SB-2

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER __, 2003

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

OmniComm Systems, Inc.

(Name of small business issuer in its charter)

Delaware	541511	11-3349762
State or Other Jurisdiction of Incorporation or Organization	Primary Standard Industrial Classification Number	I.R.S. Employer Identification No.

2555 Davie Road
Suite 110-B
Davie, Florida 33317
954.473.1254
(Address and Telephone Number of Principal Executive Offices)

Ronald T. Linares, Chief Financial Officer
2555 Davie Road
Suite 110-B
Davie, Florida 33317
954.473.1254
(Name, Address and Telephone Number of Agent For Service)

Copies of All Communications to:
Katz, Barron, Squitero, Faust & Boyd, P.A.
100 N.E. Third Avenue
Suite 280
Ft. Lauderdale, FL 33301
954 522-3636
Attention: Roxanne K. Beilly, Esq.

Approximate Date of Proposed Sale To The Public: As soon as practicable after the effective date of this Registration Statement

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following
box. [X]

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.

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If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [  ]

CALCULATION OF REGISTRATION FEE

			Proposed		Proposed			Amount
Title of Each			Maximum		Maximum			Of
Class of Securities	Amount To Be		Offering Price		Aggregate			Registration
To Be Registered	Registered		Per Security		Offering Price			Fee
Common stock, $.001 par value(1)		21,486,000	$	0.25	$	5,371,500	(2)	$	434.55
Common stock, $.001 par value(3)		14,743,000	$	0.25	$	3,685,750	(4)	$	298.18
Common stock, $.001 par value (5)		3,650,850	$	0.25	$	912,713	(6)	$	73.84
Total Registration Fee								$	806.57

(1)  Shares issuable upon conversion of Series B Preferred Stock and Series C Preferred Stock.

(2)  Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. Based on the average of the high and low sale price of the common stock as reported on the OTC Bulletin Board on September 26, 2003.

(3)  Shares issuable upon exercise of warrants.

(4)  Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. Based on the average of the high and low sale price of the common stock as reported on the OTC Bulletin Board on September 26, 2003.

(5)  Shares issuable upon exercise of Placement Agent Unit Options.

(6)  Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. Based on the average of the high and low sale price of the common stock as reported on the OTC Bulletin Board on September 26, 2003.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Subject to Completion September    , 2003

PROSPECTUS

OMNICOMM SYSTEMS, INC. [LOGO]

39,879,850 Shares of Common Stock

This prospectus relates to the resale of up to 39,879,850 shares of our common stock by certain selling stockholders issuable upon conversion or exercise of our Series B Preferred Stock, Series C Preferred Stock, warrants, and Placement Agent Unit Options.

We will not receive any proceeds from the sale of the shares by the selling stockholders.

Our common stock is traded on the OTC Bulletin Board under the trading symbol “OMCM”. On September 26, 2003, the closing price for our common stock was $0.25.

THIS INVESTMENT INVOLVES A HIGH DEGREE TO RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 4.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is        , 2003

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TABLE OF CONTENTS

Form of Warrant Agreement - Series B

Form of Warrant Agreement - Series C

Form of 10% Convertible Note

Form of Placement Agent Unit Option Series C

Form of Placement Agent Unit Option - Series C

Opinion of Katz, Barron, Squitero, Faust & Boyd

Amendment to Employment Ageement w/Wit

Consent of Greenberg & Company CPA's, LLC

PROSPECTUS SUMMARY

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the “Risk Factors” section, the financial statements and the notes to the financial statements.

The Business

We are an Internet-based healthcare technology company that provides Web-based electronic data capture (“EDC”) solutions and related value-added services to pharmaceutical and biotechnology companies, clinical research organizations (“CRO’s”), academic research institutions and other clinical trial sponsors. TrialMaster®, our Internet-based software, 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. At every research site, clinical research data is entered electronically. All participants in the clinical trial process are connected and have access to the data in real time. Clinical trial sponsors can review, monitor, and analyze the data remotely and in real time.

Medical Error Reporting System (“MERS-TH”) was co-developed with Columbia University. MERS-TH provides our clients, U.S. and European based hospitals and medical centers, a standardized system for collecting data on medical errors, adverse events and near misses. Medical errors lead to between 40,000 and 90,000 deaths annually and cost the U.S. health care system over $33 billion annually. We expect MERS-TH to help standardize the data collection process and help the medical community begin the process of reducing the incidence of medical errors.

Our principal offices are located at 2555 Davie Road, Suite 110-B, Davie, Florida, 33317, and our telephone number is 954-473-1254. We are a Delaware corporation. Our fiscal year end is December 31. The information contained on our website is not part of this prospectus.

The Offering

Common stock offered by the selling stockholders:

Up to 39,879,850 shares of our common stock, consisting of:

• 8,000,000 shares of common stock issuable upon conversion of Series B Preferred Stock,

• 13,486,000 shares of common stock issuable upon conversion of Series C Preferred Stock,

• 14,743,000 shares of common stock issuable upon exercise of warrants, and

• 3,650,850 shares of common stock issuable upon exercise of Placement Agent Unit Options.

Common stock outstanding:

Prior to the offering: 14,034,618 shares.

After the offering: 53,914,468 shares (1).

OTC Bulletin Board Trading Symbol:     OMCM

(1)  Assumes the subsequent conversion of the Series B Preferred Stock and Series C Preferred Stock, and exercise of warrants and Placement Agent Unit Options by the selling stockholders.

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SELECTED FINANCIAL DATA

The following summary of our financial information has been derived from our audited financial statements for December 31, 2002 and unaudited financial information for the six months ended June 30, 2003 that are included in this prospectus.

Statement of Operations Data:

				Six Months Ended
	Year Ended			June 30, 2003
	December 31, 2002			(unaudited)
Revenues	$	437,698		$	333,550
Cost of Sales	$	288,790		$	95,334
Gross Margin	$	148,908		$	238,216
Other Expenses	$	3,580,910		$	1,236,455
Net Loss Attributable to Common Stockholders	$	(5,266,264	)	$	(1,605,295	)
Net Loss Per Share	$	(0.63	)	$	(.13	)
Weighted Number of Shares Outstanding		8,333,820			12,420,836

Balance Sheet Data:

				At June 30, 2003
	At December 31, 2002			(unaudited)
Working Capital (Deficit)		(1,516,794	)	$	(1,389,198	)
Total Assets	$	752,909		$	369,010
Current Liabilities	$	1,994,970		$	1,545,355
Notes Payable		682,570		$	1,152,570
Convertible Notes Payable	$	450,000		$	450,000
Shareholders’ Deficit	$	(2,374,631	)	$	(2,778,915	)

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 $5,266,265 and $7,549,596 in fiscal 2002 and 2001, respectively. At June 30, 2003, we had an accumulated deficit of approximately $23,191,271 and a working capital deficit of approximately $1,389,198. 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 2003, 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.

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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, 2002 contained an explanatory paragraph indicating there was substantial doubt about our ability to continue as a going concern.

WE HAVE A LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR BUSINESS.

We were incorporated in 1997 and initiated our development of TrialMaster in August 1998. We have a limited operating history on which you can base an evaluation of our business and prospects. Our revenue and income potential are unproven. An investor must consider the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies with limited capital in new and rapidly evolving markets, including the Internet B2B market. These risks and difficulties include our ability to:

• develop our infrastructure;

• attract and maintain a base of end users;

• develop and introduce desirable services;

• provide customer support, personnel and facilities, to support our business;

• establish and maintain strategic relationships;

• establish and maintain relationships within the pharmaceutical, medical device, and biotechnology industries; and

• respond effectively to competitive and technological developments.

We cannot assure you that our business strategy will be successful or that we will successfully address any of these risks or difficulties.

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

At June 30, 2003, we had outstanding borrowings of approximately $1,708,551 of which

• approximately $450,000, at 10% interest, is due June 2004, however we are in default in the payment of interest and, at the option of the holder, the full amount of the notes could be declared in default;

• approximately $802,551, at 0 to 9% interest, is due October 31, 2004; and

• approximately $456,000, at 9% interest, is due January 31, 2005.

Since June 30, 2003 we have borrowed an additional $116,000 at 9% interest which is due January 31, 2005.

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

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:

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• fund more rapid expansion;

• fund additional capital or marketing expenditures;

• develop new or enhanced features, services and products;

• enhance our operating infrastructure;

• respond to competitive pressures; or

• acquire complementary businesses or necessary technologies.

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

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 trials. Barriers to entry on the Internet are relatively low, and we expect competition to increase significantly in the future. We face competitive pressures from numerous actual and potential competitors, both online and offline, many of which have longer operating histories, greater brand name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. We cannot assure you that the Web-based clinical trials maintained by our existing and potential competitors will not be perceived by clinical trial sponsors as being superior to ours.

WE MAY BE UNABLE TO PREVENT COMPETITORS FROM USING OUR INTELLECTUAL PROPERTY, AND WE WOULD FACE POTENTIALLY EXPENSIVE LITIGATION TO ASSERT OUR RIGHTS AND TO DEFEND OURSELVES AGAINST PATENT OR OTHER 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. In addition, we presently have a patent application pending for our TrialMaster product. The effect and extent of patent and other protection for our intellectual property is uncertain. We cannot guarantee that our patent application will be approved. Even if it is approved, we cannot guarantee that our patent will be broad and effective, nor can there be any assurance that we will not be involved in litigation to protect our intellectual property and to defend ourselves against infringement claims by our competitors. 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 continually 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 above, 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

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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 failure, break-ins, earthquake and similar events. 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.

WE DO NOT BELIEVE WE ARE SUBJECT TO REGULATION BY THE FDA, BUT WE HAVE MADE NO INDEPENDENT INQUIRIES.

Based upon our internal review of the relevant statutes, rules and regulations, we do not believe that our TrialMaster product is subject to FDA review or approval. However, because we have neither made independent inquiry of the FDA nor have we engaged special FDA counsel to provide us with an opinion regarding the applicability of the subject statutes, rules and regulations, our belief as to their inapplicability may be incorrect. In that event, we could be subject to fines and/or other sanctions, which will adversely affect our results of operations. In addition, if at some time in the future the FDA adopts rules to which we become subject, the cost of compliance therewith may be significant to us which would likewise adversely affect our results of operations and liquidity.

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.

We are registering an aggregate of 39,879,850 shares of our common stock, which are issuable upon the conversion or exercise of outstanding shares of our Series B Preferred Stock, Series C, Preferred Stock, warrants and Placement Agent Unit Options. It is possible that the selling stockholders will offer all of the shares for sale. Further, because it is possible that a significant number of shares could be sold at the same time hereunder, the sale, or the possibility thereof, may have a depressive effect on the market price of our common stock.

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 September 17, 2003, we had a total of 23,327,785 shares of our common stock underlying options, warrants and other convertible securities and 24,296,149 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.

FLUCTUATIONS IN OUR OPERATING RESULTS MAY ADVERSELY AFFECT OUR STOCK PRICE.

Historically, there has been volatility in the market price for our common stock. Our quarterly operating results, changes in general conditions in the economy, the financial markets or our industry segment, or other developments affecting us or our competitors, could cause the market price of our common stock to fluctuate substantially. We expect to experience significant fluctuations in our future quarterly operating results due to a variety of factors. Factors that may adversely affect our quarterly operating results include:

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• the announcement or introduction of new products by us and our competitors;

• our ability to retain existing clients and attract new clients at a steady rate, and maintain client satisfaction;

• the amount and timing of operating costs and capital expenditures relating to expansion of our business and operations;

• government regulation; and

• general economic conditions and economic conditions specific to the clinical trials industry.

As a result of these factors, in one or more future quarters, our operating results may fall below the expectations of securities analysts and investors, which could result in a decrease in the trading price of 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 Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction.

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

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

Provisions of our articles of incorporation and by-laws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, our articles of incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our board of directors, of which 5,977,500 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.

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2003. The table should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This table does not give effect to:

• the issuance of 2,020,000 shares of our common stock issued subsequent to June 30, 2003;

• the issuance of up to 2,752,039 shares of our common stock in the event stock options that have been granted are exercised;

• the issuance of up to 16,564,896 shares of our common stock in the event that outstanding common stock purchase warrants are exercised;

• the issuance of 24,296,149 shares of our common stock in the event that outstanding shares of 5% Series A, Series B and Series C Preferred Stock are exercised;

• the issuance of 2,160,000 shares of our common stock in the event certain Placement Agent Unit Options granted to the placement agent of the Series B Convertible Preferred Stock are exercised;

• the issuance of 1,490,850 shares of our common stock in the event certain Placement Agent Unit Options granted to the placement agent of the Series C Preferred Stock are exercised; or

• the issuance of up to 360,000 shares of common stock in the event that the outstanding 10% convertible notes are converted by the noteholders.

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	June 30, 2003
	(unaudited)
Long term liabilities	$	1,374,571
SHAREHOLDERS’ EQUITY (DEFICIT)
Undesignated preferred stock - $.001 par value. 4,022,500 shares authorized, -0- shares issued and outstanding		-0-
Series B preferred stock, - $.001 par value, 230,000 shares authorized, 200,000 issued and outstanding; liquidation preference $2,000,000		200
Series C preferred stock, - $.001 par value, 747,500 shares authorized, 337,150 issued and outstanding; liquidation preference $3,371,500		337
5% Series A preferred stock - $0.001 par value, 5,000,000 shares authorized; 4,215,224 issued and outstanding; liquidation preference $4,215,224		4,215
Common stock – 150,000,000 shares authorized, 13,414,618 shares issued and outstanding, after deducting 673,878 shares of treasury stock, at $.001 par value		14,040
Additional paid in capital – preferred		9,203,352
Additional paid in capital – common		11,548,983
Less: Treasury stock, cost method, 673,878 shares		(299,861	)
Accumulated deficit		(23,191,271	)
Deferred compensation		(57,770	)
Subscriptions receivable		(1,140	)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)		(2,778,915	)

USE OF PROCEEDS

We will not receive any proceeds upon the sale of shares of common stock by the selling stockholders.

This prospectus covers resales of shares of common stock issuable upon exercise of Placement Agent Unit Options and warrants. The terms of the Placement Agent Unit Options and warrants include a cashless exercise provision. If, and when the Placement Agent Unit Options and warrants are exercised by the selling stockholders without using the cashless exercise, the proceeds of $394,238 and $4,204,225, respectively, from the exercise shall be used for general working capital purposes. If, and when the Placement Agent Unit Options and warrants are exercised by the selling stockholders using the cashless exercise we will not receive any proceeds from the exercises.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is traded on a limited basis on the OTC Bulletin Board under the symbol OMCM. The following table sets forth the high and low closing 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.

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	High		Low
Fiscal 2001
1st Quarter	$	1.56	$	0.38
2nd Quarter	$	0.56	$	0.25
3rd Quarter	$	0.95	$	0.38
4th Quarter	$	0.55	$	0.21
Fiscal 2002
1st Quarter	$	0.44	$	0.16
2nd Quarter	$	0.25	$	0.12
3rd Quarter	$	0.25	$	0.15
4th Quarter	$	0.26	$	0.14
Fiscal 2003
1st Quarter	$	0.25	$	0.20
2nd Quarter	$	0.30	$	0.20

On September 26, 2003, the closing price of our common stock as reported on the OTC Bulletin Board was $0.25 As of September 26, 2003, we had approximately 402 shareholders of record; however, we believe that we have in excess of 1,000 beneficial stockholders 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. 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.

FORWARD-LOOKING STATEMENTS

Statements contained in this prospectus 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, such as statements relating to expectations as to operations and operational improvements; expectations as to revenue growth and earnings; the time by which certain objectives will be achieved; estimates of costs; and other matters contained in this prospectus 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 prospectus. Therefore, our actual

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experience and results achieved during the period covered by any particular projections or forward-looking statements may differ substantially from those projected. Consequently, the inclusion of projections and other forward- looking statements should not be regarded as a representation by us or any other person that these plans will be consummated or that estimates and projections will be realized, and actual results may vary materially. There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate. We assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, and no inference should be drawn that we will make any updates with respect thereto. For any forward-looking statements contained in this prospectus, we claim protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

General

The following information should be read in conjunction with the consolidated financial statements and notes thereto and other information set forth in this report.

Overview

We are a healthcare technology company that provides Web-based electronic data capture (“EDC”) solutions and related value-added services to pharmaceutical and biotechnology companies, clinical research organizations, and other clinical trial sponsors via our Internet-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. Medical Error Reporting System (“MERS-TH”) was co-developed with Columbia University during 2002. MERS-TH provides our clients, U.S. and European based hospitals and medical centers, a standardized system for collecting data on medical errors, adverse events and near misses. Medical errors lead to between 40,000 and 90,000 deaths annually and cost the U.S. health care system over $33 billion annually. We phased out the systems integration segment of our business during 2001. All of our personnel are involved in the development and marketing of TrialMaster.

The Six Months Ended June 30, 2003 Compared With the Six Months Ended June 30, 2002

Results of Operations

Revenues

Revenues for the period ended June 30, 2003 were $333,550 compared to $225,973 for the same period in 2002. The increase can be attributed to increased success we experienced in marketing TrialMaster. While industry growth estimates vary, most predictions indicate that EDC is anticipated to become widely accepted within the next three to five years. Web-based EDC has been around for approximately four years and between 10% and 15% of all clinical trials are currently conducted using Web-based EDC. Incremental growth within the industry should continue as competitive pressures mount in the pharmaceutical industry to replace existing prescription drugs losing their patent protection.

We changed our marketing focus to include clinical research organizations (CRO’s) approximately eight months ago. CRO’s generally market to and service a broad range of pharmaceutical and medical device manufacturers and consequently provide us the opportunity to market to a broader, bigger and more diverse end-user base. We have recently found CRO’s to be more receptive to the use of EDC. This is likely in response to pressure from clinical trial sponsors for more rapid and cost-efficient clinical trials, a result that EDC use can impact. We expect to increase the number of CRO’s using TrialMaster during the next six months. TrialMaster supplements the traditional CRO’s basket of products and services and would be sold as integral part of the outsource package offered to their trial sponsor clients. This should provide us the opportunity to leverage their sales force thereby increasing new clients with only modest increases in our sales and marketing expenditures.

Our TrialMaster product is currently being sold 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.

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TrialMaster contracts provide for pricing that is based on both the size and duration of the clinical trial. Size parameters include the number of patients participating in the trial and the number of data points being collected per patient. The client will pay a trial setup fee based on the previously mentioned factors, and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial. Generally, these contracts will range in duration from four months to several years. Setup fees are generally earned prior to the inception of a trial; however, the revenues will be recognized in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101 “Revenue Recognition in Financial Statements” 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.

Cost of Goods Sold

Cost of goods sold decreased to $95,334 in 2003 compared to $202,934 during the comparable period in 2002. Cost of goods sold relates primarily to salaries and benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. In addition, we have entered into a strategic alliance with a company based in Holland to provide help-desk services for our clients located in Europe. We do not expect the costs associated with this relationship to materially affect our results of operations.

Our gross margins during the first quarter of 2003 were approximately 71.4%. TrialMaster V3.0 automated many of the manual programming functions inherent in earlier versions of the product. This combined with the experience gained from serving our existing client base has allowed to decrease the time and cost involved in producing clinical trials. We expect gross margins to contract during the third quarter as we transition our business to providing TrialMaster on both an ASP and licensed basis. We expect margins to return to the 70-75% range during the fourth quarter of 2003 after these design efforts have been completed.

Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses are our biggest expense at 74.2% of total Other Expenses for the first half of 2003. Salaries and related expenses totaled $916,943 in 2003 compared to $876,565 in 2002. Total salaries declined relative to 2002 since a portion of total payroll is accounted for in cost of goods sold. We currently employ approximately 15 employees out of our Davie, Florida corporate office and two out-of-state sales executives. We expect to increase headcount within our technology and sales and marketing functions in concert with anticipated increases in TrialMaster clients during fiscal 2003.

Rent

Rent expense was $75,282 for fiscal 2003 compared with $78,565 for fiscal 2002. Although rent expense remained relatively constant, the components of the costs have changed. Our development office in Tampa was closed in March 2001 and that function was relocated to the corporate office to provide a complementary workflow between our R & D function and our operations and marketing departments. During November 2001 our corporate offices were relocated to the Ft. Lauderdale, Florida area. We believe this market provides a better environment for technical personnel recruiting. We were also able to reduce our rent obligations by approximately $3,300 per month. In December 2001, we established a disaster recovery site at an IBM Co-Location facility in Atlanta, Georgia. This site allows 100% system up-time and provides us with redundant data storage capabilities.

Legal and Professional Fees

Legal and professional fees totaled $31,517 in 2003 compared with $118,795 during fiscal 2002. Key components of the 2003 amounts include $45,000 paid to our placement agent for financial advisory services, $25,000 in audit related fees, $(50,018) in legal fees which includes a credit of $(52,023) for a settlement of accrued legal fees associated with a private placement of our Series C Preferred Stock and $11,534 that relate to accounting and legal services associated with our obligations as a public company. We expect on-going legal and professional fees to fall in-line with what was experienced during 2002.

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Travel

We incurred $28,857 in travel expenses during fiscal 2003 compared to $20,260 during 2002. We expect travel to increase as we experience more success in penetrating the marketplace with our sales efforts. We expect this increase to be offset by the increase in accompanying revenues.

Telephone and Internet

Telephone and Internet related costs were reduced by $4,639, or approximately 11.6%, due to decreased telephone and Internet access costs associated with the change of our telecom provider from MCI to AT&T. We do not anticipate increases in access charges during fiscal 2003 based on our own existing communications infrastructure and our projected 2003 clinical trial workload.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SGA”) were $67,463 during the first half of 2003. These expenses relate primarily to costs incurred in running our office day-to-day and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. We expect to increase the overall dollar volume spent on SGA as we increase our revenue base and step-up our overall activity. The increase of approximately $14,000 is partially attributable to increased advertising and public relations costs of approximately $3,000 and increased insurance costs of approximately $11,000.

Interest Expense

Interest expense was $58,421 during 2003 versus $145,026 in fiscal 2002. The Company converted its 12% Convertible Notes during December 2002 into shares of its Series C Preferred Stock. This conversion reduced annualized interest expense by approximately $190,000.

Preferred Stock Dividends

In March 2003 we issued 590,000 warrants to investors in a private placement of our Series C Preferred Stock. The warrants were valued at $135,344 utilizing the Black-Scholes model. The net proceeds received in the Series C Preferred Stock offering were allocated to the Series C Preferred Stock and we recognized a deemed dividend on preferred stock of $135,344 resulting in a charge to retained earnings and a credit to additional paid-in capital within our stockholders’ equity as of June 30, 2003. In June 2003 we issued 700,000 warrants to investors in a private placement of our common stock. The warrants were valued at $160,577 utilizing the Black-Scholes model. The net proceeds received in the common stock offering were allocated to the common stock and we recognized a deemed dividend on common stock of $160,577 resulting in a charge to retained earnings and a credit to additional paid-in capital within our stockholders’ equity as of June 30, 2003. Dividends on our Series A Preferred Stock totaled $0 in 2003 compared to $101,837 for the comparable period in 2002. There were arrearages of $101,837 in Series A Preferred Stock dividends, of $79,342 in Series B Preferred Stock dividends and $129,956 in Series C Preferred Stock dividends at June 30, 2003 and we therefore deducted $311,135 from Net Income (Loss).

The Three Months Ended June 30, 2003 Compared With the Three Months Ended June 30, 2002

Results of Operations

Revenues

Revenues for the period ended June 30, 2003 were $132,420 compared to $121,951 for the same period in 2002. The increase can be attributed to increased success we experienced in marketing TrialMaster. We expect revenues to increase as we experience continued success in marketing TrialMaster to larger entities. These clients will afford us a higher likelihood of multiple trial engagements. In addition, the trials conducted will characteristically encompass more locations and therefore provide us incremental revenues.

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Cost of Goods Sold

Cost of goods sold decreased to $48,227 in 2003 compared to $78,225 during the comparable period in 2002. Cost of goods sold relates primarily to salaries and benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. In addition, we have entered into a strategic alliance with a company based in Holland to provide help-desk services for our clients located in Europe. We do not expect the costs associated with this relationship to materially affect our results of operations.

Our gross margins during the second quarter of 2003 were approximately 63.6%. The decrease in gross margins versus the first quarter of 2003 is a result of smaller than expected revenues combined with significant amounts of labor expended on producing a new version of TrialMaster focused primarily on companies conducting Phase I clinical trials.

Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses were our biggest expense at 88.1% of total Other Expenses for the second quarter of 2003. Salaries and related expenses totaled $465,856 in 2003 compared to $438,952 in 2002. Total salaries declined relative to 2002 since a portion of total payroll is accounted for in cost of goods sold. We currently employ approximately 15 employees out of our Davie, Florida corporate office and two out-of-state sales executives. We expect to increase headcount within our technology and sales and marketing functions in concert with anticipated increases in TrialMaster clients during fiscal 2003.

Rent

Rent expense was $38,524 for fiscal 2003 compared with $38,345 for fiscal 2002. Although rent expense remained relatively constant, the components of the costs have changed. Our development office in Tampa was closed in March 2001 and that function was relocated to the corporate office to provide a complementary workflow between our R & D function and our operations and marketing departments. During November 2001 our corporate offices were relocated to the Ft. Lauderdale, Florida area. We believe this market provides a better environment for technical personnel recruiting. We were also able to reduce our rent obligations by approximately $3,300 per month. In December 2001, we established a disaster recovery site at an IBM Co-Location facility in Atlanta, Georgia. This is designed to ensure 100% system up-time.

Legal and Professional Fees

Legal and professional fees totaled $6,764 in 2003 compared with $36,867 during fiscal 2002. Key components of the 2003 amounts include $22,500 paid to our placement agent for financial advisory services, $25,000 for audit related fees, $(49,971) in legal fees which includes a credit of $52,023 for a settlement of accrued legal fees associated with the private placement of our Series C Preferred Stock, and $11,534 that relate to accounting and legal services associated with our obligations as a public company. We expect on-going legal and professional fees to fall in-line with what was experienced during 2002.

Travel

We incurred $19,102 in travel expenses during fiscal 2003 compared to $5,814 during 2002. We expect travel to increase as we experience more success in penetrating the marketplace with our sales efforts. We expect this increase to be offset by the increase in accompanying revenues.

Telephone and Internet

Telephone and Internet related costs increased by $3,278. We do not anticipate increases in access charges during fiscal 2003 based on our own existing communications infrastructure and our projected 2003 clinical trial workload.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SGA”) were $34,272 during the second quarter of 2003. These expenses relate primarily to costs incurred in running our office day-to-day and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business.

Interest Expense

Interest expense was $29,311 during 2003 versus $72,982 in fiscal 2002. The holders of our 12% Convertible Notes converted these notes during December 2002 into shares of our Series C Preferred Stock and warrants. This conversion reduced annualized interest expense by approximately $190,000.

Preferred Stock Dividends

In June 2003 we issued 700,000 warrants to investors in a private placement of our common stock. The warrants were valued at $160,577 utilizing the Black-Scholes model. The net proceeds received in the Series C Preferred Stock offering were allocated to the common stock and we recognized a deemed dividend on preferred stock of $160,577 resulting in a charge to retained earnings and a credit to additional paid-in capital within our stockholders’ equity as of June 30, 2003. Dividends on our Series A Preferred Stock totaled $0 in 2003 compared to $51,200 for the comparable period in 2002. There were arrearages of $51,200 in Series A Preferred Stock dividends, $39,890 in Series B Preferred Stock dividends and $67,245 in Series C Preferred Stock dividends at June 30, 2003 and we therefore deducted $158,335 from Net Income (Loss).

The Year Ended December 31, 2002 Compared With the Year Ended December 31, 2001

Results of Operations

Revenues

Revenues for the period ended December 31, 2002 were $437,698 compared to $170,522 for the same period in 2001, an increase of 156.7%. We have found the markets increasingly receptive to utilizing EDC services during the second half of 2002. This is consistent with our expectation that the market would begin adopting EDC services more rapidly as early adopters bring increased credibility to the market. We built upon this momentum through the acquisition of new clients and via repeat engagements with existing clients. We placed additional emphasis on broadening the market segments that we market our products to. During the latter half of 2002 we secured engagements from our first Clinical Research Organization (CRO) and academic research organization, Columbia University. We believe the broadened marketing horizon provides us some insulation from downturns in any specific segment for clinical trial services and also affords us some ability to cross-market services between our different clients. Working with CRO’s brings our services to their built-in client base and allows us to benefit from their sales efforts by bundling TrialMaster as part of their service offerings. Conversely, we can provide the CRO potential new clients for their non-data collection services.

CRO’s have become more receptive to the EDC process during 2002 and we expect their adoption rate to continue increasing. We believe that the adoption of EDC by CRO’s is a significant factor to the overall success of EDC as a data collection tool. We expect the adoption rate to increase as clinical trial sponsors continue seeking methods to reduce their R & D costs and more importantly as they continue seeking a way to make the clinical trial process more efficient. Academic research organizations provide us an attractive opportunity due to their participation in cutting-edge projects, access to government sponsored projects and the credibility afforded companies partnering with institutions such as Columbia University.

The general weakness exhibited in the economy has not diminished the level of activity in new drug therapy research since the drug and medical device manufacturers are continuously forced to find replacements for therapies coming under the pressures exerted by the loss of patent protection. We do believe, however, that the broad perception that small, high-technology firms are operating under severe financial constraints has caused slower adoption of EDC. More specifically, we have found that potential clients are apprehensive of doing business with us because of our going-concern issues. We believe we have had success in addressing this issue and that our recent success in securing new clients in conjunction with our improved financial results will lessen the effect this has on our sales efforts.

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While industry growth estimates vary, most predictions indicate that EDC is anticipated to become widely accepted. For example, Forrester Research and Frost & Sullivan each predict annual double-digit growth in the use of EDC technologies between 2001 and 2006. Web-based EDC has been around for approximately four years and between 10% and 15% of all clinical trials are currently conducted using Web-based EDC. Incremental growth within the industry should continue as competitive pressures mount in the pharmaceutical industry to replace existing prescription drugs losing their patent protection.

Our TrialMaster product is currently being sold 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.

TrialMaster contracts provide for pricing that is based on both the size and duration of the clinical trial. Size parameters include the case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee based on the previously mentioned factors, and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial. Generally, these contracts will range in duration from four months to several years. Setup fees are generally earned prior to the inception of a trial, however, the revenues will be recognized in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” 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.

We expect to begin marketing our new EDC product MERS-TH, during 2003. The Medical Event Reporting System (MERS-TH) is an event reporting system developed for hospitals and medical centers to collect, classify, and analyze events that could potentially compromise patient safety. MERS-TH provides the opportunity to study and monitor both actual and near-miss events to facilitate process improvement efforts. MERS-TH was developed in conjunction with Columbia University and will be marketed by both of us to hospital and medical centers in the U.S. and Europe initially.

Cost of Goods Sold

Cost of goods sold increased to $288,790 in 2002 compared to $194,108. Cost of goods sold were approximately 66.0% of sales. Approximately 8.1% of the expenses incurred in 2001 relate to our systems integration business and these expenses were eliminated in 2002 as we continued phasing out that line of our business. Cost of goods sold now relates primarily to salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients.

We expect to increase development programming labor costs on an absolute basis as our trial revenues increase. We expect labor costs to decrease on a relative percentage basis as we increase our trial base and develop economies of scale with regard to trial production. TrialMaster V3.0, the latest release of our trial-building software will improve our ability to reduce our trial production related costs since it automates many of the trial building functions that were manually performed in prior releases of our software. In addition, MERS-TH will provide a sales platform with high gross margins since we expect few client specific alterations to the basic software platform.

Other Expenses

Salaries, Benefits and Related Taxes

Salaries and related expenses are our biggest expense at 45.3% of total Other Expenses for 2002. Salaries and related expenses totaled $1,620,663 in 2002 compared to $1,829,385 in 2001. Total salaries decreased by approximately 5.6% versus 2001 since a portion of total payroll is now accounted for in cost of goods sold. We currently employ approximately 15 employees out of our Davie, Florida corporate office and have two out-of-state employees. We expect to increase headcount by about 25% within our production function in concert with anticipated increases in TrialMaster clients during fiscal 2003. We will look to selectively add experienced sales and marketing personnel in 2003 in an effort to increase our market penetration and to continue broadening our client base.

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Rent & Occupancy Expenses

Rent expense was $153,344 for fiscal 2002 compared with $185,040 for fiscal 2001. We have diminished our rent expense by closing our development office in Tampa in March 2001 and relocating that function to the corporate office to provide a more effective synthesis of workflows between our R & D function and our operations and marketing departments. During November 2001 our corporate offices were relocated to the Ft. Lauderdale, Florida area. We believe this market provides a better environment for technical personnel recruiting. We were also able to reduce our rent obligations by approximately $3,300 per month. In December 2001, we established a disaster recovery site at an IBM Co-Location facility in Atlanta, Georgia. This is designed to ensure 100% system up-time.

Legal and Professional Fees

Legal and professional fees totaled $178,214 in 2002 compared with $215,001 during fiscal 2001. Key components of the 2002 amounts include $90,000 paid to our placement agent for financial advisory services, $53,058 to our accountants for audit and tax related services, $8,891 in legal expenses related to various matters and $26,265 that relate to accounting and legal services associated with our obligations as a public company. We expect on-going legal and professional fees to approximate what was experienced during 2002.

Travel

We incurred $34,548 in travel expenses during fiscal 2002 compared to $66,205 during 2001. We began reducing travel expenses during mid-2000 as a result of the on-going working capital difficulties that we have been experiencing. Those cost-cutting measures continued in 2001 and during the first quarter of 2002. We expect travel to increase markedly as we experience more success in penetrating the marketplace with our sales efforts. We expect this increase to be offset by the increase in accompanying revenues.

Telephone and Internet

Telephone and Internet related costs were reduced by $14,597 due to decreased telephone and Internet access costs associated with the closing of our office in Tampa, Florida, and a decrease in overall long-distance charges associated with the closed facilities. We anticipate reducing our total telecommunications expenses by approximately 40% during 2003 by virtue of our change in long-distance and data line providers.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SGA”) were $224,844 during 2002. These expenses relate primarily to costs incurred in running our office day-to-day and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. We made a concerted effort during the second half of 2000 to eliminate or reduce SGA expenses not crucial to the efficient operation of our company. This effort continued during 2001 and is now culturally ingrained. We do expect to increase the overall dollar volume spent on SGA as we increase our revenue base and step-up our overall activity.

Interest Expense

Interest expense was $938,639 during 2002 versus $918,834 in fiscal 2001. In December 2002, the holders of 12% Convertible Notes converted those notes into shares of our Series C Preferred Stock. This conversion lowered the conversion price of the investors from $0.50 per share to $0.25 per share resulting in a debt conversion expense due to the more favorable conversion terms afforded the investors. The debt conversion expense of $646,000 was recorded as additional interest expense, this expense is non-cash and we recorded a corresponding increase to our additional paid-in capital.

During 2001 we entered into a private placement of 12% Convertible Notes. We recorded interest expense of $508,835 in connection with a “beneficial conversion feature” that was deemed to exist when the conversion price of some of the 12% Notes was issued at a discount to the prevailing market price of the stock. This expense is non-cash and we recorded a corresponding increase to our additional paid-in capital.

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During 2001 we issued 230,700 detachable common stock warrants as additional compensation in connection with short-term bridge loans that were used for working capital purposes. We valued the warrants utilizing the Black-Scholes model and recorded $124,827 as interest expense in 2001 and $165 as interest expense in 2002.

Preferred Stock Dividends

During 2002 we issued 6,153,000 warrants to investors in a private placement of our Series C Preferred Stock, including 3,230,000 warrants issued in the conversion of our 12% Convertible Notes into shares of Series C Preferred Stock. The warrants were valued at $1,411,475 utilizing the Black-Scholes model. The net proceeds received in the Series C Preferred Stock offering were allocated to the Series C Preferred Stock and we recognized a deemed dividend on preferred stock of $1,411,475 resulting in a charge to retained earnings and a credit to additional paid-in capital within our stockholders’ equity as of December 31, 2002.

During 2001 we issued 8,000,000 warrants to investors in a private placement of our Series B Preferred Stock. The warrants were valued at $3,383,168 utilizing the Black-Scholes model. The net proceeds received in the Series B Preferred Stock offering were allocated to the Series B Preferred Stock and we recognized a deemed dividend on preferred stock of $3,383,168 resulting in a charge to retained earnings and a credit to additional paid-in capital within our stockholders’ equity as of December 31, 2001.

Dividends on our Series A Preferred Stock totaled $121,025 in 2002 compared to $205,585 for the comparable period in 2001. This occurred as a result of our filing an Amended Certificate of Designation for the Series A Preferred Stock. The Amended Certificate of Designation was filed with the State of Delaware effective August 2, 2002. The Amended Certificate of Designation changed the terms of the Series A Preferred Stock dividend so that it becomes a liability only “when and if declared” by our board of directors. There were arrearages of $84,958 in Series A Preferred Stock dividends, $211,256 in Series B Preferred Stock dividends and $56,805 in Series C Preferred Stock dividends at December 31, 2002. We deducted $301,763 from Net Income (Loss) Attributable to Common Stockholders’ for the year ended December 31, 2002 relating to undeclared Series A, B and C Preferred Stock dividends.

Liquidity and Capital Resources

We have historically experienced negative cash flows and have relied primarily 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.

Cash and cash equivalents decreased by $129,090 from $194,877 to $65,787 at June 30, 2003. This was the result of cash provided by financing activities of $680,265 offset by cash used in operating activities of approximately $797,533. The significant components of the activity include a loss from operations of approximately $998,239 offset by non-cash expenses of 88,459, increases in cash of $112,247 from changes in working capital accounts and approximately $680,265 we raised through the sale of debt and equity securities.

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. We do not presently have any commitment for capital expenditures.

We are currently in default on interest payments owed totaling $66,879 on our 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. We were in default effective January 30, 2002.

We had a recorded liability of $145,711 at June 30, 2003 for federal employment taxes. We had not fully satisfied the liability as of August 15, 2003.

We have been operating with a cash burn rate. In order to manage cash flows, we have issued preferred stock and common stock to satisfy operating expenses and obligations. Between March 28, 2002 and March 2003 we sold 165,650 shares of our Series C Preferred Stock and warrants to purchase 3,513,000 shares of our common stock. Gross cash proceeds from this offering totaled $1,656,500. We accrued $333,077 in transaction related fees leaving net proceeds of approximately $1,423,423.

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From April 2003 through May 31, 2003 we sold an aggregate of 1,400,000 shares of our Common Stock and warrants to purchase 700,000 shares of our common stock for gross proceeds of $350,000. We accrued $35,000 in transaction fees leaving net proceeds to us of $315,000.

From July 2003 through August 31, 2003 we sold an aggregate of 620,000 shares of our common stock for gross proceeds of $155,000. We accrued $15,500 in transaction fees leaving net proceeds to us of $139,500.

During the second half of fiscal 2002 and first half of 2003, we entered into contracts for EDC services worth approximately $1.6 million in value. During this period we added seven new clients, including two clinical research organizations (CRO) and an academic research institution. These clients in particular are deemed vital to our long-term growth since these two areas have become a point of emphasis for our sales and marketing activities.

Our selling efforts now include marketing our products to several Fortune 500 pharmaceutical and medical device manufacturers and two of the largest CRO’s. We began providing services to some of these entities during the first half of 2003. These contracts should provide us the opportunity to limit our need for funding our operations via debt and equity capital. Obtaining contracts with clients of this size and reputation would also increase the credibility of the company.

We feel that the momentum established from new client acquisitions; the development of a new EDC product – MERS-TH; and our ability to retain clients for repeat engagements provide a good operating base from which to build during 2003. We improved our sales staff during the latter half of fiscal 2002 and expect to increase the level of resources utilized in the sales and marketing areas. We embarked on a cost cutting program during fiscal 2000. That program became part of our organization’s identity and remains ingrained in our culture today. 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. The capital markets since mid-2000 have provided a difficult climate for raising capital due to the decline in value of publicly held technology stocks and the resultant apprehension on the part of investors to invest in technology oriented firms. In addition, 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 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 will continue to require substantial funds to continue our research and development activities and to market, sell and commercialize our technology. We will 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 patents and 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 will seek to raise additional financing through debt and equity financings. There can be no assurance that any such findings will be available to us on favorable terms or at all. If adequate funds are not available when needed, we may be required to delay, scale back or eliminate some or all of our research and product development programs, and our business operations. If we are successful in obtaining additional financings, the terms of such financings may have the effect of diluting or adversely affecting the holdings or the rights of the holders of our common and preferred stock. Further, there can be no assurance that even if such additional capital is obtained or the planned cost reductions are implemented, that we will achieve positive cash flow or profitability or be able to continue as a business.

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Our ability to continue in existence is dependent on our having sufficient financial resources to bring products and services to market. As a result of our significant losses, negative cash flows from operations, and accumulated deficits for the periods ending June 30, 2003, there is doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

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

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

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

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

DEFERRED REVENUE

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

REVENUE RECOGNITION POLICY

Our business 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 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.

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We recognize sales, for both financial statement and tax purposes, in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101 “Revenue Recognition in Financial Statements” (SAB 101), SAB 101 requires that revenue be recognized ratably over the life of a contract. In accordance with SAB 101 we will periodically record deferred revenues relating to advance payments in contracts.

STOCK BASED COMPENSATION.

Options granted to employees under our Stock Option Plan are accounted for by using the intrinsic value method under APB Opinion 25, Accounting for Stock Issued to Employees (APB 25). In October 1995, the Financial Accounting Standards Board issued Statement No.123, Accounting for Stock-Based Compensation (SFAS 123), which defines a fair value based method of accounting for stock options. In December 2002, the FASB issued SFAS No.148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FAS 123”. This statement amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of FAS 148 are effective for fiscal years ending after December 15, 2002. We account for stock options under the intrinsic value method specified in APB 25 and have adopted the disclosure requirement of FAS 148.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 141”), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). They also issued Statement of Financial Accounting Standards No. 143, “Accounting for Obligations Associated with the Retirement of Long Lived Assets” (“SFAS 143”), and Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), in August and October 2001, respectively. Statement of Financial Accounting Standards No. 145-“Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, was issued in April 2002. Also during 2002, Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” and Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FAS 123” were issued in June and December 2002, respectively.

SFAS 141 requires all business combinations initiated after September 30, 2001 be accounted for under the purchase method. SFAS 141 supersedes APB Opinion No. 16, “Business Combination’s”, and Statement of Financial Accounting Standards No. 38, “Accounting for Preacquisition Contingencies” of purchased Enterprises, and is effective for all business combinations initiated after September 30, 2001.

SFAS 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, we are no longer required to amortize goodwill and other intangible assets with indefinite lives, but will be subject to periodic testing for impairment. SFAS 142 supercedes APB Opinion No. 17, “Intangible Assets”. We expect that SFAS 142 will not have a material impact on our consolidated results of operations and financial position upon adoption. We adopted SFAS 142 on January 1, 2002.

SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS 143 is effective in fiscal years beginning after September 15, 2002, with early adoption permitted. We expect that the provisions of SFAS 143 will not have a material impact on our consolidated results of operations and financial position upon adoption. We adopted SFAS 143 effective January 1, 2002.

SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144, supersedes Statement of Financial Accounting Standards No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS 121”), and APB Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and

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Infrequently Occurring Events and Transactions”. The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in general are to be applied prospectively. We adopted SFAS 144 effective January 1, 2002 and do not expect that the adoption will have a material impact on our consolidated results of operations and financial position.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item. Under SFAS No. 145, such gains and losses should be classified as extraordinary only if they meet the criteria of APB Opinion No. 30. In addition, SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. We do not expect the adoption of SFAS No. 145, which will become effective after May 2002 to have a material effect on our financial condition or results of operations.

June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Previous accounting guidance was provided by EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring)”. SFAS No. 146 replaces Issue 94-3. The provisions of SFAS No. 146 are to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We do not expect the adoption of this pronouncement to have a material effect on our earnings or financial position.

On December 31, 2002, the FASB issued SFAS No.148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FAS 123”. This statement amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of FAS 148 are effective for fiscal years ending after December 15, 2002. We do not expect the adoption to have a material effect on our earnings or financial position.

DESCRIPTION OF BUSINESS

Summary

We are an Internet-based healthcare technology company that provides Web-based electronic data capture (“EDC”) solutions and related value-added services to pharmaceutical and biotechnology companies, clinical research organizations (“CRO’s”), academic research institutions and other clinical trial sponsors. TrialMaster, our Internet-based software, 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. At every research site, clinical research data is entered electronically. All participants in the clinical trial process are connected and have access to the data in real time. Clinical trial sponsors can review, monitor, and analyze the data remotely and in real time.

Medical Error Reporting System (“MERS-TH”) was co-developed with Columbia University during 2002. MERS-TH provides our clients, U.S. and European based hospitals and medical centers, a standardized system for collecting data on medical errors, adverse events and near misses. Based on a February 2000 report made to the President medical errors are estimated to lead to between 40,000 and 90,000 deaths annually, and cost the U.S. health care system over $33 billion annually.

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.

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TrialMaster

TrialMaster is a Web-based software application that uses Internet technologies for EDC to conduct and manage clinical trial data from geographically dispersed sites.

We believe TrialMaster offers the following advantages, which increase the efficiency and decrease the costs of the clinical trial process:

• Accelerates initiation and completion of clinical trials by approximately 30%;

• Provides real-time access to clinical trial data;

• Eliminates double data entry and paper based reports;

• Decreases the cost of data collection in clinical trials by up to 80%;

• Provides real time connection between all participants in the clinical trial process;

• Improves data entry accuracy by up to 80%; and

• Secures collection and storage of clinical trial data, through encryption and multilevel storage in two locations.

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. Most clinical trials are currently conducted in an antiquated manner and fail to optimize the resources available for a successful clinical trial. We believe that our solution significantly reduces costs, improves data quality and expedites 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.

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 three to five 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 the dynamics:

• The average drug approved for sale by the FDA in 2000 cost $635,000,000 to bring to market.

• Drug companies lose as much as $13 million in potential revenue for each day a trial is delayed on a blockbuster drug such as Lipitor™.

We believe TrialMaster provides us with strong market opportunities, including:

The Clinical Trial Industry is a Large and Growing Industry.

Worldwide R & D spending totaled $57 billion in 2000. A June 2003 Covance report projects 10% annual growth in R & D spending powered by the development of new drugs and treatments, increases in the complexity and number of clinical trials, increasing number of patients in the average application, an aging population and strong demand for drugs to treat this aging population.

CenterWatch estimates that in 2000 $4.8 billion was spent in the United States on clinical research data management and handling. We estimate that in 2002 approximately 10%-15% of all clinical trials were conducted using Web-based (EDC) solutions.

Industry Trends

Industry and regulatory trends have led pharmaceutical, biotechnology, and medical device companies to increase research and development for proprietary new drugs and medical devices. To keep pace in today’s market companies must conduct both more and increasingly complex clinical trials, develop multinational clinical trial capability, and, at the same time, control costs. These trends have created even greater competitive demands on the industry to bring products to market efficiently and quickly.

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Competitive Pressures

Increased competition and pressure from generic brands and increased volume of new drug candidates from the genomics industry have forced pharmaceutical companies to attempt to shorten the clinical trial processes to bring new drugs to market as soon as possible. New drugs are also needed because shortened life cycles of drugs have narrowed the window of opportunity for companies to enjoy extraordinary returns from patented drugs. According to Accenture, pharmaceutical companies are striving to select winning drugs earlier and to reduce the time it takes to bring the drug to market by one-third.

Expensive and Inefficient Paper-Based Clinical Trials Compared to EDC Solution

One of the bottlenecks in the clinical trials process is in the collection, validation and management of data. Traditional paper-based clinical trials are an inefficient process. Several market-leading CRO’s are conducting trials using Web-based trial solutions. Trial sponsors are beginning to use EDC in order to remain competitive relative to the costs in conducting trials and the time to completion.

Emerging Market of Web-Based EDC

Web-based EDC has been around for four years and an estimated 10% to 15% of all clinical trials are currently conducted using Web-based EDC. We believe that the move toward emerging Web-based technologies is natural since it involves the management of large quantities of trial data in different formats, which is by definition one of the core skills and competencies of the IT industry. While industry growth estimates vary, all predictions indicate that EDC will become widely accepted. For example, Forrester Research and Frost & Sullivan each predict annual double-digit growth in the use of EDC technologies between 2001 and 2006; Accenture predicts that by 2004, 60% of all clinical trials will use some form of EDC.

Unique Competitive Advantages

We believe we are well positioned to succeed within the emerging EDC industry due to our competitive strengths which include:

A focus toward customer requirements.

Unlike competitors that have “global” solutions with standard data fields, screens and forms, we provide a fully customized solution to meet very specific client needs. TrialMaster V3.0 is a robust, dynamically-driven software platform. It has been designed, based on our past experience, to include many “custom” features our clients have sought in our past engagements. TrialMaster’s flexible architecture allows us to perform client specific customizations in what we believe are industry best turnaround times. Our team of developers and programmers ensures user acceptance and system performance and provides customer-focused support services to guarantee a smooth integration of technology into each sponsor’s clinical trials. We assist with the design, installation, and integration of TrialMaster with existing systems, host the clinical trial data in a secure and controlled state-of-the-art facility, provide customer support 24 hours a day, 7 days a week, and train on-site personnel.

Quality EDC solution offered at a discount to the market price.

Our business strategy focuses on the continued development, marketing and sale of our TrialMaster product. TrialMaster V3.0 was introduced less than a year ago. As of today, we are involved in conducting or developing multi-center, clinical trials for seventeen clients. We completed a multi-center, multi-national clinical trial with a European-based medical device company and a European-based clinical research organization. This clinical trial encompassed 400 patients in 42 sites throughout Canada, Western Europe, and Scandinavia. We are in negotiations with several U.S.-based pharmaceutical and clinical research organizations to implement TrialMaster. During the last twelve months we have signed contracts with eight new clients with contractual values exceeding $1.6 million.

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Industry Background

Global research and development expenditures by the pharmaceutical, medical device and biotechnology industries reached an estimated $57 billion in 2000, with $23 billion being spent by North American-based pharmaceutical, biotechnology and medical device companies. It is estimated that pre-clinical and clinical trial costs represent approximately one-third of the total spent on research and development, with approximately 8.5% of the total costs spent on data management.

Pre-clinical and clinical trials historically were performed almost exclusively by in-house personnel at the major pharmaceutical companies. Over the last two decades, clinical trial sponsors have transitioned to a model that includes the outsourcing of clinical trial management to clinical research organizations (“CRO’s”).

We believe that certain industry and regulatory trends summarized below have led pharmaceutical, biotechnology and medical device companies to increase research and development 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.

Clinical Trial Overview

In order for a drug or medical device to be marketed the drug or device must undergo extensive testing and regulatory review to determine that it is safe and effective. To support an application for regulatory approval, clinical data must be collected, reviewed and compiled. Clinical data is collected from case report forms (“CRF’s”) that are submitted to and filled out by an investigator, typically a doctor or research assistant who is administering the clinical trial. CRF’s can be five to several hundred pages long, and document a series of visits by patients over a period of time.

Once information is collected by the investigator and the CRF is completed, the investigator submits the CRF to the sponsor or the CRO. The data is then input manually into a database. Typically, double data entry is used to resolve errors.

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TrialMaster allows participants in the clinical trial process, such as a sponsor or CRO, to perform data collection, handling and transmission via a direct, secure Internet connection. After the CRF’s are Internet enabled and the validation criteria encoded, the CRF forms are accessed via the Internet from our server to the sites where the clinical trials will take place.

The TrialMaster Suite of Products

TrialMaster is an open system that is fully integratable with existing legacy data systems such as Oracle^® and Microsoft SQL^®. The application utilizes a standard browser such as Internet Explorer 5.0^®. TrialMaster allows clinical data to be entered directly from a source document, such as a patient record or doctor’s notes, via computer. The clinical data is transmitted via the Internet to a secure server where the data is validated and stored. The cost for implementing the application is based on a data point per page/per patient fee which increases or decreases depending on the size and length of the trial.

TrialMaster’s features and benefits include:

• Internet-based network - no special client software required;

• Role-based security - data presented on basis of role in the trial (i.e., investigator, sponsor, trial manager);

• Audit trail of all transactions - all original data and changes are recorded;

• Primary data validation - data ranges and requirements are checked upon entry of data

• Customized reports based on client’s specifications;

• Enhanced Messaging system - sends email notifications based upon client defined events both systemically and client generated;

• Data export - client can export database in a variety of formats for interim analysis;

• Real time data access - clients can monitor trial progress and make go/no-go decisions;

• ASP model - uses our secure data infrastructure and can be installed utilizing client-supplied equipment as an option;

• Fully compliant with FDA 21 CFR Part 11 and subsequent April 1999 Guidance to Industry;

• CDISC compliant exported data.

TrialMaster is intended to enhance the clinical trial process in the following three areas:

Data Collection is Faster and Cheaper. Clinical data is collected from the CRF’s that are provided by the trial sponsor and submitted to and filled out by an investigator - a doctor or a research assistant - who is participating in the clinical trial. The forms are five to several hundred pages per patient and encompass a series of visits by patients over a period of time. Currently, the cost to process data ranges from $7.00 to $25.00 per page per patient. Under the TrialMaster system, the cost to process the data is approximately two to five times less per page per patient. The time to process the data under the current manual system can take anywhere from one to eight weeks, which is significantly reduced utilizing TrialMaster because the data is entered in real-time with validation occurring instantly.

Data is Collected More Accurately. Upon its submission, data is reviewed to determine if the collected data is within the parameters of the clinical trial. If data is outside of the clinical trial parameters or if there are typographical errors or similar data problems, the data collection process will generate an edit query. This edit query must be submitted to the investigator for resolution and resubmitted for data processing. Under the current manual system, the cost to process an edit query is approximately $80 to $115 per query; for a large trial, it is not uncommon to generate 500 to 1,000 edit queries a week. The time to process the data for each patient under the current manual system can take anywhere from three to eight weeks. By using TrialMaster, the number of edit queries are significantly reduced because the system validates data as it is input, and the cost of the queries can be reduced by up to 80% to 85%.

Clinical Studies Can Be Monitored More Efficiently. Monitors are an integral and necessary part of the clinical trial process. These individuals travel to clinical sites to ensure that the investigators are complying with good clinical practice standards. They make sure clinical data is collected and submitted in a safe, timely and accurate manner. Monitoring and its associated costs, such as travel, can exceed one-quarter of the total costs of a clinical trial. Under the current system, the cost for a monitoring visit can vary from $1,000 to $3,000 per visit, and a trial can require as many as three to seven visits by the monitor. The number of visits can be reduced when using TrialMaster because the status of sites can be monitored remotely and in real-time. Under the current system, the time for each visit is usually one to two days; utilizing TrialMaster, we believe monitoring hours can be reduced by 50% and monitoring visits can be more efficiently scheduled due to the availability of more accurate and complete information on the trials.

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TrialMaster Sales and Marketing

EDC services are currently used in approximately 10% to 15% of clinical trials. Our sales efforts encompass a broad range of clinical trial sponsors including multi-national pharmaceutical companies, small and mid-size pharmaceutical, medical device, academic research institutions and clinical research organizations. We have begun allocating a substantial portion of our sales effort towards large multi-national pharmaceutical companies. These firms conduct numerous trials per year making TrialMaster a scalable and cost-efficient solution. The scope of work available from these large sponsors provides a strong market for sales growth for us. Our focus on small and mid-size companies is predicated upon the fact that they are unlikely to have the technological resources necessary to develop a product like TrialMaster which will offer these companies operating efficiencies in the clinical trial process as well as potential cost savings.

TrialMaster can be used within any segment of the pharmaceutical, biotechnology or medical device industries that undertake clinical trials. We have focused our sales and marketing efforts on the pharmaceutical industry, a market dominated by companies such as Johnson & Johnson and Pfizer. We believe the following are the relevant factors for approaching this market:

• access to “validators” for the market,

• relatively standardized and advanced approach to clinical trial process,

• a very competitive market with relatively short product cycles providing for a need to get products to market quickly, and

• a tight group of opinion leaders within the market segment with which we have direct relationships.

Our marketing strategy includes establishing relationships with “opinion leaders” and decision makers within the clinical trial industry. In this regard, we have created a Medical Advisory Board to advise us on the development and marketing of the TrialMaster system. The Medical Advisory Board will also provide a platform to contact these opinion leaders and to provide information about the application. We are also using traditional methods to market TrialMaster, including advertising in trade periodicals and attending industry conventions.

Medical Error Reporting System – MERS-TH

MERS-TH is a Web-based reporting system used to collect, classify and analyze medical events from geographically dispersed sites. MERS-TH provides the opportunity to study and monitor actual and near-miss errors to facilitate the improvement of the care-giving process. We developed MERS-TH in conjunction with Columbia University during 2002.

We believe MERS-TH will improve the process of collecting, cataloging and studying medical errors. MERS-TH provides the following benefits:

• Standardized error classification system and reporting will allow larger hospital and health care providers to streamline the reporting process;

• Real-time access to data;

• Seamless integration into existing health care reporting systems utilizing data imports;

• Improves existing QA systems’ effectiveness without creating additional layers of responsibility;

• Facilitates compliance with governmental mandated reporting requirements; and

• Secure collection and storage of data through encryption.

Medical Errors Defined

Types of Medical Errors

• Diagnostic

• Error or delay in diagnosis;

• Failure to act on results of testing or monitoring;

• Using outdated tests.

• Treatment

• Error in the performance of an operation, procedure or test;

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• Error in administering the treatment;

• Error in the dose or method of using a drug.

• Preventive

• Failure to provide prophylactic treatment;

• Inadequate monitoring or follow-up treatment.

• Other

• Equipment failure;

• Other system failure.

A “near miss” is an event or situation that could have resulted in an accident, injury, or illness, but did not, either by chance or through timely intervention.

Market Opportunity

In November 1999, the Institute of Medicine (“IOM”) issued a report titled “To Err is Human: Building a Safer Health System,” detailing its findings from reviewing medical errors in the U.S. health care system. The report found that between 44,000 and 98,000 people are killed annually from preventable medical errors and that another one million people are injured by errors in treatment at hospitals. Beyond their cost in human lives, preventable medical errors are estimated to cost as much as $29 billion annually in U.S. hospitals. These costs include; the expense of additional care necessitated by the errors, lost income and household productivity, and disability. The report called on states to create mandatory reporting systems, starting with hospitals. The consequences of medical mistakes are often more severe than the consequences of mistakes in other industries—leading to death or disability rather than inconvenience on the part of consumers.

Most hospitals underestimate or are underreporting the number of errors and injuries that occur due to a workplace culture that tends to punish those making mistakes and because hospital personnel tend to regard health care provider errors as evidence of personal carelessness. Dr. Lucien Leape of the Harvard School of Public Health estimates that only 2 to 3% of major errors are reported through hospital incident reporting systems. Worse yet, another study by Dr. Leape found that 70% of adverse events found in a review of 1,133 medical records were preventable.

A wide body of research, including studies by the Agency for Healthcare Research and Quality (“AHRQ”), support the IOM conclusions. Studies conducted during the 90’s have shown that adverse events occur in approximately 3 to 4% of patients. Another study conducted by Dr. Leape found that the average intensive care unit (“ICU”) patient experienced almost two errors per day, a proficiency level of 99 percent. However, one out of five of these errors were potentially serious or fatal. If performance levels of 99.9%— substantially better than those found in the ICU—applied to the airline industry, it would equate to two dangerous landings per day at O’Hare International Airport in Chicago.

Other industries, e.g., aviation or manufacturing, have done a better job than the health care industry in managing the risk level inherent in their operating activities. Some industries, such as the aviation industry, have adopted quality improvement, safety assurance and error reduction programs as a core mission. A review of the experience in non-health-care industries offers some lessons that may be applicable to reducing medical errors. Characteristics found in industries that have effectively reduced errors include:

• Development of tracking mechanisms that expose errors;

• Thorough investigation of errors;

• Applying to error reduction a systems oriented approach that combines human intervention, technical tools and organizational remedies;

• Systems solutions that are focused on fixing the problem, not the blame;

• Changing organizational cultures so that an environment that embraces error reduction is nurtured; and

• Allocating the resources necessary to fix the problems.

One of the problems in concluding that a chronic medical error problem exists is that medical errors usually affect only one patient at a time; therefore, they are treated as isolated incidents. Health-care errors are also underreported due to liability and confidentiality concerns. Implementing a broad-based solution that is available to the healthcare industry can help begin to remedy the first problem. Only changing the culture intrinsic to the industry can combat the second.

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Regulatory Background

In December of 1999, President Clinton directed the Quality Interagency Coordination Task Force (“QuIC”) to evaluate recommendations from To Err is Human and to respond with a strategy to identify prevalent threats to patient safety and reduce medical errors. The QuIC is a multi-agency task force with participants including the Department of Health and Human Services; Department of Defense; and the Department of Veteran Affairs. The latter two are of significance since they collectively manage over 1,800 health care sites serving 13 million patients annually.

In response to the IOM report, the President directed the QuIC to prepare a set of recommendations for specific actions to improve health care outcomes and prevent medical errors. Specifically, the President requested that the QuIC report:

• Identify prevalent threats to patient safety and medical errors that can be prevented through the use of decision-support systems;

• Identify additional strategies to reduce medical errors and ensure patient safety in Federal health care programs;

• Evaluate the extent to which medical errors are caused by misuse of medications and medical devices, and consider steps to strengthen the FDA’s reporting structure on these types of errors; and

• Identify opportunities for the Federal Government to take specific action to improve patient safety and health care quality through collaboration with the private sector.

The IOM’s report resulted in a flurry of regulatory activity. As of January 2003, approximately 20 states have implemented laws making error reporting systems mandatory. The goal of such legislation is to improve patient safety and to hold health care organizations responsible for the quality of care they provide.

The IOM and QuIC made several recommendations in their respective reports. Amongst their recommendations are to:

• Create a national mandatory reporting system;

• Include patient safety in performance standards for health care organizations – require specific performance levels in order to retain the rights to provide goods and services;

• Ask independent accrediting organizations to demonstrate how they are coordinating and strengthening their patient safety standards;

• Identify a core set of errors reporting data;

• Identify and attempt to pool existing data sets (such as State mandatory errors reporting data) that can be brought together to enhance the knowledge and understanding of errors.

AHRQ and the CDC have expanded their research efforts in the area of informatics to include initiatives aimed at developing and evaluating electronic systems to identify, track, and address patient safety concerns. Additionally, Governmental participation especially in requiring the pooling of data, and in setting and enforcing safety standards from its vendors is likely. On a more global basis, establishing a national MERS-TH database will provide useful data to study system failure points, enable benchmarking and provide data to study the efforts that prevented near misses from becoming errors. The errors that are cataloged will provide useful information on the causes of health care problems. Perhaps more importantly, near misses occur more frequently than errors and reveal a greater variety of systemic problems with processes and procedures.

MERS-TH Description

When designing MERS-TH the following design criteria were identified as crucial for an ideal reporting system:

Error reporting should:

• Be confidential and non-punitive;

• Be relatively easy to integrate into an existing quality assurance system;

• Include near-misses and no harm events, in addition to errors;

• Classify events by what and where events happened, where and how they were discovered, and by the underlying root causes of the errors;

• Use a uniform method for recording data;

• Include a process for analyzing data and sharing solutions; and

• Feed into a non-regulatory central system where the aggregated data can be further analyzed.

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Since quality assurance (“QA”) programs are already required by regulation, it is vital that the design of an error reporting system be complementary to existing QA systems to avoid employee resistance. The system therefore could not duplicate existing QA systems, but instead needs to meet the above criteria and still be compatible with existing QA systems.

MERS-TH provides a software-based process to sort error reports based on the potential for risk to a patient and provides health care organizations a consistent method for classifying the causes of events. The system has been designed to handle high volume environments without becoming cumbersome to use at the local hospital level.

MERS-TH has been developed with the knowledge that errors can never be eliminated; however they can be reduced by managing, identifying and addressing the risks inherent in health care services. MERS-TH provides a standardized means of organized data collection and analysis of medical errors, adverse events and near misses. Its effectiveness depends on the willingness of individuals to report such information.

How does MERS-TH work?

• Detection: Identify, report and record the event.

• Selection: Determine the extent of investigation needed.

• Investigation: Find out more about the context in which the event occurred, and conduct a root cause analysis, if necessary.

• Description and Classification: Assign standardized codes to describe the event and root causes.

• Computation: Analyze the aggregate data to identify patterns and trends.

• Interpretation: Use the results to guide organizational risk reduction efforts.

Barriers to Implementation

Information systems and technical problems. To be practical, error prevention will need to rely on sophisticated management and clinical information systems, both as sources of data on adverse events and as a component of interventions to reduce errors. However, information systems existent in health care organizations today are neither sufficiently integrated nor flexible enough to serve either of these purposes. We believe MERS-TH bridges this gap by combining a user-friendly interface that will avoid initial user reluctance, with an engine dynamically driven by its database that provides a flexible system that is readily integrated into existing healthcare information structures.

Cost and structural problems. Although considerable cost savings can be realized by the effective reduction of medical errors, instituting such programs will require a substantial initial investment. In addition, the relative autonomy of departments within some health care institutions is a potential barrier to rapid organization change and the adoption of new models and procedures to prevent errors. We view the cultural changes needed to implement new error reduction campaigns as the more relevant obstacle. MERS-TH is a reasonably priced alternative for fulfilling an organization’s MIS needs in combating medical errors. Most health-care organizations have capital expenditure budgets that dwarf the investment necessary to implement MERS-TH.

MERS-TH Sales and Marketing

MERS-TH is currently installed and is being evaluated as part of an approximately one-year pilot study that began in January 2003 at the University of Columbia. The sales and marketing of MERS-TH will be done separately from TrialMaster and is likely to command specialized sales personnel with risk management backgrounds. As our co-developer in the project, Columbia University provides an extensive network of research associates as potential clientele. Our initial target will be the domestic market with academic institutions and private and public hospitals and medical centers targeted equally. The European market provides an equally attractive sales market. Illustrative of the potential market for MERS-TH is the number of hospitals in operation domestically and in the European market. As of January 2003 approximately :

• Privately run U.S. hospitals – 5,801

• Government run U.S. hospitals – 1,802

• European academic and state-run hospitals – 14,000

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The market for error reporting systems is in its initial stages, with few competitors and no products currently exerting market dominance. Our internal estimates are that error reporting systems may account for as much as a $500 million annual market. Given the likelihood that governmental regulation may make error reporting systems mandatory; we believe that this market provides enormous short and long-term prospects.

Systems

We provide application hosting services for our web-based clinical trial applications utilizing a secure, medical-grade network infrastructure. We maintain both a primary data center and a secondary disaster recovery site. These sites utilize identical configurations with the primary site located at our headquarters while the secondary site is located at an IBM owned co-location facility in Atlanta, GA.

Internet communications to the data center is maintained via two high-speed digital data communication lines; a primary and a “shadow” line. The shadow monitors the primary line and automatically becomes active should an interruption in communications occur to the primary line. These lines are connected to a Cisco high-speed dual line router. Data is then passed from the router to a Cisco PIX hardware firewall. The hardware firewall is capable of providing 120 Mbps data throughput and up to 125,000 simultaneous sessions. The two Cisco PIX firewalls located at the primary data center and at the secondary disaster recovery site are linked via a secure, static, encrypted virtual private network (VPN) connection. The PIX provides firewall, VPN, and intrusion detection functions to the network. Data from the PIX is passed to an HP high-speed data switch. The switch is capable of processing data at a rate of 36.6 Gbps. The switch is used to connect all of our servers to the PIX.

Our software applications were developed utilizing Microsoft’s Distributed Network Architecture (DNA). Thus, the network was designed to accommodate the security and scalability of the DNA framework. Using this approach, servers are paired so that the production server is visible to the internet while the database server is not. Data from the database is made available to authorized users via our proprietary software object module running on the production server. Communication between the servers is handled by the HP switch.

HP Netserver computers running Microsoft Windows 2000 are used in all production and database servers. The servers are configured with dual Intel Pentium class processors, dual power supplies, and hot-swappable RAID disk storage for maximum availability and reliability. Database servers are configured with one gigabyte of RAM memory and 36 gigabytes of disk storage. Production servers are configured with 512 megabytes of RAM memory and 27 gigabytes of disk storage. All servers are capable of supporting up to one gigabyte of RAM memory and one terabyte (1,099,511,627,776 bytes) of disk storage. Up-time of 100% has been experienced since the deployment of these servers.

The current production environment employs two production/database server pairs at the primary data center which is mirrored at the co-location facility. Database synchronization between the primary data center and the co-location facility is accomplished utilizing transaction replication technology via the Virtual Private Network link established between the two locations.

Research and Development

We acquired the technology, developed by Education Navigator, Inc., for our TrialMaster product in June 1998. Since that date, our development of TrialMaster and its subsequent improvements and refinements have been handled by our in-house staff of programmers. During fiscal 2002, we spent approximately $465,000 on research and development activities, the majority of which represented salaries to our developers. In fiscal 2001 we spent approximately $392,000 on research and development activities. We intend to continue to improve and broaden our product line to increase our ability to compete in our market segment

Competition

We compete in the EDC market. This industry can be characterized as rapidly evolving, highly competitive and fragmented. There are other entities that compete with TrialMaster. The principal competitors include Phase Forward Incorporated and eResearch Technology. We believe that 25 to 30 viable competitors in varying degrees of development exist. Many of these competitors have significantly greater financial, technical and marketing resources, or name recognition than we do. In addition, other companies could enter the EDC market due to the vast size of the market opportunity. We believe that the most significant competitive factors we face are a lack of operating history and the poor financial results experienced during the period covering fiscal 2000 to the present.

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We believe, however, 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.

Government Regulation

We do not believe that we are currently regulated, nor do we need any approvals by the FDA or any specific government or quasi-governmental agency. There can be no assurance, however, that we will not become subject to government regulation in the future. See the “Risk Factors” section of this document.

Intellectual Property Rights

Our success depends in part on our ability to protect our intellectual property. To protect our proprietary rights, we rely generally on copyright, trademark and trade secret laws, confidentiality agreements with employees and third parties, and agreements with consultants, vendors and customers, although we have not signed such agreements in every case. Despite such protections, a third party could, without authorization, copy or otherwise obtain and use our software. We can give no assurance that our agreements with employees, consultants and others who participate in development activities will not be breached, or that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors.

We have a patent application pending with respect to our TrialMaster product. This application was filed in May 2000 and remains pending. We are also in the process of registering a number of trademarks including “OMNICOMM SYSTEMS, INC.,” and we have federally registered “TRIALMASTER” and “OMNICOMM SYSTEMS,” as well as copyrights on any computer software applications produced by us. We intend to make such other state and federal registrations as we deem necessary and appropriate to protect our intellectual property rights.

Employees

We currently have 17 full time employees of which three are executives, two are administrative, seven are programmers, two are technology and systems managers and three are in sales and marketing. We believe that relations with our employees are good. None of our employees is represented by a union.

DESCRIPTION OF PROPERTY

Our principal executive offices are located in commercial office space in approximately 4,400 square feet at 2555 Davie Road, Suite 110B, Fort Lauderdale, Florida, and our telephone number is (954) 473-1254. We lease these offices under the terms of a sublease expiring in September 2005. Our annual rental payment under this sublease is $66,900 plus sales tax.

Our secondary data site, which serves as our disaster recovery location, is located in Atlanta, Georgia and is leased from IBM. We lease this space under the terms of a lease expiring in October 2004. Our annual lease payment is approximately $53,460.

LEGAL PROCEEDINGS

On or about September 6, 2000, the Company’s wholly owned subsidiary, OmniTrial B.V. (“OmniTrial”) submitted a petition for bankruptcy protection from the bankruptcy court of the Netherlands. The court appointed a liquidating trustee. The Company claimed that certain assets in the possession of OmniTrial were paid for by the Company and therefore should not be part of the liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and told the Company that as part of the OmniTrial bankruptcy estate the assets would be sold to diminish any deficiency of the estate. On July 5, 2001 the Company signed a settlement agreement providing for the return of the assets to the Company in exchange for a payment of $10,000 that was made on or about July 5, 2001. The bankruptcy proceeding is ongoing. The Company does not expect to incur any additional liability in this bankruptcy proceeding.

Other than the foregoing, we are not a party to any legal proceedings.

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MANAGEMENT

The following individuals are our executive officers and the members of our board of directors. Each director is elected at our annual meeting of stockholders and holds office until the next annual meeting of stockholders, or until his or her successor is elected and qualified. Our by-laws permit the board of directors to fill any vacancy and such director may serve until the next annual meeting of stockholders or until his or her successor is elected and qualified. The board of directors elects officers annually and their terms of office are at the discretion of the board.

Person	Age		Position
Cornelis F. Wit		57	Chief Executive Officer, President and Director
Randall G. Smith		46	Chairman and Chief Technology Officer
Ronald T. Linares		40	Chief Financial Officer
Charles Beardsley		57	Senior Vice President Marketing and Sales
Guus van Kesteren		62	Director

Cornelis F. Wit. Mr. Wit has been a member of our board of directors since November 1999, and CEO and President since June of 2002. Mr. Wit was interim CEO from June to July 2000. Mr. Wit was the President of Corporate Finance at Noesis Capital Corp, Boca Raton, Florida, an NASD member firm, from March 1995 until September 2000. Prior to 1994, Mr. Wit was the CEO for DMV, USA, the American subsidiary for Campina Melkunie, a Dutch multi-billion dollar food and pharmaceutical ingredient company, and he also served as Vice President International Operations for Duphar, a pharmaceutical company in Holland. Mr. Wit graduated from Nijenrode, a business university in Holland.

Randall G. Smith. Mr. Smith has been an executive officer and member of our board of directors since 1997, serving as President and Chief Technology Officer from May 1997 until August 2000 and thereafter as our Chief Technology Officer. From December 1995 to May 1997, Mr. Smith was Director of Operations for Global Communications Group. Mr. Smith received a B.S. from Purdue University.

Ronald T. Linares. Mr. Linares has served as our Chief Financial Officer since April 2000. Prior to joining us, from 1996 until 1999, Mr. Linares was Chief Financial Officer of First Performance Corp., a financial consulting firm, and from 1992 to 1996, Mr. Linares served in various senior financial positions within the Kenny Rogers Roasters Company including Chief Financial Officer of Foodquest, Inc. from 1994 to 1996. Mr. Linares received a B.S. from the University of Florida and a Masters in Public Accountancy from Barry University.

Charles Beardsley. Mr. Beardsley has served as Senior Vice President, Marketing and Sales since January 2003. Prior to joining us, from 1974 to 1995, Mr. Beardsley spent most of his career at Rhone-Poulenc Rorer (RPR, now Aventis Pharmaceuticals), where he served as Vice President of U.S. Marketing and Sales and later as President and General Manager of RPR Canada. More recently, he has served in senior level leadership roles with ASI Business Solutions, from 1997 to 1999, CB Technologies, from 2001 to 2002, and Quintiles Transnational, from 2000 to 2001, companies involved in information technology to include electronic data capture, business intelligence, decision-support and sales force automation and optimization. Mr. Beardsley received his B.S from San Jose State University and his M.B.A. from Golden Gate University.

Guus van Kesteren. Mr. van Kesteren has been a member of our board of directors since November 1999. Since 1996, Mr. van Kesteren has been a consultant to Noesis Capital Corp. , a NASD member firm. Prior thereto, he was employed from 1972 until 1996 by Johnson & Johnson in various capacities, holding the position of Vice President International from 1985 until 1996 with responsibility for the Australasian subsidiaries. Mr. van Kesteren graduated from Nijenrode, a business university in Holland.

Medical Advisory Board

We have formed a Medical Advisory Board whose purpose is to advise and consult with us on the development, implementation and marketing of the TrialMaster and MERS-TH applications. Currently there are no members on our Medical Advisory Board; we are seeking to add members as we identify individuals who can advise us in adding value to TrialMaster and MERS-TH.

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Committees of our Board of Directors

Our board of directors established a Governance Committee, Compensation Committee and an Audit Committee. The Governance Committee, established during 2002, assists the board of directors in fulfilling its responsibility relating to compliance with all Securities and Exchange Commission rules and regulations. Its primary tasks during 2003 will be the implementation of the various requirements of the Sarbanes-Oxley Act of 2002. Mr. van Kesteren chairs this committee, but all of the directors in concert with our Chief Financial Officer are involved in integrating the requirements of the various regulatory agencies dictating public company rules and regulations into our operating structure. The Compensation Committee administers our stock option plan and makes recommendations to the board of directors concerning compensation, including incentive arrangements, of our officers and key employees. The members of the Compensation Committee are Mr. van Kesteren, who serves as Chairman of the committee and Mr. Wit. The Audit Committee assists the board of directors in fulfilling its oversight responsibility relating to our financial statements and financial reporting process, the qualifications, independence, engagement and performance of our independent auditors, and the performance of our internal control functions. The audit committee also reviews all non-audit fees and services to be rendered to us by the independent auditors. Mr. van Kesteren, as our sole independent director and financial expert, as such term is generally defined by the Securities and Exchange Commission, is the only current member of the Audit Committee.

Right to Designate Members to our Board of Directors

In connection with our private placement of Series A Preferred Stock in July 1999, in which Noesis Capital Corp. acted as placement agent, we granted Noesis Capital Corp. the right to designate through July 2004 two directors to our board of directors pursuant to which Mr. Wit and Mr. Van Kesteren were appointed to our board of directors.

In connection with our private placement of Series B Preferred Stock in August and September 2001, in which Commonwealth Associates, L.P. acted as placement agent, we granted Commonwealth Associates and the Series B investors the right to designate one director. Our officers, directors and certain of our principal stockholders have delivered an irrevocable proxy to Commonwealth Associates agreeing that until the later of August 31, 2006 or such time as less than 25% of certain currently issued and outstanding securities are then issued and outstanding such individuals will continue to vote for Commonwealth Associates’ designee as a member of our board of directors.

We also agreed that all committees of our board of directors would include a proportionate number of directors designated by Commonwealth Associates. Finally, Commonwealth Associates is also entitled to appoint an observer to attend all meetings of our board of directors.

In connection with our private placement of our Series C Preferred Stock in 2002, in which Noesis Capital Corp. acted as placement agent, we granted Noesis Capital Corp. the right to designate two directors to our board of directors. As of the date of this prospectus, Noesis Capital Corp. had not yet exercised the right to name either director.

EXECUTIVE COMPENSATION

The following table sets forth certain information relating to the compensation of (i) our Chief Executive Officer; and (ii) each of our executive officers who earned more than $100,000 during the three most recent fiscal years (collectively, the “Named Executive Officers”).

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										Long term Compensation
			Annual Compensation							Awards				Payouts
								Other				Securities
Name								Annual		Restricted		Under-				All other
And								Compen-		Stock		Lying		LTIP		Compen-
Principal								sation		Awards		Options		Payout		sation
Position	Year		Salary ($)			Bonus ($)		($)		($)		SARs (#)		($)		($)
Cornelis F. Wit, CEO/Director		2002	$	67,385	(1)	$	-0-	$	-0-	$	-0-		190,000	$	-0-	$	-0-
David Ginsberg,		2002	$	88,904	(2)	$	20,833	$	-0-	$	-0-		-0-	$	-0-	$	-0-
CEO/Director		2001	$	312,813		$	12,500	$	-0-	$	-0-		750,000	$	-0-	$	-0-
		2000	$	134,255	(3)	$	-0-	$	-0-	$	-0-		240,000	$	-0-	$	16,759	(4)
Peter Knezevich CEO/Director		2000	$	131,231	(5)	$	-0-	$	-0-	$	-0-		-0-	$	-0-	$	5,300	(6)
Randall Smith		2002	$	156,000		$	-0-	$	-0-	$	-0-		65,000	$	-0-	$	-0-
President/Director		2001	$	138,506		$	-0-	$	-0-	$	-0-		270,000	$	-0-	$	300	(6)
		2000	$	119,831		$	-0-	$	-0-	$	-0-		2,000	$	-0-	$	6,800	(6)
Ronald T. Linares		2002	$	138,880		$	-0-	$	-0-	$	-0-		45,000	$	0	$	0
CFO		2001	$	119,044		$	-0-	$	-0-	$	-0-		300,000	$	-0-	$	150	(6)
Clifton Middleton Vice President		2000	$	100,899		$	-0-	$	-0-	$	-0-		252,000	$	-0-	$	3,000	(6)
Gene Gordon Vice President		2000	$	115,000		$	-0-	$	-0-	$	-0-		2,000	$	-0-	$	6,600	(6)

(1)	Mr. Wit joined our company as Chief Executive Officer on June 1, 2002.
(2)	Dr. Ginsberg left our employ on June 1, 2002.
(3)	Dr. Ginsberg joined our company on August 1, 2000.
(4)	Consisted of reimbursements for moving expenses and temporary housing during calendar 2000.
(5)	Mr. Knezevich left our employ on May 25, 2000.
(6)	Consisted of car allowance payments.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

Individual Grants
	Number of
	Securities		% of Total
	Underlying		Options/SARs
	Options/		Granted to
	SARs		Employees in			Exercise or Base		Expiration
Name	Granted (#)		Fiscal Year			Price ($/Share)		Date
Cornelis F. Wit		50,000		6.2	%	$	0.25		6/1/07
Cornelis F. Wit		15,000		1.8	%	$	0.25		8/26/07
Cornelis F. Wit		50,000		6.2	%	$	0.25		12/19/07
Cornelis F. Wit		75,000		9.2	%	$	0.25		12/19/07
Randall Smith		15,000		1.8	%	$	0.25		8/26/07
Randall Smith		50,000		6.2	%	$	0.25		12/19/07
Ronald Linares		15,000		1.8	%	$	0.25		8/26/07
Ronald Linares		30,000		3.7	%	$	0.25		12/19/07

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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

					Number of
					Securities				Value of
					Underlying				Unexercised
	Shares				Unexercised				In-the-money
	Acquired				Options/SARs at				Options/SARs at
	On				FY End (#)				FY End ($)
Name	Exercise (#)		Value Realized ($)		Exercisable		Unexercisable		Exercisable		Unexercisable
Cornelis Wit		-0-	$	-0-		400,000		-0-	$	-0-	$	-0-
Randall Smith		-0-	$	-0-		671,539		-0-	$	-0-	$	-0-
Ronald Linares		-0-	$	-0-		457,000		-0-	$	-0-	$	-0-

Compensation of Directors

Non-management directors receive options under the 1998 Stock Option Plan. Under the 1998 Plan, a grant of options to purchase 30,000 shares of common stock was granted in December 2002 at an exercise price equal to 110% of the market value of one share on the date of grant, or $.25 per share. Such options were immediately exercisable upon grant and will expire five years after the date of grant. In addition, non-management directors are reimbursed for ordinary expenses incurred in connection with attendance at meetings.

Employment Agreements

In August 2003, we entered into an employment agreement with Cornelis F. Wit to serve as our Chief Executive Officer and President through December 31, 2004. Mr. Wit receives an annual salary of $175,000 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 September 2001, we entered into a three-year employment agreement with Mr. Randall Smith to serve as our Chief Technology Officer. Under the terms of the agreement, as compensation for his services, Mr. Smith receives an annual salary of $165,000 as of January 1, 2003 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. Mr. Smith was granted an aggregate of 210,000 options under our 1998 Stock Incentive Plan. The options, which vest 70,000 on the date of the employment agreement, 70,000 on September 30, 2002, and 70,000 on September 30, 2003, are exercisable at the market price plus 10% per share, or $0.43 per share for five years from the date of vesting. 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.

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In September 2001, we entered into a three-year employment agreement with Mr. Ronald Linares to serve as our Chief Financial Officer. Under the terms of this agreement, Mr. Linares receives an annual salary of $150,000 as of January 1, 2003 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. Mr. Linares was granted an aggregate of 210,000 options under our 1998 Stock Incentive Plan. The options, which vest 70,000 on the date of the employment agreement, 70,000 on September 30, 2002, and 70,000 on September 30, 2003, are exercisable at the market price plus 10% per share or $0.43 per share, for five years from the date of vesting. 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 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.

In January 2003, we entered into a three-year employment agreement with Mr. Charles Beardsley to serve as our Senior Vice President for Sales and Marketing. Under the terms of this agreement, Mr. Beardsley receives an annual salary of $150,000 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. Mr. Beardsley is eligible for a commission, payable on a quarterly basis, equal to 2% of the Company’s Net Operating Income as defined in an exhibit to his employment contract. Mr. Beardsley was granted an aggregate of 150,000 options under our 1998 Stock Incentive Plan. The options, which vest 50,000 annually beginning with January 2, 2004, are exercisable at a price of $0.25 per share, for five years from the date of vesting. Mr. Beardsley received a grant of 100,000 shares of restricted common stock upon execution of his employment agreement. 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. Beardsley upon 30 days notice of a material breach and Mr. Beardsley may terminate the agreement under the same terms and conditions. If Mr. Beardsley 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.

Stock Option Plan

Our 1998 Stock Incentive Plan (the “1998 Plan”) was adopted in January 1998, and was amended in July 2001 by our board of directors to increase the number of shares available under the 1998 Plan. This increase was approved by our shareholders at the shareholder meeting held on November 16, 2001. As of September 15, 2003 we have outstanding options under the 1998 Plan to purchase an aggregate of 2,752,039 shares of our common stock at exercise prices ranging from $0.15 to $2.75 per share.

The purpose of the 1998 Plan is to provide a means through which we can attract able persons to enter and remain in our employ, and to provide a means whereby those key persons upon whom the responsibilities of our successful administration and management rest, and whose present and potential contributions to our welfare are of importance, can acquire and maintain stock ownership, thereby strengthening their commitment to our welfare and promoting an identity of interest between stockholders and these key persons.

A further purpose of the 1998 Plan is to provide such key persons with additional incentive and reward opportunities designed to enhance our profitable growth. So that the appropriate incentive can be provided, the 1998 Plan provides for granting incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, phantom stock unit awards and performance share units, or any combination of the foregoing.

We believe that the 1998 Plan encourages the participants to contribute materially to our growth and will align the economic interests of the participants with those of our stockholders.

General

We have reserved 5,000,000 shares of our common stock for issuance upon the exercise of options granted under the 1998 Plan. These shares may be authorized but unissued shares of our common stock or may be shares that we have reacquired, including shares we may purchase on the open market. If any options or stock appreciation rights granted under the 1998 Plan expire or are terminated for any reason without being exercised or restricted shares or performance shares are forfeited, the shares of common stock underlying that award will again be available for grant under the 1998 Plan.

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Administration of the 1998 Plan

The Compensation Committee of our board of directors administers and interprets the 1998 Plan. The Compensation Committee has the sole authority to designate participants, grant awards and determine the terms of all grants, subject to the terms of the 1998 Plan. The Compensation Committee has the full authority to interpret the 1998 Plan and to make rules, regulations, agreements and instruments for implementing the 1998 Plan.

Eligibility

Grants may be made to any of our employees and to any non-employee member of the board of directors. Key advisors who perform services for us or any of our subsidiaries are eligible if they render bona fide services, not as part of the offer or sale of securities in a capital-raising transaction.

Options

Incentive stock options may be granted to employees, directors and key advisors. Non-qualified stock options may be granted to employees, key advisors and non-employee directors. The exercise price of common stock underlying an option is determined by the Compensation Committee at the time the option is granted, and may be equal to, greater than, or less than the fair market value of such stock on the date the option is granted; provided, that the exercise price of an incentive stock option must be equal to or greater than the fair market value of a share of common stock on the date the incentive stock option is granted, and the exercise price of an incentive stock option granted to an employee who owns more than 10% of our common stock, or who is an officer or director, cannot be less than 110% of the fair market value. Unless the applicable option agreement provides otherwise, a participant can exercise an option award after the option has fully vested, by paying the applicable exercise price in cash, or, with the approval of the Compensation Committee, by delivering shares of common stock owned by the grantee and having a fair market value on the date of exercise equal to the exercise price of the grants, or by such other method as the Compensation Committee approves, including payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board.

Options vest according to the terms and conditions determined by the Compensation Committee and specified in the grant instrument. The Compensation Committee determines the term of each option up to a maximum of 10 years from the date of grant except that the term of an incentive stock option granted to an employee who owns more than 10% of our common stock, or who is an officer or director, may not exceed five years from the date of grant. The Compensation Committee may accelerate the exercisability of any or all outstanding options at any time for any reason.

Restricted Stock

The Compensation Committee determines the number of restricted shares granted to a participant, subject to the maximum plan limit described above. Grants of restricted shares will be conditioned on such performance requirements, vesting provisions, transfer restrictions or other restrictions and conditions as the Compensation Committee may determine in its sole discretion. The restrictions will remain in force during a restriction period set by the Compensation Committee. If the grantee is no longer employed by us during the restriction period or if any other conditions are not met, the restricted shares grant will terminate as to all shares covered by the grant for which the restrictions are still applicable, and those shares must be immediately returned to us.

Stock Appreciation Rights

The Compensation Committee can grant stock appreciation rights (SARs) to any participant, subject to the maximum plan limit described above. At any time, the Compensation Committee may grant an SAR award, either separately or in connection with any option; provided, that, if an SAR is granted in connection with an incentive stock option, it must be granted at the same time that as underlying option is granted. The Compensation Committee will determine the base amount of the SAR at the time that it is granted and will establish any applicable vesting provisions, transfer restrictions or other restrictions as it may determine is appropriate in its sole discretion. When a participant exercises an SAR, he or she will receive the amount by which the value of the stock has appreciated since the SAR was granted, which may be payable to the participant in cash, shares, or a combination of cash and shares, as determined by the Compensation Committee.

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Performance Share Awards

The Compensation Committee can grant performance share awards to any employee or key advisor. A performance share award represents the right to receive an amount based on the value of our common stock, but may be payable only if certain performance goals that are established by the Compensation Committee are met. If the Compensation Committee determines that the applicable performance goals have been met, a performance share award will be payable to the participant in cash, shares or a combination of cash and shares, as determined by the Compensation Committee.

Amendment and Termination of the 1998 Plan

Our board of directors can at any time terminate the 1998 Plan. With the express written consent of an individual participant, the board may cancel or reduce or otherwise alter the outstanding awards thereunder if, in its judgment, the tax, accounting, or other effects of the 1998 Plan or potential payouts thereunder would not be in our best interest. The board may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the 1998 Plan in whole or in part, provided, however, that without further stockholder approval the board shall not:

• Increase the maximum number of shares of our common stock which may be issued on exercise of awards under the 1998 Plan;

• Change the maximum option price;

• Extend the maximum option term;

• Extend the termination date of the 1998 Plan; or

• Change the class of persons eligible to receive awards under the Plan.

Adjustment Provisions

In the event that certain reorganizations of our company or similar transactions or events occur, the maximum number of shares of stock available for grant, the maximum number of shares that any participant in the 1998 Plan may be granted, the number of shares covered by outstanding grants, the kind of shares issued under the 1998 Plan and the price per share or the applicable market value of such grants shall be adjusted by the committee to reflect changes to our common stock as a result of such occurrence to prevent the dilution or enlargement of rights of any individual under the 1998 Plan.

Change of Control and Reorganization

     Upon a change of control, as defined in the 1998 Plan, the Compensation Committee may:

• determine that the outstanding grants, whether in the form of options and stock appreciation rights, shall immediately vest and become exercisable;

• determine that the restrictions and conditions on all outstanding restricted stock or performance share awards shall immediately lapse;

• require that grantees surrender their outstanding options and stock appreciation rights in exchange for payment by us, in cash or common stock, in an amount equal to the amount by which the then fair market value of the shares of our common stock subject to the grantee’s unexercised options or stock appreciation rights exceeds the exercise price of those options; and/or

• after giving grantees an opportunity to exercise their outstanding options and stock appreciation rights, terminate any or all unexercised options and stock appreciation rights.

Upon a reorganization, as defined in the 1998 Plan, where we are not the surviving entity or where we survive only as a subsidiary of another entity, unless the Compensation Committee determines otherwise, all outstanding option or SAR grants shall be assumed by or replaced with comparable options or rights by the surviving corporation. In addition, the Compensation Committee may require that grantees surrender their outstanding options in exchange for payment by us, in cash or common stock, at an amount equal to the amount by which the then fair market value of the shares of common stock subject to the grantee’s unexercised options exceeds the exercise price of those options and/or after accelerating all vesting and giving grantees an opportunity to exercise their outstanding options or SARs, terminate any or all unexercised options and SARs.

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Limitation on Liability and Indemnification Matters

Our Articles of Incorporation, as amended and restated, provide to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, that our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director’s or officer’s fiduciary duty. The effect of this provision of our Articles of Incorporation, as amended and restated, is to eliminate our rights and our shareholders (through shareholders’ derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers.

Our by-laws also provide that the board of directors may also authorize us to indemnify our employees or agents, and to advance the reasonable expenses of such persons, to the same extent, following the same determinations and upon the same conditions as are required for the indemnification of and advancement of expenses to our directors and officers. As of the date of this prospectus, the board of directors has not extended indemnification rights to persons other than directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (“Securities Act”) may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Cornelis F. Wit, our President and Chief Executive Officer and a member of our board of directors served as President of Corporate Finance of Noesis Capital Corp. from March 1995 to September 2000. Noesis Capital Corp., a NASD member firm, has served as placement agent for us in six private placements of securities which occurred between September 1999 and March 2003, and is a 7.97% stockholder. Guus van Kesteren, a member of our board of directors, is a consultant to Noesis Capital Corp.

In December 1999, we entered into a consulting agreement with Messrs. van Kesteren and Wit, each of whom is a member of our board of directors, providing that we will compensate each of these individuals for sales leads or contacts developed by them in connection with TrialMaster. For the periods ended December 30, 2001 and 2002, no compensation was earned by either Mr. van Kesteren or Mr. Wit under this agreement. This agreement was terminated upon mutual agreement of the parties effective June 30, 2002.

On April 5, 2002, Cornelis F. Wit, our President and Chief Executive Officer and a member of our board of directors, invested $10,000 in a private placement of our Series C Preferred Stock and warrants. Mr. Wit purchased 1,000 shares of our Series C Preferred Stock, which is convertible into shares of our common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum, and 20,000 warrants for the purchase of our common stock at an exercise price of $0.25 per share expiring March 29, 2009.

On April 5, 2002, Guus van Kesteren a member of our board of directors, invested $10,000 in a private placement of our Series C Preferred Stock and warrants. Mr. van Kesteren purchased 1,000 shares of our Series C Preferred Stock, which is convertible into shares of our common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum, and warrants to purchase 20,000 shares of common stock at an exercise price of $0.25 per share and expiring March 29, 2009.

On January 30 2002, Noesis N.V., one of our principal stockholders, invested $90,000 in a private placement of our Series C Preferred Stock and warrants. Noesis NV purchased 9,000 shares of our Series C Preferred Stock, which is convertible into shares of our common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum, and warrants to purchase 180,000 shares of common stock at an exercise price of $0.25 per share expiring March 29, 2009.

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From time to time we have borrowed funds from Mr. van Kesteren, a member of our board of directors, including:

• between July 2000 and December 2000, we borrowed an aggregate of $110,000 from him under two promissory notes, one of which bore interest at a rate of 12% per annum and the other at 5% per annum. These notes were converted into a 12% convertible note issued as part of a private placement of our 12% Convertible Notes in January 2001. The note accrues interest at 12% per annum and is convertible into shares of our common stock at the holder’s option at a rate of $0.50 per share commencing on January 31, 2002. This note was converted on December 31, 2002 into 11,000 shares of our Series C Preferred Stock, which are convertible into shares of our common stock at a conversion price of $0.25 per share, and warrants to purchase 220,000 shares of our common stock at an exercise price of $0.25 per share and expiring March 29, 2009.

• between February 2001 and July 2001, we borrowed an aggregate of $190,000 from him 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, and with one half of the principal payable upon the closing of any financing by us resulting in gross proceeds in excess of $2,000,000, and the balance of the principal together with accrued interest payable no later than August 30, 2003. These notes were amended and restated on December 31, 2002 extending the maturity date of the notes to October 31, 2004. This note remained outstanding as of the date of this prospectus.

• in September 2001, we borrowed an aggregate of $25,000 from him under promissory notes which bore interest at a rate of 12% per annum and had a maturity date of December 22, 2001. These notes were converted on August 2001 into 2,500 shares of our Series B Preferred Stock, which are convertible into shares of our common stock at a conversion price of $0.25 per share, and warrants to purchase 100,000 shares of our common stock at an exercise price of $0.25 per share expiring August 31, 2006.

In conjunction with these various loans, we granted Mr. van Kesteren warrants to purchase an aggregate of 70,700 shares of our common stock at exercise prices ranging from $.30 to $2.25 per share. All of these warrants have expired.

In July 2001, Noesis Capital Corp., the placement agent for our 12% Convertible Notes, assigned $60,000 of accrued fees that we owed to Noesis Capital Corp. to Cornelis Wit, a member of our board of directors at the time. Mr. Wit converted that accrued expense into our 12% Convertible Notes. The 12% Convertible Notes were subsequently converted on December 31, 2002 into 6,000 shares of our Series C Preferred Stock and warrants to purchase 120,000 shares of our common stock at an exercise price of $0.25 expiring March 29, 2009.

We granted Randall G. Smith, our Chairman of the board and Chief Technology Officer, warrants to purchase 20,000 shares of our common stock at an exercise price of $0.41 per share in connection with a pledge of real property he made in securing a loan made to us by Mr. van Kesteren, a member of our board of directors in July 2001, in the amount of $100,000. These warrants have expired.

On August 17, 2000, we borrowed $100,000 from Noesis N.V., one of our principal stockholders. The promissory note bore interest at a rate of 8% per annum and had a maturity date of January 1, 2001. At our request, Noesis N.V. agreed to convert this promissory note into a 12% convertible note issued as part of a private placement of our 12% Convertible Notes in January 2001. The note accrues interest at 12% per annum, is convertible into shares of our common stock at the holder’s option at a rate of $0.50 per share commencing on January 31, 2002. This note was converted on December 31, 2002 into 10,000 shares of our Series C Preferred Stock, which are convertible into shares of our common stock at a conversion price of $0.25 per share, and warrants to purchase 200,000 shares of our common stock at an exercise price of $0.25 per share expiring March 29, 2009.

During March 2002, we borrowed $2,341 from Randall G. Smith, our Chairman of the board and Chief Technology Officer. This amount was repaid without interest on April 12, 2002. In addition, we borrowed $6,000 without interest from Mr. Smith on November 25, 2002. In March 2003 this note was amended and restated extending the maturity date to January 31, 2005. This amount remained outstanding as of the date of this prospectus.

In April 2002, we borrowed $1,500 from Ronald Linares, our Chief Financial Officer. This amount was repaid without interest on May 1, 2002.

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In September and July of 2002, we borrowed an aggregate of $20,000 without interest from Nico Letschert, officer, director and principal shareholder of Noesis Capital Corp., one of our principal stockholders. This amount is due and payable January 31, 2005.

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 and restated on March 31, 2003 extending the maturity date of the note to October 31, 2004. This amount remained outstanding as of the date of this prospectus.

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 and restated on March 31, 2003 extending the maturity date of the note to October 31, 2004. This amount remained outstanding as of the date of this prospectus.

In March 2003, we borrowed $2,600 from Cornelis Wit, our Chief Executive Officer and President and a member of our board of directors. This amount was repaid without interest on April 3, 2003.

In June 2003, we borrowed $100,000 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 January 31, 2005. This amount remained outstanding as of the date of this prospectus.

In July and August 2003, we borrowed $116,000 from Cornelis Wit, our President and Chief Executive Officer and a member of our board of directors. This amount was borrowed under promissory notes bearing interest at a rate of 9% per annum, payable on January 31, 2005. This amount remained outstanding as of the date of this prospectus.

PRINCIPAL STOCKHOLDERS

At September 26, 2003 there were an aggregate of:

• 14,034,618 shares of common stock,

• 4,215,224 shares of 5% Series A Preferred Stock,

• 200,000 shares of Series B Preferred Stock, and

• 337,150 shares of Series C Preferred Stock

issued and outstanding. These securities comprise our “Voting Securities”. The holders of our shares of common stock are entitled to one vote for each outstanding share on all matters submitted to our stockholders. The holders of the 5% Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock are also entitled to vote on matters submitted to our stockholders, with one vote for each share of common stock into which these series of our preferred stock are convertible. Based upon the current conversion price for each of the 5% Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock on September 15, 2003, these holders would be entitled to 24,296,149 votes at a meeting of our stockholders, and the common stockholders would be entitled to 14,034,618 votes, for an aggregate of 38,330,767 votes for all currently outstanding Voting Securities.

The following table sets forth, as of September 26, 2003 information known to us relating to the beneficial ownership of shares of our Voting Securities by:

• each person who is the beneficial owner of more than 5% of the outstanding shares of Voting Securities, aggregate all three classes together;

• each director;

• each executive officer; and

• all executive officers and directors as a group.

Under securities laws, a person is considered to be the beneficial owner of securities he owns and that can be acquired by him within 60 days from September 26, 2003 upon the exercise of options, warrants, convertible securities or other understandings. We determine a beneficial owner’s percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person and which are exercisable within 60 days of September 26, 2003 have been exercised or converted.

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The following table, however, gives no effect to the exercise of any outstanding options or warrants unless specifically set forth therein. We believe that all persons named in the table have sole voting and investment power with respect to all shares of Voting Securities beneficially owned by them. Unless otherwise noted, the address for each person is 2555 Davie Road, Suite 110-B, Davie, Florida 33317.

	No. of Shares
	Beneficially
Name of Beneficial Owner	Owned		Percentage of Voting Securities
Cornelis Wit (1) (12)		933,603		2.38	%
Randall G. Smith (2) (12)		1,648,255		4.19	%
Ronald T. Linares (3) (12)		496,529		1.27	%
Guus van Kesteren (4) (12)		1,315,901		3.35	%
ComVest Venture Partners LP (5)		6,904,000		16.21	%
Magnolia Private Foundation (6)		2,268,000		5.75	%
Noesis Capital Corp. (7)		3,282,683		7.97	%
Noesis N.V. (8)		4,615,030		11.36	%
Shea Venture, LLC (9)		2,000,000		5.0	%
Robert Priddy (10)		2,000,000		5.0	%
Wisa Options BV (11)		2,218,751		5.63	%
All Directors and Officers as a group (four persons) (12)		4,394,288		10.73	%

(1)	Includes vested options to purchase an aggregate of 400,000 shares of our common stock at prices ranging from $0.25 to $2.20 per share with expiration dates ranging from November 2005 to December 2007, 304,000 shares of our common stock issuable upon conversion of our Series C Stock, and 152,000 shares of our common stock issuable upon conversion of warrants.
(2)	Includes vested options to purchase an aggregate of 671,539 shares of our common stock at prices ranging from $0.25 to $2.75 per share with expiration dates ranging from November 2005 to July 2009.
(3)	Includes vested options to purchase an aggregate of 457,000 shares of our common stock at prices ranging from $0.25 to $2.75 per share with expiration dates ranging from March 2006 to July 2009.
(4)	Includes vested options to purchase an aggregate of 230,000 shares of our common stock at prices ranging from $0.25 to $2.20 per shares with expiration dates ranging from May 2005 to December 2007, 352,000 shares of our common stock issuable upon conversion of warrants, 100,000 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 504,000 shares of our common stock issuable upon conversion of our Series C Preferred Stock.
(5)	Includes 3,000,000 shares of our common stock issuable upon the conversion of our Series B Preferred Stock and 3,000,000 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share. Also includes 452,000 shares of our common stock issuable upon the conversion of our Series B Preferred Stock and 452,000 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that ComVest Venture Partners LP received from Commonwealth Associates. ComVest Venture Partners, LP is an affiliate of the Commonwealth Associates, L.P., the placement agent for our private offering of our Series B Preferred Stock. The information presented for ComVest Venture Partners, LP, however, does not include any holdings of Commonwealth Associates, L.P., or its affiliates. ComVest Venture Partner’s address is 830 Third Avenue, Fourth Floor, New York, NY 10022.
(6)	Includes 760,000 shares of our common stock issuable upon conversion of warrants and 1,220,000 shares of our common stock issuable upon conversion of our Series C Preferred Stock. Magnolia Private Foundation’s address is Landhuis Joonchi, Kaya Richard J. Beaujon z/n, Curacao, Netherlands Antilles.

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(7)	Includes 800,000 shares of our common stock issuable upon the conversion of our Series C Preferred Stock and 991,833 shares of our common stock issuable upon the conversion of warrants at an exercise price ranging from $.25 to $1.10 per share. Also includes 993,900 shares of our common stock issuable upon the conversion of shares of our Series C Preferred Stock and 496,950 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option. Noesis Capital Corp.’s address is 1801 Clint Moore Road, Suite 100, Boca Raton, FL 33487.
(8)	Includes 1,600,000 shares of our common stock issuable upon the conversion of shares of our Series B Preferred Stock, 2,022,532 shares of our common stock issuable upon the conversion of warrants and 560,000 shares of our common stock issuable upon conversion of our Series C Preferred Stock. Noesis, N.V.’s address is Landhuis Joonchi, Kaya Richard J. Beaujon z/n, Curacao, Netherlands Antilles.
(9)	Includes 1,000,000 shares of our common stock issuable upon the conversion of our Series B Preferred Stock and 1,000,000 shares of our common stock issuable upon the exercise of warrants. Shea Venture, LLC’s address is 655 Brea Canyon Road, Walnut, CA 91789.
(10)	Includes 1,000,000 shares of our common stock issuable upon the conversion of our Series B Preferred Stock and 1,000,000 shares of our common stock issuable upon the conversion of warrants. Mr. Priddy’s address is 3435 Kingsboro Road, Apartment 1601, Atlanta, GA 30326.
(11)	Includes 700,000 shares of our common stock issuable upon conversion of warrants and 1,400,000 shares of our common stock issuable upon conversion of our Series C Preferred Stock. Wisa Options BV’s address is Singel 83, 1012 VE Amsterdam, Holland.
(12)	Includes footnotes (1) through (4) above.

DESCRIPTION OF SECURITIES

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 September 15, 2003 we had the following outstanding securities:

• 14,034,618 shares of common stock issued and outstanding;

• 16,564,896 warrants issued and outstanding to purchase shares of our common stock;

• 4,215,224 shares of our Series A Preferred Stock issued and outstanding,

• 200,000 shares of our Series B Preferred Stock issued and outstanding;

• 337,150 shares of our Series C Preferred Stock issued and outstanding;

• a Series B Placement Agent Unit Option;

• 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 Stock holders and Series C Preferred Stockholders, each outstanding share of common stock entitles its holder to participate in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock.

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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, other than with regard to an outstanding balance of $1,140 for subscriptions receivable, are duly authorized, validly issued, fully paid and non-assessable.

Preferred stock

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

• dividend and liquidation preferences,

• voting rights,

• conversion privileges, and

• redemption terms.

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

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 4,215,224 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 junior to Series B Preferred Stock and Series C Preferred Stock. At our option, dividends can be paid in cash or shares of common stock valued at the conversion price of the Series A Preferred Stock.

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

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

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.

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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 200,000 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,

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. This registration statement satisfies our obligation to file a registration statement pursuant to the mandatory registration rights.

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

47

	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.

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. This registration statement satisfies our obligation to file a registration statement pursuant to the mandatory registration rights.

Warrants

We have issued and outstanding warrants to purchase a total of 16,564,896 shares of our common stock, including:

• warrants to purchase 8,000,000 shares of our common stock at an exercise price of $.25 per share expiring September 2006 which were issued by us in connection with the Series B 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. This registration statement satisfies our obligation to file a registration statement pursuant to the mandatory registration rights.

• warrants to purchase 869,896 shares of our common stock at exercise prices ranging from $.50 to $10.00 per share expiring periodically through July 2006.

• warrants to purchase 6,743,000 shares of our common stock at an exercise price of $.25 per share expiring May 2007 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. This registration statement satisfied our obligation to file a registration statement pursuant to the mandatory registration rights.

• warrants to purchase 700,000 shares of our common stock at an exercise price of $.25 per share expiring May 2008 which were issued by us in connection with a private placement of common stock, which warrants contain a cashless exercise provision.

• warrants to purchase 202,000 shares of our common ctock at an exercise price of $.25 per share expiring December 2008 which were issued by us to the placement agent of two offerings of our common stock that were conducted during 2003.

48

Series B Placement Agent Unit Option

In connection with our September 2001 private placement of Series B Preferred Stock, we issued the placement agent an option to purchase 2.7 units. Each unit is exercisable at $100,000 per unit and consists of 10,000 shares of Series B Preferred Stock and 5-year warrants to purchase 400,000 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 B Preferred Stock and exercise of the warrants underlying the Placement Agent Unit Option. This registration statement satisfied our obligation to file a registration statement pursuant to the mandatory registration rights. The Placement Agent Unit Option expires August 31, 2006.

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. This registration statement satisfied our obligation to file a registration statement pursuant to the mandatory registration rights. 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 10.00% interest and are 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. We have the right to prepay the principal amount at any time with 60 days prior written notice. During 2000 and 2001, certain of the note holders converted an aggregate of $412,500 principal amount of the notes according to their terms into 330,000 shares of our common stock at a conversion price of $1.25 per share. 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.

Transfer Agent

Our transfer agent is Jersey Transfer and Trust Co., 201 Bloomfield Avenue, Box #36, Verona, New Jersey 07044. Their telephone number is 973-239-2712.

SELLING STOCKHOLDERS

Overview

This prospectus relates to the periodic offers and sales of up to 39,879,850 shares of common stock by the selling stockholders listed below and their pledgees, donees and other successors in interest. Common stock registered for resale under this prospectus constitute 74.0% of our issued and outstanding common stock as of September 26, 2003, assuming the conversion of the Series B Preferred Stock and Series C Preferred Stock, and the exercise of the warrants and Placement Agent Unit Options by the selling stockholders, which includes:

• 18,160,000 shares of common stock, which includes 8,000,000 shares of common stock issuable upon the conversion of outstanding shares of Series B Preferred Stock, 8,000,000 shares of common stock issuable upon exercise of warrants issued in connection with the Series B Preferred Stock and 2,160,000 shares of common stock issuable upon exercise of Placement Agent Unit Options. In September 2001, we sold 200,000 shares of our Series B Preferred Stock, having a conversion rate of one share of Series B Preferred Stock for 40 shares of common stock, and five year warrants to purchase 8,000,000 shares of our common stock at an exercise price of $.25 per share, to 8 accredited investors in a private placement exempt from registration under the Securities Act in reliance on exemptions provided in Section 4(2) and Regulation D promulgated thereunder. Commonwealth Associates, L.P., an NASD member firm, acted as placement agent in the offering

49

and as compensation therefore received a commission equal to 10% of the sales made by it, or an aggregate of $180,000 and an option to purchase 2.7 Units, each Unit consisting of (a) 10,000 shares of Series B Preferred Stock, convertible into 400,000 shares of common stock and (b) 5-year warrants to purchase 400,000 shares of common stock at an exercise price of $.25 per share, at an exercise price of $100,000 per Unit. Subsequent to the offering Commonwealth transferred the Placement Agent Unit Option to certain of its affiliates as set forth below. We received gross proceeds of $2,000,000 from this transaction. Subsequent to the offering, Commonwealth transferred a portion of the Placement Agent Unit Option to certain of its affiliates as set forth below; and

•

21,719,850 shares of common stock, which includes 13,486,000 shares of common stock issuable upon the conversion of outstanding shares of Series C Preferred Stock, 6,743,000 shares of common stock issuable upon exercise of warrants issued in connection with the Series C Preferred Stock, and 1,490,850 shares of common stock issuable upon exercise of Placement Agent Unit Option. From March 2002 through March 2003, we sold 165,650 shares of our Series C Preferred Stock, having a conversion rate of one share of Series C Preferred Stock for 40 shares of common stock, and five year warrants to purchase 3,313,000 shares of our common stock at an exercise price of $.25 per share, to 28 accredited investors. We also issued 171,500 shares of our Series C Preferred Stock and 5 year warrants to purchase to purchase 3,430,000 shares of our common stock at an exercise price of $.25 per share in satisfaction of $1,615,000 principal amount of 12% Convertible Notes, held by 16 accredited investors and $100,000 of expenses. The foregoing was undertaken in a private placement exempt from registration under the Securities Act in reliance on exemptions provided in Section 4(2) and Regulation D promulgated thereunder. Noesis Capital Corp, an NASD member firm, acted as placement agent in the offering and as compensation therefore received a commission equal to 10% of the sales made by it, or an aggregate of $165,650 and an option to purchase 2.48 Units, each Unit consisting of (a) 10,000 shares of Series C Preferred Stock, convertible into 400,000 shares of common stock and (b) 5-year warrants to purchase 200,000 shares of common stock at an exercise price of $.25 per share, at an exercise price of $100,000 per Unit. We received gross proceeds of $1,656,000 from this transaction;

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,

50

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. This registration statement satisfies our obligation to file a registration statement pursuant to the mandatory registration rights.

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.

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. This registration statement satisfies our obligation to file a registration statement pursuant to the mandatory registration rights.

The following table sets forth:

• the name of each selling stockholder;

• the amount of common stock owned beneficially by each selling stockholder (which includes those shares underlying options and warrants);

• the number of shares that may be offered by each selling stockholder pursuant to this prospectus;

• the number of shares to be owned by each selling stockholder following sale of the shares covered by this prospectus; and

• the percentage of our common stock to be owned by each selling stockholder following sale of the shares covered by this prospectus (based on 14,034,618 shares of our common stock outstanding as of the date of this prospectus), as adjusted to give effect to the issuance of shares upon the conversion of the named selling stockholder’s preferred stock and exercise of the named selling stockholder’s warrants, but no other person’s preferred stock or warrants.

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The costs of registering the shares offered by the selling stockholders are being paid by us. The selling stockholders will pay all other costs of the sale of the shares offered by them.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to outstanding voting securities, as well as any voting securities which the person has the right to acquire within 60 days, through the conversion or exercise of any security or other right. The information as to the number of shares of our common stock owned by each selling stockholder is based upon our books and records and the information provided by our transfer agent.

We may amend or supplement this prospectus, from time to time, to update the disclosure set forth in the table. All of the shares being registered for resale under this prospectus for the selling security holders may be offered hereby. Because the selling stockholders identified in the table may sell some or all of the shares owned by them which are included in this prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares, no estimate can be given as to the number of shares available for resale hereby that will be held by the selling stockholders upon termination of this offering. We have, therefore, assumed for the purposes of the following table, that the selling stockholders will sell all of the shares owned beneficially by them, which are covered by this prospectus, but will not sell any other shares of our common stock that they presently own.

The information contained in the following table is derived from our books and records, as well as from our transfer agent.

					Shares
					Owned		Shares to be				Percent
					Beneficially		Offered		Shares		of Class
					Prior		Pursuant to		Owned		Owned
					to This		This		After		After
Stockholder					Offering		Prospectus		Offering		Offering
			Arnold J. Smit	(1)		129,000		129,000		0		*
			Aart R. De Koomen	(2)		78,000		78,000		0		*
			Achille Verly	(3)		300,000		300,000		0		*
			Ad Klinkenberg	(4)		1,545,400		1,200,000		345,400		*
			Alberto Mendoza	(5)		150,000		150,000		0		*
			Alvin Stroyny	(6)		206,511		150,000		56,511		*
	Anthony J. Giardina			(7)		12,560		12,560		0		*
			Bert Van Deun	(8)		400,000		300,000		100,000		*
			Beth Lipman	(9)		2,512		2,512		0		*
			Carl Kleidman	(10)		50,240		50,240		0		*
Commonwealth Associates, LP				(11)		661,912		661,912		0		*
ComVest Venture Partners, LP				(12)		6,904,000		6,904,000		0		*
			Cornelis Wit	(13)		933,603		456,000		477,603		*
			Denison Smith	(14)		203,213		150,000		53,213		*
		Dr. Guru Ramanthan		(15)		60,000		60,000		0		*
			Doug Lindsay	(16)		714,691		300,000		414,691		*
			Fernando Montero	(17)		300,000		300,000		0		*

52

					Shares
					Owned		Shares to be				Percent
					Beneficially		Offered		Shares		of Class
					Prior		Pursuant to		Owned		Owned
					to This		This		After		After
Stockholder					Offering		Prospectus		Offering		Offering
		Gerry van Meeteren		(18)		600,000		600,000		0		*
			Guus van Kesteren	(19)		1,315,901		956,000		359,901		*
			Guy Brissette	(20)		1,861,115		1,520,000		341,115		*
			Harold Blue	(21)		125,600		125,600		0		*
		Helder Holding BV		(22)		150,000		150,000		0		*
			Hendrik Morelisse	(23)		348,000		300,000		48,000		*
			Inder Tallur	(24)		25,120		25,120		0		*
			Jan van Bemmel	(25)		150,000		150,000		0		*
			Jaap Hoff	(26)		1,668,403		600,000		1,068,403		2.1	%
			Jacob Safier	(27)		1,200,000		1,200,000		0		*
			John Gruber	(28)		9,420		9,420		0		*
			Jos Dreesens	(29)		1,654,102		1,200,000		454,102		*
			Joseph P. Wynne	(30)		25,120		25,120		0		*
			Karim Badr	(31)		220,424		120,000		100,424		*
			Karmare N.V	(32)		1,500,000		1,500,000		0		*
			Keith Rosenbloom	(33)		25,120		25,120		0		*
			Kuyl Holdings BV	(34)		300,000		300,000		0		*
			Meindert Ververs	(35)		1,500,000		1,500,000		0		*
Magnolia Private Foundation				(36)		2,268,000		1,830,000		438,000		*
			Michael Falk	(37)		251,200		251,200		0		*
			Michiel Scholten	(38)		494,170		300,000		194,170		*
			Nathan Jacobson	(39)		546,498		300,000		246,498		*
			Noam Gottesman	(40)		400,000		400,000		0		*
	Noesis Capital Corp.			(41)		3,282,683		2,690,850		591,833		1.1	%
			Noesis NV	(42)		4,615,030		3,840,000		775,030		1.5	%
			Peter van Wel	(43)		300,000		300,000		0		*
			Rob J. Schuurman	(44)		180,000		180,000		0		*
			Robert O’Sullivan	(45)		25,120		25,120		0		*
			Robert Priddy	(46)		2,000,000		2,000,000		0		*
			Robert Smith	(47)		150,000		150,000		0		*
			Scott Greiper	(48)		18,840		18,840		0		*

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			Shares
			Owned		Shares to be				Percent
			Beneficially		Offered		Shares		of Class
			Prior		Pursuant to		Owned		Owned
			to This		This		After		After
Stockholder			Offering		Prospectus		Offering		Offering
	Shari Misher	(49)		400,000		400,000		0		*
	Shea Ventures	(50)		2,000,000		2,000,000		0		*
	Simon P. Kooyman	(51)		150,000		150,000		0		*
	Steve Yeung	(52)		307,812		150,000		157,812		*
	Susan Hoffman	(53)		1,256		1,256		0		*
	Susan Trimbo	(54)		60,000		60,000		0		*
	Tobias Oord	(55)		150,000		150,000		0		*
	Taxus BV	(56)		150,000		150,000		0		*
	Thom Waye	(57)		21,980		21,980		0		*
	WesWin Corp.	(58)		714,690		300,000		414,690		*
	Wim Boegem	(59)		691,923		600,000		91,923		*
	Wisa Options BV	(60)		2,218,751		2,100,000		118,751		*
				46,525,922		39,879,850		6,646,072

An “*” indicates less than 1%.

(1)	Includes 86,000 shares of common stock issuable upon the conversion of outstanding shares of Series C Preferred Stock and 43,000 shares of common stock issuable upon the exercise of outstanding warrants with an exercise price of $.25 per share.
(2)	Includes 52,000 shares of common stock issuable upon the conversion of outstanding shares of Series C Preferred Stock and 26,000 shares of common stock issuable upon the exercise of outstanding warrants with an exercise price of $.25 per share.
(3)	Includes 200,000 shares of common stock issuable upon the conversion of outstanding shares of Series C Preferred Stock and 100,000 shares of common stock issuable upon the exercise of outstanding warrants with an exercise price of $.25 per share.
(4)	Includes 800,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, 133,333 shares of common stock issuable upon the conversion of Series A Preferred Stock and 400,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(5)	Includes 100,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(6)	Includes 100,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, 33,333 shares of common stock issuable upon the conversion of Series A Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(7)	Includes 6,280 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 6,250 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Giardina received from Commonwealth Associates. Mr. Giardina is an affiliate of Commonwealth Associates.

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(8)	Includes 200,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, 100,000 shares of common stock issuable upon the conversion of Series A Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(9)	Includes 1,256 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 1,256 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Lipman received from Commonwealth Associates. Mr. Lipman is an affiliate of Commonwealth Associates.
(10)	Includes 25,120 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 25,120 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Kliedman received from Commonwealth Associates. Mr. Kliedman is an affiliate of Commonwealth Associates.
(11)	Includes 330,956 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 330,956 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option. Commonwealth Associates, LP is a NASD member who acted as the placement agent for our Series B Preferred Stock Offering.
(12)	Includes 3,000,000 shares of our common stock issuable upon the conversion of our Series B Preferred Stock and 3,000,000 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share. Also includes 452,000 shares of our common stock issuable upon the conversion of our Series B Preferred Stock and 452,000 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that ComVest Venture Partners LP received from Commonwealth Associates. ComVest Venture Partners, LP is an affiliate of the Commonwealth Associates, L.P. Michael S. Falk is the control person of ComVest Venture Partners, LP.
(13)	Includes 304,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, vested options to purchase an aggregate of 400,000 shares of our common stock at prices ranging from $0.25 to $2.20 per share with expiration dates ranging from November 2005 to December 2007 and 152,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Mr. Wit is our Chief Executive Officer, President and a member of our Board of directors.
(14)	Includes 100,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, 30,000 shares of common stock issuable upon the conversion of Series A Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(15)	Includes 40,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock and 20,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(16)	Includes 200,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, 133,333 shares of common stock issuable upon the conversion of Series A Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(17)	Includes 200,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(18)	Includes 400,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock and 200,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(19)	Includes 100,000 shares of common stock issuable upon the conversion of our Series B Preferred Stock, 504,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, vested options to purchase an aggregate of 230,000 shares of our common stock at prices ranging from $0.25 to $2.20 per shares with expiration dates ranging from May 2005 to December 2007 and 352,000 shares of common stock issuable upon the exercise of warrants with an exercise prices of $.25 per share. Mr. Van Kesteren is a member of our board of directors.

55

(20)	Includes 480,000 shares of common stock issuable upon the conversion of our Series C Preferred Stock, 60,000 shares of common stock issuable upon the conversion of Series A Preferred Stock, 400,000 shares of common stock issuable upon the conversion of shares of Series B Preferred Stock and 640,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(21)	Includes 62,800 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 62,800 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Blue received from Commonwealth Associates. Mr. Blue is an affiliate of Commonwealth Associates. Mr. Blue was a member of our board of directors from September 2001 to August 2002.
(22)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Peter J. van Kalthoven is the control person of Helder Holding BV.
(23)	Includes 200,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(24)	Includes 12,560 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 12,560 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Tallur received from Commonwealth Associates. Mr. Tallur is an affiliate of Commonwealth Associates.
(25)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(26)	Includes 400,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 166,667 shares of common stock issuable upon the conversion of Series A Preferred Stock and 200,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(27)	Includes 600,000 shares of common stock issuable upon the conversion of Series B Preferred Stock and 600,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(28)	Includes 4,710 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 4,710 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Gruber received from Commonwealth Associates. Mr. Gruber is an affiliate of Commonwealth Associates.
(29)	Includes 800,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 133,333 shares of common stock issuable upon the conversion of Series A Preferred Stock and 400,000 shares of common stock issuable upon the exercise of warrants with exercise prices ranging from $.25 to $2.00 per share.
(30)	Includes 12,560 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 12,560 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Wynne received from Commonwealth Associates. Mr. Wynne is an affiliate of Commonwealth Associates.
(31)	Includes 80,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 46,667 shares of common stock issuable upon the conversion of Series A Preferred Stock and 40,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(32)	Includes 1,000,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 500,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Martin Kallen is the control person of Karmare N.V.

56

(33)	Includes 12,560 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 12,560 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Rosenbloom received from Commonwealth Associates. Mr. Rosenbloom is an affiliate of Commonwealth Associates.
(34)	Includes 200,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Herman Kuyl is the control person of Kuyl Holdings BV.
(35)	Includes 1,000,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 500,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(36)	Includes 1,220,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 760,000 shares of common stock issuable upon the exercise of warrants with exercise prices ranging from $.25 to $1.50 per share. Jan Vandamme is the control person of Magnolia Private Foundation.
(37)	Includes 125,600 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 125,600 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Falk received from Commonwealth Associates. Mr. Falk is an affiliate of Commonwealth Associates.
(38)	Includes 200,000 shares of common stock issuable upon the conversion of outstanding shares of Series C Preferred Stock 83,333 shares of common stock issuable upon the conversion of Series A Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(39)	Includes 200,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 100,000 shares of common stock issuable upon the conversion of Series A Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(40)	Includes 200,000 shares of common stock issuable upon the conversion of Series B Preferred Stock and 200,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(41)	Includes 800,000 shares of our common stock issuable upon the conversion of our Series C Preferred Stock and 991,833 shares of our common stock issuable upon the conversion of warrants at an exercise price ranging from $.25 to $1.10 per share. Also includes 993,900 shares of our common stock issuable upon the conversion of shares of our Series C Preferred Stock and 496,950 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option. Noesis Capital Corp. is an NASD member who acted as the placement agent for our Series C Preferred Stock Offering and certain other offerings.
(42)	Includes 560,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 1,500,000 shares of our common stock issuable upon the conversion of shares of our Series B Preferred Stock and 1,922,532 shares of common stock issuable upon the exercise of warrants with exercise prices ranging from $.25 to $2.25 per share. Gregory Elias is the control person of Noesis NV.
(43)	Includes 200,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(44)	Includes 120,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 60,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(45)	Includes 12,560 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 12,560 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. O’Sullivan received from Commonwealth Associates. Mr. O’Sullivan is an affiliate of Commonwealth Associates.

57

(46)	Includes 1,000,000 shares of common stock issuable upon the conversion of Series B Preferred Stock and 1,000,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(47)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(48)	Includes 9,420 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 9,420 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Greiper received from Commonwealth Associates. Mr. Greiper is an affiliate of Commonwealth Associates.
(49)	Includes 200,000 shares of common stock issuable upon the conversion of Series B Preferred Stock and 200,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(50)	Includes 1,000,000 shares of common stock issuable upon the conversion of Series B Preferred Stock and 1,000,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Ronald L. Lakey is the control person of Shea Ventures.
(51)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(52)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 66,667 shares of common stock issuable upon the conversion of Series A Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(53)	Includes 628 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 628 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Hoffman received from Commonwealth Associates. Mr. Hoffman is an affiliate of Commonwealth Associates.
(54)	Includes 40,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 20,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(55)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(56)	Includes 100,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 50,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Koge van der Woude is the control person of Taxus BV.
(57)	Includes 10,990 shares of our common stock issuable upon conversion of our Series B Preferred Stock and 10,990 shares of our common stock issuable upon the conversion of warrants at an exercise price of $.25 per share pursuant to a Placement Agent Unit Option that Mr. Waye received from Commonwealth Associates. Mr. Waye is an affiliate of Commonwealth Associates.
(58)	Includes 200,000 shares of common stock issuable upon the conversion of Series C Preferred Stock, 133,333 shares of common stock issuable upon the conversion of Series A Preferred Stock and 100,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Wes Pritchett is the control person of WesWin Corp.

58

(59)	Includes 400,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 200,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share.
(60)	Includes 1,400,000 shares of common stock issuable upon the conversion of Series C Preferred Stock and 700,000 shares of common stock issuable upon the exercise of warrants with an exercise price of $.25 per share. Ad Klinkenberg is the control person of Wisa Options BV.

None of the selling stockholders has had, or within the past three years has had, any position, office or other material relationship with us or any of our affiliates other than as set forth herein. None of the selling stockholders are broker/dealers or affiliates of broker/dealers other than as set forth above. Commonwealth Associates, LP is a registered NASD broker-dealer and it received the securities as compensation for acting as placement agent for our Series B Preferred Stock offering. Noesis Capital Corp. is a registered NASD broker-dealer and it received the securities as compensation for acting as placement agent for our Series C Preferred Stock offering. To our knowledge neither Commonwealth Associates, LP nor Noesis Capital Corp., nor any of the selling stockholders, have any arrangement with any person to participate in the distribution of such securities.

PLAN OF DISTRIBUTION

The shares offered hereby by the selling security holders may be sold from time to time by the selling stock holders, or by pledgees, donees, transferees or other successors in interest. These sales may be made on one or more exchanges or in the over-the-counter market, or otherwise at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The shares may be sold by one or more of the following methods, including, without limitation:

• a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent,

• but may position and resell a portion of the block as principal to facilitate the transaction;

• purchases by a broker or dealer as principal and resale by a broker or dealer for its account under

• this prospectus;

• ordinary brokerage transactions and transactions in which the broker solicits purchasers;

• face-to-face or other direct transactions between the selling security holders and purchasers

• without a broker-dealer or other intermediary; and

• ordinary brokerage transactions and transactions in which the broker solicits purchasers.

In effecting sales, brokers or dealers engaged by the selling stockholders may arrange for other brokers or dealers to participate in the resales. Brokers, dealers or agents may receive compensation in the form of commissions, discounts or concessions from selling stockholders in amounts to be negotiated in connection with the sale. The selling stockholders and these broker-dealers and agents and any other participating broker-dealers, or agents may be deemed to be “underwriters” within the meaning of the Securities Act, in connection with the sales. In addition, any securities covered by this prospectus that qualify for sale under Rule 144 might be sold under Rule 144 rather than under this prospectus.

In connection with distributions of the shares or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers. In connection with the transactions, broker-dealers may engage in short sales of the shares registered hereunder in the course of hedging the positions they assume with selling stockholders. The selling security holders may also sell shares short and deliver the shares to close out the positions. The selling stockholders may enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the shares registered hereunder, which the broker-dealer may resell under this prospectus. The selling stockholders may also pledge the shares registered hereunder to a broker or dealer and upon a default, the broker or dealer may effect sales of the pledged shares under this prospectus.

Information as to whether an underwriter(s) who may be selected by the selling security holders, or any other broker-dealer, is acting as principal or agent for the selling stockholders, the compensation to be received by underwriters who may be selected by the selling stockholders, or any broker-dealer, acting as principal or agent for the selling stockholders and the compensation to be received by other broker-dealers, in the event the compensation of other broker-dealers is in excess of usual and customary commissions, will, to the extent required, be set forth in a supplement to this prospectus. Any dealer or broker participating in any distribution of the shares may be required to deliver a copy of this prospectus, including the supplement, if any, to any person who purchases any of the shares from or through a dealer or broker.

59

We have advised the selling stockholders that during the time as they may be engaged in a distribution of the shares included herein they are required to comply with Regulation M of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). With certain exceptions, Regulation M precludes any selling stockholders, any affiliated purchasers and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchase made in order to stabilize the price of a security in connection with an at the market offering such as this offering. All of the foregoing may affect the marketability of our common stock.

SHARES ELIGIBLE FOR FUTURE SALE

At the date of this prospectus, we have 14,034,618 shares of common stock issued and outstanding of which 8,432,696 shares are freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by an affiliate of ours. This does not include 5,000,000 shares issuable upon exercise of options under our stock option plan, 2,752,039 of which have been granted or 16,564,896 shares issuable upon exercise of outstanding warrants. They may be resold by their holders as long as they are covered by a current registration statement or under an available exemption from registration.

The remaining 5,601,922 shares of common stock currently outstanding are restricted securities. The remaining restricted shares will become eligible for sale under Rule 144 at various times provided that they have been held for at least one year. In general, Rule 144 permits a stockholder 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. We must be current in our reporting obligations in order for a stockholder to sell shares under Rule 144. In addition, shareholders other than our officers, directors or 10% or greater stockholders 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.

LEGAL MATTERS

The validity of the securities offered by this prospectus will be passed upon for us by Katz, Barron, Squitero, Faust & Boyd, P.A., 100 N.E. 3rd Avenue, Suite 280, Fort Lauderdale, FL 33301,

EXPERTS

Our consolidated financial statements. as of December 31, 2002 and 2001, and for the years then ended, appearing in this prospectus and registration statement have been audited by Greenberg & Company CPA’s LLC, independent auditors, as set forth in their report thereon appearing elsewhere in this prospectus, and are included in reliance upon this report given on the authority of such firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission the registration statement on Form SB-2 under the Securities Act for the common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information in the registration statement and the exhibits filed with it, portions of which have been omitted as permitted by Securities and Exchange Commission rules and regulations. For further information concerning us and the securities offered by this prospectus, we refer to the registration statement and to the exhibits filed with it. Statements contained in this prospectus as to the content of any contract or other document referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts and/or other documents filed as exhibits to the registration statement, and these statements are qualified in their entirety by reference to the contract or document.

60

The registration statement, including all exhibits, may be inspected without charge, or copies of these materials may be made upon the payment of prescribed fees, at the Securities and Exchange Commission’s Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549, You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. In addition, this registration statement and our other filings made with the Securities and Exchange Commission through its Electronic Data Gathering, Analysis and Retrieval (EDGAR) system are publicly available through the Securities and Exchange Commission’s site located at http//www.sec.gov.

Following the effective date of the registration statement relating to this prospectus, we will continue to be subject to the reporting requirements of the Exchange Act and in accordance with these requirements, will file annual, quarterly and special reports, and other information with the Securities and Exchange Commission. We also intend to furnish our shareholders with annual reports containing audited financial statements and other periodic reports as we think appropriate or as may be required by law.

61

OMNICOMM SYSTEMS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors’ Report	F-2
Consolidated Balance Sheet – December 31, 2002 and 2001	F-3
Consolidated Income Statement – Years Ended December 31, 2002 and 2001	F-4
Consolidated Statement of Cash Flows – Years Ended December 31, 2002 and 2001	F-5
Consolidated Statement of Shareholders’ Equity – Years Ended December 31, 2002 and 2001	F-7
Notes to Consolidated Audited Financial Statements	F-9
Unaudited Financial Statements
Consolidated Balance Sheet – June 30, 2003	F-29
Consolidated Income Statement – Six Months Ended June 30, 2003 and 2002	F-30
Consolidated Statement of Cash Flows – Six Months Ended June 30, 2003 and 2002	F-31
Consolidated Statement of Shareholders’ Equity – Six Months Ended June 30, 2003 and 2002
Notes to Consolidated Unaudited Financial Statements	F-32

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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, 2002 and 2001 and the related consolidated statements of operations, changes in shareholders’ equity (deficiency) and cash flows for each of the two years in the period ended December 31, 2002 These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based upon our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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, such consolidated financial statements presented above present fairly, in all material respects, the consolidated financial position of OMNICOMM SYSTEMS, INC. at December 31, 2002 and 2001, and the consolidated results of their operations and cash flows for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Corporation will continue as a going concern. As discussed in Note 3 to the financial statements, the Corporation has incurred losses and negative cash flows from operations in recent years through December 31, 2002 and these conditions are expected to continue through 2003, raising substantial doubt about the Corporation’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
March 21, 2003

F-2

OMNICOMM SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

		December 31,			December 31,
		2002			2001
ASSETS
CURRENT ASSETS
	Cash	$	194,677		$	142,826
	Accounts receivable		274,540			65,705
	Prepaid expenses		8,959			2,095
	Total current assets		478,176			210,626
PROPERTY AND EQUIPMENT, net			261,736			421,512
OTHER ASSETS
	Intangible assets, net		-0-			48,452
	Other assets		12,997			5,500
TOTAL ASSETS		$	752,909		$	686,090
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued expenses	$	1,446,450		$	1,026,919
	Notes payable – current		120,000			242,963
	Notes payable related party- current		106,000			98,322
	Deferred revenue		322,520			83,085
	Total current liabilities		1,994,970			1,451,289
CONVERTIBLE DEBT			450,000			2,065,000
NOTES PAYABLE, net of current portion			485,926			242,963
NOTES PAYABLE RELATED PARTY, net of current portion			196,644			98,322
TOTAL LIABILITIES			3,127,540			3,857,574
COMMITMENTS AND CONTINGENCIES
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, 200,000 and 200,000 issued and outstanding, respectively; liquidation preference $2,000,000 and $2,000,000, respectively		200			200
	Series C convertible preferred stock, - $.001 par value. 747,500 shares authorized, 307,650 and –0- issued and outstanding, respectively; liquidation preference $3,076,500 and $-0-, respectively		308			-0-
	5% Series A convertible preferred stock - $0.001 par value, 5,000,000 shares authorized; 4,215,224 and 4,215,224 issued and outstanding, respectively; liquidation preference $4,215,224 and $4,215,224, respectively		4,215			4,215
	Common stock – 150,000,000 shares authorized, 12,018,719 and 8,323,697 issued and outstanding, after deducting 669,777 and 620,951 shares of treasury stock, at $.001 par value, respectively		12,640			8,944
	Additional paid in capital – preferred		8,938,117			5,519,282
	Additional paid in capital – common		10,939,462			8,613,635
	Less: Treasury stock, cost method, 669,777 and 620,951 shares, respectively		(298,794	)		(293,912	)
	Accumulated deficit		(21,897,111	)		(16,932,609	)
	Deferred compensation		(72,528	)		(90,099	)
	Subscriptions receivable		(1,140	)		(1,140	)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)			(2,374,631	)		(3,171,484	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)		$	752,909		$	686,090

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

F-3

OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001

	2002			2001
Revenues	$	437,698		$	170,522
Cost of sales		288,790			194,108
Gross margin		148,908			(23,586	)
Other expenses
Salaries, benefits and related taxes		1,620,663			1,829,385
Rent & occupancy expenses		153,344			185,040
Consulting – medical advisory		139,423			37,734
Consulting – marketing sales		582			(38,000	)
Consulting – product development		-0-			21,125
Legal and professional fees		178,214			215,001
Travel		34,548			66,205
Telephone and internet		82,421			97,018
Selling, general and administrative		224,844			98,206
Asset impairment		-0-			9,127
Interest expense, net		938,639			918,834
Depreciation and amortization		208,232			446,326
Total other expenses		3,580,910			3,886,001
(Loss) before taxes and preferred dividends		(3,432,002	)		(3,909,587	)
Income tax expense (benefit)		-0-			-0-
Net income (loss)		(3,432,002	)		(3,909,587	)
Preferred stock dividends, including deemed dividends of $1,411,475 and $3,383,168 for the years ended December 31, 2002 and 2001, and dividends in arrears of $84,958 and $-0- on the 5% Series A Convertible Preferred Stock for the years ended December 31, 2002 and 2001; $211,256 and $51,256 on the Series B Convertible Preferred Stock for the years ended December 31, 2002 and 2001, and $56,805 and $0 on the Series C Convertible Preferred Stock for the years ended December 31, 2002 and 2001		(1,834,262	)		(3,640,009	)
Net income (loss) attributable to common stockholders	$	(5,266,264	)	$	(7,549,596	)
Net (loss) per share	$	(0.63	)	$	(0.95	)
Weighted average number of shares outstanding		8,333,820			7,960,069

See accompanying summary of accounting policies and notes to financial statements

F-4

OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001

		2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)	$	(3,432,002	)	$	(3,909,587	)
	Adjustment to reconcile net income to net cash provided by (used in) operating activities:
	Depreciation and amortization		208,232			446,326
	Common stock issued for services		917,882			118,221
	Preferred stock issued for services		100,000			-0-
	Interest expense from beneficial conversion feature on 12% convertible note		646,000			508,835
	Amortization of deferred compensation		17,571			5,590
	Interest expense on detachable warrants		165			124,827
	Warrants issued in early lease termination		-0-			4,396
	Asset impairment		-0-			9,127
	Change in assets and liabilities:
	Accounts receivable		(213,718	)		(55,778	)
	Prepaid expenses		(6,864	)		(2,095	)
	Intangible assets		-0-			(49,080	)
	Other assets		(7,500	)		5,500
	Accounts payable and accrued expenses		298,507			(85,145	)
	Deferred revenue		239,434			56,224
Net cash provided by (used in) operating activities			(1,232,293	)		(2,822,639	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of property and equipment		-0-			(81,911	)
Net cash provided by (used in) operating activities			-0-			(81,911	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from convertible notes, net of issuance costs			-0-			794,900
Payments on notes payable			(4,888	)		(60,000	)
Proceeds from notes payable			230,888			490,000
Proceeds from issuance of common stock			-0-			4,200
Issuance of Series C convertible preferred stock, net of issuance costs			1,058,144			1,711,318
Proceeds from stock option exercise			-0-			16,000
Net cash provided by (used in) financing activities			1,284,144			2,956,418
Net increase (decrease) in cash and cash equivalents			51,851			51,868
Cash and cash equivalents at beginning of period			142,826			90,958
Cash and cash equivalents at end of period		$	194,677		$	142,826

F-5

OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

	For the years ended
	December 31,
	2002		2001
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income tax	$	-0-	$	-0-
Interest	$	11,280	$	50,363
Non-cash Transactions
Conversion of convertible notes payable into shares of common stock	$	-0-	$	12,500
Common stock issued in exchange for notes payable and accrued interest	$	361,576	$	379,666
Common stock issued for services and in lieu of pay	$	22,401	$	118,221
Conversion of notes payable into 12% convertible notes	$	-0-	$	760,000
Shares issued as collateral for a note payable	$	-0-	$	75,000
Conversion of Series A preferred stock into shares of common stock	$	-0-	$	45,000
Convertible notes payable issued for accrued expenses	$	-0-	$	60,000
Preferred stock issued in exchange for convertible notes payable	$	1,615,000	$	-0-
Common stock issued for accrued preferred stock dividends	$	533,904	$	-0-
Treasury stock repurchase of common stock for accounts receivable	$	4,883	$	-0-

See accompanying summary of accounting policies and notes to financial statements

F-6

OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 2000 TO DECEMBER 31, 2002

																Preferred Stock
							5% Series A Convertible									8% Series B Convertible
	Common Stock
					Additional								Additional							Additional
	Number		$0.001		Paid In		Number			$0.001			Paid In			Number		$0.001		Paid In
	of Shares		Par Value		Capital		of Shares			Par Value			Capital			of Shares		Par Value		Capital
Balances at December 31, 2000		7,353,627		7,975		3,767,675		4,260,224			4,260			3,852,919			—		—		—
Issuance of shares		90,000		90		74,910
Conversion of preferred stock to common stock		30,000		30		44,970		(45,000	)		(45	)		(44,955	)
Conversion of convertible notes payable to common stock, net of issuance costs of $2,890		10,000		10		9,600
Exercise of stock options		20,000		20		15,980
Stock issued in lieu of pay and for trade payables		170,451		170		118,051
Conversion of notes payable to common stock		636,494		636		313,157
Issuance of common stock		13,125		13		4,187
Issuance of Series B preferred stock, net of issuance costs of $288,482																	200,000		200		1,711,318
Deferred compensation on stock warrant issued						95,689
Amortization of deferred compensation
Interest expense on detachable stock warrants						124,827
Interest expense from beneficial conversion feature on 12% Conv. Notes						508,835
Rent expense on stock warrants issued lieu of payment						4,396
Debt acquisition costs on stock warrants issued to placement agent for 12% convertible notes						148,190
Net loss for the year ended December 31, 2001
Dividends on preferred stock including $3,383,168 in deemed dividends		—		—		3,383,168		—			—			—			—		—		—
Balances at December 31, 2001		8,323,697		8,944		8,613,635		4,215,224			4,215			3,807,964			200,000		200		1,711,318

[Additional columns below]

[Continued from above table, first column(s) repeated]

	8% Series C Convertible
																			Total
					Additional														Shareholders’
	Number		$ 0.001		Paid In		Accumulated			Deferred			Subscription			Treasury			Equity
	of Shares		Par Value		Capital		Deficit			Compensation			Receivable			Stock			(Deficit)
Balances at December 31, 2000		—		—		—		(9,434,270	)		—			(1,140	)		(293,912	)		(2,096,493	)
Issuance of shares																				75,000
Conversion of preferred stock to common stock																				(0	)
Conversion of convertible notes payable to common stock, net of issuance costs of $2,890																				9,610
Exercise of stock options																				16,000
Stock issued in lieu of pay and for trade payables																				118,221
Conversion of notes payable to common stock																				313,793
Issuance of common stock																				4,200
Issuance of Series B preferred stock, net of issuance costs of $288,482																				1,711,518
Deferred compensation on stock warrant issued											(95,689	)								—
Amortization of deferred compensation											5,590									5,590
Interest expense on detachable stock warrants																				124,827
Interest expense from beneficial conversion feature on 12% Conv. Notes																				508,835
Rent expense on stock warrants issued lieu of payment																				4,396
Debt acquisition costs on stock warrants issued to placement agent for 12% convertible notes																				148,190
Net loss for the year ended December 31, 2001								(3,909,587	)											(3,909,587	)
Dividends on preferred stock including $3,383,168 in deemed dividends		—		—		—		(3,588,752	)		—			—			—			(205,584	)
Balances at December 31, 2001		—		—		—		(16,932,609	)		(90,099	)		(1,140	)		(293,912	)		(3,171,484	)

F-7

OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 2000 TO DECEMBER 31, 2002

													Preferred Stock
							5% Series A Convertible						8% Series B Convertible
	Common Stock
					Additional						Additional						Additional
	Number		$0.001		Paid In		Number		$0.001		Paid In		Number		$0.001		Paid In
	of Shares		Par Value		Capital		of Shares		Par Value		Capital		of Shares		Par Value		Capital
Amortization of deferred compensation
Issuance of Series C preferred stock, net of issuance costs of $303,356
Interest expense on detachable stock warrants						166
Conversion of 12% Convertible Notes to Convertible Series C Preferred Stock
Net loss for the period ended December 31, 2002
Stock issued in lieu of pay		113,100		113		22,288
Stock issued in lieu of interest payable - Convertible 12% note payable		1,446,306		1,447		360,130
Stock issued in lieu of dividends payable - 5% Convertible Series A Preferred Stock		2,135,616		2,136		531,768
Treasury stock reacquired in settlement of accounts receivable
Dividends on preferred stock including $1,411,475 in deemed dividends		—		—		1,411,475		—		—		—		—		—		—
Balances at December 31, 2002		12,018,719	$	12,640	$	10,939,462		4,215,224	$	4,215	$	3,807,964		200,000	$	200	$	1,711,318

[Additional columns below]

[Continued from above table, first column(s) repeated]

	8% Series C Convertible
																			Total
					Additional														Shareholders’
	Number		$ 0.001		Paid In		Accumulated			Deferred			Subscription			Treasury			Equity
	of Shares		Par Value		Capital		Deficit			Compensation			Receivable			Stock			(Deficit)
Amortization of deferred compensation											17,571									17,571
Issuance of Series C preferred stock, net of issuance costs of $303,356		146,150		146		1,157,997														1,158,143
Interest expense on detachable stock warrants																				166
Conversion of 12% Convertible Notes to Convertible Series C Preferred Stock		161,500		162		2,260,838														2,261,000
Net loss for the period ended December 31, 2002								(3,432,002	)											(3,432,002	)
Stock issued in lieu of pay																				22,401
Stock issued in lieu of interest payable - Convertible 12% note payable																				361,577
Stock issued in lieu of dividends payable - 5% Convertible Series A Preferred Stock																				533,904
Treasury stock reacquired in settlement of accounts receivable																	(4,882	)		(4,882	)
Dividends on preferred stock including $1,411,475 in deemed dividends		—		—		—		(1,532,500	)		—			—			—			(121,025	)
Balances at December 31, 2002		307,650	$	308	$	3,418,835	$	(21,897,111	)	$	(72,528	)	$	(1,140	)	$	(298,794	)	$	(2,374,631	)

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

F-8

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002

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. Our Internet-based TrialMaster® software allows clinical trial sponsors and investigative sites to securely collect, validate, transmit, and analyze clinical study data. The Medical Event Reporting System (MERS-TH) is an event reporting system developed for hospitals and medical centers to collect, classify, and analyze events that could potentially compromise patient safety. MERS-TH provides the opportunity to study and monitor both actual and near-miss events to facilitate process improvement efforts. MERS-TH was developed in conjunction with Columbia University and will be marketed by both of us to hospital and medical centers in the U.S. and Europe initially.
NOTE 2:	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
	The Company’s accounts include those of its two wholly owned subsidiaries, OmniCommerce and OmniTrial B.V and have been prepared in conformity with (i) generally accepted accounting principles; 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 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 2001 financial statements to conform to the 2002 presentation. These reclassifications did not have any effect on net income (loss) or shareholders’ equity.
	SEGMENT INFORMATION
	The Company operates in one reportable segment.
	CASH AND CASH EQUIVALENTS
	Cash equivalents consist of highly liquid, short-term investments with maturities of 90 days or less. The carrying amount reported in the accompanying 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. As of each balance sheet date, no reserve was considered necessary.
	CONCENTRATION OF CREDIT RISK
	Accounts receivable subject the Company to its highest potential concentration of credit risk. The Company reserves for credit losses. The Company does not require collateral on trade accounts receivables. During fiscal 2002 CV Therapeutics accounted for approximately 44%, the Children’s Research Institute for 13%, Guidant Cardiac Surgery for 11% and Ivax Research for 9% of our net sales.

F-9

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(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.

INTANGIBLE AND OTHER ASSETS

Intangible assets are amortized on a straight-line basis over periods ranging from one to five years. The Company continually reviews the recoverability of the carrying value of these assets using the methodology prescribed in SFAS 121. The Company also reviews long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate the carrying amounts of such assets may not be recoverable. If it is determined the carrying amount of the assets is permanently impaired then intangible assets are written down to fair value and the useful life of the asset may be changed prospectively. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets. As of December 31, 2002, management believes no revision to the remaining useful lives or write-down of intangible assets is required.

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. The Company had $322,520 in deferred revenues relating to contracts for services to be performed over periods ranging from 4 months 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 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 periodically record deferred revenues relating to advance payments in contracts. The Company had $322,520 in deferred revenue relating to contracts for services to be performed over periods ranging from 4 months to 4 years.

ADVERTISING

Advertising costs are expensed as incurred. Advertising costs were $13,008 and $10,293 for the periods ended December 31, 2002 and 2001, respectively.

F-10

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(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 (“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 $465,422 in 2002 and $392,401 in 2001 for the years ended December 31, respectively.

STOCK OPTIONS

The Company uses the intrinsic-value method of accounting for stock-based awards granted to employees and, accordingly, does not recognize compensation expense for its stock-based awards to employees in the Consolidated Statements of Income. See Note 13 for pro forma information on the impact of the fair-value method of accounting for stock options.

STOCK BASED COMPENSATION

Stock-based compensation is recognized using the intrinsic value method in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. For disclosure purposes, pro forma net loss and loss per common share are provided in accordance with Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation”, as if the fair value method had been applied.

EARNINGS PER SHARE

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

Basic earnings per share were calculated using the weighted average number of shares outstanding of 8,333,820 and 7,960,069 for the years ended December 31, 2002 and 2001, respectively. There were no differences between basic and diluted earnings per share. Options to purchase 2,785,039 shares of common stock at prices ranging from $.15 to $5.50 per share were outstanding at December 31, 2002. Stock warrants to purchase 17,748,428 shares of common stock at prices ranging from $0.25 to $10.00 per share were outstanding at December 31 2002. The Company granted a Unit Purchase Option (“Agent Option”) to the Placement Agent of its Series B Convertible Preferred Stock that provides the Placement Agent the ability to purchase 27,000 Series B Preferred Shares with 1,080,000 detachable common stock warrants. The exercise of the Agent Option would result in the issuance of an aggregate of 2,160,000 shares of common stock at an exercise price of $0.25 per share. The options, 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.

F-11

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

INCOME TAXES

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

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

IMPACT OF NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 141”), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). They also issued Statement of Financial Accounting Standards No. 143, “Accounting for Obligations Associated with the Retirement of Long Lived Assets” (“SFAS 143”), and Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), in August and October 2001, respectively. Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.”, was issued in April 2002. Also during 2002, Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” and Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FAS 123” were issued in June and December 2002, respectively.

SFAS 141 requires all business combinations initiated after September 30, 2001 be accounted for under the purchase method. SFAS 141 supersedes APB Opinion No. 16, “Business Combination’s”, and Statement of Financial Accounting Standards No. 38, “Accounting for Preacquisition Contingencies” of purchased Enterprises, and is effective for all business combinations initiated after September 30, 2001.

SFAS 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, the Company is no longer required to amortize goodwill and other intangible assets with indefinite lives, but will be subject to periodic testing for impairment. SFAS 142 supercedes APB Opinion No. 17, “Intangible Assets”. The Company expects that SFAS 142 will not have a material impact on its consolidated results of operations and financial position upon adoption. The Company adopted SFAS 142 on January 1, 2002.

SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS 143 is effective in fiscal years beginning after September 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS 143 will not have a material impact on its consolidated results of operations and financial position upon adoption. The Company adopted SFAS 143 effective January 1, 2002.

SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144, supersedes Statement of Financial Accounting Standards No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS 121”), and APB Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and

F-12

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

	Infrequently Occurring Events and Transactions”. The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in general are to be applied prospectively. The Company adopted SFAS 144 effective January 1, 2002 and does not expect that the adoption will have a material impact on its consolidated results of operations and financial position.
	In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt ,” which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item. Under SFAS No. 145, such gains and losses should be classified as extraordinary only if they meet the criteria of APB Opinion No. 30. In addition, SFAS No. 145 amends SFAS No. 13, “Accounting for Leases ,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company does not expect the adoption of SFAS No. 145, which will become effective after May 2002 to have a material effect on its financial condition or results of operations.
	In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Previous accounting guidance was provided by EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring )”. SFAS No. 146 replaces Issue 94-3. The provisions of SFAS No. 146 are to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not expect the adoption of this pronouncement to have a material effect on the earnings or financial position of the Company.
	On December 31, 2002, the FASB issued SFAS No.148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FAS 123”. This statement amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of FAS 148 are effective for fiscal years ending after December 15, 2002. The Company does not expect the adoption to have a material effect on the earnings or financial position of the Company.
NOTE 3:	OPERATIONS AND LIQUIDITY
	We have experienced negative cash flow from operations since 1999 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 will 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.

F-13

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

	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 will seek additional financing through debt and equity financings. There can be no assurance that any such fundings 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 periods ending December 31, 2002, there is doubt about the Company’s ability to continue as a going concern.
NOTE 4:	INTANGIBLE ASSETS AND GOODWILL
	Included in Intangible Assets are the following assets:

	December 31, 2002
			Accumulated
	Cost		Amortization
Covenant not to compete	$	120,000	$	120,000
Software development costs		87,500		87,500
Organization costs		539		539
Debt acquisition costs		301,888		301,888
	$	509,927	$	509,927

	December 31, 2001
			Accumulated
	Cost		Amortization
Covenant not to compete	$	120,000	$	120,000
Software development costs		87,500		87,500
Organization costs		539		539
Debt acquisition costs		301,888		253,436
	$	509,927	$	461,475

The covenant not to compete and the software development costs were acquired as a result of the acquisition of Education Navigator, Inc. (EdNav) on September 26, 1998. The covenant was for a two-year period and was being amortized ratably over that time. The software development costs were capitalized and were amortized ratably over a three-year period, as that was the expected life of the various products.

F-14

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

	During the year ended December 31, 2001, the Company issued Convertible Notes with gross proceeds totaling $1,615,000. The Company recorded total debt acquisition fees of $218,440 of which $70,250 were to be paid in cash and $148,190 were deemed additional compensation derived from 323,000 stock warrants issued to the placement agent as additional compensation. The debt acquisition costs were amortized ratably over the term of the notes. Amortization expense of the debt acquisition costs totaled $48,552 for the year ended December 30, 2002. Approximately $2,890 of the debt acquisition costs were reclassified as stock issuance costs in connection with the conversion of $12,500 (original cost) of the convertible notes into common stock of the Company during 2001.
NOTE 5:	PROPERTY AND EQUIPMENT, AT COST
	Property and equipment consists of the following:

	December 31, 2002				December 31, 2001
			Accumulated				Accumulated		Estimated
	Cost		Depreciation		Cost		Depreciation		Useful Lives
Computer and office equipment	$	420,298	$	253,416	$	420,298	$	169,408	5 years
Leasehold improvements		3,299		1,392		3,299		734	5 years
Computer software		260,287		183,989		260,287		117,349	3 years
Office furniture		42,350		25,701		42,350		17,231	5 years
	$	726,234	$	464,498	$	726,234	$	304,722

	Depreciation expense for the periods ended December 31, 2002 and 2001 was $159,776 and $146,879 respectively.
NOTE 6:	ACCOUNTS PAYABLE AND ACCRUED EXPENSES
	Accounts payable and accrued expenses consist of the following at December 31, 2002 and December 31, 2001:

		12/31/02		12/31/01
Accounts payable		$	431,736	$	155,531
Accrued payroll and related costs			473,384		41,818
Other accrued expenses			293,233		77,083
Accrued interest			120,578		212,089
Accrued dividends			-0-		412,879
Accrued expenses of OmniTrial BV			127,519		127,519
	Total accounts payable and accrued expenses	$	1,446,450	$	1,026,919

Other accrued expenses consist primarily of placement agent fees and expenses due on private placements of our debt and equity securities that occurred during 2000, 2001 and 2002 and accrued legal fees associated with the sale of Series C Convertible Preferred Stock. Accrued payroll and related costs includes approximately $433,288 in past due payroll taxes accrued fiscal 2002 that the Company had not paid as of December 31, 2002, but are considered legal obligations of the Company. See Note 16 Subsequent Events for further information regarding the past due employment taxes.

F-15

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

NOTE 7:

EARNINGS PER SHARE

Basic earnings per shares (“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 46,169,616 have been omitted from the calculation of dilutive EPS for the period ended December 31, 2002. A reconciliation between numerators and denominators of the basic and diluted earnings per shares is as follows:

	Year Ended December 31, 2002								Year Ended December 31, 2001
	Income			Shares		Per-Share			Income			Shares		Per-Share
	Numerator			Denominator		Amount			Numerator			Denominator		Amount
Basic EPS	$	(5,266,264	)		8,333,820	$	(0.62	)	$	(7,549,596	)		7,960,069	$	(0.95	)
Effect of Dilutive Securities None.		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(5,266,264	)		8,333,820	$	(0.62	)	$	(7,549,596	)		7,960,069	$	(0.95	)

NOTE 8:	NOTES PAYABLE
	At December 31 2002, the Company owed $908,571 in notes payable. The table below provides details as to the terms and conditions of the notes payable.

	Origination		Due		Interest					Short		Long
Note Holder	Date		Date		Rate			Amount		Term		Term
Guus van Kesteren		8/30/2001		10/31/2004		8.0	%	$	196,644	$	0	$	196,644
Magnolia Private Fnd.		8/30/2001		10/31/2004		8.0	%		209,534		0		209,534
Magnolia Private Fnd.		8/30/2001		10/31/2004		8.0	%		276,392		0		276,392
Nico Letschert		7/31/2002		7/31/2003		0.0	%		10,000		10,000		0
Nico Letschert		9/3/2002		5/31/2003		0.0	%		10,000		10,000		0
Randy Smith		11/25/2002		3/25/2003		0.0	%		6,000		6,000		0
Guus van Kesteren		12/26/2002		3/26/2003		9.0	%		50,000		50,000		0
Cornelis Wit		12/30/2002		3/30/2003		9.0	%		50,000		50,000		0
Guy Brissette		12/30/2002		3/30/2003		9.0	%		100,000		100,000		0
								$	908,570	$	226,000	$	682,570

Promissory notes totaling $682,570 were amended and restated on December 31, 2002,, with new terms which included an extension of the maturity date to October 31, 2004 with one half of the principal payable upon the closing of any financing by the Company resulting in gross proceeds in excess of $2,000,000.

Related Party Notes Payable

At December 31, 2002, the Company owed $302,644 in related party notes payable. Included in this amount is a $196,644 promissory note that was amended and restated on December 31, 2002 with new terms which include an extension of the maturity date to October 31, 2004 with one half of the principal payable upon the closing of any financing by the Company resulting in gross proceeds in excess of $2,000,000.

F-16

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

	During March 2002, the Company borrowed $2,341 from Randall Smith, the Company’s Chairman and Chief Technology Officer. This amount was repaid without interest on April 12, 2002. In addition, the Company borrowed $6,000 from Mr. Smith on November 25, 2002 and this amount remained outstanding at December 31, 2002.
	During April 2002, the Company borrowed $1,500 from Ronald Linares, the Company’s Chief Financial Officer. This amount was repaid without interest on May 1, 2002.
	During December 2002, the Company borrowed $50,000 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. This amount remained outstanding at December 31, 2002.
	During December 2002, the Company borrowed $50,000 from Guus van Kesteren, a Director of the Company. This amount remained outstanding at December 31, 2002.
NOTE 9:	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 Company also granted the agent the option to purchase 250,000 common shares at $.001 per share. The agent exercised the option. 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 is five years, into shares of common stock of the Company at $1.25 per share. As of December 31, 2002 approximately $412,500 of the Convertible Notes had been converted into 330,000 shares of common stock of the Company leaving an outstanding balance of $450,000.
	The Company is currently in default on interest payments owed totaling $33,573 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 was in default effective January 30, 2002.
	During the first six months of 2001, the Company issued 12% Convertible Notes Payable in the amount of $1,615,000 pursuant to a Confidential Private Placement Memorandum. There were costs of $218,440 associated with the offering of which $148,190 is attributable to warrants issued to the placement agent as additional compensation that were valued using the Black-Scholes method. The net proceeds to the Company were $1,484,750 with the cash compensation costs of $70,250 accrued at December 31, 2002, and $60,000 of accrued expenses due to the placement agent converted as part of the private placement of the 12% Convertible Notes Payable. The notes bear interest at twelve percent annually, payable at maturity. The notes are convertible after maturity, which is January 31, 2002, into shares of common stock of the Company at $0.50 per share. EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, requires Company’s to record interest expense on convertible debt that is issued with an embedded beneficial conversion feature, or in the money at the date the investor is committed to purchase the convertible securities. The Company valued the 12% Convertible Notes Payable utilizing the intrinsic value method and recorded $508,835 in interest expense with a corresponding credit to additional paid-in capital.
	The Company completed a conversion of its 12% Convertible Notes on December 31, 2002. The Company converted the principal amount outstanding of $1,615,000 into Units of its Series C Preferred Stock resulting in the issuance of 161,500 shares of the Series C Preferred with 3,230,000 attached common stock warrants providing the shareholder the right to purchase additional shares at $0.25 per share. In addition, the outstanding accrued interest on the 12% Convertible Notes, which totaled $361,576 on December 31, 2002, resulted in the issuance of 1,446,306 shares of common stock.

F-17

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

NOTE 10:	COMMITMENTS AND CONTINGENCIES
	The Company currently leases office space under operating leases. The minimum future lease payments required under the Company’s operating leases at December 31, 2002 are as follows:

2003	$	98,060
2004		44,550
2005		0
2006		0
2007		0
Total	$	142,610

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. Rental expense was $153,344 and $185,040 for the years ended December 31, 2002 and 2001.

CONTINGENT LIABILITIES

On or about September 6, 2000, the Company’s wholly owned subsidiary, OmniTrial B.V. (“OmniTrial”) submitted a petition for bankruptcy protection from the bankruptcy court of the Netherlands. The court appointed a liquidating trustee. The Company claimed that certain assets in the possession of OmniTrial were paid for by the Company and therefore should not be part of the liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and told the Company that as part of the OmniTrial bankruptcy estate the assets would be sold to diminish any deficiency of the estate. On July 5, 2001 the Company signed a settlement agreement providing for the return of the assets to the Company in exchange for a payment of $10,000 that was made on or about July 5, 2001. The Company does not expect to incur any additional liability in this bankruptcy proceeding.

In January 2001, a former employee, Eugene A. Gordon, filed a lawsuit in Dade County, Florida alleging breach of his employment contract with us. The plaintiff alleged we owed him more than $100,000 for back payment of salary according to the terms of his employment contract. We disputed Mr. Gordon’s allegations and vigorously defended this lawsuit. As part of its defense, the Company filed a counterclaim against Mr. Gordon and a counter-suit against his wife. The parties entered into a settlement agreement on August 19, 2002. The parties subsequently filed and the court accepted a Joint Stipulation for Dismissal With Prejudice on September 6, 2002.

On February 2, 2001, an advertising firm, Wray Ward Laseter filed a lawsuit in the Superior Court of North Carolina against the Company. The plaintiff alleged claims totaling approximately $84,160 against the Company for fees associated with advertising, marketing and public relations services provided between March and September 2000. On or about April 27, 2001, the Company and Wray Ward Laseter entered into a settlement agreement which provided that the plaintiff dismiss the lawsuit with prejudice and release its claims against the Company in return for a series of payments totaling $66,000. The Company made all required payments under the settlement agreement. Wray Ward Laseter filed and the Superior Court accepted on November 30, 2001 a Stipulation of Dismissal.

On February 16, 2001, a staffing agency, Temp Art, Inc. filed a lawsuit in the County Court in and for Miami-Dade County, Florida. The plaintiff alleged the Company breached its contract and owed approximately $13,126 for back payment of services rendered plus interest and costs. On September 25, 2001, the Company and Temp Art entered into a settlement agreement that provided that the plaintiff dismiss the lawsuit with prejudice and release its claims against the Company in return for a payment of $15,700. The Company made the required payment on September 25, 2001 and a Voluntary Dismissal was entered by the County Court on October 5, 2001.

F-18

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

	EMPLOYMENT AGREEMENTS
	During 2001, the Company entered into three-year employment agreements with its Chairman/Chief Technology Officer and Chief Financial Officer with compensation for up to six months if terminated under certain conditions. Under separate stock option agreements entered into concurrently with their employment agreements, the Chairman/Chief Technology Officer and Chief Financial Officer were granted incentive stock options to purchase 210,000 shares of common stock at the market price per share respectively.
	During June 2002, the Company entered into a one-year employment agreement with its President and Chief Executive Officer. The Company concurrently entered into stock options agreements that provide for 50,000 options to be issued at the time of execution with additional options issued based on the achievement of certain operating parameters that include revenue and operating cash flow performance.
	FINANCIAL ADVISORY AGREEMENT
	During March 2002, the Company entered into a one-year financial advisory agreement with Noesis Capital to 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 during the one-year term of the agreement. The advisory agreement was extended for a twelve month term effective December 23, 2002.
NOTE 11:	RELATED PARTY TRANSACTIONS
	Cornelis F. Wit, our President and Chief Executive Officer and a member of our Board of Directors, is a consultant to Noesis Capital Corp. and served as President of Corporate Finance of Noesis Capital Corp. from March 1995 to September 2000. Noesis Capital Corp. has served as placement agent for us in three private placements of securities which occurred between September 1999 and December 2002. Guus van Kesteren, a member of our Board of Directors, is a consultant for Noesis Capital Corp.
	In December 1999, we entered into a consulting agreement with Messrs. van Kesteren and Wit, each of whom is a member of our Board of Directors, providing that we will compensate each of these individuals for sales leads or contacts developed by them in connection with our TrialMaster system. For the periods ended December 30, 2001 and 2002, no compensation was earned by either Mr. van Kesteren or Mr. Wit under this agreement. This agreement was terminated upon mutual agreement of OmniComm and Messrs. Wit and van Kesteren effective June 30, 2002.
	On April 5, 2002, Cornelis F. Wit, President and Chief Executive Officer and a Director of the Company, invested $10,000 in a private placement of our Series C Preferred Stock. The Series C Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum.
	On April 5, 2002, Guus van Kesteren a Director of the Company, invested $10,000 in a private placement of our Series C Preferred Stock. The Series C Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum.
	On January 30 2002, Noesis N.V., one of our stockholders, invested $90,000 in a private placement of our Series C Preferred Stock. The Series C Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum.

F-19

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

From time to time we have borrowed funds from Mr. van Kesteren, including:

• Between July 2000 and December 2000, we borrowed an aggregate of $110,000 from him under two promissory notes, one of which bore interest at a rate of 12% per annum and the other at 5% per annum. These notes were converted into debt issued as part of a private placement of our debt in January 2000. The private placement debt accrues interest at 12% per annum and is convertible into shares of our common stock at the holder’s option at a rate of $0.50 per share commencing on January 31, 2002.

• between February 2001 and July 2001, we borrowed an aggregate of $190,000 from him under promissory notes which bore interest of 12% per annum. These promissory notes were amended and restated on August 30, 2001 with new terms which included an interest rate of 8% per annum, and with one half of the principal payable upon the closing of any financing by us resulting in gross proceeds in excess of $2,000,000, and the balance of the principal together with accrued interest payable no later than August 30, 2003.

• in September 2001, we borrowed an aggregate of $25,000 from him under promissory notes which bore interest at a rate of 12% per annum and had a maturity date of December 22, 2001. These notes were converted into the Units sold in our private placement of Series B Preferred Stock in August 2001.

• in December 2002, we borrowed $50,000 from him under a promissory note bearing interest at a rate of 9% per annum, payable on March 31, 2003.

In conjunction with these various loans, we have granted Mr. van Kesteren warrants to purchase an aggregate of 70,700 shares of our common stock at exercise prices ranging from $.30 to $2.25 per share.

In July 2001, Noesis Capital, the Placement Agent for our 12% Convertible Notes, assigned $60,000 of accrued fees owed to it Cornelis Wit, a Director at the time. Mr. Wit converted that accrued expense into the Private Placement of our 12% Convertible Notes. The 12% Convertible Notes were subsequently converted on December 31, 2002 into shares of our Series C Preferred Stock.

The Company granted Randall G. Smith, Chairman of the Board and Chief Technology Officer, warrants to purchase 20,000 shares of our Common stock at an exercise price of $0.41 per share in connection with a pledge of real property he made in securing a loan made to the Company by Mr. van Kesteren in July 2001, in the amount of $100,000

On August 17, 2000, we borrowed $100,000 from Noesis N.V., one of our stockholders. One of our Directors, Mr. Wit, was President of Corporate Finance of Noesis Capital Corp., an affiliate of Noesis N.V., and remains a consultant to the firm. The promissory note bore interest rate at a rate of 8% per annum and had a maturity date of January 1, 2001. At our request, Noesis N.V. agreed to convert this promissory note into debt issued as part of a private placement of our debt in January 2001. The private placement debt accrues interest at 12% per annum and is convertible into shares of our Common Stock at the holder’s option at a rate of $0.50 per share commencing on January 31, 2002.

During March 2002, the Company borrowed $2,341 from Randall Smith, the Company’s Chairman and Chief Technology Officer. This amount was repaid without interest on April 12, 2002. In addition, the Company borrowed $6,000 from Mr. Smith on November 25, 2002 and this amount remained outstanding at December 31, 2002.

F-20

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

	During April 2002, the Company borrowed $1,500 from Ronald Linares, the Company’s Chief Financial Officer. This amount was repaid without interest on May 1, 2002.
	During December 2002, the Company borrowed $50,000 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. This amount was borrowed under a promissory note bearing interest at a rate of 9% per annum, payable on March 31, 2003.
NOTE 12:	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 SFAS’s 106 or 112.
NOTE 13:	STOCKHOLDERS’ EQUITY (DEFICIT)
	The authorized capital stock of the Company 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 Series A Preferred Stock, 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, 2002 the Company had the following outstanding securities:

• 12,018,719 shares of common stock issued and outstanding;

• 17,748,428 warrants issued and outstanding to purchase shares of our common stock;

• 4,215,224 shares of our 5% Series A Preferred Stock issued and outstanding, and

• 200,000 shares of our 8% Series B Preferred Stock issued and outstanding

• 307,650 shares of our Series C Preferred Stock issued and outstanding

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 and holders of a majority of our voting securities voting for the election of directors can elect all of the directors. Holders of common stock are entitled to share in all dividends that the Board of Directors, in its discretion, declares from legally available funds.

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

Preferred stock

Our Board of Directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. 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.

F-21

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

5% Series A Preferred Stock

In 1999, our Board of Directors designated 5,000,000 shares of our preferred stock as 5% Series A Preferred Stock (“Series A Preferred”). The Series A Preferred was created pursuant to a Certificate of Designations filed with the Delaware Secretary of State on July 19, 1999.

Between September 1999 and January 2000 the Company issued 4,263,500 shares of the Series A Preferred with net proceeds of $4,018,843.

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

• the shares are not redeemable,

• each share of Series A Preferred 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. The conversion price will be further adjusted 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,

• the shares of Series A Preferred pay a dividend at a rate of 5% per annum, 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 A Preferred Stock. Dividends are cumulative,

• in the event of our liquidation or winding up, each share of Series A Preferred carries a liquidation preference equal to $1.00 per share,

• each share of Series A Preferred has full voting rights, share for share, with the then outstanding common stock on the basis of one vote for each share of common stock issuable upon the conversion of the Series A Preferred Stock.

• the holders of the Series A Preferred were granted certain demand and piggy-back registration rights covering the shares of our common stock issuable upon the conversion of the Series A Preferred into common stock of the Company.

• the holders of the 5% Series A Preferred are entitled to vote two of the five members of the Company’s Board of Directors.

There were $0 and $412,789 of accrued and unpaid dividends on the Series A Preferred at December 31, 2002 and 2001, respectively. In addition, there was an arrearage of $84,958 on the Series A Preferred for undeclared dividends on December 31, 2002.

Series B Convertible Preferred Stock

In August 2001, our Board of Directors designated 200,000 shares of our preferred stock as Series B Preferred Stock (“Series B Preferred”). The Series B Preferred was created pursuant to a Certificate of Designations filed with the Delaware Secretary of State on August 31, 2001. 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 to 230,000. During September 2001 the Company issued 200,000 shares of the Series B Preferred with net proceeds of $1,711,518.

F-22

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

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

• the stated value of each share is $10.00 per share,

• the shares are not redeemable,

• each share of Series B Preferred 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 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 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 has been declared effective,

• The conversion price will be further adjusted 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 pay a dividend at a rate of 8% per annum, 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. Dividends are cumulative,

• each share of Series B Preferred 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 carries a liquidation preference equal to $10.00 per share plus accrued and unpaid dividends, and

• the holders of the Series B Preferred 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,

• the holders of the Series B Preferred were granted certain registration rights covering the shares of our Common Stock issuable upon the conversion of the Series B Preferred,

• the holders of the Series B Preferred are entitled to vote one of the five members of the Company’s Board of Directors.

There were arrearages of $211,256 and $51,256 on the Series B Preferred for undeclared dividends as of December 31, 2002 and 2001.

F-23

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

Series C Preferred Stock

In March 2002, our Board of Directors designated 747,500 shares of our preferred stock as Series C Preferred Stock (“Series C Preferred”). The Series C Preferred was created pursuant to a Certificate of Designations filed with the Delaware Secretary of State on March 31, 2002. To date, the Company has issued 307,650 shares of the Series C Preferred Stock, including 161,500 shares issued in connection with the conversion of the Company’s 12% Convertible Notes on December 31, 2002 and 10,000 shares issued pursuant to the conversion of $100,000 in accrued expenses owed to Noesis Capital, the Placement Agent for this private placement. Net proceeds were approximately $1,058,144. At December 31, 2002 the Company was still actively marketing the Series C Preferred Private Placement to accredited investors and anticipated closing the placement on or about February 28, 2003.

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

• the stated value of each share is $10.00 per share,

• the shares are not redeemable,

• each share of Series C Preferred 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 by $0.25, which is the Series C Conversion Price. The Series C Preferred will automatically convert 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 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 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 equal to 10 times the average daily trading volume during the 20-day look-back period set forth above,

• The conversion price will be further adjusted 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 pay a dividend at a rate of 8% per annum, 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. Dividends are cumulative,

• each share of Series C Preferred 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 carries a liquidation preference equal to $10.00 per share plus accrued and unpaid dividends, and

F-24

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

• the holders of the Series C Preferred 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,

• the holders of the Series C Preferred were granted certain registration rights covering the shares of our common stock issuable upon the conversion of the Series C Preferred Stock,

• the holders of the Series C Preferred are entitled to vote two of the seven members of the Company’s Board of Directors.

There were arrearages of $56,805 and $-0- on the Series C Convertible Preferred Stock for undeclared dividends as of December 31, 2002 and 2001.

Warrants

We have issued and outstanding warrants to purchase a total of 17,748,428 shares of our common stock, including:

• warrants to purchase 2,359,832 shares of our 5% Series A Preferred Stock at an exercise price of $2.00 per share expiring in June 2003 which were issued by us in connection with the offering of the Series A Preferred Stock offering.

• warrants to purchase 8,000,000 shares of our common stock at an exercise price of $.25 per share expiring September 2006 which were issued by us in connection with the Series B Preferred Stock offering, which warrants contain a cashless exercise provision.

• warrants to purchase 1,235,596 shares of our common stock at exercise prices ranging from $.30 to $10.00 per share expiring periodically through July 2006 which were issued by us to various individuals for a variety of reasons including consulting services, advisory services, settlement of a long-term lease obligation, and in connection with the issuance of certain promissory notes.

• warrants to purchase 6,153,000 shares of our common stock at an exercise price of $.25 per share expiring May 2007 which were issued by us in connection with the Series C Preferred Stock offering, which warrants contain a cashless exercise provision.

Placement Agent’s Unit Purchase Option

Commonwealth Associates, L.P. acted as our placement agent in connection with the September 2001 private placement of units which included our Series B Preferred Stock. We issued Commonwealth Associates a seven year option to purchase 2.7 units, each unit consisting of 10,000 shares of Series B Preferred Stock and warrants to purchase 400,000 shares of common stock, exercisable at $100,000 per unit, as additional compensation.

Accounting for Stock Based Compensation

The Company has adopted Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, (“SFAS No. 123”) and as permitted under SFAS 123 applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, (“APB 25”) and related interpretations in accounting for stock-based compensation plans. If the Company had elected to adopt optional recognition provisions of SFAS 123 for its stock option plans, net loss and net loss per share would have been changed to the pro forma amounts indicated below:

F-25

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

(in thousands, except for per share data)		2002			2001
Net loss available to common stockholders
	As reported	$	(5,266	)	$	(7,550	)
	Pro forma	$	(5,343	)	$	(7,772	)
Basic and diluted net loss per share
	As reported	$	(0.63	)	$	(0.98	)
	Pro forma	$	(0.64	)	$	(1.00	)

These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years.

The estimated fair value of each OmniComm option granted is calculated using the Black-Scholes pricing model. The weighted average assumptions used in the model were as follows:

	2002			2001
Risk-free interest rate		5.00	%		5.00	%
Expected years until exercise	6 Years			6 Years
Expected stock volatility		137.2	%		150.0	%
Dividend yield		0	%		0	%

Stock Option Plan

In 1998, the Company’s Board of Directors approved the OmniComm Systems 1998 Stock Option Plan, (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 5,000,000 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.

The Company’s share option activity and related information is summarized below:

		Year ended December 31,				Year ended December 31,
		2002				2001
				Weighted				Weighted
				Average				Average
				Exercise				Exercise
		Options		Price		Options		Price
Outstanding at beginning of period			3,584,039	$	1.33		3,316,006	$	2.28
	Granted		811,000	$	0.25		2,089,500	$	0.48
	Exercised		-0-	$	0.00		20,000	$	0.80
	Cancelled		1,610,000	$	1.36		1,801,467	$	2.09
Outstanding at end of period			2,785,039	$	1.00		3,584,039	$	1.33
Exercisable at end of period			2,761,705	$	0.82		2,636,372	$	1.47

F-26

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

The following table summarizes information about stock options outstanding at December 31, 2002:

	Outstanding						Exercisable
			Weighted
			Average
			Remaining		Weighted				Weighted
			Years of		Average				Average
Range of	Number of		Contractual		Exercise		Number of		Exercise
Exercise Prices	Options		Life		Price		Options		Price
$0.25 - $0.47		1,662,500		4.99	$	0.34		1,652,500	$	0.34
$0.50 - $0.80		392,000		7.10	$	0.54		378,666	$	0.54
$1.00 - $2.75		730,539		3.26	$	1.74		730,539	$	1.74

	Other Stock Based Compensation
	During 2001, the Company issued an aggregate of 126,340 shares of common stock to employees and advisors with a fair market value of $97,858 for services rendered under employment and consulting agreements.
	During 2001, the Company issued 50,000 warrants to advisors as compensation for services to be rendered over periods ranging from 3 to 5 years. The Company valued the warrants in accordance with SFAS 123 utilizing the Black-Scholes Model. The Company recorded $95,689 in deferred compensation and is amortizing the amounts over the expected life of the consulting services to be rendered. The Company recognized non-cash compensation expense totaling $17,571 during the year ended December 31, 2002 in connection with the warrant grants.
	During 2002, the Company issued an aggregate of 113,100 shares of restricted common stock to employees including three of its officers. The stock issued had a fair market value of $22,288 and was issued for employment services rendered in lieu of cash payments.
NOTE 14:	OMNITRIAL, B.V. BANKRUPTCY
	On or about September 6, 2000, the Company’s wholly owned subsidiary, OmniTrial B.V. (“OmniTrial”) submitted a petition for bankruptcy protection from the bankruptcy court of the Netherlands. The court appointed a liquidating trustee. The Company claimed that certain assets in the possession of OmniTrial were paid for by the Company and therefore should not be part of the liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and told the Company that as part of the OmniTrial bankruptcy estate the assets would be sold to diminish any deficiency of the estate. On July 5, 2001 the Company signed a settlement agreement providing for the return of the assets to the Company in exchange for a payment of $10,000.
NOTE 15:	INCOME TAXES
	Income taxes are accrued at statutory US and state income tax rates. Income tax expense is as follows:

		12/31/02			12/31/01
Current tax expense (benefit):
	Income tax at statutory rates	$	-0-		$	-0-
Deferred tax expense (benefit):
	Amortization of goodwill and covenant		-0-			(59,396	)
	Operating loss carryforward		(1,291,463	)		(1,121,779	)
			(1,291,463	)		(1,181,175	)
Valuation allowance			1,291,463			1,181,175
Total tax expense (benefit)		$	-0-		$	-0-

F-27

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(continued)

The tax effects of significant temporary differences, which comprise the deferred tax assets, are as follows:

		12/31/02			12/31/01
Deferred tax assets:
Amortization of intangibles		$	283,698		$	283,698
Operating loss carryforwards			5,549,331			4,257,868
	Gross deferred tax assets		5,833,029			4,541,566
	Valuation allowance		(5,833,029	)		(4,541,566	)
	Net deferred tax asset	$	-0-		$	-0-

	The Company has net operating loss carryforwards (NOL) for income tax purposes of approximately $14,735,000. This loss is allowed to be offset against future income until the year 2021 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 2002.
NOTE 16:	SUBSEQUENT EVENTS
	The Company had a recorded liability of $433,288 at December 31, 2002 for federal employment taxes. The Company made payments of $221,530 on January 6, 2003, $123,730 on January 7, 2003 and $88,028 on March 3, 2003 that satisfied the liability.
	The Company is currently in default on interest payments owed totaling $44,586 on 10% Convertible Notes. The terms of the notes provide a payment grace period of thirty days in which to make the required semi-annual interest payments. The Company has been in default since January 30, 2002.

F-28

OMNICOMM SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

		June 30,			December 31,
		2003			2002
		(unaudited)
ASSETS
CURRENT ASSETS
	Cash	$	65,587		$	194,677
	Accounts receivable		55,195			274,540
	Prepaid expenses		35,375			8,959
	Total current assets		156,157			478,176
PROPERTY AND EQUIPMENT, net			199,856			261,736
OTHER ASSETS
	Intangible assets, net		-0-			-0-
	Other assets		12,997			12,997
TOTAL ASSETS		$	369,010		$	752,909
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued expenses	$	1,096,423		$	1,446,450
	Notes payable – current		100,000			120,000
	Notes payable related party- current		6,000			106,000
	Deferred revenue		342,932			322,520
	Total current liabilities		1,545,355			1,994,970
CONVERTIBLE DEBT			450,000			450,000
NOTES PAYABLE, net of current portion			755,926			485,926
NOTES PAYABLE RELATED PARTY, net of current portion			396,644			196,644
TOTAL LIABILITIES			3,147,925			3,127,540
COMMITMENTS AND CONTINGENCIES
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, 200,000 and 200,000 issued and outstanding, respectively; liquidation preference $2,000,000 and $2,000,000, respectively		200			200
	Series C convertible preferred stock, - $.001 par value. 747,500 shares authorized, 337,150 and 307,650 issued and outstanding, respectively; liquidation preference $3,371,500 and $3,076,500, respectively		337			308
	5% Series A convertible preferred stock - $0.001 par value, 5,000,000 shares authorized; 4,215,224 and 4,215,224 issued and outstanding, respectively; liquidation preference $4,215,224 and $4,215,224, respectively		4,215			4,215
	Common stock – 150,000,000 shares authorized, 13,414,618 and 12,018,719 issued and outstanding, after deducting 673,878 and 669,777 shares of treasury stock, at $.001 par value, respectively		14,040			12,640
	Additional paid in capital – preferred		9,203,352			8,938,117
	Additional paid in capital – common		11,548,983			10,939,462
	Less: Treasury stock, cost method, 673,878 and 669,777 shares, respectively		(299,861	)		(298,794	)
	Accumulated deficit		(23,191,271	)		(21,897,111	)
	Deferred compensation		(57,770	)		(72,528	)
	Subscriptions receivable		(1,140	)		(1,140	)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)			(2,778,915	)		(2,374,631	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)		$	369,010		$	752,909

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

F-29

OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	For the six months ended						For the three months ended
	June 30,						June 30,
	2003			2002			2003			2002
Revenues	$	333,550		$	225,973		$	132,420		$	121,951
Cost of sales		95,334			202,934			48,227			78,225
Gross margin		238,216			23,039			84,193			43,726
Other expenses
Salaries, benefits and related taxes		916,943			876,565			465,856			438,952
Rent & occupancy expenses		75,282			78,565			38,524			38,345
Consulting – medical advisory		(53,385	)		14,423			(120,692	)		14,423
Consulting – marketing sales		2,239			582			2,239			582
Legal and professional fees		31,517			118,795			6,764			36,869
Travel		28,857			20,260			19,102			5,814
Telephone and internet		35,417			40,056			19,809			16,531
Selling, general and administrative		67,463			53,484			34,272			34,739
Interest expense, net		58,421			145,026			29,310			72,982
Depreciation and amortization		73,701			128,394			33,782			45,612
Total other expenses		1,236,455			1,476,150			528,966			704,849
(Loss) before taxes and preferred dividends		(998,239	)		(1,453,111	)		(444,773	)		(661,123	)
Income tax expense (benefit)		-0-			-0-			-0-			-0-
Net income (loss)		(998,239	)		(1,453,111	)		(444,773	)		(661,123	)
Preferred stock dividends Series A Preferred		-0-			(101,837	)		-0-			(51,202	)
Preferred stock dividends in arrears Series A Preferred		(101,837	)		-0-			(51,200	)		-0-
Preferred stock dividends in arrears Series B Preferred		(79,342	)		(79,342	)		(39,890	)		(39,890	)
Preferred stock dividends in arrears Series C Preferred		(129,956	)		(12,094	)		(67,245	)		(10,063	)
Preferred stock dividends – deemed dividends		(295,921	)		(366,805	)		(160,577	)		(263,805	)
Total preferred stock dividends		(607,056	)		(560,078	)		(318,912	)		(364,960	)
Net income (loss) attributable to common stockholders	$	(1,605,295	)	$	(2,013,189	)	$	(763,685	)	$	(1,026,083	)
Net (loss) per share	$	(0.13	)	$	(0.24	)	$	(0.06	)	$	(0.12	)
Weighted average number of shares outstanding		12,420,836			8,323,697			12,822,953			8,323,697

See accompanying summary of accounting policies and notes to financial statements

F-30

OMNICOMM SYSTEMS, INC.
OMNICOMM SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002
(unaudited)

		2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)	$	(998,239	)	$	(1,453,111	)
	Adjustment to reconcile net income to net cash provided by (used in) operating activities:
	Depreciation and amortization		73,701			128,394
	Amortization of deferred compensation		14,758			7,384
	Interest expense on detachable warrants		-0-			165
	Change in assets and liabilities:
	Accounts receivable		218,278			43,032
	Prepaid expenses		(26,416	)		(12,584	)
	Accounts payable and accrued expenses		(100,027	)		712,750
	Deferred revenue		20,412			(61,444	)
Net cash provided by (used in) operating activities			(797,533	)		(635,414	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of property and equipment		(11,822	)		-0-
Net cash provided by (used in) investing activities			(11,822	)		-0-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable			102,600			3,841
Payments on notes payable			(2,600	)		(3,841	)
Proceeds from issuance of common stock, net of issuance costs			315,000			-0-
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs			265,265			552,944
Net cash provided by (used in) financing activities			680,265			552,944
Net increase (decrease) in cash and cash equivalents			(129,090	)		(82,470	)
Cash and cash equivalents at beginning of period			194,677			142,826
Cash and cash equivalents at end of period		$	65,587		$	60,356

	For the six months
	ended
	June 30,
	2003		2002
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income tax	$	-0-	$	-0-
Interest	$	-0-	$	22,560
Non-cash Transactions
Treasury stock repurchase of stock for trade accounts receivable	$	1,067	$	-0-

See accompanying summary of accounting policies and notes to financial statements

F-31

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)

NOTE 1:	ORGANIZATION AND NATURE OF OPERATIONS
	OmniComm Systems, Inc. is a healthcare technology company that provides Web-based electronic data capture (“EDC”) solutions and related value-added services to pharmaceutical and biotech companies, clinical research organizations, and other clinical trial sponsors. Our Internet-based TrialMaster® software allows clinical trial sponsors and investigative sites to securely collect, validate, transmit, and analyze clinical study data. The Medical Event Reporting System (MERS-TH) is an event reporting system developed for hospitals and medical centers to collect, classify, and analyze events that could potentially compromise patient safety. MERS-TH provides the opportunity to study and monitor both actual and near-miss events to facilitate process improvement efforts. MERS-TH was developed in conjunction with Columbia University and will be marketed by both of us to hospital and medical centers in the U.S. and Europe initially.
NOTE 2:	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
	The Company’s accounts include those of its two wholly owned subsidiaries, OmniCommerce and OmniTrial B.V and have been prepared in conformity with (i) generally accepted accounting principles; 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 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 2002 financial statements to conform to the 2003 presentation. These reclassifications did not have any effect on net income (loss) or shareholders’ equity.
	SEGMENT INFORMATION
	The Company operates in one reportable segment.
	CASH AND CASH EQUIVALENTS
	Cash equivalents consist of highly liquid, short-term investments with maturities of 90 days or less. The carrying amount reported in the accompanying 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. As of each balance sheet date, no reserve was considered necessary.

F-32

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

CONCENTRATION OF CREDIT RISK

Accounts receivable subject the Company to its highest potential concentration of credit risk. The Company reserves for credit losses. The Company does not require collateral on trade accounts receivables.

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.

INTANGIBLE AND OTHER ASSETS

Intangible assets are amortized on a straight-line basis over periods ranging from one to five years. The Company continually reviews the recoverability of the carrying value of these assets using the methodology prescribed in SFAS 121. The Company also reviews long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate the carrying amounts of such assets may not be recoverable. If it is determined the carrying amount of the assets is permanently impaired then intangible assets are written down to fair value and the useful life of the asset may be changed prospectively. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets. As of June 30, 2003, management believes no revision to the remaining useful lives or write-down of intangible assets is required.

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. The Company had $342,932 in deferred revenues relating to contracts for services to be performed over periods ranging from 4 months 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 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.

F-33

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

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 periodically record deferred revenues relating to advance payments in contracts. The Company had $342,932 in deferred revenue relating to contracts for services to be performed over periods ranging from 4 months to 4 years.

ADVERTISING

Advertising costs are expensed as incurred. Advertising costs were $3,301 and $4,050 for the six months ended June 30, 2003 and 2002, respectively.

RESEARCH AND DEVELOPMENT EXPENSES

Software development costs are included in research and development and are expensed as incurred. Statement of Financial Accounting Standards No. 86 (“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 $288,517 in 2003 and $239,120 in 2002 for the six months ended June 30, respectively.

STOCK OPTIONS

The Company uses the intrinsic-value method of accounting for stock-based awards granted to employees and, accordingly, does not recognize compensation expense for its stock-based awards to employees in the Consolidated Statements of Income. See Note 13 for pro forma information on the impact of the fair-value method of accounting for stock options.

STOCK BASED COMPENSATION

Stock-based compensation is recognized using the intrinsic value method in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. For disclosure purposes, pro forma net loss and loss per common share are provided in accordance with Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation”, as if the fair value method had been applied.

EARNINGS PER SHARE

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

F-34

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

Basic earnings per share were calculated using the weighted average number of shares outstanding of 12,420,836 and 8,323,697 for the six-months ended June 30, 2003 and 2002, respectively; and 12,822,953 and 8,323,697 for the three-months ended June 30, 2003 and 2002 respectively. There were no differences between basic and diluted earnings per share. Options to purchase 2,795,039 shares of common stock at prices ranging from $.15 to $5.50 per share were outstanding at June 30, 2003. Stock warrants to purchase 19,038,428 shares of common stock at prices ranging from $0.25 to $10.00 per share were outstanding at June 30 2003. The Company granted a Unit Purchase Option (“Agent Option”) to the Placement Agent of its Series B Preferred Stock that provides the Placement Agent the ability to purchase 27,000 Series B Preferred Shares with 1,080,000 detachable common stock warrants. The exercise of the Agent Option would result in the issuance of an aggregate of 2,160,000 shares of common stock at an exercise price of $0.25 per share. The options, 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.

INCOME TAXES

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

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

IMPACT OF NEW ACCOUNTING STANDARDS

SFAS 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, the Company is no longer required to amortize goodwill and other intangible assets with indefinite lives, but will be subject to periodic testing for impairment. SFAS 142 supercedes APB Opinion No. 17, “Intangible Assets”. The Company expects that SFAS 142 will not have a material impact on its consolidated results of operations and financial position upon adoption. The Company adopted SFAS 142 on January 1, 2002.

SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS 143 is effective in fiscal years beginning after September 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS 143 will not have a material impact on its consolidated results of operations and financial position upon adoption. The Company adopted SFAS 143 effective January 1, 2002.

F-35

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144, supersedes Statement of Financial Accounting Standards No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS 121”), and APB Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”. The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in general are to be applied prospectively. The Company adopted SFAS 144 effective January 1, 2002 and does not expect that the adoption will have a material impact on its consolidated results of operations and financial position.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item. Under SFAS No. 145, such gains and losses should be classified as extraordinary only if they meet the criteria of APB Opinion No. 30. In addition, SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company does not expect the adoption of SFAS No. 145, which will become effective after May 2002 to have a material effect on its financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Previous accounting guidance was provided by EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring)”. SFAS No. 146 replaces Issue 94-3. The provisions of SFAS No. 146 are to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not expect the adoption of this pronouncement to have a material effect on the earnings or financial position of the Company.

On December 31, 2002, the FASB issued SFAS No.148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FAS 123”. This statement amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of FAS 148 are effective for fiscal years ending after December 15, 2002. The Company does not expect the adoption to have a material effect on the earnings or financial position of the Company.

F-36

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

	In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). The interpretation provides guidance for determining when a primary beneficiary should consolidate a variable interest entity or equivalent structure, that functions to support the activities of the primary beneficiary. The interpretation is effective as of the beginning of the Company’s third quarter of 2003 for variable interest entities created before February 1, 2003. The Company holds no interest in any variable interest entities. Accordingly, the adoption of this statement is currently not expected to have a material impact on the consolidated financial statements.
	In May 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (SFAS 149), Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 is intended to result in more consistent reporting of contracts as either freestanding derivative instruments subject to Statement 133 in its entirely, or as hybrid instruments with debt host contracts and embedded derivative features. SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS 149 is not expected to have a material effect on the Company’s results of operations, liquidity, or financial condition.
	In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 (SFAS 150), Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS 150 requires certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity to be classified as liabilities. Many of these instruments previously were classified as equity or temporary equity and as such, SFAS 150 represents a significant change in practice in the accounting for a number of mandatorily redeemable equity instruments and certain equity derivatives that frequently are used in connection with share repurchase programs. SFAS 150 is effective for all financial instruments created or modified after May 31, 2003, and to other instruments at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 is not expected to have a material effect on the Company’s results of operations, liquidity, or financial condition.
NOTE 3:	OPERATIONS AND LIQUIDITY
	We have experienced negative cash flow from operations since 1999 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 will 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.

F-37

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

	To satisfy our capital requirements, we will 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 periods ending June 30, 2003 there is doubt about the Company’s ability to continue as a going concern.
NOTE 4:	INTANGIBLE ASSETS AND GOODWILL
	Included in Intangible Assets are the following assets:

	June 30, 2003
			Accumulated
	Cost		Amortization
Covenant not to compete	$	120,000	$	120,000
Software development costs		87,500		87,500
Organization costs		539		539
Debt acquisition costs		301,888		301,888
	$	509,927	$	509,927

	December 31, 2002
			Accumulated
	Cost		Amortization
Covenant not to compete	$	120,000	$	120,000
Software development costs		87,500		87,500
Organization costs		539		539
Debt acquisition costs		301,888		301,888
	$	509,927	$	509,927

The covenant not to compete and the software development costs were acquired as a result of the acquisition of Education Navigator, Inc. (EdNav) on September 26, 1998. The covenant was for a two-year period and was being amortized ratably over that time. The software development costs were capitalized and were amortized ratably over a three-year period, as that was the expected life of the various products.

During the year ended December 31, 2001, the Company issued Convertible Notes with gross proceeds totaling $1,615,000. The Company recorded total debt acquisition fees of $218,440 of which $70,250 were to be paid in cash and $148,190 were deemed additional compensation derived from 323,000 stock warrants issued to the placement agent as additional compensation. The debt acquisition costs were amortized ratably over the term of the notes. Amortization expense of the debt acquisition costs totaled $48,552 for the year ended December 31, 2002. Approximately $2,890 of the debt acquisition costs were reclassified as stock issuance costs in connection with the conversion of $12,500 (original cost) of the convertible notes into common stock of the Company during 2001.

F-38

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

NOTE 5:	PROPERTY AND EQUIPMENT, AT COST
	Property and equipment consists of the following:

	June 30, 2003				December 31, 2002
			Accumulated				Accumulated		Estimated
	Cost		Depreciation		Cost		Depreciation		Useful Lives
Computer and office equipment	$	420,298	$	295,446	$	420,298	$	253,416	5 years
Leasehold improvements		3,299		1,722		3,299		1,392	5 years
Computer software		272,108		211,095		260,287		183,989	3 years
Office furniture		42,350		29,936		42,350		25,701	5 years
	$	738,055	$	538,199	$	726,234	$	464,498

	Depreciation expense for the periods ended June 30, 2003 and 2002 was $73,701 and $79,940 respectively.
NOTE 6:	ACCOUNTS PAYABLE AND ACCRUED EXPENSES
	Accounts payable and accrued expenses consist of the following at June 30, 2003 and December 31, 2002:

		6/30/03		12/31/02
Accounts payable		$	374,131	$	431,736
Accrued payroll and related costs			220,774		473,384
Other accrued expenses			195,000		293,233
Accrued interest			178,999		120,578
Accrued expenses of OmniTrial BV			127,519		127,519
	Total accounts payable and accrued expenses	$	1,096,423	$	1,446,450

	Other accrued expenses consist primarily of placement agent fees and expenses due on private placements of our debt and equity securities that occurred during 2000, 2001 and 2002 and accrued legal fees associated with the sale of Series C Convertible Preferred Stock. Accrued payroll and related costs includes approximately $145,711 in past due payroll taxes accrued during fiscal 2003 that the Company had not paid as of June 30, 2003, but are considered legal obligations of the Company. See Note 16 Subsequent Events for further information regarding the past due employment taxes.
NOTE 7:	EARNINGS PER SHARE
	Basic earnings per shares (“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 48,649,616 have been omitted from the calculation of dilutive EPS for the period ended June 30, 2003. A reconciliation between numerators and denominators of the basic and diluted earnings per shares is as follows:

F-39

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

	6 Months Ended June 30, 2003								6 Months Ended June 30, 2002
	Income			Shares		Per-Share			Income			Shares		Per-Share
	Numerator			Denominator		Amount			Numerator			Denominator		Amount
Basic EPS	$	(1,605,295	)		12,420,836	$	(0.12	)	$	(2,013,189	)		8,323,697	$	(0.24	)
Effect of Dilutive Securities None.		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(1,605,295	)		12,420,836	$	(0.12	)	$	(2,013,189	)		8,323,697	$	(0.24	)

	3 Months Ended June 30, 2003								3 Months Ended June 30, 2002
	Income			Shares		Per-Share			Income			Shares		Per-Share
	Numerator			Denominator		Amount			Numerator			Denominator		Amount
Basic EPS	$	(763,685	)		12,822,953	$	(0.06	)	$	(1,026,083	)		8,323,697	$	(0.12	)
Effect of Dilutive Securities None.		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(763,685	)		12,822,953	$	(0.06	)	$	(1,026,083	)		8,323,697	$	(0.12	)

NOTE 8:	NOTES PAYABLE
	At June 30 2003, the Company owed $1,258,571 in notes payable. The table below provides details as to the terms and conditions of the notes payable.

	Origination		Due		Interest					Short		Long
Note Holder	Date		Date		Rate			Amount		Term		Term
Guus van Kesteren		8/30/2001		10/31/2004		8.0	%	$	196,644	$	0	$	196,644
Magnolia Private Fnd.		8/30/2001		10/31/2004		8.0	%		209,534		0		209,534
Magnolia Private Fnd.		8/30/2001		10/31/2004		8.0	%		276,393		0		276,393
Nico Letschert		7/31/2002		10/31/2004		0.0	%		10,000		0		10,000
Nico Letschert		9/3/2002		10/31/2004		0.0	%		10,000		0		10,000
Randy Smith		11/25/2002		3/25/2003		0.0	%		6,000		6,000		0
Guus van Kesteren		12/26/2002		10/31/2004		9.0	%		50,000		0		50,000
Cornelis Wit		12/30/2002		10/31/2004		9.0	%		50,000		0		50,000
Cornelis Wit		6/30/2003		1/31/2005		9.0	%		100,000		0		100,000
Noesis Capital		6/30/2003		1/31/2005		9.0	%		250,000				250,000
Guy Brissette		12/30/2002		3/30/2003		9.0	%		100,000		100,000		0
								$	1,258,571	$	106,000	$	1,152,571

F-40

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

Promissory notes totaling $682,571 were amended and restated on December 31, 2002, with new terms which included an extension of the maturity date to October 31, 2004 with one half of the principal payable upon the closing of any financing by the Company resulting in gross proceeds in excess of $2,000,000.

Promissory notes totaling $120,000 were amended and restated on March 31, 2003, with new terms which included an extension of the maturity date to October 31, 2004.

A promissory note in the amount of $250,000 was issued to Noesis Capital Corp. on June 30, 2003 in exchange for accounts payable and accrued expenses owed in connection with financial advisory services rendered and for placement agent fees earned in three different private placements of the Company’s debt and equity securities.

Related Party Notes Payable

Included in related party notes payables is a $196,644 promissory note that was amended and restated on December 31, 2002 with new terms which include an extension of the maturity date to October 31, 2004 with one half of the principal payable upon the closing of any financing by the Company resulting in gross proceeds in excess of $2,000,000.

During March 2002, the Company borrowed $2,341 from Randall Smith, the Company’s Chairman and Chief Technology Officer. This amount was repaid without interest on April 12, 2002. In addition, the Company borrowed $6,000 from Mr. Smith on November 25, 2002 and this amount remained outstanding as of June 30, 2003.

During April 2002, the Company borrowed $1,500 from Ronald Linares, the Company’s Chief Financial Officer. This amount was repaid without interest on May 1, 2002.

During December 2002, the Company borrowed $50,000 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. 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 and restated on March 31, 2003 extending the maturity date of the note to October 31, 2004.

During December 2002, the Company borrowed $50,000 from Guus van Kesteren, a Director of the Company. 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 and restated on March 31, 2003 extending the maturity date of the note to October 31, 2004.

During March 2003, the Company borrowed $2,600 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. This amount was repaid without interest on April 3, 2003.

During June 2003, the Company borrowed $100,000 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. This amount was borrowed under a promissory note bearing interest at a rate of 9% per annum, payable on January 31, 2005.

F-41

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

NOTE 9:	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 Company also granted the agent the option to purchase 250,000 common shares at $.001 per share. The agent exercised the option. 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 is five years, into shares of common stock of the Company at $1.25 per share. As of March 31, 2003 approximately $412,500 of the Convertible Notes had been converted into 330,000 shares of common stock of the Company leaving an outstanding balance of $450,000.
	The Company is currently in default on interest payments owed totaling $55,733 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 was in default effective January 30, 2002.
	During the first six months of 2001, the Company issued 12% Convertible Notes Payable in the amount of $1,615,000 pursuant to a Confidential Private Placement Memorandum. There were costs of $218,440 associated with the offering of which $148,190 is attributable to warrants issued to the placement agent as additional compensation that were valued using the Black-Scholes method. The net proceeds to the Company were $1,484,750 with the cash compensation costs of $70,250 accrued at December 31, 2002, and $60,000 of accrued expenses due to the placement agent converted as part of the private placement of the 12% Convertible Notes Payable. The notes bear interest at twelve percent annually, payable at maturity. The notes are convertible after maturity, which is January 31, 2002, into shares of common stock of the Company at $0.50 per share. EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, requires Company’s to record interest expense on convertible debt that is issued with an embedded beneficial conversion feature, or in the money at the date the investor is committed to purchase the convertible securities. The Company valued the 12% Convertible Notes Payable utilizing the intrinsic value method and recorded $508,835 in interest expense with a corresponding credit to additional paid-in capital.
	The Company completed a conversion of its 12% Convertible Notes on December 31, 2002. The Company converted the principal amount outstanding of $1,615,000 into Units of its Series C Convertible Preferred Stock resulting in the issuance of 161,500 shares of the Series C Preferred with 3,230,000 attached common stock warrants providing the shareholder the right to purchase additional shares at $0.25 per share. In addition, the outstanding accrued interest on the 12% Convertible Notes, which totaled $361,576 on December 31, 2002, resulted in the issuance of 1,446,306 shares of common stock.
NOTE 10:	COMMITMENTS AND CONTINGENCIES
	The Company currently leases office space under operating leases. The minimum future lease payments required under the Company’s operating leases at June 30, 2003 are as follows:

2003	$	37,880
2004		44,550
2005		0
2006		0
2007		0
Total	$	82,430

F-42

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

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. Rental expense was $75,282 and $78,565 for the six months ended June 30, 2003 and 2002.

CONTINGENT LIABILITIES

On or about September 6, 2000, the Company’s wholly owned subsidiary, OmniTrial B.V. (“OmniTrial”) submitted a petition for bankruptcy protection from the bankruptcy court of the Netherlands. The court appointed a liquidating trustee. The Company claimed that certain assets in the possession of OmniTrial were paid for by the Company and therefore should not be part of the liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and told the Company that as part of the OmniTrial bankruptcy estate the assets would be sold to diminish any deficiency of the estate. On July 5, 2001 the Company signed a settlement agreement providing for the return of the assets to the Company in exchange for a payment of $10,000 that was made on or about July 5, 2001. The Company does not expect to incur any additional liability in this bankruptcy proceeding.

In January 2001, a former employee, Eugene A. Gordon, filed a lawsuit in Dade County, Florida alleging breach of his employment contract with us. The plaintiff alleged we owed him more than $100,000 for back payment of salary according to the terms of his employment contract. We disputed Mr. Gordon’s allegations and vigorously defended this lawsuit. As part of its defense, the Company filed a counterclaim against Mr. Gordon and a counter-suit against his wife. The parties entered into a settlement agreement on August 19, 2002. The parties subsequently filed and the court accepted a Joint Stipulation for Dismissal With Prejudice on September 6, 2002.

EMPLOYMENT AGREEMENTS

During 2001, the Company entered into three-year employment agreements with its Chairman/Chief Technology Officer and Chief Financial Officer with compensation for up to six months if terminated under certain conditions. Under separate stock option agreements entered into concurrently with their employment agreements, the Chairman/Chief Technology Officer and Chief Financial Officer were granted incentive stock options to purchase 210,000 shares of common stock at the market price per share respectively.

During June 2002, the Company entered into a one-year employment agreement with its President and Chief Executive Officer. The Company concurrently entered into stock options agreements that provide for 50,000 options to be issued at the time of execution with additional options issued based on the achievement of certain operating parameters that include revenue and operating cash flow performance.

In January 2003, we entered into a three year employment agreement with Mr. Charles Beardsley to serve as our Senior Vice President for Sales and Marketing. Under the terms of this agreement, Mr. Beardsley receives an annual salary of $150,000 to be paid in the form of cash and/or stock and he is eligible to receive additional incentive compensation based upon achieving financial milestones. Mr. Beardsley is eligible for a commission, payable on a quarterly basis, equal to 2% of the Company’s Net Operating Income as defined in an exhibit to his employment contract. Mr. Beardsley was granted an aggregate of 150,000 options under our 1998 Stock Incentive Plan. The three year options, which vest 50,000 annually beginning with January 2, 2004, are exercisable at a price of $0.25 per share. Mr. Beardsley received a grant of 100,000 shares of restricted common

F-43

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

	stock upon execution of his employment agreement. 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. Beardsley upon 30 days notice of a material breach and Mr. Beardsley may terminate the agreement under the same terms and conditions. If Mr. Beardsley 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.
	FINANCIAL ADVISORY AGREEMENT
	During March 2002, the Company entered into a one-year financial advisory agreement with Noesis Capital to 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 during the one-year term of the agreement. The advisory agreement was extended for a twelve month term effective June 15, 2003.
NOTE 11:	RELATED PARTY TRANSACTIONS
	Cornelis F. Wit, our President and Chief Executive Officer and a member of our Board of Directors, is a consultant to Noesis Capital Corp. and served as President of Corporate Finance of Noesis Capital Corp. from March 1995 to September 2000. Noesis Capital Corp. has served as placement agent for us in three private placements of securities which occurred between September 1999 and December 2002. Guus van Kesteren, a member of our Board of Directors, is an advisor to Noesis Capital Corp.
	In December 1999, we entered into a consulting agreement with Messrs. van Kesteren and Wit, each of whom is a member of our Board of Directors, providing that we will compensate each of these individuals for sales leads or contacts developed by them in connection with our TrialMaster® system. For the periods ended December 30, 2001 and 2002, no compensation was earned by either Mr. van Kesteren or Mr. Wit under this agreement. This agreement was terminated upon mutual agreement of OmniComm and Messrs. Wit and van Kesteren effective June 30, 2002.
	On April 5, 2002, Cornelis F. Wit, President and Chief Executive Officer and a Director of the Company, invested $10,000 in a private placement of our Series C Preferred Stock. The Series C Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum and included 20,000 common stock warrants for the purchase of common stock at an exercise price of $0.25 per share.
	On April 5, 2002, Guus van Kesteren a Director of the Company, invested $10,000 in a private placement of our Series C Preferred Stock. The Series C Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum and included 20,000 common stock warrants for the purchase of common stock at an exercise price of $0.25 per share.

F-44

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

On January 30 2002, Noesis N.V., one of our stockholders, invested $90,000 in a private placement of our Series C Preferred Stock. The Series C Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share and carries a stated dividend rate of 8% per annum and included 180,000 common stock warrants for the purchase of common stock at an exercise price of $0.25 per share.

From time to time we have borrowed funds from Mr. van Kesteren, including:

• between July 2000 and December 2000, we borrowed an aggregate of $110,000 from him under two promissory notes, one of which bore interest at a rate of 12% per annum and the other at 5% per annum. These notes were converted into debt issued as part of a private placement of our debt in January 2000. The private placement debt accrues interest at 12% per annum and is convertible into shares of our common stock at the holder’s option at a rate of $0.50 per share commencing on January 31, 2002. This series of Convertible Notes was converted on December 31, 2002 into shares of the Company’s Series C Preferred Stock resulting in the issuance of 11,000 shares of Series C Preferred Stock.

• between February 2001 and July 2001, we borrowed an aggregate of $190,000 from him under promissory notes which bore interest of 12% per annum. These promissory notes were amended and restated on August 30, 2001 with new terms which included an interest rate of 8% per annum, and with one half of the principal payable upon the closing of any financing by us resulting in gross proceeds in excess of $2,000,000, and the balance of the principal together with accrued interest payable no later than August 30, 2003. These notes were amended and restated on December 31, 2002 extending the maturity date of the notes to October 31, 2004.

• in September 2001, we borrowed an aggregate of $25,000 from him under promissory notes which bore interest at a rate of 12% per annum and had a maturity date of December 22, 2001. These notes were converted into the Units sold in our private placement of Series B Preferred Stock in August 2001.

In conjunction with these various loans, we have granted Mr. van Kesteren warrants to purchase an aggregate of 70,700 shares of our common stock at exercise prices ranging from $.30 to $2.25 per share.

In July 2001, Noesis Capital, the Placement Agent for our 12% Convertible Notes, assigned $60,000 of accrued fees owed to Cornelis Wit, a Director at the time. Mr. Wit converted that accrued expense into the Private Placement of our 12% Convertible Notes. The 12% Convertible Notes were subsequently converted on December 31, 2002 into 6,000 shares of our Series C Preferred Stock.

The Company granted Randall G. Smith, Chairman of the Board and Chief Technology Officer, warrants to purchase 20,000 shares of our common stock at an exercise price of $0.41 per share in connection with a pledge of real property he made in securing a loan made to the Company by Mr. van Kesteren in July 2001, in the amount of $100,000.

F-45

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

	On August 17, 2000, we borrowed $100,000 from Noesis N.V., one of our stockholders. One of our Directors, Mr. Wit, was President of Corporate Finance of Noesis Capital Corp. and remains a consultant to the Noesis. The promissory note bore interest rate at a rate of 8% per annum and had a maturity date of January 1, 2001. At our request, Noesis N.V. agreed to convert this promissory note into debt issued as part of a private placement of our debt in January 2001. The private placement debt accrues interest at 12% per annum and is convertible into shares of our common stock at the holder’s option at a rate of $0.50 per share commencing on January 31, 2002.
	During March 2002, the Company borrowed $2,341 from Randall Smith, the Company’s Chairman and Chief Technology Officer. This amount was repaid without interest on April 12, 2002. In addition, the Company borrowed $6,000 from Mr. Smith on November 25, 2002 and this amount remained outstanding as of June 30, 2003.
	During April 2002, the Company borrowed $1,500 from Ronald Linares, the Company’s Chief Financial Officer. This amount was repaid without interest on May 1, 2002.
	During December 2002, the Company borrowed $50,000 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. 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 and restated on March 31, 2003 extending the maturity date of the note to October 31, 2004.
	During December 2002, the Company borrowed $50,000 from Guus van Kesteren a Director. 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 and restated on March 31, 2003 extending the maturity date of the note to October 31, 2004.
	During March 2003, the Company borrowed $2,600 from Cornelis Wit, the Company’s Chief Executive Officer. This amount was repaid without interest on April 3, 2003.
	During June 2003, the Company borrowed $100,000 from Cornelis Wit, the Company’s President and Chief Executive Officer and a Director. This amount was borrowed under a promissory note bearing interest at a rate of 9% per annum, payable on January 31, 2005.
NOTE 12:	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 SFAS’s 106 or 112.
NOTE 13:	STOCKHOLDERS’ EQUITY (DEFICIT)
	The authorized capital stock of the Company 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 Series A Preferred Stock, 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 June 30, 2003 the Company had the following outstanding securities:

• 13,414,618 shares of common stock issued and outstanding;

F-46

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

• 19,038,428 warrants issued and outstanding to purchase shares of our common stock;

• 4,215,224 shares of our 5% Series A Preferred Stock issued and outstanding, and

• 200,000 shares of our 8% Series B Preferred Stock issued and outstanding

• 337,150 shares of our Series C Preferred Stock issued and outstanding

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 and holders of a majority of our voting securities voting for the election of directors can elect all of the directors. Holders of common stock are entitled to share in all dividends that the Board of Directors, in its discretion, declares from legally available funds.

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, other than with regard to an outstanding balance of $1,140 for subscriptions receivable, are duly authorized, validly issued, fully paid and non-assessable.

Preferred stock

Our Board of Directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. 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.

5% Series A Preferred Stock

In 1999, our Board of Directors designated 5,000,000 shares of our preferred stock as 5% Series A Preferred Stock (“Series A Preferred”). The Series A Preferred was created pursuant to a Certificate of Designations filed with the Delaware Secretary of State on July 19, 1999.

Between September 1999 and January 2000 the Company issued 4,263,500 shares of the Series A Preferred with net proceeds of $4,018,843.

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

• the shares are not redeemable,

F-47

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

• each share of Series A Preferred 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. The conversion price will be further adjusted 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,

• the shares of Series A Preferred pay a dividend at a rate of 5% per annum, 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 A Preferred Stock. Dividends are cumulative,

• in the event of our liquidation or winding up, each share of Series A Preferred carries a liquidation preference equal to $1.00 per share,

• each share of Series A Preferred has full voting rights, share for share, with the then outstanding common stock on the basis of one vote for each share of common stock issuable upon the conversion of the Series A Preferred Stock.

• the holders of the Series A Preferred were granted certain demand and piggy-back registration rights covering the shares of our common stock issuable upon the conversion of the Series A Preferred into common stock of the Company.

• the holders of the 5% Series A Preferred are entitled to vote two of the five members of the Company’s Board of Directors.

There were $0 and $514,716 of accrued and unpaid dividends on the Series A Preferred at June 30, 2003 and 2002, respectively. In addition, there was an arrearage of $186,796 on the Series A Preferred for undeclared dividends as of June 30, 2003.

Series B Preferred Stock

In August 2001, our Board of Directors designated 200,000 shares of our preferred stock as Series B Preferred Stock (“Series B Preferred”). The Series B Preferred was created pursuant to a Certificate of Designations filed with the Delaware Secretary of State on August 31, 2001. 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 to 230,000. During September 2001 the Company issued 200,000 shares of the Series B Preferred with net proceeds of $1,711,518.

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

• the stated value of each share is $10.00 per share,

• the shares are not redeemable,

F-48

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

• each share of Series B Preferred 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 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 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 has been declared effective,

• The conversion price will be further adjusted 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 pay a dividend at a rate of 8% per annum, 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. Dividends are cumulative,

• each share of Series B Preferred 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 carries a liquidation preference equal to $10.00 per share plus accrued and unpaid dividends, and

• the holders of the Series B Preferred 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,

• the holders of the Series B Preferred were granted certain registration rights covering the shares of our common stock issuable upon the conversion of the Series B Preferred,

• the holders of the Series B Preferred are entitled to vote one of the five members of the Company’s Board of Directors.

There were arrearages of $239,342 and $79,342 on the Series B Preferred for undeclared dividends as of June 30, 2003 and 2002.

Series C Preferred Stock

In March 2002, our Board of Directors designated 747,500 shares of our preferred stock as Series C Preferred Stock (“Series C Preferred”). The Series C Preferred was created pursuant to a Certificate of Designations filed with the Delaware Secretary of State on March 31, 2002. To date, the Company has issued 337,150 shares of the Series C Preferred Stock, including 161,500 shares issued in connection with the conversion of the Company’s 12% Convertible Notes on December 31, 2002 and 10,000 shares issued pursuant to the conversion of $100,000 in accrued expenses owed to Noesis Capital, the Placement Agent for this private placement. Net proceeds were approximately $1,423,423. The Company closed the placement on March 31, 2003.

F-49

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

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

• the stated value of each share is $10.00 per share,

• the shares are not redeemable,

• each share of Series C Preferred 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 by $0.25, which is the Series C Conversion Price. The Series C Preferred will automatically convert 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 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 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 equal to 10 times the average daily trading volume during the 20-day look-back period set forth above,

• the conversion price will be further adjusted 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 pay a dividend at a rate of 8% per annum, 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. Dividends are cumulative,

• each share of Series C Preferred 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 carries a liquidation preference equal to $10.00 per share plus accrued and unpaid dividends, and

• the holders of the Series C Preferred 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,

• the holders of the Series C Preferred were granted certain registration rights covering the shares of our common stock issuable upon the conversion of the Series C Preferred Stock,

• the holders of the Series C Preferred are entitled to vote two of the members of the Company’s Board of Directors.

F-50

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

There were arrearages of $186,761 and $12,094 on the Series C Preferred Stock for undeclared dividends as of June 30, 2003 and 2002.

Warrants

We have issued and outstanding warrants to purchase a total of 19,038,428 shares of our common stock, including:

• warrants to purchase 2,359,832 shares of our 5% Series A Preferred Stock at an exercise price of $2.00 per share expiring in June 2003 which were issued by us in connection with the offering of the Series A Preferred Stock offering.

• warrants to purchase 8,000,000 shares of our common stock at an exercise price of $.25 per share expiring September 2006 which were issued by us in connection with the Series B Preferred Stock offering, which warrants contain a cashless exercise provision.

• warrants to purchase 1,235,596 shares of our common stock at exercise prices ranging from $.30 to $10.00 per share expiring periodically through July 2006 which were issued by us to various individuals for a variety of reasons including consulting services, advisory services, settlement of a long-term lease obligation, and in connection with the issuance of certain promissory notes.

• warrants to purchase 6,743,000 shares of our common stock at an exercise price of $.25 per share expiring May 2007 which were issued by us in connection with the Series C Preferred Stock offering, which warrants contain a cashless exercise provision.

• warrants to purchase 700,000 shares of our common stock at an exercise price of $.25 per share expiring May 2008 which were issued by us in connection with a private placement of common stock, which warrants contain a cashless exercise provision.

Series B Placement Agent’s Unit Purchase Option

Commonwealth Associates, L.P. acted as our placement agent in connection with the September 2001 private placement of units which included our Series B Preferred Stock. We issued Commonwealth Associates a seven year option to purchase 2.7 units, each unit consisting of 10,000 shares of Series B Preferred Stock and warrants to purchase 400,000 shares of common stock, exercisable at $100,000 per unit, as additional compensation.

Accounting for Stock Based Compensation

At June 30, 2003, the Company has one stock-based compensation plan which is described more fully below. The Company accounts for its plan under the recognition and measurement principles of APB Opinion No 25, “Accounting for Stock Issued to Employees”, (“APB 25”) and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan had an exercise price equal to or above the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation” to stock-based employee compensation.

F-51

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

(in thousands, except for per share data)		2003			2002
Net loss available to common stockholders
As reported		$	(1,605	)	$	(2,013	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		$	(9,110	)	$	(8,965	)
Pro forma net loss available to common stockholders		$	(10,715	)	$	(10,978	)
Basic and diluted net loss per share
	As reported	$	(0.13	)	$	(0.24	)
	Pro forma	$	(0.86	)	$	(1.32	)

The estimated fair value of each OmniComm option granted is calculated using the Black-Scholes pricing model. The weighted average assumptions used in the model were as follows:

	2003			2002
Risk-free interest rate		5.00	%		5.00	%
Expected years until exercise	6 Years			6 Years
Expected stock volatility		137.2	%		150.0	%
Dividend yield		0	%		0	%

Stock Option Plan

In 1998, the Company’s Board of Directors approved the OmniComm Systems 1998 Stock Option Plan, (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 5,000,000 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.

The Company’s share option activity and related information is summarized below:

		Year ended December 31,				6 Months ended June 30,
		2002				2003
				Weighted				Weighted
				Average				Average
				Exercise				Exercise
		Options		Price		Options		Price
Outstanding at beginning of period			3,584,039	$	1.33		2,785,039	$	1.00
	Granted		811,000	$	0.25		40,000	$	0.25
	Exercised		-0-	$	0.00		-0-	$	0.00
	Cancelled		1,610,000	$	1.36		30,000	$	0.25
Outstanding at end of period			2,785,039	$	1.00		2,795,039	$	1.00
Exercisable at end of period			2,761,705	$	0.82		2,771,705	$	0.82

F-52

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

     The following table summarizes information about stock options outstanding at June 30, 2003:

	Outstanding						Exercisable
			Weighted
			Average
			Remaining		Weighted				Weighted
			Years of		Average				Average
Range of	Number of		Contractual		Exercise		Number of		Exercise
Exercise Prices	Options		Life		Price		Options		Price
$0.25 - $0.47		1,662,500		4.01	$	0.34		1,662,500	$	0.34
$0.50 - $0.80		392,000		6.10	$	0.54		378,666	$	0.54
$1.00 - $2.75		730,539		2.26	$	1.74		730,539	$	1.74

	Other Stock Based Compensation
	During 2001, the Company issued an aggregate of 126,340 shares of common stock to employees and advisors with a fair market value of $97,858 for services rendered under employment and consulting agreements.
	During 2001, the Company issued 50,000 warrants to advisors as compensation for services to be rendered over periods ranging from 3 to 5 years. The Company valued the warrants in accordance with SFAS 123 utilizing the Black-Scholes Model. The Company recorded $95,689 in deferred compensation and is amortizing the amounts over the expected life of the consulting services to be rendered. The Company recognized non-cash compensation expense totaling $17,571 during the year ended December 31, 2002 in connection with the warrant grants.
	During 2002, the Company issued an aggregate of 113,100 shares of restricted common stock to employees including three of its officers. The stock issued had a fair market value of $22,288 and was issued for employment services rendered in lieu of cash payments.
NOTE 14:	OMNITRIAL B.V. BANKRUPTCY
	On or about September 6, 2000, the Company’s wholly owned subsidiary, OmniTrial B.V. (“OmniTrial”) submitted a petition for bankruptcy protection from the bankruptcy court of the Netherlands. The court appointed a liquidating trustee. The Company claimed that certain assets in the possession of OmniTrial were paid for by the Company and therefore should not be part of the liquidating assets of OmniTrial. The bankruptcy trustee rejected that claim and told the Company that as part of the OmniTrial bankruptcy estate the assets would be sold to diminish any deficiency of the estate. On July 5, 2001 the Company signed a settlement agreement providing for the return of the assets to the Company in exchange for a payment of $10,000.
NOTE 15:	INCOME TAXES
	Income taxes are accrued at statutory US and state income tax rates. Income tax expense is as follows:

		6/30/03			6/30/02
Current tax expense (benefit):
	Income tax at statutory rates	$	-0-		$	-0-
Deferred tax expense (benefit):
	Amortization of goodwill and covenant		-0-			-0-
	Operating loss carryforward		(375,637	)		(546,806	)
			(375,637	)		(546,806	)
Valuation allowance			375,637			546,806
Total tax expense (benefit)		$	-0-		$	-0-

F-53

OMNICOMM SYSTEMS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
(continued)

The tax effects of significant temporary differences, which comprise the deferred tax assets, are as follows:

		6/30/03			12/31/02
Deferred tax assets:
Amortization of intangibles		$	283,698		$	283,698
Operating loss carryforwards			5,924,968			5,549,331
	Gross deferred tax assets		6,208,666			5,833,029
	Valuation allowance		(6,208,666	)		(5,833,029	)
	Net deferred tax asset	$	-0-		$	-0-

	The Company has net operating loss carryforwards (NOL) for income tax purposes of approximately $15,733,000. This loss is allowed to be offset against future income until the year 2023 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 June 30, 2003.
NOTE 16:	SUBSEQUENT EVENTS
	The Company had a recorded liability of $145,711 at June 30, 2003 for federal employment taxes. The Company had not fully satisfied the liability as of August 15, 2003.
	The Company is currently in default on interest payments owed totaling $66,879 on 10% Convertible Notes. The terms of the notes provide a payment grace period of thirty days in which to make the required semi-annual interest payments. The Company has been in default since January 30, 2002.

F-54

No dealer, sales representative or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the company or any of the underwriters. This prospectus does not constitute an offer of any securities other than those to which it relates or an offer to sell, or a solicitation of any offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create an implication that the information set forth herein is correct as of any time subsequent to the date hereof.

TABLE OF CONTENTS

	Page
Prospectus Summary
Risk Factors
Capitalization
Use of Proceeds
Price Range of Common Stock and Dividend Policy
Forward-Looking Statements
Management’s Discussion and Analysis or Plan of Operation
Description of Business
Management
Executive Compensation
Certain Transactions
Principal Stockholders
Description of Securities
Selling Stockholders
Plan of Distribution
Shares Eligible for Future Sale
Legal Matters
Experts
Additional Information
Financial Statements		F-1
39,879,850 SHARES
OMNICOMM SYSTEMS, INC
PROSPECTUS
, 2003

115

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our Articles of Incorporation, as amended and restated, provide to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, that our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director’s or officer’s fiduciary duty. The effect of this provision of our Articles of Incorporation, as amended and restated, is to eliminate our rights and our shareholders rights (through shareholders’ derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers.

Our by-laws also provide that the board of directors may also authorize the company to indemnify our employees or agents, and to advance the reasonable expenses of such persons, to the same extent, following the same determinations and upon the same conditions as are required for the indemnification of and advancement of expenses to our directors and officers. As of the date of this Registration Statement, the board of directors has not extended indemnification rights to persons other than directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an itemization of all estimated expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered:

SEC Registration Fee	$	806
Accounting fees and expenses*		5,000
Legal fees and expenses*		10,000
Financial Printing*		3,500
Transfer Agent Fees*		1,350
Blue Sky Fees*		0
Miscellaneous*		2,500
Total*	$	23,156

* Estimated.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

From June 1999 through January 2000, we sold an aggregate of 4,263,500 shares of our Series A Preferred Stock and warrants to purchase 2,359,832 shares of our common stock at an exercise price of $2.00 per share expiring June 2003 to accredited investors and or to non-U. S. persons, resulting in gross proceeds of $4,153,433. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2), Regulation D, Rule 506 and Regulation S. 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 acquiring the shares for investment

116

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. None of these investors were our affiliates. Each share of Series A Preferred Stock is convertible, at the option of the holder, into shares of our common stock at a conversion price of $1.50 per share. Noesis Capital Corp., an NASD member firm, acted as placement agent in the offering and as compensation therefore received a commission equal to 10% of the sales made by it, or an aggregate of $341,340, and a warrant to purchase at par value, $.001, 10% of the shares sold, or 1,736,665 shares of our common stock. An aggregate of 48,276 shares of Series A Preferred Stock were converted into common stock as of the date of this registration statement and 4,215,224 shares are outstanding. The warrants have expired.

From July 2000 through October 2000, we sold an aggregate of 668,334 shares of our common stock at a sale price of $1.00 per share to accredited investors resulting in gross proceeds of $668,334. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2) and Regulation D, Rule 506. 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 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. None of these investors were our affiliates. 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 $53,466, a non-accountable expense allowance equal to 2% of the sales made by it, or an aggregate of $13,367, and a warrant to purchase at $.1.10 per share, 10% of the shares sold, or 66,833 shares of our common stock.

From June 2000 to August 2001, we issued warrants to purchase an aggregate of 785,763 shares of our common stock to the makers of certain bridge loans, including 70,700 warrants issued to Mr. van Kesteren, a member of our directors, between July 2000 and July 2001, and 20,000 warrants issued to Randall Smith, our Chairman and Chief Technology Officer, in July 2001. The warrants are exercisable at a range of $.30 to $2.25, and expire ranging between July 2003 and January 2006. We valued these warrants at $570,596. The recipients were accredited investors and had full access to, or were otherwise provided with, all relevant information, and had such knowledge and experience in financial, investment and business matters, reasonably necessary to evaluate us and the merits and risks of the prospective investment in our securities. These shares were issued pursuant to an exemption from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and Regulation D, Rule 506. No general solicitation or advertising was used in connection with these transactions. The certificate evidencing the warrants that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.

From January 2001 through July 2001, we sold an aggregate of $1,615,000 12% Convertible Notes to accredited investors resulting in gross proceeds of $1,615, 000. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2) and Regulation D, Rule 506. No general solicitation or advertising was used in connection with this transaction, and the certificates evidencing the notes 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 acquiring the notes 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. None of these investors were our affiliates except Guus van Kesteren, a member of our board of directors invested $110,000, and Cornelis Wit, our Chief Executive Officer and President, and a member of our board of directors invested $60,000. Noesis Capital Corp., an NASD member firm, acted as placement agent in the offering and as compensation therefore received a commission equal to 5% of the sales made by it, or an aggregate of $70,250, and a warrant to purchase at $.50 per share, 10% of the shares sold, or 323,000 shares of our common stock. The principal amount of $1,615,000 in 12% Convertible Notes was converted into shares of our Series C Preferred Stock and warrants, as described below.

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From February 2001 to March 2001, we issued an aggregate of 126,340 shares of our common stock to certain employees and advisors for services rendered under employment or consulting agreements. We valued these shares at $97,858. The recipients were either accredited or sophisticated investors and had full access to, or were otherwise provided with, all relevant information, and who had such knowledge and experience in financial, investment and business matters, reasonably necessary to evaluate us and the merits and risks of the prospective investment in our securities. These shares were issued pursuant to an exemption from registration under the Securities Act in reliance on Section 4(2) of the Securities Act. No general solicitation or advertising was used in connection with these transactions. The certificate 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.

From August 2001 to November 2001 we issued warrants to purchase 50,000 shares of our common stock at exercise prices ranging from $2.50 to $10.00 per share and expire ranging between November 2004 to August 2005 for advisory services to be rendered to us, in a private transaction exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(2) of the Securities Act. We valued these warrants at $95,689. The recipients were either accredited investors or non-accredited investors who had such knowledge and experience in financial, investment and business matters that they were capable of evaluating the merits and risks of the prospective investment in our securities. No general solicitation or advertising was used in connection with these transactions. The certificate evidencing the warrants that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.

In September 2001 we issued warrants to purchase 10,000 shares of our common stock at $.50 per share, expiring September 2005, to an unaffiliated third party in consideration of the termination of our office lease. These shares were issued in a private transaction exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(2) of the Securities Act. We valued these warrants at $4,396. The recipient was an accredited investor with such knowledge and experience in financial, investment and business matters that he was capable of evaluating the merits and risks of the prospective investment in our securities. No general solicitation or advertising was used in connection with these transactions. The certificate evidencing the warrants that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.

In September 2001, we sold an aggregate of 200,000 shares of our Series B Preferred Stock and warrants to purchase an aggregate of 8,000,000 shares of our common stock to accredited investors resulting in gross proceeds of $2,000,000. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2) and Regulation D, Rule 506. 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 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. None of these investors were our affiliates, except Guus van Kesteren, a member of our board of directors, invested $25,000. Each share of Series B Preferred Stock is convertible, at the option of the holder, into 40 shares of our common stock, or all 200,000 shares convert into 8,000,000 shares of our common stock. The warrants are exercisable at $.25 per share and expire September 2006. Commonwealth Associates, L.P., an NASD member firm, acted as placement agent in the offering and as compensation therefore received a commission equal to 10% of the sales made by it, or an aggregate of $180,000, and an option to purchase placement agent units equal to 15% of the shares sold. The Units consist of (a) 10,000 shares of Series B Preferred Stock, or 400,000 shares of common stock and (b) 5-year warrants to purchase 400,000 shares of common stock at an exercise price of $.25 per share, at an exercise price of $100,000 per Unit. We also paid Noesis Capital Corp., an NASD member firm, a commission equal to $20,000 for sales made by it. All 200,000 shares remain outstanding.

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From March 2002 through March 2003, we sold an aggregate of 337,150 shares of our Series C Preferred Stock and warrants to purchase an aggregate of 6,743,000 shares of our common stock to accredited investors resulting in gross cash proceeds of $1,656,500 and the satisfaction of $1,615,000 of 12% Convertible Notes and $100,000 in expenses. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2) and Regulation D, Rule 506. 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 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. None of these investors were our affiliates, except Guus van Kesteren, a member of our board of directors, invested $16,000 and Cornelis Wit, our Chief Executive Officer and President, and member of our board of directors invested $16,000. Each share of Series C Preferred Stock is convertible, at the option of the holder, into 40 shares of our common stock, or all 337,150 shares convert into 13,486,000 shares of our common stock. The warrants are exercisable at $.25 per share expiring May 2007. Noesis Capital Corp., an NASD member firm, acted as placement agent in the offering and as compensation therefore received a commission equal to 10% of the sales made by it, or an aggregate of $165,650, and an option to purchase placement agent units equal to 15% of the shares sold. The Units consist of (a) 10,000 shares of Series B Preferred Stock or 400,000 shares of common stock and (b) 5-year warrants to purchase 200,000 shares of common stock at an exercise price of $.25 per share of common stock, at an exercise price of $100,000 per Unit. All 337,150 shares remain outstanding.

In August 2002 we issued an aggregate of 113,100 shares of our common stock to certain employees, including three officers, for employment services rendered. We valued these shares at $22,288. The recipients were either accredited or sophisticated investors and had full access to, or were otherwise provided with, all relevant information, and who had such knowledge and experience in financial, investment and business matters, reasonably necessary to evaluate us and the merits and risks of the prospective investment in our securities. These shares were issued pursuant to an exemption from registration under the Securities Act in reliance on Section 4(2) of the Securities Act. No general solicitation or advertising was used in connection with these transactions. The certificate 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.

On December 31, 2002, we issued 1,446,306 shares of our common stock to the holders of our 12% Convertible Notes in satisfaction of $361,576 of outstanding accrued interest. The recipients were accredited investors and had full access to, or were otherwise provided with, all relevant information, and who had such knowledge and experience in financial, investment and business matters, reasonably necessary to evaluate us and the merits and risks of the prospective investment in our securities. These shares were issued pursuant to an exemption from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D. No general solicitation or advertising was used in connection with these transactions. The certificate 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.

On December 31, 2002, we issued 2,135,616 shares of our common stock to the holders of our Series A Preferred Stock in satisfaction of $533,904 of outstanding accrued dividends. The recipients were accredited investors and had full access to, or were otherwise provided with, all relevant information, and who had such knowledge and experience in financial, investment and business matters, reasonably necessary to evaluate us and the merits and risks of the prospective investment in our securities. These shares were issued pursuant to an exemption from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D. No general solicitation or advertising was used in connection with these transactions. The certificate 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.

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From April 2003 through May, 2003, we sold an aggregate of 1,400,000 shares of our common stock and warrants to purchase 700,000 shares of our common stock to accredited investors resulting in gross proceeds of $350,000. The warrants are exercisable at an exercise price of $0.25 per share expiring May 2008. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2) and Regulation S. Each of these transactions was an “offshore” transaction to a non-U.S. person. 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. None of these investors were our affiliates. 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 $28,000, a non-accountable expense allowance equal to 2% of the sales made by it, or an aggregate of $7,000 and a warrant to purchase at $0.25 per share, 10% of the shares sold, or 140,000 shares of our common stock.

From July 2003 through August 2003, we sold an aggregate of 620,000 shares of our common stock resulting in gross proceeds of $155,000. This private placement was exempt from registration under the Securities Act in reliance on Section 4(2) and Regulation S. Each of these transactions was an “offshore” transaction to a non-U. S. person. 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. None of these investors were our affiliates. 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 $12,400, a non-accountable expense allowance equal to 2% of the sales made by it, or an aggregate of $3,100 and a warrant to purchase at $0.25 per share, 10% of the shares sold, or 62, 000 shares of our common stock.

We established the 1998 Stock Incentive Plan effective July 31, 1998, which provides for the issuance of qualified options to officers, directors and key employees, and nonqualified options to consultants, advisors and other service providers. Through September 26, 2003, we have issued and outstanding options to purchase approximately 2,752,039 shares of common stock under the Plan with exercise prices ranging from $.15 to $2.75 and various expiration dates. The options were issued to approximately 20 officers, directors, key employees, consultants, advisors and other service providers. The security issuances were exempt from registration by Section 4(2) of the Securities Act. The option holders had access to information about us and had the opportunity to ask questions about us. The options issued contain a legend restricting their transferability absent registration or an available exemption.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(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)

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EXHIBIT NO.	DESCRIPTION
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
4.2	Form of Warrant Agreement including the Form of Warrant issued in connection with the Series C Preferred Stock offering
4.3	Form of 10% Convertible Note
4.4	Form of Placement Agent Unit Option issued to Commonwealth Associates, LP in connection with the Series B Preferred Stock offering
4.5	Form of Placement Agent Unit Option issued to Noesis Capital Corp. in connection with the Series C Preferred Stock offering
5.1	Opinion of Katz, Barron, Squitero, Faust & Boyd, P.A.
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)
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.

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EXHIBIT NO.	DESCRIPTION
23.1	Consent of Greenberg & Company CPA’s LLC, Registrant’s Independent Auditors
23.2	Consent of Katz, Barron, Squitero, Faust & Boyd, P.A. (included in Exhibit 5.1)

(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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(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.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes to:

(1)  File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

(i)  Include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii)  Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement, and

(iii)  Include any additional or changed material information on the plan of distribution.

(2)  For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3)  File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4)  For purposes of determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this registration statement as of the time it was declared effective.

(5)  For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorizes this registration statement to be signed on its behalf by the undersigned, in the City of Davie, State of Florida, on September 29, 2003.

OMNICOMM SYSTEMS, INC.
	BY:	/s/ Cornelis F. Wit
		Cornelis F. Wit

Chief Executive Officer, (Principal Executive Officer),

President and Director

In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.

SIGNATURE	TITLE	DATE
/s/ Cornelis F. Wit     Cornelis F. Wit	Chief Executive Officer, (Principal Executive Officer), President and Director	Sept. 29, 2003
/s/ Randall G. Smith     Randall G. Smith	Chairman of the Board and Chief Technology Officer	Sept. 29, 2003
/s/ Ronald T. Linares     Ronald T. Linares	Chief Financial Officer (Principal Financial and Accounting Officer)	Sept. 29, 2003
/s/ Guus van Kesteren     Guus van Kesteren	Director	Sept. 29, 2003

124 EX-4.1 3 g85073exv4w1.txt FORM OF WARRANT AGREEMENT - SERIES B EXHIBIT 4.1 WARRANT AGREEMENT AGREEMENT, dated as of this ____ day of August 2001, by and among OMNICOMM SYSTEMS, INC., a Delaware corporation (the "Company") and COMMONWEALTH ASSOCIATES, L.P., a New York limited partnership ("Commonwealth"). W I T N E S S E T H WHEREAS, in connection with a private placement (the "Private Placement") of up to a maximum of 200,000 shares of Series B Convertible Preferred Stock (the "Preferred Shares"), the Company will issue warrants (the "Warrants") to purchase up to an aggregate of 8,000,000 shares of Common Stock; WHEREAS, in connection with the Private Placement the Company may issue to the placement agent an option (the "Placement Agent Option") to purchase up to an additional 30,000 Preferred Shares and Warrants to purchase up to an additional 1,200,000 shares of Common Stock. NOW THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the certificates representing the Warrants and the respective rights and obligations thereunder of the Company, the holders of certificates representing the Warrants and the parties hereto agree as follows: SECTION 1. DEFINITIONS. As used herein, the following terms shall have the following meanings, unless the context shall otherwise require: (a) "Common Stock" shall mean common stock of the Company of any class, whether now or hereafter authorized, which has the right to participate in the distributions of earnings and assets of the Company without limit as to amount or percentage, which at the date hereof consists of 20,000,000 authorized shares of Common Stock, par value $.001 per share (to be increased to 60,000,000 shares upon the Amendment Date (as defined below)). (b) "Corporate Office" shall mean the office of the Company in its capacity as warrant agent (or its successor) at which at any particular time its principal business shall be administered, which office is currently located at 3250 Mary Street, Suite 402, Miami, Florida 33133. (c) "Exercise Date" shall mean, as to any Warrant, the date on which the Company shall have received both (a) the Warrant Certificate representing such Warrant, with the exercise form thereon duly executed by the Registered Holder thereof or his attorney duly authorized in writing, and (b) either payment in cash, or by official bank or certified check or by check drawn on an account of Commonwealth or such other investment banks and brokerage houses as the Company shall approve, in each case made payable to the Company, of an amount in lawful money of the United States of America equal to the Exercise Price or a Notice of Exchange. (d) "Exercise Price" shall mean the purchase price to be paid upon exercise of each Warrant in accordance with the terms hereof, which price shall initially be $0.25 per share and which price shall be subject to adjustment from time to time pursuant to the provisions of Section 8 hereof and subject to the Company's right to reduce the applicable Exercise Price upon notice to all warrantholders. (e) "Initial Warrant Exercise Date" shall mean the earlier of (i) January 31, 2002, and (ii) the close of business on the date ("Amendment Date") that the Company files with the Secretary of State of the State of Delaware an amendment to the Company's Certificate of Incorporation increasing the authorized number of shares of Common Stock to at least 60 million shares. -1- (f) "Registered Holder" shall mean the person in whose name any certificate representing Warrants shall be registered on the books maintained by the Company pursuant to Section 6. (g) "Transfer Agent" shall mean Jersey Transfer & Trust Company as the Company's transfer agent, or its authorized successor, as such. (h) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on the earlier of _______ __, 2006 or the Call Date (as defined in Section 9); provided that if such date shall in the State of New York be a holiday or a day on which banks are authorized to close, then 5:00 P.M. (New York time) on the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. Upon notice to all warrantholders the Company shall have the right to extend the Warrant Expiration Date. (i) "Warrant Shares" shall mean the shares of Common Stock deliverable upon exercise of the Warrants, as adjusted from time to time pursuant to the provisions hereof. SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES. (a) A Warrant shall initially entitle the Registered Holder of the Warrant Certificate representing such Warrant to purchase one share of Common Stock upon the exercise thereof, in accordance with the terms hereof, subject to modification and adjustment as provided in Section 8. (b) From time to time, up to the Warrant Expiration Date, the Transfer Agent shall execute and deliver stock certificates in required whole number denominations representing up to an aggregate of 9,200,000 shares of Common Stock, subject to adjustment as described herein, upon the exercise of Warrants in accordance with this Agreement. (c) From time to time, up to the Warrant Expiration Date, the Company shall execute and deliver Warrant Certificates in required whole number denominations to the persons entitled thereto in connection with any transfer or exchange permitted under this Agreement; provided that no Warrant Certificates shall be issued except (i) those initially issued hereunder, those issued hereunder on any subsequent closing of the Private Placement and those issued upon exercise of any Placement Agent Option; (ii) those issued on or after the Initial Warrant Exercise Date, upon the exercise of fewer than all Warrants represented by any Warrant Certificate, to evidence any unexercised Warrants held by the exercising Registered Holder; (iii) those issued upon any transfer or exchange pursuant to Section 6; (iv) those issued in replacement of lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7; and (v) those issued at the option of the Company, in such form as may be approved by its Board of Directors, to reflect (a) any adjustment or change in the Exercise Price or the number of shares of Common Stock purchasable upon exercise of the Warrants made pursuant to Section 8 hereof, and (b) other modifications approved in accordance with Section 15 hereof. SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES. (a) The Warrant Certificates for the Warrants, shall be substantially in the form annexed hereto as Exhibit A (the provisions of which are hereby incorporated herein) and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed, engraved or typed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in registered form. The Warrants shall be numbered serially with the letters PW. (b) Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or any Vice President and by its Chief Financial Officer, Secretary or an Assistant Secretary and shall have imprinted thereon a facsimile of the Company's seal. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer of the Company before the date of issuance of the Warrant -2- Certificates and delivery thereof, such Warrant Certificates may nevertheless be issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be such officer of the Company. After execution by the Company, Warrant Certificates shall be delivered by the Company to the Registered Holder. SECTION 4. EXERCISE. (a) Each Warrant may be exercised by the Registered Holder thereof at any time on or after the Initial Warrant Exercise Date, but not after the Warrant Expiration Date, upon the terms and subject to the conditions set forth herein and in the applicable Warrant Certificate. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date and the person entitled to receive the securities deliverable upon such exercise shall be treated for all purposes as the holder upon exercise thereof as of the close of business on the Exercise Date. As soon as practicable on or after the Exercise Date the Company shall cause to be issued and delivered by the Transfer Agent, to the person or persons entitled to receive the same, a certificate or certificates for the securities deliverable upon such exercise, (plus a certificate for any remaining unexercised Warrants of the Registered Holder). (b) The Board of Directors has approved and determined to submit to stockholders a certificate of amendment to the Company's Certificate of Incorporation to increase the number of shares of authorized Common Stock to 60,000,000 shares (the "Proposed Charter Amendment"). It is understood that if the Proposed Charter Amendment is not filed with the Secretary of State of Delaware by the Initial Warrant Exercise Date, after reserving the number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock sold in the Private Placement, including the Series B Preferred Stock underlying the Placement Agent Option, the Company may not have a sufficient number of shares of Common Stock authorized and available for issuance upon exercise of this Warrant. Therefore, prior to the filing of the Proposed Charter Amendment, a holder of this Warrant shall be allowed to exercise this Warrant for only that number of shares of Common Stock equal to the product of the number of authorized, unissued and unreserved shares of Common Stock on the date of exercise multiplied by a fraction, the numerator of which is the total number of Warrant Shares issuable upon exercise of the Warrant held by such holder and the denominator of which is the total number of Warrant Shares issuable upon exercise of the Warrants sold in the Private Placement, including the Placement Agent Option. (c) The Registered Holder may, at its option, at any time on or after the Initial Warrant Exercise Date, exchange Warrants on a cashless basis, in whole or in part (a "Warrant Exchange"), for the number of Warrant Shares determined in accordance with this Section (4)(c), by surrendering the Warrant Certificate at the principal office of the Company, accompanied by a notice stating such Registered Holder's intent to effect such exchange, the number of Warrants to be exchanged and the date on which the Registered Holder requests that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for the shares issuable upon such Warrant Exchange and, if applicable, a new Warrant Certificate of like tenor evidencing the balance of the Warrants remaining subject to the surrendered Warrant Certificate, shall be issued as of the Exchange Date and delivered to the Registered Holder within seven (7) days following the Exchange Date. In connection with any Warrant Exchange, a Warrant Certificate shall represent the right to subscribe for and acquire the number of Warrant Shares (rounded to the next highest integer) equal to (i) the number of Warrants specified by the Registered Holder in its Notice of Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price by (B) the current market price of a share of Common Stock. Current market price shall have the meaning set forth Section 11 hereof, except that for purposes hereof, the date of exercise, as used in such Section 11 hereof, shall mean the Exchange Date. SECTION 5. RESERVATION OF SHARES; BLUE SKY APPROVALS; PAYMENT OF TAXES. (a) Subject to Section 4(b) above, the Company covenants that it will at all times following the Initial Warrant Exercise Date reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of Warrants, such number of -3- shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants and payment of the Exercise Price shall, at the time of delivery, be duly and validly issued, fully paid, nonassessable and free from all taxes, liens and charges with respect to the issue thereof (other than those which the Company shall promptly pay or discharge). (b) The Company will use reasonable efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws with respect to the exercise of the Warrants; provided, however, that the Company shall not be obligated to file any general consent to service of process or qualify as a foreign corporation in any jurisdiction. With respect to any such securities laws, however, Warrants may not be exercised by, or shares of Common Stock issued to, any Registered Holder in any state in which such exercise would be unlawful. (c) The Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance, or delivery of any shares upon exercise of the Warrants; provided, however, that if the shares of Common Stock are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Company the amount of transfer taxes or charges incident thereto, if any. SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER. Subject to the restrictions on transfer contained in the Warrant Certificates and the Subscription Agreement(s) between the Company and each of the investors in the Private Placement: (a) Warrant Certificates may be exchanged for other Warrant Certificates representing an equal aggregate number of Warrants or may be transferred in whole or in part. Warrant Certificates to be exchanged shall be surrendered to the Company at its Corporate Office, and upon satisfaction of the terms and provisions hereof, the Company shall execute, issue and deliver in exchange therefor the Warrant Certificate or Certificates which the Registered Holder making the exchange shall be entitled to receive. (b) The Company shall keep at its office books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and the transfer thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Warrant Certificate at its office, the Company shall execute, issue and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants of the same tranche. The Company shall also make available to Commonwealth for inspection by its agents or employees, from time to time as Commonwealth may request, such original books of accounts and record (including original Warrant Certificates surrendered to the Company upon exercise of Warrants) as may be maintained by the Company in connection with the issuance and exercise of Warrants hereunder, such inspections to occur at the Company's Corporate Office during normal business hours. (c) With respect to all Warrant Certificates presented for registration of transfer, or for exchange or exercise, the subscription form on the reverse thereof shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company, duly executed by the Registered Holder or his attorney-in-fact duly authorized in writing. (d) The Company may require payment by such holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (e) All Warrant Certificates surrendered for exercise or for exchange shall be promptly canceled by the Company and thereafter retained by the Company until termination of this Agreement, or, with the prior written consent of Commonwealth, disposed of or destroyed. (f) Prior to due presentment for registration of transfer thereof, the Company may deem and treat the Registered Holder of any Warrant Certificate as the absolute, true and lawful owner thereof and of each Warrant represented thereby (notwithstanding any notations of ownership or writing thereon made by anyone other than a duly authorized officer of the Company) for all purposes and the Company shall not be affected by any notice to the contrary, except as otherwise expressly provided in Section 7 hereof. -4- SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company of evidence satisfactory to it of the ownership of and loss, theft, destruction or mutilation of any Warrant Certificate and (in case of loss, theft or destruction) of indemnity satisfactory to them, and (in the case of mutilation) upon surrender and cancellation thereof, and in the absence of notice to the Company that the Warrant Certificate has been acquired by a bonafide purchaser, the Company shall execute and deliver to the Registered Holder in lieu thereof a new Warrant Certificate of like tenor representing an equal aggregate number of Warrants. Applicants for a substitute Warrant Certificate shall comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 8. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (b) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the "Subscription Price") (or having a conversion price per share) less than the current market price (as defined below) on such record date, the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of such issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned below and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at such current market price per share of the Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date and the number of additional shares of Common Stock offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. (c) In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (a) above) or subscription rights or warrants (excluding those referred to in Subsection (b) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined below), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (d) In case the Company shall hereafter issue shares of its Common Stock (excluding shares issued (i) in any of the transactions described in Subsection (a) above, (ii) upon exercise of options granted to the Company's officers, directors, employees and consultants under a plan or plans adopted by the Company's Board of Directors or a committee thereof and approved by its shareholders, if such shares would otherwise be included in this Subsection (d), (but only to the -5- extent that the aggregate number of shares excluded by this Subsection (d)(ii) does not exceed 15% of the Company's Common Stock outstanding, on a fully diluted basis, at the time of any issuance), (iii) upon exercise of options, warrants, convertible securities and convertible debentures outstanding as of the final closing of the Private Placement, (iv) to shareholders of any corporation which merges into the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) in a private placement where the Offering Price (as defined below) is at least 75% of the current market price, (vi) in a bona fide public offering pursuant to a firm commitment underwriting, or (vii) in connection with an acquisition of a business or technology which has been approved by a majority of the Company's outside directors but only if no adjustment is required pursuant to any other specific subsection of this Section 8 (without regard to Subsection (i) below) with respect to the transaction giving rise to such rights) for a consideration per share (the "Offering Price") less than the current market price on the date of such issuance, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received for the issuance of such additional shares would purchase at such current market price per share of Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. (e) In case the Company shall hereafter issue any securities convertible into or exchangeable for its Common Stock (excluding securities issued in transactions described in Subsections (b) and (c) above or in the exclusions set forth in (d)(i) through (vii) above) for a consideration per share of Common Stock (the "Exchange Price") initially deliverable upon conversion or exchange of such securities (determined as provided in Subsection (g) below) less than the current market price on the date of such issuance, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such securities and the number of shares of Common Stock which the aggregate consideration received for such securities would purchase at such current market price per share of Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the maximum number of shares of Common Stock of the Company deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made. (f) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e) above or pursuant to subsection (j) below, the number of Warrant Shares purchasable upon exercise of each Warrant shall simultaneously be adjusted by multiplying the number of Warrant Shares initially issuable upon exercise of such Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (g) For purposes of any computation respecting consideration received pursuant to Subsections (d) and (e) above and (j) below, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (C) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, -6- the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (g)). Upon the expiration or termination of any such securities convertible into or exchangeable for shares of Common Stock, the Exercise Price shall be automatically readjusted to the Exercise Price that would have been obtained had such convertible or exchangeable securities not been issued. (h) For the purpose of any computation under Subsection (b), (c), (d) and (e) above, the current market price per share of Common Stock at any date shall be determined in the manner set forth in Section 11 hereof. (i) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which by reason of this Subsection (i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section 8 to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section 8, as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal income tax liability to the holders of Common Stock or securities convertible into Common Stock (including Warrants). (j) Notwithstanding the other provisions of this Section 8, (A) in the event that the Company shall at any time issue securities in transactions of the type described in Subsections (b), (d) and (e) of this Section 8 (other than securities issued in transactions described in Subsection (d)(i) through (vii) above) having an Offering Price, Subscription Price or Exchange Price less than the Exercise Price, then the Exercise Price shall be immediately reset to equal such lower Offering Price, Subscription Price or Exchange Price and (B) no adjustment under Subsections (b), (d) or (e) shall be required for issuances below the current market price if (i) the Offering Price, Subscription Price or Exchange Price, as applicable, is at least 300% of the Exercise Price then in effect and (ii) a registration statement covering the Warrant Shares is in effect and remains in effect for the 90 days after such issuance or Rule 144(k) under the Securities Act of 1933, as amended (the "Act") is available for resale of all of the Warrant Shares. (k) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly cause a notice setting forth the adjusted Exercise Price and adjusted number of Warrant Shares issuable upon exercise of each Warrant, and, if requested, information describing the transactions giving rise to such adjustments, to be mailed to the holders at their last addresses appearing in the registry books maintained by the Company pursuant to Section 6(b), and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section 8, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment absent manifest error. (l) In the event that at any time, as a result of an adjustment made pursuant to this Section 8, a holder of Warrants thereafter shall become entitled to receive any securities, other than Common Stock, thereafter the number of such other securities so receivable upon exercise of a Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (a) to (j), inclusive above. -7- (m) In case of any reorganization, reclassification or change of the Common Stock (including any such reorganization, reclassification or change in connection with a consolidation or merger in which the Company is the continuing entity), or any consolidation of the Company with, or merger of the Company with or into, any other entity (other than a consolidation or merger in which the Company is the continuing entity), or of any sale of the properties and assets of the Company as, or substantially as, an entirety to any other person or entity, each Warrant then outstanding shall thereafter be convertible into the kind and amount of stock or other securities or property receivable upon each such reorganization, reclassification, change, consolidation, merger or sale by a holder of the number of shares of Common Stock for which such Warrant would have been exercisable prior to such transaction assuming such Warrant had been exercisable. The provisions of this Paragraph (m) shall similarly apply to successive reorganizations, reclassifications, changes, consolidations, mergers or sales immediately prior to such reorganization, reclassification, change, consolidation, merger or sale. (n) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. SECTION 9. WARRANT CALL. (a) If at any time the current market value of a share of Common Stock (determined in accordance with Section 11 hereof) equals or exceeds three times the Exercise Price then in effect for a period of 20 consecutive trading days then, at any time during the five trading day period following the last day of such 20 day period the Company may, at its option, accelerate the expiration of the Warrants to a date not less than 30 days from the date written notice thereof (the "Call Notice") is sent to the Registered Holders of the Warrants provided (i) a registration statement covering the Warrant Shares filed under the Act has been declared effective and remains effective on the date fixed for expiration of the Warrants (the "Call Date"), (ii) the Warrants and Warrant Shares are not subject to a lock-up agreement and (iii) on each day during such 20 consecutive day trading period the Common Stock was traded on a national securities exchange, included for quotation on the Nasdaq SmallCap Market or National Market System or reported by the NASD Over the Counter Bulletin Board. (b) If the conditions set forth in Section 9(a) are met, and the Company desires to exercise its right to accelerate the exercise date of the Warrants, it shall mail a Call Notice to each of the Registered Holders of the Warrants, first class, postage prepaid, at their last address as shall appear on the records maintained pursuant to Section 6(b). Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. (c) The Call Notice shall specify (i) the Call Date, which shall be no later than the 60th day following the last day of the 20 consecutive day trading period referred to in Section 9(a), and (ii) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the Call Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such acceleration of the Expiration Date except as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Secretary or an Assistant Secretary of the Company that the Call Notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York time) on the Call Date. After 5:00 p.m. (New York time) on the Call Date, Registered Holders of the Warrants shall have no further rights and such Warrants shall expire and become void and all rights hereunder and under the Warrant Certificates shall cease. SECTION 10. REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company agrees to register the Warrant Shares for resale under the Securities Act of -8- 1933, as amended (the "Act") on the terms and subject to the conditions set forth in Annex A to the Subscription Agreement(s) between the Company and each of the investors in the Private Placement. SECTION 11. FRACTIONAL WARRANTS AND FRACTIONAL SHARES. If the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted pursuant to Section 8 hereof, the Company shall nevertheless not be required to issue fractions of shares, upon exercise of the Warrants or otherwise, or to distribute certificates that evidence fractional shares. With respect to any fraction of a share called for upon any exercise of any Warrant, the Company shall pay to the holder thereof an amount in cash equal to such fraction multiplied by the current market price of a share of Common Stock, determined as follows: (a) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market System ("NMS"), the current market price shall be the higher of (x) the average of the last reported sale prices of the Common Stock on such exchange for the 20 trading days prior to the date of exercise of this Warrant and (y) the last reported sales price on the trading day immediately preceding such date; provided that if no such sale is made on a day within such period or no closing sale price is quoted, that day's price shall be the average of the closing bid and asked prices for such day on such exchange or system; or (b) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market, the current market price shall be the higher of (x) the average of the closing bid and asked prices for the 20 trading days prior to the date of exercise of this Warrant on such market and (y) the last reported bid price on the trading day immediately preceding such date on such market and if the Common Stock is not so traded, the current market price shall be the higher of (i) the mean of the last reported bid and asked prices reported by the NASD Over the Counter Bulletin Board for the 20 trading days prior to the date of the exercise of this Warrant and (ii) the last reported bid price on the trading day immediately preceding such date as reported by the NASD Over the Counter Bulletin Board; or (c) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market price shall be an amount determined in a reasonable manner by the Board of Directors of the Company. SECTION 12. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of Warrants shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of such Warrants for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the holder of Warrants, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Holder shall have exercised such Warrants and been issued shares of Common Stock in accordance with the provisions hereof. SECTION 13. RIGHTS OF ACTION. All rights of action with respect to this Agreement are vested in the respective Registered Holders of the Warrants, and any Registered Holder of a Warrant, without consent of the Company or of the holder of any other Warrant, may, on his own behalf and for his own benefit, enforce against the Company his right to exercise his Warrants for the purchase of shares of Common Stock in the manner provided in the Warrant Certificate and this Agreement. SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant Certificates evidencing the same shall thereupon be canceled by it and retired. SECTION 15. MODIFICATION OF AGREEMENT. The parties hereto may by supplemental agreement make any changes or corrections in this Agreement (i) that it shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; (ii) to reflect an increase in the number of Warrants which are to be governed by this Agreement resulting from an increase in the size of the Private Placement or the -9- number of Warrants issued in connection with the Private Placement; (iii) to provide for a warrant agent for the Warrants; or (iv) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates. Except as set forth above, this Agreement shall not be modified, supplemented or altered in any respect except with the consent in writing of the Company and the holders of not less than 50% of the outstanding Warrants. SECTION 16. NOTICES. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed first class registered or certified mail, postage prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the address of such holder as shown on the registry books maintained by the Company in its capacity as warrant agent; if to the Company, OmniComm Systems, Inc., 3250 Mary Street, Suite 402, Miami, Florida 33133, Att: Chief Financial Officer; and if to Commonwealth, at Commonwealth Associates, 830 Third Avenue, New York, New York 10022, Att: Carl Kleidman. SECTION 17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. SECTION 18. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company and Commonwealth (and their respective successors and assigns) and the holders from time to time of Warrant Certificates. Nothing in this Agreement is intended or shall be construed to confer upon any other person any right, remedy or claim, in equity or at law, or to impose upon any other person any duty, liability or obligation. SECTION 19. TERMINATION. This Agreement shall terminate on the earlier to occur of (i) the close of business on the Expiration Date of all the Warrants; or (ii) the date upon which all Warrants have been exercised or called. SECTION 20. COUNTERPARTS. This Agreement may be executed in several counterparts, which taken together shall constitute a single document. -10- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. OMNICOMM SYSTEMS, INC. By: -------------------------------------- Name: Title: COMMONWEALTH ASSOCIATES, L.P. By: Commonwealth Associates Management Company, Inc., its general partner By: -------------------------------------- Name: Title: -11- THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT') OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE ACT AND/OR APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. No. PW ________ Warrants VOID AFTER__________ __, 2006 WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK OMNICOMM SYSTEMS, INC. This certifies that FOR VALUE RECEIVED ___________________ or registered assigns (the "Registered Holder") is the owner of the number of Warrants ("Warrants") specified above. Each Warrant initially entitles the Registered Holder to purchase, subject to the terms and conditions set forth in this Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and nonassessable share of common stock, par value $.001 per share ("Common Stock") of OmniComm Systems, Inc., a Delaware corporation (the "Company") at any time commencing on the Initial Warrant Exercise Date (as defined in the Warrant Agreement) and prior to the Expiration Date (as hereinafter defined), upon the presentation and surrender of this Warrant Certificate with the Subscription Form on the reverse hereof duly executed, at the corporate office of the Company, as warrant agent, or its successor (the "Warrant Agent"), accompanied by payment of an amount equal to $.25 for each Warrant (the "Exercise Price") in lawful money of the United States of America in cash or by official bank or certified check or by check drawn on an account of Commonwealth or such other investment banks and brokerage houses as the Company shall approve, in each case made payable to OmniComm Systems, Inc. or a Notice of Exchange (as defined in the Warrant Agreement). The Company may, at its election, reduce the Exercise Price. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated August __2001 by and among the Company and Commonwealth Associates, L.P. In the event of certain contingencies provided for in the Warrant Agreement, the Exercise Price or the number of shares of Common Stock subject to purchase upon the exercise of each Warrant represented hereby are subject to modification or adjustment. The Warrants may be called by the Company under certain circumstances described in the Warrant Agreement. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional shares of Common Stock will be issued. In the case of the exercise of less than all the Warrants represented hereby, the Company shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor for the balance of such Warrants. The term "Expiration Date" shall mean 5:00 P.M. (New York time) on ___ _, 2006 or unless the Warrants are called by the Company prior to such date. If such date shall in the State of New York be a holiday or a day on which the banks are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York time) the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. The Company may, at its election, extend the Expiration Date. This Warrant Certificate is exchangeable, upon the surrender hereof by the Registered Holder at the corporate office of the Company, for a new Warrant Certificate or Warrant Certificates of like tenor representing an equal aggregate number of Warrants, each of such new Warrant Certificates to represent such number of Warrants as shall be designated by such Registered Holder at the time of such surrender. Upon due presentment with any tax or other governmental charge imposed in connection therewith, for registration of transfer of this Warrant Certificate at such office, a new Warrant Certificate or Warrant Certificates representing an equal aggregate number of Warrants will be issued to the transferee in exchange therefor, subject to the limitations provided in the Warrant Agreement. Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any of the rights of a stockholder of the Company, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. Prior to due presentment for registration of transfer hereof, the Company may deem and treat the Registered Holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notations of ownership or writing hereon made by anyone other than a duly authorized officer of the Company) for all purposes and the Company shall not be affected by any notice to the contrary. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New York. -2- IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile, by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon. OMNICOMM SYSTEMS, INC. Dated: _______ __, 2001 By: ------------------------------ Name: Title: [seal] By: ------------------------------ Name: Title: -3- SUBSCRIPTION FORM To Be Executed by the Registered Holder in Order to Exercise Warrants The undersigned Registered Holder hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ [please print or type name and address] and be delivered to ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ [please print or type name and address] and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below. Dated: ---------------------- X ---------------------- Address: ------------------------------ ------------------------------ Taxpayer Identification Number ------------------------------ ------------------------------ Signature Guaranteed ASSIGNMENT To Be Executed by the Registered Holder in Order to Assign Warrants FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ [please print or type name and address] ____________________________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints __________________________________ _______________________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises. Dated: ---------------------- X ---------------------- Signature Guaranteed - ------------------------------- THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE. EX-4.2 4 g85073exv4w2.txt FORM OF WARRANT AGREEMENT - SERIES C EXHIBIT 4.2 WARRANT AGREEMENT AGREEMENT, dated as of this 29 day of March 2002, by and among OMNICOMM SYSTEMS, INC., a Delaware corporation (the "Company") and NOESIS CAPITAL CORP., ("Noesis"). W I T N E S S E T H WHEREAS, in connection with a private placement (the "Private Placement") of up to a maximum of 250,000 shares of Series C Convertible Preferred Stock (the "Preferred Shares"), the Company will issue warrants (the "Warrants") to purchase up to an aggregate of 5,000,000 shares of Common Stock; WHEREAS, in connection with the Private Placement the Company may issue to the placement agent an option (the "Placement Agent Option") to purchase up to an additional 60,000 Preferred Shares and Warrants to purchase up to an additional ________ shares of Common Stock. NOW THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the certificates representing the Warrants and the respective rights and obligations thereunder of the Company, the holders of certificates representing the Warrants and the parties hereto agree as follows: SECTION 1. DEFINITIONS. As used herein, the following terms shall have the following meanings, unless the context shall otherwise require: (a) "Common Stock" shall mean common stock of the Company of any class, whether now or hereafter authorized, which has the right to participate in the distributions of earnings and assets of the Company without limit as to amount or percentage, which at the date hereof consists of 60,000,000 authorized shares of Common Stock, par value $.001 per share. (b) "Corporate Office" shall mean the office of the Company in its capacity as warrant agent (or its successor) at which at any particular time its principal business shall be administered, which office is currently located at 2555 Davie Road, Suite 110-B, Davie, Florida 33317. (c) "Exercise Date" shall mean, as to any Warrant, the date on which the Company shall have received both (a) the Warrant Certificate representing such Warrant, with the exercise form thereon duly executed by the Registered Holder thereof or his attorney duly authorized in writing, and (b) either payment in cash, or by official bank or certified check or by check drawn on an account of Noesis or such other investment banks and brokerage houses as the Company shall approve, in each case made payable to the Company, of an amount in lawful money of the United States of America equal to the Exercise Price or a Notice of Exchange. (d) "Exercise Price" shall mean the purchase price to be paid upon exercise of each Warrant in accordance with the terms hereof, which price shall initially be $___ per share and which price shall be subject to adjustment from time to time pursuant to the provisions of Section 8 hereof and subject to the Company's right to reduce the applicable Exercise Price upon notice to all warrantholders. (e) "Initial Warrant Exercise Date" shall mean the date of issuance of the Warrants. (f) "Registered Holder" shall mean the person in whose name any certificate representing Warrants shall be registered on the books maintained by the Company pursuant to Section 6. (g) "Transfer Agent" shall mean Jersey Transfer & Trust Company as the Company's transfer agent, or its authorized successor, as such. -1- (h) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on the earlier of March 29, 2009 or the Call Date (as defined in Section 9); provided that if such date shall in the State of New York be a holiday or a day on which banks are authorized to close, then 5:00 P.M. (New York time) on the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. Upon notice to all warrantholders the Company shall have the right to extend the Warrant Expiration Date. (i) "Warrant Shares" shall mean the shares of Common Stock deliverable upon exercise of the Warrants, as adjusted from time to time pursuant to the provisions hereof. SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES. (a) A Warrant shall initially entitle the Registered Holder of the Warrant Certificate representing such Warrant to purchase one share of Common Stock upon the exercise thereof, in accordance with the terms hereof, subject to modification and adjustment as provided in Section 8. (b) From time to time, up to the Warrant Expiration Date, the Transfer Agent shall execute and deliver stock certificates in required whole number denominations representing up to an aggregate of 7,000,000 shares of Common Stock, subject to adjustment as described herein, upon the exercise of Warrants in accordance with this Agreement. (c) From time to time, up to the Warrant Expiration Date, the Company shall execute and deliver Warrant Certificates in required whole number denominations to the persons entitled thereto in connection with any transfer or exchange permitted under this Agreement; provided that no Warrant Certificates shall be issued except (i) those initially issued hereunder, those issued hereunder on any subsequent closing of the Private Placement and those issued upon exercise of any Placement Agent Option; (ii) those issued on or after the Initial Warrant Exercise Date, upon the exercise of fewer than all Warrants represented by any Warrant Certificate, to evidence any unexercised Warrants held by the exercising Registered Holder; (iii) those issued upon any transfer or exchange pursuant to Section 6; (iv) those issued in replacement of lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7; and (v) those issued at the option of the Company, in such form as may be approved by its Board of Directors, to reflect (a) any adjustment or change in the Exercise Price or the number of shares of Common Stock purchasable upon exercise of the Warrants made pursuant to Section 8 hereof, and (b) other modifications approved in accordance with Section 15 hereof. SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES. (a) The Warrant Certificates for the Warrants, shall be substantially in the form annexed hereto as Exhibit A (the provisions of which are hereby incorporated herein) and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed, engraved or typed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in registered form. The Warrants shall be numbered serially with the letters PW. (b) Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or any Vice President and by its Chief Financial Officer, Secretary or an Assistant Secretary and shall have imprinted thereon a facsimile of the Company's seal. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer of the Company before the date of issuance of the Warrant Certificates and delivery thereof, such Warrant Certificates may nevertheless be issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be such officer of the Company. After execution by the Company, Warrant Certificates shall be delivered by the Company to the Registered Holder. -2- SECTION 4. EXERCISE. (a) Each Warrant may be exercised by the Registered Holder thereof at any time on or after the Initial Warrant Exercise Date, but not after the Warrant Expiration Date, upon the terms and subject to the conditions set forth herein and in the applicable Warrant Certificate. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date and the person entitled to receive the securities deliverable upon such exercise shall be treated for all purposes as the holder upon exercise thereof as of the close of business on the Exercise Date. As soon as practicable on or after the Exercise Date the Company shall cause to be issued and delivered by the Transfer Agent, to the person or persons entitled to receive the same, a certificate or certificates for the securities deliverable upon such exercise, (plus a certificate for any remaining unexercised Warrants of the Registered Holder). (b) The Registered Holder may, at its option, at any time on or after the Initial Warrant Exercise Date, exchange Warrants on a cashless basis, in whole or in part (a "Warrant Exchange"), for the number of Warrant Shares determined in accordance with this Section (4)(c), by surrendering the Warrant Certificate at the principal office of the Company, accompanied by a notice stating such Registered Holder's intent to effect such exchange, the number of Warrants to be exchanged and the date on which the Registered Holder requests that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for the shares issuable upon such Warrant Exchange and, if applicable, a new Warrant Certificate of like tenor evidencing the balance of the Warrants remaining subject to the surrendered Warrant Certificate, shall be issued as of the Exchange Date and delivered to the Registered Holder within seven (7) days following the Exchange Date. In connection with any Warrant Exchange, a Warrant Certificate shall represent the right to subscribe for and acquire the number of Warrant Shares (rounded to the next highest integer) equal to (i) the number of Warrants specified by the Registered Holder in its Notice of Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price by (B) the current market price of a share of Common Stock. Current market price shall have the meaning set forth Section 11 hereof, except that for purposes hereof, the date of exercise, as used in such Section 11 hereof, shall mean the Exchange Date. SECTION 5. RESERVATION OF SHARES; BLUE SKY APPROVALS; PAYMENT OF TAXES. (a) The Company covenants that it will at all times following the Initial Warrant Exercise Date reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of Warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants and payment of the Exercise Price shall, at the time of delivery, be duly and validly issued, fully paid, nonassessable and free from all taxes, liens and charges with respect to the issue thereof (other than those which the Company shall promptly pay or discharge). (b) The Company will use reasonable efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws with respect to the exercise of the Warrants; provided, however, that the Company shall not be obligated to file any general consent to service of process or qualify as a foreign corporation in any jurisdiction. With respect to any such securities laws, however, Warrants may not be exercised by, or shares of Common Stock issued to, any Registered Holder in any state in which such exercise would be unlawful. (c) The Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance, or delivery of any shares upon exercise of the Warrants; provided, however, that if the shares of Common Stock are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Company the amount of transfer taxes or charges incident thereto, if any. -3- SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER. Subject to the restrictions on transfer contained in the Warrant Certificates and the Subscription Agreement(s) between the Company and each of the investors in the Private Placement: (a) Warrant Certificates may be exchanged for other Warrant Certificates representing an equal aggregate number of Warrants or may be transferred in whole or in part. Warrant Certificates to be exchanged shall be surrendered to the Company at its Corporate Office, and upon satisfaction of the terms and provisions hereof, the Company shall execute, issue and deliver in exchange therefor the Warrant Certificate or Certificates which the Registered Holder making the exchange shall be entitled to receive. (b) The Company shall keep at its office books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and the transfer thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Warrant Certificate at its office, the Company shall execute, issue and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants of the same tranche. The Company shall also make available to Noesis for inspection by its agents or employees, from time to time as Noesis may request, such original books of accounts and record (including original Warrant Certificates surrendered to the Company upon exercise of Warrants) as may be maintained by the Company in connection with the issuance and exercise of Warrants hereunder, such inspections to occur at the Company's Corporate Office during normal business hours. (c) With respect to all Warrant Certificates presented for registration of transfer, or for exchange or exercise, the subscription form on the reverse thereof shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company, duly executed by the Registered Holder or his attorney-in-fact duly authorized in writing. (d) The Company may require payment by such holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (e) All Warrant Certificates surrendered for exercise or for exchange shall be promptly canceled by the Company and thereafter retained by the Company until termination of this Agreement, or, with the prior written consent of Noesis, disposed of or destroyed. (f) Prior to due presentment for registration of transfer thereof, the Company may deem and treat the Registered Holder of any Warrant Certificate as the absolute, true and lawful owner thereof and of each Warrant represented thereby (notwithstanding any notations of ownership or writing thereon made by anyone other than a duly authorized officer of the Company) for all purposes and the Company shall not be affected by any notice to the contrary, except as otherwise expressly provided in Section 7 hereof. SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company of evidence satisfactory to it of the ownership of and loss, theft, destruction or mutilation of any Warrant Certificate and (in case of loss, theft or destruction) of indemnity satisfactory to them, and (in the case of mutilation) upon surrender and cancellation thereof, and in the absence of notice to the Company that the Warrant Certificate has been acquired by a bonafide purchaser, the Company shall execute and deliver to the Registered Holder in lieu thereof a new Warrant Certificate of like tenor representing an equal aggregate number of Warrants. Applicants for a substitute Warrant Certificate shall comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 8. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of -4- the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (b) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the "Subscription Price") (or having a conversion price per share) less than the current market price (as defined below) on such record date, the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of such issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned below and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at such current market price per share of the Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date and the number of additional shares of Common Stock offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. (c) In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (a) above) or subscription rights or warrants (excluding those referred to in Subsection (b) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined below), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (d) In case the Company shall hereafter issue shares of its Common Stock (excluding shares issued (i) in any of the transactions described in Subsection (a) above, (ii) upon exercise of options granted to the Company's officers, directors, employees and consultants under a plan or plans adopted by the Company's Board of Directors or a committee thereof and approved by its shareholders, if such shares would otherwise be included in this Subsection (d), (but only to the extent that the aggregate number of shares excluded by this Subsection (d)(ii) does not exceed 15% of the Company's Common Stock outstanding, on a fully diluted basis, at the time of any issuance), (iii) upon exercise of options, warrants, convertible securities and convertible debentures outstanding as of the final closing of the Private Placement, (iv) to shareholders of any corporation which merges into the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) in a private placement where the Offering Price (as defined below) is at least 75% of the current market price, (vi) in a bona fide public offering pursuant to a firm commitment underwriting, or (vii) in connection with an acquisition of a business or technology which has been approved by a majority of the Company's outside directors but only if no adjustment is required pursuant to any other specific subsection of this Section 8 (without regard to Subsection (i) below) with respect to the transaction giving rise to such rights) for a consideration per share (the "Offering Price") less than the current market price on the date of such issuance, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received for the issuance of such additional shares would purchase at such current market price per share of Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. -5- (e) In case the Company shall hereafter issue any securities convertible into or exchangeable for its Common Stock (excluding securities issued in transactions described in Subsections (b) and (c) above or in the exclusions set forth in (d)(i) through (vii) above) for a consideration per share of Common Stock (the "Exchange Price") initially deliverable upon conversion or exchange of such securities (determined as provided in Subsection (g) below) less than the current market price on the date of such issuance, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such securities and the number of shares of Common Stock which the aggregate consideration received for such securities would purchase at such current market price per share of Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the maximum number of shares of Common Stock of the Company deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made. (f) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e) above or pursuant to subsection (j) below, the number of Warrant Shares purchasable upon exercise of each Warrant shall simultaneously be adjusted by multiplying the number of Warrant Shares initially issuable upon exercise of such Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (g) For purposes of any computation respecting consideration received pursuant to Subsections (d) and (e) above and (j) below, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (C) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (g)). Upon the expiration or termination of any such securities convertible into or exchangeable for shares of Common Stock, the Exercise Price shall be automatically readjusted to the Exercise Price that would have been obtained had such convertible or exchangeable securities not been issued. (h) For the purpose of any computation under Subsection (b), (c), (d) and (e) above, the current market price per share of Common Stock at any date shall be determined in the manner set forth in Section 11 hereof. (i) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which by reason of this Subsection (i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section 8 to the contrary notwithstanding, the Company shall be -6- entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section 8, as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal income tax liability to the holders of Common Stock or securities convertible into Common Stock (including Warrants). (j) Notwithstanding the other provisions of this Section 8, (A) in the event that the Company shall at any time issue securities in transactions of the type described in Subsections (b), (d) and (e) of this Section 8 (other than securities issued in transactions described in Subsection (d)(i) through (vii) above) having an Offering Price, Subscription Price or Exchange Price less than the Exercise Price, then the Exercise Price shall be immediately reset to equal such lower Offering Price, Subscription Price or Exchange Price and (B) no adjustment under Subsections (b), (d) or (e) shall be required for issuances below the current market price if (i) the Offering Price, Subscription Price or Exchange Price, as applicable, is at least 300% of the Exercise Price then in effect and (ii) a registration statement covering the Warrant Shares is in effect and remains in effect for the 90 days after such issuance or Rule 144(k) under the Securities Act of 1933, as amended (the "Act") is available for resale of all of the Warrant Shares. (k) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly cause a notice setting forth the adjusted Exercise Price and adjusted number of Warrant Shares issuable upon exercise of each Warrant, and, if requested, information describing the transactions giving rise to such adjustments, to be mailed to the holders at their last addresses appearing in the registry books maintained by the Company pursuant to Section 6(b), and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section 8, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment absent manifest error. (l) In the event that at any time, as a result of an adjustment made pursuant to this Section 8, a holder of Warrants thereafter shall become entitled to receive any securities, other than Common Stock, thereafter the number of such other securities so receivable upon exercise of a Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (a) to (j), inclusive above. (m) In case of any reorganization, reclassification or change of the Common Stock (including any such reorganization, reclassification or change in connection with a consolidation or merger in which the Company is the continuing entity), or any consolidation of the Company with, or merger of the Company with or into, any other entity (other than a consolidation or merger in which the Company is the continuing entity), or of any sale of the properties and assets of the Company as, or substantially as, an entirety to any other person or entity, each Warrant then outstanding shall thereafter be convertible into the kind and amount of stock or other securities or property receivable upon each such reorganization, reclassification, change, consolidation, merger or sale by a holder of the number of shares of Common Stock for which such Warrant would have been exercisable prior to such transaction assuming such Warrant had been exercisable. The provisions of this Paragraph (m) shall similarly apply to successive reorganizations, reclassifications, changes, consolidations, mergers or sales immediately prior to such reorganization, reclassification, change, consolidation, merger or sale. (n) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. -7- SECTION 9. WARRANT CALL. (a) If at any time the current market value of a share of Common Stock (determined in accordance with Section 11 hereof) equals or exceeds three times the Exercise Price then in effect for a period of 20 consecutive trading days then, at any time during the five trading day period following the last day of such 20 day period the Company may, at its option, accelerate the expiration of the Warrants to a date not less than 30 days from the date written notice thereof (the "Call Notice") is sent to the Registered Holders of the Warrants provided (i) a registration statement covering the Warrant Shares filed under the Act has been declared effective and remains effective on the date fixed for expiration of the Warrants (the "Call Date"), (ii) the Warrants and Warrant Shares are not subject to a lock-up agreement and (iii) on each day during such 20 consecutive day trading period the Common Stock was traded on a national securities exchange, included for quotation on the Nasdaq SmallCap Market or National Market System or reported by the NASD Over the Counter Bulletin Board. (b) If the conditions set forth in Section 9(a) are met, and the Company desires to exercise its right to accelerate the exercise date of the Warrants, it shall mail a Call Notice to each of the Registered Holders of the Warrants, first class, postage prepaid, at their last address as shall appear on the records maintained pursuant to Section 6(b). Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. (c) The Call Notice shall specify (i) the Call Date, which shall be no later than the 60th day following the last day of the 20 consecutive day trading period referred to in Section 9(a), and (ii) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the Call Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such acceleration of the Expiration Date except as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Secretary or an Assistant Secretary of the Company that the Call Notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York time) on the Call Date. After 5:00 p.m. (New York time) on the Call Date, Registered Holders of the Warrants shall have no further rights and such Warrants shall expire and become void and all rights hereunder and under the Warrant Certificates shall cease. SECTION 10. REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company agrees to register the Warrant Shares for resale under the Securities Act of 1933, as amended (the "Act") on the terms and subject to the conditions set forth in Annex A to the Subscription Agreement(s) between the Company and each of the investors in the Private Placement. SECTION 11. FRACTIONAL WARRANTS AND FRACTIONAL SHARES. If the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted pursuant to Section 8 hereof, the Company shall nevertheless not be required to issue fractions of shares, upon exercise of the Warrants or otherwise, or to distribute certificates that evidence fractional shares. With respect to any fraction of a share called for upon any exercise of any Warrant, the Company shall pay to the holder thereof an amount in cash equal to such fraction multiplied by the current market price of a share of Common Stock, determined as follows: (a) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market System ("NMS"), the current market price shall be the higher of (x) the average of the last reported sale prices of the Common Stock on such exchange for the 20 trading days prior to the date of exercise of this Warrant and (y) the last reported sales price on the trading day immediately preceding such date; provided that if no such sale is made on a day within such period or no closing sale price is quoted, that day's price shall be the average of the closing bid and asked prices for such day on such exchange or system; or (b) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market, the current market price shall be the higher of (x) the average of the closing bid and asked prices for the 20 trading days prior to the date of exercise of this Warrant on such market and (y) the last -8- reported bid price on the trading day immediately preceding such date on such market and if the Common Stock is not so traded, the current market price shall be the higher of (i) the mean of the last reported bid and asked prices reported by the NASD Over the Counter Bulletin Board for the 20 trading days prior to the date of the exercise of this Warrant and (ii) the last reported bid price on the trading day immediately preceding such date as reported by the NASD Over the Counter Bulletin Board; or (c) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market price shall be an amount determined in a reasonable manner by the Board of Directors of the Company. SECTION 12. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of Warrants shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of such Warrants for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the holder of Warrants, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Holder shall have exercised such Warrants and been issued shares of Common Stock in accordance with the provisions hereof. SECTION 13. RIGHTS OF ACTION. All rights of action with respect to this Agreement are vested in the respective Registered Holders of the Warrants, and any Registered Holder of a Warrant, without consent of the Company or of the holder of any other Warrant, may, on his own behalf and for his own benefit, enforce against the Company his right to exercise his Warrants for the purchase of shares of Common Stock in the manner provided in the Warrant Certificate and this Agreement. SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant Certificates evidencing the same shall thereupon be canceled by it and retired. SECTION 15. MODIFICATION OF AGREEMENT. The parties hereto may by supplemental agreement make any changes or corrections in this Agreement (i) that it shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; (ii) to reflect an increase in the number of Warrants which are to be governed by this Agreement resulting from an increase in the size of the Private Placement or the number of Warrants issued in connection with the Private Placement; (iii) to provide for a warrant agent for the Warrants; or (iv) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates. Except as set forth above, this Agreement shall not be modified, supplemented or altered in any respect except with the consent in writing of the Company and the holders of not less than 50% of the outstanding Warrants. SECTION 16. NOTICES. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed first class registered or certified mail, postage prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the address of such holder as shown on the registry books maintained by the Company in its capacity as warrant agent; if to the Company, OmniComm Systems, Inc., 2555 Davie Road, Suite 110-B, Davie, Florida 33317, Att: Chief Financial Officer; and if to Noesis, at Noesis Capital, 1801 Clint Moore Road, Suite 100, Boca Raton, FL, 33487, Attn: Cory Nass. SECTION 17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. SECTION 18. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company and Noesis (and their respective successors and assigns) and the holders from time to time of Warrant Certificates. Nothing in this Agreement is intended or shall be construed to confer upon any other person any right, remedy or claim, in equity or at law, or to impose upon any other person any duty, liability or obligation. -9- SECTION 19. TERMINATION. This Agreement shall terminate on the earlier to occur of (i) the close of business on the Expiration Date of all the Warrants; or (ii) the date upon which all Warrants have been exercised or called. SECTION 20. COUNTERPARTS. This Agreement may be executed in several counterparts, which taken together shall constitute a single document. -10- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. OMNICOMM SYSTEMS, INC. By: ------------------------------- Name: Cornelis Wit Title: President and CEO NOESIS CAPITAL CORP. By: ------------------------------- Name: Nico Letschert Title: President -11- THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT') OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE ACT AND/OR APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. No. ___________ ________Warrants VOID AFTER_____________, 2009 WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK OMNICOMM SYSTEMS, INC. This certifies that FOR VALUE RECEIVED ______________or registered assigns (the "Registered Holder") is the owner of the number of Warrants ("Warrants") specified above. Each Warrant initially entitles the Registered Holder to purchase, subject to the terms and conditions set forth in this Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and nonassessable share of common stock, par value $.001 per share ("Common Stock") of OmniComm Systems, Inc., a Delaware corporation (the "Company") at any time commencing on the Initial Warrant Exercise Date (as defined in the Warrant Agreement) and prior to the Expiration Date (as hereinafter defined), upon the presentation and surrender of this Warrant Certificate with the Subscription Form on the reverse hereof duly executed, at the corporate office of the Company, as warrant agent, or its successor (the "Warrant Agent"), accompanied by payment of an amount equal to $0.25 for each Warrant (the "Exercise Price") in lawful money of the United States of America in cash or by official bank or certified check or by check drawn on an account of Noesis or such other investment banks and brokerage houses as the Company shall approve, in each case made payable to OmniComm Systems, Inc. or a Notice of Exchange (as defined in the Warrant Agreement). The Company may, at its election, reduce the Exercise Price. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated March 29, 2002 by and among the Company and Noesis Capital Corp. In the event of certain contingencies provided for in the Warrant Agreement, the Exercise Price or the number of shares of Common Stock subject to purchase upon the exercise of each Warrant represented hereby are subject to modification or adjustment. The Warrants may be called by the Company under certain circumstances described in the Warrant Agreement. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional shares of Common Stock will be issued. In the case of the exercise of less than all the Warrants represented hereby, the Company shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor for the balance of such Warrants. The term "Expiration Date" shall mean 5:00 P.M. (New York time) on_March 29, 2009 or unless the Warrants are called by the Company prior to such date. If such date shall in the State of New York be a holiday or a day on which the banks are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York time) the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. The Company may, at its election, extend the Expiration Date. This Warrant Certificate is exchangeable, upon the surrender hereof by the Registered Holder at the corporate office of the Company, for a new Warrant Certificate or Warrant Certificates of like tenor representing an equal aggregate number of Warrants, each of such new Warrant Certificates to represent such number of Warrants as shall be designated by such Registered Holder at the time of such surrender. Upon due presentment with any tax or other governmental charge imposed in connection therewith, for registration of transfer of this Warrant Certificate at such office, a new Warrant Certificate or Warrant Certificates representing an equal aggregate number of Warrants will be issued to the transferee in exchange therefor, subject to the limitations provided in the Warrant Agreement. Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any of the rights of a stockholder of the Company, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. Prior to due presentment for registration of transfer hereof, the Company may deem and treat the Registered Holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notations of ownership or writing hereon made by anyone other than a duly authorized officer of the Company) for all purposes and the Company shall not be affected by any notice to the contrary. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Florida. -2- IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile, by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon. OMNICOMM SYSTEMS, INC. Dated:___________, 2002 By: --------------------------------- Name: Cornelis Wit Title: President and CEO [seal] By: --------------------------------- Name: Ronald Linares Title: Vice President and CFO SUBSCRIPTION FORM To Be Executed by the Registered Holder in Order to Exercise Warrants The undersigned Registered Holder hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER ------------------------------ ------------------------------ ------------------------------ ------------------------------ [please print or type name and address] and be delivered to ------------------------------ ------------------------------ ------------------------------ ------------------------------ [please print or type name and address] and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below. Dated: ---------------------------- X ---------------------------- Address: ---------------------------- ---------------------------- -------------------------------- Taxpayer Identification Number -------------------------------- Signature Guaranteed -3- ASSIGNMENT To Be Executed by the Registered Holder in Order to Assign Warrants FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER ------------------------------ ------------------------------ ------------------------------ ------------------------------ [please print or type name and address] _________________________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints ___________________________________ _______________________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises. Dated: ---------------------------- X ---------------------------- Signature Guaranteed - ----------------------------------- THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE. EX-4.3 5 g85073exv4w3.txt FORM OF 10% CONVERTIBLE NOTE EXHIBIT 4.3 CONVERTIBLE NOTE THIS NOTE AND THE COMMON STOCK INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS THAT TERM IN IS DEFINED IN REGULATION S UNDER THE ACT), UNLESS THEY ARE REGISTERED UNDER THE ACT AND UNDER THE LAWS OF THE STATES WHERE EACH SALE IS MADE, OR AN EXEMPTION FROM REGISTRATION REQUIREMENTS IS AVAILABLE IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY. FOR VALUE RECEIVED, OmniComm Systems, Inc., a Florida corporation (hereinafter called "Borrower"), hereby promises to pay to _____________(the "Holder") or order without demand, the sum of _________, with interest accruing at an annual rate of ten percent (10%), on June 30, 2004 (the "Maturity Date"), as such date may be extended by agreement of the parties hereto. This Convertible Note is issued pursuant to a subscription agreement by and between the Borrower and the Holder dated the date hereof (the "Subscription Agreement") the terms and conditions of which are hereby incorporated herein by this reference. The following terms shall apply to this Note: ARTICLE I DEFAULT REALTED PROVISIONS 1.1 PAYMENT GRACE PERIOD. The Borrower shall have a thirty (30) day grace period to pay any monetary amounts due under this Note. 1.2 CONVERSION PRIVILEGES. The Conversion Privileges set forth in Article II shall remain in full force and effect from the date of this Note until the Note principal and accrued interest is paid in full. 1.3 INTEREST RATE. Borrower shall pay interest on the outstanding principal amount of the Note (a) semi-annually on June 30th and December 31st of each year, and if either June 30th or December 31st of any year is not a business day then on the next succeeding business day (an "Interest Payment Date"), at a rate of 10% per annum or (b) at the option of the Holder made in writing to the Borrower at least 30 days prior to an Interest Payment Date, to be carried forward as accrued interest on the Note and paid on the next Interest Payment Date unless further deferred and, if there is no next Interest Payment Date, paid at the Maturity Date, accelerated or otherwise, at the annual rate of 10% per annum together with such principal payment. 1.4 INTEREST RATE ADJUSTMENT. In the event 50% of the cumulative Holder or Holders demand registration pursuant to such registration rights as set in the Subscription Agreement and the registration statement is not declared effective within 90 days after the date of notice of demand, then the interest rate on the Convertible Note beginning on the next quarter following expiration of the 90 day period, shall be increased to 15%, and shall remain at 15% until said registration statement is effective, at which time the interest rate shall revert back to 10%. -1- ARTICLE II CONVERSION RIGHTS 2.1 The Holder shall have the right to convert the principal amount and accrued and unpaid interest due under this Note into shares of the Borrower's Common Stock as set forth below. (a) RIGHT TO CONVERT. The holder of a Convertible Note may, at any time, without the payment of any additional consideration therefore, convert the then outstanding principal amount into that number of fully paid and nonassessable shares of common stock, $.001 par value, of the Corporation (the "Shares") as is determined by dividing the then outstanding principal amount by $1.25 ("Conversion Price"). (b) MECHANICS OF CONVERSION. No fractional Shares shall be issued upon conversion of the Convertible Note. If upon conversion of a Convertible Note held by a registered holder, such registered holder would, but for the provisions of this Section 2(b), receive a fraction of a Share, then in lieu of any such fractional share to which such holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Conversion Price. Before any holder of Convertible Notes shall be entitled to convert the same into full Shares, such holder shall surrender the Convertible Note or Convertible Notes therefor, duly endorsed, at the office of the Corporation or any transfer agent for the Convertible Note, and shall give written notice by facsimile or otherwise (the "Conversion Notice") to the Corporation at such office that such holder elects to convert the same and shall state therein such holder's name or the name of its nominees in which such holder wishes the certificate or certificates for Shares to be issued. The Corporation shall, as soon as practicable thereafter, but in any event within three business days of the date of its receipt of the Conversion Notice, issue and deliver or cause to be issued and delivered to such holder of a Convertible Note, or to its nominee or nominees, a certificate or certificates for the number of Shares to which such holder shall be entitled, together with cash in lieu of any fraction of a share. Such conversion shall be deemed to have been made on the date that the Corporation receives the Conversion Notice by facsimile or otherwise, and the person or persons entitled to receive the Shares upon conversion shall be treated for all purposes as the record holder or holders of such Shares on such date. (c) NOTICES OF RECORD DATE. In the event of (i) any declaration by the Corporation of a record date of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution or (ii) any capital reorganization of the Corporation, any classification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, and any transfer of all or substantially all of the assets of the Corporation to any other Corporation, or any other entity or person, or any voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the Corporation shall mail to each holder of a Convertible Note at least twenty (20) days prior to the record date specified therein, a notice specifying (A) the date on which any such record is to be declared for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (C) the time, if any, that is to be fixed, as to when the holders of record of common stock (or other securities) shall be entitled to exchange their Shares(or other securities) for securities or other property deliverable upon such reorganization, transfer, consolidation, merger, dissolution or winding up. (d) STOCK DIVIDENDS; STOCK SPLITS; ETC. In the event that the Corporation shall (i) take a record of holders of shares of the common stock for the purpose of determining the holders entitled to receive dividends payable in shares of common stock, (ii) subdivide the outstanding shares of common stock, (iii) combine the outstanding Shares into smaller number of shares or (iv) issue, by reclassification of the common stock, any other securities of the Corporation, then, in each such case, the Conversion Price then in effect shall be adjusted so that upon conversion of a Convertible Note then outstanding the number of Shares into which such Convertible Note are convertible after the happening of any of the events described in clauses (i) through (iv) above shall be the number of such Shares into which such shares would have been converted if so converted immediately after the happening of such event or any record date with respect thereto. -2- (e) COMMON STOCK RESERVED. The Corporation shall reserve and keep available out of its authorized but unissued common stock such numbers of Shares as shall from time to time be sufficient to effect conversion of all of the then outstanding shares of Convertible Note. In the event there are insufficient shares to effect a conversion, the Corporation shall increase the number of authorized shares to effect conversion. In the event shareholder approval is required to increase the authorized shares, the holder shall be entitled to vote with the holders of the common stock, as a single class, where each Convertible Note shall be entitled to that number of votes to which it would be entitled had all of the Convertible Note had been converted into Shares were notice of conversion given on the date of such vote. No sale or disposition of all or substantially all of the Corporation's assets shall take place without the approval of the holders of the Convertible Note, voting as a single class. (f) VOTING RIGHTS OF CONVERTIBLE NOTE HOLDERS. Except as provided for in Section 2(e), the holders of a Convertible Note shall not be entitled to vote on any matters submitted to the stockholders of the Corporation. (g) RANKING. The Convertible Note shall rank senior to any other class of capital stock of the Corporation now or hereafter issued as to the payment of dividends and the distribution of assets on redemption, liquidation, dissolution or winding up of the Corporation. ARTICLE III PREPAYMENT 3.1 PREPAYMENT AT THE OPTION OF THE BORROWER. The principal amount outstanding on the Note, and all interest accrued thereon, may be prepaid by the Borrower, in whole but not in part; provided, that written notice is delivered to the Holder not more than sixty (60) days nor less than thirty (30) days prior to the applicable prepayment date. Holder may exercise any rights or options it may nave hereunder up until any such prepayment is made. ARTICLE IV EVENTS OF DEFAULT 4.1 The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums or principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand, presentment of notice, or grace period, all of which hereby are expressly waived, except as set forth below: (a) FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails to pay any installment of principal or interest hereon when due and such failure continues for a period of thirty (30) days after written notice to the Borrower from the Holder. (b) BREACH OF COVENANT. The Borrower breaches any covenant or other term or condition of this Note and such breach continues for a period of ten (10) days after written notice to the Borrower from the Holder. (c) BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or warranty of the Borrower made herein, in the Subscription Agreement, or in any statement or certificate given in writing pursuant hereto or in connection herewith shall be false or misleading in any material respect. (d) RECEIVER OR TRUSTEE. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. -3- (e) JUDGMENTS. Any money judgment, writ or similar process shall be entered or filed against Borrower or any of its property or other assets for more than $25,000, and shall remain unvacated, unbonded or unstayed for a period of sixty (60) days. (f) BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation proceeding or other proceedings for relief under any bankruptcy law or any law for the relied of debtors shall be instituted by or against the Borrower. ARTICLE V MISCELLANEOUS 5.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedied existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 5.2 NOTICES. Any notice herein required or permitted to be given shall be in writing and may be personally served and shall be deemed to be delivered upon receipt or shall be deemed to have been given three (3) days after being deposited in the United States mail, certified, registered, with postage pre-paid and properly addressed or on receipt, or sent by fax transmission (with the original sent by certified or registered mail or by overnight courier) and shall be deemed to have been delivered on the day telecopied. Both Holder and Borrower may change the addresses and fax number for service of written or fax notice to the other as herein provided. 5.3 AMENDMENT PROVISIONS. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or later amended or supplemented, then as so amended or supplemented. 5.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. 5.5 COST OF COLLECTION. If default is made in the payment of this Note, Borrower shall pay the Holder hereof costs of collection, including attorney's fees. 5.6 GOVERNING LAW. This Note shall be governed by the internal laws of the State of Florida, without regard to the principles of conflict of laws. IN WITNESS WHEREOF, Borrower has caused this Note to be signed by the undersigned on this 26th day of March, 1999. OMNICOMM SYSTEMS, INC. By: --------------------------------- Peter S. Knezevich, Director and Chief Financial Officer -4- EX-4.4 6 g85073exv4w4.txt FORM OF PLACEMENT AGENT UNIT OPTION SERIES C EXHIBIT 4.4 THIS OPTION AND THE WARRANTS, SHARES OF COMMON STOCK AND SHARES OF PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS AND CONVERSION OF THE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE TRANSFERRED IN VIOLATION OF ANY APPLICABLE SECURITIES LAWS. THIS OPTION IS ALSO SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 3 HEREOF. THIS LEGEND SHALL BE ENDORSED UPON ANY OPTION ISSUED IN EXCHANGE FOR THIS OPTION AND, UNLESS SUCH SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, ON ANY WARRANTS, SHARES OF COMMON STOCK OR SHARES OF PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS OR UPON CONVERSION OF THE PREFERRED STOCK. OPTION TO PURCHASE UNITS CONSISTING OF WARRANTS AND PREFERRED STOCK OF OMNICOMM SYSTEMS, INC. This is to certify that, FOR VALUE RECEIVED, Commonwealth Associates, L.P. or assigns ("Holder"), is entitled to purchase, subject to the provisions of this Option, from Omnicomm Systems, Inc., a Delaware corporation (the "Company"), 0.75 Units, each Unit consisting of (a) 10,000 fully paid, validly issued and non-assessable shares (the "Preferred Shares") of Series B Convertible Preferred Stock of the Company ("Preferred Stock"), each share of Preferred Stock convertible into 40 shares of common stock, par value $.01 per share (the "Common Stock") and (b) 5-year warrants (the "Warrants") to purchase 400,000 shares of Common Stock at an exercise price of $.25 per share of Common Stock, at an exercise price of $100,000 per Unit (the "Exercise Price"). The number of Preferred Shares, the conversion rate of the Preferred Stock and the number of shares of Common Stock issuable upon exercise and the exercise price of the Warrants are subject to adjustment upon the occurrence of certain events as set forth in Section 5 hereof. This Option is exercisable at any time or from time to time during the five year period commencing on the date hereof and terminating at 5:00 p.m. New York City time on August 31, 2006 (the "Exercise Period"). The aggregate number shares of Common Stock issuable upon exercise of the Warrants and conversion of the Preferred Stock deliverable upon exercise of this Option, as adjusted from time to time, are hereinafter sometimes referred to as "Underlying Shares." This Option was originally issued pursuant to an Agency Agreement (the "Agency Agreement") dated August 31, 2001 between the Company and Commonwealth Associates, L.P. ("Commonwealth"), for nominal consideration. The shares of Preferred Stock issuable upon exercise of this Option are to be authorized and issued pursuant to the provisions of a Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock (the "Certificate of Designation") filed with the Secretary of State of the State of Delaware on August 31, 2001. The Warrants issuable upon exercise of this Option are to be authorized and issued pursuant to that certain Warrant Agreement, dated August 31, 2001, between the Company and Commonwealth (the "Warrant Agreement"). -1- (1) EXERCISE OF OPTION. (a) The rights represented by this Option may be exercised at any time during the Exercise Period, in whole or in part, by (i) the surrender of this Option (with the purchase form at the end hereof properly executed) at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company); and (ii) payment to the Company of the exercise price then in effect for the number of Units specified in the above-mentioned purchase form together with applicable stock transfer taxes, if any. This Option shall be deemed to have been exercised, in whole or in part to the extent specified, immediately prior to the close of business on the date this Option is surrendered and payment is made in accordance with the foregoing provisions of this Section 1, and the person or persons in whose name or names the certificates for the Preferred Shares and Warrants shall be issuable upon such exercise shall become the holder or holders of record of such Preferred Shares and Warrants at that time and date. The certificates for the Preferred Shares and Warrants so purchased shall be delivered to the Holder as soon as practicable but not later than seven (7) days after the rights represented by this Option shall have been so exercised. If this Option should be exercised in part only, the Company shall, upon surrender of this Option for cancellation, execute and deliver a new Option evidencing the rights of the Holder thereof to purchase the balance of the Units purchasable thereunder. (b) At any time during the Exercise Period, the Holder may, at its option, exchange this Option, in whole or in part (an "Option Exchange"), into the number of Units determined in accordance with this Section (b), by surrendering this Option at the principal office of the Company or at the office of its stock transfer agent, if any, accompanied by a notice stating such Holder's intent to effect such exchange, the number of Units subject to the Option Exchange and the date on which the Holder requests that such Option Exchange occur (the "Notice of Exchange"). The Option Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for the Preferred Shares and Warrants issuable upon such Option Exchange and, if applicable, a new Option of like tenor evidencing the balance of the Units remaining subject to this Option, shall be issued as of the Exchange Date and delivered to the Holder within seven (7) days following the Exchange Date. In connection with any Option Exchange, this Option shall represent the right to subscribe for and acquire the number of Units (rounded to the next highest integer) equal to (x) the number of Units specified by the Holder in its Notice of Exchange up to the maximum number of Units subject to this Option (the "Total Number") less (y) the number of Units equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price by (B) the Fair Market Value of a Unit. "Fair Market Value of a Unit" shall by the sum of the current market value of the Underlying Shares represented by such Unit (as adjusted in accordance with Section 5 hereof) less the exercise price associated with the exercise of the Warrants which are part of such Unit. The current market value of the Underlying Shares of Common Stock shall be determined as follows: (i) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market System ("NMS"), the current market value shall be the average of the last reported sale price on such exchange or system for the 10 trading days prior to the Exchange Date; provided that if no sale is made on a day within such period or no closing sale price is quoted, that day's market value shall be the average of the closing bid and asked prices for such day on such exchange or system; or (ii) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market, the current market value shall be the average of the closing bid and asked prices for the 10 trading days prior to the Exchange Date on such market and if the Common Stock is not so traded, the current market value shall be the mean of the last reported bid and asked prices reported by the NASD Electronic Bulletin Board for the 10 trading days prior to the Exchange Date; or -2- (iii) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount determined in a reasonable manner by the Board of Directors of the Company. (2) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Option such number of shares of its Preferred Stock and the number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Option in full and the exercise in full of the Warrants and conversion of all the shares of Preferred Stock issuable upon exercise of this Option. (3) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF OPTION. This Option is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Options of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Preferred Stock and Warrants purchasable hereunder. This Option may be assigned or transferred only to a direct or indirect affiliate of Commonwealth or an employee of or consultant to Commonwealth (a "Permitted Transferee"). Upon surrender of this Option to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Option in the name of the Permitted Transferee named in such instrument of assignment and this Option shall promptly be canceled. This Option may be divided or combined with other Options which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Options are to be issued and signed by the Holder hereof. The term "Option" as used herein includes any Options into which this Option may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Option, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Option, if mutilated, the Company will execute and deliver a new Option of like tenor and date. Any such new Option executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Option so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (4) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Option and are not enforceable against the Company except to the extent set forth herein. (5) ANTI-DILUTION PROVISIONS. (a) Upon exercise of this Option, the terms of the shares of Preferred Stock and Warrants issuable hereunder shall be adjusted to give effect to any anti-dilution adjustments which would have been made pursuant to Section 7 of the Certificate of Designation or Section 8 of the Warrant Agreement, as the case may be, if such shares of Preferred Stock and Warrants had been issued on the date hereof it being the intent of the parties that the shares of Preferred Stock and Warrants issuable upon exercise of this Option shall be convertible into or exercisable for the number of shares of Common Stock or such other securities, and at an exercise price, as the holder hereof would have received had this Option been exercised and the Preferred Stock and Warrants been issued on the date hereof. (b) In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding shares of Preferred Stock in shares of Preferred Stock, (ii) subdivide or reclassify its outstanding shares of Preferred Stock into a greater number of shares, (iii) combine or reclassify its outstanding shares of Preferred Stock into a smaller number of shares, (iv) effect any other reclassification, capital reorganization or change of outstanding shares of Preferred Stock, (v) consolidate or merge the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Preferred Stock) or (vi) sell, lease or convey to another corporation all or substantially all of the property of the Company (collectively, a "Transaction"), the Company shall, as a condition precedent to such transaction, -3- cause effective provisions to be made so that upon exercise of this Option the Holder shall receive the kind and amount of securities and property which would have been received by such Holder had this Option been exercised, and, if applicable, the Preferred Stock converted and the Warrants exercised, immediately prior to such Transaction and the Holder received the benefits conferred on the holders of such securities and property as a result of such Transaction. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Option. (c) If any event or condition occurs as to which other provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the exercise or purchase rights of Options and the Preferred Stock and Warrants issuable hereunder in accordance with the essential intent and principles of such provisions, or which might materially and adversely affect the exercise or purchase rights of the Holder hereunder, then the Company shall make an adjustment in the application of such provisions, or if necessary the applicable provisions of the Preferred Stock and Warrants, so as to preserve without dilution the rights of the Holder. In no event shall any adjustment under this paragraph 5 have the effect of increasing the Exercise Price of this Option. (6) NOTICES. (a) Whenever this Option shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjustments determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. (b) So long as this Option shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Preferred Stock or Common Stock or (ii) if the Company shall offer to the holders of Preferred Stock or Common Stock for subscription or purchase by them any share of any class or any other rights, (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, or (iv) if the Company is required to notify the holders of Preferred Stock pursuant to the terms of the Certificate of Designation or the holders of warrants pursuant to the terms of the Warrant Agreement or for any reason determines to notify the holders of Preferred Stock or such warrants, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, in the case of (i), (ii) or (iii) above, at least fifteen days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Preferred Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or in the case of (iv) on the date such notice is sent to the holders of Preferred Stock or warrants. (7) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company agrees to register the Underlying Shares for resale under the Securities Act of 1933, as amended (the "Act") on the terms and subject to the conditions set forth in Annex A to the Subscription Agreement between the Company and each of the investors in the offering contemplated by the Agency Agreement, it being the intent of the parties that the holder of this Option shall have all the rights of a holder of Securities under Annex A to the Subscription Agreement and that the Underlying Shares shall be treated as "Conversion Shares" and "Warrant Shares" under Annex A to the Subscription Agreement. -4- (8) GOVERNING LAW. This Option shall be governed by and in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. OMNICOMM SYSTEMS, INC. By: ------------------------------- Dated: , 2001 Name: ---------------- Title: -5- PURCHASE FORM Dated ________________ The undersigned hereby irrevocably elects to exercise the within Option to the extent of purchasing _______ Units and hereby [ ] makes payment of $_______ in payment of the actual exercise price thereof or [ ] elects to effect an Option Exchange in accordance with Section 1(b) on _______ [DATE]. INSTRUCTIONS FOR REGISTRATION OF UNITS Name ------------------------------------- (Please typewrite or print in block letters) Address --------------------------------- Signature -------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, _____________ hereby sells, assigns and transfers unto Name ------------------------------------- (Please typewrite or print in block letters) Address --------------------------------- the right to purchase Preferred Stock and Warrants represented by this Option to the extent of _____Units as to which such right is exercisable and does hereby irrevocably constitute and appoint ______ as Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date ------------------------------------- Signature --------------------------------- EX-4.5 7 g85073exv4w5.txt FORM OF PLACEMENT AGENT UNIT OPTION - SERIES C EXHIBIT 4.5 THIS OPTION AND THE WARRANTS, SHARES OF COMMON STOCK AND SHARES OF PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS AND CONVERSION OF THE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE TRANSFERRED IN VIOLATION OF ANY APPLICABLE SECURITIES LAWS. THIS OPTION IS ALSO SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 3 HEREOF. THIS LEGEND SHALL BE ENDORSED UPON ANY OPTION ISSUED IN EXCHANGE FOR THIS OPTION AND, UNLESS SUCH SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, ON ANY WARRANTS, SHARES OF COMMON STOCK OR SHARES OF PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS OR UPON CONVERSION OF THE PREFERRED STOCK. OPTION TO PURCHASE UNITS CONSISTING OF WARRANTS AND PREFERRED STOCK OF OMNICOMM SYSTEMS, INC. This is to certify that, FOR VALUE RECEIVED, Noesis Capital Corp. or assigns ("Holder"), is entitled to purchase, subject to the provisions of this Option, from OmniComm Systems, Inc., a Delaware corporation (the "Company"), 2.48475 Units, each Unit consisting of (a) 10,000 fully paid, validly issued and non-assessable shares (the "Preferred Shares") of Series C Convertible Preferred Stock of the Company ("Preferred Stock"), each share of Preferred Stock convertible into 40 shares of common stock, par value $.01 per share (the "Common Stock") and (b) 5-year warrants (the "Warrants") to purchase 200,000 shares of Common Stock at an exercise price of $.25 per share of Common Stock, at an exercise price of $100,000 per Unit (the "Exercise Price"). The number of Preferred Shares, the conversion rate of the Preferred Stock and the number of shares of Common Stock issuable upon exercise and the exercise price of the Warrants are subject to adjustment upon the occurrence of certain events as set forth in Section 5 hereof. This Option is exercisable at any time or from time to time during the five year period commencing on the date hereof and terminating at 5:00 p.m. New York City time on March 31, 2008 (the "Exercise Period"). The aggregate number shares of Common Stock issuable upon exercise of the Warrants and conversion of the Preferred Stock deliverable upon exercise of this Option, as adjusted from time to time, are hereinafter sometimes referred to as "Underlying Shares." This Option was originally issued pursuant to an Agency Agreement (the "Agency Agreement") dated March 29, 2002 between the Company and Noesis Capital Corp. ("Noesis"), for nominal consideration. The shares of Preferred Stock issuable upon exercise of this Option are to be authorized and issued pursuant to the provisions of a Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock (the "Certificate of Designation") filed with the Secretary of State of the State of Delaware on March 27, 2002. The Warrants issuable upon exercise of this Option are to be authorized and issued pursuant to that certain Warrant Agreement, dated March 29, 2002, between the Company and Noesis (the "Warrant Agreement"). (1) EXERCISE OF OPTION. (a) The rights represented by this Option may be exercised at any time during the Exercise Period, in whole or in part, by (i) the surrender of this Option (with the purchase form at the end hereof properly executed) at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company); and (ii) payment to the Company of the exercise price then in effect for the number of Units specified in the above-mentioned purchase form together with applicable stock transfer taxes, if any. This Option shall be deemed to have been exercised, in whole or in part to the extent specified, immediately prior to the close of business on the date this Option is surrendered and payment is made in accordance with the foregoing provisions of this Section 1, and the person or persons in whose name or names the certificates for the Preferred Shares and Warrants shall be issuable upon such exercise shall become the holder or holders of record of such Preferred Shares and Warrants at that time and date. The certificates for the Preferred Shares and Warrants so purchased shall be delivered to the Holder as soon as practicable but not later than seven (7) days after the rights represented by this Option shall have been so exercised. If this Option should be exercised in part only, the Company shall, upon surrender of this Option for cancellation, execute and deliver a new Option evidencing the rights of the Holder thereof to purchase the balance of the Units purchasable thereunder. (b) At any time during the Exercise Period, the Holder may, at its option, exchange this Option, in whole or in part (an "Option Exchange"), into the number of Units determined in accordance with this Section (b), by surrendering this Option at the principal office of the Company or at the office of its stock transfer agent, if any, accompanied by a notice stating such Holder's intent to effect such exchange, the number of Units subject to the Option Exchange and the date on which the Holder requests that such Option Exchange occur (the "Notice of Exchange"). The Option Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for the Preferred Shares and Warrants issuable upon such Option Exchange and, if applicable, a new Option of like tenor evidencing the balance of the Units remaining subject to this Option, shall be issued as of the Exchange Date and delivered to the Holder within seven (7) days following the Exchange Date. In connection with any Option Exchange, this Option shall represent the right to subscribe for and acquire the number of Units (rounded to the next highest integer) equal to (x) the number of Units specified by the Holder in its Notice of Exchange up to the maximum number of Units subject to this Option (the "Total Number") less (y) the number of Units equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price by (B) the Fair Market Value of a Unit. "Fair Market Value of a Unit" shall by the sum of the current market value of the Underlying Shares represented by such Unit (as adjusted in accordance with Section 5 hereof) less the exercise price associated with the exercise of the Warrants which are part of such Unit. The current market value of the Underlying Shares of Common Stock shall be determined as follows: (i) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market System ("NMS"), the current market value shall be the average of the last reported sale price on such exchange or system for the 10 trading days prior to the Exchange Date; provided that if no sale is made on a day within such period or no closing sale price is quoted, that day's market value shall be the average of the closing bid and asked prices for such day on such exchange or system; or (ii) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market, the current market value shall be the average of the closing bid and asked prices for the 10 trading days prior to the Exchange Date on such market and if the Common Stock is not so traded, the current market value shall be the mean of the last reported bid and asked prices reported by the NASD Electronic Bulletin Board for the 10 trading days prior to the Exchange Date; or (iii) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount determined in a reasonable manner by the Board of Directors of the Company. -2- (2) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Option such number of shares of its Preferred Stock and the number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Option in full and the exercise in full of the Warrants and conversion of all the shares of Preferred Stock issuable upon exercise of this Option. (3) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF OPTION. This Option is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Options of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Preferred Stock and Warrants purchasable hereunder. This Option may be assigned or transferred only to a direct or indirect affiliate of Noesis or an employee of or consultant to Noesis (a "Permitted Transferee"). Upon surrender of this Option to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Option in the name of the Permitted Transferee named in such instrument of assignment and this Option shall promptly be canceled. This Option may be divided or combined with other Options which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Options are to be issued and signed by the Holder hereof. The term "Option" as used herein includes any Options into which this Option may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Option, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Option, if mutilated, the Company will execute and deliver a new Option of like tenor and date. Any such new Option executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Option so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (4) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Option and are not enforceable against the Company except to the extent set forth herein. (5) ANTI-DILUTION PROVISIONS. (a) Upon exercise of this Option, the terms of the shares of Preferred Stock and Warrants issuable hereunder shall be adjusted to give effect to any anti-dilution adjustments which would have been made pursuant to Section 7 of the Certificate of Designation or Section 8 of the Warrant Agreement, as the case may be, if such shares of Preferred Stock and Warrants had been issued on the date hereof it being the intent of the parties that the shares of Preferred Stock and Warrants issuable upon exercise of this Option shall be convertible into or exercisable for the number of shares of Common Stock or such other securities, and at an exercise price, as the holder hereof would have received had this Option been exercised and the Preferred Stock and Warrants been issued on the date hereof. -3- (b) In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding shares of Preferred Stock in shares of Preferred Stock, (ii) subdivide or reclassify its outstanding shares of Preferred Stock into a greater number of shares, (iii) combine or reclassify its outstanding shares of Preferred Stock into a smaller number of shares, (iv) effect any other reclassification, capital reorganization or change of outstanding shares of Preferred Stock, (v) consolidate or merge the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Preferred Stock) or (vi) sell, lease or convey to another corporation all or substantially all of the property of the Company (collectively, a "Transaction"), the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that upon exercise of this Option the Holder shall receive the kind and amount of securities and property which would have been received by such Holder had this Option been exercised, and, if applicable, the Preferred Stock converted and the Warrants exercised, immediately prior to such Transaction and the Holder received the benefits conferred on the holders of such securities and property as a result of such Transaction. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Option. (c) If any event or condition occurs as to which other provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the exercise or purchase rights of Options and the Preferred Stock and Warrants issuable hereunder in accordance with the essential intent and principles of such provisions, or which might materially and adversely affect the exercise or purchase rights of the Holder hereunder, then the Company shall make an adjustment in the application of such provisions, or if necessary the applicable provisions of the Preferred Stock and Warrants, so as to preserve without dilution the rights of the Holder. In no event shall any adjustment under this paragraph 5 have the effect of increasing the Exercise Price of this Option. (6) NOTICES. (a) Whenever this Option shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjustments determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. (b) So long as this Option shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Preferred Stock or Common Stock or (ii) if the Company shall offer to the holders of Preferred Stock or Common Stock for subscription or purchase by them any share of any class or any other rights, (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or -4- substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, or (iv) if the Company is required to notify the holders of Preferred Stock pursuant to the terms of the Certificate of Designation or the holders of warrants pursuant to the terms of the Warrant Agreement or for any reason determines to notify the holders of Preferred Stock or such warrants, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, in the case of (i), (ii) or (iii) above, at least fifteen days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Preferred Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or in the case of (iv) on the date such notice is sent to the holders of Preferred Stock or warrants. (7) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company agrees to register the Underlying Shares for resale under the Securities Act of 1933, as amended (the "Act") on the terms and subject to the conditions set forth in Annex A to the Subscription Agreement between the Company and each of the investors in the offering contemplated by the Agency Agreement, it being the intent of the parties that the holder of this Option shall have all the rights of a holder of Securities under Annex A to the Subscription Agreement and that the Underlying Shares shall be treated as "Conversion Shares" and "Warrant Shares" under Annex A to the Subscription Agreement. (8) GOVERNING LAW. This Option shall be governed by and in accordance with the laws of the State of Florida, without giving effect to the principles of conflicts of law thereof. OMNICOMM SYSTEMS, INC. By: Dated ----------------------- -------------- Name: Title: -5- PURCHASE FORM Dated ________________ The undersigned hereby irrevocably elects to exercise the within Option to the extent of purchasing __________ Units and hereby [ ] makes payment of $_______ in payment of the actual exercise price thereof or [ ] elects to effect an Option Exchange in accordance with Section 1(b) on _______ [DATE]. INSTRUCTIONS FOR REGISTRATION OF UNITS Name ----------------------------------------- (Please typewrite or print in block letters) Address ------------------------------------- Signature ------------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, _____________ hereby sells, assigns and transfers unto Name ----------------------------------------- (Please typewrite or print in block letters) Address ------------------------------------- the right to purchase Preferred Stock and Warrants represented by this Option to the extent of _____Units as to which such right is exercisable and does hereby irrevocably constitute and appoint ______ as Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date --------------------------------- Signature --------------------------------- EX-5.1 8 g85073exv5w1.txt OPINION OF KATZ, BARRON, SQUITERO, FAUST & BOYD EXHIBIT 5.1 KATZ, BARRON, SQUITERO, FAUST & BOYD, P.A. 100 N.E. Third Avenue Suite 280 Fort Lauderdale, Florida 33301 September 26, 2003 OmniComm Systems, Inc. 2555 Davie Road Suite 110-B Davie, FL 33317 Re: Registration Statement on Form SB-2 ("Registration Statement"); OmniComm Systems, Inc. (the "Company") Gentlemen: This opinion is submitted pursuant to the applicable rules of the Securities and Exchange Commission with respect to the registration for public sale of 39,879,850 shares of common stock, $.001 par value per share ("Common Stock"), including shares of Common Stock issuable upon conversion of Series B Preferred Stock and Series C Preferred Stock, and exercise of common stock purchase warrants and Placement Agent Unit Options. In connection therewith, we have examined and relied upon original, certified, conformed, photostat or other copies of (a) the Articles of Incorporation, as amended, and Bylaws of the Company; (b) resolutions of the Board of Directors of the Company authorizing the issuance of the Common Stock and related matters; (c) the Registration Statement and the exhibits thereto; and (d) such other matters of law as we have deemed necessary for the expression of the opinion herein contained. In all such examinations, we have assumed the genuineness of all signatures on original documents, and the conformity to originals or certified documents of all copies submitted to us as conformed, photostat or other copies. In passing upon certain corporate records and documents of the Company, we have necessarily assumed the correctness and completeness of the statements made or included therein by the Company, and we express no opinion thereon. As to the various questions of fact material to this opinion, we have relied, to the extent we deemed reasonably appropriate, upon representations or certificates of officers or directors of the Company and upon documents, records and instruments furnished to us by the Company, without independently checking or verifying the accuracy of such documents, records and instruments. We are members of the Bar of the State of Florida and express no opinion on any law other than the laws of the State of Florida applicable to Federal Securities laws. Based upon and subject to the foregoing, we are of the opinion that the shares of Common Stock have been duly and validly authorized, and when issued and paid for in accordance with their terms will be fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to use our name under the caption "Legal Matters" in the prospectus comprising part of the Registration Statement. Sincerely, /s/ KATZ, BARRON, SQUITERO, FAUST & BOYD, P.A. ---------------------------------------------- KATZ, BARRON, SQUITERO, FAUST EX-10.8 9 g85073exv10w8.txt AMENDMENT TO EMPLOYMENT AGEEMENT W/WIT EXHIBIT 10.8 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT dated as of August 22, 2003 by and between Omnicomm Systems, Inc. (the "Company"), a Delaware corporation, and Cornelis Wit (the "Executive"). 1. Reference is hereby made to that certain Employment Agreement (the "Employment Agreement") dated June 1, 2002 by and between the Company and Executive. All terms used herein and not otherwise defined herein shall have the same meaning as set forth in the Employment Agreement. 2. Paragraph 2 of the Employment Agreement shall be amended in its entirety to read as follows: "Term and Termination. This Agreement shall commence on June 1, 2002 and shall terminate as of the earlier of: (a) December 31, 2004, unless extended by the Company; (b) the death or disability of the Executive. Disability shall mean the Executive's inability, due to sickness or injury, to perform effectively his duties hereunder for a period of at least 90 consecutive days; (c) thirty (30) days after notice is given by the Company to the Executive after a material breach hereof by the Executive; or, (d) thirty (30) days after notice is given by the Executive to the Company after a material breach hereof by the Company. The exercise of the Company's or the Executive's right to terminate this Agreement pursuant to clause (c) or (d) hereof, as the case may be, shall not abrogate the rights and remedies of the terminating party in respect of the breach giving rise to such termination. 3. Except as otherwise amended hereby the terms and conditions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first hereinabove written. OMNICOMM SYSTEMS, INC. BY: /s/ RANDALL SMITH ------------------------------- Name: Randall Smith Title: Chairman of the Board EXECUTIVE: /s/ CORNELIS WIT - -------------------- Cornelis Wit EX-23.1 10 g85073exv23w1.txt CONSENT OF GREENBERG & COMPANY CPA'S, LLC EXHIBIT 23.1 INDEPENDENT AUDITOR'S CONSENT To the Board of Directors Omnicomm Systems, Inc. We consent to the use in this Registration Statement of Omnicomm Systems, Inc. on Form SB-2 of our report dated March 21, 2003, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ GREENBERG & COMPANY CPA'S LLC - --------------------------------- Greenberg & Company CPA's LLC Springfield, N.J. September , 2003 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     EXHIBIT 4.1


                                WARRANT AGREEMENT

         AGREEMENT, dated as of this ____ day of August 2001, by and among
OMNICOMM SYSTEMS, INC., a Delaware corporation (the "Company") and COMMONWEALTH
ASSOCIATES, L.P., a New York limited partnership ("Commonwealth").

                               W I T N E S S E T H

         WHEREAS, in connection with a private placement (the "Private
Placement") of up to a maximum of 200,000 shares of Series B Convertible
Preferred Stock (the "Preferred Shares"), the Company will issue warrants (the
"Warrants") to purchase up to an aggregate of 8,000,000 shares of Common Stock;

         WHEREAS, in connection with the Private Placement the Company may issue
to the placement agent an option (the "Placement Agent Option") to purchase up
to an additional 30,000 Preferred Shares and Warrants to purchase up to an
additional 1,200,000 shares of Common Stock.

         NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the parties hereto agree as follows:

         SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:

                  (a) "Common Stock" shall mean common stock of the Company of
         any class, whether now or hereafter authorized, which has the right to
         participate in the distributions of earnings and assets of the Company
         without limit as to amount or percentage, which at the date hereof
         consists of 20,000,000 authorized shares of Common Stock, par value
         $.001 per share (to be increased to 60,000,000 shares upon the
         Amendment Date (as defined below)).

                  (b) "Corporate Office" shall mean the office of the Company in
         its capacity as warrant agent (or its successor) at which at any
         particular time its principal business shall be administered, which
         office is currently located at 3250 Mary Street, Suite 402, Miami,
         Florida 33133.

                  (c) "Exercise Date" shall mean, as to any Warrant, the date on
         which the Company shall have received both (a) the Warrant Certificate
         representing such Warrant, with the exercise form thereon duly executed
         by the Registered Holder thereof or his attorney duly authorized in
         writing, and (b) either payment in cash, or by official bank or
         certified check or by check drawn on an account of Commonwealth or such
         other investment banks and brokerage houses as the Company shall
         approve, in each case made payable to the Company, of an amount in
         lawful money of the United States of America equal to the Exercise
         Price or a Notice of Exchange.

                  (d) "Exercise Price" shall mean the purchase price to be paid
         upon exercise of each Warrant in accordance with the terms hereof,
         which price shall initially be $0.25 per share and which price shall be
         subject to adjustment from time to time pursuant to the provisions of
         Section 8 hereof and subject to the Company's right to reduce the
         applicable Exercise Price upon notice to all warrantholders.

                  (e) "Initial Warrant Exercise Date" shall mean the earlier of
         (i) January 31, 2002, and (ii) the close of business on the date
         ("Amendment Date") that the Company files with the Secretary of State
         of the State of Delaware an amendment to the Company's Certificate of
         Incorporation increasing the authorized number of shares of Common
         Stock to at least 60 million shares.



                                      -1-


                  (f) "Registered Holder" shall mean the person in whose name
         any certificate representing Warrants shall be registered on the books
         maintained by the Company pursuant to Section 6.

                  (g) "Transfer Agent" shall mean Jersey Transfer & Trust
         Company as the Company's transfer agent, or its authorized successor,
         as such.

                  (h) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
         time) on the earlier of _______ __, 2006 or the Call Date (as defined
         in Section 9); provided that if such date shall in the State of New
         York be a holiday or a day on which banks are authorized to close, then
         5:00 P.M. (New York time) on the next following day which in the State
         of New York is not a holiday or a day on which banks are authorized to
         close. Upon notice to all warrantholders the Company shall have the
         right to extend the Warrant Expiration Date.

                  (i) "Warrant Shares" shall mean the shares of Common Stock
         deliverable upon exercise of the Warrants, as adjusted from time to
         time pursuant to the provisions hereof.

         SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.

                  (a) A Warrant shall initially entitle the Registered Holder of
         the Warrant Certificate representing such Warrant to purchase one share
         of Common Stock upon the exercise thereof, in accordance with the terms
         hereof, subject to modification and adjustment as provided in Section
         8.

                  (b) From time to time, up to the Warrant Expiration Date, the
         Transfer Agent shall execute and deliver stock certificates in required
         whole number denominations representing up to an aggregate of 9,200,000
         shares of Common Stock, subject to adjustment as described herein, upon
         the exercise of Warrants in accordance with this Agreement.

                  (c) From time to time, up to the Warrant Expiration Date, the
         Company shall execute and deliver Warrant Certificates in required
         whole number denominations to the persons entitled thereto in
         connection with any transfer or exchange permitted under this
         Agreement; provided that no Warrant Certificates shall be issued except
         (i) those initially issued hereunder, those issued hereunder on any
         subsequent closing of the Private Placement and those issued upon
         exercise of any Placement Agent Option; (ii) those issued on or after
         the Initial Warrant Exercise Date, upon the exercise of fewer than all
         Warrants represented by any Warrant Certificate, to evidence any
         unexercised Warrants held by the exercising Registered Holder; (iii)
         those issued upon any transfer or exchange pursuant to Section 6; (iv)
         those issued in replacement of lost, stolen, destroyed or mutilated
         Warrant Certificates pursuant to Section 7; and (v) those issued at the
         option of the Company, in such form as may be approved by its Board of
         Directors, to reflect (a) any adjustment or change in the Exercise
         Price or the number of shares of Common Stock purchasable upon exercise
         of the Warrants made pursuant to Section 8 hereof, and (b) other
         modifications approved in accordance with Section 15 hereof.

         SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.

                  (a) The Warrant Certificates for the Warrants, shall be
         substantially in the form annexed hereto as Exhibit A (the provisions
         of which are hereby incorporated herein) and may have such letters,
         numbers or other marks of identification or designation and such
         legends, summaries or endorsements printed, lithographed, engraved or
         typed thereon as the Company may deem appropriate and as are not
         inconsistent with the provisions of this Agreement, or as may be
         required to comply with any law or with any rule or regulation made
         pursuant thereto or with any rule or regulation of any stock exchange
         on which the Warrants may be listed, or to conform to usage. The
         Warrant Certificates shall be dated the date of issuance thereof
         (whether upon initial issuance, transfer, exchange or in lieu of
         mutilated, lost, stolen, or destroyed Warrant Certificates) and issued
         in registered form. The Warrants shall be numbered serially with the
         letters PW.

                  (b) Warrant Certificates shall be executed on behalf of the
         Company by its Chairman of the Board, Chief Executive Officer,
         President or any Vice President and by its Chief Financial Officer,
         Secretary or an Assistant Secretary and shall have imprinted thereon a
         facsimile of the Company's seal. In case any officer of the Company who
         shall have signed any of the Warrant Certificates shall cease to be
         such officer of the Company before the date of issuance of the Warrant


                                      -2-


         Certificates and delivery thereof, such Warrant Certificates may
         nevertheless be issued and delivered with the same force and effect as
         though the person who signed such Warrant Certificates had not ceased
         to be such officer of the Company. After execution by the Company,
         Warrant Certificates shall be delivered by the Company to the
         Registered Holder.

         SECTION 4. EXERCISE.

                  (a) Each Warrant may be exercised by the Registered Holder
         thereof at any time on or after the Initial Warrant Exercise Date, but
         not after the Warrant Expiration Date, upon the terms and subject to
         the conditions set forth herein and in the applicable Warrant
         Certificate. A Warrant shall be deemed to have been exercised
         immediately prior to the close of business on the Exercise Date and the
         person entitled to receive the securities deliverable upon such
         exercise shall be treated for all purposes as the holder upon exercise
         thereof as of the close of business on the Exercise Date. As soon as
         practicable on or after the Exercise Date the Company shall cause to be
         issued and delivered by the Transfer Agent, to the person or persons
         entitled to receive the same, a certificate or certificates for the
         securities deliverable upon such exercise, (plus a certificate for any
         remaining unexercised Warrants of the Registered Holder).

                  (b) The Board of Directors has approved and determined to
         submit to stockholders a certificate of amendment to the Company's
         Certificate of Incorporation to increase the number of shares of
         authorized Common Stock to 60,000,000 shares (the "Proposed Charter
         Amendment"). It is understood that if the Proposed Charter Amendment is
         not filed with the Secretary of State of Delaware by the Initial
         Warrant Exercise Date, after reserving the number of shares of Common
         Stock issuable upon conversion of the Series B Preferred Stock sold in
         the Private Placement, including the Series B Preferred Stock
         underlying the Placement Agent Option, the Company may not have a
         sufficient number of shares of Common Stock authorized and available
         for issuance upon exercise of this Warrant. Therefore, prior to the
         filing of the Proposed Charter Amendment, a holder of this Warrant
         shall be allowed to exercise this Warrant for only that number of
         shares of Common Stock equal to the product of the number of
         authorized, unissued and unreserved shares of Common Stock on the date
         of exercise multiplied by a fraction, the numerator of which is the
         total number of Warrant Shares issuable upon exercise of the Warrant
         held by such holder and the denominator of which is the total number of
         Warrant Shares issuable upon exercise of the Warrants sold in the
         Private Placement, including the Placement Agent Option.

                  (c) The Registered Holder may, at its option, at any time on
         or after the Initial Warrant Exercise Date, exchange Warrants on a
         cashless basis, in whole or in part (a "Warrant Exchange"), for the
         number of Warrant Shares determined in accordance with this Section
         (4)(c), by surrendering the Warrant Certificate at the principal office
         of the Company, accompanied by a notice stating such Registered
         Holder's intent to effect such exchange, the number of Warrants to be
         exchanged and the date on which the Registered Holder requests that
         such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
         Exchange shall take place on the date specified in the Notice of
         Exchange or, if later, the date the Notice of Exchange is received by
         the Company (the "Exchange Date"). Certificates for the shares issuable
         upon such Warrant Exchange and, if applicable, a new Warrant
         Certificate of like tenor evidencing the balance of the Warrants
         remaining subject to the surrendered Warrant Certificate, shall be
         issued as of the Exchange Date and delivered to the Registered Holder
         within seven (7) days following the Exchange Date. In connection with
         any Warrant Exchange, a Warrant Certificate shall represent the right
         to subscribe for and acquire the number of Warrant Shares (rounded to
         the next highest integer) equal to (i) the number of Warrants specified
         by the Registered Holder in its Notice of Exchange (the "Total Number")
         less (ii) the number of Warrant Shares equal to the quotient obtained
         by dividing (A) the product of the Total Number and the existing
         Exercise Price by (B) the current market price of a share of Common
         Stock. Current market price shall have the meaning set forth Section 11
         hereof, except that for purposes hereof, the date of exercise, as used
         in such Section 11 hereof, shall mean the Exchange Date.

         SECTION 5. RESERVATION OF SHARES; BLUE SKY APPROVALS; PAYMENT OF TAXES.

                  (a) Subject to Section 4(b) above, the Company covenants that
         it will at all times following the Initial Warrant Exercise Date
         reserve and keep available out of its authorized Common Stock, solely
         for the purpose of issue upon exercise of Warrants, such number of


                                      -3-


         shares of Common Stock as shall then be issuable upon the exercise of
         all outstanding Warrants. The Company covenants that all shares of
         Common Stock which shall be issuable upon exercise of the Warrants and
         payment of the Exercise Price shall, at the time of delivery, be duly
         and validly issued, fully paid, nonassessable and free from all taxes,
         liens and charges with respect to the issue thereof (other than those
         which the Company shall promptly pay or discharge).

                  (b) The Company will use reasonable efforts to obtain
         appropriate approvals or registrations under state "blue sky"
         securities laws with respect to the exercise of the Warrants; provided,
         however, that the Company shall not be obligated to file any general
         consent to service of process or qualify as a foreign corporation in
         any jurisdiction. With respect to any such securities laws, however,
         Warrants may not be exercised by, or shares of Common Stock issued to,
         any Registered Holder in any state in which such exercise would be
         unlawful.

                  (c) The Company shall pay all documentary, stamp or similar
         taxes and other governmental charges that may be imposed with respect
         to the issuance of Warrants, or the issuance, or delivery of any shares
         upon exercise of the Warrants; provided, however, that if the shares of
         Common Stock are to be delivered in a name other than the name of the
         Registered Holder of the Warrant Certificate representing any Warrant
         being exercised, then no such delivery shall be made unless the person
         requesting the same has paid to the Company the amount of transfer
         taxes or charges incident thereto, if any.

         SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER. Subject to the
restrictions on transfer contained in the Warrant Certificates and the
Subscription Agreement(s) between the Company and each of the investors in the
Private Placement:

                  (a) Warrant Certificates may be exchanged for other Warrant
         Certificates representing an equal aggregate number of Warrants or may
         be transferred in whole or in part. Warrant Certificates to be
         exchanged shall be surrendered to the Company at its Corporate Office,
         and upon satisfaction of the terms and provisions hereof, the Company
         shall execute, issue and deliver in exchange therefor the Warrant
         Certificate or Certificates which the Registered Holder making the
         exchange shall be entitled to receive.

                  (b) The Company shall keep at its office books in which,
         subject to such reasonable regulations as it may prescribe, it shall
         register Warrant Certificates and the transfer thereof in accordance
         with its regular practice. Upon due presentment for registration of
         transfer of any Warrant Certificate at its office, the Company shall
         execute, issue and deliver to the transferee or transferees a new
         Warrant Certificate or Certificates representing an equal aggregate
         number of Warrants of the same tranche. The Company shall also make
         available to Commonwealth for inspection by its agents or employees,
         from time to time as Commonwealth may request, such original books of
         accounts and record (including original Warrant Certificates
         surrendered to the Company upon exercise of Warrants) as may be
         maintained by the Company in connection with the issuance and exercise
         of Warrants hereunder, such inspections to occur at the Company's
         Corporate Office during normal business hours.

                  (c) With respect to all Warrant Certificates presented for
         registration of transfer, or for exchange or exercise, the subscription
         form on the reverse thereof shall be duly endorsed, or be accompanied
         by a written instrument or instruments of transfer and subscription, in
         form satisfactory to the Company, duly executed by the Registered
         Holder or his attorney-in-fact duly authorized in writing.

                  (d) The Company may require payment by such holder of a sum
         sufficient to cover any tax or other governmental charge that may be
         imposed in connection therewith.

                  (e) All Warrant Certificates surrendered for exercise or for
         exchange shall be promptly canceled by the Company and thereafter
         retained by the Company until termination of this Agreement, or, with
         the prior written consent of Commonwealth, disposed of or destroyed.

                  (f) Prior to due presentment for registration of transfer
         thereof, the Company may deem and treat the Registered Holder of any
         Warrant Certificate as the absolute, true and lawful owner thereof and
         of each Warrant represented thereby (notwithstanding any notations of
         ownership or writing thereon made by anyone other than a duly
         authorized officer of the Company) for all purposes and the Company
         shall not be affected by any notice to the contrary, except as
         otherwise expressly provided in Section 7 hereof.

                                      -4-


         SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to them, and (in the case of mutilation)
upon surrender and cancellation thereof, and in the absence of notice to the
Company that the Warrant Certificate has been acquired by a bonafide purchaser,
the Company shall execute and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.

         SECTION 8. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at
any time and the number and kind of securities purchasable upon the exercise of
the Warrants shall be subject to adjustment from time to time upon the happening
of certain events as follows:

                  (a) In case the Company shall hereafter (i) declare a dividend
         or make a distribution on its outstanding shares of Common Stock in
         shares of Common Stock, (ii) subdivide or reclassify its outstanding
         shares of Common Stock into a greater number of shares, or (iii)
         combine or reclassify its outstanding shares of Common Stock into a
         smaller number of shares, the Exercise Price in effect at the time of
         the record date for such dividend or distribution or of the effective
         date of such subdivision, combination or reclassification shall be
         adjusted so that it shall equal the price determined by multiplying the
         Exercise Price by a fraction, the denominator of which shall be the
         number of shares of Common Stock outstanding after giving effect to
         such action, and the numerator of which shall be the number of shares
         of Common Stock outstanding immediately prior to such action. Such
         adjustment shall be made successively whenever any event listed above
         shall occur.

                  (b) In case the Company shall fix a record date for the
         issuance of rights or warrants to all holders of its Common Stock
         entitling them to subscribe for or purchase shares of Common Stock (or
         securities convertible into Common Stock) at a price (the "Subscription
         Price") (or having a conversion price per share) less than the current
         market price (as defined below) on such record date, the Exercise Price
         shall be adjusted so that the same shall equal the price determined by
         multiplying the Exercise Price in effect immediately prior to the date
         of such issuance by a fraction, the numerator of which shall be the sum
         of the number of shares of Common Stock outstanding on the record date
         mentioned below and the number of additional shares of Common Stock
         which the aggregate offering price of the total number of shares of
         Common Stock so offered (or the aggregate conversion price of the
         convertible securities so offered) would purchase at such current
         market price per share of the Common Stock, and the denominator of
         which shall be the sum of the number of shares of Common Stock
         outstanding on such record date and the number of additional shares of
         Common Stock offered for subscription or purchase (or into which the
         convertible securities so offered are convertible). Such adjustment
         shall be made successively whenever such rights or warrants are issued
         and shall become effective immediately after the record date for the
         determination of shareholders entitled to receive such rights or
         warrants.

                  (c) In case the Company shall hereafter distribute to the
         holders of its Common Stock evidences of its indebtedness or assets
         (excluding cash dividends or distributions and dividends or
         distributions referred to in Subsection (a) above) or subscription
         rights or warrants (excluding those referred to in Subsection (b)
         above), then in each such case the Exercise Price in effect thereafter
         shall be determined by multiplying the Exercise Price in effect
         immediately prior thereto by a fraction, the numerator of which shall
         be the total number of shares of Common Stock outstanding multiplied by
         the current market price per share of Common Stock (as defined below),
         less the fair market value (as determined by the Company's Board of
         Directors) of said assets or evidences of indebtedness so distributed
         or of such rights or warrants, and the denominator of which shall be
         the total number of shares of Common Stock outstanding multiplied by
         such current market price per share of Common Stock. Such adjustment
         shall be made successively whenever such a record date is fixed. Such
         adjustment shall be made whenever any such distribution is made and
         shall become effective immediately after the record date for the
         determination of shareholders entitled to receive such distribution.

                  (d) In case the Company shall hereafter issue shares of its
         Common Stock (excluding shares issued (i) in any of the transactions
         described in Subsection (a) above, (ii) upon exercise of options
         granted to the Company's officers, directors, employees and consultants
         under a plan or plans adopted by the Company's Board of Directors or a
         committee thereof and approved by its shareholders, if such shares
         would otherwise be included in this Subsection (d), (but only to the


                                      -5-


         extent that the aggregate number of shares excluded by this Subsection
         (d)(ii) does not exceed 15% of the Company's Common Stock outstanding,
         on a fully diluted basis, at the time of any issuance), (iii) upon
         exercise of options, warrants, convertible securities and convertible
         debentures outstanding as of the final closing of the Private
         Placement, (iv) to shareholders of any corporation which merges into
         the Company in proportion to their stock holdings of such corporation
         immediately prior to such merger, upon such merger, (v) in a private
         placement where the Offering Price (as defined below) is at least 75%
         of the current market price, (vi) in a bona fide public offering
         pursuant to a firm commitment underwriting, or (vii) in connection with
         an acquisition of a business or technology which has been approved by a
         majority of the Company's outside directors but only if no adjustment
         is required pursuant to any other specific subsection of this Section 8
         (without regard to Subsection (i) below) with respect to the
         transaction giving rise to such rights) for a consideration per share
         (the "Offering Price") less than the current market price on the date
         of such issuance, the Exercise Price shall be adjusted immediately
         thereafter so that it shall equal the price determined by multiplying
         the Exercise Price in effect immediately prior thereto by a fraction,
         the numerator of which shall be the sum of the number of shares of
         Common Stock outstanding immediately prior to the issuance of such
         additional shares and the number of shares of Common Stock which the
         aggregate consideration received for the issuance of such additional
         shares would purchase at such current market price per share of Common
         Stock, and the denominator of which shall be the number of shares of
         Common Stock outstanding immediately after the issuance of such
         additional shares. Such adjustment shall be made successively whenever
         such an issuance is made.

                  (e) In case the Company shall hereafter issue any securities
         convertible into or exchangeable for its Common Stock (excluding
         securities issued in transactions described in Subsections (b) and (c)
         above or in the exclusions set forth in (d)(i) through (vii) above) for
         a consideration per share of Common Stock (the "Exchange Price")
         initially deliverable upon conversion or exchange of such securities
         (determined as provided in Subsection (g) below) less than the current
         market price on the date of such issuance, the Exercise Price shall be
         adjusted immediately thereafter so that it shall equal the price
         determined by multiplying the Exercise Price in effect immediately
         prior thereto by a fraction, the numerator of which shall be the sum of
         the number of shares of Common Stock outstanding immediately prior to
         the issuance of such securities and the number of shares of Common
         Stock which the aggregate consideration received for such securities
         would purchase at such current market price per share of Common Stock,
         and the denominator of which shall be the sum of the number of shares
         of Common Stock outstanding immediately prior to such issuance and the
         maximum number of shares of Common Stock of the Company deliverable
         upon conversion of or in exchange for such securities at the initial
         conversion or exchange price or rate. Such adjustment shall be made
         successively whenever such an issuance is made.

                  (f) Whenever the Exercise Price payable upon exercise of each
         Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e)
         above or pursuant to subsection (j) below, the number of Warrant Shares
         purchasable upon exercise of each Warrant shall simultaneously be
         adjusted by multiplying the number of Warrant Shares initially issuable
         upon exercise of such Warrant by the Exercise Price in effect on the
         date hereof and dividing the product so obtained by the Exercise Price,
         as adjusted.

                  (g) For purposes of any computation respecting consideration
         received pursuant to Subsections (d) and (e) above and (j) below, the
         following shall apply:

                           (A) in the case of the issuance of shares of Common
                  Stock for cash, the consideration shall be the amount of such
                  cash, provided that in no case shall any deduction be made for
                  any commissions, discounts or other expenses incurred by the
                  Company for any underwriting of the issue or otherwise in
                  connection therewith;

                           (B) in the case of the issuance of shares of Common
                  Stock for a consideration in whole or in part other than cash,
                  the consideration other than cash shall be deemed to be the
                  fair market value thereof as determined in good faith by the
                  Board of Directors of the Company (irrespective of the
                  accounting treatment thereof), whose determination shall be
                  conclusive; and

                           (C) in the case of the issuance of securities
                  convertible into or exchangeable for shares of Common Stock,


                                      -6-


                  the aggregate consideration received therefor shall be deemed
                  to be the consideration received by the Company for the
                  issuance of such securities plus the additional minimum
                  consideration, if any, to be received by the Company upon the
                  conversion or exchange thereof (the consideration in each case
                  to be determined in the same manner as provided in clauses (A)
                  and (B) of this Subsection (g)). Upon the expiration or
                  termination of any such securities convertible into or
                  exchangeable for shares of Common Stock, the Exercise Price
                  shall be automatically readjusted to the Exercise Price that
                  would have been obtained had such convertible or exchangeable
                  securities not been issued.

                  (h) For the purpose of any computation under Subsection (b),
         (c), (d) and (e) above, the current market price per share of Common
         Stock at any date shall be determined in the manner set forth in
         Section 11 hereof.

                  (i) No adjustment in the Exercise Price shall be required
         unless such adjustment would require an increase or decrease of at
         least five cents ($0.05) in such price; provided, however, that any
         adjustments which by reason of this Subsection (i) are not required to
         be made shall be carried forward and taken into account in any
         subsequent adjustment required to be made hereunder. All calculations
         under this Section 8 shall be made to the nearest cent or to the
         nearest one-hundredth of a share, as the case may be. Anything in this
         Section 8 to the contrary notwithstanding, the Company shall be
         entitled, but shall not be required, to make such changes in the
         Exercise Price, in addition to those required by this Section 8, as it
         shall determine, in its sole discretion, to be advisable in order that
         any dividend or distribution in shares of Common Stock, or any
         subdivision, reclassification or combination of Common Stock, hereafter
         made by the Company shall not result in any Federal income tax
         liability to the holders of Common Stock or securities convertible into
         Common Stock (including Warrants).

                  (j) Notwithstanding the other provisions of this Section 8,

                                    (A) in the event that the Company shall at
                  any time issue securities in transactions of the type
                  described in Subsections (b), (d) and (e) of this Section 8
                  (other than securities issued in transactions described in
                  Subsection (d)(i) through (vii) above) having an Offering
                  Price, Subscription Price or Exchange Price less than the
                  Exercise Price, then the Exercise Price shall be immediately
                  reset to equal such lower Offering Price, Subscription Price
                  or Exchange Price and

                                    (B) no adjustment under Subsections (b), (d)
                  or (e) shall be required for issuances below the current
                  market price if (i) the Offering Price, Subscription Price or
                  Exchange Price, as applicable, is at least 300% of the
                  Exercise Price then in effect and (ii) a registration
                  statement covering the Warrant Shares is in effect and remains
                  in effect for the 90 days after such issuance or Rule 144(k)
                  under the Securities Act of 1933, as amended (the "Act") is
                  available for resale of all of the Warrant Shares.

                  (k) Whenever the Exercise Price is adjusted, as herein
         provided, the Company shall promptly cause a notice setting forth the
         adjusted Exercise Price and adjusted number of Warrant Shares issuable
         upon exercise of each Warrant, and, if requested, information
         describing the transactions giving rise to such adjustments, to be
         mailed to the holders at their last addresses appearing in the registry
         books maintained by the Company pursuant to Section 6(b), and shall
         cause a certified copy thereof to be mailed to its transfer agent, if
         any. The Company may retain a firm of independent certified public
         accountants selected by the Board of Directors (who may be the regular
         accountants employed by the Company) to make any computation required
         by this Section 8, and a certificate signed by such firm shall be
         conclusive evidence of the correctness of such adjustment absent
         manifest error.

                  (l) In the event that at any time, as a result of an
         adjustment made pursuant to this Section 8, a holder of Warrants
         thereafter shall become entitled to receive any securities, other than
         Common Stock, thereafter the number of such other securities so
         receivable upon exercise of a Warrant shall be subject to adjustment
         from time to time in a manner and on terms as nearly equivalent as
         practicable to the provisions with respect to the Common Stock
         contained in Subsections (a) to (j), inclusive above.

                                      -7-


                  (m) In case of any reorganization, reclassification or change
         of the Common Stock (including any such reorganization,
         reclassification or change in connection with a consolidation or merger
         in which the Company is the continuing entity), or any consolidation of
         the Company with, or merger of the Company with or into, any other
         entity (other than a consolidation or merger in which the Company is
         the continuing entity), or of any sale of the properties and assets of
         the Company as, or substantially as, an entirety to any other person or
         entity, each Warrant then outstanding shall thereafter be convertible
         into the kind and amount of stock or other securities or property
         receivable upon each such reorganization, reclassification, change,
         consolidation, merger or sale by a holder of the number of shares of
         Common Stock for which such Warrant would have been exercisable prior
         to such transaction assuming such Warrant had been exercisable. The
         provisions of this Paragraph (m) shall similarly apply to successive
         reorganizations, reclassifications, changes, consolidations, mergers or
         sales immediately prior to such reorganization, reclassification,
         change, consolidation, merger or sale.

                  (n) Irrespective of any adjustments in the Exercise Price or
         the number or kind of shares purchasable upon exercise of this Warrant,
         Warrants theretofore or thereafter issued may continue to express the
         same price and number and kind of shares as are stated in the similar
         Warrants initially issuable pursuant to this Agreement.

         SECTION 9. WARRANT CALL.

                  (a) If at any time the current market value of a share of
         Common Stock (determined in accordance with Section 11 hereof) equals
         or exceeds three times the Exercise Price then in effect for a period
         of 20 consecutive trading days then, at any time during the five
         trading day period following the last day of such 20 day period the
         Company may, at its option, accelerate the expiration of the Warrants
         to a date not less than 30 days from the date written notice thereof
         (the "Call Notice") is sent to the Registered Holders of the Warrants
         provided (i) a registration statement covering the Warrant Shares filed
         under the Act has been declared effective and remains effective on the
         date fixed for expiration of the Warrants (the "Call Date"), (ii) the
         Warrants and Warrant Shares are not subject to a lock-up agreement and
         (iii) on each day during such 20 consecutive day trading period the
         Common Stock was traded on a national securities exchange, included for
         quotation on the Nasdaq SmallCap Market or National Market System or
         reported by the NASD Over the Counter Bulletin Board.

                  (b) If the conditions set forth in Section 9(a) are met, and
         the Company desires to exercise its right to accelerate the exercise
         date of the Warrants, it shall mail a Call Notice to each of the
         Registered Holders of the Warrants, first class, postage prepaid, at
         their last address as shall appear on the records maintained pursuant
         to Section 6(b). Any notice mailed in the manner provided herein shall
         be conclusively presumed to have been duly given whether or not the
         Registered Holder receives such notice.

                  (c) The Call Notice shall specify (i) the Call Date, which
         shall be no later than the 60th day following the last day of the 20
         consecutive day trading period referred to in Section 9(a), and (ii)
         that the right to exercise the Warrant shall terminate at 5:00 P.M.
         (New York time) on the Call Date. No failure to mail such notice nor
         any defect therein or in the mailing thereof shall affect the validity
         of the proceedings for such acceleration of the Expiration Date except
         as to a Registered Holder (a) to whom notice was not mailed or (b)
         whose notice was defective. An affidavit of the Secretary or an
         Assistant Secretary of the Company that the Call Notice has been mailed
         shall, in the absence of fraud, be prima facie evidence of the facts
         stated therein.

                  (d) Any right to exercise a Warrant shall terminate at 5:00
         P.M. (New York time) on the Call Date. After 5:00 p.m. (New York time)
         on the Call Date, Registered Holders of the Warrants shall have no
         further rights and such Warrants shall expire and become void and all
         rights hereunder and under the Warrant Certificates shall cease.


         SECTION 10. REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company
agrees to register the Warrant Shares for resale under the Securities Act of


                                      -8-


1933, as amended (the "Act") on the terms and subject to the conditions set
forth in Annex A to the Subscription Agreement(s) between the Company and each
of the investors in the Private Placement.

         SECTION 11. FRACTIONAL WARRANTS AND FRACTIONAL SHARES. If the number of
shares of Common Stock purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 8 hereof, the Company shall nevertheless not be required to
issue fractions of shares, upon exercise of the Warrants or otherwise, or to
distribute certificates that evidence fractional shares. With respect to any
fraction of a share called for upon any exercise of any Warrant, the Company
shall pay to the holder thereof an amount in cash equal to such fraction
multiplied by the current market price of a share of Common Stock, determined as
follows:

                  (a) If the Common Stock is listed on a national securities
         exchange or admitted to unlisted trading privileges on such exchange or
         listed for trading on the Nasdaq National Market System ("NMS"), the
         current market price shall be the higher of (x) the average of the last
         reported sale prices of the Common Stock on such exchange for the 20
         trading days prior to the date of exercise of this Warrant and (y) the
         last reported sales price on the trading day immediately preceding such
         date; provided that if no such sale is made on a day within such period
         or no closing sale price is quoted, that day's price shall be the
         average of the closing bid and asked prices for such day on such
         exchange or system; or

                  (b) If the Common Stock is not so listed or admitted to
         unlisted trading privileges, but is traded on the Nasdaq SmallCap
         Market, the current market price shall be the higher of (x) the average
         of the closing bid and asked prices for the 20 trading days prior to
         the date of exercise of this Warrant on such market and (y) the last
         reported bid price on the trading day immediately preceding such date
         on such market and if the Common Stock is not so traded, the current
         market price shall be the higher of (i) the mean of the last reported
         bid and asked prices reported by the NASD Over the Counter Bulletin
         Board for the 20 trading days prior to the date of the exercise of this
         Warrant and (ii) the last reported bid price on the trading day
         immediately preceding such date as reported by the NASD Over the
         Counter Bulletin Board; or

                  (c) If the Common Stock is not so listed or admitted to
         unlisted trading privileges and bid and asked prices are not so
         reported, the current market price shall be an amount determined in a
         reasonable manner by the Board of Directors of the Company.

         SECTION 12. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.

         SECTION 13. RIGHTS OF ACTION. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Company or of the
holder of any other Warrant, may, on his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.

         SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be canceled by it and retired.

         SECTION 15. MODIFICATION OF AGREEMENT. The parties hereto may by
supplemental agreement make any changes or corrections in this Agreement (i)
that it shall deem appropriate to cure any ambiguity or to correct any defective
or inconsistent provision or manifest mistake or error herein contained; (ii) to
reflect an increase in the number of Warrants which are to be governed by this
Agreement resulting from an increase in the size of the Private Placement or the


                                      -9-


number of Warrants issued in connection with the Private Placement; (iii) to
provide for a warrant agent for the Warrants; or (iv) that it may deem necessary
or desirable and which shall not adversely affect the interests of the holders
of Warrant Certificates. Except as set forth above, this Agreement shall not be
modified, supplemented or altered in any respect except with the consent in
writing of the Company and the holders of not less than 50% of the outstanding
Warrants.

         SECTION 16. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Company
in its capacity as warrant agent; if to the Company, OmniComm Systems, Inc.,
3250 Mary Street, Suite 402, Miami, Florida 33133, Att: Chief Financial Officer;
and if to Commonwealth, at Commonwealth Associates, 830 Third Avenue, New York,
New York 10022, Att: Carl Kleidman.

         SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.

         SECTION 18. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and Commonwealth (and their respective
successors and assigns) and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.

         SECTION 19. TERMINATION. This Agreement shall terminate on the earlier
to occur of (i) the close of business on the Expiration Date of all the
Warrants; or (ii) the date upon which all Warrants have been exercised or
called.

         SECTION 20. COUNTERPARTS. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.




                                      -10-




                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.

                                      OMNICOMM SYSTEMS, INC.

                                      By:
                                         --------------------------------------
                                         Name:
                                         Title:


                                      COMMONWEALTH ASSOCIATES, L.P.

                                      By:  Commonwealth Associates Management
                                           Company, Inc., its general partner

                                      By:
                                         --------------------------------------
                                         Name:
                                         Title:


                                      -11-




THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT') OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT
UNDER THE ACT AND/OR APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE ISSUER OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.

No. PW                                                        ________ Warrants


                          VOID AFTER__________ __, 2006

                        WARRANT CERTIFICATE FOR PURCHASE
                                 OF COMMON STOCK

                             OMNICOMM SYSTEMS, INC.


                  This certifies that FOR VALUE RECEIVED ___________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and nonassessable share of common stock, par value $.001 per share ("Common
Stock") of OmniComm Systems, Inc., a Delaware corporation (the "Company") at any
time commencing on the Initial Warrant Exercise Date (as defined in the Warrant
Agreement) and prior to the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of the
Company, as warrant agent, or its successor (the "Warrant Agent"), accompanied
by payment of an amount equal to $.25 for each Warrant (the "Exercise Price") in
lawful money of the United States of America in cash or by official bank or
certified check or by check drawn on an account of Commonwealth or such other
investment banks and brokerage houses as the Company shall approve, in each case
made payable to OmniComm Systems, Inc. or a Notice of Exchange (as defined in
the Warrant Agreement). The Company may, at its election, reduce the Exercise
Price.

                  This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
August __2001 by and among the Company and Commonwealth Associates, L.P.

                  In the event of certain contingencies provided for in the
Warrant Agreement, the Exercise Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.

                  The Warrants may be called by the Company under certain
circumstances described in the Warrant Agreement.

                  Each Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of less than all the Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor for the balance of such Warrants.

                  The term "Expiration Date" shall mean 5:00 P.M. (New York
time) on ___ _, 2006 or unless the Warrants are called by the Company prior to
such date. If such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall mean
5:00 P.M. (New York time) the next following day which in the State of New York
is not a holiday or a day on which banks are authorized to close. The Company
may, at its election, extend the Expiration Date.



                  This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Company, for a
new Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.

                  Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any of the rights of a stockholder of
the Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.

                  Prior to due presentment for registration of transfer hereof,
the Company may deem and treat the Registered Holder as the absolute owner
hereof and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company) for all purposes and the Company shall not be affected by any
notice to the contrary.

                  This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.

                                       -2-







                  IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.

                                               OMNICOMM SYSTEMS, INC.


Dated: _______  __, 2001


                                               By:
                                                  ------------------------------
                                                   Name:
                                                   Title:
[seal]

                                               By:
                                                  ------------------------------
                                                   Name:
                                                   Title:

                                      -3-



                                SUBSCRIPTION FORM

                     To Be Executed by the Registered Holder
                          in Order to Exercise Warrants

                  The undersigned Registered Holder hereby irrevocably elects to
exercise Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of

            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

                      ------------------------------------

                      ------------------------------------

                      ------------------------------------

                      ------------------------------------
                     [please print or type name and address]

and be delivered to

                      ------------------------------------

                      ------------------------------------

                      ------------------------------------

                      ------------------------------------
                     [please print or type name and address]

and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.


Dated:
         ----------------------
X
         ----------------------

         Address:

         ------------------------------          ------------------------------
                                                 Taxpayer Identification Number
         ------------------------------
                                                 ------------------------------
                                                 Signature Guaranteed







                                   ASSIGNMENT


                     To Be Executed by the Registered Holder
                           in Order to Assign Warrants


FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto

            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

                      ------------------------------------

                      ------------------------------------

                      ------------------------------------

                      ------------------------------------
                     [please print or type name and address]

____________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
__________________________________ _______________________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.


Dated:
         ----------------------
X
         ----------------------

Signature Guaranteed


- -------------------------------

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.

EX-4.2

                                                                     EXHIBIT 4.2

                                WARRANT AGREEMENT

         AGREEMENT, dated as of this 29 day of March 2002, by and among OMNICOMM
SYSTEMS, INC., a Delaware corporation (the "Company") and NOESIS CAPITAL CORP.,
("Noesis").

                               W I T N E S S E T H

         WHEREAS, in connection with a private placement (the "Private
Placement") of up to a maximum of 250,000 shares of Series C Convertible
Preferred Stock (the "Preferred Shares"), the Company will issue warrants (the
"Warrants") to purchase up to an aggregate of 5,000,000 shares of Common Stock;

         WHEREAS, in connection with the Private Placement the Company may issue
to the placement agent an option (the "Placement Agent Option") to purchase up
to an additional 60,000 Preferred Shares and Warrants to purchase up to an
additional ________ shares of Common Stock.

         NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the parties hereto agree as follows:

         SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:

                  (a) "Common Stock" shall mean common stock of the Company of
         any class, whether now or hereafter authorized, which has the right to
         participate in the distributions of earnings and assets of the Company
         without limit as to amount or percentage, which at the date hereof
         consists of 60,000,000 authorized shares of Common Stock, par value
         $.001 per share.

                  (b) "Corporate Office" shall mean the office of the Company in
         its capacity as warrant agent (or its successor) at which at any
         particular time its principal business shall be administered, which
         office is currently located at 2555 Davie Road, Suite 110-B, Davie,
         Florida 33317.

                  (c) "Exercise Date" shall mean, as to any Warrant, the date on
         which the Company shall have received both (a) the Warrant Certificate
         representing such Warrant, with the exercise form thereon duly executed
         by the Registered Holder thereof or his attorney duly authorized in
         writing, and (b) either payment in cash, or by official bank or
         certified check or by check drawn on an account of Noesis or such other
         investment banks and brokerage houses as the Company shall approve, in
         each case made payable to the Company, of an amount in lawful money of
         the United States of America equal to the Exercise Price or a Notice of
         Exchange.

                  (d) "Exercise Price" shall mean the purchase price to be paid
         upon exercise of each Warrant in accordance with the terms hereof,
         which price shall initially be $___ per share and which price shall be
         subject to adjustment from time to time pursuant to the provisions of
         Section 8 hereof and subject to the Company's right to reduce the
         applicable Exercise Price upon notice to all warrantholders.

                  (e) "Initial Warrant Exercise Date" shall mean the date of
         issuance of the Warrants.

                  (f) "Registered Holder" shall mean the person in whose name
         any certificate representing Warrants shall be registered on the books
         maintained by the Company pursuant to Section 6.

                  (g) "Transfer Agent" shall mean Jersey Transfer & Trust
         Company as the Company's transfer agent, or its authorized successor,
         as such.

                                      -1-


                  (h) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
         time) on the earlier of March 29, 2009 or the Call Date (as defined in
         Section 9); provided that if such date shall in the State of New York
         be a holiday or a day on which banks are authorized to close, then 5:00
         P.M. (New York time) on the next following day which in the State of
         New York is not a holiday or a day on which banks are authorized to
         close. Upon notice to all warrantholders the Company shall have the
         right to extend the Warrant Expiration Date.

                  (i) "Warrant Shares" shall mean the shares of Common Stock
         deliverable upon exercise of the Warrants, as adjusted from time to
         time pursuant to the provisions hereof.

         SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.

                  (a) A Warrant shall initially entitle the Registered Holder of
         the Warrant Certificate representing such Warrant to purchase one share
         of Common Stock upon the exercise thereof, in accordance with the terms
         hereof, subject to modification and adjustment as provided in Section
         8.

                  (b) From time to time, up to the Warrant Expiration Date, the
         Transfer Agent shall execute and deliver stock certificates in required
         whole number denominations representing up to an aggregate of 7,000,000
         shares of Common Stock, subject to adjustment as described herein, upon
         the exercise of Warrants in accordance with this Agreement.

                  (c) From time to time, up to the Warrant Expiration Date, the
         Company shall execute and deliver Warrant Certificates in required
         whole number denominations to the persons entitled thereto in
         connection with any transfer or exchange permitted under this
         Agreement; provided that no Warrant Certificates shall be issued except
         (i) those initially issued hereunder, those issued hereunder on any
         subsequent closing of the Private Placement and those issued upon
         exercise of any Placement Agent Option; (ii) those issued on or after
         the Initial Warrant Exercise Date, upon the exercise of fewer than all
         Warrants represented by any Warrant Certificate, to evidence any
         unexercised Warrants held by the exercising Registered Holder; (iii)
         those issued upon any transfer or exchange pursuant to Section 6; (iv)
         those issued in replacement of lost, stolen, destroyed or mutilated
         Warrant Certificates pursuant to Section 7; and (v) those issued at the
         option of the Company, in such form as may be approved by its Board of
         Directors, to reflect (a) any adjustment or change in the Exercise
         Price or the number of shares of Common Stock purchasable upon exercise
         of the Warrants made pursuant to Section 8 hereof, and (b) other
         modifications approved in accordance with Section 15 hereof.

         SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.

                  (a) The Warrant Certificates for the Warrants, shall be
         substantially in the form annexed hereto as Exhibit A (the provisions
         of which are hereby incorporated herein) and may have such letters,
         numbers or other marks of identification or designation and such
         legends, summaries or endorsements printed, lithographed, engraved or
         typed thereon as the Company may deem appropriate and as are not
         inconsistent with the provisions of this Agreement, or as may be
         required to comply with any law or with any rule or regulation made
         pursuant thereto or with any rule or regulation of any stock exchange
         on which the Warrants may be listed, or to conform to usage. The
         Warrant Certificates shall be dated the date of issuance thereof
         (whether upon initial issuance, transfer, exchange or in lieu of
         mutilated, lost, stolen, or destroyed Warrant Certificates) and issued
         in registered form. The Warrants shall be numbered serially with the
         letters PW.

                  (b) Warrant Certificates shall be executed on behalf of the
         Company by its Chairman of the Board, Chief Executive Officer,
         President or any Vice President and by its Chief Financial Officer,
         Secretary or an Assistant Secretary and shall have imprinted thereon a
         facsimile of the Company's seal. In case any officer of the Company who
         shall have signed any of the Warrant Certificates shall cease to be
         such officer of the Company before the date of issuance of the Warrant
         Certificates and delivery thereof, such Warrant Certificates may
         nevertheless be issued and delivered with the same force and effect as
         though the person who signed such Warrant Certificates had not ceased
         to be such officer of the Company. After execution by the Company,
         Warrant Certificates shall be delivered by the Company to the
         Registered Holder.



                                      -2-


         SECTION 4. EXERCISE.

                  (a) Each Warrant may be exercised by the Registered Holder
         thereof at any time on or after the Initial Warrant Exercise Date, but
         not after the Warrant Expiration Date, upon the terms and subject to
         the conditions set forth herein and in the applicable Warrant
         Certificate. A Warrant shall be deemed to have been exercised
         immediately prior to the close of business on the Exercise Date and the
         person entitled to receive the securities deliverable upon such
         exercise shall be treated for all purposes as the holder upon exercise
         thereof as of the close of business on the Exercise Date. As soon as
         practicable on or after the Exercise Date the Company shall cause to be
         issued and delivered by the Transfer Agent, to the person or persons
         entitled to receive the same, a certificate or certificates for the
         securities deliverable upon such exercise, (plus a certificate for any
         remaining unexercised Warrants of the Registered Holder).

                   (b) The Registered Holder may, at its option, at any time on
         or after the Initial Warrant Exercise Date, exchange Warrants on a
         cashless basis, in whole or in part (a "Warrant Exchange"), for the
         number of Warrant Shares determined in accordance with this Section
         (4)(c), by surrendering the Warrant Certificate at the principal office
         of the Company, accompanied by a notice stating such Registered
         Holder's intent to effect such exchange, the number of Warrants to be
         exchanged and the date on which the Registered Holder requests that
         such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
         Exchange shall take place on the date specified in the Notice of
         Exchange or, if later, the date the Notice of Exchange is received by
         the Company (the "Exchange Date"). Certificates for the shares issuable
         upon such Warrant Exchange and, if applicable, a new Warrant
         Certificate of like tenor evidencing the balance of the Warrants
         remaining subject to the surrendered Warrant Certificate, shall be
         issued as of the Exchange Date and delivered to the Registered Holder
         within seven (7) days following the Exchange Date. In connection with
         any Warrant Exchange, a Warrant Certificate shall represent the right
         to subscribe for and acquire the number of Warrant Shares (rounded to
         the next highest integer) equal to (i) the number of Warrants specified
         by the Registered Holder in its Notice of Exchange (the "Total Number")
         less (ii) the number of Warrant Shares equal to the quotient obtained
         by dividing (A) the product of the Total Number and the existing
         Exercise Price by (B) the current market price of a share of Common
         Stock. Current market price shall have the meaning set forth Section 11
         hereof, except that for purposes hereof, the date of exercise, as used
         in such Section 11 hereof, shall mean the Exchange Date.

         SECTION 5. RESERVATION OF SHARES; BLUE SKY APPROVALS; PAYMENT OF TAXES.

                  (a) The Company covenants that it will at all times following
         the Initial Warrant Exercise Date reserve and keep available out of its
         authorized Common Stock, solely for the purpose of issue upon exercise
         of Warrants, such number of shares of Common Stock as shall then be
         issuable upon the exercise of all outstanding Warrants. The Company
         covenants that all shares of Common Stock which shall be issuable upon
         exercise of the Warrants and payment of the Exercise Price shall, at
         the time of delivery, be duly and validly issued, fully paid,
         nonassessable and free from all taxes, liens and charges with respect
         to the issue thereof (other than those which the Company shall promptly
         pay or discharge).

                  (b) The Company will use reasonable efforts to obtain
         appropriate approvals or registrations under state "blue sky"
         securities laws with respect to the exercise of the Warrants; provided,
         however, that the Company shall not be obligated to file any general
         consent to service of process or qualify as a foreign corporation in
         any jurisdiction. With respect to any such securities laws, however,
         Warrants may not be exercised by, or shares of Common Stock issued to,
         any Registered Holder in any state in which such exercise would be
         unlawful.

                  (c) The Company shall pay all documentary, stamp or similar
         taxes and other governmental charges that may be imposed with respect
         to the issuance of Warrants, or the issuance, or delivery of any shares
         upon exercise of the Warrants; provided, however, that if the shares of
         Common Stock are to be delivered in a name other than the name of the
         Registered Holder of the Warrant Certificate representing any Warrant
         being exercised, then no such delivery shall be made unless the person
         requesting the same has paid to the Company the amount of transfer
         taxes or charges incident thereto, if any.



                                      -3-


         SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER. Subject to the
restrictions on transfer contained in the Warrant Certificates and the
Subscription Agreement(s) between the Company and each of the investors in the
Private Placement:

                  (a) Warrant Certificates may be exchanged for other Warrant
         Certificates representing an equal aggregate number of Warrants or may
         be transferred in whole or in part. Warrant Certificates to be
         exchanged shall be surrendered to the Company at its Corporate Office,
         and upon satisfaction of the terms and provisions hereof, the Company
         shall execute, issue and deliver in exchange therefor the Warrant
         Certificate or Certificates which the Registered Holder making the
         exchange shall be entitled to receive.

                  (b) The Company shall keep at its office books in which,
         subject to such reasonable regulations as it may prescribe, it shall
         register Warrant Certificates and the transfer thereof in accordance
         with its regular practice. Upon due presentment for registration of
         transfer of any Warrant Certificate at its office, the Company shall
         execute, issue and deliver to the transferee or transferees a new
         Warrant Certificate or Certificates representing an equal aggregate
         number of Warrants of the same tranche. The Company shall also make
         available to Noesis for inspection by its agents or employees, from
         time to time as Noesis may request, such original books of accounts and
         record (including original Warrant Certificates surrendered to the
         Company upon exercise of Warrants) as may be maintained by the Company
         in connection with the issuance and exercise of Warrants hereunder,
         such inspections to occur at the Company's Corporate Office during
         normal business hours.

                  (c) With respect to all Warrant Certificates presented for
         registration of transfer, or for exchange or exercise, the subscription
         form on the reverse thereof shall be duly endorsed, or be accompanied
         by a written instrument or instruments of transfer and subscription, in
         form satisfactory to the Company, duly executed by the Registered
         Holder or his attorney-in-fact duly authorized in writing.

                  (d) The Company may require payment by such holder of a sum
         sufficient to cover any tax or other governmental charge that may be
         imposed in connection therewith.

                  (e) All Warrant Certificates surrendered for exercise or for
         exchange shall be promptly canceled by the Company and thereafter
         retained by the Company until termination of this Agreement, or, with
         the prior written consent of Noesis, disposed of or destroyed.

                  (f) Prior to due presentment for registration of transfer
         thereof, the Company may deem and treat the Registered Holder of any
         Warrant Certificate as the absolute, true and lawful owner thereof and
         of each Warrant represented thereby (notwithstanding any notations of
         ownership or writing thereon made by anyone other than a duly
         authorized officer of the Company) for all purposes and the Company
         shall not be affected by any notice to the contrary, except as
         otherwise expressly provided in Section 7 hereof.

         SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to them, and (in the case of mutilation)
upon surrender and cancellation thereof, and in the absence of notice to the
Company that the Warrant Certificate has been acquired by a bonafide purchaser,
the Company shall execute and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.

         SECTION 8. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at
any time and the number and kind of securities purchasable upon the exercise of
the Warrants shall be subject to adjustment from time to time upon the happening
of certain events as follows:

                  (a) In case the Company shall hereafter (i) declare a dividend
         or make a distribution on its outstanding shares of Common Stock in
         shares of Common Stock, (ii) subdivide or reclassify its outstanding
         shares of Common Stock into a greater number of shares, or (iii)
         combine or reclassify its outstanding shares of Common Stock into a
         smaller number of shares, the Exercise Price in effect at the time of


                                      -4-


         the record date for such dividend or distribution or of the effective
         date of such subdivision, combination or reclassification shall be
         adjusted so that it shall equal the price determined by multiplying the
         Exercise Price by a fraction, the denominator of which shall be the
         number of shares of Common Stock outstanding after giving effect to
         such action, and the numerator of which shall be the number of shares
         of Common Stock outstanding immediately prior to such action. Such
         adjustment shall be made successively whenever any event listed above
         shall occur.

                  (b) In case the Company shall fix a record date for the
         issuance of rights or warrants to all holders of its Common Stock
         entitling them to subscribe for or purchase shares of Common Stock (or
         securities convertible into Common Stock) at a price (the "Subscription
         Price") (or having a conversion price per share) less than the current
         market price (as defined below) on such record date, the Exercise Price
         shall be adjusted so that the same shall equal the price determined by
         multiplying the Exercise Price in effect immediately prior to the date
         of such issuance by a fraction, the numerator of which shall be the sum
         of the number of shares of Common Stock outstanding on the record date
         mentioned below and the number of additional shares of Common Stock
         which the aggregate offering price of the total number of shares of
         Common Stock so offered (or the aggregate conversion price of the
         convertible securities so offered) would purchase at such current
         market price per share of the Common Stock, and the denominator of
         which shall be the sum of the number of shares of Common Stock
         outstanding on such record date and the number of additional shares of
         Common Stock offered for subscription or purchase (or into which the
         convertible securities so offered are convertible). Such adjustment
         shall be made successively whenever such rights or warrants are issued
         and shall become effective immediately after the record date for the
         determination of shareholders entitled to receive such rights or
         warrants.

                  (c) In case the Company shall hereafter distribute to the
         holders of its Common Stock evidences of its indebtedness or assets
         (excluding cash dividends or distributions and dividends or
         distributions referred to in Subsection (a) above) or subscription
         rights or warrants (excluding those referred to in Subsection (b)
         above), then in each such case the Exercise Price in effect thereafter
         shall be determined by multiplying the Exercise Price in effect
         immediately prior thereto by a fraction, the numerator of which shall
         be the total number of shares of Common Stock outstanding multiplied by
         the current market price per share of Common Stock (as defined below),
         less the fair market value (as determined by the Company's Board of
         Directors) of said assets or evidences of indebtedness so distributed
         or of such rights or warrants, and the denominator of which shall be
         the total number of shares of Common Stock outstanding multiplied by
         such current market price per share of Common Stock. Such adjustment
         shall be made successively whenever such a record date is fixed. Such
         adjustment shall be made whenever any such distribution is made and
         shall become effective immediately after the record date for the
         determination of shareholders entitled to receive such distribution.

                  (d) In case the Company shall hereafter issue shares of its
         Common Stock (excluding shares issued (i) in any of the transactions
         described in Subsection (a) above, (ii) upon exercise of options
         granted to the Company's officers, directors, employees and consultants
         under a plan or plans adopted by the Company's Board of Directors or a
         committee thereof and approved by its shareholders, if such shares
         would otherwise be included in this Subsection (d), (but only to the
         extent that the aggregate number of shares excluded by this Subsection
         (d)(ii) does not exceed 15% of the Company's Common Stock outstanding,
         on a fully diluted basis, at the time of any issuance), (iii) upon
         exercise of options, warrants, convertible securities and convertible
         debentures outstanding as of the final closing of the Private
         Placement, (iv) to shareholders of any corporation which merges into
         the Company in proportion to their stock holdings of such corporation
         immediately prior to such merger, upon such merger, (v) in a private
         placement where the Offering Price (as defined below) is at least 75%
         of the current market price, (vi) in a bona fide public offering
         pursuant to a firm commitment underwriting, or (vii) in connection with
         an acquisition of a business or technology which has been approved by a
         majority of the Company's outside directors but only if no adjustment
         is required pursuant to any other specific subsection of this Section 8
         (without regard to Subsection (i) below) with respect to the
         transaction giving rise to such rights) for a consideration per share
         (the "Offering Price") less than the current market price on the date
         of such issuance, the Exercise Price shall be adjusted immediately
         thereafter so that it shall equal the price determined by multiplying
         the Exercise Price in effect immediately prior thereto by a fraction,
         the numerator of which shall be the sum of the number of shares of
         Common Stock outstanding immediately prior to the issuance of such
         additional shares and the number of shares of Common Stock which the
         aggregate consideration received for the issuance of such additional
         shares would purchase at such current market price per share of Common
         Stock, and the denominator of which shall be the number of shares of
         Common Stock outstanding immediately after the issuance of such
         additional shares. Such adjustment shall be made successively whenever
         such an issuance is made.

                                      -5-


                  (e) In case the Company shall hereafter issue any securities
         convertible into or exchangeable for its Common Stock (excluding
         securities issued in transactions described in Subsections (b) and (c)
         above or in the exclusions set forth in (d)(i) through (vii) above) for
         a consideration per share of Common Stock (the "Exchange Price")
         initially deliverable upon conversion or exchange of such securities
         (determined as provided in Subsection (g) below) less than the current
         market price on the date of such issuance, the Exercise Price shall be
         adjusted immediately thereafter so that it shall equal the price
         determined by multiplying the Exercise Price in effect immediately
         prior thereto by a fraction, the numerator of which shall be the sum of
         the number of shares of Common Stock outstanding immediately prior to
         the issuance of such securities and the number of shares of Common
         Stock which the aggregate consideration received for such securities
         would purchase at such current market price per share of Common Stock,
         and the denominator of which shall be the sum of the number of shares
         of Common Stock outstanding immediately prior to such issuance and the
         maximum number of shares of Common Stock of the Company deliverable
         upon conversion of or in exchange for such securities at the initial
         conversion or exchange price or rate. Such adjustment shall be made
         successively whenever such an issuance is made.

                  (f) Whenever the Exercise Price payable upon exercise of each
         Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e)
         above or pursuant to subsection (j) below, the number of Warrant Shares
         purchasable upon exercise of each Warrant shall simultaneously be
         adjusted by multiplying the number of Warrant Shares initially issuable
         upon exercise of such Warrant by the Exercise Price in effect on the
         date hereof and dividing the product so obtained by the Exercise Price,
         as adjusted.

                  (g) For purposes of any computation respecting consideration
         received pursuant to Subsections (d) and (e) above and (j) below, the
         following shall apply:

                           (A) in the case of the issuance of shares of Common
                  Stock for cash, the consideration shall be the amount of such
                  cash, provided that in no case shall any deduction be made for
                  any commissions, discounts or other expenses incurred by the
                  Company for any underwriting of the issue or otherwise in
                  connection therewith;

                           (B) in the case of the issuance of shares of Common
                  Stock for a consideration in whole or in part other than cash,
                  the consideration other than cash shall be deemed to be the
                  fair market value thereof as determined in good faith by the
                  Board of Directors of the Company (irrespective of the
                  accounting treatment thereof), whose determination shall be
                  conclusive; and

                           (C) in the case of the issuance of securities
                  convertible into or exchangeable for shares of Common Stock,
                  the aggregate consideration received therefor shall be deemed
                  to be the consideration received by the Company for the
                  issuance of such securities plus the additional minimum
                  consideration, if any, to be received by the Company upon the
                  conversion or exchange thereof (the consideration in each case
                  to be determined in the same manner as provided in clauses (A)
                  and (B) of this Subsection (g)). Upon the expiration or
                  termination of any such securities convertible into or
                  exchangeable for shares of Common Stock, the Exercise Price
                  shall be automatically readjusted to the Exercise Price that
                  would have been obtained had such convertible or exchangeable
                  securities not been issued.

                  (h) For the purpose of any computation under Subsection (b),
         (c), (d) and (e) above, the current market price per share of Common
         Stock at any date shall be determined in the manner set forth in
         Section 11 hereof.

                  (i) No adjustment in the Exercise Price shall be required
         unless such adjustment would require an increase or decrease of at
         least five cents ($0.05) in such price; provided, however, that any
         adjustments which by reason of this Subsection (i) are not required to
         be made shall be carried forward and taken into account in any
         subsequent adjustment required to be made hereunder. All calculations
         under this Section 8 shall be made to the nearest cent or to the
         nearest one-hundredth of a share, as the case may be. Anything in this
         Section 8 to the contrary notwithstanding, the Company shall be


                                      -6-


         entitled, but shall not be required, to make such changes in the
         Exercise Price, in addition to those required by this Section 8, as it
         shall determine, in its sole discretion, to be advisable in order that
         any dividend or distribution in shares of Common Stock, or any
         subdivision, reclassification or combination of Common Stock, hereafter
         made by the Company shall not result in any Federal income tax
         liability to the holders of Common Stock or securities convertible into
         Common Stock (including Warrants).

                  (j) Notwithstanding the other provisions of this Section 8,

                                    (A) in the event that the Company shall at
                  any time issue securities in transactions of the type
                  described in Subsections (b), (d) and (e) of this Section 8
                  (other than securities issued in transactions described in
                  Subsection (d)(i) through (vii) above) having an Offering
                  Price, Subscription Price or Exchange Price less than the
                  Exercise Price, then the Exercise Price shall be immediately
                  reset to equal such lower Offering Price, Subscription Price
                  or Exchange Price and

                                    (B) no adjustment under Subsections (b), (d)
                  or (e) shall be required for issuances below the current
                  market price if (i) the Offering Price, Subscription Price or
                  Exchange Price, as applicable, is at least 300% of the
                  Exercise Price then in effect and (ii) a registration
                  statement covering the Warrant Shares is in effect and remains
                  in effect for the 90 days after such issuance or Rule 144(k)
                  under the Securities Act of 1933, as amended (the "Act") is
                  available for resale of all of the Warrant Shares.

                  (k) Whenever the Exercise Price is adjusted, as herein
         provided, the Company shall promptly cause a notice setting forth the
         adjusted Exercise Price and adjusted number of Warrant Shares issuable
         upon exercise of each Warrant, and, if requested, information
         describing the transactions giving rise to such adjustments, to be
         mailed to the holders at their last addresses appearing in the registry
         books maintained by the Company pursuant to Section 6(b), and shall
         cause a certified copy thereof to be mailed to its transfer agent, if
         any. The Company may retain a firm of independent certified public
         accountants selected by the Board of Directors (who may be the regular
         accountants employed by the Company) to make any computation required
         by this Section 8, and a certificate signed by such firm shall be
         conclusive evidence of the correctness of such adjustment absent
         manifest error.

                  (l) In the event that at any time, as a result of an
         adjustment made pursuant to this Section 8, a holder of Warrants
         thereafter shall become entitled to receive any securities, other than
         Common Stock, thereafter the number of such other securities so
         receivable upon exercise of a Warrant shall be subject to adjustment
         from time to time in a manner and on terms as nearly equivalent as
         practicable to the provisions with respect to the Common Stock
         contained in Subsections (a) to (j), inclusive above.

                  (m) In case of any reorganization, reclassification or change
         of the Common Stock (including any such reorganization,
         reclassification or change in connection with a consolidation or merger
         in which the Company is the continuing entity), or any consolidation of
         the Company with, or merger of the Company with or into, any other
         entity (other than a consolidation or merger in which the Company is
         the continuing entity), or of any sale of the properties and assets of
         the Company as, or substantially as, an entirety to any other person or
         entity, each Warrant then outstanding shall thereafter be convertible
         into the kind and amount of stock or other securities or property
         receivable upon each such reorganization, reclassification, change,
         consolidation, merger or sale by a holder of the number of shares of
         Common Stock for which such Warrant would have been exercisable prior
         to such transaction assuming such Warrant had been exercisable. The
         provisions of this Paragraph (m) shall similarly apply to successive
         reorganizations, reclassifications, changes, consolidations, mergers or
         sales immediately prior to such reorganization, reclassification,
         change, consolidation, merger or sale.

                  (n) Irrespective of any adjustments in the Exercise Price or
         the number or kind of shares purchasable upon exercise of this Warrant,
         Warrants theretofore or thereafter issued may continue to express the
         same price and number and kind of shares as are stated in the similar
         Warrants initially issuable pursuant to this Agreement.



                                      -7-


         SECTION 9. WARRANT CALL.

                  (a) If at any time the current market value of a share of
         Common Stock (determined in accordance with Section 11 hereof) equals
         or exceeds three times the Exercise Price then in effect for a period
         of 20 consecutive trading days then, at any time during the five
         trading day period following the last day of such 20 day period the
         Company may, at its option, accelerate the expiration of the Warrants
         to a date not less than 30 days from the date written notice thereof
         (the "Call Notice") is sent to the Registered Holders of the Warrants
         provided (i) a registration statement covering the Warrant Shares filed
         under the Act has been declared effective and remains effective on the
         date fixed for expiration of the Warrants (the "Call Date"), (ii) the
         Warrants and Warrant Shares are not subject to a lock-up agreement and
         (iii) on each day during such 20 consecutive day trading period the
         Common Stock was traded on a national securities exchange, included for
         quotation on the Nasdaq SmallCap Market or National Market System or
         reported by the NASD Over the Counter Bulletin Board.

                  (b) If the conditions set forth in Section 9(a) are met, and
         the Company desires to exercise its right to accelerate the exercise
         date of the Warrants, it shall mail a Call Notice to each of the
         Registered Holders of the Warrants, first class, postage prepaid, at
         their last address as shall appear on the records maintained pursuant
         to Section 6(b). Any notice mailed in the manner provided herein shall
         be conclusively presumed to have been duly given whether or not the
         Registered Holder receives such notice.

                  (c) The Call Notice shall specify (i) the Call Date, which
         shall be no later than the 60th day following the last day of the 20
         consecutive day trading period referred to in Section 9(a), and (ii)
         that the right to exercise the Warrant shall terminate at 5:00 P.M.
         (New York time) on the Call Date. No failure to mail such notice nor
         any defect therein or in the mailing thereof shall affect the validity
         of the proceedings for such acceleration of the Expiration Date except
         as to a Registered Holder (a) to whom notice was not mailed or (b)
         whose notice was defective. An affidavit of the Secretary or an
         Assistant Secretary of the Company that the Call Notice has been mailed
         shall, in the absence of fraud, be prima facie evidence of the facts
         stated therein.

                  (d) Any right to exercise a Warrant shall terminate at 5:00
         P.M. (New York time) on the Call Date. After 5:00 p.m. (New York time)
         on the Call Date, Registered Holders of the Warrants shall have no
         further rights and such Warrants shall expire and become void and all
         rights hereunder and under the Warrant Certificates shall cease.

         SECTION 10. REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company
agrees to register the Warrant Shares for resale under the Securities Act of
1933, as amended (the "Act") on the terms and subject to the conditions set
forth in Annex A to the Subscription Agreement(s) between the Company and each
of the investors in the Private Placement.

         SECTION 11. FRACTIONAL WARRANTS AND FRACTIONAL SHARES. If the number of
shares of Common Stock purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 8 hereof, the Company shall nevertheless not be required to
issue fractions of shares, upon exercise of the Warrants or otherwise, or to
distribute certificates that evidence fractional shares. With respect to any
fraction of a share called for upon any exercise of any Warrant, the Company
shall pay to the holder thereof an amount in cash equal to such fraction
multiplied by the current market price of a share of Common Stock, determined as
follows:

                  (a) If the Common Stock is listed on a national securities
         exchange or admitted to unlisted trading privileges on such exchange or
         listed for trading on the Nasdaq National Market System ("NMS"), the
         current market price shall be the higher of (x) the average of the last
         reported sale prices of the Common Stock on such exchange for the 20
         trading days prior to the date of exercise of this Warrant and (y) the
         last reported sales price on the trading day immediately preceding such
         date; provided that if no such sale is made on a day within such period
         or no closing sale price is quoted, that day's price shall be the
         average of the closing bid and asked prices for such day on such
         exchange or system; or

                  (b) If the Common Stock is not so listed or admitted to
         unlisted trading privileges, but is traded on the Nasdaq SmallCap
         Market, the current market price shall be the higher of (x) the average
         of the closing bid and asked prices for the 20 trading days prior to
         the date of exercise of this Warrant on such market and (y) the last


                                      -8-


         reported bid price on the trading day immediately preceding such date
         on such market and if the Common Stock is not so traded, the current
         market price shall be the higher of (i) the mean of the last reported
         bid and asked prices reported by the NASD Over the Counter Bulletin
         Board for the 20 trading days prior to the date of the exercise of this
         Warrant and (ii) the last reported bid price on the trading day
         immediately preceding such date as reported by the NASD Over the
         Counter Bulletin Board; or

                  (c) If the Common Stock is not so listed or admitted to
         unlisted trading privileges and bid and asked prices are not so
         reported, the current market price shall be an amount determined in a
         reasonable manner by the Board of Directors of the Company.

         SECTION 12. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.

         SECTION 13. RIGHTS OF ACTION. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Company or of the
holder of any other Warrant, may, on his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.

         SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be canceled by it and retired.

         SECTION 15. MODIFICATION OF AGREEMENT. The parties hereto may by
supplemental agreement make any changes or corrections in this Agreement (i)
that it shall deem appropriate to cure any ambiguity or to correct any defective
or inconsistent provision or manifest mistake or error herein contained; (ii) to
reflect an increase in the number of Warrants which are to be governed by this
Agreement resulting from an increase in the size of the Private Placement or the
number of Warrants issued in connection with the Private Placement; (iii) to
provide for a warrant agent for the Warrants; or (iv) that it may deem necessary
or desirable and which shall not adversely affect the interests of the holders
of Warrant Certificates. Except as set forth above, this Agreement shall not be
modified, supplemented or altered in any respect except with the consent in
writing of the Company and the holders of not less than 50% of the outstanding
Warrants.

         SECTION 16. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Company
in its capacity as warrant agent; if to the Company, OmniComm Systems, Inc.,
2555 Davie Road, Suite 110-B, Davie, Florida 33317, Att: Chief Financial
Officer; and if to Noesis, at Noesis Capital, 1801 Clint Moore Road, Suite 100,
Boca Raton, FL, 33487, Attn: Cory Nass.

         SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.

         SECTION 18. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and Noesis (and their respective successors
and assigns) and the holders from time to time of Warrant Certificates. Nothing
in this Agreement is intended or shall be construed to confer upon any other
person any right, remedy or claim, in equity or at law, or to impose upon any
other person any duty, liability or obligation.



                                      -9-


         SECTION 19. TERMINATION. This Agreement shall terminate on the earlier
to occur of (i) the close of business on the Expiration Date of all the
Warrants; or (ii) the date upon which all Warrants have been exercised or
called.

         SECTION 20. COUNTERPARTS. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.




                                      -10-




                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.

                                             OMNICOMM SYSTEMS, INC.

                                             By:
                                                -------------------------------
                                             Name: Cornelis Wit
                                             Title: President and CEO


                                             NOESIS CAPITAL CORP.

                                             By:
                                                -------------------------------
                                             Name: Nico Letschert
                                             Title:  President


                                      -11-


THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT') OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT
UNDER THE ACT AND/OR APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE ISSUER OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.

No. ___________                                               ________Warrants


                          VOID AFTER_____________, 2009

                        WARRANT CERTIFICATE FOR PURCHASE
                                 OF COMMON STOCK

                             OMNICOMM SYSTEMS, INC.


                  This certifies that FOR VALUE RECEIVED ______________or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and nonassessable share of common stock, par value $.001 per share ("Common
Stock") of OmniComm Systems, Inc., a Delaware corporation (the "Company") at any
time commencing on the Initial Warrant Exercise Date (as defined in the Warrant
Agreement) and prior to the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of the
Company, as warrant agent, or its successor (the "Warrant Agent"), accompanied
by payment of an amount equal to $0.25 for each Warrant (the "Exercise Price")
in lawful money of the United States of America in cash or by official bank or
certified check or by check drawn on an account of Noesis or such other
investment banks and brokerage houses as the Company shall approve, in each case
made payable to OmniComm Systems, Inc. or a Notice of Exchange (as defined in
the Warrant Agreement). The Company may, at its election, reduce the Exercise
Price.

                  This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
March 29, 2002 by and among the Company and Noesis Capital Corp.

                  In the event of certain contingencies provided for in the
Warrant Agreement, the Exercise Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.

                  The Warrants may be called by the Company under certain
circumstances described in the Warrant Agreement.

                  Each Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of less than all the Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor for the balance of such Warrants.

                  The term "Expiration Date" shall mean 5:00 P.M. (New York
time) on_March 29, 2009 or unless the Warrants are called by the Company prior
to such date. If such date shall in the State of New York be a holiday or a day
on which the banks are authorized to close, then the Expiration Date shall mean
5:00 P.M. (New York time) the next following day which in the State of New York
is not a holiday or a day on which banks are authorized to close. The Company
may, at its election, extend the Expiration Date.




                  This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Company, for a
new Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.

                  Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any of the rights of a stockholder of
the Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.

                  Prior to due presentment for registration of transfer hereof,
the Company may deem and treat the Registered Holder as the absolute owner
hereof and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company) for all purposes and the Company shall not be affected by any
notice to the contrary.

                  This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Florida.

                                      -2-



                  IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.

                                           OMNICOMM SYSTEMS, INC.


Dated:___________, 2002


                                           By:
                                              ---------------------------------
                                               Name: Cornelis Wit
                                               Title: President and CEO
[seal]

                                           By:
                                              ---------------------------------
                                               Name: Ronald Linares
                                               Title: Vice President and CFO




                                SUBSCRIPTION FORM

                     To Be Executed by the Registered Holder
                          in Order to Exercise Warrants

                  The undersigned Registered Holder hereby irrevocably elects to
exercise Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of

            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

                         ------------------------------

                         ------------------------------

                         ------------------------------

                         ------------------------------
                     [please print or type name and address]

and be delivered to

                         ------------------------------

                         ------------------------------

                         ------------------------------

                         ------------------------------
                     [please print or type name and address]


and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.


Dated:
       ----------------------------
X
       ----------------------------

         Address:

       ----------------------------

       ----------------------------

                                               --------------------------------
                                               Taxpayer Identification Number

                                               --------------------------------
                                               Signature Guaranteed


                                      -3-




                                   ASSIGNMENT


                     To Be Executed by the Registered Holder
                           in Order to Assign Warrants


FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers unto


            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

                         ------------------------------

                         ------------------------------

                         ------------------------------

                         ------------------------------
                     [please print or type name and address]


_________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
___________________________________ _______________________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.


Dated:
       ----------------------------
X
       ----------------------------

Signature Guaranteed

- -----------------------------------

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.

EX-4.3

                                                                     EXHIBIT 4.3

                                CONVERTIBLE NOTE

THIS NOTE AND THE COMMON STOCK INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR UNDER THE LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS THAT TERM IN
IS DEFINED IN REGULATION S UNDER THE ACT), UNLESS THEY ARE REGISTERED UNDER THE
ACT AND UNDER THE LAWS OF THE STATES WHERE EACH SALE IS MADE, OR AN EXEMPTION
FROM REGISTRATION REQUIREMENTS IS AVAILABLE IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.

         FOR VALUE RECEIVED, OmniComm Systems, Inc., a Florida corporation
(hereinafter called "Borrower"), hereby promises to pay to _____________(the
"Holder") or order without demand, the sum of _________, with interest accruing
at an annual rate of ten percent (10%), on June 30, 2004 (the "Maturity Date"),
as such date may be extended by agreement of the parties hereto. This
Convertible Note is issued pursuant to a subscription agreement by and between
the Borrower and the Holder dated the date hereof (the "Subscription Agreement")
the terms and conditions of which are hereby incorporated herein by this
reference.

         The following terms shall apply to this Note:

                                    ARTICLE I
                           DEFAULT REALTED PROVISIONS

         1.1 PAYMENT GRACE PERIOD. The Borrower shall have a thirty (30) day
grace period to pay any monetary amounts due under this Note.

         1.2 CONVERSION PRIVILEGES. The Conversion Privileges set forth in
Article II shall remain in full force and effect from the date of this Note
until the Note principal and accrued interest is paid in full.

         1.3 INTEREST RATE. Borrower shall pay interest on the outstanding
principal amount of the Note (a) semi-annually on June 30th and December 31st of
each year, and if either June 30th or December 31st of any year is not a
business day then on the next succeeding business day (an "Interest Payment
Date"), at a rate of 10% per annum or (b) at the option of the Holder made in
writing to the Borrower at least 30 days prior to an Interest Payment Date, to
be carried forward as accrued interest on the Note and paid on the next Interest
Payment Date unless further deferred and, if there is no next Interest Payment
Date, paid at the Maturity Date, accelerated or otherwise, at the annual rate of
10% per annum together with such principal payment.

         1.4 INTEREST RATE ADJUSTMENT. In the event 50% of the cumulative Holder
or Holders demand registration pursuant to such registration rights as set in
the Subscription Agreement and the registration statement is not declared
effective within 90 days after the date of notice of demand, then the interest
rate on the Convertible Note beginning on the next quarter following expiration
of the 90 day period, shall be increased to 15%, and shall remain at 15% until
said registration statement is effective, at which time the interest rate shall
revert back to 10%.


                                      -1-


                                   ARTICLE II
                                CONVERSION RIGHTS

         2.1 The Holder shall have the right to convert the principal amount and
accrued and unpaid interest due under this Note into shares of the Borrower's
Common Stock as set forth below.

                  (a) RIGHT TO CONVERT. The holder of a Convertible Note may, at
any time, without the payment of any additional consideration therefore, convert
the then outstanding principal amount into that number of fully paid and
nonassessable shares of common stock, $.001 par value, of the Corporation (the
"Shares") as is determined by dividing the then outstanding principal amount by
$1.25 ("Conversion Price").

                  (b) MECHANICS OF CONVERSION. No fractional Shares shall be
issued upon conversion of the Convertible Note. If upon conversion of a
Convertible Note held by a registered holder, such registered holder would, but
for the provisions of this Section 2(b), receive a fraction of a Share, then in
lieu of any such fractional share to which such holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the Conversion Price. Before any holder of Convertible Notes shall be entitled
to convert the same into full Shares, such holder shall surrender the
Convertible Note or Convertible Notes therefor, duly endorsed, at the office of
the Corporation or any transfer agent for the Convertible Note, and shall give
written notice by facsimile or otherwise (the "Conversion Notice") to the
Corporation at such office that such holder elects to convert the same and shall
state therein such holder's name or the name of its nominees in which such
holder wishes the certificate or certificates for Shares to be issued. The
Corporation shall, as soon as practicable thereafter, but in any event within
three business days of the date of its receipt of the Conversion Notice, issue
and deliver or cause to be issued and delivered to such holder of a Convertible
Note, or to its nominee or nominees, a certificate or certificates for the
number of Shares to which such holder shall be entitled, together with cash in
lieu of any fraction of a share. Such conversion shall be deemed to have been
made on the date that the Corporation receives the Conversion Notice by
facsimile or otherwise, and the person or persons entitled to receive the Shares
upon conversion shall be treated for all purposes as the record holder or
holders of such Shares on such date.

                  (c) NOTICES OF RECORD DATE. In the event of (i) any
declaration by the Corporation of a record date of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution or (ii) any capital reorganization
of the Corporation, any classification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation, and any
transfer of all or substantially all of the assets of the Corporation to any
other Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of a Convertible Note at least twenty (20)
days prior to the record date specified therein, a notice specifying (A) the
date on which any such record is to be declared for the purpose of such dividend
or distribution and a description of such dividend or distribution, (B) the date
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective
and (C) the time, if any, that is to be fixed, as to when the holders of record
of common stock (or other securities) shall be entitled to exchange their
Shares(or other securities) for securities or other property deliverable upon
such reorganization, transfer, consolidation, merger, dissolution or winding up.

                  (d) STOCK DIVIDENDS; STOCK SPLITS; ETC. In the event that the
Corporation shall (i) take a record of holders of shares of the common stock for
the purpose of determining the holders entitled to receive dividends payable in
shares of common stock, (ii) subdivide the outstanding shares of common stock,
(iii) combine the outstanding Shares into smaller number of shares or (iv)
issue, by reclassification of the common stock, any other securities of the
Corporation, then, in each such case, the Conversion Price then in effect shall
be adjusted so that upon conversion of a Convertible Note then outstanding the
number of Shares into which such Convertible Note are convertible after the
happening of any of the events described in clauses (i) through (iv) above shall
be the number of such Shares into which such shares would have been converted if
so converted immediately after the happening of such event or any record date
with respect thereto.



                                      -2-




                  (e) COMMON STOCK RESERVED. The Corporation shall reserve and
keep available out of its authorized but unissued common stock such numbers of
Shares as shall from time to time be sufficient to effect conversion of all of
the then outstanding shares of Convertible Note. In the event there are
insufficient shares to effect a conversion, the Corporation shall increase the
number of authorized shares to effect conversion. In the event shareholder
approval is required to increase the authorized shares, the holder shall be
entitled to vote with the holders of the common stock, as a single class, where
each Convertible Note shall be entitled to that number of votes to which it
would be entitled had all of the Convertible Note had been converted into Shares
were notice of conversion given on the date of such vote. No sale or disposition
of all or substantially all of the Corporation's assets shall take place without
the approval of the holders of the Convertible Note, voting as a single class.

                  (f) VOTING RIGHTS OF CONVERTIBLE NOTE HOLDERS. Except as
provided for in Section 2(e), the holders of a Convertible Note shall not be
entitled to vote on any matters submitted to the stockholders of the
Corporation.

                  (g) RANKING. The Convertible Note shall rank senior to any
other class of capital stock of the Corporation now or hereafter issued as to
the payment of dividends and the distribution of assets on redemption,
liquidation, dissolution or winding up of the Corporation.

                                   ARTICLE III
                                   PREPAYMENT

         3.1 PREPAYMENT AT THE OPTION OF THE BORROWER. The principal amount
outstanding on the Note, and all interest accrued thereon, may be prepaid by the
Borrower, in whole but not in part; provided, that written notice is delivered
to the Holder not more than sixty (60) days nor less than thirty (30) days prior
to the applicable prepayment date. Holder may exercise any rights or options it
may nave hereunder up until any such prepayment is made.

                                   ARTICLE IV
                                EVENTS OF DEFAULT

         4.1 The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums or principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, all without demand, presentment of
notice, or grace period, all of which hereby are expressly waived, except as set
forth below:
                  (a) FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails
to pay any installment of principal or interest hereon when due and such failure
continues for a period of thirty (30) days after written notice to the Borrower
from the Holder.

                  (b) BREACH OF COVENANT. The Borrower breaches any covenant or
other term or condition of this Note and such breach continues for a period of
ten (10) days after written notice to the Borrower from the Holder.

                  (c) BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Borrower made herein, in the Subscription
Agreement, or in any statement or certificate given in writing pursuant hereto
or in connection herewith shall be false or misleading in any material respect.

                  (d) RECEIVER OR TRUSTEE. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.


                                      -3-


                  (e) JUDGMENTS. Any money judgment, writ or similar process
shall be entered or filed against Borrower or any of its property or other
assets for more than $25,000, and shall remain unvacated, unbonded or unstayed
for a period of sixty (60) days.

                  (f) BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceeding or other proceedings for relief under any bankruptcy law
or any law for the relied of debtors shall be instituted by or against the
Borrower.

                                    ARTICLE V
                                  MISCELLANEOUS

         5.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the part
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedied existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

         5.2 NOTICES. Any notice herein required or permitted to be given shall
be in writing and may be personally served and shall be deemed to be delivered
upon receipt or shall be deemed to have been given three (3) days after being
deposited in the United States mail, certified, registered, with postage
pre-paid and properly addressed or on receipt, or sent by fax transmission (with
the original sent by certified or registered mail or by overnight courier) and
shall be deemed to have been delivered on the day telecopied. Both Holder and
Borrower may change the addresses and fax number for service of written or fax
notice to the other as herein provided.

         5.3 AMENDMENT PROVISIONS. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or later amended or supplemented, then as so amended or supplemented.

         5.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns.

         5.5 COST OF COLLECTION. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof costs of collection, including attorney's
fees.

         5.6 GOVERNING LAW. This Note shall be governed by the internal laws of
the State of Florida, without regard to the principles of conflict of laws.

         IN WITNESS WHEREOF, Borrower has caused this Note to be signed by the
undersigned on this 26th day of March, 1999.


OMNICOMM SYSTEMS, INC.



By:
    ---------------------------------
    Peter S. Knezevich, Director
    and Chief Financial Officer


                                      -4-

EX-4.4

                                                                     EXHIBIT 4.4

THIS OPTION AND THE WARRANTS, SHARES OF COMMON STOCK AND SHARES OF PREFERRED
STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS AND CONVERSION OF
THE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE TRANSFERRED IN VIOLATION OF ANY
APPLICABLE SECURITIES LAWS. THIS OPTION IS ALSO SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 3 HEREOF. THIS LEGEND SHALL BE ENDORSED UPON ANY
OPTION ISSUED IN EXCHANGE FOR THIS OPTION AND, UNLESS SUCH SECURITIES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT, ON ANY WARRANTS, SHARES OF COMMON STOCK OR
SHARES OF PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS
OR UPON CONVERSION OF THE PREFERRED STOCK.


                     OPTION TO PURCHASE UNITS CONSISTING OF
                          WARRANTS AND PREFERRED STOCK

                                       OF

                             OMNICOMM SYSTEMS, INC.


         This is to certify that, FOR VALUE RECEIVED, Commonwealth Associates,
L.P. or assigns ("Holder"), is entitled to purchase, subject to the provisions
of this Option, from Omnicomm Systems, Inc., a Delaware corporation (the
"Company"), 0.75 Units, each Unit consisting of (a) 10,000 fully paid, validly
issued and non-assessable shares (the "Preferred Shares") of Series B
Convertible Preferred Stock of the Company ("Preferred Stock"), each share of
Preferred Stock convertible into 40 shares of common stock, par value $.01 per
share (the "Common Stock") and (b) 5-year warrants (the "Warrants") to purchase
400,000 shares of Common Stock at an exercise price of $.25 per share of Common
Stock, at an exercise price of $100,000 per Unit (the "Exercise Price"). The
number of Preferred Shares, the conversion rate of the Preferred Stock and the
number of shares of Common Stock issuable upon exercise and the exercise price
of the Warrants are subject to adjustment upon the occurrence of certain events
as set forth in Section 5 hereof.

         This Option is exercisable at any time or from time to time during the
five year period commencing on the date hereof and terminating at 5:00 p.m. New
York City time on August 31, 2006 (the "Exercise Period"). The aggregate number
shares of Common Stock issuable upon exercise of the Warrants and conversion of
the Preferred Stock deliverable upon exercise of this Option, as adjusted from
time to time, are hereinafter sometimes referred to as "Underlying Shares." This
Option was originally issued pursuant to an Agency Agreement (the "Agency
Agreement") dated August 31, 2001 between the Company and Commonwealth
Associates, L.P. ("Commonwealth"), for nominal consideration.

         The shares of Preferred Stock issuable upon exercise of this Option are
to be authorized and issued pursuant to the provisions of a Certificate of
Designations, Preferences and Rights of Series B Convertible Preferred Stock
(the "Certificate of Designation") filed with the Secretary of State of the
State of Delaware on August 31, 2001. The Warrants issuable upon exercise of
this Option are to be authorized and issued pursuant to that certain Warrant
Agreement, dated August 31, 2001, between the Company and Commonwealth (the
"Warrant Agreement").


                                      -1-


         (1) EXERCISE OF OPTION.

                  (a) The rights represented by this Option may be exercised at
any time during the Exercise Period, in whole or in part, by (i) the surrender
of this Option (with the purchase form at the end hereof properly executed) at
the principal executive office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of the Company); and (ii) payment
to the Company of the exercise price then in effect for the number of Units
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any. This Option shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this Section 1, and the person or
persons in whose name or names the certificates for the Preferred Shares and
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Preferred Shares and Warrants at that time and date. The
certificates for the Preferred Shares and Warrants so purchased shall be
delivered to the Holder as soon as practicable but not later than seven (7) days
after the rights represented by this Option shall have been so exercised. If
this Option should be exercised in part only, the Company shall, upon surrender
of this Option for cancellation, execute and deliver a new Option evidencing the
rights of the Holder thereof to purchase the balance of the Units purchasable
thereunder.

                  (b) At any time during the Exercise Period, the Holder may, at
its option, exchange this Option, in whole or in part (an "Option Exchange"),
into the number of Units determined in accordance with this Section (b), by
surrendering this Option at the principal office of the Company or at the office
of its stock transfer agent, if any, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Units subject to the
Option Exchange and the date on which the Holder requests that such Option
Exchange occur (the "Notice of Exchange"). The Option Exchange shall take place
on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Preferred Shares and Warrants issuable upon such Option
Exchange and, if applicable, a new Option of like tenor evidencing the balance
of the Units remaining subject to this Option, shall be issued as of the
Exchange Date and delivered to the Holder within seven (7) days following the
Exchange Date. In connection with any Option Exchange, this Option shall
represent the right to subscribe for and acquire the number of Units (rounded to
the next highest integer) equal to (x) the number of Units specified by the
Holder in its Notice of Exchange up to the maximum number of Units subject to
this Option (the "Total Number") less (y) the number of Units equal to the
quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the Fair Market Value of a Unit. "Fair Market
Value of a Unit" shall by the sum of the current market value of the Underlying
Shares represented by such Unit (as adjusted in accordance with Section 5
hereof) less the exercise price associated with the exercise of the Warrants
which are part of such Unit. The current market value of the Underlying Shares
of Common Stock shall be determined as follows:

                  (i) If the Common Stock is listed on a national securities
                  exchange or admitted to unlisted trading privileges on such
                  exchange or listed for trading on the Nasdaq National Market
                  System ("NMS"), the current market value shall be the average
                  of the last reported sale price on such exchange or system for
                  the 10 trading days prior to the Exchange Date; provided that
                  if no sale is made on a day within such period or no closing
                  sale price is quoted, that day's market value shall be the
                  average of the closing bid and asked prices for such day on
                  such exchange or system; or

                  (ii) If the Common Stock is not so listed or admitted to
                  unlisted trading privileges, but is traded on the Nasdaq
                  SmallCap Market, the current market value shall be the average
                  of the closing bid and asked prices for the 10 trading days
                  prior to the Exchange Date on such market and if the Common
                  Stock is not so traded, the current market value shall be the
                  mean of the last reported bid and asked prices reported by the
                  NASD Electronic Bulletin Board for the 10 trading days prior
                  to the Exchange Date; or

                                      -2-


                  (iii) If the Common Stock is not so listed or admitted to
                  unlisted trading privileges and bid and asked prices are not
                  so reported, the current market value shall be an amount
                  determined in a reasonable manner by the Board of Directors of
                  the Company.

         (2) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Option such number of shares of
its Preferred Stock and the number of shares of Common Stock as shall be
required for issuance and delivery upon exercise of this Option in full and the
exercise in full of the Warrants and conversion of all the shares of Preferred
Stock issuable upon exercise of this Option.

         (3) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF OPTION. This Option is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Preferred
Stock and Warrants purchasable hereunder. This Option may be assigned or
transferred only to a direct or indirect affiliate of Commonwealth or an
employee of or consultant to Commonwealth (a "Permitted Transferee"). Upon
surrender of this Option to the Company at its principal office or at the office
of its stock transfer agent, if any, with the Assignment Form annexed hereto
duly executed and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Option in the name of the Permitted
Transferee named in such instrument of assignment and this Option shall promptly
be canceled. This Option may be divided or combined with other Options which
carry the same rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which new Options are
to be issued and signed by the Holder hereof. The term "Option" as used herein
includes any Options into which this Option may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Option, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Option, if mutilated, the Company will execute and deliver
a new Option of like tenor and date. Any such new Option executed and delivered
shall constitute an additional contractual obligation on the part of the
Company, whether or not this Option so lost, stolen, destroyed, or mutilated
shall be at any time enforceable by anyone.

         (4) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Option and
are not enforceable against the Company except to the extent set forth herein.

         (5) ANTI-DILUTION PROVISIONS.

                  (a) Upon exercise of this Option, the terms of the shares of
Preferred Stock and Warrants issuable hereunder shall be adjusted to give effect
to any anti-dilution adjustments which would have been made pursuant to Section
7 of the Certificate of Designation or Section 8 of the Warrant Agreement, as
the case may be, if such shares of Preferred Stock and Warrants had been issued
on the date hereof it being the intent of the parties that the shares of
Preferred Stock and Warrants issuable upon exercise of this Option shall be
convertible into or exercisable for the number of shares of Common Stock or such
other securities, and at an exercise price, as the holder hereof would have
received had this Option been exercised and the Preferred Stock and Warrants
been issued on the date hereof.

                  (b) In case the Company shall hereafter (i) declare a dividend
or make a distribution on its outstanding shares of Preferred Stock in shares of
Preferred Stock, (ii) subdivide or reclassify its outstanding shares of
Preferred Stock into a greater number of shares, (iii) combine or reclassify its
outstanding shares of Preferred Stock into a smaller number of shares, (iv)
effect any other reclassification, capital reorganization or change of
outstanding shares of Preferred Stock, (v) consolidate or merge the Company with
or into another corporation (other than a merger with a subsidiary in which
merger the Company is the continuing corporation and which does not result in
any reclassification, capital reorganization or other change of outstanding
shares of Preferred Stock) or (vi) sell, lease or convey to another corporation
all or substantially all of the property of the Company (collectively, a
"Transaction"), the Company shall, as a condition precedent to such transaction,


                                      -3-


cause effective provisions to be made so that upon exercise of this Option the
Holder shall receive the kind and amount of securities and property which would
have been received by such Holder had this Option been exercised, and, if
applicable, the Preferred Stock converted and the Warrants exercised,
immediately prior to such Transaction and the Holder received the benefits
conferred on the holders of such securities and property as a result of such
Transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Option.

                  (c) If any event or condition occurs as to which other
provisions of this Section 5 are not strictly applicable or if strictly
applicable would not fairly protect the exercise or purchase rights of Options
and the Preferred Stock and Warrants issuable hereunder in accordance with the
essential intent and principles of such provisions, or which might materially
and adversely affect the exercise or purchase rights of the Holder hereunder,
then the Company shall make an adjustment in the application of such provisions,
or if necessary the applicable provisions of the Preferred Stock and Warrants,
so as to preserve without dilution the rights of the Holder. In no event shall
any adjustment under this paragraph 5 have the effect of increasing the Exercise
Price of this Option.

         (6) NOTICES.

                  (a) Whenever this Option shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjustments determined as herein provided, setting forth in reasonable detail
the facts requiring such adjustment and the manner of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Holder and the Company shall, forthwith after each such
adjustment, mail a copy by certified mail of such certificate to the Holder or
any such holder.

                  (b) So long as this Option shall be outstanding, (i) if the
Company shall pay any dividend or make any distribution upon the Preferred Stock
or Common Stock or (ii) if the Company shall offer to the holders of Preferred
Stock or Common Stock for subscription or purchase by them any share of any
class or any other rights, (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, or (iv) if the Company is required to notify
the holders of Preferred Stock pursuant to the terms of the Certificate of
Designation or the holders of warrants pursuant to the terms of the Warrant
Agreement or for any reason determines to notify the holders of Preferred Stock
or such warrants, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, in the case of (i), (ii) or (iii) above, at least
fifteen days prior the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action and stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed, as of which the holders of
Preferred Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up or in the case of (iv) on the
date such notice is sent to the holders of Preferred Stock or warrants.

         (7) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company agrees
to register the Underlying Shares for resale under the Securities Act of 1933,
as amended (the "Act") on the terms and subject to the conditions set forth in
Annex A to the Subscription Agreement between the Company and each of the
investors in the offering contemplated by the Agency Agreement, it being the
intent of the parties that the holder of this Option shall have all the rights
of a holder of Securities under Annex A to the Subscription Agreement and that
the Underlying Shares shall be treated as "Conversion Shares" and "Warrant
Shares" under Annex A to the Subscription Agreement.



                                      -4-


         (8) GOVERNING LAW. This Option shall be governed by and in accordance
with the laws of the State of New York, without giving effect to the principles
of conflicts of law thereof.

                                             OMNICOMM SYSTEMS, INC.


                                             By:
                                                -------------------------------
Dated:               , 2001                     Name:
     ----------------                           Title:



                                      -5-




                                  PURCHASE FORM


                                                          Dated ________________


         The undersigned hereby irrevocably elects to exercise the within Option
to the extent of purchasing _______ Units and hereby

         [ ]  makes payment of $_______ in payment of the actual exercise
              price thereof

          or

         [ ]  elects to effect an Option Exchange in accordance with
              Section 1(b) on _______ [DATE].


                     INSTRUCTIONS FOR REGISTRATION OF UNITS

Name
    -------------------------------------
(Please typewrite or print in block letters)

Address
        ---------------------------------

Signature
         --------------------------------






                                 ASSIGNMENT FORM

    FOR VALUE RECEIVED, _____________ hereby sells, assigns and transfers unto


Name
    -------------------------------------
(Please typewrite or print in block letters)

Address
        ---------------------------------

the right to purchase Preferred Stock and Warrants represented by this Option to
the extent of _____Units as to which such right is exercisable and does hereby
irrevocably constitute and appoint ______ as Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.

Date
    -------------------------------------

Signature
        ---------------------------------

EX-4.5

                                                                     EXHIBIT 4.5

THIS OPTION AND THE WARRANTS, SHARES OF COMMON STOCK AND SHARES OF PREFERRED
STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS AND CONVERSION OF
THE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE TRANSFERRED IN VIOLATION OF ANY
APPLICABLE SECURITIES LAWS. THIS OPTION IS ALSO SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 3 HEREOF. THIS LEGEND SHALL BE ENDORSED UPON ANY
OPTION ISSUED IN EXCHANGE FOR THIS OPTION AND, UNLESS SUCH SECURITIES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT, ON ANY WARRANTS, SHARES OF COMMON STOCK OR
SHARES OF PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS OPTION AND THE WARRANTS
OR UPON CONVERSION OF THE PREFERRED STOCK.


                     OPTION TO PURCHASE UNITS CONSISTING OF
                          WARRANTS AND PREFERRED STOCK

                                       OF

                             OMNICOMM SYSTEMS, INC.






         This is to certify that, FOR VALUE RECEIVED, Noesis Capital Corp. or
assigns ("Holder"), is entitled to purchase, subject to the provisions of this
Option, from OmniComm Systems, Inc., a Delaware corporation (the "Company"),
2.48475 Units, each Unit consisting of (a) 10,000 fully paid, validly issued and
non-assessable shares (the "Preferred Shares") of Series C Convertible Preferred
Stock of the Company ("Preferred Stock"), each share of Preferred Stock
convertible into 40 shares of common stock, par value $.01 per share (the
"Common Stock") and (b) 5-year warrants (the "Warrants") to purchase 200,000
shares of Common Stock at an exercise price of $.25 per share of Common Stock,
at an exercise price of $100,000 per Unit (the "Exercise Price"). The number of
Preferred Shares, the conversion rate of the Preferred Stock and the number of
shares of Common Stock issuable upon exercise and the exercise price of the
Warrants are subject to adjustment upon the occurrence of certain events as set
forth in Section 5 hereof.

         This Option is exercisable at any time or from time to time during the
five year period commencing on the date hereof and terminating at 5:00 p.m. New
York City time on March 31, 2008 (the "Exercise Period"). The aggregate number
shares of Common Stock issuable upon exercise of the Warrants and conversion of
the Preferred Stock deliverable upon exercise of this Option, as adjusted from
time to time, are hereinafter sometimes referred to as "Underlying Shares." This
Option was originally issued pursuant to an Agency Agreement (the "Agency
Agreement") dated March 29, 2002 between the Company and Noesis Capital Corp.
("Noesis"), for nominal consideration.

         The shares of Preferred Stock issuable upon exercise of this Option are
to be authorized and issued pursuant to the provisions of a Certificate of
Designations, Preferences and Rights of Series B Convertible Preferred Stock
(the "Certificate of Designation") filed with the Secretary of State of the
State of Delaware on March 27, 2002. The Warrants issuable upon exercise of this
Option are to be authorized and issued pursuant to that certain Warrant
Agreement, dated March 29, 2002, between the Company and Noesis (the "Warrant
Agreement").





         (1) EXERCISE OF OPTION.

                  (a) The rights represented by this Option may be exercised at
any time during the Exercise Period, in whole or in part, by (i) the surrender
of this Option (with the purchase form at the end hereof properly executed) at
the principal executive office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of the Company); and (ii) payment
to the Company of the exercise price then in effect for the number of Units
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any. This Option shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this Section 1, and the person or
persons in whose name or names the certificates for the Preferred Shares and
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Preferred Shares and Warrants at that time and date. The
certificates for the Preferred Shares and Warrants so purchased shall be
delivered to the Holder as soon as practicable but not later than seven (7) days
after the rights represented by this Option shall have been so exercised. If
this Option should be exercised in part only, the Company shall, upon surrender
of this Option for cancellation, execute and deliver a new Option evidencing the
rights of the Holder thereof to purchase the balance of the Units purchasable
thereunder.

                  (b) At any time during the Exercise Period, the Holder may, at
its option, exchange this Option, in whole or in part (an "Option Exchange"),
into the number of Units determined in accordance with this Section (b), by
surrendering this Option at the principal office of the Company or at the office
of its stock transfer agent, if any, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Units subject to the
Option Exchange and the date on which the Holder requests that such Option
Exchange occur (the "Notice of Exchange"). The Option Exchange shall take place
on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Preferred Shares and Warrants issuable upon such Option
Exchange and, if applicable, a new Option of like tenor evidencing the balance
of the Units remaining subject to this Option, shall be issued as of the

Exchange Date and delivered to the Holder within seven (7) days following the
Exchange Date. In connection with any Option Exchange, this Option shall
represent the right to subscribe for and acquire the number of Units (rounded to
the next highest integer) equal to (x) the number of Units specified by the
Holder in its Notice of Exchange up to the maximum number of Units subject to
this Option (the "Total Number") less (y) the number of Units equal to the
quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the Fair Market Value of a Unit. "Fair Market
Value of a Unit" shall by the sum of the current market value of the Underlying
Shares represented by such Unit (as adjusted in accordance with Section 5
hereof) less the exercise price associated with the exercise of the Warrants
which are part of such Unit. The current market value of the Underlying Shares
of Common Stock shall be determined as follows:

                  (i) If the Common Stock is listed on a national securities
                  exchange or admitted to unlisted trading privileges on such
                  exchange or listed for trading on the Nasdaq National Market
                  System ("NMS"), the current market value shall be the average
                  of the last reported sale price on such exchange or system for
                  the 10 trading days prior to the Exchange Date; provided that
                  if no sale is made on a day within such period or no closing
                  sale price is quoted, that day's market value shall be the
                  average of the closing bid and asked prices for such day on
                  such exchange or system; or

                  (ii) If the Common Stock is not so listed or admitted to
                  unlisted trading privileges, but is traded on the Nasdaq
                  SmallCap Market, the current market value shall be the average
                  of the closing bid and asked prices for the 10 trading days
                  prior to the Exchange Date on such market and if the Common
                  Stock is not so traded, the current market value shall be the
                  mean of the last reported bid and asked prices reported by the
                  NASD Electronic Bulletin Board for the 10 trading days prior
                  to the Exchange Date; or

                  (iii) If the Common Stock is not so listed or admitted to
                  unlisted trading privileges and bid and asked prices are not
                  so reported, the current market value shall be an amount
                  determined in a reasonable manner by the Board of Directors of
                  the Company.


                                      -2-


         (2) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Option such number of shares of
its Preferred Stock and the number of shares of Common Stock as shall be
required for issuance and delivery upon exercise of this Option in full and the
exercise in full of the Warrants and conversion of all the shares of Preferred
Stock issuable upon exercise of this Option.

         (3) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF OPTION. This Option is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Preferred
Stock and Warrants purchasable hereunder. This Option may be assigned or
transferred only to a direct or indirect affiliate of Noesis or an employee of
or consultant to Noesis (a "Permitted Transferee"). Upon surrender of this
Option to the Company at its principal office or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto duly executed
and funds sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Option in the name of the Permitted Transferee named
in such instrument of assignment and this Option shall promptly be canceled.
This Option may be divided or combined with other Options which carry the same
rights upon presentation hereof at the principal office of the Company or at the
office of its stock transfer agent, if any, together with a written notice
specifying the names and denominations in which new Options are to be issued and
signed by the Holder hereof. The term "Option" as used herein includes any
Options into which this Option may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Option, if mutilated, the Company will execute and deliver a new Option of
like tenor and date. Any such new Option executed and delivered shall constitute
an additional contractual obligation on the part of the Company, whether or not
this Option so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.

         (4) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Option and
are not enforceable against the Company except to the extent set forth herein.

         (5) ANTI-DILUTION PROVISIONS.

                  (a) Upon exercise of this Option, the terms of the shares of
Preferred Stock and Warrants issuable hereunder shall be adjusted to give effect
to any anti-dilution adjustments which would have been made pursuant to Section
7 of the Certificate of Designation or Section 8 of the Warrant Agreement, as
the case may be, if such shares of Preferred Stock and Warrants had been issued
on the date hereof it being the intent of the parties that the shares of
Preferred Stock and Warrants issuable upon exercise of this Option shall be
convertible into or exercisable for the number of shares of Common Stock or such
other securities, and at an exercise price, as the holder hereof would have
received had this Option been exercised and the Preferred Stock and Warrants
been issued on the date hereof.
                                      -3-


                  (b) In case the Company shall hereafter (i) declare a dividend
or make a distribution on its outstanding shares of Preferred Stock in shares of
Preferred Stock, (ii) subdivide or reclassify its outstanding shares of
Preferred Stock into a greater number of shares, (iii) combine or reclassify its
outstanding shares of Preferred Stock into a smaller number of shares, (iv)
effect any other reclassification, capital reorganization or change of
outstanding shares of Preferred Stock, (v) consolidate or merge the Company with
or into another corporation (other than a merger with a subsidiary in which
merger the Company is the continuing corporation and which does not result in
any reclassification, capital reorganization or other change of outstanding
shares of Preferred Stock) or (vi) sell, lease or convey to another corporation
all or substantially all of the property of the Company (collectively, a
"Transaction"), the Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that upon exercise of this Option the
Holder shall receive the kind and amount of securities and property which would
have been received by such Holder had this Option been exercised, and, if
applicable, the Preferred Stock converted and the Warrants exercised,
immediately prior to such Transaction and the Holder received the benefits
conferred on the holders of such securities and property as a result of such
Transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Option.

                  (c) If any event or condition occurs as to which other
provisions of this Section 5 are not strictly applicable or if strictly
applicable would not fairly protect the exercise or purchase rights of Options
and the Preferred Stock and Warrants issuable hereunder in accordance with the
essential intent and principles of such provisions, or which might materially
and adversely affect the exercise or purchase rights of the Holder hereunder,
then the Company shall make an adjustment in the application of such provisions,
or if necessary the applicable provisions of the Preferred Stock and Warrants,
so as to preserve without dilution the rights of the Holder. In no event shall
any adjustment under this paragraph 5 have the effect of increasing the Exercise
Price of this Option.

         (6) NOTICES.

                  (a) Whenever this Option shall be adjusted as required by the
provisions of the foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjustments determined as herein provided, setting forth in reasonable detail
the facts requiring such adjustment and the manner of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Holder and the Company shall, forthwith after each such
adjustment, mail a copy by certified mail of such certificate to the Holder or
any such holder.

                  (b) So long as this Option shall be outstanding, (i) if the
Company shall pay any dividend or make any distribution upon the Preferred Stock
or Common Stock or (ii) if the Company shall offer to the holders of Preferred
Stock or Common Stock for subscription or purchase by them any share of any
class or any other rights, (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or

                                      -4-


substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, or (iv) if the Company is required to notify
the holders of Preferred Stock pursuant to the terms of the Certificate of
Designation or the holders of warrants pursuant to the terms of the Warrant
Agreement or for any reason determines to notify the holders of Preferred Stock
or such warrants, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, in the case of (i), (ii) or (iii) above, at least
fifteen days prior the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action and stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed, as of which the holders of
Preferred Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up or in the case of (iv) on the
date such notice is sent to the holders of Preferred Stock or warrants.

         (7) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company agrees
to register the Underlying Shares for resale under the Securities Act of 1933,
as amended (the "Act") on the terms and subject to the conditions set forth in
Annex A to the Subscription Agreement between the Company and each of the
investors in the offering contemplated by the Agency Agreement, it being the
intent of the parties that the holder of this Option shall have all the rights
of a holder of Securities under Annex A to the Subscription Agreement and that
the Underlying Shares shall be treated as "Conversion Shares" and "Warrant
Shares" under Annex A to the Subscription Agreement.

         (8) GOVERNING LAW. This Option shall be governed by and in accordance
with the laws of the State of Florida, without giving effect to the principles
of conflicts of law thereof.

                                                     OMNICOMM SYSTEMS, INC.


                                                     By:
Dated                                                   -----------------------
      --------------                                    Name:
                                                        Title:



                                      -5-



                                  PURCHASE FORM


                                                          Dated ________________

         The undersigned hereby irrevocably elects to exercise the within Option
to the extent of purchasing __________ Units and hereby

         [ ]  makes payment of $_______ in payment of the actual exercise
              price thereof

          or

         [ ]  elects to effect an Option Exchange in accordance with
              Section 1(b) on _______ [DATE].



                     INSTRUCTIONS FOR REGISTRATION OF UNITS

Name
     -----------------------------------------
(Please typewrite or print in block letters)


Address
         -------------------------------------

Signature
         -------------------------------------






                                 ASSIGNMENT FORM

    FOR VALUE RECEIVED, _____________ hereby sells, assigns and transfers unto


Name
     -----------------------------------------
(Please typewrite or print in block letters)


Address
         -------------------------------------

the right to purchase Preferred Stock and Warrants represented by this Option to
the extent of _____Units as to which such right is exercisable and does hereby
irrevocably constitute and appoint ______ as Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.

Date
      ---------------------------------

Signature
      ---------------------------------

EX-5.1

                                                                     EXHIBIT 5.1

                   KATZ, BARRON, SQUITERO, FAUST & BOYD, P.A.
                              100 N.E. Third Avenue
                                    Suite 280
                         Fort Lauderdale, Florida 33301

                                                              September 26, 2003
OmniComm Systems, Inc.
2555 Davie Road
Suite 110-B
Davie, FL 33317

         Re:   Registration Statement on Form SB-2 ("Registration Statement");
               OmniComm Systems, Inc. (the "Company")

Gentlemen:

         This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration for public
sale of 39,879,850 shares of common stock, $.001 par value per share ("Common
Stock"), including shares of Common Stock issuable upon conversion of Series B
Preferred Stock and Series C Preferred Stock, and exercise of common stock
purchase warrants and Placement Agent Unit Options.

         In connection therewith, we have examined and relied upon original,
certified, conformed, photostat or other copies of (a) the Articles of
Incorporation, as amended, and Bylaws of the Company; (b) resolutions of the
Board of Directors of the Company authorizing the issuance of the Common Stock
and related matters; (c) the Registration Statement and the exhibits thereto;
and (d) such other matters of law as we have deemed necessary for the expression
of the opinion herein contained. In all such examinations, we have assumed the
genuineness of all signatures on original documents, and the conformity to
originals or certified documents of all copies submitted to us as conformed,
photostat or other copies. In passing upon certain corporate records and
documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company, and we
express no opinion thereon. As to the various questions of fact material to this
opinion, we have relied, to the extent we deemed reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independently checking or verifying the accuracy of such documents, records and
instruments.

         We are members of the Bar of the State of Florida and express no
opinion on any law other than the laws of the State of Florida applicable to
Federal Securities laws.

         Based upon and subject to the foregoing, we are of the opinion that the
shares of Common Stock have been duly and validly authorized, and when issued
and paid for in accordance with their terms will be fully paid and
non-assessable.

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to use our name under the caption "Legal Matters" in
the prospectus comprising part of the Registration Statement.


                             Sincerely,


                             /s/ KATZ, BARRON, SQUITERO, FAUST & BOYD, P.A.
                             ----------------------------------------------
                                 KATZ, BARRON, SQUITERO, FAUST

EX-10.8

                                                                    EXHIBIT 10.8

                        AMENDMENT TO EMPLOYMENT AGREEMENT

         THIS AMENDMENT TO EMPLOYMENT AGREEMENT dated as of August 22, 2003 by
and between Omnicomm Systems, Inc. (the "Company"), a Delaware corporation, and
Cornelis Wit (the "Executive").

         1. Reference is hereby made to that certain Employment Agreement (the
"Employment Agreement") dated June 1, 2002 by and between the Company and
Executive. All terms used herein and not otherwise defined herein shall have the
same meaning as set forth in the Employment Agreement.

         2. Paragraph 2 of the Employment Agreement shall be amended in its
entirety to read as follows:

                  "Term and Termination. This Agreement shall commence on June
                  1, 2002 and shall terminate as of the earlier of:

                  (a)      December 31, 2004, unless extended by the Company;

                  (b)      the death or disability of the Executive. Disability
                           shall mean the Executive's inability, due to sickness
                           or injury, to perform effectively his duties
                           hereunder for a period of at least 90 consecutive
                           days;

                  (c)      thirty (30) days after notice is given by the Company
                           to the Executive after a material breach hereof by
                           the Executive; or,

                  (d)      thirty (30) days after notice is given by the
                           Executive to the Company after a material breach
                           hereof by the Company.

         The exercise of the Company's or the Executive's right to terminate
this Agreement pursuant to clause (c) or (d) hereof, as the case may be, shall
not abrogate the rights and remedies of the terminating party in respect of the
breach giving rise to such termination.

         3. Except as otherwise amended hereby the terms and conditions of the
Employment Agreement shall remain in full force and effect.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.

OMNICOMM SYSTEMS, INC.

BY: /s/ RANDALL SMITH
   -------------------------------
    Name: Randall Smith
    Title: Chairman of the Board

EXECUTIVE:

/s/ CORNELIS WIT
- --------------------
Cornelis Wit

EX-23.1

                                                                    EXHIBIT 23.1

                          INDEPENDENT AUDITOR'S CONSENT

To the Board of Directors
Omnicomm Systems, Inc.

We consent to the use in this Registration Statement of Omnicomm Systems, Inc.
on Form SB-2 of our report dated March 21, 2003, appearing in the Prospectus,
which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.



/s/  GREENBERG & COMPANY CPA'S LLC
- ---------------------------------
Greenberg & Company CPA's LLC
Springfield, N.J.
September  , 2003