NOTE

EMPLOYEE EQUITY INCENTIVE PLANS

Stock Option Plan

Description of

2016

Equity Incentive Plan

2016,

the Company

’s Board of Directors and stockholders approved the OmniComm Systems, Inc.

2016

Equity Incentive Plan (the

“2016

Plan”). The

2016

Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units. The

2016

Plan provides for the issuance of up to

10,000,000

shares of our common stock for issuance upon awards granted under the

2016

Plan. In addition, the number of shares of common stock available for issuance under the

2016

Plan shall automatically increase on

January

1st

of each year for a period of

nine

(

) years commencing on

January 1, 2017

and ending on (and including)

January 1, 2025,

in an amount equal to

five

percent (

) of the total number of shares authorized under the

2016

Plan. Unless earlier terminated by the Board, the

2016

Plan shall terminate on

June 29, 2026. As of December 31, 2017

10,500,000

shares were authorized under the 2016 Plan.

The maximum term for any option grant under the

2016

Plan is

ten

years from the date of the grant; however, options granted under the

2016

Plan will generally expire

five

years from the date of grant. Options granted under the

2016

Plan generally vest either upon grant or in

two

installments and may be conditioned on performance. Performance based options may be conditioned upon the attainment of revenue, EDITDA or other financial or performance goals of the Company. The

first

vesting, which is equal to

50%

of the granted stock options, usually occurs upon completion of

one

full year of employment from the date of grant and the

second

vesting usually occurs on the

second

anniversary of the date of grant. The vesting period typically begins on the date of hire for new employees and on the date of grant for existing employees. The restrictions on restricted shares granted under the

2016

Plan generally lapse in

three

equal annual installments on the anniversary of the date of grant.

Any unvested stock options or restricted shares with restrictions that have

not

lapsed that are granted under the

2016

Plan are forfeited and expire upon termination of employment.

As of

December 31, 2017,

there were

4,900,000

outstanding options and -

- restricted stock shares that have been granted under the

2016

Plan. At

December 31, 2017,

there were

5,600,000

shares available for grant as options or other forms of share-based compensation under the

2016

Plan.

Description of

2009

Equity Incentive Plan

2009,

the Company

’s Board of Directors and stockholders approved the

2009

Equity Incentive Plan of OmniComm Systems, Inc. (the

“2009

Plan”). The

2009

Plan provided 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 were authorized for issuance.

The maximum term for any op

tion grant under the

2009

Plan was

ten

years from the date of the grant; however, options granted under the

2009

Plan generally expired

five

years from the date of grant for most employees, officers and directors of the Company. Options granted under the

2009

Plan generally vested either upon grant or in

two

installments. The

first

vesting, which is equal to

50%

of the granted stock options, occurred upon completion of

one

full year of employment from the date of grant and the

second

vesting occurred on the

second

anniversary of the employee’s employment. The vesting period typically began on the date of hire for new employees and on the date of grant for existing employees.

The restrictions on restricted shares granted under the

2009

Plan generally lapsed in

three

equal annual installments on the anniversary of the date of grant.

Any unvested stock options or restricted shares with restrictions that had

not

lapsed that were granted under the

2009

Plan were forfeited and expired upon termination of employment. The

2009

Plan was terminated upon the approval of the

2016

Plan.

further grants will be made under the

2009

Plan.

As of

December 31, 2017,

there were

375,000

outstanding options and

3,876,662

restricted stock shares that have been granted under the

2009

Plan. At

December 31, 2017,

there were -

- shares available for grant as options or other forms of share-based compensation under the

2009

Plan.

The following table summarizes the stock option activity for the Company

’s equity incentive plans:

	Number of options			Weighted average exercise price (per share)		Weighted average remaining contractual term (in years)		Aggregate intrinsic value

Outstanding at December 31, 2015		2,002,500		$	0.14		1.40	$	198,990
Granted		450,000			0.20
Exercised		(1,120,000	)		0.12
Forfeited/cancelled/expired		(107,500	)		0.29

Outstanding at December 31, 2016		1,225,000			0.17		2.62	$	83,425
Granted		4,650,000			0.26
Exercised		(300,000	)		0.13
Forfeited/cancelled/expired		(300,000	)		0.14

Outstanding at December 31, 2017		5,275,000		$	0.26		4.09	$	130,475


Vested and exercisable at December 31, 2017		400,000		$	0.19		1.42	$	32,638

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, 2017.

The total number of shares vested and the fair value of shares vested for the years ended

December 31, 2017

and

December 31, 2016,

respectively, was:

Fair value of options vesting for the year ended	Number of options vested		Fair value of options vested
December 31, 2017		62,500	$	12,742
December 31, 2016		162,500	$	33,622

Cash received from stock option exercises for the year ended

December 31, 2017

was

$35,250

and

$129,500

for the year ended

December 31, 2016.

Due to the Company’s net loss position,

income tax benefit has been realized during the years ended

December 31, 2017

and

December 31, 2016.

The following table summarizes information concerning options outstanding at

December 31, 2017:

Awards breakdown by price range at December 31, 2017
			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		300,000		1.93	$	0.18		250,000		1.48	$	0.17
0.21	to	0.30		4,250,000		4.12		0.25		150,000		1.30		0.22
0.31	to	0.50		725,000		4.82		0.34		-0-		0.00		0.00
0.00	to	0.50		5,275,000		4.09	$	0.26		400,000		1.42	$	0.19

The following table summarizes information concerning options outstanding at

December 31, 2016:

Awards breakdown by price range at December 31, 2016
			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		850,000		2.15	$	0.15		625,000		1.32	$	0.14
0.21	to	0.30		375,000		3.70		0.23		112,500		1.67		0.21
0.31	to	0.50		-0-		0.00		0.00		-0-		0.00		0.00
0.00	to	0.50		1,225,000		2.62	$	0.17		737,500		1.38	$	0.15

The weighted average fair value (per share) of

options granted during the year ended

December 31, 2017

was

$0.21

and

$0.19

for the year ended

December 31, 2016

using the Black Scholes option-pricing model.

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

2017

and

2016.

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.

	For the year ended
Stock option assumptions	December 31, 2017		December 31, 2016
Risk-free interest rate		1.81%		1.45%
Expected dividend yield		0.0%		0.0%
Expected volatility		127.1%		155.5%
Expected life of options (in years)		5		5

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

	Weighted average grant date fair value
	for the year ended December 31,
	2017		2016
Stock options granted during the period	$	0.21	$	0.19

Stock options vested during the period	$	0.20	$	0.21

Stock options forfeited during the period	$	0.13	$	0.28

A summary of the status of the Company

’s non-vested shares underlying stock options as of

December 31, 2017,

and changes during the year ended

December 31, 2017

is as follows:

	Shares underlying stock options		Weighted average grant date fair value
Nonvested shares at January 1, 2017		487,500	$	0.19

Nonvested shares at December 31, 2017		4,875,000	$	0.21

As of

December 31, 2017,

approximately

$656,978

of total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted-average period of

2.08

years.