10QSB

SECURITIES AND EXCHANGE COMISSION

Washington, D.C. 20549

FORM 10-QSB

[Mark One]

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

For the quarterly period ended June 30, 2006

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

For the transition period from              to             

Commission File Number: 0-25203

OmniComm Systems, Inc.

(Name of Small Business Issuer in its Charter)

Delaware	11-3349762
State of Incorporation	IRS Federal Employer Identification Number
2101 W. Commercial Blvd. Suite 4000, Ft. Lauderdale, FL	33309
Current Address of Principal Office	Zip Code
2555 Davie Road, Suite 110-B, Davie, FL	33317
Former Address of Principal Office	Zip Code

Registrant’s Telephone Number: 954.473.1254

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

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

The number of shares outstanding of each of the issuer’s classes of common equity as of August 11, 2006: 37,398,804 common stock $.001 par value.

Transitional Small Business Disclosure Format (Check one):    Yes  ¨    No  x

TABLE OF CONTENTS TO THE QUARTERLY REPORT ON FORM 10-QSB

FOR THE SIX MONTHS ENDED JUNE 30, 2006

PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets – June 30, 2006 and December 31, 2005	3
Consolidated Statements of Operations – Six and Three Months Ended June 30, 2006 and June 30, 2005	4
Consolidated Statements of Cash Flows – Six and Three Months Ended June 30, 2006 and June 30, 2005	5
Notes to Consolidated Unaudited Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Controls and Procedures	25
PART II. OTHER INFORMATION
Item 6. Exhibits	27
SIGNATURES	28
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act OF 2002– CEO Cornelis F. Wit
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act OF 2002– CFO Ronald T. Linares
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act OF 2002 – CEO - Cornelis F. Wit
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act OF 2002 – CFO - Ronald T. Linares

2

OMNICOMM SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2006			December 31, 2005
	(unaudited)
ASSETS
CURRENT ASSETS
Cash	$	202,184		$	9,931
Accounts receivable, net of allowance for doubtful accounts of $58,539 and $58,539 in 2006 and 2005, respectively		637,167			234,565
Prepaid expenses		36,386			2,394
Total current assets		875,737			246,890
PROPERTY AND EQUIPMENT, net		182,520			31,222
OTHER ASSETS
Intangible assets, net		2,910			-0-
Other assets		24,123			5,497
TOTAL ASSETS	$	1,085,290		$	283,609
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	885,012		$	779,456
Accrued payroll taxes		119,885			58,742
10% Convertible Notes		125,000			125,000
Notes payable – current portion		460,000			-0-
Notes payable, related party – current portion		167,000			-0-
Deferred revenue		1,765,475			1,048,707
Total current liabilities		3,522,372			2,011,905
NOTES PAYABLE, net of current portion		1,683,623			2,043,623
NOTES PAYABLE RELATED PARTY, net of current portion		963,637			1,150,937
TOTAL LIABILITIES		6,169,632			5,206,465
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS’ EQUITY (DEFICIT)
Undesignated preferred stock - $.001 par value. 4,022,500 shares authorized, no shares issued and outstanding		-0-			-0-
Series B convertible preferred stock, - $.001 par value. 230,000 shares authorized, 50,000 and 65,000 issued and outstanding, respectively; liquidation preference $500,000 and $650,000, respectively		50			65
Series C convertible preferred stock, - $.001 par value. 747,500 shares authorized, 337,150 and 337,150 issued and outstanding, respectively; liquidation preference $3,371,500 and $3,371,500, respectively		337			337
5% Series A convertible preferred stock - $0.001 par value, 5,000,000 shares authorized; 4,215,224 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, 37,398,804 and 27,425,915 issued and outstanding, after deducting 673,878 and 673,878 shares of treasury stock, at $.001 par value, respectively		38,024			28,051
Additional paid in capital – preferred		7,703,502			7,853,488
Additional paid in capital – common		16,675,263			15,201,406
Accumulated other comprehensive income		1,924			-0-
Less: Treasury stock, cost method, 673,878 and 673,878 shares, respectively		(299,861	)		(299,861	)
Accumulated deficit		(29,207,796	)		(27,710,557	)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)		(5,084,342	)		(4,922,856	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)	$	1,085,290		$	283,609

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

3

OMNICOMM SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2006 AND JUNE 30, 2005

(unaudited)

	For the six months ended June 30,						For the three months ended June 30,
	2006			2005			2006			2005
Revenues	$	1,222,263		$	762,601		$	702,752		$	352,370
Cost of sales		459,814			167,930			275,853			91,480
Gross margin		762,449			594,671			426,899			260,890
Operating expenses
Salaries, benefits and related taxes		1,470,734			930,648			744,616			465,986
Rent & occupancy expenses		80,049			75,614			33,493			37,979
Consulting – marketing, sales and product development		150,625			-0-			54,375			-0-
Legal and professional fees		106,432			87,171			83,717			44,730
Travel		97,116			59,694			70,504			28,188
Telephone and internet		40,618			34,900			24,093			17,989
Selling, general and administrative		139,745			92,701			84,387			45,090
Depreciation and amortization		22,205			18,397			15,250			4,327
Total operating expenses		2,107,524			1,299,125			1,110,435			644,289
Operating income (loss)		(1,345,075	)		(704,454	)		(683,536	)		(383,399	)
Other income (expense)
Interest expense		(152,164	)		(227,657	)		(76,409	)		(167,041	)
Interest income		-0-			81			-0-			-0-
(Loss) before taxes and preferred dividends		(1,497,239	)		(932,030	)		(759,945	)		(550,440	)
Income tax expense (benefit)		-0-			-0-			-0-			-0-
Net income (loss)		(1,497,239	)		(932,030	)		(759,945	)		(550,440	)
Preferred stock dividends in arrears Series A Preferred		(101,837	)		(101,837	)		(51,200	)		(51,200	)
Preferred stock dividends in arrears Series B Preferred		(22,499	)		(29,227	)		(9,973	)		(12,964	)
Preferred stock dividends in arrears Series C Preferred		(133,751	)		(133,751	)		(67,245	)		(67,245	)
Total preferred stock dividends		(258,087	)		(264,815	)		(128,418	)		(131,409	)
Net income (loss) attributable to common stockholders	$	(1,755,326	)	$	(1,196,845	)	$	(888,363	)	$	(681,849	)
Net (loss) per share	$	(0.06	)	$	(0.05	)	$	(0.03	)	$	(0.03	)
Weighted average number of shares outstanding		30,844,522			25,415,829			33,224,741			26,149,019

See accompanying summary of accounting policies and notes to financial statements

4

OMNICOMM SYSTEM, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2006 AND JUNE 30, 2005

(unaudited)

	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(1,497,239	)	$	(932,030	)
Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		22,205			18,397
Interest expense from beneficial conversion feature on 10% convertible notes payable		-0-			104,000
Employee stock option wage expense		163,545			-0-
Change in assets and liabilities:
Accounts receivable		(401,085	)		(358,150	)
Prepaid expenses		(33,879	)		(32,400	)
Other assets		(16,809	)		-0-
Accounts payable and accrued expenses		145,574			370,643
Deferred revenue		716,768			330,948
Net cash provided by (used in) operating activities		(900,920	)		(498,592	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in intangible assets		(3,065	)		-0-
Sale of property and equipment		2,500			-0-
Purchase of property and equipment		(177,371	)		(15,163	)
NET Net cash provided by (used in) investing activities		(177,936	)		(15,163	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable		(20,300	)		(40,000	)
Proceeds from employee stock option exercise		1,500			-0-
Proceeds from issuance of common stock, net of issuance costs		1,189,909			180,000
Proceeds from notes payable		100,000			310,000
Net cash provided by (used in) financing activities		1,271,109			450,000
Net increase (decrease) in cash and cash equivalents		192,253			(63,755	)
Cash and cash equivalents at beginning of period		9,931			65,695
Cash and cash equivalents at end of period	$	202,184		$	1,940

	For the six months ended June 30,
	2006		2005
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income tax	$	-0-	$	-0-
Interest	$	5,494	$	2,500
Non-cash Transactions
Conversion of Series B common stock warrants on a cashless basis	$	150,000	$	-0-
Exercise of Series B Placement Agent Unit Option on a cashless basis	$	557,013	$	-0-
Conversion of 10% Convertible Notes Payable in common stock	$	-0-	$	130,000
Accrued interest converted into common stock	$	-0-	$	21,985
Conversion of Series B Preferred Stock into common stock	$	150,000	$	325,000

See accompanying summary of accounting policies and notes to financial statements

5

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS

OmniComm Systems, Inc. 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. TrialMaster® allows clinical trial sponsors and investigative sites to securely collect, validate, transmit and analyze clinical trial data.

Our ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through TrialMaster. Our research and development ( R & D) efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality. During fiscal 2005, we spent approximately $478,000 on R & D activities, the majority of which represented salaries to our developers. In fiscal 2004 we spent approximately $537,000 on R & D activities, which include costs associated with customization of the TrialMaster software for our client’s projects.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

UNAUDITED FINANCIAL STATEMENTS

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

Operating results for the six and three months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005.

ESTIMATES IN FINANCIAL STATEMENTS

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

6

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

RECLASSIFICATIONS

Certain reclassifications have been made in the 2005 financial statements to conform to the 2006 presentation. These reclassifications did not have any effect on net income (loss) or shareholders’ equity.

SEGMENT INFORMATION

The Company operates in one reportable segment.

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

Accounts receivable are judged as to collectibility by management and an allowance for bad debts is established as necessary. The Company had recorded an allowance for uncollectible accounts receivable of $58,539 and $58,539 as of June 30, 2006 and December 31, 2005.

CONCENTRATION OF CREDIT RISK

Accounts receivable subject the Company to its highest potential concentration of credit risk. The Company reserves for credit losses. The Company does not require collateral on trade accounts receivables. Our top five customers accounted for approximately 49% of our revenues during the first six months of 2006 and approximately 62% of our revenues during the same period in fiscal 2005. One customer accounted individually for 10% or more of our revenues during fiscal 2006.

PROPERTY AND EQUIPMENT

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

DEFERRED REVENUE

Deferred revenue represents cash advances received in excess of revenue earned on on-going contracts. Payment terms vary with each contract but may include an initial payment at the time the contract is executed, with future payments dependent upon the completion of certain contract phases or targeted milestones. In the event of contract cancellation, the Company is entitled to payment for all work performed through the point of cancellation. As of June 30, 2006 the Company had $1,765,475 in deferred revenues relating to contracts for services to be performed over periods ranging from 1 month to 5 years.

REVENUE RECOGNITION POLICY

OmniComm’s revenue model is transaction-based and can be implemented either as an ASP (Application Service Provider) or licensed for implementation by a customer such as a pharmaceutical company. Revenues are derived from the set-up of clinical trial engagements; on-going maintenance fees incurred throughout the duration of an engagement; fees for report writing and project change orders. The clinical

7

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

trials that are conducted using TrialMaster can last from a few months to several years. Most of the fees associated with our product including post-setup customer support in the form of maintenance charges are recognized ratably over the term of the clinical trial. Cost of sales is primarily comprised of programmer salaries and taxes and is expensed as incurred.

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

ADVERTISING

Advertising costs are expensed as incurred. Advertising costs were $47,723 and $8,480 for the six months ended June 30, 2006 and June 30, 2005, respectively.

RESEARCH AND DEVELOPMENT EXPENSES

Software development costs are included in research and development and are expensed as incurred. Statement of Financial Accounting Standards No. 86 “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”, (“SFAS 86”), 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 $307,723 and $252,593 for the six months ended June 30, 2006 and June 30, 2005 respectively.

EMPLOYEE EQUITY INCENTIVE PLANS

The company has an employee equity incentive plan, which is more fully described below. Until December 31, 2005, the company accounted for its equity incentive plan under the intrinsic value recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Effective with the first quarter of fiscal 2006 which ended March 31, 2006, the Company began accounting for employee stock options using the fair-value method. The exercise price of options granted is equal to the market price of OmniComm Systems common stock (defined as the closing bid price reported on the NASDAQ OTC Bulletin-Board) on the date of grant. The following table illustrates the effect on net income and earnings per share as if the company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as amended, (“SFAS 123”), to options granted under the stock options plan for options granted through the six months ended June 30, 2005. The net loss available to common stockholders for the six months ended June 30, 2006 reflects the expense attributable to employee stock option grants under the fair-value method. For purpose of this pro-forma disclosure, the value of the options is estimated using a Binomial option pricing model. Because the estimated value is determined as of the date of grant, the actual value ultimately realized by the employee may be significantly different.

8

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

	Six Months Ended June 30,
(in thousands, except for per share data)	2006			2005
Net loss available to common stockholders
As reported	$	(1,755	)	$	(1,197	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		-0-			(184	)
Pro forma net loss available to common stockholders	$	(1,755	)	$	(1,381	)
Weighted average number of common shares outstanding used to compute net income (loss) per common share – basic and diluted		30,845			25,416
Reported basic and diluted net loss per common share	$	(0.06	)	$	(0.05	)
Pro forma basic and diluted net loss per common share	$	(0.06	)	$	(0.05	)

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

The estimated value of employee stock options granted during the six months ended June 30, 2006 was $9,870 ($101,850 for the six months ended June 30, 2005). The value of options granted in 2006 and 2005 was estimated at the date of grant using the following assumptions:

	2006		2005
Risk-free interest rate	4.55	%	2.70	%
Expected years until exercise	6 Years		6 Years
Expected stock volatility	100.1	%	107.2	%
Dividend yield	0	%	0	%

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

Description of Stock Option Plan

In 1998, the Company’s Board of Directors approved the 1998 Stock Incentive Plan of OmniComm Systems, (the “1998 Plan”). The 1998 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units. Pursuant to the 1998 Plan the Company may grant options to purchase up to 7,500,000 shares of the Company’s common stock. The term of each option may not exceed ten years from the date of grant, and options vest in accordance with a vesting schedule established by the Plan administrator. As of June 30, 2006 substantially all of the company’s employees were participating in the 1998 Plan. Options granted under the 1998 Plan will generally expire ten years from the date of grant for most employees and seven years from the date of grant for officers and directors of the company.

EARNINGS PER SHARE

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

9

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

Basic earnings per share were calculated using the weighted average number of shares outstanding of 30,844,522 and 25,415,829 for the six months ended June 30, 2006 and 2005, respectively. Basic earnings per share were calculated using the weighted average number of shares outstanding of 33,224,741 and 26,149,019 for the three months ended June 30, 2006 and 2005, respectively. There were no differences between basic and diluted earnings per share. Options were granted under the 1998 Stock Incentive Plan to purchase 7,113,770 shares of common stock at prices ranging from $.15 to $2.75 per share were outstanding at June 30, 2006. Stock warrants to purchase 4,728,148 shares of common stock at prices ranging from $0.25 to $0.50 per share were outstanding at June 30, 2006.

The Company granted a Unit Purchase Option (“Agent Option”) to the Placement Agent of its Series B Convertible Preferred Stock that originally provided 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 remaining outstanding Agent Options would result in the issuance of an aggregate of 114,296 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 granted a Unit Purchase Option (“Agent Option”) to the Placement Agent of its Series C Convertible Preferred Stock that provides the Placement Agent the ability to purchase 24,848 Series C Preferred Shares with 496,950 detachable common stock warrants. The exercise of the Agent Option would result in the issuance of an aggregate of 1,490,850 shares of common stock at an exercise price of $0.25 per share. The warrants and Agent Options were not included in the computation of diluted earnings per share because they have an anti-dilutive effect on net loss per share.

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

INCOME TAXES

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

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

IMPACT OF NEW ACCOUNTING STANDARDS

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic method previously allowable under APB Opinion No. 25. SFAS No. 123(R) will be effective for interim or annual reporting periods beginning on or after December 15, 2005. We previously adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation and have accounted for all awards granted to employees in recent years using the optional intrinsic value method. Accordingly we believe SFAS No. 123(R) will have a material impact on financial statement at such time as options are granted.

10

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

NOTE 3: OPERATIONS AND LIQUIDITY

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

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

To satisfy our capital requirements, we may seek additional financing through debt and equity financings. There can be no assurance that any such funding will be available to us on favorable terms or at all. If adequate funds are not available when needed, we may be required to delay, scale back or eliminate some or all of our research and product development and marketing programs. If we are successful in obtaining additional financings, the terms of such financings may have the effect of diluting or adversely affecting the holdings or the rights of the holders of our common and preferred stock.

The ability of the Company to continue in existence is dependent on its having sufficient financial resources to bring products and services to market for marketplace acceptance. As a result of its significant losses, negative cash flows from operations, and accumulated deficits for the six months ending June 30, 2006 there is doubt about the Company’s ability to continue as a going concern.

NOTE 4: EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing income available to common shareholders (which for the Company equals its net loss) by the weighted average number of common shares outstanding, and dilutive EPS adds the dilutive effect of stock options and other common stock equivalents. Antidilutive shares aggregating 32,837,466 and 44,456,065 have been omitted from the calculation of dilutive EPS for the six and three months June 30, 2006 and June 30, 2005, respectively. Provided below is reconciliation between numerators and denominators of the basic and diluted earnings per shares:

Six Months Ended

	June 30, 2006							June 30, 2005
	Income Numerator			Shares Denominator	Per-Share Amount			Income Numerator			Shares Denominator	Per-Share Amount
Basic EPS	$	(1,755,326	)	30,844,522	$	(0.06	)	$	(1,196,845	)	25,415,829	$	(0.05	)
Effect of Dilutive Securities
None.		-0-		-0-		-0-			-0-		-0-		-0-
Diluted EPS	$	(1,755,326	)	30,844,522	$	(0.06	)	$	(1,196,845	)	25,415,829	$	(0.05	)

11

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

Three Months Ended

	June 30, 2006							June 30, 2005
	Income Numerator			Shares Denominator	Per-Share Amount			Income Numerator			Shares Denominator	Per-Share Amount
Basic EPS	$	(888,363	)	33,224,741	$	(0.03	)	$	(681,849	)	26,149,019	$	(0.03	)
Effect of Dilutive Securities
None.		-0-		-0-		-0-			-0-		-0-		-0-
Diluted EPS	$	(888,363	)	33,224,741	$	(0.03	)	$	(681,849	)	26,149,019	$	(0.03	)

NOTE 5: NOTES PAYABLE

At June 30, 2006, the Company owed $3,274,260 in notes payable. The table below provides details as to the terms and conditions of the notes payable.

12

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

Origination Date	Due Date	Interest Rate		Amount		Short Term		Long Term
12/31/2003	1/31/2007	9.00	%	$	20,000	$	20,000		-0-
8/15/2003	1/31/2007	9.00	%		100,000		100,000		-0-
12/31/2005	4/1/2008	9.00	%		117,550		—		117,550
12/31/2005	4/1/2008	9.00	%		259,758		—		259,758
12/31/2005	4/1/2008	9.00	%		117,665		—		117,665
12/31/2005	4/1/2008	9.00	%		549,501		—		549,501
12/31/2005	4/1/2008	9.00	%		414,136		—		414,136
12/31/2005	4/1/2008	9.00	%		676,740		—		676,740
12/31/2005	4/1/2008	9.00	%		511,910		—		511,910
3/31/2005	1/31/2007	9.00	%		22,000		22,000		-0-
4/7/2005	1/31/2007	9.00	%		25,000		25,000		-0-
4/7/2005	1/31/2007	9.00	%		50,000		50,000		-0-
5/12/2005	1/31/2007	9.00	%		40,000		40,000		-0-
6/30/2005	1/31/2007	9.00	%		120,000		120,000		-0-
11/8/2005	5/31/2007	9.00	%		50,000		50,000		-0-
11/30/2005	5/31/2007	9.00	%		50,000		50,000		-0-
12/5/2005	5/31/2007	9.00	%		50,000		50,000		-0-
1/10/2006	5/31/2007	9.00	%		100,000		100,000		-0-
				$	3,274,260	$	627,000	$	2,647,260

NOTE 6: COMMITMENTS AND CONTINGENCIES

The Company currently leases office space under an operating lease. The minimum future lease payments required under the Company’s operating leases at June 30, 2006 are as follows:

2006	$	73,542
2007		143,869
2008		95,652
2009		99,484
2010		103,465
Total	$	516,012

In addition to annual base rental payments the Company pays for the operating expenses associated with its leased office space and is responsible for any escalation in operating expenses as determined in the lease. Rent expense was $80,049 and $75,614 for the six months ended June 30, 2006 and 2005, respectively.

LEGAL PROCEEDINGS

On November 16, 2005, Lawton Jackson, (“Jackson”) filed suit (Civil Action No. 05-14582 CA 01) in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida against OmniComm Systems, Inc. In his suit Jackson alleges that we breached two employment agreements by not paying him the salary set forth in the agreements. Jackson is seeking $128,098 as damages. We

13

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

filed a Motion to Dismiss, on December 5, 2005, to Jackson’s claim of breach of contract. The Court denied our Motion to Dismiss but responded that it found issues with Jackson’s claims based on the statute of limitations regarding the employment contracts. Jackson filed a First Amended Complaint in January, 2006, alleging certain oral agreements amended the original employment agreements. We filed an Answer and Affirmative Defenses in January, 2006. This matter is ongoing and we are prepared to vigorously defend against the claim.

NOTE 7: INCOME TAXES

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

	6/30/06			6/30/05
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		(563,411	)		(350,723	)
		(563,411	)		(350,723	)
Valuation allowance		563,411			350,723
Total tax expense (benefit)	$	-0-		$	-0-

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

	6/30/06			12/31/05
Deferred tax assets:
Amortization of intangibles	$	283,698		$	283,698
Operating loss carryforwards		8,168,497			7,318,203
Gross deferred tax assets		8,452,195			7,601,901
Valuation allowance		(8,452,195	)		(7,601,901	)
Net deferred tax asset	$	-0-		$	-0-

The Company has net operating loss carryforwards (NOL) for income tax purposes of approximately $21,695,315. 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, 2006.

14

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

General

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

Forward-Looking Statements

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Overview

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

During 2006 the Company has continued its efforts in executing its strategy. The primary focus of our strategy includes:

• Stimulating Demand by Providing Clinical Trial Sponsors with High Value EDC;

• Emphasizing Low Operating Costs;

• Providing EDC Services to Small & Midsize Pharma, Bio-Tech, Medical Device Companies and CROs (Clinical Research Organizations); and

• Differentiation Through Service.

15

A crucial success factor in the EDC industry is the overall penetration of our industry into the domestic and international clinical trial market. CenterWatch, an industry publication, estimates that 20 to 25% of clinical trials are currently conducted with the use of EDC. Global R & D was estimated at $66 billion in 2004. Based on a 2002 CenterWatch report approximately 8.5% of total R & D costs are spent on data management. Our operating focus is first to increase our sales and marketing capabilities and penetration rate and secondly, to continue developing and improving TrialMaster to ensure our services and products remain an attractive, high-value EDC choice. During 2005 and the first half of 2006 we expanded our sales and marketing team and we anticipate continuing to increasing our marketing and sales personnel during the remainder of fiscal 2006.

The Six Months Ended June 30, 2006 Compared With the Six Months Ended June 30, 2005

Results of Operations

A summarized version of our results of operations for the six months ended June 30, 2006 and June 30, 2005 is included in the table below.

Summarized Statement of Operations

	For the six months ended June 30,										$ Change			% Change
	2006			% of Revenues		2005			% of Revenues
Total revenues	$	1,222,263				$	762,601				$	459,662		60.3	%
Cost of sales		459,814		37.6	%		167,930		22.0	%		291,884		173.8	%
Gross margin		762,449		62.4	%		594,671		78.0	%		167,778		28.2	%
Salaries, benefits and related taxes		1,470,734		120.3	%		930,648		122.0	%		540,086		58.0	%
Travel		97,116		7.9	%		59,694		7.8	%		37,422		62.7	%
Selling, general and administrative		139,745		11.4	%		92,701		12.2	%		47,044		50.7	%
Depreciation and amortization		22,205		1.8	%		18,397		2.4	%		3,808		20.7	%
Total Operating Expenses		2,107,524		172.4	%		1,299,125		170.4	%		808,399		62.2	%
Operating income (loss)		(1,345,075	)	-110.0	%		(704,454	)	-92.4	%		(640,621	)	90.9	%
Interest Expense		152,164		12.4	%		227,657		29.9	%		(75,493	)	-33.2	%
Interest income		—		0.0	%		81		0.0	%		(81	)	-100.0	%
(Loss) before income taxes and dividends		(1,497,239	)	-122.5	%		(932,030	)	-122.2	%		(565,209	)	60.6	%
Income tax expense (benefit)		-0-		0.0	%		-0-		0.0	%		-0-		N/M
Net (loss)		(1,497,239	)	-122.5	%		(932,030	)	-122.2	%		(565,209	)	60.6	%
Total preferred stock dividends		(258,087	)	-21.1	%		(264,815	)	-34.7	%		6,728		-2.5	%
Net (loss) attributable to common stockholders	$	(1,755,326	)	-143.6	%	$	(1,196,845	)	-156.9	%	$	(558,481	)	46.7	%

16

Revenues for the six months ended June 30, 2006 were $1,222,263 compared to $762,601 for the same period in 2005, an increase of 60.3%. The revenue increase can be attributed to a 46% increase in projects under management. In addition the average trial currently being managed is approximately 38% larger than the trials being managed in fiscal 2005. Industry acceptance of EDC continues to increase and we believe that currently approximately 20% - 25% of clinical trials use Web-based EDC services. TrialMaster is currently sold primarily as an Application Service Provider (“ASP”) that provides EDC and other services such as an enterprise management suite which assists its clients in the pharmaceutical, biotechnology and medical device industries in accelerating the completion of clinical trials. As we continue developing TrialMaster and our client relationships mature, we expect some of our clients to deploy TrialMaster on a licensed, rather than ASP hosted basis. TrialMaster contracts provide for pricing that is based on both the size and duration of the clinical trial. Size parameters include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee based on the previously mentioned factors, and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial. During the six months ended June 30, 2006 approximately 72.4% of revenues were generated by trial setup activities, 17.8% were generated from on-going maintenance fees and approximately 9.8% was generated from fees charged for changes to on-going clinical trial engagements. During the six months ended June 30, 2005 we generated 71.9% of revenues from setup fees, 20.1% from on-going maintenance fees and 8.0% from project change orders. Generally, these contracts will range in duration from one month to several years. Setup fees are generally earned prior to the inception of a trial, however, the revenues will be recognized in accordance with SEC Staff Accounting Bulletin No. 104 “Revenue Recognition” which requires that the revenues be recognized ratably over the life of the contract. The maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized as incurred.

Our top five customers accounted for approximately 49% of our revenues during the six months ended June 30, 2006 and approximately 62% of our revenues during the six months ended June 30, 2005. One customer accounted individually for 10% or more of our revenues during the first half of fiscal 2006. The loss of any of our contracts or these customers in the future could adversely affect our results of operations.

Cost of goods sold increased to $459,814 for the six months ended June 30, 2006 compared to $167,930 for the six months ended June 30, 2005, an increase of $291,884, or 173.8%. Cost of goods sold were approximately 37.6% of sales for the six months ended June 30, 2006 compared to 22.0% for the six months ended June 30, 2005. Cost of goods sold relates primarily to salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Salaries increased during the six months ended June 30, 2006 due to the addition of five additional programmers and four quality assurance analysts as part of our trial operations. We believe that the staffing of our quality assurance department is crucial to our long-term success. We expect our current staffing levels to provide the appropriate level of quality assurance resources needed to manage our business when evaluated in concert with our expected release of TrialMaster V4.0.

We expect to increase development programming labor costs on an absolute basis as our trial revenues increase. We expect our cost of goods sold to return to approximately 20-25% of sales during the next twelve months. We expect to continue to increase follow-on engagements from existing clients and expect to increase the phase I and CRO portions of our client base. TrialMaster V3.0, the current release of our trial-building software has improved our ability to reduce trial production related costs since it automates many of the trial building functions that were manually performed in prior releases of our software. We expect the next version of TrialMaster, (V4.0), which we anticipate releasing during 2006, to increase the efficiency of trial building operations by 20 to 25%. V4.0 is being designed using Microsoft’s .Net framework. Microsoft® .NET is described by Microsoft as a set of software technologies for connecting information, people, systems and devices. This new generation of technology is based on Web services—small building-block applications that can connect to each other as well as to other, larger applications over the Internet.

Salaries and related expenses are our largest expense at 69.8% of total Operating Expenses for the six months ended June 30, 2006. Salaries and related expenses totaled $1,470,734 for the six months ended June 30, 2006 compared to $930,648 for the six months ended June 30, 2005, an increase of 58.0%. We currently employ approximately 29 employees out of our Ft. Lauderdale, Florida corporate office and have seven out-of-state employees. During the first half of 2006 we increased our corporate level staff by twelve employees. Our objective during this period was to strengthen our Business

17

Development, R & D and Clinical Support functions in anticipation of growth expected to occur during the balance of 2006. We believe that our ability to compete and to continue growing our business within the EDC industry is predicated, in part, on the success of our efforts at developing new and more sophisticated products. These efforts allow us to service our clients more efficiently; our ability to provide service and support that is more effective than that of our competitors and through increasing our level of market penetration. We believe that the personnel added during the course of the first half of 2006 provide us with the human resources necessary to achieve these operating objectives. We will look to selectively add experienced sales and marketing personnel during the remainder of fiscal 2006 in an effort to increase our market penetration and to continue broadening our client base, but do not believe that any other corporate level department will increase significantly during the second half of fiscal 2006.

We incurred $150,250 in consulting fees during the six months ended June 30, 2006. This represents fees paid to human resource consultants to assist in recruiting sales, marketing and clinical services professionals. We anticipate incurring more professional fees during the second half of fiscal 2006 for this type of consulting services.

Rent and related expenses increased by $4,435 during the six months ended June 30, 2006 compared to the same period in 2005. We signed a new corporate office lease during March 2006. The company did not incur a financial obligation associated with this lease until May 2006. This lease, which is for a term of five years, is expected to fulfill our operating needs during the term of the lease. In December 2001, we established a disaster recovery site at an IBM owned Co-Location facility in Atlanta, Georgia and will continue utilizing this facility for the foreseeable future since it is designed to ensure 100% production system up-time and to provide system redundancy.

Legal and professional fees totaled $106,432 for the six months ended June 30, 2006 compared with $87,171 for the six months ended June 30, 2005, an increase of approximately $19,261. We expect legal and professional fees to increase during the second half of 2006 in connection with our project aimed at ensuring timely compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Selling, general and administrative expenses (“SGA”) were $139,745 during the six months ended June 30, 2006 compared to $92,701 during the six months ended June 30, 2005, an increase of 50.7%. These expenses relate primarily to costs incurred in running our office day-to-day and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. The Company increased its marketing, sales and advertising expenditures by $24,878 for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 from $22,845 to $47,723, an increase of approximately 108.9%. We expect SGA expenses to continue increasing as we intensify and extend our selling and marketing efforts.

Interest expense was $152,164 during the six months ended June 30, 2006 versus $227,657 during the six months ended June 30, 2005, a decrease of $75,493 or 33.2%. The decrease can be attributed to approximately $104,000 in interest expense associated with a beneficial conversion provided to certain holders of our 10% Convertible Notes during the six months ended June 30, 2005 offset by the interest expense incurred on notes issued during the six months ended June 30, 2006 and the increase in interest expense associated with notes issued throughout the six months ended June 30, 2005. We evaluate the cost of capital available to us in combination with our overall capital structure in deciding what financing best fulfills our short and long-term capital needs. During the six months ended June 30, 2006 we issued $100,000 in promissory notes. During the six months ended June 30, 2005, we issued $310,000 in promissory notes.

There were arrearages of $101,837 in 5% Series A Preferred Stock dividends, $22,499 in Series B Preferred Stock dividends and $133,751 in Series C Preferred Stock dividends for the six months ended June 30, 2006, compared with arrearages of $101,837 in 5% Series A Preferred Stock dividends, $29,227 in Series B Preferred Stock dividends and $133,751 in Series C Preferred Stock dividends for the six months ended June 30, 2005. We deducted $258,087 and $264,815 from Net Income (Loss) Attributable to Common Stockholders for the six months ended June 30, 2006 and June 30, 2005, respectively, relating to undeclared Series A, B and C Convertible Preferred Stock dividends.

Included in our results of operations for the first half of 2006 are the results of our European Sales and Marketing subsidiary, OmniComm Europe, BV which was formed during April 2006. This operation incurred approximately $54,074 in selling, general and administrative expenses and recorded $311 in depreciation expense. This operation is expected to provide sales, marketing and limited support services to the European clinical trial market.

18

The Three Months Ended June 30, 2006 Compared With the Three Months Ended June 30, 2005

Results of Operations

A summarized version of our results of operations for the three months ended June 30, 2006 and June 30, 2005 is included in the table below.

Summarized Statement of Operations

	For the 3 months ended June 30,										$ Change			% Change
	2006			% of Revenues		2005			% of Revenues
Total revenues	$	702,752				$	352,370				$	350,382		99.4	%
Cost of sales		275,853		39.3	%		91,480		26.0	%		184,373		201.5	%
Gross margin		426,899		60.7	%		260,890		74.0	%		166,009		63.6	%
Salaries, benefits and related taxes		744,616		106.0	%		465,986		132.2	%		278,630		59.8	%
Travel		70,504		10.0	%		28,188		8.0	%		42,316		150.1	%
Selling, general and administrative		84,387		12.0	%		45,090		12.8	%		39,297		87.2	%
Bad debt expense		—		0.0	%		—		0.0	%		—		N/M
Depreciation and amortization		15,250		2.2	%		4,327		1.2	%		10,923		252.4	%
Total Operating Expenses		1,110,437		158.0	%		644,289		182.8	%		466,148		72.4	%
Operating income (loss)		(683,538	)	-97.3	%		(383,399	)	-108.8	%		(300,139	)	78.3	%
Interest Expense		76,409		10.9	%		167,041		47.4	%		(90,632	)	-54.3	%
Interest income		—		0.0	%		—		0.0	%		—		0.0	%
(Loss) before income taxes and dividends		(759,947	)	-108.1	%		(550,440	)	-156.2	%		(209,507	)	38.1	%
Income tax expense (benefit)		-0-		0.0	%		-0-		0.0	%		-0-		N/M
Net (loss)		(759,947	)	-108.1	%		(550,440	)	-156.2	%		(209,507	)	38.1	%
Total preferred stock dividends		(128,418	)	-18.3	%		(131,409	)	-37.3	%		2,991		-2.3	%
Net (loss) attributable to common stockholders	$	(888,365	)	-126.4	%	$	(681,849	)	-193.5	%	$	(206,516	)	30.3	%

Revenues for the three months ended June 30, 2006 were $702,752 compared to $352,370 for the same period in 2005, an increase of 99.4%. We recognized revenues from approximately 54 clinical trial projects during the second quarter of 2006 compared with 37 clinical trial projects during the same period in 2005, an increase of approximately 45.9%. Industry acceptance of EDC continues to increase and we believe that currently approximately 20% - 25% of clinical trials use Web-based EDC services. TrialMaster is currently sold primarily as an Application Service Provider (“ASP”)

19

that provides EDC and other services such as an enterprise management suite which assists its clients in the pharmaceutical, biotechnology and medical device industries in accelerating the completion of clinical trials. As we continue developing TrialMaster and our client relationships mature we expect some of our clients to deploy TrialMaster on a licensed, rather than ASP hosted basis. TrialMaster contracts provide for pricing that is based on both the size and duration of the clinical trial. Size parameters include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee based on the previously mentioned factors, and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial. During the second quarter of 2006 approximately 74.3% of revenues were generated by trial setup activities, 17.2% were generated from on-going maintenance fees and approximately 8.5% was generated from fees charged for changes to on-going clinical trial engagements. During the second quarter of fiscal 2005 we generated 74.5% of revenues from setup fees, 18.3% from on-going maintenance fees and 7.2% from project change orders. Generally, these contracts will range in duration from one month to several years. Setup fees are generally earned prior to the inception of a trial, however, the revenues will be recognized in accordance with SEC Staff Accounting Bulletin No. 104 “Revenue Recognition” which requires that the revenues be recognized ratably over the life of the contract. The maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized as incurred.

Cost of goods sold increased to $275,853 for the three months ended June 30, 2006 compared to $91,480 for the three months ended June 30, 2005, an increase of $184,373. Cost of goods sold were approximately 39.3% of sales for the three months ended June 30, 2006 compared to 26.0% for the three months ended June 30, 2005. Cost of goods sold relates primarily to salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Salaries increased during the three months ended June 30, 2006 due to the addition of seven additional programmers and four quality assurance analysts as part of our trial operations.

We expect to increase development programming labor costs on an absolute basis as our trial revenues increase. We expect our cost of goods sold to return to approximately 20-25% of sales during the second half of 2006. We expect to continue to increase follow-on engagements from existing clients and expect to increase the phase I and CRO portions of our client base. TrialMaster V3.0, the current release of our trial-building software has improved our ability to reduce trial production related costs since it automates many of the trial building functions that were manually performed in prior releases of our software. We expect the next version of TrialMaster, (V4.0), which we anticipate releasing during the second half of 2006, to increase the efficiency of trial building operations by 20 to 25%. V4.0 is being designed using Microsoft’s .Net framework. Microsoft^® .NET is described by Microsoft as a set of software technologies for connecting information, people, systems and devices. This new generation of technology is based on Web services—small building-block applications that can connect to each other as well as to other, larger applications over the Internet.

Salaries and related expenses are our largest expense at 67.1% of total Operating Expenses for the three months ended June 30, 2006. Salaries and related expenses totaled $744,616 for the three months ended June 30, 2006 compared to $465,986 for the three months ended June 30, 2005, an increase of 59.8%. We currently employ approximately 29 employees out of our Ft. Lauderdale, Florida corporate office and have seven out-of-state employees. During the second quarter of 2006 we increased our corporate level staff by eight employees. Our objective during this period was to strengthen our Business Development, R & D and Clinical Support functions in anticipation of growth expected to occur during the balance of 2006. We believe that our ability to compete and to continue growing our business within the EDC industry is predicated, in part, on the success of our efforts at developing new and more sophisticated products. These efforts allow us to service our clients more efficiently; our ability to provide service and support that is more effective than that of our competitors and through increasing our level of market penetration. We believe that the personnel added during the course of the second quarter provide us with the human resources necessary to achieve these operating objectives. We will look to selectively add experienced sales and marketing personnel during the remainder of fiscal 2006 in an effort to increase our market penetration and to continue broadening our client base, but, do not believe that any other corporate level department will increase significantly during the second half of fiscal 2006.

We incurred $54,375 in consulting fees during the three months ended June 30, 2006. This represents fees paid to human resource consultants to assist in recruiting sales, marketing and clinical services professionals. We anticipate incurring more professional fees during the second half of fiscal 2006 for this type of consulting services.

Rent and related expenses decreased by $4,486 during the three months ended June 30, 2006 compared to the same period in 2005. We signed a new corporate office lease during March 2006. The company did not incur a financial obligation associated with this lease until May 2006. This lease, which is for a term of five years, is expected to fulfill our operating needs during the term of the lease. In December 2001, we established a disaster recovery site at an IBM owned Co-Location facility in Atlanta, Georgia and will continue utilizing this facility for the foreseeable future since it is designed to ensure 100% production system up-time and to provide system redundancy.

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Legal and professional fees totaled $83,717 for the three months ended June 30, 2006 compared with $44,730 for the three months ended June 30, 2005, an increase of approximately $38,987. The increase can be attributed to legal and accounting fees attributable to two registration statements filed with Securities and Exchange Commission during 2006 and legal fees incurred relating to litigation defense. We expect legal and professional fees to increase during the second half of 2006 in connection with our project aimed at ensuring timely compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Selling, general and administrative expenses (“SGA”) were $84,387 during the three months ended June 30, 2006 compared to $45,090 during the three months ended June 30, 2005, an increase of 87.2%. These expenses relate primarily to costs incurred in running our office day-to-day and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. The Company increased its marketing, sales and advertising expenditures by $15,993 in the three months ended June 30, 2006 compared to the three months ended June 30, 2005 from $16,777 to $32,770, an increase of approximately 98.5%. We expect SGA expenses to continue increasing as we intensify and extend our selling and marketing efforts.

Interest expense was $76,409 during the three months ended June 30, 2006 versus $167,041 during the three months ended June 30, 2005, a decrease of $90,632 or 54.3%. The decrease can be attributed to approximately $104,000 in interest expense associated with a beneficial conversion provided to certain holders of our 10% Convertible Notes during the three months ended June 30, 2005 offset by the interest expense incurred on notes issued during the three months ended June 30, 2006 and the increase in interest expense associated with notes issued throughout the three months ended June 30, 2005. We evaluate the cost of capital available to us in combination with our overall capital structure in deciding what financing best fulfills our short and long-term capital needs. During the second quarter of 2006 we issued $-0- in promissory notes. During the second quarter of fiscal 2005, we issued $288,000 in promissory notes.

There were arrearages of $51,200 in 5% Series A Preferred Stock dividends, $9,973 in Series B Preferred Stock dividends and $67,245 in Series C Preferred Stock dividends for the three months ended June 30, 2006, compared with arrearages of $51,200 in 5% Series A Preferred Stock dividends, $12,964 in Series B Preferred Stock dividends and $67,245 in Series C Preferred Stock dividends for the three months ended June 30, 2005. We deducted $128,418 and $131,409 from Net Income (Loss) Attributable to Common Stockholders for the three months ended June 30, 2006 and June 30, 2005, respectively, relating to undeclared Series A, B and C Convertible Preferred Stock dividends.

Included in our results of operations for the second quarter of 2006 are the results of our European Sales and Marketing subsidiary, OmniComm Europe, BV which was formed during April 2006. This operation incurred approximately $54,074 in selling, general and administrative expenses and recorded $311 in depreciation expense. This operation is expected to provide sales, marketing and limited support services to the European clinical trial market.

Liquidity and Capital Resources

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

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

Liquidity and Capital Resources

Disclosure for the Period Ended

June 30, 2006

	2006		2005		Change
Cash	202,184		9,931		192,253
Accounts Receivable, net of allowance for doubtful accounts	637,167		234,565		402,602
Current Assets	875,737		246,890		628,847
Accounts Payable and accrued expenses	885,012		779,456		105,556
Accrued payroll taxes	119,885		58,742		61,143
Deferred revenue	1,765,475		1,048,707		716,768
Convertible notes payable	125,000		125,000		—
Current Liabilities	3,522,372		2,011,905		1,510,467
Working Capital (Deficit)	(2,646,635	)	(1,765,015	)	(881,620	)
Net cash provided by (used in) operating activities	(900,920	)	(498,592	)
Net cash provided by (used in) investing activities	(177,936	)	(15,163	)
Net cash provided by financing activities	1,271,109		450,000
Net increase (decrease) in cash and cash equivalents	192,141		(63,755	)

Cash and cash equivalents increased by $192,253 from $9,931 to $202,184 at June 30, 2006. This was the result of cash provided by financing activities of $1,271,109 offset by cash used in operating activities of approximately $900,920 and $177,936 used in investing activities. The significant components of the activity include a loss from operations of approximately $1,497,239 offset by non-cash expenses of $185,750 and approximately $1,271,109 we raised through the issuance of debt and equity securities offset by $177,936 used in investing activities and increases in cash of $410,569 from changes in working capital accounts.

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

Contractual Obligations

The following table sets forth our contractual obligations as of June 30, 2006:

Contractual Obligations			Payments Due by Period
	Total		Less than 1 year			1-2 Years			2-3 Years		3- 5 Years
Long Term Debt (1)	$	3,399,260	$	752,000	(2)	$	2,647,260	(3)	$	-0-	$	-0-
Operating Lease Obligations		550,948		150,070			114,545			97,543		188,790
Financial Advisory Agreement		45,000		45,000			-0-			-0-		-0-
Total	$	3,995,208	$	947,070		$	2,761,805		$	97,543	$	188,790

1. Amounts do not include interest to be paid.

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2. Includes $125,000 of convertible notes currently in default and due that are convertible into shares of common stock at the option of the debenture holder at a conversion rate of $1.25 per share and $627,000 in promissory notes bearing interest at 9% annually that mature in January 31, 2007 and May 2007.

3. Includes $2,647,260 in promissory notes bearing interest at 9% annually that mature on April 1, 2008.

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

We are currently in arrears on principal and interest payments owed totaling $192,053 on our 10% Convertible Notes. We were in default effective January 30, 2002.

We have been operating with a cash burn rate since beginning our EDC operations. In order to manage cash flows, we have issued preferred stock, common stock and debt to satisfy operating expenses and obligations. From April 2005 through July 2005, we sold an aggregate of 850,000 shares of our common stock resulting in gross proceeds of $212,500. We accrued $20,000 in transaction fees leaving net proceeds to us of $192,500. From January to June 2006 holders of common stock warrants exercised warrants to purchase 4,772,000 shares of common stock resulting in $1,193,000 in gross proceeds.

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

We experienced increased success in marketing TrialMaster during fiscal 2005. We entered into approximately $4.1 million in contracts for trials to be serviced over the next five years. These contracts included ten engagements with new clients. This success carried over into the first half of fiscal 2006. During this period we entered into contracts totaling approximately $4.3 million in new engagements, including engagements with six new clients. These contracts may however, be terminated by our clients at any time. Our focus continues to include increasing our penetration of all phases of the clinical trial market with a continued emphasis on becoming the market leader in Phase I EDC services. We believe this market is an operating and strategic strength of the Company due to the inherent flexibility that our TrialMaster Phase I product provides us. We believe we have the ability to produce trials more quickly and economically than our competitors for this specialized and large market. Additionally, we continue to focus on adding CROs as strategic and marketing partners. There is an industry-wide emphasis in establishing strategic relationships with CROs. These relationships provide marketing leverage in the form of joint marketing and sales efforts and also provide an installed base of trained TrialMaster users. This installed base of users increases our ability to provide rapidly developed, cost effective solutions for our clients.

We feel that the momentum established from new client acquisitions and our ability to retain clients for repeat engagements provide a good operating base from which to build during 2006. We expect to continue increasing the level of resources deployed in our sales and marketing efforts. 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. 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.

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

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

Our ability to continue in existence is dependent on our having sufficient financial resources to bring products and services to market. As a result of our significant losses, negative cash flows from operations, and accumulated deficits for the six months ending June 30, 2006, there is doubt about our ability to continue as a going concern. In addition, our auditors Greenberg and Company, LLC, included language which qualified their opinion regarding our ability to continue as a going concern in their report dated February 10, 2006.

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.

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

Deferred Revenue

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

Revenue Recognition Policy

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

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

Stock Based Compensation.

Options granted to employees under our Stock Option Plan were accounted for by using the intrinsic value method under APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) until December 31, 2005. In October 1995, the Financial Accounting Standards Board (“FASB”) issued Statement No.123, Accounting for Stock-Based Compensation (“SFAS No. 123”), which defines a fair value based method of accounting for stock options. All stock based compensation issued to individuals, other than employees and directors such compensation which is accounted for in accordance with APB Opinion No. 25, are accounted for in accordance with SFAS No. 123, as amended by SFAS No.148. Effective with our first quarter, ended June 30, 2006, the Company was no longer using the intrinsic value method to value employee stock options. The Company began accounting for employee stock options using the fair value method effective January 1, 2006.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic method previously allowable under APB Opinion No. 25. SFAS No. 123(R) will be effective for interim or annual reporting periods beginning on or after December 15, 2005. We previously adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation and have accounted for all awards granted to employees in recent years using the optional intrinsic value method. The impact of SFAS No. 123(R) during the six and three month periods ended June 30, 2006 was $163,545. We believe that SFAS 123(R) will continue to have a material impact on our financial statements at those times when stock options are granted.

ITEM 3. CONTROLS AND PROCEDURES

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-QSB, being June 30, 2006, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation and up to the filing date of this Quarterly Report on Form 10-QSB. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

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

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PART II OTHER INFORMATION

ITEM 6. EXHIBITS

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

EXHIBIT NO.	DESCRIPTION
10.1	Lease agreement for principal offices dated March 24, 2006 between OmniComm Systems, Inc. and RFP Main Street, 2101 Commercial, LLC
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

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SIGNATURES

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

OmniComm Systems, Inc.
Registrant
By:	/s/ Cornelis F. Wit
	Cornelis F. Wit, Director, Chief Executive Officer and President
Date:	August 11, 2006
By:	/s/ Ronald T. Linares
	Ronald T. Linares, Vice President of Finance, Chief Financial and Accounting Officer
Date:	August 11, 2006

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Exhibit Index

Exhibit Number	Description
10.1	Lease agreement for principal offices dated March 24, 2006 between OmniComm Systems, Inc. and RFP Main Street, 2101 Commercial, LLC.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

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EX-10.1

Exhibit 10.1

LEASE AGREEMENT

BETWEEN

RFP MAINSTREET 2101 COMMERCIAL, LLC

(“LANDLORD”)

AND

OMNICOMM, SYSTEMS, INC.

(“TENANT”)

THE 2101 BUILDING

2101 West Commercial Boulevard

Fort Lauderdale, Florida 33309

1

BASIC LEASING INFORMATION

THE 2101 BUILDING

LEASE DATE :	March 24, 2006
TENANT:	OMNICOMM SYSTEMS, INC., a Delaware corporation
ADDRESS OF TENANT:	2101 West Commercial Blvd. Ft. Lauderdale, Florida 33309
TENANT’S CONTACT:	Ron Linares	TELEPHONE: 954-473-1254
LANDLORD:	RFP Mainstreet 2101 Commercial, LLC, a Delaware limited liability company
ADDRESS OF LANDLORD:	c/o Mainstreet Real Estate Services, Inc.
	One Financial Plaza, Suite 102 Fort Lauderdale, Florida 33301
LANDLORD’S CONTACT:	Tamar Lubow TELEPHONE: 954-764-8380
LEASED PREMISES:	Suite No. 4000, which is located in the office building which has been constructed, and known as THE 2101 BUILDING (the “Building”), located at 2101 West Commercial Blvd., Fort Lauderdale, FL 33309
LEASE TERM:	Sixty-three (63) months.
TARGET DATE:	April 15, 2006
BASE RENT:

YEAR RATE/PRSF	SQUARE FOOT	BASE ANNUAL* RENTAL RATE	BASE ANNUAL* RENTAL
MONTHS 1-3	7,833	No charge to Base Rent –	Operating Expenses only
MONTHS 4-12	7,833	$101,829.00	$13.00
MONTHS 13-24	7,833	$105,902.00	$13.52
MONTHS 25-36	7,833	$110,131.98	$14.06
MONTHS 37-48	7,833	$114,518.46	$14.62
MONTHS 49-60	7,833	$119,061.60	$15.20
MONTHS 6 1-63	7,833	$  30,940.35	$15.80

* plus applicable sales tax

ADDITIONAL RENT:	Currently estimated to be approximately $10.00 per rentable square foot per year (plus applicable sales tax), subject to increase/adjustment as provided within the Lease.
TENANT’S PROPORTIONATE SHARE:	8.3%
SECURITY DEPOSIT:	$15,232.33 due and payable upon Tenant’s execution of the Lease.
PREPAID RENT/INITIAL PAYMENT:	$15,232.33 due and payable upon Tenant’s execution of the Lease.
RENTABLE SQUARE FEET IN THE BUILDING (RSF):	94,352 RSF**
RENTABLE SQUARE FEET (LEASED PREMISES):	7,833 RSF**
PERMITTED USE:	General Office
BROKER(S):	Cushman & Wakefield, on behalf of Landlord, and, Brenner Real Estate Group, on behalf of Tenant
GUARANTORS:	Mr. Cornelis Wit Mr. Randall Smith Mr. Ronald Linares Mr. Matthew Veatch Mr. Gustaaf van Kesteren

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PARKING SPACES:	4:1,000 Surface Spaces
	Thirty-two(32) Non-reserved surface parking spaces in Parking Area at no charge.
	Parking spaces are allotted at a rate of four (4) spaces per 1,000 rentable square feet.
	The above rates are the current rates charged for parking at the time of Lease execution and are subject to change during the Lease Term.
TERMINATION OPTION:	Tenant shall have the right to terminate the Lease Term after three (3) years pursuant to the terms outlined in Paragraph 40 of thes Lease Agreement.
FURNITURE PURCHASE:	Upon execution of the Lease Tenant shall pay Landlord
	$4,000 for the furniture that is currently located in the Premises.

The foregoing Basic Lease Information is hereby incorporated into and made a part of the Lease identified hereinabove. Each reference in the Lease to any of the information and definitions set forth in the Basic Lease Information shall mean and refer to the information and definitions hereinabove set forth and shall be used in conjunction with and limited by all references thereto in the provisions of the Lease. In the event of any conflict between any Basic Lease Information and the Lease, the Lease shall control.

** Building measurements based on modified BOMA Standards; multi-tenant loss factor of 15%.

3

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is made and entered into as of the      day of                 , 2006 by and between RFP Mainstreet 2101 Commercial, LLC, a Delware limited liability company (“Landlord”), whose address is One Financial Plaza, Suite 102, Fort Lauderdale, Florida, 33301 and OMNICOMM SYSTEMS, INC., a                              corporation (“Tenant”), whose address is 2101 West Commercial Boulevard, Suite 4000, Fort Lauderdale, Florida, 33309

W I T N E S S E T H:

1.1 DEFINED TERMS:

(1) Leased Premises and Project: Suite No. 4000 (the “Leased Premises”) in the “Building” (as that term is hereafter defined). The Leased Premises is in a center now known as “The 2101 Building” located at 2101 West Commercial Boulevard, Fort Lauderdale, Florida, which is comprised of, but is not limited to, a 5-story office building (the “Building”) and Parking Facilities (as defined below), all of which collectively together with all ancillary improvements appurtenant thereto shall hereafter be called the “Project.”

(2) Leased Premises Completion Date: In the event that this Lease calls for Landlord’s Work, (as per Exhibit “A-1”) this date shall be no more than five (5) days after the Landlord notifies Tenant that the work is complete (the “Leased Premises Completion Date”).

(3) Business Hours: “Business Hours” of the Project shall mean Monday through Friday from 8:00 a.m. to 6:00 p.m., and Saturday from 8:00 A.M. to 12:00 P.M., except on New Years Day, Presidents’ Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas Day, Martin Luther King’s Birthday and any other national legal holiday which may be established.

1.2 LEASED PREMISES: Subject to and upon the terms, pro-visions, covenants and conditions hereinafter set forth, and in consideration of their respective duties, covenants and obligations hereunder, Landlord does hereby lease, demise and let to Tenant and Tenant does hereby lease, demise and let from Landlord those certain premises (the “Leased Premises”) located in the Project, as further identified in paragraph 1.1(1) of this Lease and as reflected on the floor plan attached as Exhibit “A” and by this reference made a part of this Lease.

The rentable area (the “Rentable Area”) of the Leased Premises (which includes a portion of hallways, restrooms, shafts, ducts, electrical, janitorial and telephone closets, elevators, lobbies and other such “Common Areas” as hereinafter defined) is hereby mutually agreed to by the parties to be, for all purposes, as shown in the Basic Leasing Information of this Lease, whether the same should be more or less as a result of minor variations resulting from actual construction and, if applicable, completion of the Leased Premises by Landlord for occupancy so long as such work is done substantially in accordance with the approved plans. The Rentable Area of the Project is hereby stipulated and mutually agreed to by the parties to be, for all purposes, to be that shown in the Basic Leasing Information, subject to Paragraph 17 below. This Lease does not grant to Tenant or any other third party any right to light or air over or about the Leased Premises.

2. TERM:

2.1 The Term of this Lease shall be for the period shown under the Basic Leasing Information of this Lease, or until such term shall sooner cease and expire as hereinafter provided (the “Term”).

The Term of this Lease shall commence on a date (the “Commencement Date”) which shall be the first to occur of:

(i) the date upon which Tenant begins business operations in the Leased Premises; or

4

(ii) the day Tenant, or anyone claiming under or through Tenant, first occupies or uses the Leased Premises; or

(iii) the date of the issuance of a Certificate of Occupancy or similar approval by the applicable governmental authority permitting occupancy of the Leased Premises; or

(iv) the Leased Premises Completion Date stated in paragraph 1.1(2) of this Lease; or

(v) if no Landlord’s Work is required to be performed by Landlord pursuant to this Lease, five (5) days after this Lease is executed; or

(vi) in all events no later than one hundred fifty (150) days following Lease execution.

2.2 Upon the request of Landlord, Tenant shall join in the execution of an agreement stipulating the Commencement Date and the date upon which this Lease is scheduled to terminate.

2.3 If the occurrence of any condition set forth in subparagraph 2.1 above shall be delayed due to any act or omission of Tenant, the Leased Premises shall be deemed ready for occupancy, and the Commencement Date shall occur, on the date when said condition would have been met but for such delay. Landlord’s notice to Tenant of the meeting of any condition set forth in subparagraph 2.1 shall be definitive evidence of the same.

2.4 Taking possession of the Leased Premises by Tenant shall be conclusive evidence as against Tenant that the Leased Premises were in good and satisfactory condition when possession was so taken (subject only to punchlist items, if any).

3. COMPLETION OF LEASED PREMISES: Landlord agrees to perform work, if any (“Landlord’s Work”), in the Leased Premises in substantial accordance with the provisions of Exhibit “B-1” attached to and made a part of this Lease. If Landlord is to perform Landlord’s Work, Landlord shall attempt to complete Landlord’s Work by the Target Date (the “Target Date”) which is shown in the Basic Leasing Information of this Lease. Landlord’s obligation as to work to be performed for Tenant, if any, is solely as set forth in Exhibit “B-1”. Once Landlord has completed Landlord’s Work, except for reasonable punch list items, Landlord shall notify Tenant and Tenant will thereafter promptly begin the construction or installation of improvements and finishes which Tenant is to perform in the Leased Premises (“Tenant’s Work”) which shall be in substantial accordance with the provisions of Exhibit “B-2” attached to and made a part of this Lease. If Landlord is not obligated to perform any Landlord’s Work, Tenant will begin the construction or installation of Tenant’s Work immediately after this Lease is executed (subject to the pre-construction requirements set forth in this Lease).

In the event Tenant is to perform any Tenant’s work, within 15 days following the full execution of this Lease, but in all events prior to Tenant constructing or performing any portion of Tenant’s Work in the Leased Premises, Tenant shall:

(i) submit to Landlord for Landlord’s prior written approval (and shall obtain Landlord’s prior written approval) which Landlord shall exercise reasonably, detailed plans and specifications for all of Tenant’s Work prepared by an architect reasonably satisfactory to Landlord, generally conforming to the provisions of Exhibit “B-2”, along with samples for all of the Tenant finishes in the Leased Premises;

(ii) obtain Landlord’s approval of the general contractor which Tenant intends to use. In connection with that approval, Tenant shall provide Landlord with financial information and other information on the contractor and evidence that the contractor has reasonable insurance coverage, all of which must meet Landlord’s approval;

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(iii) obtain all required permits;

(iv) provide Landlord with a certified copy of each insurance policy required pursuant to this Lease; and

(v) provide a complete list of all approved contractors (general and sub) who will be working within the Leased Premises.

Tenant agrees that all improvements or alterations made by it pursuant to this Lease will be performed in a good and workmanlike manner and that once Tenant begins construction of any improvements or alterations, it will diligently pursue such work to completion. In addition, after completion of construction, Tenant agrees to diligently pursue obtaining an occupational license and a Certificate of Occupancy, and all other permits, licenses and approvals as are necessary and required by all state and local governmental agencies or authorities.

If Tenant does not fully comply with the provisions of this Paragraph, it will be considered a default of this Lease, and Landlord will have the right, in addition to all other rights and remedies, at Landlord’s option, to re-enter the Leased Premises and complete Tenant’s Work or any other improvements or alterations to be made by Tenant, at Tenant’s sole cost and expense, which Tenant agrees to reimburse Landlord upon demand.

Within five (5) business days of the completion of Tenant’s Work and of any other improvements or alterations approved by Landlord and made by Tenant, Tenant shall notify Landlord stating that the Tenant’s Work, and if applicable, any other improvements or alterations are completed. Within ten (10) days of receipt of this notice from Tenant, Landlord shall have the option to inspect and approve Tenant’s Work, and if applicable, any other improvements or alterations to insure that they were performed in accordance with the plans and specifications approved by Landlord and to insure that no defects exist. If Landlord determines that any defects exist or that the Tenant’s Work, and if applicable, any other improvements or alterations were not performed in accordance with the plans and specifications, Landlord shall notify Tenant and Tenant shall thereafter within a reasonable time frame correct the defect(s), at Tenant’s sole cost and expense. If such correction is not timely made by Tenant, this Lease may, in Landlord’s sole discretion, and without limiting its other rights and remedies, be terminated and Tenant, upon request from Landlord, shall immediately remove all improvements and alterations, and shall return the Leased Premises to the condition they were in prior to Tenant’s occupation of the Leased Premises.

Except for that contemplated under Landlord’s Work, Tenant shall be responsible for all costs associated with Tenant’s Work, and if applicable, all other improvements or alterations to the Leased Premises, including, but not limited to, preparation of the Leased Premises, preparation of the plans and specifications, architectural, engineering, and construction costs and the costs of obtaining any and all governmental approvals, permits and licenses.

If the occurrence of any condition set forth in this section shall be delayed due to any act or omission of Tenant, the Leased Premises shall be deemed ready for occupancy, and the Commencement Date shall occur, on the date when said condition would have been met but for such delay in Landlord’s reasonable opinion. Landlord’s notice to Tenant of the meeting of any condition set forth in this section shall be definitive evidence of the same.

4. BASE RENT: Tenant agrees to pay to Landlord without notice an annual “Base Rent”. The Base Rent will be payable at the annual rate shown in the Basic Leasing Information of this Lease without any offset, defense or deduction whatsoever, in lawful (legal tender for public or private debts) money of the United States of America, at Landlord’s address or elsewhere as designated from time to time by Landlord’s written notice to Tenant. The Base Rent will be adjusted for increases as set forth within the Basic Leasing Information of this Lease.

Landlord, upon execution of this Lease by Landlord and Tenant, hereby acknowledges payment by Tenant of the “Initial Payment” as shown in the Basic Leasing Information of this Lease, representing payment of the monthly installment(s) of annual Base Rent and Additional Rent (as hereafter defined), together with the sales tax thereon. The total Base Rent is payable in monthly installments on the first day of each calendar month. If the

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Term commences on any day of a month other than the first day, Tenant shall pay Landlord the full monthly Base Rent as provided for herein for such commencement month, and thereafter the sum which should have actually been paid for said first month shall be calculated on a pro rata basis (such proration to be based on the actual number of days in the commencement month), and the difference shall be credited as a reduction in the next month’s installment of annual Base Rent to be paid by Tenant hereunder on the first day of the next succeeding month. Base Rent for any partial month of occupancy at the end of the Term of this Lease will be prorated, such proration to be based on the actual number of days in the partial month.

In addition to Base Rent, Tenant shall and hereby agrees to pay to Landlord on the first day of each calendar month a sum equal to any sales tax, tax on rentals, and any other governmental charges, taxes and/or impositions now in existence or hereafter imposed based upon the privilege of renting the Leased Premises or upon the amount of Rent (as defined below) collected therefor, without any offset defense or deduction whatsoever, in lawful (legal tender for public or private debts) money of the United States of America, at Landlord’s address or elsewhere as designated from time to time by Landlord’s written notice to Tenant. In addition, Tenant agrees to be fully responsible for the payment of documentary stamps, if any, due pursuant to this Lease. Nothing herein shall, however, be taken to require Tenant to pay any part of any Federal and State Taxes on income imposed upon Landlord.

Tenant shall be required to pay Landlord interest on any Rent (as defined below) due that remains unpaid for five (5) days after its due date. Further, in the event (i) Tenant fails to pay Rent by the fifth (5th) day of the month in which such installment is due, or (ii) any other sums owed to Landlord pursuant to the terms of this Lease within five (5) days after accrual thereof or billing therefor, there will be added to such unpaid sum a late charge equal to ten percent (10%) of the installment or sum due, in order to defray the costs to Landlord for additional administrative expenses incurred as a result of such late payments. For all purposes of this Lease, the term “Rent” shall include all Base Rent, charges or impositions thereon, Additional Rent (as defined below), adjustments to Rent and any and all other payments due or which may become due from Tenant to Land-lord hereunder. Interest will be computed at the maximum legal rate and will be deemed to accrue from the fifth (5th) day after Rent is due and shall continue to accrue for as long as the sum remains unpaid. Provided, however, this provision shall not be construed as requiring Landlord to accept any late payment of Rent or as a waiver of any of Landlord’s rights or remedies by virtue of Tenant’s not making timely payment of Rent hereunder, and Land-lord’s acceptance of late Rent and such interest shall not be construed as constituting a waiver by Landlord of any rights or remedies available to it in the event that Rent is not timely paid by Tenant on any one or more future occasions, including declaring Tenant in default under this Lease and pursuing all remedies available to it arising from such default.

The Base Rent as specified in the Basic Leasing Information of this Lease will increase annually on each yearly anniversary of the Lease Term as stated therein.

Tenant by acceptance and execution of this Lease shall be deemed to have agreed to and received notice of the Annual Base Rent for each year of the Lease Term. Landlord shall not be required to provide notice of the new Base Rent; and Tenant must pay Landlord the current monthly payment of Base Rent, in accordance with the schedule set forth in the Basic Leasing Information.

5. ADDITIONAL RENT:

(A) In addition to the Base Rent, Tenant shall, during each year, or portion of a year, pay to Landlord as “Additional Rent” the “Tenant’s Proportionate Share” (as defined below) of the “Operating Expenses” (as defined below) and “Taxes” (as defined below) for the applicable year. As used herein, the term:

(i) “Tenant’s Proportionate Share” shall mean the percentage which the Rentable Area then leased by Tenant in the Project bears to the total Rentable Area contained in the Project which share is hereby agreed to be the percentage shown in the Basic Leasing Information of this Lease, subject to changes in the Rentable Area of the Project as described in paragraph 1.2 above.

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(ii) “Operating Expenses” shall mean all expenses, costs and disbursements, of every kind and nature, which Landlord shall pay or become obligated to pay because of or in connection with the ownership, maintenance and/or operation of the Project computed on the accrual basis, but shall not include Taxes (as defined below), the cost of mortgage financing, individual tenant improvements, or the replacement of capital investment items and new capital improvements unless such items and/or improvements result in the operating cost of the Project being decreased, in which latter event the cost of said capital investment item or new capital improvement shall be included by spreading it over the period necessary to recover the cost of such improvements from the savings accomplished by the decreased operating cost. By way of explanation and clarification, but not by way of limitation, Operating Expenses will include the following:

(a) Wages and salaries of all employees engaged in the operation and maintenance of the Project, employer’s social security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages and salaries, the cost of disability and hospitalization insurance, pension or retirement benefits, and any other fringe benefits for such employees.

(b) All costs, supplies and materials used or incurred in the operation, repair and maintenance of the Project.

(c) Cost of all utilities, including, but not limited to, water, sewer, electricity, gas and fuel oil used by or in the Project which are not billed directly to tenants.

(d) Cost of Project management, management fees, janitorial services, accounting and legal services, security services, trash and garbage removal, operating, servicing and maintenance of all systems and equipment including, but not limited to, elevators, plumbing, heating, air conditioning, ventilating, lighting, electrical, security and fire alarms, fire pumps, fire extinguishers and hose cabinets, mail chutes, guard service, painting, window cleaning, landscaping and gardening.

(e) Cost of casualty and liability insurance applicable to the Project and Landlord’s personal property used in connection therewith, except to the extent same is specifically paid by Tenant or other tenants in the Project.

Notwithstanding any other provision herein to the contrary, it is agreed that in the event the Project is less than ninety-five percent (95%) occupied during any partial year or any full calendar year for which Operating Expenses are to be calculated (including the Base Year), an adjustment shall be made in computing the Operating Expenses for such year to compensate for any vacancies in the Project for such year so that the Operating Expenses for such year shall assume a ninety-five percent (95%) occupancy for the Project for a full year and shall include, (1) those Operating Expenses actually incurred during such year and (2) sums needed to compensate for vacancies in the Project for such year.

(iii) “Taxes” shall mean all impositions, taxes, user fees, assessments (special or otherwise), and other govern-mental liens or charges of any and every kind, nature and sort whatsoever, ordinary and extraordinary, foreseen and unfore-seen, and substitutes therefor, including all taxes whatsoever (except only those taxes of the following categories: any social security tax or comparable tax due in respect to wages of employees and the cost of which is included in the computation of Operating Expenses, any inheritance, estate, succession, transfer or gift taxes imposed upon Landlord or any income taxes specifically payable by Landlord as a separate taxpaying entity without regard to Landlord’s income source arising from or out of the Project and/or the land on which it is located) attributable in any manner to the Project, the land on which the Project is located or the rents (however the term may be defined) receivable therefrom or any part thereof, or any use thereof, or any facility located therein or thereon or used in conjunction therewith or any charge or other payment made or required to be paid to any governmental authority, whether or not any of the foregoing shall be designated “real estate tax”, “sales tax” (except to the extent already paid by Tenant or other tenants in the Project), “rental tax”, “excise tax”, “business tax”, or designated in any other manner.

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Landlord agrees to maintain accounting books and records reflecting the Operating Expenses of the Project in accordance with generally accepted accounting principles. Landlord shall notify Tenant within a reasonable time after the start of each calendar year during the Term of this Lease (or, for the first year, within a reasonable time after this Lease is executed, unless otherwise indicated) of the amount which Landlord estimates (as evidenced by budgets prepared by or on behalf of Landlord) will be the amount of Tenant’s Proportionate Share of Operating Expenses and Taxes for the then current calendar year. Tenant shall pay any sum attributable to prior months for the then current calendar year within fifteen (15) days after receipt of said notice and the prospective balance of such sums in advance to Landlord in equal monthly installments, over the balance of the current calendar year, on the first day of each said month commencing on the first day of the first month following Tenant’s receipt of such notification.

Within a reasonable time after the end of each calendar year during the Term, Landlord shall submit to Tenant a statement showing the actual amount which should have been paid by Tenant as Additional Rent pursuant to this Paragraph 5(A) for the past calendar year, the amount actually paid during that calendar year by Tenant and the amount of the resulting balance due thereon, or overpayment thereof, as the case may be. Within thirty (30) days after receipt by Tenant of this statement, Tenant shall have the right in person to inspect Landlord’s books and records, at Land-lord’s office, during normal business hours, after five (5) days prior written notice, showing the Operating Expenses and Taxes for the Project for the calendar year covered by said statement. This statement shall become final and conclusive between the parties, their successors and assigns as to the matters set forth therein unless Landlord receives written objections with respect thereto within this thirty (30) day period. Any balance shown to be due pursuant to said statement, whether or not objected to by Tenant, shall be paid by Tenant to Landlord within thirty (30) days following Tenant’s receipt thereof and any overpayment shall be immediately credited against Tenant’s prospective obligation to pay expected Additional Rent pursuant to this Paragraph 5(A) or, if by reason of any termination of this Lease no such future obligation exists, refunded to Tenant. Anything in this Lease to the contrary notwithstanding, Tenant shall not delay or withhold payment of any balance shown to be due pursuant to a statement rendered by Landlord to Tenant, pursuant to the terms hereof, because of any objection which Tenant may raise with respect to the statement and Landlord shall immediately credit any overpayment found to be owing to Tenant against Tenant’s prospective obligation to pay Additional Rent pursuant to this Paragraph 5(A) for the then current calendar year (and future calendar years, if necessary) upon the resolution of said objection or, if at the time of the resolution of said objection the Lease Term has expired, immediately refund to Tenant any overpayment found to be owing to Tenant.

(B) Additional Rent, due by reason of the provisions of subparagraph 5(A) and this subparagraph 5(B) for the final months of this Lease is due and payable even though it may not be calculated until subsequent to the termination date of the Lease; the Operating Expenses and Taxes for the calendar year during which the Lease commences and terminates shall be prorated according to that portion of the calendar year that this Lease was actually in effect. Tenant expressly agrees that Landlord, at Landlord’s sole discretion, may apply the Security Deposit specified in Paragraph 8 of this Lease in full or partial satisfaction of any Additional Rent due for the final months of this Lease by reason of the provisions of Paragraph 5(A) and this Paragraph 5(B). If the Security Deposit is greater than the amount of any such Additional Rent and there are no other sums or amounts owed Landlord by Tenant by reason of any other terms, provisions, covenants or conditions of this Lease, then Landlord shall refund the balance of the Security Deposit to Tenant as provided in Paragraph 8 of this Lease. Nothing herein contained shall be construed to relieve Tenant, or imply that Tenant is relieved, of the liability for, or the obligation to pay, any Additional Rent due for the final months of this Lease by reason of the provisions of subparagraph 5(A) and this subparagraph 5(B) nor shall Landlord be required to first apply the Security Deposit to such Additional Rent if there are any other sums or amounts owed Landlord by Tenant by reason of any other terms, provisions, covenants or conditions of this Lease. Additional Rent for any portion of a year during the final lease year, if applicable, shall be calculated as if Tenant were occupying the Leased Premises for the entire calendar year, but shall be due only in respect to those months included within the term of this Lease. Any Additional Rent for any partial month of occupancy at the end of the term of the Lease will be prorated, such proration to be based on the actual number of days in said partial month.

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6. TRIPLE NET LEASE: It is the purpose and intent of Landlord and Tenant that the Rent herein reserved shall be absolutely net to Landlord so that this Lease shall, except as may be provided in this Lease to the contrary, yield net to Landlord the Base Annual Rent to be paid in each year during the term of this Lease, and that, except as set forth herein, all costs and expenses including, but not limited to, taxes, insurance, utilities, maintenance, repairs and obligations of every kind or nature whatsoever relating to the Leased Premises (the Project and the buildings and improvements thereon) which may arise or become due during the term of this Lease, shall be paid by Tenant and that Landlord shall be indemnified and saved harmless by Tenant from and against the same.

7. TIME OF PAYMENT: Tenant agrees that Tenant will promptly pay any and all Rent due hereunder, at the times and place stated above; that Tenant will promptly pay charges for work performed on order of Tenant, and any other charges that accrue under this Lease; and that, if any part of the Rent or above mentioned charges shall remain due and unpaid for five (5) days after the same shall become due and payable, Landlord shall have the option (in addition to all other rights and remedies available to it by law and in equity and under this Lease) of declaring the balance of the entire Base Rent for the entire Term of this Lease to be immediately due and payable, and Landlord may then proceed to collect all of the unpaid Base Rent called for by this Lease by distress or otherwise.

8. SECURITY DEPOSIT: Tenant, concurrently with the execution of this Lease, has deposited with Landlord the sum shown under the Basic Leasing Information of this Lease as the “Security Deposit” (the “Security Deposit”), the receipt of which is hereby acknowledged by Landlord, which sum shall be retained by Landlord as security for the payment by Tenant of the Rent and all other payments herein agreed to be paid by Tenant, and for the faithful performance by Tenant of the terms, provisions, covenants and conditions of this Lease. It is agreed that Landlord, at Landlord’s option, may at the time of any default by Tenant under any of the terms, provisions, covenants or conditions of this Lease apply this sum or any part thereof towards the payment of the Rent and all other sums payable by Tenant under this Lease, and towards the performance of each and every one of Tenant’s covenants under this Lease, but such covenants and Tenant’s liability under this Lease shall thereby be discharged only pro tanto and Tenant shall remain liable for any amounts that the sum shall be insufficient to pay and, in addition, shall be obligated to immediately deposit with Landlord the amount necessary to increase the Security Deposit to its original amount; that Landlord may exhaust any and all rights and remedies against Tenant before resorting to this sum, but nothing herein contained shall require or be deemed to require Landlord to do so; that, in the event the Security Deposit shall not be utilized for any such purposes, then the Security Deposit shall be returned by Landlord to Tenant within the later of thirty (30) days next after the expiration of the Term of this Lease; or (ii) the determination and payment of the amounts due elsewhere under this Lease, including the determination and payment of the Additional Rent due under Paragraph 5 within the time period provided in Paragraph 5. Landlord shall not be required to pay Tenant any interest on the Security Deposit. In this connection, it is expressly understood and agreed that Landlord shall not be obligated to segregate the Security Deposit from any other funds or to hold same in escrow during the term of this Lease, or to pay any interest to Tenant in respect of the Security Deposit. On the contrary, Landlord shall have the absolute right, at any and all times during the term of this Lease, to commingle the Security Deposit with any of Landlord’s other funds, to utilize the Security Deposit at any time and for any purpose, to retain all interest and/or other proceeds and/or avails earned or accrued in respect of the Security Deposit, and otherwise to treat, use and dispose of the Security Deposit as if, for all purposes, the same were the absolute property of Landlord (it being understood, however, that nothing in the foregoing shall be deemed to relieve Landlord of its obligation to return the Security Deposit (or such portion thereof as shall not have been used and applied in the event of any default by Tenant as described and in the manner set forth above) to Tenant at the expiration of the Lease Term.

9. ACCORD AND SATISFACTION: No payment by Tenant or receipt by Landlord of any lesser amount than the amount stipulated to be paid hereunder shall be deemed other than on account of the earliest stipulated rental or other sum payable by Tenant to Landlord hereunder; nor shall any endorsement or statement on any check or letter be deemed an accord and satisfaction, and Landlord may accept any check or payment without prejudice to Landlord’s rights to recover the balance due and/or to pursue any other remedy available to Landlord.

10. USE: Tenant will use and occupy the Leased Premises for the use or purpose, and for no other use or purpose whatsoever, as shown under the Basic Leasing Information of

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this Lease. In the event that Tenant uses the Leased Premises for any purpose not expressly permitted herein, said use shall be deemed a default by Tenant, and Landlord may, in addition to all other remedies available to it, terminate this Lease or restrain the improper use by injunction.

11. QUIET ENJOYMENT: Upon payment by Tenant of the Rent, and upon the observance and performance of all terms, provisions, covenants and conditions on Tenant’s part to be observed and performed pursuant to this Lease, Tenant shall, subject to all of the terms, provisions, covenants and conditions of this Lease, peaceably and quietly hold and enjoy the Leased Premises for the Term hereby demised. Notwithstanding any provisions contained in this Lease to the contrary, Tenant acknowledges that the Project shall be closed on Sundays and on the following holidays: New Year’s Day, Memorial Day, Thanksgiving Day, Christmas Day, and such other days as are locally observed in multi-tenant commercial office buildings in the market area in which the Project is located. Tenant shall nonetheless have access to the Leased Premises 24 hours a day, 365 days per year, except in the event of emergencies.

12. INSURANCE PREMIUMS: If Landlord’s insurance premiums exceed the standard premium rates because of the nature of Tenant’s use of the Leased Premises, then Tenant shall, upon receipt of appropriate invoices from Landlord, reimburse Landlord for such increase in premiums. It is understood and agreed between the parties to this Lease that any such increase in premiums shall be considered as Rent due and shall be included in any lien for Rent. Tenant shall comply with any and all requirements of Landlord’s insurer(s).

13. RULES AND REGULATIONS: Tenant agrees to comply with all rules and regulations Landlord may reasonably adopt from time to time for the operation of the Project, including but not limited to, parking facilities contemplated to be utilized in connection therewith (“Parking Facilities”) and the protection and welfare of the Project, including, but not limited to, the Parking Facilities, its tenants, visitors and occupants. The present rules and regulations, which Tenant hereby agrees to comply with, entitled “Rules and Regulations” are attached to this Lease as Exhibit “C” and are by this reference incorporated in to this Lease. Further, Tenant shall also observe and abide by the terms of the Parking Agreement annexed hereto and made a part hereof as Exhibit “D”. Any future rules and regulations shall become a part of this Lease, and Tenant hereby agrees to comply with the same upon delivery of a copy thereof to Tenant. Tenant specifically agrees that Tenant shall not:

(i) conduct, or permit or suffer to be conducted, any solicitation, demonstration, business, occupation, undertaking or activity outside of the building located upon the Lease Premises or the Project;

(ii) use or permit or suffer the use of any portion of the Leased Premises or of the Project for any unlawful, improper, objectionable (i.e., to Landlord or any of the other tenants in the Project), or immoral use or purpose or for itinerant vending or for any other activity of a type which is inconsistent with reasonable standards of office building practice (as determined by Landlord in the exercise of Landlord’s reasonable judgment); and

(iii) burn trash or, except for the use of so-called “Dempster Dumpsters”, trash compactors or similar apparatus located in a screened or enclosed area, store any trash or garbage in any area other than inside the Leased Premises (and Tenant shall attend to the timely disposal of trash in the manner provided in this Lease).

14. GOVERNMENTAL REQUIREMENTS: Tenant shall faithfully observe in the use of the Leased Premises all municipal and county ordinances and codes and state and federal statutes now in force or which may hereafter be in force. In this regard, Tenant shall diligently pursue the procurement of all licenses, permits and approvals necessary for the permitted use of the Leased Premises as provided herein, and shall furnish to Landlord upon execution of this Lease or within five (5) days from Tenant’s receipt thereof, copies of the same, including, but not limited to, city and county occupational licenses and all other licenses, permits or the like as may be necessary or required to operate Tenant’s business in the Leased Premises. Tenant shall thereafter maintain all such licenses, permits and approvals necessary for the permitted use of the Leased Premises, and shall furnish to Landlord on an annual basis, copies thereof. Tenant agrees to comply with any requirement that the Leased Premises be vacated during any smoke test or other governmental inspection of the Project and to hold the applicable governmental authorities and Landlord harmless for any loss or damage incurred by Tenant in connection therewith.

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Tenant shall comply with any certificate of occupancy relating to the Leased Premises and with all other laws, statutes, ordinances, orders, rules, regulations and requirements of all federal, state, county and municipal governments and the appropriate agencies, officers, departments, boards and commissions thereof and the board of fire underwriters and/or the fire insurance rating organization or similar organization in force applicable to the Project or any part thereof and/or to the Leased Premises, including, without limiting the generality of the foregoing, the Americans With Disabilities Act (and in this connection, Tenant shall be obligated to make any and all alterations and/or modifications within and/or about the Leased Premises as shall, at any time, be required pursuant to the provisions thereof and/or of the regulations promulgated thereunder), and all federal, state, municipal and/or administrative laws, statutes, ordinances, orders, rules, regulations and requirements governing and/or relating to the monitoring, usage, handling, storage and/or disposal of hazardous wastes and/or materials. If Tenant shall at any time receive any notice from any governmental body or governmental office that pertains to the Leased Premises or the Project (including those relating to taxes or zoning), or if Tenant shall at any time receive a notice of litigation or threatened litigation affecting the Leased Premises or Project, Tenant shall promptly send a copy of the same to Landlord. If required by any applicable governmental authority, Tenant will execute a separate instrument confirming the foregoing.

15. SERVICES AND UTILITIES: Landlord will furnish only the following services to Tenant:

(A) Cleaning services, deemed by Landlord to be normal and usual in a first class office building, on Monday through Friday (but not on New Years Day, Presidents’ Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas Day, Martin Luther King’s Birthday and any other national legal holiday which may be established), except that shampooing and replacement of carpet as required by Tenant shall be at Tenant’s expense.

(B) Automatically operated elevator service during Business Hours (i.e., standard passenger and freight elevator services) with at least one passenger elevator during non-business hours; public stairs; electrical current for lighting, incidentals, and normal office use for general use of the Project’s tenants; and water at those points of supply provided for general use of the Project’s tenants at all times and on all days throughout the year. Tenant shall nonetheless have access to the Leased Premises at all times and heating, ventilation and air conditioning services shall be available to Tenant twenty-four (24) hours per day, three hundred sixty five (365) days per year.

Such services shall be provided as long as Tenant is not in default under any of the terms, provisions, covenants and conditions of this Lease, subject to interruption caused by repairs, renewals, improvements, changes of service, alterations, strikes, lockouts, labor controversies, inability to obtain fuel or power, accidents, breakdowns, catastrophes, national or local emergencies, actions or requirements by any governmental agency or official, acts of God and conditions and causes beyond the control of Landlord, and upon such happening, no claim for damages or abatement of Rent for failure to furnish any such services shall be made by Tenant or allowed by Landlord nor shall any such happening be construed as a constructive eviction of Tenant. All other responsibility for maintenance of the Leased Premises, unless specifically assigned to Landlord, shall be the responsibility of Tenant.

Tenant agrees to pay for all costs and expenses for electricity, heat, cooling, telephone, gas, if any, and any and all other utilities furnished to or connected with the Leased Premises during the Tenant’s construction of Tenant’s Work or installation of other improvements and during the Lease Term, promptly as each payment becomes due including, but not limited to, all initial changes, costs and fees.

No electric current shall be used except that furnished or approved by Landlord, nor shall electric cable or wire be brought into the Leased Premises, except upon the written consent and approval of Landlord. Tenant shall use only office machines, fixtures, and equipment that operate on the Project’s standard electric circuits, but which in no event shall overload the Project’s standard electric circuits from which Tenant obtains electric current. Any required installation of special circuits or equipment to service Tenant’s unusual electrical needs shall be at Tenant’s expense and only if prior approval therefor is given in writing by Landlord. Should Tenant require HVAC at any time other than the Building Hours, the same may be provided at an additional cost to Tenant in accordance with Landlord’s charges for the same then in effect and subject to change during the Lease Term.

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Further, Landlord reserves the right to require the Tenant to install and maintain, at the Tenant’s sole cost and expense, a water meter or sub-meter. If the Leased Premises is separately metered for electricity, then Tenant shall arrange for electric service and establish an account for electric service with the local power/electrical company servicing the Project. If no such separate meter is in place, Tenant shall pay for its electrical usage as a part of Tenant’s payment toward Operating Expenses. If the Landlord requires, the Tenant agrees to make payments for its water and sewer service directly to Landlord as a reimbursement for expenses Landlord has incurred on Tenant’s behalf, directly to the company providing the service, or as part of Tenant’s payment toward Operating Expenses. If Landlord requires Tenant to install a water meter or sub-meter, Landlord will not charge Tenant for Tenant’s pro-rata share of the cost for water consumption from any similar tenant meters. However, Tenant will still be responsible for the pro-rata share of the cost of water consumed in connection with the Common Areas (as defined below).

16. LEASEHOLD WORK: It is understood and agreed between the parties to this Lease that any charges against Tenant by Landlord for services or for work done on the Leased Premises by order of Tenant, or otherwise accruing under this Lease, shall be considered as Rent due and shall be included in any lien for Rent.

17. REPAIR OF LEASED PREMISES/ALTERATION TO PROJECT: Tenant will, at Tenant’s sole cost and expense, keep the Leased Premises in good repair and tenantable condition during the Lease Term and, in furtherance thereof, will make such repairs and replacements (under the direction and to the satisfaction of Landlord) at its own expense to the Leased Premises in order to keep the Leased Premises clean, neat, safe, sanitary, in good order, repair and condition (including all painting and decorating necessary to maintain at all times a clean and sightly appearance) and free of vermin, including all equipment, facilities, fixtures, glass (excluding the curtain wall and exterior windows), doors, windows, furniture, furnishings, moldings and trim therein. Tenant shall have no obligation to make repairs to the HVAC system or other system serving the entire Project except as to (i) HVAC or other equipment which serves the Leased Premises (ii) Tenant’s obligation for its pro-rata share of the cost thereof as part of Tenant’s obligations for Additional Rent under Paragraph 5 of the Lease and (iii) as to any repair necessitated by or resulting from any action on the part of Tenant. In making repairs, Tenant shall use materials equal in kind and quality to the original work. Tenant shall repaint and refurbish the Leased Premises at reasonable periodic intervals to assure that the Leased Premises is kept in a first class and attractive condition throughout the term of this Lease. Tenant shall not suffer or permit any strip, waste or neglect of the Leased Premises, equipment, facilities and fixtures to be committed.

Tenant will make no alterations, additions or improvements in or to the Leased Premises without the prior written consent of Landlord, which consent shall, among other considerations, be predicated upon Landlord’s approval of plans and Tenant’s use of contractors who are acceptable to Landlord and who provide a full payment, completion and performance bond. All additions, fixtures, carpet or improvements, except only office furniture and fixtures which shall be readily removable without injury to the Leased Premises, shall be and remain a part of the Leased Premises at the expiration of this Lease. Tenant’s obligation hereunder constitutes a recognition of the necessity to maintain a uniformity of materials and systems throughout the Project and to ensure harmonious labor relations.

In the event that Landlord shall determine, at any time during the term of this Lease, in Landlord’s reasonable judgment, that Tenant has failed, refused or neglected to perform any of the above-described duties or obligations, and in the event that such failure, refusal or neglect shall not be cured by Tenant within thirty (30) days following written notice to Tenant thereof, then, in such event, Landlord (and/or its designee[s], successor[s], grantee[s] or assign[s]) shall have and is hereby granted the right (but not the obligation), through its (their) agents and employees, to enter upon the Leased Premises and to cause the required repairs, maintenance and/or replacements to be performed for and on behalf of Tenant and to recover from Tenant all costs and expenses (including reasonable attorney’s fees) incurred by Landlord (or by its designee[s], successor[s], grantee[s] or assign[s]) in connection therewith, plus reasonable overhead costs, together with interest computed from the date on which such costs shall have been incurred, until the date of payment thereof in full, at the highest rate permitted by

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applicable law. Anything in the foregoing to the contrary notwithstanding, it is understood and agreed that in the event of any emergency situation (including, without limiting the generality of the foregoing, any situation which might reasonably be expected to pose any potential danger, hazard or risk of violation of any applicable law, ordinance, rule or regulation, which if not immediately remedied, might subject Landlord and/or the Leased Premises or Project to any fine, penalty or other similar governmental action or to any adverse publicity, then, in such event, Landlord shall be entitled (but not obligated) immediately, and without need of any prior notice to Tenant, to exercise the rights of entry, repair, etc., granted to Landlord in this Paragraph 17.

It is further agreed that this Lease is made by Landlord and accepted by Tenant with the distinct understanding and agreement that Landlord shall have the right and privilege to make any additions to the Project of which the Leased Premises are a part, and make such alterations and repairs to the Project as it may deem wise and advisable without any liability to Tenant. In the event Landlord alters the Project, the Rentable Area of the Project, as stated in Paragraph 1 above, shall take such alteration into account.

18. INDEMNIFICATION AGAINST LIENS: Tenant agrees that Tenant will pay all liens of contractors, subcontractors, mechanics, laborers, materialmen, and other items of like character, and will indemnify Landlord against all expenses, costs and charges, including bond premiums for release of liens and attorneys fees and costs reasonably incurred in and about the defense of any suit in discharging the Leased Premises or any part thereof from any liens, judgments, or encumbrances caused or suffered by Tenant. In the event any such lien shall be made or filed, Tenant shall bond against or discharge the same within ten (10) days after the same has been made or filed. It is understood and agreed between the parties to this Lease that the expenses, costs and charges above referred to shall be considered as Rent due and shall be included in any lien for Rent.

Tenant shall not have any authority to create any liens for labor or material on Landlord’s interest in the Leased Premises and all persons contracting with Tenant for the destruction or removal of any facilities or other improvements or for the erection, installation, alteration, or repair of any facilities or other improvements on or about the Leased Premises, and all materialmen, contractors, mechanics, and laborers are hereby charged with notice (which notice Tenant shall deliver in writing to each such party prior to the commencement of any service by said party) that they must look only to Tenant and to Tenant’s interests in the Leased Premises to secure the payment of any bill for work done or material furnished at the request or instruction of Tenant. The provisions of this paragraph may be set forth in any Memorandum of this Lease which is recorded with Landlord’s consent pursuant to Paragraph 52 hereof or other instrument recorded by Landlord.

19. PARKING: See EXHIBIT “D”, PARKING AGREEMENT ANNEXED HERETO AND MADE A PART HEREOF.

20. ESTOPPEL STATEMENT: Tenant agrees that from time to time, upon not less than ten (10) days prior request by Landlord, Tenant will deliver to Landlord a statement in writing certifying (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the Lease as modified is in full force and effect and stating the modifications); (b) the dates to which the Rent and other charges have been paid; (c) that Landlord is not in default under any provisions of this Lease, or, if in default, the nature thereof in detail; (d) whether or not Tenant is in occupancy of the Leased Premises, and (e) such other information pertaining to this Lease and Tenant as Landlord may reasonably request. Failure by Tenant to so reply within said ten (10) days shall be deemed confirmation by Tenant that all parties are in good standing under the Lease.

21. SUBORDINATION OF LEASE: If the Leased Premises are at any time subject to a mortgage or ground lease, and Tenant has received written notice from the holder thereof (“Landlord’s Mortgagee”) of same, then after being requested to do so by Landlord, in any instance in which Tenant gives notice to Landlord alleging default by Landlord hereunder, Tenant will also simultaneously give a copy of such notice to each Landlord’s Mortgagee and each Landlord’s Mortgagee shall have the right (but not the obligation) to cure or remedy such default during the period that is permitted to Landlord hereunder, plus an additional period of thirty (30) days (unless such cure or remedy cannot be completed within thirty [30] days, then Landlord’s Mortgagee shall have such additional time as needed to cure or remedy such default), and Tenant will accept such curative or remedial action (if any) taken by Landlord’s Mortgagee with the same effect as if such action had been taken by Landlord.

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This Lease shall be subject and subordinate to any mortgage or ground lease now or hereafter encumbering or affecting all or any part of the Project. This provision shall be self-operative without the execution of any further instruments. Notwithstanding the foregoing, however, Tenant hereby agrees to execute any instrument(s) which Landlord may deem desirable to evidence the subordination of this Lease to any and all such mortgages.

22. ATTORNMENT: If the interests of Landlord under this Lease shall be transferred voluntarily or by reason of foreclosure or other proceedings for enforcement of any mortgage on the Leased Premises, Tenant shall, at the election of such transferee, be bound to such transferee (herein sometimes called the “Purchaser”) for the balance of the term hereof remaining, and any extensions or renewals thereof which may be effected in accordance with the terms and provisions hereof, with the same force and effect as if the Purchaser were Landlord under this Lease, and Tenant does hereby agree to attorn to the Purchaser, including the mortgagee under any such mortgage if it be the Purchaser, as its landlord, said attornment to be effective and self-operative without the execution of any further instruments, upon the Purchaser succeeding to the interest of Landlord under this Lease.

Notwithstanding the foregoing, however, Tenant hereby agrees to execute any instrument(s) which Landlord may deem desirable to evidence said attornment by Tenant. The respective rights and obligations of Tenant and the Purchaser upon such attornment, to the extent of the then remaining balance of the Term of this Lease and any such extensions and renewals, shall be and are the same as those set forth herein. In the event of such transfer of Landlord’s interests, Landlord shall be released and relieved from all liability and responsibility thereafter accruing to Tenant under this Lease or otherwise and Landlord’s successor by acceptance of Rent from Tenant hereunder shall become liable and responsible to Tenant in respect to all obligations of Landlord under this Lease accruing from and after the date of such transfer.

23. ASSIGNMENT OR SUBLETTING: Without the written consent of Landlord first obtained in each case, Tenant shall not assign, transfer, mortgage, pledge, or otherwise encumber or dispose of this Lease or sublet the Leased Premises or any part of the Leased Premises or permit the Leased Premises to be occupied by other persons. Landlord’s exercise of its consent shall not be unreasonably withheld subject to such conditions for consent as provided herein. In furtherance thereof, in the case of a subletting, Landlord’s consent may be predicated, among other things, upon Landlord becoming entitled to collect and retain all Rent and any other economic consideration payable under the sublease, and in the case of an assignment, Landlord’s consent may be predicated, among other things, upon Landlord’s becoming entitled to collect and retain any economic consideration for said assignment paid or payable by the prospective assignee to Tenant. If this Lease be assigned, or if the Leased Premises or any part thereof be sublet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect or accept Rent from the assignee, subtenant, or occupant and apply the net amount collected or accepted to the Rent herein reserved, but no such collection or acceptance shall be deemed a waiver of this covenant or the acceptance of the assignee, subtenant, or occupant as Tenant, nor shall it be construed as, or implied to be, a release of Tenant or any guarantor of the Lease from the further observance and performance by Tenant of the terms, provisions, covenants and conditions contained in this Lease. Notwithstanding anything contained herein to the contrary in the event of any assignment of Lease or subletting of this Lease to which Landlord consents, Landlord and Tenant shall divide equally any net profit derived therefrom.

Landlord shall have a right of first refusal with regard to any proposed sublease or assignment on the same terms and conditions as contained in such proposed sublease or agreement to assign, which right of first refusal shall be exercisable by Landlord giving notice of its intention to do so within thirty (30) business days after receipt of any proposed sublease or assignment.

The consent by Landlord to any assignment or subletting hereunder shall not be construed as releasing Tenant from any liability hereunder or as constituting the consent by Landlord to any subsequent assignment or subletting, which subsequent assignment or subletting shall require the prior written approval of Landlord as provided herein in each instance. Any assignment, subletting, hypothecation, pledging or other disposition of Tenant’s interest hereunder, in violation of the terms hereof shall be deemed null and void, and shall constitute an act of default hereunder.

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If Tenant is not an individual, any direct or indirect change in the ownership (legal or equitable) of a controlling and/or a majority interest of Tenant, whether such change in ownership occurs at one time or as a result of sequential incremental changes, and whether said change is by sale, assignment, hypothecation, bequest, inheritance, operation of law, merger or consolidation, or otherwise, shall be deemed an assignment of this Lease subject to the required consent of Landlord, the failure of which shall be deemed a default hereunder.

24. SUCCESSORS AND ASSIGNS: All terms, provisions, covenants and conditions to be observed and performed by Tenant shall be applicable to and binding upon Tenant’s respective heirs, administrators, executors, successors and assigns, subject, however, to the restrictions as to assignment or subletting by Tenant as provided herein. All expressed covenants of this Lease shall be deemed to be covenants running with the land.

25. HOLD HARMLESS OF LANDLORD: In consideration of the Leased Premises being leased to Tenant for the above Rent, Tenant agrees that Tenant, at all times, will indemnify and hold harmless Landlord from all losses, damages, liabilities and expenses, which may be incurred by Landlord or which may arise or be claimed against Landlord by Tenant or any persons, firms, corporations or any other entities, for any injuries or damages to the person or property of Landlord, Tenant, any persons, firms, corporations or any other entities, consequent upon or arising from the use and/or occupancy of the Leased Premises by Tenant, or consequent upon or arising from any acts, omissions, neglect or fault of Tenant, its agents, servants, employees, licensees, visitors, customers, patrons or invitees, or consequent upon or arising from Tenant’s failure to comply with any laws, statutes, ordinances, codes or regulations as herein provided; that Landlord shall not be liable to Tenant for any damages, losses or injuries to the persons or property of Tenant, its invitees, licensees or patrons, which may be caused by the acts, neglect, omissions or faults of Tenant, any persons, firms, corporations, or other entities, except when such injury, loss or damage results solely from direct gross negligence or willful misconduct of Landlord, its agents or employees. Notwithstanding the above sentence, all personal property placed or moved into the Leased Premises or the Project shall be at the risk of Tenant or the owner thereof, and Landlord shall not be liable to Tenant for any damage to said personal property.

In case Landlord shall be made a party to any litigation commenced against, by or through Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorneys fees incurred or paid by Landlord in connection with such litigation and any appeal thereof.

Notwithstanding any provision to the contrary contained in this Lease, Tenant shall look solely to the equity of Landlord in the Leased Premises (or if this Lease shall become subordinate to any ground or underlying leasehold interest of Landlord under such ground or underlying lease[s]) in the event of a breach or default by Landlord pursuant to the terms and provisions of this Lease, Tenant agrees that the liability of Landlord under this Lease shall not exceed the value of such equity (or leasehold interest) of Landlord in the Leased Premises. No other properties or assets of Landlord shall be subject to levy, execution or other enforcement proceedings for the satisfaction of any judgment (or other judicial process) arising out of, or in connection with, this Lease and if Tenant shall acquire a lien or the like on any such properties or assets by judgment or otherwise, Tenant shall promptly release such lien on such properties and assets by executing, acknowledging and delivering to Landlord an instrument to that effect prepared by Landlord’s attorney.

26. TENANT’S INSURANCE REQUIREMENTS: Tenant shall maintain the following insurance:

A. liability insurance policy or policies in an amount or amounts sufficient, in Landlord’s opinion, to indemnify Landlord or pay Landlord’s damages, if any, resulting from any matter set forth in this Lease. Such insurance shall be written on a comprehensive basis with inclusive limits of not less than Two Million Dollars $2,000,000 for each occurrence for bodily injury and property damage or such higher limits as Landlord, acting reasonably, may require from time to time. The limit of said insurance shall not, however, limit the liability of Tenant hereunder. Landlord shall be named on all liability policies maintained by Tenant. All such policies shall name Landlord and Landlord’s mortgagee, if any, as additional insureds, as their interests may appear.

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B. any other insurance required for compliance with any and all applicable statutes, laws, ordinances, codes, rules and regulations of any and all governmental and/or quasi-governmental agencies and bodies.

C. any other insurance which may be reasonably required by Landlord or its mortgagee(s) or ground or underlying lessor(s).

D. prior to the delivery of possession of the Leased Premises to Tenant, Tenant shall deliver to Landlord and any additional named insured(s), certificates from the company(ies) issuing such insurance as to the coverages afforded and the existence, in force, of such fully paid for policies.

E. Tenant shall procure and pay for renewals of such insurance from time to time before the expiration thereof and Tenant shall deliver to Landlord and any additional named insured(s), certificates as to such renewal policy(ies) at least thirty (30) days before the expiration of any existing policy(ies). Tenant’s insurance shall at all times be primary with respect to any insurance carried by Landlord and its agents and any such coverage of Landlord and its agents shall be deemed to be excess insurance. Each such policy shall be written with a company acceptable to Landlord and authorized to engage in business of general liability insurance and/or fire and extended coverage and/or other insurance, as the case may be, in the State of Florida. It is understood that Landlord shall not be obligated to approve any company with a rating less than “A” in the then current edition of Best’s Key Rating Guide. All such policies shall name insured(s) designated by Landlord under such policies as their respective interests may appear and shall contain provisions to the effect that such policies shall not be cancelled without at least thirty (30) days prior written notice from the insurance company to Landlord, sent via certified mail, return receipt requested. Each policy shall also specify that Tenant shall be solely responsible for payment of premiums and that Landlord shall not be required to pay any premiums for such insurance. All insurance policies herein required to be procured by Tenant shall contain an express waiver of any right of subrogation by the insurance company against Landlord and Landlord’s mortgagee(s), if any. Each policy shall also specify any exclusions from coverage and such exclusions shall be subject to Landlord’s approval.

27. ATTORNEYS’ FEES AND COSTS: If Tenant defaults in the performance of any of the terms, provisions, covenants and conditions of this Lease and by reason thereof Landlord employs the services of an attorney to enforce performance of the covenants, or to perform any service based upon such defaults, then in the event Landlord prevails, Landlord shall be entitled to receive from Tenant reasonable attorneys’ fees and all expenses and costs incurred by Landlord pertaining thereto (including costs and fees relating to any appeal and any other costs of collection), and in enforcement of any remedy.

28. LANDLORD-TENANT RELATIONSHIP ONLY: The parties understand and agree that the relationship between them is that of landlord and tenant, and the Tenant specifically acknowledges that all statutory proceedings in the State of Florida regulating the relationship of landlord and tenant respecting collection of rent or possession of the Leased Premises or Project, accrue to the Landlord hereunder, but subject to the terms of this Lease.

29. DAMAGE OR DESTRUCTION: In the event the Leased Premises shall be destroyed or so damaged or injured by fire or other casualty during the Term of this Lease, whereby the same shall be rendered untenantable, then Landlord shall have the right, but not the obligation, to render such Leased Premises tenantable by repairs within one hundred eighty (180) days therefrom. If the Leased Premises are not rendered tenantable within said time, it shall be optional with either party to this Lease to cancel this Lease, and in the event of such cancellation the Rent shall be paid only to the date of such cancellation. The cancellation herein mentioned shall be evidenced in writing. During any time that the Leased Premises are untenantable due to causes set forth in this paragraph, the Rent or a just and fair proportion thereof shall be abated. Notwithstanding the foregoing, if the cause of such damage, destruction or injury to the Leased Premises originates from the Leased Premises or occurs by reason of any act, omission or negligence of Tenant or any employee, agent, licensee, patron or invitee of Tenant, (“Tenant Damage”) Tenant shall not have the right to cancel this Lease and no abatement of Rent shall occur. As to such Tenant Damage, Landlord shall have the right, but not the obligation, to

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render the Leased Premises tenantable. If Landlord elects to repair said Tenant Damage and render the Leased Premises tenantable, all insurance proceeds available shall be paid to Landlord and the balance of the cost of such repairs shall be paid by Tenant when due as Additional Rent. If Landlord elects not to repair such Tenant Damage, Tenant shall make such repairs pursuant to Paragraph 17 and shall be entitled to any insurance proceeds received in respect to the cost thereof.

30. EMINENT DOMAIN: If any part of the Leased Premises or the Project (including, but not limited to, the Parking Facilities), shall be taken by eminent domain or condemnation, which taking interferes with the maintenance, operation or use of the Leased Premises or Project (including, but not limited to, the Parking Facilities), Landlord may elect to terminate this Lease or to continue the Lease in effect. If Landlord elects to continue the Lease, and if the taking reduces the area of the Leased Premises, the Rent shall be reduced in proportion to the area of the Leased Premises so taken and Landlord shall repair any damage to the Leased Premises or the Project interfering with Tenant’s use of the Leased Premises and resulting from such taking. If any part of the Leased Premises is taken by condemnation or eminent domain which renders the Leased Premises unsuitable for its intended use, Tenant may elect to terminate this Lease. If any part of the Leased Premises is so taken which does not render the Leased Premises unsuitable for its intended use, and Landlord does not otherwise elect to terminate this Lease, this Lease shall continue in effect and the Rent shall be reduced in proportion to the area of the Leased Premises so taken and Landlord shall repair any damage to the remaining Leased Premises resulting from such taking as soon as is practicable. If all of the Leased Premises is taken by condemnation or eminent domain, this Lease shall terminate on the date of taking. All sums awarded (or agreed upon between Landlord and the condemning authority) for the taking of the interest of Landlord and/or Tenant, whether as damages or as compensation, and whether for partial or total condemnation, will be the property of Landlord. If this Lease should be terminated under any provisions of this paragraph, Rent (including all Additional Rent) shall be payable up to the date that possession is taken by the taking authority, and Landlord will refund to Tenant any prepaid unaccrued Rent pertaining to any subsequent period, less any sum or amount then owing by Tenant to Landlord.

31. ABANDONMENT: If, during the Term of this Lease, Tenant shall for a period of fifteen (15) days or more, abandon, vacate or remove from the Leased Premises the major portion of the goods, wares, equipment or furnishings usually kept on the Leased Premises, or shall cease doing business in the Leased Premises, or shall suffer any Rent hereunder to be in arrears, Landlord may, at its option, cancel this Lease and/or enter upon the Leased Premises in the manner stated in Paragraph 33.

32. DEFAULT: Each of the following shall be deemed to be an event of default by Tenant and a breach by Tenant hereunder:

(a) the filing by or against Tenant or any assignee or guarantor of this Lease in any court pursuant to any statute either of the United States or of any state, of a petition in bankruptcy or insolvency or a petition for reorganization or for the appointment of a receiver or trustee of all or a portion of the property of Tenant or such assignee or guarantor or the making by Tenant or such assignee or guarantor of an assignment for the benefit of creditors, or the petitioning for or entering into an arrangement pursuant to any statute either of the United States or of any state by Tenant or such assignee or guarantor or the taking of this Lease under any post-judgment writ of execution or attachment, or the issuance of any post-judgment, execution or attachment against Tenant or such assignee or guarantor or any of their property, or the dissolution or liquidation or commencement of any action or proceeding for the dissolution or liquidation of Tenant or such assignee or guarantor, provided, however, that Tenant shall not be deemed to be in default hereunder by reason of the filing of any petition for reorganization under Chapter 11 of the Bankruptcy Act if, and for so long as (x) Tenant shall pay to Landlord, as, when, and in the amount(s) due and payable pursuant to the terms of this Lease, all Rent and Additional Rent which shall accrue and become due and payable prior to the filing of such petition and all Rent which shall accrue and become due and payable subsequent to the filing of such petition, and (y) Tenant shall operate its business in the Premises in the same manner as it had been operated prior to the filing of such reorganization petition, and (z) Tenant shall, in all other respects, pay all other sums and perform all other duties and obligations on its part to be paid and performed under this Lease; or

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(b) the passing of this Lease to or the devolution of this Lease upon any person, firm or entity other than Tenant or a permitted assignee or subtenant, whether by operation of law or otherwise; or

(c) the Leased Premises being abandoned within the meaning of Section 83.05 of the Florida Statutes; or

(d) the Leased Premises becoming vacant or deserted at any time prior to the first anniversary of the Commencement Date and remaining so for ten (10) or more consecutive days; or

(e) the Leased Premises becoming vacant or deserted at any time subsequent to the first anniversary of the Commencement Date and remaining so for thirty (30) or more days; or

(f) default by Tenant in the payment of all Rent or any part thereof as and when same is due, or in the making of any other payment herein provided for and the continuation of such default for a period of five (5) days after Landlord shall have given Tenant a written notice specifying the default in question, provided however that if Tenant shall fail, refuse or neglect, for any reason, to pay any portion of any Rent or other sum due hereunder on more than two (2) occasions in any period of twelve (12) consecutive months during the term of this Lease, then, notwithstanding that such prior defaults shall have been cured within the period after notice provided in this SubParagraph 32 (f), any further similar default during such twelve (12) month period shall be deemed to be deliberate and shall constitute a material event of default hereunder with respect to which no notice or grace period shall be granted or available to Tenant; or

(g) default by Tenant in the performance of any other duty, obligation, covenant, or agreement on Tenant’s part to be performed under this Lease and the continuation of such default for thirty (30) days after Landlord shall have given to Tenant a written notice specifying the nature of such default, provided however that if said default shall be of such a nature that it cannot reasonably be cured or remedied within said thirty (30) day period, the same shall not be deemed an event of default if Tenant shall have commenced, in good faith, the curing or remedying of such default within such thirty (30) day period and shall thereafter continuously and diligently proceed therewith to completion.

33. REMEDIES OF LANDLORD: Tenant shall pay to Landlord, on demand, such expenses as Landlord may incur (regardless of whether or not suit is filed), including, without limitation, court costs and attorney’s fees and disbursements, in enforcing the performance of any obligation of Tenant under this Lease. During the continuation of any event of default beyond the expiration of any applicable grace period, in addition to any other rights Landlord may have at law or in equity for Tenant’s default, Landlord shall have the right, at its option, to serve upon Tenant a notice that this Lease will terminate on a date to be specified in such notice, which date shall not be less than three (3) days after such notice, and upon the date so specified, this Lease shall terminate but Tenant shall remain liable and as hereinafter set forth provided however that if Tenant shall commit the same type of default more than two (2) times in any period of twelve (12) consecutive months, then, notwithstanding that such defaults shall have been cured within the period after notice provided in Paragraph 32 above, any further similar default shall be deemed to be deliberate and if any further similar default shall occur, Landlord, without affording Tenant an opportunity to cure such further default, may thereafter serve upon Tenant a notice that this Lease will terminate on a date to be specified in such notice, which date shall be not less than three (3) days after such notice, and upon the date so specified, this Lease shall, at Landlord’s option, terminate but Tenant shall remain liable as hereinafter provided. Nothing in this paragraph shall be deemed to require Landlord to give the notices herein provided for prior to the commencement of a summary proceeding for nonpayment of rent or any other sum payable by Tenant to Landlord pursuant to the terms hereof or prior to the commencement of a plenary action for the recovery of rent or any other sum payable by Tenant to Landlord pursuant to the terms hereof on account of any default in the payment of any such Rent or additional sum, it being intended that such notices are for the sole purpose of creating a conditional limitation hereunder pursuant to which this Lease shall be terminated and Tenant shall become a holdover tenant. If this Lease shall be terminated as provided above in this paragraph or if this Lease shall be terminated by summary proceedings or otherwise or if the Leased Premises shall become vacant or deserted or abandoned during the Term and shall remain so beyond the time periods noted in SubParagraph 32(d) or 32(e), as applicable, or if Tenant

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shall default in the payment of any sum or in the performance of any duty, obligation, covenant or agreement on Tenant’s part to be performed pursuant to the terms of this Lease, (a) Landlord or its agents, servants or representatives may, immediately or at any time thereafter, re-enter and resume possession of the Leased Premises and remove all persons and property therefrom, either by summary dispossess proceedings or by a suitable action or proceeding at law, without being liable for any damages therefor, and no such re-entry shall be deemed an acceptance or surrender of this Lease, and (b) Landlord may, in its own name but as agent for Tenant if this Lease is not terminated, or in Landlord’s own behalf if this Lease is terminated, re-let the whole or any portion of the Leased Premises for any period equal to or greater or less than the period which would have constituted the balance of the Term, for any sum which Landlord may deem reasonable, to any Tenant(s) which Landlord may deem suitable and satisfactory, and for any use and purpose which Landlord may deem appropriate, and Landlord may grant concessions and/or free rent. Landlord shall in no event be liable in any way whatsoever for its failure or refusal to re-let the Leased Premises or any part thereof or in the event that the Leased Premises are re-let, for its failure to collect the rent under such re-letting, and no such refusal or failure to re-let or failure to collect rent shall release or affect Tenant’s liability for damages or otherwise under this Lease. Landlord shall not in any event be required to pay to Tenant any surplus of any sums received by Landlord on a re-letting of all or any part of the Leased Premises in excess of the Rent reserved in this Lease.

If this Lease shall be terminated as provided above in this paragraph, or if this Lease shall be terminated by summary proceedings or otherwise, or if the Leased Premises shall become vacant or deserted or be abandoned during the Term and shall remain so beyond the time periods noted in SubParagraphs 32(d) or 32(e), as applicable, or if Tenant shall default in the payment of any sum or in the performance of any duty, obligation, covenant or agreement on Tenant’s part to be performed pursuant to the terms of this Lease, whether the Leased Premises shall be re-let or not, Landlord shall be entitled, in addition to all other rights and remedies available to Landlord at law, in equity and/or under this Lease, to recover from Tenant and Tenant shall pay to Landlord (x) an amount equal to all of the expenses incurred by Landlord in connection with recovering possession of the Leased Premises, any re-letting(s), brokerage in connection with any re-letting(s), courts costs and attorney’s fees and disbursements, any expenses for putting and keeping the Leased Premises in good order and for making alterations, repairs, replacements and decorations in and to the Leased Premises and otherwise preparing the same for re-letting(s), which amounts shall be due and payable by Tenant to Landlord on demand after any such expenses are incurred by Landlord and (y) the Rent to accrue from the date upon which this Lease shall have been so terminated or the date upon which the Leased Premises shall have become vacant or deserted or abandoned or the date upon which Tenant shall have defaulted under this lease, whichever shall have first occurred, to the end of the Term.

34. WAIVER OF DEFAULT: Failure of Landlord to declare any default immediately upon occurrence thereof, or delay in taking any action in connection therewith, shall not waive such default, but Landlord shall have the right to declare any such default at any time and take such action as might be lawful or authorized hereunder, in law and/or in equity. No waiver by Landlord of a default by Tenant shall be implied, and no express waiver by Landlord shall affect any default other than the default specified in such waiver and that only for the time and extension therein stated.

No waiver of any term, provision, condition or covenant of this Lease by Landlord shall be deemed to imply or constitute a further waiver by Landlord of any other term, provision, condition or covenant of this Lease. In addition to any rights and remedies specifically granted Landlord herein, Landlord shall be entitled to all rights and remedies available at law and in equity in the event that Tenant shall fail to perform any of the terms, provisions, covenants or conditions of this Lease on Tenant’s part to be performed or fails to pay

20

Base Rent, Additional Rent or any other sums due Landlord hereunder when due. All rights and remedies specifically granted to Landlord herein, by law and in equity shall be cumulative and not mutually exclusive.

35. RIGHT OF ENTRY: Landlord, or any of its agents, shall have the right to enter the Leased Premises with 24 hours’ notice, and non-disruptive to business, except in the case of an emergency, during all reasonable hours to examine the same or to make such repairs, additions or alterations as may be deemed necessary for the safety, comfort, or preservation thereof, or of the Project. Landlord may exhibit the Leased Premises at any time within one hundred eighty (180) days before the expiration of the Lease Term. This right of entry shall likewise exist for the purpose of removing placards, signs, fixtures, alterations, or additions which do not conform to this Lease.

36. NOTICE: Any notice given to Landlord as provided for in this Lease shall be sent to Landlord by certified United States mail, postage paid, return receipt requested addressed to Landlord at Landlord’s Management Office in the Project or hand delivered to Landlord at such office. Any notice to be given Tenant under the terms of this Lease, unless otherwise stated herein, shall be in writing and shall be sent by certified United States mail, postage paid, return receipt requested or hand delivered to Tenant at the Leased Premises. Either party, from time to time, by such notice, may specify another address to which subsequent notice shall be sent. Notwithstanding the foregoing, prior to the Commencement Date of the Term of this Lease, notices shall be given by United States mail, postage paid, addressed to Tenant at Tenant’s address stated in the Basic Leasing Information of this Lease and addressed to Landlord at Landlord’s address stated in the Basic Leasing Information of this Lease. Any notice given by mail shall be deemed given three (3) days following the date of mailing.

37. COMMON AREAS AND PARKING FACILITIES: All automobile parking facilities, driveways, entrances and exits thereto, and other facilities in the Project furnished by Landlord, including, but not limited to, the Parking Facilities, truck way or ways, loading areas, pedestrian walkways and ramps, landscaped areas, stairways, corridors, and other areas and improvements provided by Landlord for the general use, in common, of tenants, their officers, agents, employees, servants, invitees, licensees, visitors, patrons and customers which may be enlarged or expanded (all of the foregoing sometimes referred to as the “Common Areas”), shall be at all times subject to the exclusive control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce the Rules and Regulations with respect to all such Common Areas and improvements; to police the same; from time to time to change the area, level and location and arrangement of the Common Areas, and other facilities hereinabove referred to; to restrict parking by and enforce parking charges (by operation of meters or otherwise) to tenants, their officers, agents, invitees, employees, servants, licensees, visitors, patrons and customers; to close all or any portion of the Common Areas to such extent as Landlord may desire or as may in the opinion of Landlord’s counsel be legally sufficient to prevent a dedication thereof or the accrual of any rights to any person or the public therein; to close temporarily all or any portion of any public areas or Common Areas; to discourage non-tenant parking; to charge a fee for visitor and/or customer parking; and to do and perform such other acts in and to said areas and improvements as, in the sole judgment of Landlord, Landlord shall determine to be advisable. Landlord will operate and maintain the Common Areas, and other areas referred to above in such manner as Landlord shall determine from time to time. Without limiting the scope of such discretion, Landlord shall have the full right and authority to designate a manager of the Common Areas and other areas who shall have full authority to make and enforce rules and regulations regarding the use of the same or to employ all personnel and to make and enforce all rules and regulations pertaining to and necessary for the proper operation and maintenance of the Common Areas and other areas. Reference in this paragraph to Parking Facilities shall in no way be construed as giving Tenant hereunder any rights and/or privileges in connection with such Parking Facilities unless such rights and/or privileges are expressly set forth in Exhibit “D” annexed hereto and made a part hereof.

38. CONDITION OF PREMISES ON TERMINATION OF LEASE AND HOLDING OVER: Tenant agrees to surrender to Landlord, at the end of the Term of this Lease and/or upon any cancellation of this Lease, the Leased Premises in as good condition as the Leased Premises were at the Commencement Date, ordinary wear and tear not caused by Tenant’s negligence, excepted. Tenant agrees that if Tenant does not surrender the Leased Premises to Landlord at the end of the Term of this Lease, then Tenant will pay to Landlord, to the extent permitted by law, one and one half the amount (i.e., 150%) of the Rent paid by Tenant

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for the last month of the Lease Term, for each month or portion thereof that Tenant holds over plus all damages that Landlord may suffer on account of Tenant’s failure to so surrender to Landlord possession of the Leased Premises, and will indemnify and save Landlord harmless from and against all claims made by any succeeding tenant of the Leased Premises against Landlord on account of delay of Landlord in delivering possession of said Leased Premises to said succeeding tenant so far as such delay is occasioned by failure of Tenant to so surrender said Leased Premises in accordance herewith.

No receipt of money by Landlord from Tenant after termination of this Lease or the service of any notice of commencement of any suit or final judgment for possession shall reinstate, continue or extend the Term of this Lease or affect any such notice, demand, suit or judgment, or otherwise limit or affect any other remedies available to Landlord hereunder.

No act or thing done by Landlord or its agents during the Term of this Lease shall be deemed an acceptance of a surrender of the Leased Premises, and no agreement to accept a surrender of the Leased Premises shall be valid, unless it be made in writing by a duly authorized officer or agent of Landlord.

39. TERMINATION OPTION: Tenant will have a one time right to terminate the Term of this Lease upon the completion of the 36^th consecutive month of the payment of Rent. As a condition of this termination option, Tenant shall provide written notice to Landlord at least 180-days in advance, as well as pay to Landlord a fee (“Termination Fee”) in the amount equal to all unamortized tenant improvement dollars and brokerage commissions paid by Landlord, plus two months of gross rent (base rent and operating expenses, plus sales tax). The Termination Fee is due and payable at least ten (10) days prior to the termination date. Tenant may not be in default at anytime prior to its exercising of said option.

40. OCCUPANCY TAX: Tenant shall be responsible for and shall pay before delinquency all municipal, county or state taxes assessed during the Term of this Lease against any occupancy interest or personal property of any kind, owned by or placed in, upon or about the Leased Premises by Tenant.

41. SIGNS: Landlord shall have the right to install signs on the interior or exterior of the Project and the Leased Premises and/or change the Project’s name or street address. Tenant agrees not to place or allow to be maintained on any exterior door, roof, wall or window of the Leased Premises any sign, decoration, lettering or other thing of any kind without Landlord’s advance written consent. Building standard signage is available in the main lobby entrance on the first floor and at the main entrance to Tenant’s suite. Initial building standard signage is provided at the expense of the Tenant.

42. TRIAL BY JURY: It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, and Tenant’s use or occupancy of the Leased Premises. Tenant further agrees that it shall not interpose any counterclaim or counterclaims in a summary proceeding or in any action based upon nonpayment of Rent or any other payment required of Tenant hereunder.

43. RELOCATION OF TENANT: Landlord expressly reserves the right at Landlord’s sole cost and expense to remove Tenant from the Leased Premises and to relocate Tenant in some other space in the Project of Landlord’s choosing of approximately the same dimensions and, size, and commercially comparable to the Premises, with the ability to connect to Tenant’s generator, and including open space for cubicles. Such other space shall be improved and decorated by Landlord at Landlord’s expense. Landlord shall have the right, in Landlord’s sole discretion, to use such decorations and materials from the existing Leased Premises, or other materials so that the space in which Tenant is relocated shall be comparable in its interior design and decoration to the Leased Premises from which Tenant is removed. Nothing herein contained shall be construed to relieve Tenant or imply that Tenant is relieved of the liability for or obligation to pay any Additional Rent due by reason of the provisions of Paragraph 5 of this Lease, the provisions of which paragraph shall be applied to the space in which Tenant is relocated on the same basis as said provisions were applied to the Leased Premises from which Tenant is removed. Tenant agrees that Landlord’s exercise of its election to remove and relocate Tenant shall not terminate this Lease or release Tenant, in whole or in part, from Tenant’s obligations to pay Rent and perform the covenants and agreements hereunder for the full Lease Term.

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44. CROSS DEFAULT: If the term of any lease, other than this Lease, made by Tenant for any other space in the Project shall be terminated or terminable after the making of this Lease because of any default by Tenant under such other lease, such default shall, ipso facto, constitute a default hereunder and empower Landlord, at Landlord’s sole option, to terminate this Lease as herein provided in the event of default.

45. TENANT GENERATOR: For period of 12-months from the execution of this Lease, Tenant will be granted the non-exclusive right to install, use, and maintain a diesel-powered generator (250 to 300 kw) for the purpose of servicing the Leased Premises in the event of a Building power failure. Tenant’s Generator may be used only in the event that the Building electric service is interrupted to the Leased Premises. All costs and expenses associated with the Tenant Generator shall be the sole responsibility of the Tenant, and Tenant shall be responsible for obtaining all necessary approvals required by any governing authorities. The area for installation shall be mutually acceptable to both parties, and in no way may the installation, use, maintenance, or any other aspect of the Tenant Generator interfere with any other tenant’s use of the Project. In the event that the Tenant Generator has not been installed by the 12^th month from the execution of this Lease Agreement, then this right shall become null and void and no right shall exist as contained herein.

46. INVALIDITY OF PROVISION: If any term, provision, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term, provision, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby and each term, provision, covenant or condition of this Lease shall be valid and be enforceable to the fullest extent permitted by law. This Lease shall be construed in accordance with the laws of the State of Florida.

47. TIME OF THE ESSENCE: It is understood and agreed between the parties to this Lease that time is of the essence of all the terms, provisions, covenants and condition of this Lease.

48. MISCELLANEOUS: The terms Landlord and Tenant as herein contained shall include singular and/or plural, masculine, feminine and/or neuter, heirs, successors, executors, administrators, personal representatives and/or assigns wherever the context so requires or admits. The terms, provisions, covenants and conditions of this Lease are expressed in the total language of this Lease Agreement and the paragraph headings are solely for the convenience of the reader and are not intended to be all inclusive and shall not be deemed to limit or expand any of the provisions of this Lease. Any formally executed addendum or rider to or modification of this Lease shall be expressly deemed incorporated by reference herein unless a contrary intention is clearly stated therein. Anything herein to the contrary notwithstanding, Landlord shall not be or be deemed to be in default hereunder unless it has failed to cure its default within a reasonable time following its receipt of notice thereof. Notwithstanding any other provision contained herein to the contrary, Landlord’s liability hereunder or under any other document executed in connection herewith, in the event of any uncured default by Landlord, shall be limited to Landlord’s interest in the Leased Premises, it being understood that none of Landlord’s other assets or the assets of any partner owning an interest in Landlord shall be subject to any judgment against Landlord hereunder. This Lease shall be construed without regard to any presumption or rule requiring construction against the party causing the lease to be drafted.

49. EFFECTIVE DATE: Submission of this instrument for examination does not constitute an offer, right of first refusal, reservation of or option for the Leased Premises or any other space or premises in, on or about the Project. This instrument becomes effective as a Lease upon execution and delivery by both Landlord and Tenant. However, this Lease may be terminated by Landlord, in its sole discretion, prior to the Lease being approved by the Landlord’s lender(s) having an interest in the Project or the Leased Premises, upon which Landlord shall be released from all further liability under the Lease.

50. ENTIRE AGREEMENT: This Lease contains the entire agreement between the parties and supercedes all previous negotiations leading thereto, and it may be modified only by an agreement in writing signed and sealed by both parties. All of the exhibits attached to this

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Lease are incorporated in, and made a part of this Lease. No surrender of the Leased Premises, or of the remainder of the Term of this Lease, shall be valid unless accepted in writing by a duly authorized officer or agent of Landlord. Tenant acknowledges and agrees that Tenant has not relied upon any statement, representation, prior written or contemporaneous oral promises, agreements or warranties except such as are expressed herein. Without limiting the foregoing, Tenant acknowledges that Landlord makes no representation concerning, and shall not be liable or responsible for, any other tenant’s tenancy in the Project or services to be provided by any other tenant.

51. MEMORANDUM OF LEASE: At Landlord’s request at any time during the Term of this Lease, Tenant agrees to immediately join in a Memorandum of Lease in form and content satisfactory to Landlord, which Memorandum, at Landlord’s option, may be recorded in the Public Records of the County in the State of Florida in which the Project is located. In no event shall this Lease or any memorandum of this Lease be recorded without Landlord’s prior written consent.

52. BROKERAGE: Tenant represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction other than the Broker(s) stated in the Basic Leasing Information of this Lease, and that no other broker, agent or other person brought about this transaction, and Tenant agrees to indemnify and hold Landlord and Landlord’s officers, directors, persons, agents and representatives harmless from and against any and all liabilities, damages, claims, costs, fees and expenses whatsoever (including, without limitation, reasonable attorney’s fees and all costs at all trial and appellate levels) resulting from any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction. The provisions of this paragraph shall survive the termination of this Lease.

53. BROKER DISCLOSURE: The Broker(s) stated in the Basic Leasing Information are being compensated by Landlord pursuant to a separate agreement. This notice is provided to Tenant in accordance with Florida Statutes and the Florida Administrative Code.

54. TENANT IMPROVEMENT AND COMMISSION GUARANTY: In the event Tenant vacates, abandons or otherwise seeks an early termination of the Lease, either voluntarily or by operation of law, Tenant acknowledges that Landlord has completed tenant improvements and compensated the Broker(s) stated in the Basic Leasing Information based upon the expectation that Tenant would occupy and pay Rent for the Leased Premises during the full term of the Lease. In the event Tenant vacates, abandons or leaves the Leased Premises prior to the end of the Lease Term, Tenant shall reimburse Landlord for the tenant improvement costs and brokerage commission(s) heretofore paid by Landlord to Broker(s) based upon a fraction, the numerator of which is the remaining number of months in the Lease Term and the denominator of which is the total number of months in the Lease Term. This obligation to reimburse Landlord for any unamortized tenant improvement costs and brokerage commissions as set forth herein shall be personally guaranteed by the Guarantor stated in the Basic Leasing Information.

55. FORCE MAJEURE: Landlord shall not be required to perform any term, condition, or covenant in this Lease so long as such performance is delayed or prevented by force majeure, which shall mean acts of God, labor disputes (whether lawful or not), material or labor shortages, restrictions by any governmental authority, civil riots, floods, and any other cause not reasonably within the control of Landlord and which by the exercise of due diligence Landlord is unable, wholly or in part, to prevent or overcome.

56. HAZARDOUS WASTE: Tenant agrees not to keep in or on the Leased Premises any inflammable, combustible or explosive substance nor any substance which would create or tend to create a dangerous or combustible condition. Tenant agrees not to cause or allow the presence, storage, use, maintenance or removal of asbestos, PCB transformers, other toxic, hazardous or contaminated substances or underground storage tanks (collectively, “Hazardous Materials”) in, on or about the Leased Premises without Landlord’s prior written consent. If Tenant’s business requires use or possession of Hazardous Materials, Tenant must obtain Landlord’s written consent before bringing any Hazardous Materials on to or creating such condition on or within the Leased Premises. If Tenant uses or maintains Hazardous Materials on or in the Leased Premises, Tenant agrees to handle, store, transport and dispose of all Hazardous Materials at Tenant’s sole cost and expense in accordance with all then-existing

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local, state and federal rules and laws. Provided it is lawful to do so, Tenant agrees to enter into a contract(s) with a company certified to handle the Hazardous Materials for the transport and disposal of all Hazardous Materials from the Leased Premises. A copy of all such contracts and all renewals must be provided to Landlord.

Landlord may, at Landlord’s sole option, now or in the future, obtain a report from an environmental consultant of Landlord’s choice as to whether Tenant has been or is currently using any part of the Leased Premises for the improper use, handling, storage, transportation or disposal of Hazardous Materials. If any such report indicates such improper use, handling, storage, transportation or disposal of Hazardous Materials, Tenant agrees to immediately reimburse Landlord for the cost of obtaining the environmental report, and, in addition, Landlord may require that all violations of the law with respect to the Hazardous Materials be corrected and/or that Tenant obtains all necessary environmental permits and approvals. If Tenant fails to correct any such violation(s) of law and/or fails to obtain such necessary permits within a reasonable time after demand from Landlord, then Landlord may declare this Lease in default and/or may cause the Leased Premises and any surrounding areas to be freed from the Hazardous Materials at Tenant’s sole cost and expense which Tenant agrees to pay on demand from Landlord as additional rent.

Tenant hereby agrees to indemnify, defend, save and keep Landlord, and Landlord’s officers, employees, partners, successors and assigns, harmless from any and all liabilities, obligations, charges, losses, damages, penalties, claims, actions and expenses, including without limitation, engineers’ and professional fees, soil tests and chemical analysis, court costs and legal fees and expenses through all trial, appellate and administrative levels, imposed on, incurred by or asserted against Landlord, in any way relating to, arising, or in connection with the use, handling, storage, transportation or disposal of the Hazardous Materials on the Leased Premises and/or the Project. The fore-going indemnification shall survive any assignment or termination of this Lease.

57. RADON: RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT HAS ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA. ADDITIONAL INFORMATION REGARDING RADON TESTING MAY BE OBTAINED FROM YOUR COUNTY PUBLIC HEALTH UNIT.

58. TENANT FINANCIAL INFORMATION: Tenant agrees to provide Landlord prior to the execution of this Lease, a balance sheet, appropriate bank references, vendor references and a minimum of two (2) years of personal financial statements for each shareholder/partner or guarantor (as the case may be) of Tenant. Further, upon request of Landlord, Tenant shall supply such references and financial statements as aforesaid on an annual basis during the Lease Term within ten (10) days of receipt of written notice from Landlord requesting same.

59. SHORING: If any excavation or construction is made adjacent to, upon or within the Building, or any part thereof, Tenant shall afford to any persons causing or authorized to cause such excavation or construction license to enter upon the Premises for the purpose of doing such work as such persons shall deem necessary to preserve the Building or any portion thereof from injury or damage and to support the same by proper foundations, braces and supports, without any claim for damages or indemnity or abatement of the Rent, or of a constructive or actual eviction of Tenant.

60. PROHIBITION REGARDING SMOKING: No smoking or consumption of tobacco products shall be permitted in the Leased Premises. Smoking is also prohibited in the Common Areas of the Building including, but not limited to, hallways, lavatories, lobbies, stairways, and any other area as it relates to the Project, except only as to any area that Landlord may designate outside the Building as a specific smoking area of the Building. Tenant shall be responsible for complying with and observing all laws, rules and regulations pertaining to smoking prohibitions within the Leased Premises, Building, and Project, as to Tenant, its employees, customers, and invitees.

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IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered this Lease on the day and year first above written.

WITNESSES:	LANDLORD:
	RFP MAINSTREET 2101 COMMERCIAL, LLC, a Delaware limited liability company
	By:
Signature of Witness		Paul J. Kilgallon
		President
Printed Name of Witness
Signature of Witness
Printed Name of Witness
	TENANT:
	OMNICOMM SYSTEMS, INC.
	By:
Signature of Witness		Cornelis F. Wit
		President & CEO
	Printed Name of Witness
	Signature of Witness
	Printed Name of Witness

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, CORNELIS WIT, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of OmniComm Systems, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(c) Disclosed in this quarterly report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

By:	/s/ Cornelis Wit
	Cornelis Wit
	Chief Executive Officer
August 11, 2006

[A signed original of this written statement required by Section 906 has been provided to OmniComm Systems, Inc. and will be retained by OmniComm Systems, Inc. and furnished to the United States Securities and Exchange Commission or its staff upon request.]

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, RONALD T. LINARES, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of OmniComm Systems, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(c) Disclosed in this quarterly report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

By:	/s/ Ronald T. Linares
	Ronald T. Linares
	Chief Financial Officer

August 11, 2006

[A signed original of this written statement required by Section 906 has been provided to OmniComm Systems, Inc. and will be retained by OmniComm Systems, Inc. and furnished to the United States Securities and Exchange Commission or its staff upon request.]

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-QSB of OmniComm Systems, Inc. (the “Company”) for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Cornelis F. Wit, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Cornelis F. Wit

Cornelis F. Wit

President, Chief Executive Officer and Director

August 11, 2006

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-QSB of OmniComm Systems, Inc. (the “Company”) for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Ronald T. Linares, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ronald T. Linares

Ronald T. Linares

Vice President and Chief Financial Officer

August 11, 2006