UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2014

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

Commission File No. 0-25203

OmniComm Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware	11-3349762
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2101 West Commercial Blvd, Suite 3500
Fort Lauderdale, FL 33309
(Address of principal executive offices)
(954)473-1254
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of class)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒  No  ☐

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

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

Large Accelerated Filer  ☐ Accelerated Filer  ☐ Non-accelerated filer  ☐ Smaller reporting company  ☒

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

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

Date	Non-Affiliate Voting Shares Outstanding	Aggregate Market
		Value
June 30, 2014	74,491,000	$11,918,560

Our common stock trades on the Over-the-Counter Bulletin Board (OTCBB).  Shares of voting stock held by each officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such person may be deemed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.  The registrant has no shares of non-voting stock authorized or outstanding.

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

Date	Class	Outstanding Shares
March 30, 2015	Common Stock, $0.001 par value per share	92,234,302

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the information to be set forth in our Proxy Statement to be filed by us pursuant to Regulation 14A relating to our 2015 Annual Meeting of Stockholders to be held on June 11, 2015 is incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.

OMNICOMM SYSTEMS, INC.

ANNUAL REPORT ON

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2014

Table of Contents
		Page
	Part I
Item 1.	Business	1
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20
	Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 8.	Financial Statements and Supplementary Data	33
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	33
Item 9A.	Controls and Procedures	33
Item 9B.	Other Information	34
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	34
Item 11.	Executive Compensation	34
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
Item 13.	Certain Relationships and Related Transactions; and Director Independence	35
Item 14.	Principal Accounting Fees and Services	35
	Part IV
Item 15.	Exhibits, Financial Statement Schedules	35
Signatures		39

i 

PART I.

ITEM 1. BUSINESS

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

Overview

OmniComm Systems, Inc. provides Web-based electronic data capture (“EDC”) and eClinical (“eClinical”) software and services that streamline the clinical research process. Our EDC and eClinical software and service offerings (“eClinical Products” or “eClinical Solutions”) consist of TrialMaster^®, TrialOne^®, Promasys^®, and eClinical Suite^™.  Our eClinical Products are designed to allow clinical trial sponsors and investigative sites to easily and securely collect, validate, transmit and analyze clinical study data. Our eClinical Products are 21 CFR Part 11 compliant solutions and are designed to offer clinical trial sponsors the ability to conduct clinical trials under multiple platforms, with significant flexibility, ease-of-use and with complete control over collected data.

Our eClinical Products offer significant business benefits to our customers and are designed to help clinical trial sponsors more efficiently conduct their clinical trials.  This efficiency can translate into more rapid initiation of data collection, less cost incurred in the data collection process and the ability to make more timely Go/No-Go decisions.   We also provide business process consulting services that focus on more effectively integrating EDC and the broader array of eClinical Solutions and processes into the clinical trial process.  Our goal is to provide our clients a data collection process that is streamlined, efficient and cost-effective.  

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

• Real-Time Access to the Data

• Faster Study Completion

• Cost Savings

• Improved quality and visibility of results

• Comprehensive clinical development solution

1

Our Strategy

Our primary goal is to establish ourselves as a leading EDC and eClinical software and services provider by offering our customers the highest quality service with a differentiated, user-friendly product. We have increased the scope and quality of the products and services we offer. During 2014 we continued to update our products and increase their functionality to offer new solutions to our clients’ challenges. In December 2013, we released TrialMaster version 4.2.  This new release includes hundreds of innovative productivity and functionality enhancements, including additional features for auto-redaction for faster and more efficient centralized and risked based monitoring, and major new features for exporting data utilizing OmniComm’s Export Utility. During 2013 we expanded our product line and our global customer base through the acquisition of Promasys B.V.

•  Scope Expansion – We plan on expanding the scope of services and products offered within the eClinical product spectrum via organic product and service development, through strategic partnerships and relationships and through the selective use of acquisitions;

•  Customer Base Expansion – We will seek to expand the customer base for our existing set of eClinical Solutions and we will design complementary solutions that will allow us to expand the universe of clients that we service; and

•  Diversification – We will continue to diversify our revenue and customer base in order to avoid over-concentration of our business on any solution/product set or client-base.

Our Business Model

The scope of client clinical trial support service needs can vary from trial to trial.  Experience with EDC and other eClinical trial management solutions can also vary based on such factor as client size and sophistication.  Our approach to satisfying the diverse needs of our customers is to offer a variety of EDC solutions.  We offer our eClinical Products under an application service provider ("ASP") business model as well as technology transition (“Technology Transition”) and technology transfer (“Technology Transfer”) business models (both of which are considered licensed).

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

Our Software Products and Services

TrialMaster EDC Solution

Our core product is TrialMaster, which allows organizations conducting clinical trials to collect and manage their clinical trial data over the internet. Users at investigative sites such as hospitals and doctors’ offices can enter data into electronic forms that represent the study protocol, and the data is immediately validated against a set of protocol-specific rules. For example, a rule could check that a medication start date is earlier than the medication stop date, and prompt the user to correct this before proceeding. Compared to paper studies such real-time feedback dramatically improves the initial data quality. This in turn decreases the time it takes to analyze the study results, helping pharmaceutical, biotech and medical device companies bring their products to market sooner.

TrialMaster has a number of competitive strengths when compared to other EDC products. A key differentiator is that the rule checks described above are implemented using JavaScript, giving a highly-responsive user experience. For example, if a medication is marked as “continuing”, the stop date field can be immediately disabled, preventing inconsistent data from being entered. Additionally, TrialMaster has an intuitive user interface, easy navigation, and robust tools for monitoring and tracking the state of the data at any time. Finally, TrialMaster has open Application Programming Interfaces (APIs) that allow other clinical trial applications to send and receive data over the internet. For example, laboratory data can be transmitted and loaded automatically, while an external project management system could inquire about how many patients were enrolled in a particular TrialMaster study and update a summary table accordingly.

2

TrialMaster has an integrated electronic learning system, a comprehensive set of standard reports and integrated ad-hoc reporting using a sophisticated business intelligence tool called LogiXML®.  TrialMaster allows the collected data to be extracted in a variety of standard formats, such as database tables, comma-delimited files, and SAS® datasets. The latest release also allows the data to be extracted in an industry-standard format called SDTM (Study Data Tabulation Model), simply by defining mappings between the input and output data structures. We believe this feature can save our customers considerable programming time.

It is standard practice to monitor all the data in the EDC system against the source medical records, an activity called Source Document Verification (SDV). In August 2011, the FDA issued draft guidance stating, among other things, that it was no longer necessary to perform 100% SDV, providing the data selection was part of a risk-based monitoring plan. TrialMaster includes a facility called “dynamic monitoring,” which allows organizations conducting clinical trials to select a subset of data for SDV based on a configurable, statistical algorithm. This capability allows TrialMaster customers to save significant costs in the conduct of clinical trials, since monitoring activities typically consume 30% of the total costs for a trial.

TrialBuilder® is the tool our customers and professional services staff use to model a clinical study. This includes the data collection forms, the data consistency rules and the visit schedule, as well as the workflow and security rules for accessing and managing the data. TrialBuilder is a sophisticated multi-window application with a productive user interface that utilizes drag-and-drop functionality.

TrialMaster Archive allows us to provide human and machine readable copies of the data when a clinical study has been completed. The human-readable format consists of PDF files that represent the data exactly as it was displayed on the interactive web pages.  These are delivered to the client via CD in a read-only format, affording our clients and the FDA the ability to review clinical trial data by trial, site, patient, visit and form. Trial sponsors receive a CD with data for all sites including final data exports in the formats their TrialMaster study used. The TrialMaster Archive also includes an optional Submission Module, which creates a casebook containing PDF formatted copies of all CRFs in FDA submission format.  This casebook is fully tabbed and bookmarked making it easy to find and view particular CRFs.

TrialOne Phase I EDC Software

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

The key benefits of TrialOne for our customers include:

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

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

● Access to valid data earlier provides more visibility for “Go/No Go” decisions;

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

● Trial sponsors can manage or run more studies with less human resources; and

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

3

TrialOne Phase I Application Suite

TrialOne is a comprehensive software application suite that provides clinical trial site sponsors, study investigators and study monitors with several tools designed at making the overall Phase I operation more efficient.  Phase I studies are used to conduct the first tests of new drugs or medical devices in humans. They are often held in dedicated Phase I clinics, where volunteers follow a strict timed schedule of dosing followed by measurements such as vital signs, electrocardiograms and repeated blood draws. TrialOne is designed to manage the automation of Phase I clinics. It allows the specification of the schedule and the corresponding dosing and required measurements, then supports the real-time collection of data according to that schedule. Much of the data collection is automated via direct entry from instruments, such as barcode scanners that read barcodes on both the patients and the vials of blood being filled.

The key components of the TrialOne application include:

Sample Tracking.

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

Subject Recruitment and Screening.

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

Scheduler.

The scheduler module provides a mechanism for defining the study structure including a time and events schedule.  The module optimizes study build times using a wizard-driven design tool creating database efficiencies using object libraries and templates.   This can quickly produce clear, easy to use, schedule driven electronic case report forms suitable for complex and adaptive clinical trials including study alarms and real time validation criteria with edits.  Additionally, the Scheduler can define actions or events to be automatically offset relative to the study drug and rapidly address mid-study changes.

Direct Data Capture (DDC).

The DDC module allows capture of real-time data for screening or study at data collection stations, bed-side or roaming.  The system allows for the collection of data online, over an intranet or internet using a desktop, notebook, or tablet PC.  Using a library of custom drivers the DDC module can collect vital signs or other biologic data directly from device and/or instrumentation.  As with later phase applications the system can clean data at the point of collection with real-time validation edit checks while enhancing protocol compliance via schedule-driven workflow.  Working with the Subject Recruitment and Screening module the system seamlessly maps data to the recruitment database for future criteria searches.  Automation and authentication checks are maintained using a full array of barcode and scanner support for all aspects of the clinic including subject ID’s, sample labeling and event tracking.

Ad  Hoc Reporting.  
An integrated Ad Hoc reporting tool is available with wizard-driven report generation with drill-down reports that include interactive charts and graphs.  The Ad Hoc module supports aggregate data and advanced calculations, an advanced and easy to use export feature, and distributable system reports by configurable schedules.  Data is protected by event configurable security and role-based security.  The Ad Hoc module allows for real-time data access to important trends such as vital signs and adverse events.

4

eClinical Suite

The eClinical Suite is comprised of a number of highly configurable modules that can be combined to provide a robust solution for capturing and managing clinical trial data based on specific client needs.  The modules are:

● eClinical Portal – the gateway to all functions, data and reports.  It provides the means to create an environment specific to any Protocol and User needs.

● eClinical Data Management – where protocols are defined using libraries of reusable standard objects (Codelists, Data Items, Data Modules, Pages, Edit Checks, etc.).

● eClinical Data Capture – is the (EDC) module used by Investigator Sites and client personnel such as Data Managers, Statisticians, Safety, etc.  In this module data can be entered and reviewed; queries resolved, etc.  The interface is highly intuitive and easy to use thereby minimizing end-user training times.  High performance is maintained to keep page turn wait times to a minimum.

● eClinical Study Conduct – proactively allows the clinical operations organization to manage the timelines, resources, budget, payments, clinical supplies, and key study milestones and metrics.

● eClinical Adverse Event Reporting – based on industry standards for safety reporting, this module allows for the capture, review, reporting and global submission of both serious and non-serious adverse event cases.

● eClinical Autoencoder – delivers both automated and manual coding of adverse event and drug medication terminology using standard and custom dictionaries and configurable coding algorithms.

OmniComm believes the eClinical suite is a robust and proven platform with a loyal customer base. There is some functional overlap with TrialMaster, in that both offer an EDC capability.  We continue to progressively integrate the features of the eClinical and TrialMaster tools and have offered those eClinical customers that solely use EDC the option to transition to TrialMaster.

Promasys

Promasys B.V. Acquisition

On November 11, 2013, with economic effect as of October 31, 2013, we acquired 100% of the capital stock of Promasys B.V., a privately held Netherlands company, from the shareholders of Promasys B.V. pursuant to a share exchange agreement in exchange for 435,998 euros (approximately $593,000) and 2,270,000 shares of our common stock. We issued the 2,270,000 shares to the shareholders who were all non US-persons/non US-entities and the issuance of the shares to them occurred in an offshore transaction.

We believe this acquisition complements our current product offerings by adding a product line dedicated to providing a flexible, cost effective EDC product specifically developed for academic and investigator initiated trials and by diversifying our customer base into the East Asia.

The acquisition has been accounted for in accordance with FASB ASC Topic 805-Business Combination. The results of the acquisition’s operations have been included in the consolidated statements of operations since November 1, 2013. In 2013 the Promasys B.V. acquisition contributed $105,660 of revenue and $963,848 of revenue in 2014.

Promasys Software

Promasys is an integrated clinical trial data management and EDC system that brings industry standard quality and efficiency to the data collection, data management and reporting process in clinical trials. Setting up a new clinical study database in Promasys is straightforward and easy and does not require any programming knowledge.

iPad Application

Promasys 7.1 brings new features and capabilities. An iPad compatible version brings secure mobile data entry and subject management to the clinical trials work floor. The Promasys iPad app delivers Promasys’ featured support for data quality and integrity and regulatory compliance on a mobile device making it easier for study investigators and study monitors to enter data while at the point of care.

Study Life Cycle™

System access control is managed based on user ID and password. For each user or user group, access rights are configured in detail with 4 levels of access; none, read, write, and admin that can be specified for each menu function, clinical trial, and study center. For multi-center trials, access rights can be configured easily to match the roles of the trial staff in the different centers while limiting access to subjects belonging to the user’s own center only. Promasys supports the execution of GCP compliant clinical trials with the Study Life Cycle™, the quality engine of the system that divides a clinical trial in 7 distinct phases. The Study Life Cycle™ dynamically adjusts the access rights of users when a trial moves from one phase to the next. In this way, the quality of the trial is supported and the integrity of the data is guaranteed, without the need for user intervention.

Web CRF

The WebCRF is a data entry interface that works through a standard web browser. It allows enrolling and including subjects and entering trial data without the need to install Promasys’ windows client component. Access to subjects is securely controlled, based on the user’s login credentials that reflect the functional role as well as the study center of the user.

5

Hosting

Our hosting services are provided at our dedicated data center in Cincinnati, Ohio, which is specifically designed to optimize the delivery of our application services and to ensure the availability and security of our customers’ research data. Our state of the art facility includes 24 by 7 staffing, enterprise class security, redundant power and cooling systems, large-scale data back-up capabilities and multiple Internet access points and providers.  In addition, we maintain back-up facilities and disaster recovery services in Fort Lauderdale, Florida.  

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

Support

We have a multi-national organization to support our applications worldwide. We offer 24 by 7 support to our customers’ and their investigator sites through multi-lingual help desks located in our US offices and in Bonn, Germany.

Consulting and Professional Services

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

■ Project Management – We assign a project manager to oversee every project and provide up-to-date communications on the status of the project.

■ Clinical Services – We have expertise in translating a clinical protocol into an electronic Case Report Form format.  We ensure that CRF design, Visit Schedule, Site and Patient Definitions, Edit Checks, Derivations, and Code Lists are all optimized to use industry best practices, and, where applicable, CDISC/CDASH standards.

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

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

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

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

■ Installation.  There are various architectures for deploying a secure EDC solution to remote investigator sites. These services explore different security, performance and system management alternatives and help the client design and install an optimal solution to meet their unique needs.

■ Validation.  We offer a test kit that includes test cases and documentation to validate the installation of our EDC applications against regulatory requirements.

Market Opportunity

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

6

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

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

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

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

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

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

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

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

License Agreements

DataSci, LLC

On April 9, 2009, we entered into a Settlement and License Agreement with DataSci, LLC (“DataSci”) which relates to a lawsuit filed on June 18, 2008 in the United States District Court for the District of Maryland by DataSci against OmniComm alleging infringement of U.S. Patent No. 6,496,827 B2 entitled “Methods and Apparatus for the Centralized Collection and Validation of Geographically Distributed Clinical Study Data with Verification of Input Data to the Distributed System” (“Licensed Patent”) owned by DataSci. Pursuant to the Settlement and License Agreement, the parties agreed to enter into a Stipulated Order of Dismissal of the lawsuit filed by DataSci and DataSci granted us a worldwide, non-exclusive non-transferable right and license under the Licensed Patent the subject of the claim and the right to sublicense TrialMaster on a Technology Transfer and Technology Transition basis. The license expressly excludes the right to make, use, sell, import, market, distribute, oversee the operation of, or service systems covered by a claim (if any) of the Licensed Patent to the extent such systems are used for creating and managing source documentation and conducting remote data validation in clinical trial studies using a tablet PC with stylus, touch screen device, digitizing tablet, digitizer pen or similar mobile processing device (“Digitizing Device”), wherein the source documentation is electronic and is completed using a Digitizing Device. Under the terms of the license, we are obligated to pay royalties quarterly for sales of Licensed Products, as defined therein, from January 1, 2009 until the expiration of the Licensed Patent. We anticipate that this will approximate the annual minimum royalty payment(s) during any calendar year as follows:  2014 - until expiration of the Licensed Patent - $450,000 per year.  In addition to the cash consideration the Company has issued a warrant for 1,000,000 shares of our common stock with an exercise price of $.01 per share.  The warrant has been granted for past use of the Licensed Patent.  The warrant can be exercised by DataSci in month 24 or later or upon its sole discretion require the Company to pay $300,000 in cash in lieu of exercising the warrant.

7

On June 23, 2009, we entered into an agreement to acquire the EDC assets of eResearch Technology.  Concurrent with the consummation of that transaction we entered into the First Amendment to Settlement and Licensing Agreement with DataSci, LLC to provide for license payments of $300,000 to DataSci for the eResearch Technology EDC assets acquired.

Our Customers

We are committed to developing long-term, partnering relationships with our clients and adapting our products and services to meet the unique and challenging needs of their trials. Our customers include leading pharmaceutical, biotechnology, medical device companies, academic institutions, clinical research organizations and other entities engaged in clinical trials. As of December 31, 2014, we had approximately 120 customers, including 2 of the top 10 global pharmaceutical companies and 4 of the top 5 CROs measured by revenue, the largest medical device company and the eighth largest biotechnology company. Our representative customers by sponsor type include:

Trial Sponsor	Sponsor Type
Boston Scientific	Medical Device
Alkermes	Biotechnology
Gilead Sciences	Biopharmaceutical
Seoul National University	Academic
INC Research	Contract Research Organization
Johnson & Johnson	Pharmaceutical
Pfizer	Pharmaceutical

Sales and Marketing

We sell our products through a direct sales force, relationships with CRO Partners, and through co-marketing agreements with Vendor and Channel Partners.  Our marketing efforts to-date have focused on increasing market awareness of our firm and products.  These efforts have primarily been comprised of attendance and participation in industry conferences and seminars.  A primary focus of our future marketing efforts will be to continue increasing our market penetration and market awareness.  As of December 31, 2014, we had 15 employees in sales and marketing.

Our efforts during 2015 will include continuing to increase the number of sales personnel and sales support staff employed in the United States, Europe and East Asia, increasing our attendance and marketing efforts at industry conferences and increasing the number of Company sponsored events including webinars, symposiums and other marketing events. 

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

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

Innovation Forum: The goal of the Innovation Forum is to ensure that attendees receive practical information, training and collaboration that can be taken back, implemented and shared within their respective organizations. The Innovation Forum attracted more than 100 attendees, along with the highest number of external thought leading and keynote speakers as well as the largest number of sponsoring and exhibiting partners. Content included product demonstrations, customer case studies, panel discussions, partner presentations, plus thought provoking presentations from independent industry thought leaders.

8

eClinical webinars:  We host periodic web-based seminars for current and prospective customers, which are typically focused on our products or current developments in the eClinical industry.  These webinars offer informative industry related topics to our customers and foster good relationships with our current and potential customers.

Product Development

The Company focuses on maintaining high quality product development standards. Product development activities include research and the development of platform and/or client specific software enhancements such as adding functionality, improving usefulness, increasing responsiveness, adapting to newer software and hardware technologies, or developing and maintaining the Company’s websites.

The Company spent $2,754,367 and $2,403,504 during the years ended December 31, 2014 and 2013, respectively, on product development initiatives. The Company’s product development efforts are focused on the continued enhancement and redesign of our eClinical Solution lines to keep our technology at the cutting edge in the markets in which we compete.

Intellectual Property

Our success and ability to compete are dependent on our efforts to develop and maintain the proprietary aspects of our technology. We rely upon a combination of trademark, trade secret, copyright and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by requiring our employees and consultants to enter into confidentiality, non-competition and assignment of inventions agreements. We have registered trademarks and service marks in the United States and abroad, and have filed applications for the registration of additional trademarks and service marks. Our principal trademarks are “OmniComm Systems,” “TrialMaster,” “TrialBuilder,” “TrialExplorer,” “Promasys” and “TrialOne.”  These legal protections afford only limited protection for our technology. Our agreements with employees, consultants and others who participate in development activities could be breached.  However, due to rapid technological change, we believe that factors such as the technological and creative skills of our personnel, new product and service developments and enhancements to existing products and services are more important than the various legal protections of our technology to establish and maintain a technology leadership position.

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

9

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

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

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

Competition

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

● systems developed internally by existing or prospective customers;

● vendors of EDC, eClinical,  clinical trial management systems and adverse event reporting product suites, including Oracle Clinical a business unit of Oracle Corporation and Medidata Solutions;

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

● CROs with internally developed EDC, clinical data management systems or adverse event reporting systems.

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

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

● reputation and financial stability of the vendor;

● low total cost of ownership and demonstrable benefits for customers;

● depth of expertise and quality of consulting and training services;

● performance, security, scalability, flexibility and reliability of the solutions;

● speed and ease of implementation and integration; and

● sales and marketing capabilities and the quality of customer support.

Government Regulation

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

10

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

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

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

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

11

Background and History

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

Employees

We currently have 119 full time equivalents (“FTEs”) of which four are executives, four are administrative, 32 are programmers, engineers or technology specialists, 56 are in clinical operations, four are technology and systems managers, four are in consulting/professional services and fifteen are in sales and marketing.  We employ 55 employees out of our headquarters in Fort Lauderdale, Florida, thirteen employees out of a regional operating office in Monmouth Junction, New Jersey and sixteen field employees located throughout the United States.  Our wholly-owned subsidiary, OmniComm Europe, GmbH, employs fifteen FTEs in Bonn, Germany.  Our wholly-owned subsidiary, OmniComm Ltd., employs ten employees in Southampton, England.  Our wholly-owned subsidiary, OmniComm Spain, S. L. employs one employee in Barcelona, Spain.  Our wholly-owned subsidiary, Promasys B.V. employs three employees in the Netherlands and one employee in Japan. We believe that relations with our employees are good.  None of our employees are represented by a collective bargaining agreement.

Available Information

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

ITEM 1A. Risk Factors

RISK FACTORS

An investment in our securities is speculative in nature and involves a high degree of risk.  In addition to the other information contained in this Annual Report on Form 10-K, the following material risk factors should be considered carefully in evaluating us and our business before purchasing our securities.

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

We incurred net losses attributable to common stockholders of $4,665,645 and $3,367,603 in 2014 and 2013, respectively. At December 31, 2014, we had an accumulated deficit of approximately $77,979,301 and a working capital deficit of approximately $18,073,070.  We expect net losses and negative cash flow for the foreseeable future until such time as we can generate sufficient revenues to achieve profitability.  We expect our operating cash flows to improve in 2015, but we have little control over the timing of contracted projects.  We expect our client and contract base to expand and diversify to the point where it meets our on-going operating needs, but this may not happen in the short-term or at all.  While we expect to achieve additional revenue through the growth of our business, we cannot assure you that we will generate sufficient revenue to fund our expenses and achieve and maintain profitability in any period.

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

At December 31, 2014, we had outstanding borrowings of approximately $20,746,500 of which:

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

● approximately $4,000,000 at 2.25% interest is due in December 2015;

● approximately $1,770,000 at 10% interest is due in January 2016;

● approximately $8,139,000 at 12% interest is due in January 2016;

● approximately $2,860,000 at 12% interest is due in March 2016;

● approximately $150,000 at 10% interest is due in April 2016;

● approximately $100,000 at 12% interest is due in April 2016;

● approximately $420,000 at 10% interest is due in April 2017 and

● approximately $3,232,500 at 12% interest is due in April 2017.

12

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

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

During the years ended December 31, 2014 and December 31, 2013 we were required to raise working capital to meet operating expenses in the amount of approximately $743,635 and $3,500,000.  Our plan of operations going forward may require us to raise additional working capital if our revenue projections are not realized. Even if our projections are realized, we may need to raise additional financing to meet our ongoing obligations, including the repayment of existing debt obligations currently in the amount of $20,746,500. In addition, we may also need to raise additional funds to meet known needs or to respond to future business opportunities, which may include the need to:

● fund more rapid expansion;

● fund additional capital or marketing expenditures;

● develop new or enhanced features, services and products;

● enhance our operating infrastructure;

● respond to competitive pressures; or

● acquire complementary businesses or necessary technologies.

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

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

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

A SYSTEM FAILURE COULD RESULT IN SIGNIFICANTLY REDUCED REVENUES.

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

13

OUR FAILURE TO PROPERLY APPLY CERTAIN FINANCIAL TESTS AND THE RESULTING FAILURE TO TIMELY FILE CERTAIN INFORMATION WITH THE SEC MAY BE INDICATIVE OF WEAKNESSES IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING AND OUR DISCLOSURE CONTROLS AND PROCEDURES.

In connection with our October 2013 acquisition of Promasys, we determined that we incorrectly applied the provisions of Item 9 of Form 8-K and Article 8 of Regulation S-X under the Exchange Act, as a result of which, (a) we concluded, incorrectly, that our acquisition of Promasys was not a “significant acquisition” within the meaning of Regulation S-X, and (b) we did not timely file a periodic report containing the audited financial statements, unaudited interim financial statements or pro-forma financial information required under Rules 8-04 and 8-05 of Regulation S-X to be filed in connection with our acquisition of Promasys. The Securities and Exchange Commission (“SEC”) has indicated that the failure to timely file a report required to be filed under the Exchange Act may be evidence of a weakness in disclosure controls. Moreover, our incorrect application of Item 9 of Form 8-K and Article 8 of Regulation S-X in connection with our acquisition of Promasys could be indicative of a deficiency in our internal control over financial reporting. In order to reduce the likelihood that a similar event will occur in the future, we have taken remedial action. While we believe the remedial steps we have taken will reduce the likelihood of a similar occurrence in the future, there is no assurance that a significant deficiency or material weakness will not be identified in the future as a result of this or other circumstances.

In 2013 we acquired PROMASYS B.V. we may expand our business further through new acquisitions in the future. Any such acquisitions, AND OUR FAILURE TO MANAGE OUR GROWTH THEREFROM, could disrupt our business, harm our financial condition and dilute current stockholders’ ownership interests in our company.

We intend to pursue potential acquisitions of, and investments in, businesses, technologies or products complementary to our business and periodically engage in discussions regarding such possible acquisitions. For example, during 2013 we acquired 100% of the outstanding shares of Promasys B.V.

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

● difficulties in identifying and acquiring complementary products, technologies or businesses;

● substantial cash expenditures;

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

● difficulties in assimilating the operations and personnel of the acquired companies;

● diversion of management's attention away from other business concerns;

● risk associated with entering markets in which we have limited or no direct experience;

● potential loss of key employees, customers and strategic alliances from either our current business or the target company’s business; and

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

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

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

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

International customers accounted for 22% and 18% of total revenues in 2014 and 2013, respectively.  International operations are subject to inherent risks. These risks include:

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

● political instability;

● greater difficulty in accounts receivable collection and enforcement of agreements and longer payment cycles;

● compliance with foreign laws;

● changes in regulatory requirements;

● fewer legal protections for intellectual property and contract rights;

● tariffs or other trade barriers;

● staffing and managing foreign operations;

● exposure to currency exchange and interest rate fluctuations;

● potentially adverse tax consequences; and

● changes to taxation of offshore earnings.

14

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

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

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

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

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

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

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

● the introduction or adoption of new technologies or products;

● changes in third-party reimbursement practices;

● changes in government regulation or governmental price controls;

● changes in medical practices;

● the assertion of product liability claims; and

● changes in general business conditions.

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

15

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

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

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

Our top five customers accounted for approximately 29% of our revenues during 2014 and approximately 37% of our revenues during 2013.  One customer accounted for 15% of our revenues during 2014 or approximately $2,395,000.  One customer accounted for 11% of our revenues during 2013, or approximately $1,551,000.  These customers can terminate our services at any time.  The loss of any of our major customers could have a material adverse effect on our results of operations or financial condition. We may not be able to maintain our customer relationships, and our customers may not renew their agreements with us, which could adversely affect our results of operations or financial condition. A significant change in the liquidity or financial position of any of these customers could also have a material adverse effect on the collectability of our accounts receivables, our liquidity and our future operating results.

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

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

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

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

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

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

16

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

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

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

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

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

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

FAILURE TO MANAGE GROWTH EFFECTIVELY COULD HARM OUR BUSINESS.

To manage our current and anticipated future growth effectively, we must continue to maintain and may need to enhance our information technology infrastructure, financial and accounting systems and controls and manage expanded operations in geographically distributed locations. Our failure to manage our growth effectively could have a material adverse effect on our business, operating results or financial condition.

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

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

17

OUR FINANCIAL STATEMENTS CONTAIN A GOING CONCERN QUALIFICATION.

Because of our historical operating losses, accumulated deficit, negative cash flows and the uncertainty as to our ability to secure additional financing, the report of our independent auditors on our consolidated financial statements for the year ended December 31, 2014 contained an explanatory paragraph indicating there is substantial doubt about our ability to continue as a going concern.

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

At March 30, 2015, we had 92,234,302 shares of common stock issued and outstanding and 82,828,649 shares issuable upon the conversion of preferred stock, convertible debt or exercise of warrants or options.  Of the issued shares, 17,829,570 are eligible for resale pursuant to Rule 144.  In general, Rule 144 permits a shareholder who has owned restricted shares for at least six months, to sell without registration, within a three-month period, up to one percent of our then outstanding common stock.  In addition, shareholders other than our officers, directors or 5% or greater shareholders who have owned their shares for at least one year may sell them without volume limitation or the need for our reports to be current.

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

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

As of March 30, 2015, we had a total of 80,078,500 shares of our common stock underlying options, warrants and other convertible securities and 2,750,149 shares of common stock underlying convertible preferred stock.  The exercise of these warrants and options and/or the conversion of these convertible securities will have a dilutive effect on our existing stockholders.

THE 250,000 SHARES OF SERIES D PREFERRED STOCK ISSUED IN 2010 PROVIDE SUPER-VOTING RIGHTS THAT RESULTED IN A CHANGE OF CONTROL OF THE CORPORATION

Each share of the Series D Preferred Stock entitles the holder to 400 votes at any meeting of our stockholders and such shares of Series D Preferred Stock will vote together with the common stockholders, provided for the election or removal of directors the shares of Series D Preferred Stock will be voted in the same percentage as all voting shares of common stock voted for each director.  As a result of the change in control, the holder of the Series D Preferred Shares could vote the shares in a manner that could be contrary to the interests of the holders of our common stock.  

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

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

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

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

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

18

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

Provisions of our Articles of Incorporation and By-laws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, our articles of incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our Board of Directors, of which 4,375,224 shares are currently issued and outstanding.  Our Board of Directors may, without stockholder approval, issue additional series of preferred stock with dividends, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters and other material leased real property as of December 31, 2014 are shown in the following table. We do not own any real property.

Location	Use	Size (square feet)		Expiration of Lease
Fort Lauderdale, Florida	Corporate Headquarters		11,519	September 2016
Monmouth Junction, New Jersey	Office Space		2,508	February 2016
Bonn, Germany	European Headquarters		3,714	July 2015
Southampton, United Kingdom	Office Space		1,415	September 2017
Leiden, Netherlands	Office Space		285	October 2018
Cincinnati, Ohio	Data Center		1,000	July 2016
Fort Lauderdale, Florida	Data Center / Disaster Recovery Office Space			December 2015

Our principal executive offices are located in approximately 11,500 square feet of commercial office space at 2101 West Commercial Blvd., Fort Lauderdale, Florida, and our telephone number is (954) 473-1254.  We lease these offices under the terms of a lease expiring in September 2016.  Our annual rental payment under this lease is $195,400 plus sales tax.

We have a regional operating office located at 1100 Cornwall Road, Monmouth Junction, New Jersey.  This office is located in approximately 2,500 square feet of commercial office space.  We lease this office under the terms of a lease expiring in February 2016 and our annual rental payment under this lease is $50,160.

Our European headquarters are located in approximately 3,700 square feet of commercial office space at Kaiserstrasse 139-141, Bonn, Germany.  We lease these offices under the terms of a lease expiring in July 2015.  Our annual rental payment under this lease is 58,680 Euros or approximately $78,000.

We have an R&D office in Europe for our TrialOne software application. The office is located at Medino House, Rushington Business Park, Totten, Southampton, UK. The office has an area of approximately 1,400 square feet.   We lease these offices under the terms of a lease expiring in September 2017.  Our annual rental payment under this lease is 42,000 British Pounds or approximately $69,000.

We have an office in the Netherlands for our Promasys software application. The office is located at Zernikedreef 8, 2333 CL, Leiden, the Netherlands. We lease this space under a lease expiring in October 2018. Our annual rent payment under this lease is 5,100 Euros or approximately $6,800.

We currently have one data site, which serves as our primary network and data hosting location. It is located in Cincinnati, Ohio and is leased from Cincinnati Bell Technology Solutions. We lease this space under the terms of a lease expiring in July 2016.  Our annual lease payment under this lease is approximately $160,000.

We maintain a business-continuity site for disaster recovery purposes.  We lease rack space for our SG&A servers and redundant data hosting in Fort Lauderdale, Florida and office space and cubicles in Boca Raton, Florida that will allow us to maintain operations in the event of a disaster.  We lease this space under the terms of a lease that expires in December 2015. Our annual rental payment under this agreement is $190,000.  

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

19

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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

	HIGH		LOW
Fiscal 2014
1st Quarter	$	0.21	$	0.10
2nd Quarter	$	0.19	$	0.14
3rd Quarter	$	0.18	$	0.14
4th Quarter	$	0.29	$	0.15
Fiscal 2013
1st Quarter	$	0.30	$	0.15
2nd Quarter	$	0.26	$	0.13
3rd Quarter	$	0.27	$	0.17
4th Quarter	$	0.20	$	0.14

On March 27, 2015 the closing price of our common stock as reported on the OTC Bulletin Board was $0.30. At March 27, 2015 we had approximately 375 shareholders of record; however, we believe that we have in excess of 1,000 beneficial owners of our common stock.

Dividend Policy

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

A special note about penny stock rules

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

ITEM 6. SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

20

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

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

Forward-Looking Statements

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

Overview

We are 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 (“CROs”), and other clinical trial sponsors worldwide. Our proprietary EDC and eClinical software applications, TrialMaster®; TrialOne®; Promasys®; and eClinical Suite™ (the “eClinical Software Products”), allow clinical trial sponsors and investigative sites to securely collect, validate, transmit and analyze clinical trial data.

During fiscal 2014 we sought to build and expand on our strategic efforts. The primary focus of our strategy includes:

● Stimulating demand by providing clinical trial sponsors with high value eClinical applications and services;

● An emphasis on penetrating the Phase I trial market with our dedicated Phase I solution, TrialOne;

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

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

Our business development focus continues to include increasing our penetration of all phases of the clinical trial market with a particular emphasis on becoming the market leader in Phase I EDC services. We believe this market is an operating and strategic strength of the Company due to the inherent flexibility of our solutions including the solutions provided by our TrialOne products and services. We believe we have the ability to produce trials more quickly and economically than our competitors for this specialized and large market. We expect to experience increased success in penetrating the market for larger pharmaceutical, biotechnology and medical device clinical trial sponsors as we continue expanding our marketing and sales efforts during 2015.

21

The Year ended December 31, 2014 compared with the Year ended December 31, 2013

Results of Operations

A summarized version of our results of operations for the years ended December 31, 2014 and December 31, 2013 is included in the table below.

Summarized Statement of Operations

For the year ended

December 31, 

				% of						% of			$			%
	2014			Revenues			2013			Revenues			Change			Change
Total revenues	$	16,461,250					$	14,331,840					$	2,129,410			14.9	%
Cost of sales		3,970,521			24.1	%		2,911,213			20.3	%		1,059,308			36.4	%
Gross margin		12,490,729			75.9	%		11,420,627			79.7	%		1,070,102			9.4	%
Salaries, benefits and related taxes		10,419,214			63.3	%		8,758,276			61.1	%		1,660,938			19.0	%
Rent		889,880			5.4	%		894,121			6.2	%		(4,241	)		-0.5	%
Consulting		89,574			0.5	%		157,905			1.1	%		(68,331	)		-43.3	%
Legal and professional fees		377,329			2.3	%		265,251			1.9	%		112,078			42.3	%
Other expenses		1,410,890			8.6	%		970,387			6.8	%		440,503			45.4	%
Selling, general and administrative		1,159,174			7.0	%		851,642			5.9	%		307,532			36.1	%
Total operating expenses		14,346,061			87.1	%		11,897,582			83.0	%		2,448,479			20.6	%
Operating (loss)		(1,855,332	)		-11.3	%		(476,955	)		-3.3	%		(1,378,377	)		289.0	%
Interest expense		(2,614,245	)		-15.9	%		(2,490,112	)		-17.4	%		(124,133	)		5.0	%
Interest income		81			0.0	%		9			0.0	%		72			800.0	%
Change in derivatives		58,807			0.4	%		(95,121	)		-0.7	%		153,928			-161.8	%
Transaction (loss)		(68,232	)		-0.4	%		(5,041	)		0.0	%		(63,191	)		1253.5	%
Income/(loss) before income taxes and dividends		(4,478,921	)		-27.2	%		(3,067,220	)		-21.4	%		(1,411,701	)		46.0	%
Income tax (expense)		19,537			0.1	%		(94,122	)		-0.7	%		113,659			-120.8	%
Net income/(loss)		(4,459,384	)		-27.1	%		(3,161,342	)		-22.1	%		(1,298,042	)		41.1	%
Total preferred stock dividends		(206,261	)		-1.3	%		(206,261	)		-1.4	%		-0-			0.0	%
Net income/(loss) attributable to common stockholders	$	(4,665,645	)		-28.3	%	$	(3,367,603	)		-23.5	%	$	(1,298,042	)		38.5	%
Net income/(loss) per share	$	(0.05	)				$	(0.04	)
Weighted average number of shares outstanding		90,701,058						87,969,202

Revenues for the year ended December 31, 2014 increased 14.9% from the year ended December 31, 2013. The table below provides a comparison of our recognized revenues for the years ended December 31, 2014 and December 31, 2013.

	For the year ended
Revenue activity	December 31, 2014				December 31, 2013				$ Change			% Change
Set-up fees	$	4,814,378	29.2	%	$	3,369,670	23.5	%	$	1,444,708			42.9	%
Change orders		467,815	2.9	%		475,680	3.3	%		(7,865	)		-1.7	%
Maintenance		4,374,245	26.6	%		4,584,594	32.0	%		(210,349	)		-4.6	%
Software licenses		3,404,655	20.7	%		2,911,509	20.3	%		493,146			16.9	%
Professional services		2,605,010	15.8	%		2,207,181	15.4	%		397,829			18.0	%
Hosting		795,147	4.8	%		783,206	5.5	%		11,941			1.5	%
Total	$	16,461,250	100.0	%	$	14,331,840	100.0	%	$	2,129,410			14.9	%

Overall Revenue increased by approximately $2.1 Million or 14.9%. This is primarily the result of increases in Set-up fees, Software licenses and Professional services offset by a decrease in Maintenance.

22

We recorded $963,848 in revenue in 2014 associated with our acquisition of Promasys B.V. including $425,926 from licensing and $429,548 from maintenance. In 2013 we recorded $105,660 from the effective date of the acquisition, October 31, 2013 through December 31, 2013.

We recorded $1,546,602 in revenues associated with clients on our TrialOne EDC software for the year ended December 31, 2014 compared with $1,302,420 for the year ended December 31, 2013.  TrialOne revenues are comprised of license subscriptions, professional services and maintenance services since the software is currently only sold under a technology transfer basis.

We recorded revenue of $11,830,956, including $4,814,378 from Set-up fees, $2,151,569 from licensing and $2,478,461 from maintenance associated with our TrialMaster suite during the year ended December 31, 2014 compared with Revenue of $9,632,765 that included $3,369,670, $1,620,791 and $2,655,259, respectively, during the year ended December 31, 2013.  The increase in revenue is primarily the result of increased business from both new and existing clients.

We recorded $2,119,844 in revenues associated with clients of eClinical Suite during the year ended December 31, 2014 compared with $3,290,995 for the year ended December 31, 2013.  The eClinical Suite revenues are primarily comprised of license subscriptions and revenues associated with our hosting and maintenance services.  The 2013 revenue results included additional one-time revenue from several long standing eClinical Suite clients demonstrating our success in continuing to expand our relationships with these clients.

We recorded $272,019 in revenues from hosting activities and $197,120 in consulting services associated with the eClinical Suite during the year ended December 31, 2014 compared with $433,084 and $437,156 respectively, for the year ended December 31, 2013.  Generally, these revenues are paid quarterly and are connected to hosting and client support for clients licensing that application.

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

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

License contracts are typically sold on a subscription basis that takes into account system usage both on a data volume and system user basis.  Pricing includes additional charges for consulting services associated with the installation, validation, training and deployment of our eClinical software and solutions.  Licensed contracts of the eClinical suite have historically been sold on a perpetual license basis with hosting and maintenance charges being paid annually.  The Company expects any licenses it sells of its software products to be sold in three to five year term licenses.

Our top five customers accounted for approximately 29% of our revenues during the year ended December 31, 2014 and approximately 37% of our revenues during the year ended December 31, 2013.  One customer accounted for approximately 11% of our revenues during the year ended December 31, 2014.   One customer accounted for approximately 15% of our revenues during the year ended December 31, 2013. The loss of any of these contracts or these customers in the future could adversely affect our results of operations.

Cost of goods sold increased approximately 36.4% or $1,059,308 for the year ended December 31, 2014 as compared to the year ended December 31, 2013.  Cost of goods sold were approximately 24.1% of revenues for the year ended December 31, 2014 compared to approximately 20.3% for the year ended December 31, 2013. 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 and pass thru expenses. Cost of goods sold increased during the year ended December 31, 2014 due to increases in headcount resulting from the successful acquisition of new business and an increase in pass-thru expenses that are classified under cost of goods sold.  

23

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.  At least initially, we expect the costs to deploy TrialOne to exceed our long-term estimates as we develop and refine our installation, validation, and training procedures.

Overall, total operating expenses increased approximately 20.6% for the year ended December 31, 2014 when compared to the year ended December 31, 2013.  Total operating expenses were approximately 87.1% of revenues during the year ended December 31, 2014 compared to approximately 83.0% of revenues for the year ended December 31, 2013. Operating expenses increased during the year ended December 31, 2014 primarily due to an increase in salary expenses.

Salaries and related expenses were our biggest operating expense at 72.6% of total operating expenses for the year ended December 31, 2014 compared to 73.6% of total operating expenses for the year ended December 31, 2013.  Salaries and related expenses increased approximately 18.9% for the year ended December 31, 2014 when compared to the same period ended December 31, 2013.  The increase in salary expense is primarily related to increased headcount coupled with salary increases for our existing staff.  The table below provides a summary of the significant components of salary and related expenses by primary cost category.

For the year ended
	December 31, 2014		December 31, 2013		$ Change			% Change
OmniComm corporate operations	$	7,139,958	$	6,561,444	$	578,514			8.8	%
New Jersey operations office		634,733		338,675		296,058			87.4	%
OmniComm Europe, GmbH		814,604		821,087		(6,483	)		-0.8	%
OmniComm Ltd.		946,649		639,020		307,629			48.1	%
OmniComm Spain		161,276		147,772		13,504			9.1	%
OmniComm Promasys B.V.		551,118		113,278		437,840			386.5	%
Employee stock compensation		170,876		137,000		33,876			24.7	%
Total salaries and related expenses	$	10,419,214	$	8,758,276	$	1,660,938			19.0	%

We currently employ approximately 55 employees out of our Fort Lauderdale, Florida corporate office, thirteen employees out of our New Jersey regional operating office, sixteen out-of-state employees, ten employees out of a wholly-owned subsidiary in the United Kingdom, twenty employees out of a wholly-owned subsidiary in Bonn, Germany, four employees out of a wholly-owned subsidiary in Leiden, the Netherlands and one employee out of a wholly-owned subsidiary in Barcelona, Spain.  We expect to continue to selectively add experienced sales and marketing personnel over the next year in an effort to increase our market penetration, particularly as it relates to the largest pharmaceutical, biotechnology and CRO customers and to continue broadening our client base domestically as well as in Europe

During the year ended December 31, 2014 and the year ended December 31, 2013 we incurred $170,876 and $137,000, respectively, in salary expense in connection with ASC 718 Compensation – Stock Compensation, which establishes standards for transactions in which an entity exchanges its equity instruments services from employees. This standard requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

Rent and related expenses decreased by approximately 0.5% during the year ended December 31, 2014 when compared to the year ended December 31, 2013.  The table below details the significant portions of our rent expense.  In particular, the decrease in 2014 is associated with increases in rent expenses for our offices in Germany, the UK and the Netherlands offset by decreases in our Fort Lauderdale corporate office, New Jersey office, Co-location facility and straight line rent expense.  Our primary data site is located at a Cincinnati Bell owned co-location facility in Cincinnati, Ohio and we will continue utilizing this facility for the foreseeable future since it is designed to ensure 100% production system up-time and to provide system redundancy. We lease co-location and disaster recovery space in the Fort Lauderdale, Florida area. This facility provides us with disaster recovery and business continuity services for our operations.  We currently lease office space in Bonn, Germany for our European subsidiary, OmniComm Europe, GmbH.  That lease expires in July 2015.  We currently lease office space for a regional operating office in New Jersey under a lease that expires in February 2016.  Our OmniComm Ltd. subsidiary leases office space in Southampton, UK under a lease that expires in September 2017.  Our Promasys B.V. subsidiary leases office space in Leiden, the Netherlands under a lease that expires in October 2018. Our Fort Lauderdale corporate office lease expires in September 2016.  The table below provides the significant components of our rent related expenses by location or subsidiary.  Included in rent during 2014 was a reduction of $14,978 in non-cash, straight line rent expense recorded to give effect to contractual, inflation-based rent increases in our leases.

For the year ended
	December 31, 2014			December 31, 2013			$ Change			% Change
Corporate office	$	335,830		$	344,044		$	(8,214	)		-2.4	%
Co-location and disaster recovery facilities		335,540			340,830			(5,290	)		-1.6	%
New Jersey operations office		54,340			58,634			(4,294	)		-7.3	%
OmniComm Europe, GmbH		94,057			87,401			6,656			7.6	%
OmniComm Ltd.		68,751			63,430			5,321			8.4	%
OmniComm Spain		7,946			7,984			(38	)		-0.5	%
OmniComm Promasys B.V.		8,394			1,170			7,224		n/m
Straight-line rent expense		(14,978	)		(9,372	)		(5,606	)		-59.8	%
Total	$	889,880		$	894,121		$	(4,241	)		-0.5	%

24

 Consulting services expense decreased to $89,574 for the year ended December 31, 2014 compared with $157,905 for the year ended December 31, 2013, a decrease of $68,331 or 43.3%. Consulting services were comprised of fees paid to consultants for help with developing our computer applications, fees incurred as part of our employee recruiting programs and for services related to our sales and marketing efforts. The table provided below provides the significant components of the expenses incurred related to consulting services. Consulting fees for both Sales and Marketing and Product Development were lower during 2014 as we limited the utilization of the services of third-party sources for this work.

For the year ended
Expense Category	December 31, 2014		December 31, 2013		$ Change			% Change
Sales and marketing	$	-0-	$	21,412	$	(21,412	)		-100.0	%
Product development		89,574		136,493		(46,919	)		-34.4	%
Total	$	89,574	$	157,905	$	(68,331	)		-43.3	%

Legal and professional fees increased approximately 42.3% for the year ended December 31, 2014 compared with the year ended December 31, 2013. Professional fees include fees paid to our auditors for services rendered on a quarterly and annual basis in connection with our SEC filings, fees paid to investment bankers for investor relations and related services, and fees paid to our attorneys in connection with representation in matters involving litigation and acquisitions or for services rendered to us related to securities and SEC related matters. During 2014 financial advisory, accounting services and legal fees all increased due to additional services provided by these vendors. The table below compares the significant components of our legal and professional fees for the years ended December 31, 2014 and December 31, 2013, respectively.

For the year ended
Expense Category	December 31, 2014		December 31, 2013		$ Change			% Change
Financial advisory	$	25,790	$	-0-	$	25,790		n/a
Audit and related		55,850		62,178		(6,328	)		-10.2	%
Accounting services		169,939		135,993		33,946			25.0	%
Legal-employment related		39,977		26,061		13,916			53.4	%
Legal-financial related		26,386		15,932		10,454			65.6	%
General legal		59,387		25,087		34,300			136.7	%
Total	$	377,329	$	265,251	$	112,078			42.3	%

Selling, general and administrative expenses (“SG&A”) increased approximately 36.1% for the year ended December 31, 2014 compared to the year ended December 31, 2013. This increase is primarily due to increases in our marketing, insurance, miscellaneous and office software expenses partially offset by a decrease in license expense. During the year ended December 31, 2014 we recorded $156,701 in license fees associated with our license agreement with DataSci, LLC compared to $189,408 during the year ended December 31, 2013. In addition, SG&A relates primarily to costs incurred in running our offices in Fort Lauderdale, Florida, Monmouth Junction, New Jersey, Southampton, England, Leiden the Netherlands and Bonn, Germany on a day-to-day basis and other costs not directly related to other captioned items in our income statement. SG&A includes the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. In 2014 we spent approximately $419,000 on marketing, sales and advertising as compared to approximately $226,000 in 2013. We expect that the 2015 marketing, sales and advertising expenses will be approximately $800,000 as we plan to increase our attendance at tradeshows and our marketing efforts worldwide.

During the year ended December 31, 2014 we recognized $147,543 in bad debt expense compared to bad debt expense of $11,131 for the year ended December 31, 2013.  During 2014, we continued to carefully and actively manage our potential exposure to bad debt by closely monitoring our accounts receivable and proactively taking the action necessary to limit our exposure.  We believe that our current allowance for uncollectible accounts accurately reflects any accounts which may prove uncollectible during fiscal 2015.

25

Interest expense was $2,614,245 during the year ended December 31, 2014 compared to $2,490,112 for the year ended December 31, 2013, an increase of $124,133.  Interest incurred to related parties was $2,389,786 during the year ended December 31, 2014 and $2,339,702 for the year ended December 31, 2013.  Included in interest expense for both periods is the accretion of discounts recorded related to financial instrument derivatives that were deemed a part of the financings we entered into.  The table below provides detail on the significant components of interest expense for the years ended December 31, 2014 and December 31, 2013.

Interest Expense
	For the year ended
Debt Description	December 31, 2014		December 31, 2013		$ Change
Accretion of discount from derivatives	$	507,542	$	609,000	$	(101,458	)
August 2008 convertible notes		192,000		192,000		-0-
December 2008 convertible notes		597,600		597,600		-0-
September 2009 secured convertible debentures		144,000		144,000		-0-
December 2009 convertible debentures		178,800		178,800		-0-
General interest		159,969		95,360		64,609
Related party notes payable		834,334		673,352		160,982
Total	$	2,614,245	$	2,490,112	$	124,133

We evaluate the cost of capital available to us in combination with our overall capital structure and the prevailing market conditions in deciding what financing best fulfills our short and long-term capital needs. Given the difficult overall economic climate and in particular the difficulties nano-cap companies have experienced in obtaining financing, we believe the structure and terms of the transactions we entered into during 2014 and 2013 were obtained at the best terms available to the Company.

We record unrealized gains/losses related to changes in our derivative liabilities associated with the issuance of convertible debt that occurred during fiscal 2008 and 2009 and the warrants associated with the issuance of promissory notes.  We recorded a net unrealized gain of $58,807 during the year ended December 31, 2014 compared with a net unrealized loss of $95,121 during the year ended December 31, 2013.  The unrealized gains/losses can be attributed to fair value calculations undertaken periodically on the warrant and conversion feature liabilities recorded by us at the time the convertible debt was issued.  Accordingly the warrant and conversion feature liabilities are increased or decreased based on the fair value calculations made at each balance sheet date.  These non-cash gains and losses have materially impacted our results of operations during the years ended December 31, 2014 and December 31, 2013 and can be reasonably anticipated to materially affect our net loss or net income in future periods. We are, however, unable to estimate the amount of such income/expense in future periods as the income/expense is partly based on the market price of our common stock at the end of a future measurement date. In addition, if we issue securities which are classified as derivatives we will incur expense and income items in future periods. Investors are cautioned to consider the impact of this non-cash accounting treatment on our financial statements.

The Company recorded arrearages of $206,261 and $206,261 in its 5% Series A Preferred Stock dividends for the years ended December 31, 2014 and December 31, 2013, respectively.  As of December 31, 2014, the Company had cumulative arrearages for preferred stock dividends as follows:

Series of Preferred Stock	Cumulative Arrearage
Series A	$	2,586,700
Series B		609,887
Series C		1,472,093
Total preferred stock arrearages	$	4,668,680

Liquidity and Capital Resources

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash.   We have historically experienced negative cash flows and have relied on the proceeds from the sale of debt and equity securities to fund our operations. In addition, we have utilized stock-based compensation as a means of paying for consulting and salary related expenses. At December 31, 2014, we had working capital deficit of approximately $18,073,070.

26

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

Liquidity and Capital Resources
Summarized Balance Sheet Disclosure
	December 31, 2014			December 31, 2013			$ Change
Cash	$	522,914		$	1,160,720		$	(637,806	)
Accounts receivable, net of allowance for doubtful accounts		3,416,151			1,599,568			1,816,583
Prepaid expenses		228,082			146,907			81,175
Prepaid stock compensation, current portion		153,500			-0-			153,500
Other current assets		18,305			-0-			18,305
Current assets		4,338,952			2,907,195			1,431,757
Accounts payable and accrued expenses		1,894,185			2,540,956			(646,771	)
Notes payable, current portion		-0-			37,500			(37,500	)
Patent litigation settlement liability, current portion		962,500			962,500			-0-
Deferred revenue, current portion		5,840,875			2,866,356			2,974,519
Line of credit		4,000,000			3,500,000			500,000
Convertible notes payable, current portion, net of discount		75,000			75,000			-0-
Conversion feature liability, related parties		2,729,902			2,979,392			(249,490	)
Conversion feature liability		214,500			146,814			67,686
Warrant liability, related parties		6,496,448			5,799,946			696,502
Warrant liability		198,612			144,031			54,581
Current liabilities		22,412,022			19,052,495			3,359,527
Working capital (deficit)	$	(18,073,070	)	$	(16,145,300	)	$	(1,927,770	)

Statement of Cash Flows Disclosure
	For the year ended
	December 31, 2014			December 31, 2013
Net cash (used in) operating activities	$	(1,228,903	)	$	(2,453,763	)
Net cash (used in) investing activities		(101,519	)		(740,320	)
Net cash provided by financing activities		743,635			3,500,000
Net increase/(decrease) in cash and cash equivalents		(637,806	)		287,405
Changes in operating accounts		2,182,303			(382,716	)
Effect of non-cash transactions on cash and cash equivalents	$	1,048,178		$	1,090,295

Cash and Cash Equivalents

Cash and cash equivalents decreased to $522,914 at December 31, 2014 from $1,160,720 at December 31, 2013. The decrease is primarily comprised of a net loss of $4,459,384, offset by an increase from non-cash transactions of $1,048,178, changes in working capital accounts of $2,182,303, investment activities of ($101,519) and financing proceeds of $743,635.

Capital Expenditures

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

Presently, we have approximately $500,000 planned for capital expenditures to further develop the Company’s infrastructure to allow for growth in our operations over the next 12 months.  We expect to fund these capital expenditure needs through a combination of vendor-provided financing, the use of operating or capital equipment leases and cash provided from operations.

27

Contractual Obligations

The following table sets forth our contractual obligations during the next five years as of December 31, 2014:

Contractual obligation			Payments due by period
	Total		Less than 1 year			1-2 Years			2-3 Years			3-5 Years
Promissory notes (1)	$	7,081,500	$	-0-		$	3,429,000	(2)	$	3,652,500	(3)	$	-0-
Convertible notes		9,665,000		75,000	(4)		9,590,000	(5)		-0-			-0-
Lines of credit (6)		4,000,000		4,000,000			-0-			-0-			-0-
Operating lease obligations (7)		1,076,892		654,134			367,327			50,266			5,165
Patent licensing fees (8)		1,862,500		962,500			450,000			450,000			-0-
Total	$	23,685,892	$	5,691,634		$	13,836,327		$	4,152,766		$	5,165

1. Amounts do not include interest to be paid.

2. Includes $569,000 of 12% notes payable that mature in January 2016 and $2,860,000 of 12% notes payable that mature in March 2016.

3. Includes $420,000 of 10% notes payable that mature in April 2017 and $3,232,500 of 12% notes payable that mature in April 2017.

4. Includes $75,000 of 10% convertible notes currently in default and due that are convertible into shares of common stock at the option of of the holder at a conversion rate of $1.25 per share.

5. Includes $1,770,000 in 10% convertible notes that mature in January 2016, $7,570,000 in 12% convertible notes that mature in January 2016, 150,000 in 10% convertible notes that mature in April 2016 and $100,000 in 12% convertible notes that mature in April 2016.

6. Includes $4,000,000 due on the revolving Line of Credit with The Northern Trust Company.

7. Includes office lease obligations for our Corporate Office in Florida, our regional operating office in New Jersey, our Co-location and disaster recovery locations in Ohio and Florida, our R&D office in England, our office in Leiden, the Netherlands and our European headquarters in Bonn, Germany.

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

Off Balance Sheet Arrangements

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.

Debt Obligations

We are currently in arrears on principal and interest payments owed totaling $192,248 on our 10% Convertible Notes that were issued in 1998. We were in default effective January 30, 2002.

On January 1, 2013 the Company issued a promissory note payable to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for accrued interest in the amount of $529,000.  The note carries an interest rate of 12% per annum and matures on January 1, 2016. On January 31, 2015 the Company issued a promissory note in the amount of $529,000 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

On January 1, 2013 the Company issued a promissory note in the amount of $308,561 in exchange for an existing promissory note in the same amount.  The promissory note carries an interest rate of 10% and has a maturity date of January 1, 2015. On December 1, 2014 the Company issued a promissory note in the amount of $300,000 and paid $8,561 in principal in exchange for the existing promissory note in the amount of $308,561. The promissory note carries an interest rate of 10% and has a maturity date of April 1, 2017.

On January 1, 2013 the Company issued a promissory note in the amount of $123,425 in exchange for an existing promissory note in the same amount.  The promissory note carries an interest rate of 10% and has a maturity date of January 1, 2015. On April 4, 2014 the Company issued a promissory note in the amount of $120,000 and paid $3,425 in principal in exchange for the existing promissory note in the amount of $123,425. The promissory note carries an interest rate of 10% and has a maturity date of April 1, 2017.

 On January 1, 2013 the Company issued a promissory note in the amount of $45,000 in exchange for an existing promissory note in the same amount.  The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2015. On April 4, 2014 the Company issued a promissory note in the amount of $45,000 in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On February 1, 2013 the Company issued a promissory note in the amount of $20,000 to our Chairman and Chief Technology Officer, Randall G. Smith, in exchange for an existing promissory note in the same amount.  The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2016.

On February 22, 2013, the Company and our former Director, Guus van Kesteren, extended the maturity date of $150,000 of convertible debentures to January 1, 2015. The debentures bear interest at 10% per annum and were originally issued in August 2008. The expiration date of the warrants associated with the debentures was also extended to January 1, 2015. On April 21, 2014, the Company and Mr. van Kesteren extended the maturity date of his $150,000 of convertible debentures to April 1, 2016. The expiration date of the warrants associated with the debentures was also extended to April 1, 2016. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $150,000 was reclassified from Related Party to Non-Related Party.

On February 22, 2013 the Company and Mr. Wit extended the maturity date of $1,770,000 of convertible debentures to our Chief Executive Officer and Director, Cornelis F. Wit, originally issued in August 2008.  The debentures carry an interest rate of 10% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2017.  The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

28

On February 22, 2013 the Company and the lenders extended the maturity date of $4,505,000 of convertible debentures, including $4,475,000 due to our Chief Executive Officer and Director Cornelis F. Wit, $25,000 due to our Chief Operating Officer and President, Stephen E. Johnson, and $5,000 due to our Chairman and Chief Technology Officer, Randall G. Smith, originally issued in December 2008.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $4,475,000 due to Mr. Wit to April 1, 2017.  The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

 On February 22, 2013 the Company and the lenders extended the maturity date of $1,200,000 of convertible debentures, including $1,100,000 due to our Chief Executive Officer and Director, Cornelis F. Wit, originally issued in September 2009.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,100,000 of convertible debentures due to Mr. Wit to April 1, 2017.  The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On February 22, 2013 the Company and the lenders extended the maturity date of $1,490,000 of convertible debentures including $1,440,000 due to our Chief Executive Officer and Director, Cornelis F. Wit, originally issued in December 2009.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,440,000 of convertible debentures due to Mr. Wit to April 1, 2017.  The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On February 27, 2013 the Company and our former Director, Matthew Veatch, extended the maturity date of $15,000 of convertible debentures originally issued to Mr. Veatch, in December 2008.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

On March 5, 2013 the Company issued a promissory note in the amount of $137,500 in exchange for a promissory note in the same amount.  The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2015. On April 4, 2014 the Company issued a promissory note in the amount of $137,500 in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

 On March 12, 2013, the Company and the lender extended the maturity date of $100,000 of convertible debentures originally issued in December 2008.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2015.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2015. On April 28, 2014, the Company and the lender extended the maturity date of the $100,000 of convertible debentures to April 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to April 1, 2016.

On April 1, 2013 the Company issued a promissory note totaling $2,866,879 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for a promissory note in the same amount.  The promissory note bears interest at 12% per annum and matures on March 31, 2016. In December 2014, the outstanding principal was reduced by $6,879. On January 31, 2015 the Company issued a promissory note in the amount of $2,860,000 to Mr. Wit in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

On December 5, 2013 the Company and our former Director, Guus van Kesteren, extended the maturity date of $160,000 of convertible debentures to Mr. van Kesteren, originally issued in August 2008.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

29

On December 9, 2013, the Company and the lender extended the maturity date of $200,000 of convertible debentures originally issued in December 2008.  The debentures carry an interest rate of 12% and have a maturity date of January 1, 2016.  The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

On January 1, 2014, the Company issued a promissory note in the principal amount of $980,000 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for accrued interest in the amount of $980,000. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

On April 4, 2014 the Company issued a promissory note payable to our Chief Executive Officer and Director, Cornelis F. Wit, in the amount of $1,600,000 in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On December 1, 2014 the Company issued a promissory note in the amount of $100,000 in exchange for accrued interest in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On December 1, 2014 the Company issued a promissory note in the amount of $90,000 in exchange for accrued interest in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On December 17, 2014 the Company issued a promissory note in the amount of $20,000 in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2016.

On December 23, 2014, the Company issued a promissory note in the amount of $280,000 to our Chief Executive Officer and Director, Cornelis F. Wit. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

During the next twelve months we expect debt in the aggregate amount of $75,000 to mature as follows:  $75,000 of 10% convertible notes currently in default and due that are convertible into shares of common stock at the option of the debenture holder at a conversion rate of $1.25 per share.

Sources of Liquidity and Capital Resources

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

 In 2014 we raised $500,000 from our Line of Credit with The Northern Trust Company and $280,000 from promissory notes issued to our Chief Executive Officer and Director Cornelis F. Wit. In 2013 we raised $3,500,000 from our Line of Credit with The Northern Trust Company.  

We may 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; the cost of filing, prosecuting, defending and enforcing intellectual property rights; and other changes in economic, regulatory or competitive conditions in our planned business.  Estimates about the adequacy of funding for our activities are based upon certain assumptions, including assumptions that the 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.

30

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 R&D 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.

While several of our officers and directors have historically, either personally or through funds with which they are affiliated, provided substantial capital either in the form of debt or equity financing there can be no assurance that they will continue to provide any such funding to us on favorable terms or at all.

Our ability to continue in existence is dependent on our having sufficient financial resources to bring products and services to market. As a result of our historical operating losses, negative cash flows and accumulated deficits for the periods ending December 31, 2014, there is substantial doubt about our ability to continue as a going concern. In addition, our auditors Liggett, Vogt & Webb, P.A., included language which qualified their opinion regarding our ability to continue as a going concern in their report dated March 31, 2015 regarding our audited financial statements for the year ended December 31, 2014.

CRITICAL ACCOUNTING POLICIES

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

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

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

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

ASSET IMPAIRMENT

Asset Acquisitions, Goodwill and Intangible Assets

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

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

31

Goodwill is evaluated for impairment using a two-step process that is performed at least annually or when circumstances indicate that an impairment may exist. The first step is a qualitative measure. If this first test is passed, the second step is not necessary. If the book value exceeds the fair value, then the second, quantitative test is performed to measure the impairment loss

Long Lived Assets

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

DEFERRED REVENUE

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

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. Revenues are derived from the set-up of clinical trial engagements; licensing arrangements, fees earned for hosting our clients’ data and projects, on-going maintenance fees incurred throughout the duration of an engagement; fees for report writing and project change orders.  The clinical trials that are conducted using our EDC Applications can last from a few months to several years.  Most of the fees associated with our product including post-setup customer support in the form of maintenance charges are recognized ratably over the term of clinical trial projects.  Cost of sales is primarily comprised of salaries and taxes and is expensed as incurred.

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

STOCK BASED COMPENSATION.

The Company accounts for its employee equity incentive plans under ASC 718, Compensation – Stock Compensation which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions.

ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Consolidated Statements of Income. The Company currently uses the Black-Scholes option pricing model to determine grant date fair value.

32

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

During fiscal 2014, we adopted the following new accounting pronouncements:

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, (“ASU No. 2013-11”). This ASU amends ASC 740, Income Taxes, to require that an unrecognized tax benefit be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward; to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward does not exist at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and not combined with deferred tax assets. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013, with early adoption permitted. Our adoption of this standard on January 1, 2014 did not have a material impact on our consolidated financial statements.

In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, (“ASU 2014-09”). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. Accordingly, the Company will adopt this ASU on January 1, 2017. Management is currently evaluating which transition approach to use and the impact of the adoption of this ASU on the Company's consolidated financial statements.

In August 2014, FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, (“ASU 2014-15”), which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and provide related disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We believe the adoption of this guidance will not have a material effect on our consolidated financial statements.

Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements that have been issued since the filing of our Form 10K for the year ended December 31, 2014 to determine their impact, if any, on our financial statements.

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

Not applicable to smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements are set forth on Pages F-1 through F-39 attached hereto.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, being December 31, 2014, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in  Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) are effective such that the information relating to OmniComm, including our consolidating subsidiaries, required to be disclosed by the Company in reports that it files or submits under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

However, in connection with our October 2013 acquisition of Promasys we determined that we incorrectly applied the provisions of Item 9 of Form 8-K and Article 8 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as a result of which, (a) we concluded, incorrectly, that our acquisition of Promasys was not a “significant acquisition” within the meaning of Regulation S-X, and (b) we did not timely file a periodic report containing the audited financial statements, unaudited interim financial statements or pro-forma financial information required under Rules 8-04 and 8-05 of Regulation S-X to be filed in connection with our acquisition of Promasys. The Securities and Exchange Commission (“SEC”) has indicated that a company’s failure to timely file a report required to be filed under the Exchange Act may be evidence of a weakness in disclosure controls. Moreover, our incorrect application of Item 9 of Form 8-K and Article 8 of Regulation S-X could be indicative of a deficiency in our internal control over financial reporting.

33

We believe that our incorrect application of Item 9 of Form 8-K and Article 8 of Regulation S-X, and the resulting failure to timely file a required report under the Exchange Act, was caused by a lack of full familiarization on the part of our financial officers with the SEC’s accounting rules relating to acquisition transactions. However, the assets, liabilities and results of operations of Promasys have been consolidated in our financial statements since the effective date of acquisition, and our late filing of the required audited financial statements, interim financial statements and pro-forma financial statements does not impact our financial statements or results of operations. In order to reduce the likelihood that a similar event will occur in the future, we have taken remedial action including (a) establishing a policy that all proposed acquisitions be discussed with both our SEC counsel and our independent auditors prior to their consummation and (b) devoting resources to bolstering our financial officers’ knowledge of SEC accounting requirements, particularly those associated with acquisition transactions.

While we believe the remedial steps we have taken will reduce the likelihood of a similar occurrence in the future, there is no assurance that a significant deficiency or material weakness will not be identified in the future as a result of this or other circumstances.

Management’s Report on Internal Control over Financial Reporting

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

Management assessed the effectiveness of OmniComm’s internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on the assessment using those criteria, management concluded that our internal control over financial reporting was effective as of December 31, 2014 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during the fourth quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required in response to this item is incorporated by reference from the information contained in the sections “Nominees for the Board of Directors,” “Management,” “Compliance with Section 16(a) of the Exchange Act,” and “Stock Option Plan,” in our Proxy Statement for our 2015 Annual Meeting of Stockholders to be held on June 11, 2015 (the “Proxy Statement”).

ITEM 11. EXECUTIVE COMPENSATION

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

34

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

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

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

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

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required in response to this item is incorporated by reference from the information contained in the section captioned “Ratification of the Appointment of Liggett, Vogt & Webb, P.A. as independent auditors of OmniComm Systems” in the Proxy Statement.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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

(a)           Exhibits

EXHIBIT NO.	DESCRIPTION
2.1	Agreement and Plan of Reorganization dated July 22, 1998 (1)
2.2	Amendment to Agreement and Plan of Reorganization (2)
2.3	Plan of Merger (3)
2.4	Agreement and Plan of Acquisition of WebIPA dated January 26, 2000 (4)
3.1	Certificate of Incorporation (5)
3.2	Certificate of Designation – Series A Preferred Stock (6)
3.3	Certificate of Increase – Series A Preferred Stock (7)
3.4	Certificate of Designation –Series B Preferred Stock (8)
3.5	Amendment to Certificate of Incorporation (9)
3.6	By-laws (10)
3.7	Certificate of Amendment – Certificate of Designation – Series A Preferred Stock (11)
3.8	Certificate of Amendment – Certificate of Incorporation (12)
3.9	Certificate of Designation – Series C  Preferred Stock (13)
3.10	Certificate of Designation – Series D Preferred Stock (14)
4.1	Form of 10% Convertible Note (15)
4.2	Notice on requests for non-material agreements*
4.3	Promissory note payable to The Northern Trust Company dated February 3, 2015*
4.4	Pledge Agreement between Northern Trust and Cornelis F. Wit dated February 3, 2015*
4.5	Securities Account Control Agreement between Northern Trust and Cornelis F. Wit dated February 3, 2015*
10.1	Employment Agreement and Stock Option Agreement between the Company and Randall G. Smith (16)
10.2	1998 Stock Incentive Plan (17)
10.3	Employment Agreement and Stock Option Agreement between the Company and Cornelis F. Wit (18)
10.4	Amendment to Employment Agreement between the Company and Cornelis F. Wit (19)
10.5	Amendment to Employment Agreement between the Company and Randall G. Smith (20)
10.6	Lease Agreement for principal offices dated March 24, 2006 between OmniComm Systems, Inc. and RFP Mainstreet 2101 Commercial, LLC (21)
10.7	Employment Agreement and Stock Option Agreement between the Company and Stephen E. Johnson dated September 4, 2006 (22)
10.8	Form of Debenture dated February 29, 2008 (23)
10.9	Form of Warrant February 29, 2008 (24)
10.10	Form of Debenture dated August 29, 2008 (25)
10.11	Form of Warrant dated August 29, 2008 (26)
10.12	Securities Purchase Agreement dated December 16, 2008 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page thereto (27)
10.13	Form of Debenture dated December 16, 2008 (28)
10.14	Form of Warrant December 16, 2008 (29)
10.15	Asset Purchase Agreement with eResearch Technology, Inc. dated June 23, 2009 (30)
10.16	Transition Service Agreement with eResearch Technology, Inc. dated June 23, 2009 (31)
10.17	Lock-up and Registration Rights Agreement with eResearch Technology, Inc. dated June 23, 2009 (32)
10.18	Agreement by and between OmniComm, Ltd. and Logos Technologies, Ltd dated August 3, 2009 (33)
10.19	Securities Purchase Agreement dated September 30, 2009 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page thereto (34)

35

10.20	Form of Debenture dated September 30, 2009 (35)
10.21	Form of Warrant dated September 30, 2009 (36)
10.22	Securities Purchase Agreement dated December 31, 2009 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page thereto*
10.23	Form of Debenture dated December 31, 2009*
10.24	Form of Warrant dated December 31, 2009*
10.25	Subscription Agreement for the Series D Preferred Stock dated November 30, 2010 by and between OmniComm Systems, Inc. and Cornelis F. Wit (37)
10.26	2009 Equity Incentive Plan (38)
10.27	Promissory note payable to Noesis International Holdings dated January 1, 2013 (39)
10.28	Promissory note payable to Ad Klinkenberg dated January 1, 2013 (40)
10.29	Promissory note payable to Wim Boegem dated January 1, 2013 (41)
10.30	Promissory note payable to Cornelis F. Wit dated January 1, 2013 (42)
10.31	Promissory note payable to Randall Smith dated February 1, 2013 (43)

10.32	August 2008 convertible note maturity date extension with Guus van Kesteren dated 2/22/2013 (44)
10.33	August 2008 convertible note maturity date extension with Cornelis F. Wit dated 2/22/2013 (45)
10.34	December 2008 convertible note maturity date extension with Stephen Johnson dated 2/22/2013 (46)
10.35	December 2008 convertible note maturity date extension with Randall Smith dated 2/22/2013 (47)
10.36	December 2008 convertible note maturity date extension with Cornelis F. Wit dated 2/22/2013 (48)
10.37	Amendment number two to securities purchase agreement between the Company and the Leonard and Janine Epstein 2012 Revocable Trust dated 2/22/2013 (49)
10.38	Amendment number two to securities purchase agreement between the Company and Cornelis F. Wit dated 2/22/2013 (50)
10.39	Amendment number two to securities purchase agreement between the Company and Richard & Carolyn Danzansky dated 2/22/2013 (51)
10.40	Amendment number two to securities purchase agreement between the Company and Paul Spitzberg dated 2/22/2013 (52)
10.41	Amendment number two to securities purchase agreement between the Company and Cornelis F. Wit dated 2/22/2013 (53)
10.42	December 2008 convertible note maturity date extension with Matthew Veatch dated 2/27/2013 (54)
10.43	Promissory note payable to Noesis International Holdings dated March 5, 2013 (55)
10.44	December 2008 convertible note maturity date extension with Fernando Montero Incentive Savings Trust dated 3/6/2013 (56)
10.45	December 2008 convertible note maturity date extension with Noesis International Holdings dated 3/12/2013 (57)
10.46	Promissory note payable to The Northern Trust Company dated March 18, 2013 (58)
10.47	Pledge Agreement between Northern Trust and Cornelis F. Wit dated March 18, 2013 (59)
10.48	Securities Account Control Agreement between Northern Trust and Cornelis F. Wit dated March 18, 2013 (60)
10.49	Promissory note payable to Cornelis F. Wit dated April 1, 2013 (61)
10.50	Share Purchase Agreement Promasys B. V. (62)
10.51	Lease, Promasys B.V. (63)
10.52	December 2008 convertible note maturity date extension with Guus van Kesteren dated 12/05/2013 (64)
10.53	December 2008 convertible note maturity date extension with the Fernando Montero Incentive Savings Trust dated 12/09/2013 (65)
10.54	Promissory note payable to Cornelis F. Wit dated January 1, 2014 (66)
10.55	Promissory note payable to Cornelis F. Wit dated April 4, 2014 (67)
10.56	Promissory note payable to Ad Klinkenberg dated April 4, 2014 (68)
10.57	Promissory note payable to Noesis International Holdings dated April 4, 2014 (69)
10.58	Promissory note payable to Noesis International Holdings dated April 4, 2014 (70)
10.59	Extension of August 2008 convertible note with Guus van Kesteren dated April 21, 2014 (71)
10.60	Extension of December 2008 convertible note with Noesis Int’l Holdings dated April 28, 2014 (72)
10.61	Promissory note payable to Wim Boegem dated December 1, 2014*
10.62	Promissory note payable to Guus van Kesteren dated December 1, 2014*
10.63	Promissory note payable to Noesis International Holdings dated December 1, 2014*
10.64	Promissory note payable to Cornelis F. Wit dated December 23, 2014*
10.65	August 2008 convertible note maturity date extension with Cornelis F. Wit dated 1/31/2015*
10.66	December 2008 convertible note maturity date extension with Cornelis F. Wit dated 1/31/2015*
10.67	Amendment number three to securities purchase agreement dated September 30, 2009 between the Company and Cornelis F. Wit dated 1/31/2015*
10.68	Amendment number three to securities purchase agreement dated December 31, 2009 between the Company and Cornelis F. Wit dated 1/31/2015*
10.69	Promissory note payable to Cornelis F. Wit dated January 31, 2015*
10.70	Promissory note payable to Cornelis F. Wit dated January 31, 2015*
10.71	Promissory note payable to Cornelis F. Wit dated January 31, 2015*
10.72	Warrant agreement with Cornelis F. Wit dated January 31, 2015*
10.73	Extension of expiration date on warrants to Cornelis F. Wit dated January 31, 2015*
10.74	Extension of expiration date on warrants to Cornelis F. Wit dated January 31, 2015*
10.75	Extension of expiration date on warrants to Cornelis F. Wit dated January 31, 2015*
10.76	Form of Restricted Stock Agreement*

36

14	OmniComm Systems, Inc. Code of Ethics (73)
21	Subsidiaries of the Company*
23	Consent of Liggett, Vogt & Webb, P.A., independent registered public accounting firm*
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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation*
101.DEF	XBRL Taxonomy Extension Definition*
101.LAB	XBRL Taxonomy Extension Label*
101.PRE	XBRL Taxonomy Extension Presentation*

1	Incorporated by reference to Exhibit 2 filed with our Report on Form 8-K dated March 3, 1999.
2	Incorporated by reference to Exhibit 2(c) filed with our Registration Statement on Form 10-SB dated December 22, 1998.
3	Incorporated by reference to Exhibit 2(c) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
4	Incorporated by reference to Exhibit 2 filed with our Report on Form 8-K dated February 9, 2000.
5	Incorporated by reference to Exhibit 3(a) filed with our Registration Statement on Form SB-2 dated February 6, 1997.
6	Incorporated by reference to Exhibit 4(b) filed with our amended Registration Statement on Form 10-SB dated August 25, 1999.
7	Incorporated by reference to Exhibit 4(c) filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
8	Incorporated by reference to Exhibit 4(D) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
9	Incorporated by reference to Exhibit 4(E) filed with our Registration Statement on Form SB-2 dated December 27, 2001.
10	Incorporated by reference to Exhibit 3(b) filed with our Registration Statement on Form SB-2 dated February 6, 1997.
11	Incorporated by reference to Exhibit 3.7 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
12	Incorporated by reference to Exhibit 3.8 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
13	Incorporated by reference to Exhibit 3.9 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
14	Incorporated by reference to Exhibit 3.10 filed with our Form 8-K dated November 30, 2010
15	Incorporated by reference to Exhibit 4.3 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
16	Incorporated by reference to Exhibit 10(a)(i) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
17	Incorporated by reference to Exhibit 10(c) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
18	Incorporated by reference to Exhibit 10.7 filed with our Form 10-Q for the period ended June 30, 2002.
19	Incorporated by reference to Exhibit 10.8 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
20	Incorporated by reference to Exhibit 10.9 filed with our Form 10-Q for the period ended September 30, 2004.
21	Incorporated by reference to Exhibit 10.1 filed with our Form 10-Q for the period ended June 30, 2006.
22	Incorporated by reference to Exhibit 10.1 filed with our Form 10-Q for the period ended September 30, 2006.
23	Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated March 5, 2008.
24	Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated March 5, 2008.
25	Incorporated by reference to Exhibit 4.8 filed with our Form 10-K dated December 31, 2009.
26	Incorporated by reference to Exhibit 4.9 filed with our Form 10-K dated December 31, 2009.
27	Incorporated by reference to Exhibit 10.1 filed with our Form 8-K dated December 17, 2008.
28	Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated December 17, 2008.
29	Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated December 17, 2008.
30	Incorporated by reference to Exhibit 10.26 filed with our Form 8-K dated June 26, 2009.
31	Incorporated by reference to Exhibit 10.27 filed with our Form 8-K dated June 26, 2009.
32	Incorporated by reference to Exhibit 10.28 filed with our Form 8-K dated June 26, 2009.
33	Incorporated by reference to Exhibit 10.29 filed with our Form 8-K dated August 4, 2009.
34	Incorporated by reference to Exhibit 10.1 filed with our Form 8-K dated October 5, 2009.
35	Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated October 5, 2009.
36	Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated October 5, 2009.
37	Incorporated by reference to Exhibit 10.32 filed with our Form 8-K dated November 30, 2010.
38	Incorporated by reference to Exhibit B filed with our 2009 Proxy Statement on Schedule 14A dated June 16, 2009.
39	Incorporated by reference to Exhibit 10.48 filed with our Form 10-K dated December 31, 2012.
40	Incorporated by reference to Exhibit 10.49 filed with our Form 10-K dated December 31, 2012.
41	Incorporated by reference to Exhibit 10.50 filed with our Form 10-K dated December 31, 2012.
42	Incorporated by reference to Exhibit 10.51 filed with our Form 10-K dated December 31, 2012.
43	Incorporated by reference to Exhibit 10.52 filed with our Form 10-K dated December 31, 2012.
44	Incorporated by reference to Exhibit 10.53 filed with our Form 10-K dated December 31, 2012.

37

45	Incorporated by reference to Exhibit 10.54 filed with our Form 10-K dated December 31, 2012.
46	Incorporated by reference to Exhibit 10.55 filed with our Form 10-K dated December 31, 2012.
47	Incorporated by reference to Exhibit 10.56 filed with our Form 10-K dated December 31, 2012.
48	Incorporated by reference to Exhibit 10.57 filed with our Form 10-K dated December 31, 2012.
49	Incorporated by reference to Exhibit 10.58 filed with our Form 10-K dated December 31, 2012.
50	Incorporated by reference to Exhibit 10.59 filed with our Form 10-K dated December 31, 2012.
51	Incorporated by reference to Exhibit 10.60 filed with our Form 10-K dated December 31, 2012.
52	Incorporated by reference to Exhibit 10.61 filed with our Form 10-K dated December 31, 2012.
53	Incorporated by reference to Exhibit 10.62 filed with our Form 10-K dated December 31, 2012.
54	Incorporated by reference to Exhibit 10.63 filed with our Form 10-K dated December 31, 2012.
55	Incorporated by reference to Exhibit 10.64 filed with our Form 10-K dated December 31, 2012.
56	Incorporated by reference to Exhibit 10.65 filed with our Form 10-K dated December 31, 2012.
57	Incorporated by reference to Exhibit 10.66 filed with our Form 10-K dated December 31, 2012.
58	Incorporated by reference to Exhibit 10.67 filed with our Form 10-Q for the period ended March 31, 2013.
59	Incorporated by reference to Exhibit 10.68 filed with our Form 10-Q for the period ended June 30, 2013.
60	Incorporated by reference to Exhibit 10.69 filed with our Form 10-Q for the period ended June 30, 2013.
61	Incorporated by reference to Exhibit 10.70 filed with our Form 10-Q for the period ended June 30, 2013.
62	Incorporated by reference to Exhibit 10.71 filed with our Form 10-Q for the period ended September 30, 2013.
63	Incorporated by reference to Exhibit 10.72 filed with our Form 10-Q for the period ended September 30, 2013.
64	Incorporated by reference to Exhibit 10.73 filed with our Form 10-K dated December 31, 2013.
65	Incorporated by reference to Exhibit 10.74 filed with our Form 10-K dated December 31, 2013.
66	Incorporated by reference to Exhibit 10.75 filed with our Form 10-K dated December 31, 2013.
67	Incorporated by reference to Exhibit 10.76 filed with our Form 10-Q for the period ended March 31, 2014.
68	Incorporated by reference to Exhibit 10.77 filed with our Form 10-Q for the period ended March 31, 2014.
69	Incorporated by reference to Exhibit 10.78 filed with our Form 10-Q for the period ended March 31, 2014.
70	Incorporated by reference to Exhibit 10.79 filed with our Form 10-Q for the period ended March 31, 2014.
71	Incorporated by reference to Exhibit 10.80 filed with our Form 10-Q for the period ended March 31, 2014.
72	Incorporated by reference to Exhibit 10.81 filed with our Form 10-Q for the period ended March 31, 2014.
73	Incorporated by reference to our Proxy Statement filed on June 9, 2003.

* Filed herewith

**Furnished herewith

38

SIGNATURES

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

Dated: March 31, 2015

OMNICOMM SYSTEMS, INC.
By:	/s/ Cornelis F. Wit
Cornelis F. Wit, Chief Executive Officer
By:	/s/ Thomas E. Vickers
Thomas E. Vickers, Chief Accounting and
Financial Officer

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

Signature	Title	Date
/s/ Cornelis F. Wit	Chief (Principal) Executive Officer	March 31, 2015
Cornelis F. Wit	and Director
/s/ Randall G. Smith	Chairman, Chief Technology Officer	March 31, 2015
Randall G. Smith
/s/ Thomas E. Vickers	Chief (Principal) Accounting and	March 31, 2015
Thomas E. Vickers	Financial Officer
/s/ Robert C. Schweitzer	Director	March 31, 2015
Robert C. Schweitzer
/s/ Adam F. Cohen	Director	March 31, 2015
Adam F. Cohen
/s/ Gary A. Shangold	Director	March 31, 2015
Gary A. Shangold

39

OMNICOMM SYSTEMS, INC.

 Financial Reporting Package

Form 10-K

for the Year Ended

December 31, 2014

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:

OmniComm Systems, Inc.

We have audited the accompanying consolidated balance sheets of OmniComm Systems, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related statements of operations and comprehensive income, changes in shareholders’ deficit and cash flows for the two years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the financial position of OmniComm Systems, Inc. as of December 31, 2014 and 2013 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has experienced net losses and negative cash flows and has utilized debt and equity financing to satisfy our capital requirements. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Liggett, Vogt & Webb, P.A.

LIGGETT, VOGT & WEBB, P.A.

Certified Public Accountants

Boynton Beach, Florida

March 31, 2015

F-2

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2014			December 31, 2013
ASSETS
CURRENT ASSETS
Cash	$	522,914		$	1,160,720
Accounts receivable, net of allowance for doubtful accounts of $186,085 and $65,341, respectively		3,416,151			1,599,568
Prepaid expenses		228,082			146,907
Prepaid stock compensation, current portion		153,500			-0-
Other current assets		18,305			-0-
Total current assets		4,338,952			2,907,195
Property and equipment, net		468,136			607,433
Other assets
Intangible assets, net		203,921			270,242
Goodwill		596,620			675,710
Prepaid stock compensation		146,653			169,375
Other assets		49,092			82,501
TOTAL ASSETS	$	5,803,374		$	4,712,456
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,894,185		$	2,540,956
Notes payable, current portion		-0-			37,500
Deferred revenue, current portion		5,840,875			2,866,356
Line of credit		4,000,000			3,500,000
Convertible notes payable, current portion, net of discount of $-0- and $-0-, respectively		75,000			75,000
Patent settlement liability, current portion		962,500			962,500
Conversion feature liability, related parties		2,729,902			2,979,392
Conversion feature liability		214,500			146,814
Warrant liability, related parties		6,496,448			5,799,946
Warrant liability		198,612			144,031
Total current liabilities		22,412,022			19,052,495
LONG TERM LIABILITIES
Notes payable, related parties, long term, net of current portion, net of discount of $568,209 and $447,666, respectively		5,700,791			4,568,213
Notes payable, long term, net of current portion		812,500			614,486
Deferred revenue, long term, net of current portion		2,393,068			1,385,017
Convertible notes payable, related parties, long term, net of current portion		8,815,000			9,125,000
Convertible notes payable, long term, net of current portion		775,000			465,000
Patent settlement liability, long term, net of current portion		669,825			963,124
TOTAL LIABILITIES		41,578,206			36,173,335
COMMITMENTS AND CONTINGENCIES (See Note 12)
SHAREHOLDERS' (DEFICIT)
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 3,772,500 shares undesignated		-0-			-0-
Series B convertible preferred stock, 230,000 shares authorized, -0- and -0- issued and outstanding, respectively at $0.001 par value; liquidation preference $-0- and $-0-, respectively		-0-			-0-
Series C convertible preferred stock, 747,500 shares authorized, -0- and -0- issued and outstanding, respectively at $0.001 par value; liquidation preference $-0- and $-0-, respectively		-0-			-0-
Series A convertible preferred stock, 5,000,000 shares authorized, 4,125,224 and 4,125,224 issued and outstanding, respectively at $0.001 par value; liquidation preference $4,125,224 and $4,125,224, respectively		4,125			4,125
Series D preferred stock, 250,000 shares authorized, 250,000 and 250,000 issued and outstanding, respectively at $0.001 par value		250			250
Common stock, 250,000,000 shares authorized, 91,561,802 and 90,104,659 issued and outstanding, respectively, at $0.001 par value		91,562			90,105
Additional paid in capital - preferred		4,717,804			4,717,804
Additional paid in capital - common		37,634,555			37,334,358
Accumulated other comprehensive (loss)		(243,827	)		(87,604	)
Accumulated deficit		(77,979,301	)		(73,519,917	)
TOTAL SHAREHOLDERS' (DEFICIT)		(35,774,832	)		(31,460,879	)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)	$	5,803,374		$	4,712,456

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

F-3

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the year ended
	December 31,
	2014			2013
Revenues	$	16,017,897		$	13,887,520
Reimbursable revenues		443,353			444,320
Total revenues		16,461,250			14,331,840
Cost of goods sold		3,245,300			2,560,191
Reimbursable expenses-cost of goods sold		725,221			351,022
Total cost of sales		3,970,521			2,911,213
Gross margin		12,490,729			11,420,627
Operating expenses
Salaries, benefits and related taxes		10,419,214			8,758,276
Rent and occupancy expenses		889,880			894,121
Consulting services		89,574			157,905
Legal and professional fees		377,329			265,251
Travel		794,193			534,135
Telephone and internet		188,130			187,078
Selling, general and administrative		1,159,174			851,642
Bad debt expense		147,543			11,131
Depreciation expense		235,591			230,323
Amortization expense		45,433			7,720
Total operating expenses		14,346,061			11,897,582
Operating income/(loss)		(1,855,332	)		(476,955	)
Other income/(expense)
Interest expense, related parties		(2,389,786	)		(2,339,702	)
Interest expense		(224,459	)		(150,410	)
Interest income		81			9
Change in derivative liabilities		58,807			(95,121	)
Transaction gain/(loss)		(68,232	)		(5,041	)
Income/(loss) before income taxes		(4,478,921	)		(3,067,220	)
Income tax (expense)/benefit		19,537			(94,122	)
Net income/(loss)		(4,459,384	)		(3,161,342	)
Preferred stock dividends
Preferred stock dividends in arrears
Series A preferred		(206,261	)		(206,261	)
Total preferred stock dividends		(206,261	)		(206,261	)
Net income/(loss) attributable to common stockholders	$	(4,665,645	)	$	(3,367,603	)
Net income/(loss) per share
Basic and diluted	$	(0.05	)	$	(0.04	)
Weighted average number of shares outstanding
Basic and diluted		90,701,058			87,969,202

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

F-4

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)

	For the year ended December 31,
	2014			2013
Net (loss) attributable to common stockholders	$	(4,665,645	)	$	(3,367,603	)
Other comprehensive (loss)
Change in foreign currency translation adjustment		(156,223	)		(18,512	)
Other comprehensive (loss)		(156,223	)		(18,512	)
Comprehensive (loss)	$	(4,821,868	)	$	(3,386,115	)

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

F-5

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2013 AND DECEMBER 31, 2014

	Preferred Stock																		Common Stock
	5% Series A Convertible				8% Series B Convertible				8% Series C Convertible				Series D Preferred
	Number of shares		$0.001 Par value		Number of shares		$0.001 Par value		Number of shares		$0.001 Par value		Number of shares		$0.001 Par value		Additional paid in capital preferred		Number of shares		$0.001 Par value		Additional paid in capital common			Accumulated deficit			Accumulated other comprehensive income			Total shareholders' (deficit)
Balances at December 31, 2012		4,125,224	$	4,125		-0-	$	-0-		-0-	$	-0-		250,000	$	250	$	4,717,804		86,598,659	$	86,599	$	36,645,589		$	(70,358,575	)	$	(69,092	)	$	(28,973,300	)
Employee stock option expense																								83,875									83,875
Foreign currency translation adjustment																														(18,512	)		(18,512	)
Restricted stock issuance																				1,225,000		1,225		221,275									222,500
Cashless issuance of common stock, stock option exercise																				11,000		11		(11	)								-0-
Shares issued for purchase of Promasys																				2,270,000		2,270		383,630									385,900
Net loss for year ended December 31, 2013		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-			(3,161,342	)		-0-			(3,161,342	)
Balances at December 31, 2013		4,125,224		4,125		-0-		-0-		-0-		-0-		250,000		250		4,717,804		90,104,659		90,105		37,334,358			(73,519,917	)		(87,604	)		(31,460,879	)
Employee stock option expense																								63,654									63,654
Foreign currency translation adjustment																														(156,223	)		(156,223	)
Restricted stock issuance																				1,400,000		1,400		236,600									238,000
Cashless issuance of common stock, stock option exercise																				57,143		57		(57	)								-0-
Net loss for year ended December 31, 2014		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-			(4,459,384	)		-0-			(4,459,384	)
Balances at December 31, 2014		4,125,224	$	4,125		-0-	$	-0-		-0-	$	-0-		250,000	$	250	$	4,717,804		91,561,802	$	91,562	$	37,634,555		$	(77,979,301	)	$	(243,827	)	$	(35,774,832	)

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

F-6

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(4,459,384	)	$	(3,161,342	)
Adjustment to reconcile net (loss) to net cash (used in) operating activities
Change in derivative liabilities		(58,807	)		95,121
Interest expense from derivative instruments		507,542			609,000
Employee stock compensation		170,876			137,000
Provision for doubtful accounts		147,543			11,131
Depreciation and amortization		281,024			238,043
Changes in operating assets and liabilities
Accounts receivable		(1,964,126	)		(153,514	)
Prepaid expenses		(81,175	)		(14,966	)
Other current assets		(18,305	)		-0-
Other assets		33,409			(31,348	)
Accounts payable and accrued expenses		523,229			775,251
Patent settlement liability		(293,299	)		(260,591	)
Deferred revenue		3,982,570			(697,548	)
Net cash (used in) operating activities		(1,228,903	)		(2,453,763	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire business, net of cash acquired		-0-			(386,545	)
Purchase of property and equipment		(101,519	)		(353,775	)
Net cash (used in) investing activities		(101,519	)		(740,320	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable		(36,365	)		-0-
Proceeds from notes payable, related parties		280,000			-0-
Proceeds from revolving line of credit		500,000			3,500,000
Net cash provided by financing activities		743,635			3,500,000
Effect of exchange rate changes on fixed and intangible assets		105,204			-0-
Effect of exchange rate changes on cash and cash equivalents		(156,223	)		(18,512	)
Net increase/(decrease) in cash and cash equivalents		(637,806	)		287,405
Cash and cash equivalents at beginning of year		1,160,720			873,315
Cash and cash equivalents at end of year	$	522,914		$	1,160,720
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes	$	35,264		$	94,122
Interest	$	1,114,666		$	835,154
Non-cash transactions:
Notes payable issued in exchange for existing notes payable	$	2,222,500		$	3,501,366
Promissory notes issued for accrued interest	$	1,170,000		$	529,000
Restricted stock issuance	$	238,000		$	222,500
Common stock issued for the acquisition of Promasys B.V.	$	-0-		$	385,900

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

F-7

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS

OmniComm Systems, Inc. (“OmniComm” or the “Company”) 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 principally located in the United States, Europe and Asia. Our proprietary EDC software applications; TrialMaster®; TrialOne®; Promasys®; and eClinical Suite, allow clinical trial sponsors and investigative sites to securely collect, validate, transmit, and analyze clinical trial data.

Our ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through our EDC software and services.  Our research and development (“R&D”) efforts are focused on developing new and complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality.    During the years ended December 31, 2014 and December 31, 2013 we spent approximately $2,754,367 and $2,403,504, respectively, on R&D activities, which is primarily comprised of salaries to our developers and other R&D personnel and related costs associated with the development of our software products.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto.  Significant estimates incorporated in our financial statements include the recorded allowance for doubtful accounts, the estimate of the appropriate amortization period of our intangible assets, the evaluation of whether our intangible assets have suffered any impairment, the allocation of revenues under multiple-element customer contracts, royalty-based patent liabilities, the value of derivatives associated with debt issued by the Company and the valuation of any corresponding discount to the issuance of our debt.  Actual results may differ from those estimates.

RECLASSIFICATIONS

Certain reclassifications have been made in the 2013 financial statements to conform to the 2014 presentation.  These reclassifications did not have any effect on our net loss or shareholders’ deficit.

FOREIGN CURRENCY TRANSLATION

The financial statements of the Company’s foreign subsidiaries are translated in accordance with ASC 830-30, Foreign Currency Matters—Translation of Financial Statements. The reporting currency for the Company is the U.S. dollar. The functional currency of the Company’s subsidiaries, OmniComm Europe GmbH in Germany, OmniComm Spain S.L. in Spain and OmniComm Promasys B.V. in the Netherlands is the Euro. The functional currency of the Company's subsidiary, OmniComm Ltd. in the United Kingdom is the British Pound Sterling. Accordingly, the assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using the exchange rate in effect at each balance sheet date. Revenue and expense accounts of the Company’s foreign subsidiaries are translated using an average rate of exchange during the period. Foreign currency translation adjustments are accumulated as a component of other comprehensive income/(loss) as a separate component of stockholders’ equity. Gains and losses arising from transactions denominated in foreign currencies are primarily related to intercompany accounts that have been determined to be temporary in nature and accordingly, are recorded directly to the statement of operations.  We record translation gains and losses in accumulated other comprehensive income as a component of stockholders’ equity. We recorded a translation loss of $156,223 for the year ended December 31, 2014 and a translation loss of $18,512 for the year ended December 31, 2013.

F-8

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

REVENUE RECOGNITION POLICY

The Company derives revenues from software licenses and services of its EDC products and services which can be purchased on a stand-alone basis. License revenues are derived principally from the sale of term licenses for the following software products offered by the Company: TrialMaster, TrialOne, Promasys and eClinical Suite (the “EDC Software”). Service revenues are derived principally from the Company's delivery of the hosted solutions of its TrialMaster and eClinical Suite software products, and consulting services and customer support, including training, for all of the Company's products.

The Company recognizes revenues when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided to the customer; (3) the collection of fees is probable; and (4) the amount of fees to be paid by the customer is fixed or determinable.

The Company operates in one reportable segment which is the delivery of EDC Software and services to clinical trial sponsors.  The Company segregates its revenues based on the activity cycle used to generate its revenues.  Accordingly, revenues are currently generated through four main activities. These activities include hosted applications, licensing, professional services and maintenance-related services.

Hosted Application Revenues

The Company offers its TrialMaster and eClinical Suite software products as hosted application solutions delivered through a standard Web-browser, with customer support and training services. To date, hosted applications revenues have been primarily related to TrialMaster.

Revenues resulting from TrialMaster and eClinical Suite application hosting services consist of three components of services for each clinical trial: the first component is comprised of application set up, including design of electronic case report forms and edit checks, installation and server configuration of the system.  The second component involves application hosting and related support services as well as billable change orders which consist of amounts billed to customers for functionality changes made. The third stage involves services required to close out, or lock, the database for the clinical trial.

Fees charged and costs incurred for the trial system design, set up and implementation are amortized and recognized ratably over the estimated hosting period.  Work performed outside the original scope of work is contracted for separately as an additional fee and is generally recognized ratably over the remaining term of the hosting period. Fees for the first and third stages of the service are billed based upon milestones.  Revenues earned upon completion of a contractual milestone are deferred and recognized over the estimated remaining hosting period.   Fees for application hosting and related services in the second stage are generally billed quarterly in advance.  Revenues resulting from hosting services for the eClinical Suite products consist of installation and server configuration, application hosting and related support services. Services for this offering are generally charged as a fixed fee payable on a quarterly or annual basis. Revenues are recognized ratably over the period of the service.

Licensing Revenues

The Company's software license revenues are earned from the sale of off-the-shelf software.  From time-to-time a client might require significant modification or customization subsequent to delivery to the customer.  The Company generally enters into software term licenses for its EDC Software products with its customers for 3 to 5 year periods, although customers have entered into both longer and shorter term license agreements.  These arrangements typically include multiple elements: software license, consulting services and customer support. The Company bills its customers in accordance with the terms of the underlying contract. Generally, the Company bills license fees in advance for each billing cycle of the license term which typically is either on a quarterly or annual basis. Payment terms are generally net 30 days.

In the past the Company has sold perpetual licenses for EDC Software products in certain situations to existing customers with the option to purchase customer support, and may in the future do so for new customers based on customer requirements or market conditions. The Company has established vendor specific objective evidence of fair value for the customer support. Accordingly, license revenues are recognized upon delivery of the software and when all other revenue recognition criteria are met. Customer support revenues are recognized ratably over the term of the underlying support arrangement.  The Company generates customer support and maintenance revenues from its perpetual license customer base.

Professional Services

The Company may also enter into arrangements to provide consulting services separate from a license arrangement. In these situations, revenue is recognized on a time-and-materials basis. Professional services can be deemed to be as essential to the functionality of the software at inception and typically are for initial trial configuration, implementation planning, loading of software, building simple interfaces and running test data and documentation of procedures.  Subsequent additions or extensions to license terms do not generally include additional professional services.

F-9

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

Maintenance Revenues

Maintenance includes telephone-based help desk support and software maintenance. The Company generally bundles customer support with the software license for the entire term of the arrangement. As a result, the Company generally recognizes revenues for both maintenance and software licenses ratably over the term of the software license and support arrangement. The Company allocates the revenues recognized for these arrangements to the different elements based on management's estimate of the relative fair value of each element.  The Company generally invoices each of the elements based on separately quoted amounts and thus has a fairly accurate estimate of the relative fair values of each of the invoiced revenue elements.

The fees associated with each business activity for the years ended December 31, 2014 and December 31, 2013, respectively are:

	For the year ended
Revenue activity	December 31, 2014		December 31, 2013
Set-up fees	$	4,814,378	$	3,369,670
Change orders		467,815		475,680
Maintenance		4,374,245		4,584,594
Software licenses		3,404,655		2,911,509
Professional services		2,605,010		2,207,181
Hosting		795,147		783,206
Total	$	16,461,250	$	14,331,840

COST OF REVENUES

Cost of revenues primarily consists of costs related to hosting, maintaining and supporting the Company’s application suite and delivering professional services and support. These costs include salaries, benefits, bonuses and stock-based compensation for the Company’s professional services staff. Cost of revenues also includes outside service provider cost.  Cost of revenues is expensed as incurred.

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

Accounts receivable are judged as to collectability by management and an allowance for bad debts is established as necessary. The allowance is based on an evaluation of the collectability of accounts receivable and prior bad debt experience.  The Company had recorded an allowance for uncollectible accounts receivable of $186,085 and $65,341 as of December 31, 2014 and December 31, 2013, respectively.

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

	December 31, 2014			December 31, 2013
Beginning of period	$	65,341		$	84,210
Bad debt expense		147,543			11,131
Write-offs		(26,875	)		(30,000	)
Exchange rate impact		76			-0-
End of period	$	186,085		$	65,341

CONCENTRATION OF CREDIT RISK

Cash and cash equivalents and restricted cash are deposited with major financial institutions and, at times, such balances with any one financial institution may be in excess of FDIC-insured limits. As of December 31, 2014, $264,234 was deposited in excess of FDIC-insured limits.  Management believes the risk in these situations to be minimal.

F-10

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

Except as follows, the Company has no significant off balance sheet risk or credit risk concentrations. Financial instruments that subject the Company to potential credit risks are principally cash equivalents and accounts receivable. Concentrated credit risk with respect to accounts receivable is limited to creditworthy customers. The Company's customers are principally located in the United States and Europe.   The Company is directly affected by the overall financial condition of the pharmaceutical, biotechnology and medical device industries and management believes that credit risk exists and that any credit risk the Company faces has been adequately reserved for as of December 31, 2014.  The Company maintains an allowance for doubtful accounts based on accounts past due according to contractual terms and historical collection experience. Actual losses when incurred are charged to the allowance. The Company's losses related to collection of accounts receivable have consistently been within management's expectations.  As of December 31, 2014, the Company believes no additional credit risk exists beyond the amounts provided for in our allowance for uncollectible accounts.  The Company evaluates its allowance for uncollectable accounts on a monthly basis based on a specific review of receivable aging and the period that any receivables are beyond the standard payment terms. The Company does not require collateral from its customers in order to mitigate credit risk.

One customer accounted for 15% of our revenue during the year ended December 31, 2014 or approximately $2,395,000, respectively. One customer accounted for 11% of our revenues during the year ended December 31, 2013 or approximately $1,551,000.  The following table summarizes the number of customers who individually comprise greater than 10% of total revenue and/or total accounts receivable and their aggregate percentage of the Company's total revenue and gross accounts receivable for the years presented.

	Revenues				Accounts receivable
For the year ended	Number of customers		Percentage of total revenues		Number of customers		Percentage of accounts receivable
December 31, 2014		1		15%		1		18%
December 31, 2013		1		11%		2		23%

The table below provides revenues from European customers for the years ended December 31, 2014 and December 31, 2013, respectively.

European revenues
For the year ended
December 31, 2014				December 31, 2013
European revenues		% of Total revenues		European revenues		% of Total revenues
$	2,383,252		14.5%	$	1,847,305		12.9%

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

PROPERTY AND EQUIPMENT

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

ASSET IMPAIRMENT

Acquisitions and Intangible Assets

We account for acquisitions in accordance with ASC 805, Business Combinations (“ASC 805”) and ASC 350, Intangibles- Goodwill and Other (“ASC 350”). The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business acquisition. Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition.

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

F-11

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

Long-lived Assets

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

DEFERRED REVENUE

Deferred revenue represents cash advances received in excess of revenue earned on on-going contracts.  Payment terms vary with each contract but may include an initial payment at the time the contract is executed, with future payments dependent upon the completion of certain contract phases or targeted milestones.  In the event of contract cancellation, the Company is generally entitled to payment for all work performed through the point of cancellation.  As of December 31, 2014, the Company had $8,233,943 in deferred revenues relating to contracts for services to be performed over periods ranging from 1 month to 5 years.  The Company had $5,840,875 in deferred revenues that are expected to be recognized in the next twelve fiscal months.

ADVERTISING

Advertising costs are expensed as incurred.  Advertising costs were $419,253 and $226,380 for the years ended December 31, 2014 and December 31, 2013, respectively and are included under selling, general and administrative expenses on our consolidated financial statements.

RESEARCH AND DEVELOPMENT EXPENSES

Software development costs are included in R&D and are expensed as incurred.  ASC 985.20, Software Industry Costs of Software to Be Sold, Leased or Marketed, requires the capitalization of certain development costs of software to be sold once technological feasibility is established, which the Company defines as completion to the point of marketability.  The capitalized cost is then amortized on a straight-line basis over the estimated product life.  To date, the period between achieving technological feasibility and the general availability of such software has been short and software development costs qualifying for capitalization have been immaterial.  Accordingly, the Company has not capitalized any software development costs under ASC 985.20.  During the years ended December 31, 2014 and December 31, 2013 we spent approximately $2,754,367 and $2,403,504 respectively, on R&D activities, which include costs associated with the development of our software products and services for our client’s projects and which are primarily comprised of salaries and related expenses for our software developers and consulting fees paid to third-party consultants.  R&D costs are primarily included under Salaries, benefits and related taxes in our Statement of Operations.

EMPLOYEE EQUITY INCENTIVE PLANS

The OmniComm Systems, Inc. 2009 Equity Incentive Plan (the “2009 Plan”) was approved at our Annual Meeting of Shareholders on July 10, 2009.  The 2009 Plan provides for the issuance of up to 7.5 million shares to employees, directors and key consultants in accordance with the terms of the 2009 Plan documents.  The predecessor plan, the OmniComm Systems, Inc., 1998 Stock Incentive Plan (the “1998 Plan”) expired on December 31, 2008.  The 1998 Plan provided for the issuance of up to 12.5 million shares in accordance with the terms of the 1998 Plan document.  Each plan is more fully described in “Note 15, Employee Equity Incentive Plans.”  The Company accounts for its employee equity incentive plans under ASC 718, Compensation – Stock Compensation which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions.

ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statements of operations. The Company currently uses the Black Scholes option pricing model to determine grant date fair value.

F-12

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

EARNINGS/(LOSS)  PER SHARE

The Company accounts for Earnings/(loss) Per Share using ASC 260 – Earnings per Share.  Unlike diluted earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities.

INCOME TAXES

The Company accounts for income taxes in accordance ASC 740, Income Taxes.  ASC 740 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

During fiscal 2014, we adopted the following new accounting pronouncements:

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, (“ASU No. 2013-11”). This ASU amends ASC 740, Income Taxes, to require that an unrecognized tax benefit be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward; to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward does not exist at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and not combined with deferred tax assets. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013, with early adoption permitted. Our adoption of this standard on January 1, 2014 did not have a material impact on our consolidated financial statements.

In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, (“ASU 2014-09”). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. Accordingly, the Company will adopt this ASU on January 1, 2017. Management is currently evaluating which transition approach to use and the impact of the adoption of this ASU on the Company's consolidated financial statements.

In August 2014, FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, (“ASU 2014-15”), which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and provide related disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We believe the adoption of this guidance will not have a material effect on our consolidated financial statements.

Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements to determine their impact, if any, on our financial statements.

NOTE 3: GOING CONCERN

We have experienced net losses and negative cash flows from operations and have utilized debt and equity financings to help provide for our working capital, capital expenditure and R&D needs.  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.

F-13

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

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 R&D and marketing programs.  If we are successful in obtaining additional financings, the terms of such financings may have the effect of diluting or adversely affecting the holdings or the rights of the holders of our common and preferred stock or result in increased interest expense in future periods.

The ability of the Company to continue in existence is dependent on its having sufficient financial resources to bring products and services to market for marketplace acceptance.  As a result of our historical operating losses, negative cash flows and accumulated deficits for the period ending December 31, 2014 there is substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 EARNINGS/(LOSS) PER SHARE

Basic (loss) per share was calculated using the weighted average number of shares outstanding of 90,701,058 and 87,969,202 for the years ended December 31, 2014 and December 31, 2013, respectively.

Antidilutive shares aggregating 80,012,198 and 79,546,913 have been omitted from the calculation of dilutive (loss) per share for the years ended December 31, 2014 and December 31, 2013 respectively as the shares were antidilutive. Provided below is the reconciliation between numerators and denominators of the basic and diluted (loss) per shares:  There were no differences between basic and diluted (loss) per share.  The table below provides a reconciliation of anti-dilutive securities outstanding as of December 31, 2014 and December 31, 2013, respectively.

Anti-Dilutive security	December 31, 2014		December 31, 2013
Preferred stock		2,750,149		2,750,149
Employee stock options		3,130,000		5,745,000
Warrants		48,463,517		44,728,873
Convertible notes		24,620,000		24,620,000
Shares issuable for accrued interest		1,048,532		1,702,891
Total		80,012,198		79,546,913

The employee stock options are exercisable at prices ranging from $0.045 to $0.50 per share.  The exercise price on the stock warrants range from $0.25 to $0.60 per share.  Shares issuable upon conversion of Convertible Debentures have conversion prices ranging from $0.25 to $0.50 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 (loss) per share.

For the year ended
	December 31, 2014								December 31, 2013
	Income/(loss)			Shares		Per-share			Income/(loss)			Shares		Per-share
	numerator			denominator		amount			numerator			denominator		amount
Basic EPS	$	(4,665,645	)		90,701,058	$	(0.05	)	$	(3,367,603	)		87,969,202	$	(0.04	)
Effect of dilutive securities - none		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(4,665,645	)		90,701,058	$	(0.05	)	$	(3,367,603	)		87,969,202	$	(0.04	)

F-14

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

NOTE 5: PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

	December 31, 2014						December 31, 2013
	Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value		Estimated useful life (years)
Computer & office equipment	$	1,880,183	$	1,482,737	$	397,446	$	1,822,098	$	1,326,256	$	495,842		5
Leasehold improvements		92,504		82,353		10,151		93,812		75,735		18,077		5
Computer software		1,580,640		1,528,418		52,222		1,556,497		1,477,801		78,696		3
Office furniture		113,365		105,048		8,317		114,373		99,555		14,818		5
Total	$	3,666,692	$	3,198,556	$	468,136	$	3,586,780	$	2,979,347	$	607,433

Depreciation expense for the years ended December 31, 2014 and December 31, 2013 was $235,591 and $230,323, respectively.

NOTE 6: INTANGIBLE ASSETS, AT COST

Intangible assets consist of the following:

	December 31, 2014						December 31, 2013
Asset	Cost		Accumulated amortization		Net book value		Cost		Accumulated amortization		Net book value		Estimated useful life (years)
eClinical customer lists	$	1,392,701	$	1,392,701	$	-0-	$	1,392,701	$	1,392,701	$	-0-		3
Promasys B.V. customer lists		120,305		9,357		110,948		136,253		1,514		134,739		15
Promasys B.V. software code		72,837		16,995		55,842		72,943		2,431		70,512		5
Promasys B.V. URLs/Website		60,760		23,629		37,131		68,814		3,823		64,991		3
Total	$	1,646,603	$	1,442,682	$	203,921	$	1,670,711	$	1,400,469	$	270,242

Amortization expense was $45,433 and $7,720 for the years ended December 31, 2014 and December 31, 2013, respectively.  

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

2015	$	42,841
2016		39,466
2017		22,588
2018		20,160
2019		8,020
Thereafter		70,846
Total	$	203,921

NOTE 7: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

Account	December 31, 2014		December 31, 2013
Accounts payable	$	613,584	$	724,421
Accrued payroll and related costs		319,629		260,072
Other accrued expenses		85,248		88,292
Accrued interest		875,724		1,468,171
Total accounts payable and accrued expenses	$	1,894,185	$	2,540,956

F-15

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

NOTE 8: PROMASYS B.V. ACQUISITION

On November 11, 2013, with economic effect as of October 31, 2013, we acquired 100% of the capital stock of Promasys B.V., a privately held Netherlands company, from the 4 shareholders of Promasys B.V. pursuant to a share purchase agreement and as a result, Promasys B.V. became our wholly owned subsidiary. Promasys B.V. is involved in the development and marketing of software and services relating to clinical data management (“Business”). Since its establishment in 2004, Promasys B.V. has built an international customer base, with a focus on the academic market and a strong presence in Asia. As consideration for the acquisition, we paid an aggregate of 435,998 euros (approximately $593,000) to one of the shareholders of Promasys B.V and issued an aggregate of 2,270,000 shares of our common stock to the other 3 shareholders of Promasys B.V. On the same day, and in connection with the share purchase agreement, we also entered into an employment agreement with one of the shareholders and a management agreement with the principal of a second shareholder pursuant to which, among other things, the individuals shall continue providing services to us as it relates to the Business. The foregoing description of the share purchase agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement which we have filed as Exhibit 10.71 to our 2014 Annual Report on Form 10K.

In conjunction with the share purchase agreement of the capital stock of Promasys B.V., effective October 31, 2013, our Board of Directors appointed Dr. Adam F. Cohen to serve on our Board of Directors. Dr. Cohen, age 61, has no family relationships with any of the executive officers or directors of the Company. Dr. Cohen was a director of Promasys B. V. and held a 10% equity interest in Promasys B.V. prior to the acquisition. He received 790,000 shares of OmniComm’s common shares in exchange for his interest in Promasys B.V. Other than the acquisition of Promasys B.V. there have been no related party transactions in the past two years in which the Company or any of its subsidiaries was or is to be a party, in which Dr. Cohen had, or will have, a direct or indirect material interest.

Dr. Cohen currently serves as the Chief Executive Officer of CHDR, a clinical research unit based in Leiden in the Netherlands. Dr. Cohen graduated in Pharmacy and Medicine from Leiden University. He subsequently joined the department of Clinical Pharmacology of the Wellcome Research Laboratories in Beckenham, UK where he obtained experience in early drug development. This work led to a PhD thesis about the development of an antihistamine (acrivastine) and an antiepileptic (lamotrigine). Further training in internal medicine was obtained at King’s College Hospital in London. Phase II-III drug development experience was obtained as European Clinical project leader for t-PA at Wellcome. He is a professor of Clinical Pharmacology at Leiden University and has a clinical attachment at the department of nephrology at Leiden University Medical Centre. He is author of more than two hundred publications about a wide range of clinical pharmacological subjects. He is executive editor of the British Journal of Clinical Pharmacology.

We accounted for the acquisition of Promasys B.V as a business combination and accordingly accounted for the acquisition under Statement of Financial Accounting Standards No. 141, Business Combinations (“SFAS 141”) (Codified within ASC 805, Business Combinations). We allocate the purchase price to the assets acquired and the liabilities assumed based on their estimated fair values on the date of the acquisition. The difference between the fair value of the net assets acquired and the purchase price is recorded as goodwill. We record the operating results of the acquired business in our consolidated statements of operations from the date of acquisition.

The table below summarizes the amounts of the assets acquired and liabilities assumed that were recognized at the acquisition date.

Cash	$	215,571
Receivables		216,287
Property and equipment		2,178
Identifiable intangibles		276,356
Goodwill		671,689
Total assets acquired	$	1,382,081
Accounts payable		(170,339	)
Deferred revenue		(229,353	)
Net assets acquired	$	982,389

F-16

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

The below table provides unaudited pro-forma results as if the acquisition had occurred effective January 1, 2013.

	For the year ended
	December 31,
	2013
Gross revenues	$	15,119,861
Total expenses		18,145,210
Net income/(loss) before taxes		(3,025,349	)
Net income/(loss) per share
Weighted average number of shares outstanding	$	(0.04	)
Basic and diluted		89,866,051

NOTE 9: LINES OF CREDIT AND NOTES PAYABLE

On March 18, 2013, the Company entered into a $2,000,000 revolving line of credit with The Northern Trust Company guaranteed by Cornelis F. Wit, Chief Executive Officer and Director. Mr. Wit receives 2.0% interest on the assets pledged for the line of credit. On December 18, 2013 the Company renewed the Line of Credit and increased the available balance to $4,000,000. On February 3, 2015 the Company renewed the Line of Credit and increased the available balance to $5,000,000. The line of credit matures on February 2, 2018 and carries a variable interest rate based on the prime rate. At December 31, 2014, $4,000,000 was outstanding on the line of credit at an interest rate of 2.25%.

At December 31, 2014, the Company owed $7,081,500 in notes payable all of which are unsecured.  The table below provides details as to the terms and conditions of the notes payable.

				Ending
				principal		Non related party				Related party
Origination	Maturity	Interest		December 31,				Long				Long
date	date	rate		2014		Current		term		Current		term
1/1/2013	1/1/2016		12%	$	529,000	$	-0-	$	-0-	$	-0-	$	529,000
2/1/2013	1/1/2016		12%		20,000		-0-		-0-		-0-		20,000
4/1/2013	3/31/2016		12%		2,860,000		-0-		-0-		-0-		2,860,000
1/1/2014	4/1/2017		12%		980,000		-0-		-0-		-0-		980,000
4/4/2014	4/1/2017		12%		1,600,000		-0-		-0-		-0-		1,600,000
4/4/2014	4/1/2017		12%		45,000		-0-		45,000		-0-		-0-
4/4/2014	4/1/2017		12%		137,500		-0-		137,500		-0-		-0-
4/4/2014	4/1/2017		10%		120,000		-0-		120,000		-0-		-0-
12/1/2014	4/1/2017		10%		300,000		-0-		300,000		-0-		-0-
12/1/2014	4/1/2017		12%		90,000		-0-		90,000		-0-		-0-
12/1/2014	4/1/2017		12%		100,000		-0-		100,000		-0-		-0-
12/17/2014	1/1/2016		12%		20,000		-0-		20,000		-0-		-0-
12/23/2014	4/1/2017		12%		280,000		-0-		-0-		-0-		280,000
Discount on note payable							-0-		-0-		-0-		(568,209	)
Total				$	7,081,500	$	-0-	$	812,500	$	-0-	$	5,700,791

F-17

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

At December 31, 2013, the Company owed $5,667,865 in notes payable all of which are unsecured.  The table below provides details as to the terms and conditions of the notes payable.

				Ending
				principal		Non related party				Related party
Origination	Maturity	Interest		December 31,				Long				Long
date	date	rate		2013		Current		term		Current		term
12/31/2011	1/1/2015		12%	$	1,600,000	$	-0-	$	-0-	$	-0-	$	1,600,000
4/1/2012	1/1/2014		12%		17,500		17,500		-0-		-0-		-0-
12/17/2012	12/16/2014		12%		20,000		20,000		-0-		-0-		-0-
1/1/2013	1/1/2016		12%		529,000		-0-		-0-		-0-		529,000
1/1/2013	1/1/2015		10%		308,561		-0-		308,561		-0-		-0-
1/1/2013	1/1/2015		10%		123,425		-0-		123,425		-0-		-0-
1/1/2013	1/1/2015		12%		45,000		-0-		45,000		-0-		-0-
2/1/2013	1/1/2016		12%		20,000		-0-		-0-		-0-		20,000
3/5/2013	1/1/2015		12%		137,500		-0-		137,500		-0-		-0-
4/1/2013	3/31/2016		12%		2,866,879		-0-		-0-		-0-		2,866,879
Discount on note payable							-0-		-0-		-0-		(447,666	)
Total				$	5,667,865	$	37,500	$	614,486	$	-0-	$	4,568,213

On January 1, 2013, the Company issued a promissory note in the principal amount of $529,000 and warrants to purchase 2,116,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of January 31, 2016 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for accrued interest in the amount of $529,000. The note carries an interest rate of 12% per annum and is due on January 1, 2016.

This issuance caused us to calculate and record a derivative liability for the warrant liability. The warrants were valued using the Black Scholes option pricing model. A value of $400,141 was calculated and allocated to the warrants and recorded as a liability to the issuance of the note payable. As a result of the liability we recorded a discount to the note payable. The carrying amount of the note at the time of issuance was therefore $128,859. The warrant liability (discount) will be amortized over the 36 month duration of the note payable. The Company will continue to perform a fair value calculation periodically on the warrant liability and accordingly the warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on changes in derivative liabilities.

On January 1, 2013, the Company issued a promissory note in the amount of $308,561 in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 10% per annum and matures on January 1, 2015. On December 1, 2014 the Company issued a promissory note in the amount of $300,000 and paid $8,561 in principal in exchange for the existing promissory note in the amount of $308,561. The promissory note carries an interest rate of 10% and has a maturity date of April 1, 2017.

On January 1, 2013, the Company issued a promissory note in the amount of $123,425 in exchange for an existing promissory note in the same amount. The note carries an interest rate of 10% per annum and matures on January 1, 2015. On April 4, 2014 the Company issued a promissory note in the amount of $120,000 and paid $3,425 in principal in exchange for the existing promissory note in the amount of $123,425. The promissory note carries an interest rate of 10% and has a maturity date of April 1, 2017.

On January 1, 2013 the Company issued a promissory note in the amount of $45,000 in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2015. On April 4, 2014 the Company issued a promissory note in the amount of $45,000 in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On February 1, 2013 the Company issued a promissory note in the amount of $20,000 to our Chairman and Chief Technology Officer, Randall G. Smith, in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2016.

On March 5, 2013 the Company issued a promissory note in the amount of $137,500 in exchange for a promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2015. On April 4, 2014 the Company issued a promissory note in the amount of $137,500 in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On April 1, 2013 the Company issued a promissory note in the amount of $2,866,879 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of March 31, 2016. The expiration date of the warrants associated with the promissory note was also extended to March 31, 2016. In December 2014, the principal amount was reduced by $6,879. On January 31, 2015 the Company issued a promissory note in the amount of $2,860,000 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

On January 1, 2014, the Company issued a promissory note in the principal amount of $980,000 and warrants to purchase 3,920,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2017 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for accrued interest in the amount of $980,000. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

This issuance caused us to calculate and record a derivative liability for the warrant liability. The warrants were valued using the Black Scholes option pricing model. A value of $628,086 was calculated and allocated to the warrants and recorded as a liability to the issuance of the note payable. As a result of the liability we recorded a discount to the note payable. The carrying amount of the note at the time of issuance was therefore $351,914. The warrant liability (discount) will be amortized over the 39 month duration of the note payable. The Company will continue to perform a fair value calculation periodically on the warrant liability and accordingly the warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on changes in derivative liabilities.

F-18

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

On April 4, 2014 the Company issued a promissory note payable to our Chief Executive Officer and Director, Cornelis F. Wit, in the amount of $1,600,000 in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On December 1, 2014 the Company issued a promissory note in the amount of $100,000 in exchange for accrued interest in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On December 1, 2014 the Company issued a promissory note in the amount of $90,000 in exchange for accrued interest in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

On December 17, 2014 the Company issued a promissory note in the amount of $20,000 in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2016.

On December 23, 2014, the Company issued a promissory note in the amount of $280,000 to our Chief Executive Officer and Director, Cornelis F. Wit. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

On January 31, 2015 the Company issued a promissory note in the amount of $529,000 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

NOTE 10 CONVERTIBLE NOTES PAYABLE

The following table summarizes the convertible debt outstanding as of December 31, 2014.

						Principal								Carrying		Carrying amount
						at				Total		Discount at		amount at		Short term				Long term
Date of issuance	Maturity date	Interest rate		Original principal		December 31, 2014		Allocated discount		discount amortized		December 31, 2014		December 31, 2014		Related		Non related		Related		Non related
8/1/1999	6/30/2004		10%		862,500	$	75,000	$	-0-	$	-0-	$	-0-	$	75,000	$	-0-	$	75,000		-0-		-0-
8/29/2008	1/1/2016		10%		2,120,000		1,770,000		1,916,480		1,916,480		-0-		1,770,000		-0-		-0-		1,770,000		-0-
8/29/2008	4/1/2016		10%		150,000		150,000		135,600		135,600		-0-		150,000		-0-		-0-		-0-		150,000
12/16/2008	1/1/2016		12%		375,000		375,000		101,250		101,250		-0-		375,000		-0-		-0-		-0-		375,000
12/16/2008	1/1/2016		12%		4,600,000		4,505,000		1,242,000		1,242,000		-0-		4,505,000		-0-		-0-		4,505,000		-0-
12/16/2008	4/1/2016		12%		100,000		100,000		27,515		27,515		-0-		100,000		-0-		-0-		-0-		100,000
9/30/2009	1/1/2016		12%		100,000		100,000		37,600		37,600		-0-		100,000		-0-		-0-		-0-		100,000
9/30/2009	1/1/2016		12%		1,300,000		1,100,000		488,800		488,800		-0-		1,100,000		-0-		-0-		1,100,000		-0-
12/31/2009	1/1/2016		12%		50,000		50,000		31,400		31,400		-0-		50,000		-0-		-0-		-0-		50,000
12/31/2009	1/1/2016		12%		1,440,000		1,440,000		904,320		904,320		-0-		1,440,000		-0-		-0-		1,440,000		-0-
Total				$	11,097,500	$	9,665,000	$	4,884,450	$	4,884,450	$	-0-	$	9,665,000	$	-0-	$	75,000	$	8,815,000	$	775,000

F-19

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

 The following table summarizes the convertible debt outstanding as of December 31, 2013.

						Principal						Discount		Carrying		Carrying amount
						at				Total		at		amount at		Short term				Long term
Date of issuance	Maturity date	Interest rate		Original principal		December 31, 2013		Allocated discount		discount amortized		December 31, 2013		December 31, 2013		Related		Non related		Related		Non related
8/1/1999	6/30/2004		10%	$	862,500	$	75,000	$	-0-	$	-0-	$	-0-	$	75,000	$	-0-	$	75,000	$	-0-	$	-0-
8/29/2008	1/1/2015		10%		150,000		150,000		135,600		135,600		-0-		150,000		-0-		-0-		150,000		-0-
8/29/2008	1/1/2016		10%		2,120,000		1,770,000		1,916,480		1,916,480		-0-		1,770,000		-0-		-0-		1,770,000		-0-
12/16/2008	1/1/2015		12%		100,000		100,000		27,515		27,515		-0-		100,000		-0-		-0-		-0-		100,000
12/16/2008	1/1/2016		12%		160,000		160,000		44,024		44,024		-0-		160,000		-0-		-0-		160,000		-0-
12/16/2008	1/1/2016		12%		200,000		200,000		55,030		55,030		-0-		200,000		-0-		-0-		-0-		200,000
12/16/2008	1/1/2016		12%		4,615,000		4,520,000		1,243,681		1,243,681		-0-		4,520,000		-0-		-0-		4,505,000		15,000
9/30/2009	1/1/2016		12%		1,400,000		1,200,000		526,400		526,400		-0-		1,200,000		-0-		-0-		1,100,000		100,000
12/31/2009	1/1/2016		12%		1,490,000		1,490,000		935,720		935,720		-0-		1,490,000		-0-		-0-		1,440,000		50,000
Total				$	11,097,500	$	9,665,000	$	4,884,450	$	4,884,450	$	-0-	$	9,665,000	$	-0-	$	75,000	$	9,125,000	$	465,000

10% Convertible Notes

During 1999, the Company issued 10% Convertible Notes payable in the amount of $862,500 pursuant to a Confidential Private Placement Memorandum.  There were costs of $119,625 associated with this offering. The net proceeds to the Company were $742,875.  The notes bear interest at ten percent annually, payable semi-annually.  The notes were convertible after maturity, which was June 30, 2004, into shares of common stock of the Company at $1.25 per share. We are in default in the payment of principal and interest. As of December 31, 2014, approximately $787,500 of the Convertible Notes had been repaid in cash or converted into 1,495,179 shares of common stock of the Company leaving an outstanding principal balance of $75,000.  There was $117,248 of accrued interest at December 31, 2014.

Secured Convertible Debentures

On September 30, 2009, the Company sold an aggregate of $1,400,000 principal amount 12% Secured Convertible Debentures (the “Debentures”) and common stock purchase warrants (the “Warrants”) to purchase an aggregate of 5,600,000 shares of our common stock exercisable at a price of $0.25 per share for four years subsequent to the closing of the transaction to four accredited investors including our Chief Executive Officer and Director, Cornelis F. Wit.   The Company received net proceeds of $1,400,000.  The Debentures, which bear interest at 12% per annum, matured on March 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share.  On March 30, 2011, the Company repaid $200,000 of the outstanding principal amounts owed and extended $1,200,000 of the convertible notes until April 1, 2013, including $1,100,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit. The Company also extended the expiration date of the warrants associated with the September 2009 offering.  On February 22, 2013, the Company and two lenders extended $1,200,000 of the convertible notes until January 1, 2016, including $1,100,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit. The expiration date of the warrants associated with the September 2009 offering was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,100,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

Convertible Debentures

On August 29, 2008, the Company sold $2,270,000 of convertible debentures and warrants to purchase an aggregate of 4,540,000 shares of our common stock to four accredited investors including our Chief Executive Officer and Director, Cornelis F. Wit and one of our Directors. The convertible debentures, which bear interest at 10% per annum, were due on August 29, 2010. The convertible debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share. On September 30, 2009, two Affiliates of the Company extended $1,920,000 of the convertible debentures until August 29, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. On February 22, 2013 the Company and Mr. van Kesteren extended the maturity date of $150,000 of the convertible debentures due to our Director, Guus van Kesteren to January 1, 2015. The expiration date of the warrants associated with the debentures was also extended to January 1, 2015. On April 21, 2014, the Company and our Director, Guus van Kesteren, extended the maturity date of his $150,000 of convertible debentures to April 1, 2016. The expiration date of the warrants associated with the debentures was also extended to April 1, 2016. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $150,000 was reclassified from Related Party to Non-Related Party. On February 22, 2013 the Company and Mr. Wit extended the maturity date of $1,770,000 of the convertible debentures due to our Chief Executive Officer and Director, Cornelis F. Wit, to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

F-20

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

On December 16, 2008, we sold $5,075,000 of convertible debentures and warrants to purchase an aggregate of 10,150,000 shares of our common stock to eleven accredited investors including our Chief Executive Officer and Director, Cornelis F. Wit, our Chief Operating Officer and President, Stephen E. Johnson, our Chairman and Chief Technology Officer, Randall G. Smith, Chief Financial Officer, Ronald T. Linares, and four of our Directors. The convertible debentures, which bear interest at 12% per annum, were due on December 16, 2010. The convertible debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share. On September 30, 2009 Affiliates of the Company extended $4,980,000 of Convertible Notes until December 16, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. On February 22, 2013 the Company and the lenders agreed to extend the maturity date of $4,505,000 of the convertible debentures including $4,475,000 due to our Chief Executive Officer and Director, Cornelis F. Wit, $25,000 due to our Chief Operating Officer and President, Stephen E. Johnson, and $5,000 due to our Chairman and Chief Technology Officer, Randall G. Smith, to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On February 27, 2013 the Company and Mr. Veatch extended the maturity date of $15,000 of convertible debentures issued to our former Director, Matthew Veatch, to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On March 6, 2013, the Company and one of the lenders agreed to extend the maturity date of $200,000 of convertible debentures to January 1, 2014. The expiration date of the warrants associated with the debentures was also extended to January 1, 2014. On March 12, 2013, the Company and one of the lenders agreed to extend the maturity date of $100,000 of convertible debentures to January 1, 2015. The expiration date of the warrants associated with the debentures was also extended to January 1, 2015. In December 2013, the Company and two lenders agreed to extend the maturity date of $360,000, including $160,000 due to our Director, Guus van Kesteren, of convertible debentures to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $160,000 was reclassified from Related Party to Non-Related Party. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $4,475,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On December 31, 2009, the Company sold an aggregate of $1,490,000 principal amount 12% Convertible Debentures (the “Debentures”) and common stock purchase warrants (the “Warrants”) to purchase an aggregate of 5,960,000 shares of our common stock exercisable at a price of $0.25 per share for four years subsequent to the closing of the transaction to three accredited investors including our Chief Executive Officer and Director, Cornelis F. Wit.  The Company received net proceeds of $1,490,000.  The Debentures, which bear interest at 12% per annum, matured on June 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share.  On September 30, 2011, the Company extended all $1,490,000 of the convertible notes until October 1, 2013, including $1,440,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit.  The Company also extended the expiration date of the warrants associated with the December 2009 offering until December 31, 2015.  On February 22, 2013, the Company extended all $1,490,000 of the convertible notes until January 1, 2016, including $1,440,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit.  The Company also extended the expiration date of the warrants associated with the December 2009 offering until January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,440,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

 The payments required at maturity under the Company’s outstanding convertible debt at December 31, 2014 are as follows:

2015	$	75,000
2016		9,590,000
Total	$	9,665,000

NOTE 11: FAIR VALUE MEASUREMENT

The Company measures the fair value of its assets and liabilities under the guidance of ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.

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

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

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

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

F-21

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

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

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

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

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

The Company also adopted the provisions of ASC 825, Financial Instruments. ASC 825 allows companies to choose to measure eligible assets and liabilities at fair value with changes in value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to re-measure any of its existing financial assets or liabilities under the provisions of this Statement and did not elect the fair value option for any financial assets and liabilities transacted in the years ended December 31, 2014 and December 31, 2013.

The Company’s financial assets or liabilities subject to ASC 820 as of December 31, 2014 include the conversion feature and warrant liability associated with convertible debentures issued during fiscal 2008 and 2009, the warrants issued during 2011, 2013 and 2014 that are associated with notes payable that were issued to our Chief Executive Officer and Director, Cornelis F. Wit, and the value of Intellectual Property and a customer list associated with the acquisition of Promasys B. V. during 2013. The conversion feature and warrants were deemed to be derivatives (the “Derivative Instruments”) since a fixed conversion price cannot be determined for either of the Derivative Instruments due to anti-dilution provisions embedded in the offering documents for the convertible debentures.  The derivative instruments were not issued for risk management purposes and as such are not designated as hedging instruments under the provisions of ASC 815 Disclosures about Derivative Instruments and Hedging Activities.  See Note 10 – Convertible Notes Payable.

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

A summary as of December 31, 2014 of the fair value of assets measured at fair value on a recurring basis follows:

	Fair value at December 31,		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
	2014		(Level 1)		(Level 2)		(Level 3)
Derivatives: (1) (2)
Conversion feature liability	$	2,944,402	$	-0-	$	-0-	$	2,944,402
Warrant liability		6,695,060		-0-		-0-		6,695,060
Total of derivative liabilities	$	9,639,462	$	-0-	$	-0-	$	9,639,462

(1) The fair value of the derivative instruments was estimated using the Income Approach and the Black Scholes option pricing model with the following assumptions for the year ended December 31, 2014

(2) The fair value at the measurement date is equal to their carrying value on the balance sheet

F-22

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

Significant valuation assumptions of derivative instruments at December 31, 2014

Risk free interest rate		0.13%
Dividend yield		0.00%
Expected volatility	119.8%	to	155.7%
Expected life (range in years)
Conversion feature liability	1.00	to	1.25
Warrant liability	1.00	to	2.25

A summary as of December 31, 2014 of the fair value of assets measured at fair value on a nonrecurring basis follows:

	Carrying amount December 31,		Carrying amount December 31,		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
	2013		2014		(Level 1)		(Level 2)		(Level 3)
Acquired assets (3)
Promasys B.V. customer lists (4)	$	134,739	$	110,948	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (4)		70,512		55,842		-0-		-0-		72,943
Promasys B.V. URLs/website (4)		64,991		37,131		-0-		-0-		68,814
Total	$	270,242	$	203,921	$	-0-	$	-0-	$	278,010

(3) The fair value of the acquired assets was estimated using the Income Approach with a discounted cash flow valuation methodology applied.

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

F-23

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

A summary as of December 31, 2013 of the fair value of liabilities measured at fair value on a recurring basis follows: 

	Fair value at December 31,		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
	2013		(Level 1)		(Level 2)		(Level 3)
Derivatives: (1) (2)
Conversion feature liability	$	3,126,206	$	-0-	$	-0-	$	3,126,206
Warrant liability		5,943,977		-0-		-0-		5,943,977
Total of derivative liabilities	$	9,070,183	$	-0-	$	-0-	$	9,070,183

(1) The fair value of the derivative instruments was estimated using the Income Approach and the Black Scholes option pricing model with the following assumptions for the year ended December 31, 2013

(2) The fair value at the measurement date is equal to their carrying value on the balance sheet

Significant valuation assumptions of derivative instruments at December 31, 2013 

Risk free interest rate	0.12%	to	0.13%
Dividend yield		0.00%
Expected volatility	166.7%	to	217.1%
Expected life (range in years)
Conversion feature liability	1.00	to	2.00
Warrant liability	1.00	to	2.25

A summary as of December 31, 2013 of the fair value of assets measured at fair value on a nonrecurring basis follows:

	Carrying amount December 31,		Carrying amount December 31,		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
	2012		2013		(Level 1)		(Level 2)		(Level 3)
Acquired assets (3)
Promasys B.V. customer lists (4)	$	-0-	$	134,739	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (4)		-0-		70,512		-0-		-0-		72,943
Promasys B.V. URLs/website (4)		-0-		64,991		-0-		-0-		68,814
Total	$	-0-	$	270,242	$	-0-	$	-0-	$	278,010

(3) The fair value of the acquired assets was estimated using the Income Approach with a discounted cash flow valuation methodology applied.

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

The Company’s goodwill and other identifiable intangible assets with indefinite lives are measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3).

Goodwill and other identifiable intangible assets with indefinite lives are reviewed for impairment annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Long-lived assets and identifiable intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that amounts may not be recoverable. If the testing performed indicates that impairment has occurred, the Company will record a noncash impairment charge for the difference between the carrying amount of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is made.

The table below presents the fair value of the Goodwill as of December 31, 2014 and December 31, 2013.

	December 31, 2014		December 31, 2013
(Level 3)
Goodwill	$	596,620	$	675,710

F-24

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

Other identifiable intangible assets, which are subject to amortization, are being amortized using the straight-line method over their estimated useful lives ranging from 3 to 15 years. The Impairment or Disposal of Long-Lived Asset subsection of the Property, Plant and Equipment Topic of the FASB ASC, requires us to test the recoverability of long-lived assets, including identifiable intangible assets with definite lives, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In testing for potential impairment, if the carrying value of the asset group exceeds the expected undiscounted cash flows, we must then determine the amount by which the fair value of those assets exceeds the carrying value and determine the amount of impairment, if any.

	Other income/(expense)
	for the year ended
	December 31, 2014		December 31, 2013
The net amount of gains/(losses) for the period included in earnings attributable to the unrealized gain/(loss) from changes in derivative liabilities at the reporting date	$	58,807	$	(95,121	)
Total unrealized gains/(losses) included in earnings	$	58,807	$	(95,121	)

The tables below set forth a summary of changes in fair value of the Company’s Level 3 financial liabilities at fair value for the years ended December 31, 2014 and December 31, 2013. The tables reflect gains and losses for all financial liabilities at fair value categorized as Level 3 as of December 31, 2014 and December 31, 2013.

	Level 3 financial liabilities at fair value
						Net unrealized
						gains/(losses)			Net
						relating to			purchases,
	Balance,					instruments still			issuances			Net transfers		Balance,
	beginning			Net realized		held at the			and			in and/or out		end of
	of year			gains/(losses)		reporting date			settlements			of Level 3		year
Year ended December 31, 2014
Derivatives:
Conversion feature liability	$	(3,126,206	)	$	-0-	$	181,804		$	-0-		$	-0-	$	(2,944,402	)
Warrant liability		(5,943,977	)		-0-		(122,997	)		(628,086	)		-0-		(6,695,060	)
Total of derivative liabilities	$	(9,070,183	)	$	-0-	$	58,807		$	(628,086	)	$	-0-	$	(9,639,462	)

	Level 3 financial liabilities at fair value
						Net unrealized
						gains/(losses)			Net
						relating to			purchases,
	Balance,					instruments still			issuances			Net transfers		Balance,
	beginning			Net realized		held at the			and			in and/or out		end of
	of year			gains/(losses)		reporting date			settlements			of Level 3		year
Year ended December 31, 2013
Derivatives:
Conversion feature liability	$	(2,287,323	)	$	-0-	$	(838,883	)	$	-0-		$	-0-	$	(3,126,206	)
Warrant liability		(6,287,598	)		-0-		743,762			(400,141	)		-0-		(5,943,977	)
Total of derivative liabilities	$	(8,574,921	)	$	-0-	$	(95,121	)	$	(400,141	)	$	-0-	$	(9,070,183	)

NOTE 12: COMMITMENTS AND CONTINGENCIES

The Company currently leases office space under operating leases for its office locations and has several operating leases related to server and network co-location and disaster recovery for its operations.  The minimum future lease payments required under the Company’s operating leases at December 31, 2014 are as follows:

2015	$	654,134
2016		367,327
2017		50,266
2018		5,165
Total	$	1,076,892

F-25

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

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 leases.  Rent expense was $889,880 and $894,121 for the years ended December 31, 2014 and December 31, 2013, respectively.

The Company’s corporate office lease expires in September 2016.  The Company’s lease on its New Jersey field office expires in February 2016.   The Company currently operates its wholly-owned subsidiary, OmniComm Ltd., in the United Kingdom under the terms of a lease that expires in September 2016.  The Company currently operates its wholly-owned subsidiary, OmniComm Europe, GmbH, in Germany under the terms of a lease that expires in July 2015. The Company currently operates its wholly-owned subsidiary, Promasys B.V., in the Netherlands under the terms of a lease that expires in October 2018.

LEGAL PROCEEDINGS

From time to time the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2014, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

PATENT LITIGATION SETTLEMENT

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

2015	$	450,000
2016		450,000
2017		450,000
Total	$	1,350,000

In conjunction with the acquisition of the eResearch Technology, Inc. EDC assets, the Company entered into the First Amendment to Settlement and Licensing Agreement with DataSci, LLC in June 2009 to provide for license payments totaling $300,000 to DataSci over the next three years for the EDC assets acquired in that transaction.  The Company has, to-date, made payments totaling $200,000.

During the years ended December 31, 2014 and December 31, 2013, respectively, the Company recorded a charge to earnings of  $156,701 and $189,408 respectively,  which amounts represent (1) the amount of additional license expense incurred above the stipulated minimum in the DataSci License Agreement during the years ended December 31, 2014 and December 31, 2013 and (2) the accretion of the difference between the total stipulated annual minimum royalty payments and the recorded present value accrual of the annual minimum royalty payments.

F-26

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

EMPLOYMENT AGREEMENTS

In December 2014, we renewed an employment agreement with Mr. Cornelis F. Wit to serve as our Chief Executive Officer through December 31, 2015. As part of the renewal the employment agreement will renew for successive one-year terms unless the employment agreement is expressly cancelled by either Mr. Wit or the Company ninety days prior to the end of the term.  Mr. Wit receives an annual salary of $196,000 payable in cash and/or stock.  In the event that we consummate a transaction with a third party resulting in the sale, merger, consolidation, reorganization or other business combination involving all or a majority of our business, assets or stock, whether effected in one transaction or a series of transactions due to the initiative of Mr. Wit (whether or not during the term of the agreement), Mr. Wit will receive a fee equal to 2% of the aggregate consideration.   The agreement also provides, among other things, for participation in employee benefits available to employees and executives.  Under the terms of the agreement, we may terminate Mr. Wit’s employment upon 30 days notice of a material breach and Mr. Wit may terminate the agreement under the same terms and conditions.  The employment agreement contains non-disclosure provisions, as well as a one year non-compete clause if Mr. Wit leaves the company voluntarily or a six month non-compete clause following his termination by the Company.

In December 2014, we renewed our employment agreement with Mr. Randall Smith to serve as our Chief Technology Officer.  As part of the renewal the employment agreement will renew for successive one-year terms unless the employment agreement is expressly cancelled by either Mr. Smith or the Company ninety days prior to the end of the term. Under the terms of the agreement, as compensation for his services, Mr. Smith receives an annual salary of $310,500 to be paid in the form of cash and/or stock, as agreed upon by the parties.  The agreement also provides, among other things, for participation in employee benefit plans or programs applicable to employees and executives.  Under the terms of the agreement, we may terminate the employment of Mr. Smith upon 30 days notice of a material breach and Mr. Smith may terminate the agreement under the same terms and conditions.  If Mr. Smith is terminated by us for any reason other than for cause, we must pay him severance benefits equal to six month’s salary.  The employment agreement contains non-disclosure provisions, as well as a one year non-competition restriction following the termination of the agreement.

In September 2014, we renewed our employment agreement with Mr. Stephen Johnson to serve as our President and Chief Operating Officer.  As part of the renewal the employment agreement will renew for successive one-year terms unless the employment agreement is expressly cancelled by either Mr. Johnson or the Company ninety days prior to the end of the term. Under the terms of this agreement, Mr. Johnson receives an annual salary of $310,500.   The agreement also provides, among other things, for participation in employee benefit plans or programs applicable to employees and executives.  Under the terms of the agreement, we may terminate the employment of Mr. Johnson upon 30 days notice of a material breach and Mr. Johnson may terminate the agreement under the same terms and conditions.  If Mr. Johnson is terminated by us for any reason other than for cause, we must pay him severance benefits equal to three month’s salary for every year of service up to a maximum of twelve months salary.  The employment agreement contains non-disclosure provisions as well as a one year non-compete clause if Mr. Johnson leaves the company voluntarily or a six month non-compete clause following his termination by the Company.

NOTE 13: RELATED PARTY TRANSACTIONS

On February 1, 2013, the Company and our Chairman and Chief Technology Officer, Randall Smith, extended the maturity date of $20,000 promissory note until January 1, 2016. The promissory note bears interest at 12% per annum.

On February 22, 2013, the Company and our Director, Guus van Kesteren, extended the maturity date of $150,000 of convertible debentures to January 1, 2015. The debentures bear interest at 10% per annum and were originally issued in August 2008. The expiration date of the warrants associated with the debentures was also extended to January 1, 2015. On April 21, 2014, the Company and Mr. van Kesteren extended the maturity date of his $150,000 of convertible debentures to April 1, 2016. The expiration date of the warrants associated with the debentures was also extended to April 1, 2016. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $150,000 was reclassified from Related Party to Non-Related Party.

On February 22, 2013, the Company and our Chief Operating Officer and President, Stephen Johnson, extended the maturity date of $25,000 of convertible debentures to January 1, 2016. The debentures bear interest at 12% per annum. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. The convertible debentures were originally issued in December 2008.

On February 22, 2013, the Company and our Chairman and Chief Technology Officer, Randall Smith, extended the maturity date of $5,000 of convertible debentures to January 1, 2016. The debentures bear interest at 12% per annum. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. The convertible debentures were originally issued in December 2008.

On December 5, 2013, the Company and our Director Guus van Kesteren, extended the maturity date of $160,000 of convertible debentures to January 1, 2016. The debentures bear interest at 12% per annum. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. The convertible debentures were originally issued in December 2008. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $160,000 was reclassified from Related Party to Non-Related Party.

F-27

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

As of December 31, 2014, we have an aggregate of $15,034,000 principal amount of convertible debentures and promissory notes outstanding to Cornelis F. Wit, our Chief Executive Officer and Director, and have issued certain warrants to Mr. Wit, as follows:

● In June 2008, Mr. Wit invested $510,000 in convertible notes. On August 29, 2008, Mr. Wit converted the $510,000 and invested an additional $1,260,000 in a private placement of convertible debentures and warrants to purchase 3,540,000 shares of our common stock. The convertible debentures, which bear interest at 10% per annum, were due on August 29, 2010. The convertible debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share. On September 30, 2009, the Company and Mr. Wit extended the $1,770,000 of convertible debentures until August 29, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. On February 22, 2013, the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

● In February 2008, Mr. Wit invested $150,000 in promissory notes and from September 2008 to December 2008, Mr. Wit invested $4,200,000 in convertible notes. On December 16, 2008, Mr. Wit converted the $4,350,000 into a private placement of convertible debentures and warrants to purchase 8,700,000 shares of our common stock. The convertible debentures, which bear interest at 12% per annum, were due on December 16, 2010. The convertible debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share. On September 30, 2009, the Company and Mr. Wit extended the $4,350,000 of convertible debentures until December 16, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. In a private transaction on October 16, 2012, Mr. Wit purchased $125,000 of the December 2008 convertible debentures and the related 250,000 warrants from Mr. Ronald Linares, the Company’s former Chief Financial Officer. On February 22, 2013, the Company and Mr. Wit extended the maturity date of the $4,475,000 of convertible debentures to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $4,475,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

● From July 2009 to September 2009, Mr. Wit invested $1,100,000 which amount was aggregated under the terms of one convertible note dated September 30, 2009.  On September 30, 2009, Mr. Wit agreed to convert this convertible note into a private placement of secured convertible debentures bearing interest at a rate of 12% per annum with a maturity date of March 30, 2011. The convertible debentures were convertible into 4,400,000 shares of common stock and Mr. Wit received 4,400,000 warrants to purchase common stock of the Company at a price of $0.25. On March 30, 2011, the Company and Mr. Wit extended the maturity date of his convertible note until April 1, 2013 in accordance with the terms of Amendment Number One To Securities Purchase Agreement. The Company also extended the expiration date of the 4,400,000 warrants issued with convertible note by two years to September 30, 2015. On February 22, 2013, the Company and Mr. Wit extended the maturity date of his convertible debentures to January 1, 2016 in accordance with the terms of Amendment Number Two To Securities Purchase Agreement. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,100,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

● From October 2009 to December 2009, Mr. Wit invested $1,440,000, which amount was aggregated under the terms of one convertible note dated December 31, 2009. On December 31, 2009, Mr. Wit agreed to convert this Convertible Note into a private placement of unsecured convertible debentures bearing interest at a rate of 12% per annum, which Convertible Debentures were due on June 30, 2011. The Company and Mr. Wit extended the maturity date of his convertible note until October 1, 2013 in accordance with the terms of Amendment Number One To Securities Purchase Agreement. The Company also extended the expiration date of the 5,760,000 warrants issued with convertible note by two years to December 31, 2015. On February 22, 2013, the Company and Mr. Wit extended the maturity date of his convertible debentures to January 1, 2016 in accordance with the terms of Amendment Number Two To Securities Purchase Agreement. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,440,000 of convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

F-28

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

● On March 31, 2011, the Company issued a note payable in the principal amount of $2,866,879 and warrants to purchase 11,467,517 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of March 31, 2016 to Mr. Wit. The note accrues interest at a rate of 12% per annum and had a maturity date of April 1, 2014. The Promissory Note replaced the following Promissory Notes that had been previously issued:

i. Promissory Note issued on April 13, 2010 for $450,000 with a maturity date of December 31, 2011;

ii. Promissory Note issued on June 29, 2010 for $115,000 with a maturity date of December 31, 2011;

iii. Promissory Note issued on September 30, 2010 for $695,000 with a maturity date of December 31, 2011;

iv. Promissory Note issued on December 31, 2010 for $1,197,500 with a maturity date of December 31, 2011; and

v.

Promissory Note issued on December 31, 2010 for $409,379 with a maturity date of April 01, 2012.

On April 1, 2013, the Company and Mr. Wit extended the maturity date of the promissory note to March 31, 2016. In December 2014, the outstanding principal was reduced by $6,879. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $2,860,000 promissory note to April 1, 2017. The expiration date of the warrants associated with the $2,860,000 promissory note was also extended to April 1, 2017

● On December 31, 2011, the Company issued a promissory note in the principal amount of $1,600,000 and warrants to purchase 6,400,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of December 31, 2015 to Mr. Wit. The note carries an interest rate of 12% per annum and is due on January 1, 2015. On April 4, 2014, the Company and Mr. Wit extended the maturity date of the promissory note until April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017. The promissory note consolidates the amounts owed as detailed below:

i. Promissory Note issued on May 13, 2011 for $96,000 with a maturity date of January 01, 2013;

ii. Promissory Note issued on September 30, 2011 for $342,000 with a maturity date of April 01, 2014;

iii. Promissory Note issued on October 05, 2011 for $130,000 with a maturity date of April 01, 2014;

iv. Promissory Note issued on October 28, 2011 for $123,000 with a maturity date of April 01, 2014;

v. Promissory Note issued on October 31, 2011 for $82,000 with a maturity date of April 01, 2014;

vi. Promissory Note issued on November 23, 2011 for $60,000 with a maturity date of January 1, 2013; and

vii. Accrued and unpaid interest in the amount of $767,000.

● On January 1, 2013, the Company issued a promissory note in the principal amount of $529,000 and warrants to purchase 2,116,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of January 31, 2016 to Mr. Wit. The note carries an interest rate of 12% per annum and is due on January 1, 2016. On January 31, 2015 the Company and Mr. Wit extended the maturity date of the promissory note until April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

● On January 1, 2014, the Company issued a promissory note in the principal amount of $980,000 and warrants to purchase 3,920,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2017 to Mr. Wit in exchange for accrued interest in the amount of $980,000. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

● On December 23, 2014, the Company issued a promissory note in the principal amount of $280,000 to Mr. Wit. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

On March 18, 2013, the Company entered into a $2,000,000 revolving line of credit with The Northern Trust Company guaranteed by Cornelis F. Wit, our Chief Executive Officer and Director. On December 18, 2013 the Company renewed the Line of Credit and increased the available balance to $4,000,000. On February 3, 2015 the Company renewed the Line of Credit and increased the available balance to $5,000,000. Mr. Wit receives 2.0% interest on the assets pledged for the line for credit. The line of credit matures on February 2, 2018 and carries a variable interest rate based on the prime rate. At December 31, 2014, $4,000,000 was outstanding on the line of credit at an interest rate of 2.25%.

For the years December 31, 2014 and December 31, 2013 we incurred $2,389,786 and $2,339,702, respectively, in interest expense payable to related parties.

NOTE 14: STOCKHOLDERS’ (DEFICIT)

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

F-29

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

As of December 31, 2014 we had the following outstanding securities:

o  91,561,802 shares of common stock issued and outstanding;

o  48,463,517 warrants issued and outstanding to purchase shares of our common stock;

o  4,125,224 shares of our  Series A  Preferred Stock issued and outstanding,

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

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

o  250,000 Series D Preferred Stock issued and outstanding; and

o  $9,665,000 principal amount Convertible Debentures convertible into 24,620,000 shares of common stock.

Common Stock

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

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

During 2014, we issued 1,400,000 restricted shares of our common stock to our senior management team and our Board of Directors. The restrictions on the shares lapse ratably over a 3 year period. In 2014 we recognized $33,055 in compensation expense related to the share issuance.

In October 2014 a former director exercised options granted to the director during his term of service. As a result of the exercise, 57,143 common shares were issued to the individual.

During 2013, we issued 1,225,000 restricted shares of our common stock to our senior management team and our Board of Directors. The restrictions on the shares lapse ratably over a 3 year period. In 2014 we recognized $74,167 and in 2013 we recognized $53,125 in compensation expense related to the share issuance.

In June 2013 a former employee exercised options granted to the employee during their employment. As a result of the exercise, 11,000 common shares were issued to the individual.

In November 2013, we issued 2,270,000 shares of our common in relation to our acquisition of Promasys B. V. We issued the shares to the Promasys B.V. shareholders who were all non US-persons/ non US-entities and the issuance of the shares to them occurred in an offshore transaction. The issuance of the 2,270,000 shares of common stock to the 3 shareholders of Promasys B.V pursuant to the share exchange agreement was exempt from registration under the Securities Act of 1933, as amended, pursuant to Regulation S thereof. (See Note 8)

Preferred stock

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

o  dividend and liquidation preferences,

o  voting rights,

o  conversion privileges, and

o  redemption terms.

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

F-30

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

The following table presents the cumulative arrearage of undeclared dividends by class of preferred stock as of December 31, 2014 and December 31, 2013, respectively, and the per share amount by class of preferred stock.

	Cumulative arrearage as of				Cumulative arrearage per share
	December 31,				as of December 31,
Series of preferred stock	2014		2013		2014		2013
Series A	$	2,586,700	$	2,380,439	$	0.63	$	0.58
Series B		609,887		609,887	$	3.05	$	3.05
Series C		1,472,093		1,472,093	$	4.37	$	4.37
Total preferred stock arrearage	$	4,668,680	$	4,462,419

Series A Preferred Stock

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

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

o the shares are not redeemable,

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

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

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

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

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

There were cumulative arrearages of $2,586,700 and $2,380,439, or $0.63 and $0.58 per share, on the Series A Preferred Stock for undeclared dividends as of December 31, 2014 and December 31, 2013 respectively.

The Company has 235,000 shares of its 5% Series A Preferred stock that have been converted by the shareholders into shares of our common stock.  Pursuant to Delaware General Corporate Law, once the Company has a positive net worth, the cumulative dividends would be payable in either cash or in shares of our common stock upon the declaration of dividends by our board of directors.

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

Series B Preferred Stock

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

F-31

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

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

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

o the shares are not redeemable,

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

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

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

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

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

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

There were cumulative arrearages of $609,887 and $609,887, or $3.05 and $3.05 per share, on the Series B Preferred Stock dividends as of December 31, 2014 and December 31, 2013, respectively.

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

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

Series C Preferred Stock

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

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

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

o the shares are not redeemable,

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

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

F-32

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

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

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

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

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

There were cumulative arrearages of $1,472,093 and $1,472,093, or $4.37 and $4.37 per share, on the Series C Preferred Stock for undeclared dividends as of December 31, 2014 and December 31, 2013, respectively.

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

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

Series D Preferred Stock

In November 2010, our Board of Directors designated 250,000 shares of our preferred stock as Series D Convertible Preferred Stock of which 250,000 shares are issued and outstanding.

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

o the stated value of the Series D Preferred is $0.001 per share,

o the Series D Preferred has no rights to receive dividend distributions or to participate in any dividends declared by the Corporation to or for the benefit of the holders of its common stock,

o the shares of Series D Preferred are not convertible into or exchangeable for any other security of the Corporation,

o except as provided in Series D Preferred Designation, in the case of the death or disability of Series D Preferred holder, the Series D Preferred is not redeemable without the prior express written consent of the holders of the majority of the voting power of all then outstanding shares of such Series D Preferred. In the event any shares of Series D Preferred are redeemed pursuant, the shares redeemed will automatically be canceled and returned to the status of authorized but unissued shares of preferred stock,

o each share of Series D Preferred entitles the holder to Four Hundred (400) votes.  With respect to such vote, the holder is entitled to notice of any stockholders' meeting in accordance with the bylaws of the Company, and is entitled to vote, together as a single class with holders of common stock and any other series of preferred stock then outstanding, with respect to any question or matter upon which holders of common stock have the right to vote.  The Series D Preferred will also entitle the holders to vote the shares as a separate class as set forth herein and as required by law. In the event of any stock split, stock dividend or reclassification of the Corporation's common stock, the number of votes which attach to each share of Series D Preferred shall be adjusted in the same proportion as any adjustment to the number of outstanding shares of common stock. The shares of Series D Preferred present at a meeting of the Company’s shareholders shall vote in the same percentage as all voting shares voted for each director at the Company’s shareholder meeting in connection with the election or removal of directors to or from the Corporation’s Board of Directors,

o in the event of the liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of shares of the Series D Preferred then outstanding are entitled to receive before holders of shares of common stock receive any amounts, out of the remaining assets of the Corporation available for distribution to its stockholders, an amount equal to $0.001 per share,

o so long as any shares of Series D Preferred are outstanding, the Company cannot without first obtaining the written approval of the holders of at least a majority of the voting power of the then outstanding shares of such Series D Preferred Stock (i) alter or change the rights, preferences or privileges of the Series D Preferred, or (ii) increase or decrease the total number of authorized shares of Series D Preferred Stock,

o the holders of the Series D Preferred are not entitled to rights to subscribe for, purchase or receive any part of any new or additional shares of any class, whether now or hereinafter authorized, or of bonds or debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any class,

o the Company has a thirty (30) day “right of first refusal” in which to match the terms and conditions set forth in any bona fide offer received by holders of the Series D Preferred Stock.  The Company must purchase all of those shares of Series D Preferred offered by the holder of the Series D Preferred Stock, and

o the holders of Series D Preferred cannot, directly or indirectly, transfer any shares of Series D Preferred.  Any such purported transfer shall be of no force or effect and shall not be recognized by the Company.

F-33

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

The following table presents preferred dividends accreted for the years ended December 31, 2014 and December 31, 2013, respectively, and the per share effect of the preferred dividends if their effect was not anti-dilutive.

	Dividends accreted				Dividends per share
	year ended December 31,				year ended December 31,
	2014		2013		2014		2013
Preferred stock dividends in arrears Series A	$	206,261	$	206,261	$	0.050	$	0.050
Preferred stock dividends in arrears Series B	$	-0-	$	-0-	$	-0-	$	-0-
Preferred stock dividends in arrears Series C	$	-0-	$	-0-	$	-0-	$	-0-

 Warrants Issued for Services and in Capital Transactions

The following tables summarize all warrants issued to consultants and warrants issued as part of convertible debt transactions for the year ended December 31, 2014 and December 31, 2013, and the related changes during these years.

December 31, 2014 warrants outstanding									December 31, 2014 warrants exercisable
Range of exercise price			Number outstanding at December 31, 2014		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable at December 31, 2014		Weighted average exercise price
$0.25	–	$0.60		48,463,517		1.17	$	0.35		48,463,517	$	0.35

December 31, 2013 warrants outstanding									December 31, 2013 warrants exercisable
Range of exercise price			Number outstanding at December 31, 2013		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable at December 31, 2013		Weighted average exercise price
$0.25	–	$0.60		44,728,873		2.05	$	0.36		44,728,873	$	0.36

Warrants
Balance at December 31, 2012		43,412,873
Issued		2,116,000
Exercised		-0-
Expired/forfeited		(800,000	)
Balance at December 31, 2013		44,728,873
Issued		3,920,000
Exercised		-0-
Expired/forfeited		(185,356	)
Balance at December 31, 2014		48,463,517
Warrants exercisable at December 31, 2014		48,463,517
Weighted average fair value of warrants granted during 2013	$	0.19
Weighted average fair value of warrants granted during 2014	$	0.15

Other Comprehensive (Loss)

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

	Foreign currency translation			Accumulated other comprehensive (loss)
Balance at December 31, 2012	$	(69,092	)	$	(69,092	)
2013 Activity		(18,512	)		(18,512	)
Balance at December 31, 2013		(87,604	)		(87,604	)
2014 Activity		(156,223	)		(156,223	)
Balance at December 31, 2014	$	(243,827	)	$	(243,827	)

F-34

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

NOTE 15: EMPLOYEE EQUITY INCENTIVE PLANS

Stock Option Plan

Description of 2009 Equity Incentive Plan

In 2009, the Company’s Board of Directors and shareholders approved the 2009 Equity Incentive Plan of OmniComm Systems, Inc. (the “2009 Plan”).  The 2009 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units.  Pursuant to the 2009 Plan, 7,500,000 shares of the Company’s common stock are authorized for issuance.

The maximum term for any option grant under the 2009 Plan is ten years from the date of the grant; however, options granted under the 2009 Plan will generally expire five years from the date of grant for most employees, officers and directors of the Company.  Options granted to employees generally vest either upon grant or in two installments.  The first vesting, which is equal to 50% of the granted stock options, occurs upon completion of one full year of employment from the date of grant and the second vesting occurs on the second anniversary of the employee’s employment.  The vesting period typically begins on the date of hire for new employees and on the date of grant for existing employees.

As of December 31, 2014, there were 2,680,000 outstanding options and 2,625,000 restricted stock shares that have been granted under the 2009 Plan.  At December 31, 2014, there were 2,195,000 shares available for grant as options or other forms of share-based compensation under the 2009 Plan.

Description of 1998 Stock Incentive Plan

In 1998, the Company’s Board of Directors and shareholders approved the 1998 Stock Incentive Plan of OmniComm Systems, Inc. (the “1998 Plan”).  The 1998 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units.  Pursuant to the 1998 Plan, 12,500,000 shares of the Company’s common stock were authorized for issuance.  The 1998 Plan expired as of December 31, 2008.  As of December 31, 2014, there were 450,000 outstanding options that have been granted under the 1998 Plan.

The following table summarizes the stock option activity for the Company’s equity incentive plans:

	Number of shares			Weighted average exercise price (per share)		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2012		10,452,500		$	0.36		1.68	$	149,598
Granted		350,000			0.17
Exercised		(100,000	)		0.18
Forfeited/cancelled/expired		(4,957,500	)		0.42
Outstanding at December 31, 2013		5,745,000			0.29		1.70	$	93,945
Granted		150,000			0.16
Exercised		(150,000	)		0.13
Forfeited/cancelled/expired		(2,615,000	)		0.40
Outstanding at December 31, 2014		3,130,000		$	0.20		1.59	$	364,900
Vested and exercisable at December 31, 2014		2,855,000		$	0.21		1.35	$	332,850

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price at fiscal year-end and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2014.

The total number of shares vested and the fair value of shares vested for the years ended December 31, 2014 and December 31, 2013, respectively, was:

	Number of options vested		Fair value of options vested
Fair value of options vesting during the year ended December 31, 2014		695,834	$	84,450
Fair value of options vesting during the year ended December 31, 2013		768,833	$	81,391

F-35

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

Cash received from stock option exercises for the years ended December 31, 2014 and December 31, 2013 was $-0- and $-0-, respectively. Due to the Company’s net loss position, no income tax benefit has been realized during the years ended December 31, 2014 and December 31, 2013.

The following table summarizes information concerning options outstanding at December 31, 2014:

Awards breakdown by price range at December 31, 2014
			Outstanding						Vested
Strike price range ($)			Outstanding stock options		Weighted average remaining contractual life		Weighted average outstanding strike price		Vested stock options		Weighted average remaining vested contractual life		Weighted average vested strike price
0.00	to	0.20		2,080,000		1.98	$	0.13		1,855,000		1.72	$	0.12
0.21	to	0.29		600,000		0.92		0.24		550,000		0.69		0.25
0.30	to	0.49		-0-		0.00		0.00		-0-		0.00		0.00
0.50	to	0.70		450,000		0.68		0.50		450,000		0.68		0.50
0.00	to	0.70		3,130,000		1.59	$	0.20		2,855,000		1.35	$	0.21

The following table summarizes information concerning options outstanding at December 31, 2013:

Awards breakdown by price range at December 31, 2013
			Outstanding						Vested
Strike price range ($)			Outstanding stock options		Weighted average remaining contractual life		Weighted average outstanding strike price		Vested stock options		Weighted average remaining vested contractual life		Weighted average vested strike price
0.00	to	0.20		3,251,000		2.16	$	0.15		2,530,166		1.86	$	0.16
0.21	to	0.29		750,000		1.64		0.25		650,000		1.20		0.25
0.30	to	0.49		110,000		0.98		0.38		110,000		0.98		0.38
0.50	to	0.70		1,634,000		0.87		0.59		1,634,000		0.87		0.59
0.00	to	0.70		5,745,000		1.70	$	0.29		4,924,166		1.42	$	0.32

The weighted average fair value (per share) of options granted during the years ended December 31, 2014 and December 31, 2013 using the Black Scholes option-pricing model was $0.16 and $0.17, respectively.

Basis for Fair Value Estimate of Share-Based Payments

Based on analysis of its historical volatility, the Company expects that the future volatility of its share price is likely to be similar to the historical volatility the Company experienced since the Company’s commercialization activities were initiated during the second half of 2000. The Company used a volatility calculation utilizing the Company’s own historical volatility to estimate its future volatility for purposes of valuing the share-based payments granted during fiscal 2014 and 2013. Actual volatility, and future changes in estimated volatility, may differ substantially from the Company’s current estimates.

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

The fair value of share-based payments was estimated using the Black Scholes option pricing model with the following assumptions for grants made during the periods indicated.   

F-36

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

	Stock option assumptions for the year ended
Stock option assumptions	December 31, 2014		December 31, 2013
Risk-free interest rate		0.93%		0.58%
Expected dividend yield		0.0%		0.0%
Expected volatility		199.0%		202.7%
Expected life of options (in years)		5		5

The following table summarizes weighted average grant date fair value activity for the Company incentive stock plans:

	Weighted average grant date fair value
	2014		2013
Stock options granted during the year ended December 31,	$	0.16	$	0.17
Stock options vested during the year ended December 31,	$	0.12	$	0.11
Stock options forfeited during the year ended December 31,	$	0.31	$	0.29

A summary of the status of the Company’s non-vested shares underlying stock options as of December 31, 2014, and changes during the year ended December 31, 2014 is as follows:

	Shares underlying stock options		Weighted average grant date fair value
Nonvested shares at January 1, 2014		820,834	$	0.13
Nonvested shares at December 31, 2014		275,000	$	0.17

As of December 31, 2014, approximately $29,825 of total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted-average period of 1.07 years.

NOTE 16: INCOME TAXES

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate to the income before provision for income taxes is as follows:

	December 31, 2014			December 31, 2013
Federal statutory rate applied to (loss) before income taxes	$	(1,685,418	)	$	(1,154,195	)
Increase/(decrease) in income taxes results from:
Current tax expense/(benefit)		(19,537	)		94,122
Non deductible expenses		198,295			296,783
Change in deferred assets		64,449			71,274
Change in valuation allowance		1,422,674			786,138
Income tax expense/(benefit)	$	(19,537	)	$	94,122

F-37

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

The components of income tax expense (benefit) for the years ended:

	December 31, 2014			December 31, 2013
Current tax expense/(benefit):	$	(19,537	)	$	94,122
Deferred tax expense/(benefit):
Bad debt allowance		(45,407	)		7,100
Operating loss carryforward		(1,441,716	)		(864,512	)
Amortization of intangibles		5,482			-0-
Patent litigation settlement		58,967			71,274
		(1,442,211	)		(692,016	)
Valuation allowance		1,422,674			786,138
Total tax expense/(benefit)	$	(19,537	)	$	94,122

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:

	December 31, 2014			December 31, 2013
Amortization of intangibles	$	278,216		$	283,698
Bad debt allowance		69,022			23,615
Patent litigation liability accrual		256,441			315,408
Operating loss carryforwards		19,662,198			18,220,482
Gross deferred tax assets		20,265,877			18,843,203
Valuation allowance		(20,265,877	)		(18,843,203	)
Net deferred tax liability/(asset)	$	-0-		$	-0-

The Company has net operating loss carry forwards (NOL) for income tax purposes of approximately $54,497,491.  This loss is allowed to be offset against future income until the year 2034 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 substantial losses incurred through December 31, 2014.  The change in the valuation allowance for the year ended December 31, 2014 was an increase of $1,422,676. The Company's tax returns for the prior three years remain subject to examination by major tax jurisdictions.

NOTE 17: SUBSEQUENT EVENTS

On January 31, 2015 the Company issued a promissory note payable in the amount of $950,000 and 3,800,000 common stock purchase warrants (“Warrants”) to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for an existing promissory note in the amount of $280,000 and accrued interest in the amount of $670,000. The note carries an interest rate of 12% per annum and matures on April 1, 2017. The Warrants are exercisable until April 1, 2017 at an exercise price of $0.25.

On January 31, 2015 the Company issued a promissory note in the amount of $2,860,000 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

On January 31, 2015 the Company issued a promissory note in the amount of $529,000 to our Chief Executive Officer and Director, Cornelis F. Wit, in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017.

On January 31, 2015 the Company and Mr. Wit extended the maturity date of $1,100,000 of convertible debentures to April 1, 2017. The debentures bear interest at 12% per annum. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

F-38

OMNICOMM SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND DECEMBER 31, 2013

On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2017. The debentures bear interest at 10% per annum. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $4,475,000 of convertible debentures to April 1, 2017. The debentures bear interest at 12% per annum. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On January 31, 2015 the Company and Mr. Wit extended the maturity date of the $1,440,000 of convertible debentures to April 1, 2017. The debentures bear interest at 12% per annum. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On January 31, 2015 the Company extended the expiration date of the warrants associated with the promissory note due to Mr. Wit in the amount of $1,600,000 with a maturity date of April 1, 2017. The Warrants are exercisable at $0.25 per share and the new expiration date of the Warrants is April 1, 2017.

On February 3, 2015 the Company renewed the Line of Credit with The Northern Trust Company and increased the available balance to $5,000,000. The line of credit matures on February 2, 2018 and carries a variable interest rate based on the prime rate.

On March 20, 2015 the Company awarded 275,000 restricted shares to our Chairman and Chief Technology Officer, Randall G. Smith, 175,000 restricted shares to our Chief Executive Officer and Director, Cornelis F. Wit, 115,000 restricted shares to our Chief Operating Officer and President, Stephen E. Johnson, and 100,000 restricted shares to our Chief Financial Officer, Thomas E. Vickers. The restrictions on the shares lapse ratably over a three year period contingent on continued employment.

On March 23, 2015 a former employee exercised 7,500 stock options.

Subsequent to December 31, 2014 the Company drew an additional $750,000 on its line of credit.

F-39