEW ACCOUNTING STANDARDS

In December 2007, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No (SFAS) 141 (revised 2007), Business Combinations, which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable assets acquired, the liabilities assumed and the goodwill acquired. SFAS 141R also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of
the business combination. SFAS 141R is effective as of the beginning of an entitys fiscal year that begins after December 15, 2008 and will be adopted by the Company in the first quarter of fiscal 2009. While the Company expects that SFAS
141R may have an impact on accounting for business combinations once adopted, the effect is dependent upon acquisitions occurring, which to-date the Company has not completed since 1998.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 was issued to allow entities
to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.
If the fair value option is elected for an instrument, SFAS 159 specifies that unrealized gains and losses for that instrument shall be reported in earnings at each subsequent reporting date. SFAS 159 is effective January 1, 2008. The Company
does not believe the adoption of SFAS 159 will have a material impact on the consolidated financial statements.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



In September 2006, the FASB issued SFAS 157, Fair Value Measurements, 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 157 is effective January 1, 2008. The Company does not believe the
adoption of SFAS 157 will have a material impact on the 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.

The ability of the Company to continue in existence is dependent on its having
sufficient financial resources to bring products and services to market for marketplace acceptance. As a result of its significant losses, negative cash flows from operations, and accumulated deficits for the year ending December 31, 2007 there
is doubt about the Companys ability to continue as a going concern.



F-13



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



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

Property
and equipment consists of the following:



|                              |  |                   |           |                         |   |         |  |                         |           |                       |   |         |  |        
|----------------------------- |  | ----------------- | --------- | ----------------------- | - | ------- |  | ----------------------- | --------- | --------------------- | - | ------- |  | -------
|                              |  | December 31, 2007 |           | December 31, 2006       |   |        
|                              |  | Cost              |           | AccumulatedDepreciation |   | Cost    |  | AccumulatedDepreciation |           | EstimatedUseful Lives
|Computer and office equipment |  | $                 | 733,121   |                         | $ | 480,747 |  | $                       | 558,810   |                       | $ | 462,911 |  | 5 years
|Leasehold improvements        |  |                   | 46,871    |                         |   | 17,348  |  |                         | 36,475    |                       |   | 7,865   |  | 5 years
|Computer software             |  |                   | 473,537   |                         |   | 350,559 |  |                         | 367,514   |                       |   | 297,106 |  | 3 years
|Office furniture              |  |                   | 85,333    |                         |   | 55,508  |  |                         | 56,081    |                       |   | 51,067  |  | 3 years
|                              |  |                   |           |                         |   |         |  |                         |           |                       |   |         |  |        
|                              |  | $                 | 1,338,862 |                         | $ | 904,162 |  | $                       | 1,018,880 |                       | $ | 818,949 |  |        
|                              |  |                   |           |                         |   |         |  |                         |           |                       |   |         |  |        

Depreciation expense for the years ended December 31, 2007 and 2006 was $85,769 and $55,900
respectively.



|NOTE 5: | ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|------- | -------------------------------------

Accounts payable and accrued expenses consist of the following:



|                                            |  |                   |         |                   |   |        
|------------------------------------------- |  | ----------------- | ------- | ----------------- | - | -------
|                                            |  | December 31, 2007 |         | December 31, 2006
|Accounts payable                            |  | $                 | 405,849 |                   | $ | 288,713
|Accrued payroll and related costs           |  |                   | 35,960  |                   |   | 9,491  
|Other accrued expenses                      |  |                   | 17,544  |                   |   | 96,117 
|Accrued interest                            |  |                   | 94,859  |                   |   | 123,535
|Accrued expenses of OmniTrial BV            |  |                   | 127,519 |                   |   | 127,519
|                                            |  |                   |         |                   |   |        
|Total accounts payable and accrued expenses |  | $                 | 681,731 |                   | $ | 645,375
|                                            |  |                   |         |                   |   |        



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

Basic earnings per
share (EPS) is computed by dividing income available to common shareholders (which for the Company equals its net loss) by the weighted average number of common shares outstanding, and dilutive EPS adds the dilutive effect of stock
options and other common stock equivalents. Antidilutive shares aggregating 30,473,460 and 31,222,670 have been omitted from the calculation of dilutive EPS for the years December 31, 2007 and December 31, 2006, respectively. Provided
below is a reconciliation between numerators and denominators of the basic and diluted earnings per shares:



|                              |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  
|----------------------------- |  | ----------------- | ---------- | - | ----------------- | ---------- | --------------- | - | ----- | --------------- |  | - | ----------------- | - | --------------- | ---------- |  | - | ----- | -
|                              |  | Years Ended       |           
|                              |  | December 31, 2007 |            |   | December 31, 2006 |           
|                              |  | IncomeNumerator   |            |   | SharesDenominator |            | Per-ShareAmount |   |       | IncomeNumerator |  |   | SharesDenominator |   | Per-ShareAmount |           
|Basic EPS                     |  | $                 | (5,773,469 | ) |                   | 55,545,968 |                 | $ | (0.10 | )               |  | $ | (4,764,498        | ) |                 | 34,936,930 |  | $ | (0.14 | )
|Effect of Dilutive Securities |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  
|None                          |  |                   | -0-        |   |                   | -0-        |                 |   | -0-   |                 |  |   | -0-               |   |                 | -0-        |  |   | -0-   |  
|                              |  |                   |            |   |                   |            |                 |   |       |                 |  |   |                   |   |                 |            |  |   |       |  
|Diluted EPS                   |  | $                 | (5,773,469 | ) |                   | 55,545,968 |                 | $ | (0.10 | )               |  | $ | (4,764,498        | ) |                 | 34,936,930 |  | $ | (0.14 | )



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



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

At December 31, 2007,
the Company owed $296,800 in notes payable. The table below provides details as to the terms and conditions of the notes payable.



|                 |  |          |  |              |   |  |        |         |           |   |          |  |   |        
|---------------- |  | -------- |  | ------------ | - |  | ------ | ------- | --------- | - | -------- |  | - | -------
|Origination Date |  | DueDate  |  | InterestRate |   |  | Amount |         | ShortTerm |   | LongTerm
|12/31/06         |  | 01/31/09 |  | 9.00         | % |  | $      | 185,000 |           | $ | -0-      |  | $ | 185,000
|01/16/07         |  | 01/01/09 |  | 9.00         | % |  |        | 51,800  |           |   | -0-      |  |   | 51,800 
|01/16/07         |  | 01/01/09 |  | 9.00         | % |  |        | 60,000  |           |   | -0-      |  |   | 60,000 
|                 |  |          |  |              |   |  |        |         |           |   |          |  |   |        
|                 |  |          |  |              |   |  | $      | 296,800 |           | $ | -0-      |  | $ | 296,800
|                 |  |          |  |              |   |  |        |         |           |   |          |  |   |        



|NOTE 8: | CONVERTIBLE NOTES
|------- | -----------------

During the first quarter
of 1999, the Company issued 10% Convertible Notes payable in the amount of $862,500 pursuant to a Confidential Private Placement Memorandum. There were costs of $119,625 associated with this offering. The net proceeds to the Company were $742,875.
The notes bear interest at ten percent annually, payable semi-annually. The notes are convertible after maturity, which was June 30, 2004, into shares of common stock of the Company at $1.25 per share. As of December 31, 2007,
approximately $775,000 of the Convertible Notes had been converted into 1,495,179 shares of common stock of the Company leaving an outstanding principal balance of $87,500.

The Company is currently in default on interest payments owed totaling $64,830 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. During the year we recorded $9,322 in interest expense on the 10% Convertible Notes.



|NOTE 9: | 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, 2007 are as follows:



|      |  |   |          
|----- |  | - | ---------
|2008  |  | $ | 294,623  
|2009  |  |   | 274,396  
|2010  |  |   | 280,086  
|2011  |  |   | 167,520  
|2012  |  |   | -0-      
|      |  |   |          
|Total |  | $ | 1,016,625
|      |  |   |          

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 $342,255 and $221,817 for the years ended December 31, 2007 and 2006, respectively.

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



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



EMPLOYMENT AGREEMENTS

In December 2007, we renewed an employment agreement with Mr. Cornelis F. Wit to serve as our Chief Executive Officer and President through
December 31, 2008. 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 $300,000 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 the 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 2007, 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 $260,000 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. The Company extended its employment agreement with Mr. Smith in December 2007 for one year under the terms of
the existing employment agreement

In December 2007, 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 $205,000 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. The Company extended its employment agreement with Mr. Linares in December 2007 for one year
under the terms of the existing employment agreement



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



In September 2006, we entered into an employment agreement with Mr. Stephen Johnson to serve as
our Senior Vice President for Sales and Marketing. The employment agreement is for a three-year term. Under the terms of this agreement, Mr. Johnson receives an annual salary of $210,000 subject to annual adjustment for cost of living
increases. Mr. Johnson is eligible for a commission, payable on a monthly basis, equal to 1% of the Companys cash receipts as defined in an exhibit to his employment contract. 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. The employment agreement contains customary non-disclosure provisions.



|NOTE 10: | 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 2004, the Company issued a promissory note in the amount of $450,875 to Noesis Capital Corp. for amounts owed to Noesis for financial advisory
services and for placement agent fees earned during 2003 and 2004. This note was amended and restated on December 31, 2005, under the terms of a new note bearing interest at 9% payable on April 1, 2008. The principal amount of the note
issued on December 31, 2005 was $511,919 which includes $61,044 in accrued and unpaid interest. The note and accrued and unpaid interest in the amount of $46,072 was converted on December 31, 2006 into 1,115,964 shares of common stock at a
conversion price of $0.50 per share.

Between February 2001 and July 2001, we borrowed an aggregate of $190,000 from Guus van Kesteren
under promissory notes which bore interest of 12% per annum. These promissory notes were amended and restated on August 30, 2001 in the amount of $196,644 with new terms which included an interest rate of 8% per annum with accrued
interest payable no later than August 30, 2003. This note was amended in September 2004 extending the maturity date to October 2006.

In December 2002, we borrowed $50,000 from Guus van Kesteren a member of our Board of Directors. This amount was borrowed under a promissory note bearing interest at a rate of 9% per annum, payable on March 31, 2003. This note was
amended in September 2004 extending the maturity date to October 31, 2006.

From February to June 2004, the Company borrowed $106,000
from Guus van Kesteren, a Company Director. These amounts were borrowed under promissory notes bearing interest at 9% per annum with maturity dates ranging from January 31, 2006 to October 31, 2006. These notes were amended and
restated on June 30, 2004 under the terms of a new note bearing interest at 9% payable with a maturity date of October 31, 2006.

The above referenced notes payable to Guus van Kesteren, which were originally amended and restated on June 30, 2004 into one promissory note with a principal amount of $364,758.38 bearing interest at 9% per annum and payable on
October 31, 2006, were amended and restated on December 31, 2005, under the terms of a new note bearing interest at 9% payable on April 1, 2008. The principal amount of the note is $414,135.75 which includes accrued and unpaid
interest of $49,337.37. The note and accrued and unpaid interest in the amount of $37,272.22 was converted on December 31, 2006 into 902,816 shares of common stock at a conversion price of $0.50 per share.

During November 2002, we borrowed $6,000 from Randall G. Smith, our Chairman of the board and Chief Technology Officer. In March 2003 this note was
amended and restated extending the maturity date to January 31, 2005. This note was amended and restated on March 31, 2005 extending the maturity date to January 31, 2007. The note and accrued but unpaid interest in the amount of
$1,860 were repaid on April 17, 2006.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



In December 2002, we borrowed $50,000 from Cornelis Wit, our President and Chief Executive Officer
and a member of our Board of Directors. This amount was borrowed under a promissory note bearing interest at a rate of 9% per annum, payable on March 31, 2003. This note was amended in September 2004 extending the maturity date to
October 31, 2006.

From September to November 2003 we borrowed $262,000 from Cornelis Wit, our President and Chief Executive Officer,
and a member of our Board of Directors. These amounts were borrowed under promissory notes bearing interest at 9% per annum with maturity dates ranging from January 31, 2005 to October 31, 2005. These notes were amended and restated
on September 30, 2004 under the terms of a new note bearing interest at 9% interest payable on October 31, 2006.

From January to
June 2004, the Company borrowed $153,500 from Cornelis Wit, the Companys President and Chief Executive Officer and a Director. These amounts were borrowed under promissory notes bearing interest at 9% per annum with maturity dates ranging
from January 31, 2006 to October 31, 2006. These notes were amended and restated on June 30, 2004 under the terms of a new note bearing interest at 9% interest payable on October 31, 2006.

The above referenced notes payable to Cornelis Wit, which were originally amended and restated on June 30, 2004 into one promissory note with a
principal amount of $483,984.00 bearing interest at 9% per annum and payable on October 31, 2006, were amended and restated on December 31, 2005, under the terms of a new note bearing interest at 9% payable on April 1, 2008. The
principal amount of the new note is $549,500.85 which includes accrued and unpaid interest of $65,516.85. The note and accrued and unpaid interest in the amount of $49,455.07was converted on December 31, 2006 into 1,197,912 shares of common
stock at a conversion price of $0.50 per share.

In March 2005, the Company borrowed $22,000 from Cornelis Wit, the Companys
President and Chief Executive Officer and a Director. These amounts were borrowed under a promissory note bearing interest at 9% per annum payable on January 31, 2007. The note and accrued and unpaid interest in the amount of $3,547.73
were converted on December 31, 2006 into 51,095 shares of common stock at a conversion price of $0.50 per share.

In April 2005, the
Company borrowed $25,000 from Guus van Kesteren, a company Director. These amounts were borrowed under a promissory note bearing interest at 9% per annum payable on January 31, 2007. The note and accrued and unpaid interest in the amount
of $3,908.22 were converted on December 31, 2006 into 57,816 shares of common stock at a conversion price of $0.50 per share.

In June
2005, the Company borrowed $120,000 from Cornelis Wit, the Companys President and Chief Executive Officer and a Director. These amounts were borrowed under a promissory note bearing interest at 9% per annum payable on January 31,
2007. The note and accrued and unpaid interest in the amount of $14,608.44 were converted on December 31, 2006 into 269,217 shares of common stock at a conversion price of $0.50 per share.

From June to September 2005, the Company borrowed $14,300 from Ronald Linares, the Companys Vice President and Chief Financial Officer. These
amounts were borrowed under a promissory note bearing interest at 9% per annum payable on January 31, 2007. The note and accrued and unpaid interest in the amount of $1,011 were repaid on April 17, 2006.

In October 2005, the Company borrowed $215,000 from Cornelis Wit, the Companys President and Chief Executive Officer and a Director. These amounts
were borrowed under a promissory note bearing interest at 9% per annum payable with a maturity date of December 31, 2006. Under the terms of the note Mr. Wit had the right to convert any unpaid principal into shares of common stock at
a conversion price of $0.28 per share in the event the note was not



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



repaid by December 31, 2005. On November 11, 2005 the Company repaid $50,000 of principal on the note. On December 31, 2005 Mr. Wit
converted the remaining $165,000 of outstanding principal and $3,000 in accrued interest into 600,000 shares of common stock.

In December
2006, the Company issued a promissory note for $185,000 that included $125,000 in accrued expenses associated with financial services provided during 2004 and 2005 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, 2009.

During March 2007, Fernando Montero, who was appointed as a member of our Board of Directors on July 27, 2007, purchased 500,000 shares of our common stock at a price of $0.50 per share, resulting in gross
proceeds to the Company of $250,000. In addition, Atlantic Balanced Fund, a corporation formed under the laws of the British Virgin Islands (ABF) purchased 2,500,000 shares of our common stock resulting in gross proceeds to the Company
of $1,250,000. Mentor Capital Corporation is the fund manager for ABF and has voting and dispositive control over the shares held by ABF. Mr. Montero is the president, director and sole owner of Mentor Capital Corporation and may be
considered the beneficial owner of the 2,500,000 shares held by ABF.

In September 2007, Cornelis Wit, the Companys President and
Chief Executive Officer and a Director, invested $100,500 in private placement of our common stock at a price of $0.67 per share and was issued 150,000 shares of our common stock.

In December 2007, Noesis Capital Corp., the Companys Placement Agent for several equity and debt transactions since 1999 converted amounts owed to
it for accrued financial advisory fees and for fees earned as Placement Agent in offerings completed in March 2007 and December 2007. A total of $37,500 in financial advisory fees and $160,748 in Placement Agent fees were converted into common stock
of the Company at a price of $0.67 per share. Noesis Capital Corp. was issued a total of 295,893 shares of common stock of the Company

During the year ended December 31, 2007 we incurred $16,650 in interest expense on a note payable to Noesis Capital Corp., the Placement Agent for the Company on several equity and debt transactions since 1999.

FINANCIAL ADVISORY AGREEMENT

During December 2006, the Company extended its financial advisory agreement with Noesis Capital. Under the agreement Noesis Capital will assist the Company in performing certain financial advisory services including the sale of securities,
and the possible sale, merger or other business combination involving the Company. Pursuant to this agreement, the Company is obligated to pay $90,000 in professional fees annually. The amendment changed the termination date of the agreement to
December 31, 2009.



|NOTE 11: | 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



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



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.



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

Our
authorized capital stock consists of 150,000,000 shares of common stock, $.001 par value per share, and 10,000,000 shares of preferred stock, par value $.001 per share, of which 5,000,000 shares have been designated as 5% Series A Preferred, 230,000
shares have been designated as Series B Preferred Stock and 747,500 shares have been designated as Series C Preferred Stock.

As of
December 31, 2007 we had the following outstanding securities:



| |  |  | 59,032,599 shares of common stock issued and outstanding;
| | - |  | ---------------------------------------------------------



| |  |  | 1,903,140 warrants issued and outstanding to purchase shares of our common stock;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | 4,170,224 shares of our Series A Preferred Stock issued and outstanding,
| | - |  | ------------------------------------------------------------------------



| |  |  | 48,000 shares of our Series B Preferred Stock issued and outstanding;
| | - |  | ---------------------------------------------------------------------



| |  |  | 337,150 shares of our Series C Preferred Stock issued and outstanding;
| | - |  | ----------------------------------------------------------------------



| |  |  | a Series C Placement Agent Unit Option; and
| | - |  | -------------------------------------------



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

Common Stock

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

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

From February 2007 through March 2007, we sold an aggregate of 5,000,000 shares of our common stock to three accredited investors resulting in gross
proceeds of $2,500,000. This private placement was exempt from registration under the Securities Act of 1933, as amended, in reliance on Rule 506 of Regulation D. Fernando Montero, who was appointed as a member of our Board of Directors on
July 27, 2007, purchased 500,000 shares of our common stock at a price of $0.50 per share, resulting in gross proceeds to the Company of $250,000. In addition, Atlantic Balanced Fund, a corporation formed under the laws of the British Virgin
Islands (ABF) purchased 2,500,000 shares of our common stock resulting in gross proceeds to the Company of $1,250,000. Mentor Capital Corporation is the fund manager for ABF and has voting and dispositive control over the shares held by
ABF. Mr. Montero is the president, director and sole owner of Mentor Capital Corporation and may be considered the beneficial owner of the 2,500,000 shares held by ABF. The Company did not use a placement agent for this offering and
accordingly no financial advisory or placement commissions were paid.

From September 2007 through December 2007, we sold an aggregate of
2,081,773 shares of our common stock resulting in gross proceeds of $1,394,788. Other than Cornelis Wit, our President and Chief Executive Officer and a



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



Director, and Noesis Capital Corp., placement agent for various offerings of our common stock since 1999, none of the investors were our affiliates. Noesis
Capital Corp. converted financial advisory fees of $37,500 and placement agent fees totaling $160,748 into shares of our common stock as part of this private placement. Noesis Capital Corp, an NASD Member firm, acted as placement agent in the
offering and as compensation therefore received a commission equal to 8% of the sales made for an aggregate fee of $95,873. Noesis also received a warrant to purchase at $0.67 per share, 5% of the shares sold, or 89,434 shares of our common stock,
an estimated fair value of $40,749 was calculated for the warrants granted to Noesis Capital Corp. using the Binomial option pricing model.

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.

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 4,170,224 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,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



| |  |  | 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 $1,122,944 and
$912,370, or $0.27 and $0.22 per share, on the Series A Preferred Stock for undeclared dividends as of December 31, 2007 and December 31, 2006, respectively.

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 48,000 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,
| | - |  | ------------------------------



| |  |  | 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 $600,151 and
$560,684, or $9.23 and $8.63 per share, on the Series B Preferred Stock dividends as of December 31, 2007 and December 31, 2006, respectively.



F-22



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



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 337,150 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,
| | - |  | ------------------------------



| |  |  | 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 $1,402,348 and
$1,132,628, or $4.16 and $3.36 per share, on the Series C Preferred Stock for undeclared dividends as of December 31, 2007 and December 31, 2006, respectively.

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.



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



The following table presents preferred dividends accreted for the years ended December 31, 2007
and December 31, 2006, respectively, and the per share effect of the preferred dividends if their effect was not anti-dilutive.



|                                              |  |                                |         |                          |   |         |  |      |      |  |   |     
|--------------------------------------------- |  | ------------------------------ | ------- | ------------------------ | - | ------- |  | ---- | ---- |  | - | ----
|                                              |  | Dividends Accreted in(dollars) |         | Dividends per share     
|                                              |  | Years ended December 31,       |         | Years ended December 31,
|                                              |  | 2007                           |         | 2006                     |   | 2007    |  | 2006
|Preferred stock dividends in arrears Series A |  | $                              | 210,574 |                          | $ | 210,761 |  | $    | 0.05 |  | $ | 0.05
|                                              |  |                                |         |                         
|Preferred stock dividends in arrears Series B |  | $                              | 39,467  |                          | $ | 42,663  |  | $    | 0.80 |  | $ | 0.80
|                                              |  |                                |         |                         
|Preferred stock dividends in arrears Series C |  | $                              | 269,720 |                          | $ | 269,720 |  | $    | 0.80 |  | $ | 0.80

Warrants

We have issued and outstanding warrants to purchase a total of 1,903,140 shares of our common stock, including:



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



| |  |  | warrants to purchase 468,400 shares of our common stock at an exercise price of $.25 per share expiring on dates ranging from May 2008 to December 2008 which were
issued by us to the placement agent of three offerings of our common stock that were conducted during 2003.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | Warrants to purchase 89,434 shares of our common stock at an exercise price of $0.67 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 496,950 shares of our common stock at an exercise price of $0.25 per share expiring in March 2008 which were issued in connection with a
private placement of common stock that was conducted in 2003.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



Series C Placement Agent Unit Option

In connection with our March 2002 to March 2003 private placement of Series C Preferred Stock, we issued the placement agent an option to purchase 2.48
units. Each unit is exercisable at $100,000 per unit and consists of 10,000 shares of Series C Preferred Stock and 5-year warrants to purchase 200,000 shares of common stock at an exercise price of $0.25 per share. The Placement Agent Unit Option
contains a cashless exercise provision. The holder of the Placement Agent Unit Option was granted certain mandatory and piggy-back registration rights covering the shares of our common stock issuable upon conversion of the Series C Preferred Stock
and exercise of the warrants underlying Placement Agent Unit Option. The Placement Agent Unit Option expires March 31, 2008.

10% Convertible Note

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

Other Comprehensive 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 loss. The following table lists the beginning balance, yearly activity and
ending balance of the components of accumulated other comprehensive loss.



|                          |  |                            |        |   |                                     |   |        |  
|------------------------- |  | -------------------------- | ------ | - | ----------------------------------- | - | ------ | -
|                          |  | Foreign CurrentTranslation |        |   | Accumulated OtherComprehensive Loss |  
|Balance January 1, 2007   |  | $                          | (2,041 | ) |                                     | $ | (2,041 | )
|2007 Activity             |  |                            | 9,998  |   |                                     |   | 9,998  |  
|                          |  |                            |        |   |                                     |   |        |  
|Balance December 31, 2007 |  | $                          | 7,957  |   |                                     | $ | 7,957  |  
|                          |  |                            |        |   |                                     |   |        |  



|NOTE  13: | EMPLOYEE EQUITY INCENTIVE PLANS
|--------- | -------------------------------

Stock Option Plan

Description of Stock Option 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 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, 2007, substantially all of the Companys employees were participating in the 1998 Plan.

The
maximum term for any option grant under the 1998 Plan is ten years from the date of the grant, however, options granted under the 1998 Plan will generally expire ten years from the date of grant for most employees and seven years



F-25



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



from the date of grant for officers and directors of the company. Options granted to employees generally vest either upon grant or in three installments with
the first installment vesting 33% upon completion of one full year from date of grant and on an annual basis over the following two years of their employment. The vesting period typically begins on the date of hire for new employees and on the date
of grant for existing employees.

In March 2006, the Board of Directors authorized the issuance of restricted stock to each of the
Companys executive officers and two Directors, in the aggregate totaling 100,000 shares. The restricted stock vested immediately at the date of grant and the Company recorded $40,000 in compensation expense in connection with the issuance.

At December 31, 2007, there were 3,179,730 shares available for grant as options or other forms of share-based compensation under the
1998 Plan.

The following table summarizes the stock option activity for the 1998 Plan:



|                                            |  |                 |   |  |                                          |       |   |                                                    |     |                                    |   |      
|------------------------------------------- |  | --------------- | - |  | ---------------------------------------- | ----- | - | -------------------------------------------------- | --- | ---------------------------------- | - | -----
|                                            |  | Numberof Shares |   |  | WeightedAverageExercise Price(per share) |       |   | WeightedAverageRemainingContractual Term(in
Years) |     | AggregateIntrinsic Valuein (000s)
|Outstanding at December 31, 2006            |  | 8,824,270       |   |  | $                                        | 0.46  |   |                                                    |     |                                    |   |      
|Granted                                     |  | 2,227,000       |   |  |                                          | 0.63  |   |                                                    |     |                                    |   |      
|Exercised                                   |  | (840,999        | ) |  |                                          | (0.31 | ) |                                                    |     |                                    |   |      
|Forfeited/cancelled/expired                 |  | (890,001        | ) |  |                                          | (0.47 | ) |                                                    |     |                                    |   |      
|                                            |  |                 |   |  |                                          |       |   |                                                    |     |                                    |   |      
|Outstanding at December 31, 2007            |  | 9,320,270       |   |  | $                                        | 0.43  |   |                                                    | 5.0 |                                    | $ | 1,998
|                                            |  |                 |   |  |                                          |       |   |                                                    |     |                                    |   |      
|Vested and exercisable at December 31, 2007 |  | 6,240,937       |   |  | $                                        | 0.37  |   |                                                    | 4.5 |                                    | $ | 1,338
|                                            |  |                 |   |  |                                          |       |   |                                                    |     |                                    |   |      

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, 2007. 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, 2007 and December 31, 2006
were $270,926 and $403,948, respectively.

The total fair value of shares vested for the years ended December 31, 2007 and
December 31, 2006 were:



|                                                                     |  |   |        
|-------------------------------------------------------------------- |  | - | -------
|Fair value of options vested during the year ended December 31, 2007 |  | $ | 558,793
|Fair value of options vested during the year ended December 31, 2006 |  | $ | 806,302

Cash received from stock option exercises for the years ended December 31, 2007 and
December 31, 2006 was $113,267 and $223,375, respectively. Due to the Companys net loss position, no windfall tax benefit has been realized during the years ended December 31, 2007 and December 31, 2006.



F-26



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



The following table summarizes information concerning options outstanding at December 31, 2007:



|                                  |  |                              |  |                                         |      |                                                   |     |                              |      
|--------------------------------- |  | ---------------------------- |  | --------------------------------------- | ---- | ------------------------------------------------- | --- | ---------------------------- | -----
|                                  |  | OptionsOutstandingin (000s) |  | WeightedAverageExercisePrice(per share) |      | WeightedAverageRemainingContractualLife(in
Years) |     | OptionsExercisablein (000s)
|Exercise Price range (per share): |  |                              |  |                                         |      |                                                   |     |                              |      
|$ 0.00 - $ 0.25                   |  | 2,517                        |  | $                                       | 0.25 |                                                   | 3.1 |                              | 2,517
|$ 0.28 - $ 0.47                   |  | 2,180                        |  |                                         | 0.35 |                                                   | 4.3 |                              | 1,805
|$ 0.48 - $ 2.75                   |  | 4,623                        |  |                                         | 0.57 |                                                   | 6.3 |                              | 1,919
|                                  |  |                              |  |                                         |      |                                                   |     |                              |      
|                                  |  | 9,320                        |  | $                                       | 0.43 |                                                   | 5.0 |                              | 6,241
|                                  |  |                              |  |                                         |      |                                                   |     |                              |      

The weighted average fair value (per share) of options granted during the years ended
December 31, 2007, and December 31, 2006 using the American Binomial option-pricing model was $0.50 and $0.42, respectively.

Stock-Based Compensation

For the year ended December 31, 2007, the Company recognized total stock-based compensation
expense of $980,823 related to stock option and other share-based awards made from its equity compensation plan.

For the year ended
December 31, 2006, the Company recognized total stock-based compensation expense of $826,703 related to stock option and other share-based awards made from its equity compensation plan, including $40,000 of stock-based compensation related to
restricted stock grants. 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, 2007 and December 31, 2006, was $980,823 and $786,703 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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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



|                                                                    |  |                         |            |   |      |   |            |  
|------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                    |  | Year ended December 31, |           
|                                                                    |  | 2007                    |            |   | 2006 |  
|Net income (loss) attributable to common stockholders (as reported) |  | $                       | (5,773,469 | ) |      | $ | (4,764,498 | )
|Salary expense recorded in accordance with SFAS No. 123(R)          |  |                         | (980,823   | ) |      |   | (786,703   | )
|                                                                    |  |                         |            |   |      |   |            |  
|Net income (loss) attributable to common stockholders (adjusted)    |  |                         | (4,792,646 | ) |      |   | (3,977,795 | )
|                                                                    |  |                         |            |   |      |   |            |  
|Net (loss) per share, basic and diluted (as reported)               |  | $                       | (0.10      | ) |      | $ | (0.14      | )
|                                                                    |  |                         |            |   |      |   |            |  
|Net (loss) per share, basic and diluted (adjusted)                  |  | $                       | (0.08      | ) |      | $ | (0.11      | )
|                                                                    |  |                         |            |   |      |   |            |  
|Weighted average number of shares outstanding, basic and diluted    |  |                         | 55,545,968 |   |      |   | 34,936,930 |  

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 2007 and 2006. 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 1998 Plan:



|                                                           |  |                                      |      |      |   |     
|---------------------------------------------------------- |  | ------------------------------------ | ---- | ---- | - | ----
|                                                           |  | WeightedAverage Grant-DateFair Value
|                                                           |  | 2007                                 |      | 2006
|Stock options granted during the year ended December 31,   |  | $                                    | 0.50 |      | $ | 0.42
|Stock options vested during the year ended December 31,    |  | $                                    | 0.39 |      | $ | 0.34
|Stock options forfeited during the year ended December 31, |  | $                                    | 0.40 |      | $ | 0.23

During the years ended December 31, 2007 and December 31, 2006 1,423,336 and 2,397,505
stock options vested, respectively. The aggregate fair value of the vested options was $558,793 and $806,302, 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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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



|                                                   |  |                                          |      |   |      |   |      |  
|-------------------------------------------------- |  | ---------------------------------------- | ---- | - | ---- | - | ---- | -
|                                                   |  | Stock Options forYear Ended December 31, |     
|                                                   |  | 2006                                     |      |   | 2007 |  
|Risk-free interest rate                            |  |                                          | 4.72 | % |      |   | 4.35 | %
|Dividend yield                                     |  |                                          | 0    | % |      |   | 0    | %
|Expected volatility                                |  |                                          | 98.5 | % |      |   | 92.1 | %
|Expected life of options (years)                   |  |                                          | 6.0  |   |      |   | 6.0  |  
|                                                   |  |                                         
|Weighted average fair value of grants (per option) |  | $                                        | 0.42 |   |      | $ | 0.50 |  

A summary of the status of the Companys nonvested shares as of December 31, 2006, and
changes during the year ended December 31, 2007 is as follows:



|                                      |  |           |  |                                      |     
|------------------------------------- |  | --------- |  | ------------------------------------ | ----
|                                      |  | Shares    |  | Weighted AverageGrant-DateFair Value
|Nonvested Shares at January 1, 2007   |  | 2,870,000 |  | $                                    | 0.39
|                                      |  |          
|Nonvested Shares at December 31, 2007 |  | 3,079,333 |  | $                                    | 0.45
|                                      |  |           |  |                                      |     

As of December 31, 2007, approximately $1,430,734 of total unrecognized compensation cost
related to unvested stock options is expected to be recognized over a weighted-average period of 0.64 years.



|NOTE 14: | 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:



|                                |  |          |            |   |          |   |            |  
|------------------------------- |  | -------- | ---------- | - | -------- | - | ---------- | -
|                                |  | 12/31/07 |            |   | 12/31/06 |  
|Current tax expense (benefit):  |  |          |            |   |          |   |            |  
|Income tax at statutory rates   |  | $        | -0-        |   |          | $ | -0-        |  
|                                |  |          |            |   |          |   |            |  
|Deferred tax expense (benefit): |  |          |            |   |          |   |            |  
|Stock option expense            |  |          | (369,084   | ) |          |   | (296,036   | )
|Operating loss carryforward     |  |          | (1,607,886 | ) |          |   | (1,299,986 | )
|                                |  |          |            |   |          |   |            |  
|                                |  |          | (1,976,970 | ) |          |   | (1,596,022 | )
|                                |  |          |            |   |          |   |            |  
|Valuation allowance             |  |          | 1,976,970  |   |          |   | 1,596,022  |  
|                                |  |          |            |   |          |   |            |  
|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:



|                              |  |          |             |   |          |   |            |  
|----------------------------- |  | -------- | ----------- | - | -------- | - | ---------- | -
|                              |  | 12/31/07 |             |   | 12/31/06 |  
|Deferred tax assets:          |  |          |             |   |          |   |            |  
|Amortization of intangibles   |  | $        | 283,698     |   |          | $ | 283,698    |  
|Employee stock option expense |  |          | 665,120     |   |          |   | 296,036    |  
|Operating loss carryforwards  |  |          | 10,512,958  |   |          |   | 8,905,072  |  
|                              |  |          |             |   |          |   |            |  
|Gross deferred tax assets     |  |          | 11,461,776  |   |          |   | 9,484,806  |  
|                              |  |          |             |   |          |   |            |  
|Valuation allowance           |  |          | (11,461,776 | ) |          |   | (9,484,806 | )
|                              |  |          |             |   |          |   |            |  
|Net deferred tax asset        |  | $        | -0-         |   |          | $ | -0-        |  
|                              |  |          |             |   |          |   |            |  



F-29



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##### Table of Contents

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(continued)



The Company has net operating loss carryforwards (NOL) for income tax purposes of approximately
$28,416,279. This loss is allowed to be offset against future income until the year 2027 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, 2007.



|NOTE 15: | SUBSEQUENT EVENTS
|-------- | -----------------

On February 29,
2008, pursuant to a Securities Purchase Agreement (Agreement) of that date, 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 in a private transaction exempt from registration under the Securities Act of 1933 in reliance on the exemptions provided by Section 4(2) and Rule 506 of Regulation D of that act. After
paying certain fees and expenses of a commission and expense reimbursement aggregating $143,750, we received net proceeds of $2,156,250.

The debentures, which bear interest at 10% per annum, are due 6 months from the issuance date. 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 $0.59
per share, subject to adjustment as provided in the transaction documents. Interest is convertible as provided in the debentures. We are not permitted to prepay the debentures 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 $0.75 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 debentures are not convertible and the warrants are not exercisable to the extent that
(i) the number of shares of our common stock beneficially owned by the holder and (ii) the number of shares of our common stock issuable upon the conversion of the debentures and/or the exercise of the warrants would result in the
beneficial ownership by holder of more than 4.99% of our then outstanding common stock.

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.

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.



F-30



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##### Table of Contents

Exhibit Index

Exhibit Number                Description



|            |  |                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|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)                                         



---

##### Table of Contents

|      |  |                                                                                                                                                                                              
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|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)                                              



---

##### Table of Contents

|     |  |                                                                                                                                                                           
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|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-KSB 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.
|---- | --------------------------------------------------------------------------------------------------------------------

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

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



---

##### Table of Contents

|(13) | Incorporated by reference to Exhibit 3.9 filed with our Annual Report on Form 10-KSB 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-QSB for the period ended June 30, 2002.
|---- | --------------------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to Exhibit 10.8 filed with our Annual Report on Form 10-KSB 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-QSB for the period ended September 30, 2004.
|---- | -------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

|(38) | Incorporated by reference to Exhibit 10.1 filed with our Form 10-QSB 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-KSB dated December 31, 2005.
|---- | ----------------------------------------------------------------------------------------------

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

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