10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

[Mark One]

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 2018

[   ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from  _______ to _______

Commission File Number: 0-25203
OmniComm Systems, Inc.
(Exact name of registrant as specified in its Charter)
Delaware	11-3349762
(State or other jurisdiction of Incorporation or organization)	(IRS Employer Identification Number)
2101 W. Commercial Blvd. Suite 3500, Fort Lauderdale, FL	33309
Address of principal executive offices	Zip Code
954.473.1254
(Registrant’s Telephone Number including area code)

No Changes

(Former name, former address and former fiscal year, if changed since last report)

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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [√] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer (Do not check if smaller reporting company)	[ ]	Smaller reporting company	[√]
		Emerging growth company	[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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

The number of shares outstanding of each of the issuer’s classes of common equity as of November 12, 2018: 152,343,647 common stock $.001 par value.

1

Table of Contents to the Quarterly Report on Form 10-Q for the nine month period ended September 30, 2018

PART I. FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
ITEM 4. CONTROLS AND PROCEDURES	50
PART II. OTHER INFORMATION	50
ITEM 1. LEGAL PROCEEDINGS	50
ITEM 1A. RISK FACTORS	50
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	51
ITEM 4. MINE SAFETY DISCLOSURES	51
ITEM 5. OTHER INFORMATION	51
ITEM 6. EXHIBITS	51
SIGNATURES	52

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2018			December 31, 2017
	(unaudited)
ASSETS
CURRENT ASSETS
Cash	$	1,371,962		$	1,176,551
Accounts receivable, net of allowance for doubtful accounts of $197,911 and $149,980, respectively		5,124,404			7,492,597
Prepaid expenses		390,565			297,131
Other current assets		11,917			11,463
Total current assets		6,898,848			8,977,742
Property and equipment, net		1,330,744			552,538
Other assets
Intangible assets, net		819,750			97,925
Other assets		129,018			46,714
TOTAL ASSETS	$	9,178,360		$	9,674,919
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,686,536		$	2,586,045
Notes payable, related parties, current portion, net of discount of $46,946 and $-0-, respectively		353,054			-0-
Convertible notes payable, current portion		-0-			50,000
Deferred revenue, current portion		6,209,198			7,564,587
Capital lease liability, current portion		114,594			-0-
Patent settlement liability, current portion		-0-			112,500
Conversion feature liability, related parties		1,744,002			1,604,723
Conversion feature liability		96,510			81,224
Warrant liability, related parties		2,754,207			2,196,570
Warrant liability		1,682,000			1,244,229
Total current liabilities		14,640,101			15,439,878
LONG TERM LIABILITIES
Line of credit, long term		3,200,000			2,650,000
Notes payable, related parties, long term, net of current portion, net of discount of $-0- and $117,365, respectively		-0-			282,635
Notes payable, long term, net of current portion, net of discount of $186,268 and $279,402, respectively		516,232			423,098
Convertible notes payable, related parties, long term, net of current portion		5,770,000			5,770,000
Convertible notes payable, long term, net of current portion		200,000			350,000
Deferred revenue, long term, net of current portion		1,658,064			1,952,366
Capital lease liability, long term, net of current portion		206,010			-0-
TOTAL LIABILITIES		26,190,407			26,867,977
COMMITMENTS AND CONTINGENCIES (See Note 10)
SHAREHOLDERS' (DEFICIT)
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 3,772,500 shares undesignated
Series A convertible preferred stock, 5,000,000 shares authorized, -0- and -0- issued and outstanding, respectively, at $0.001 par value; liquidation preference $-0- and $-0-, respectively		-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 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, 500,000,000 shares authorized, 152,309,472 and 148,542,805 issued and outstanding, respectively, at $0.001 par value		152,311			148,544
Additional paid in capital - preferred		999,750			999,750
Additional paid in capital - common		55,130,550			54,379,454
Accumulated other comprehensive (loss)		(431,661	)		(397,237	)
Accumulated (deficit)		(72,863,247	)		(72,323,819	)
TOTAL SHAREHOLDERS' (DEFICIT)		(17,012,047	)		(17,193,058	)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)	$	9,178,360		$	9,674,919

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

3

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the nine months ended						For the three months ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenues	$	19,557,161		$	19,420,456		$	6,379,641		$	6,490,147
Reimbursable revenues		775,788			755,344			463,183			225,766
Total revenues		20,332,949			20,175,800			6,842,824			6,715,913
Cost of goods sold		3,240,449			3,320,190			1,044,020			1,133,480
Reimbursable expenses-cost of goods sold		368,542			802,975			253,793			181,965
Total cost of goods sold		3,608,991			4,123,165			1,297,813			1,315,445
Gross margin		16,723,958			16,052,635			5,545,011			5,400,468
Operating expenses
Salaries, benefits and related taxes		10,695,132			9,906,293			3,483,627			3,393,915
Rent and occupancy expenses		930,972			841,718			337,824			292,669
Consulting services		219,856			185,222			55,736			64,488
Legal and professional fees		381,648			367,403			72,776			126,959
Travel		588,247			679,766			190,785			188,406
Telephone and internet		114,696			115,660			43,682			39,786
Selling, general and administrative		1,297,008			937,313			383,958			277,047
Bad debt expense		47,931			40,369			21,679			87,366
Intangible asset impairment		79,634			-0-			-0-			-0-
Depreciation expense		279,532			249,801			115,687			87,382
Amortization expense		248,790			16,455			91,343			5,580
Total operating expenses		14,883,446			13,340,000			4,797,097			4,563,598
Operating income/(loss)		1,840,512			2,712,635			747,914			836,870
Other income/(expense)
Interest expense, related parties		(682,986	)		(717,782	)		(229,906	)		(252,585	)
Interest expense		(283,407	)		(342,240	)		(95,622	)		(127,488	)
Interest income		16			589			7			3
Change in derivative liabilities		(1,160,473	)		723,532			(2,918,886	)		(812,535	)
Transaction gain/(loss)		(97,984	)		19,006			(12,128	)		(3,104	)
Income/(loss) before income taxes		(384,322	)		2,395,740			(2,508,621	)		(358,839	)
Income tax (expense)		(155,106	)		(1,194	)		(154,071	)		-0-
Net income/(loss) attributable to common stockholders	$	(539,428	)	$	2,394,546		$	(2,662,692	)	$	(358,839	)
Net income/(loss) per share
Basic	$	(0.00	)	$	0.02		$	(0.02	)	$	(0.00	)
Diluted	$	(0.00	)	$	0.02		$	(0.02	)	$	(0.00	)
Weighted average number of shares outstanding
Basic		150,282,732			147,805,410			150,905,124			147,858,566
Diluted		150,282,732			147,850,886			150,905,124			147,858,566

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

4

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(unaudited)

	For the nine months ended					For the three months ended
	September 30,					September 30,
	2018			2017		2018			2017
Net income/(loss) attributable to common stockholders	$	(539,428	)	$	2,394,546	$	(2,662,692	)	$	(358,839	)
Other comprehensive income/(loss)
Change in foreign currency translation adjustment		(34,424	)		13,386		(13,256	)		1,310
Other comprehensive income/(loss)		(34,424	)		13,386		(13,256	)		1,310
Comprehensive income/(loss)	$	(573,852	)	$	2,407,932	$	(2,675,948	)	$	(357,529	)

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

5

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIT)

FOR THE YEAR ENDED DECEMBER 31, 2017 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(unaudited)

	Preferred Stock					Common Stock
	Series D Preferred			Additional								Additional						Accumulated other			Total
	Number	$0.001		paid in capital		Number			$0.001			paid in capital			Accumulated			comprehensive			shareholders'
	of shares	Par value		preferred		of shares			Par value			common			(deficit)			(loss)			(deficit)
Balances at December 31, 2016	250,000	$	250	$	999,750		147,786,917		$	147,788		$	53,425,956		$	(75,291,037	)	$	(410,505	)	$	(21,127,798	)
Employee stock option expense													364,271									364,271
Foreign currency translation adjustment																			13,268			13,268
Restricted stock issuance/(forfeiture)							(16,668	)		(17	)		(2,817	)								(2,834	)
Cashless issuance of common stock, stock option exercise							22,556			23			(23	)								-0-
Issuance of common stock, stock option exercise							250,000			250			35,000									35,250
Issuance of common stock, warrant exercise							500,000			500			154,500									155,000
Reclassification of conversion feature liability associated with convertible debt													402,567									402,567
Net income/(loss) for the year ended December 31, 2017	-0-		-0-		-0-		-0-			-0-			-0-			2,967,218			-0-			2,967,218
Balances at December 31, 2017	250,000		250		999,750		148,542,805			148,544			54,379,454			(72,323,819	)		(397,237	)		(17,193,058	)
Employee stock option expense													157,628									157,628
Foreign currency translation adjustment																			(34,424	)		(34,424	)
Restricted Stock Issuance/Forfeiture							1,900,000			1,900			39,835									41,735
Issuance of common stock, purchase of Acuity software							1,666,667			1,667			498,333									500,000
Issuance of common stock, stock option exercise							200,000			200			44,800									45,000
Reclassification of conversion feature liability associated with convertible debt													10,500									10,500
Net income/(loss) for the period ended September 30, 2018	-0-		-0-		-0-		-0-			-0-			-0-			(539,428	)		-0-			(539,428	)
Balances at September 30, 2018 (unaudited)	250,000	$	250	$	999,750		152,309,472		$	152,311		$	55,130,550		$	(72,863,247	)	$	(431,661	)	$	(17,012,047	)

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

6

OMNICOMM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine months ended
	September 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$	(539,428	)	$	2,394,546
Adjustment to reconcile net income/(loss) to net cash provided by/(used in) operating activities
Change in derivative liabilities		1,160,473			(723,532	)
Intangible asset impairment		79,634			-0-
Interest expense from derivative instruments		163,553			241,664
Employee stock compensation		199,363			467,930
Provision for doubtful accounts		47,931			40,369
Depreciation and amortization		528,322			266,256
Changes in operating assets and liabilities
Accounts receivable		2,320,262			(889	)
Prepaid expenses		(93,434	)		(47,519	)
Other current assets		(454	)		2,915
Other assets		(82,304	)		4,843
Accounts payable and accrued expenses		(899,509	)		(510,316	)
Patent settlement liability		(112,500	)		(449,479	)
Deferred revenue		(1,649,691	)		(406,867	)
Net cash provided by/(used in) operating activities		1,122,218			1,279,921
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(700,028	)		(212,173	)
Purchase of Acuity software		(552,403	)		-0-
Net cash provided by/(used in) investing activities		(1,252,431	)		(212,173	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable		(200,000	)		(1,020,000	)
Proceeds/(repayments) from revolving line of credit		550,000			(200,000	)
Proceeds from exercise of stock options		45,000			35,250
Principal repayment of capital lease obligation		(38,064	)		-0-
Net cash provided by/(used in) financing activities		356,936			(1,184,750	)
Effect of exchange rate changes on fixed and intangible assets		3,112			(18,125	)
Effect of exchange rate changes on cash and cash equivalents		(34,424	)		13,386
Net increase/(decrease) in cash and cash equivalents		195,411			(121,741	)
Cash and cash equivalents at beginning of period		1,176,551			1,439,332
Cash and cash equivalents at end of period	$	1,371,962		$	1,317,591
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes	$	1,035		$	1,194
Interest	$	889,984		$	802,327
Non-cash transactions:
Notes payable issued in exchange for existing notes payable	$	-0-		$	350,000
Restricted stock issuance/(forfeiture)	$	41,735		$	(2,834	)
Common stock issued for the purchase of Acuity software	$	500,000		$	-0-
Capital expenditures funded by capital lease borrowing	$	359,603		$	-0-
Reclassification of conversion feature liability associated with convertible debt	$	10,500		$	402,567

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

7

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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, contract research organizations (“CROs”) and other clinical trial sponsors principally located in the United States, Europe and East Asia. Our proprietary software applications: TrialMaster^®, TrialOne^®, eClinical Suite, Promasys^®, IRTMaster, AutoEncoder and Acuity Analytics (the “EDC Software”) 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 product development 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 nine month periods ended September 30, 2018 and September 30, 2017 we spent $2,469,280 and $2,230,565, respectively, on research and product development activities, which are primarily comprised of salaries to our developers and other research and product development 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, which are more fully described in the Company’s 2017 Annual Report filed on Form 10-K with the Securities and Exchange Commission, and have been prepared in conformity with (i) accounting principles generally accepted in the United States of America; and (ii) the rules and regulations of the United States Securities and Exchange Commission. All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

UNAUDITED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the consolidated financial statements have been condensed or omitted. The results for the nine month periods ended September 30, 2018 and September 30, 2017 are unaudited, but reflect all adjustments (consisting only of normally recurring adjustments) which management considers necessary for a fair presentation of operating results.

The operating results for the nine month period ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year-ended December 31, 2018. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2017.

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of the unaudited condensed 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.

8

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

Reclassifications

Certain reclassifications have been made in the 2017 financial statements to conform to the 2018 presentation. These reclassifications did not have any effect on our net income/(loss) or shareholders’ deficit.

foreign currency translation

The financial statements of the Company’s foreign subsidiaries are translated in accordance with Accounting Standards Codification (“ASC”) 830-30, Foreign Currency Matters—Translation of Financial Statements ("ASC 830-30"). 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 Systems 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. The functional currency of the Company’s subsidiary, OmniComm eClinical Solutions Pvt. Ltd. in India, is the Indian Rupee. 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 $34,424 and a translation gain of $13,386 for the nine month periods ended September 30, 2018 and September 30, 2017, respectively.

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, eClinical Suite and Promasys. Service revenues are derived principally from the Company's delivery of the hosted solutions of its TrialMaster software product, and consulting services and customer support, including training, for all of the Company's products.

For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606 (“ASC 606"). A five-step analysis must be met as outlined in ASC 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

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, including hosted applications, licensing, professional services and maintenance-related services.

Hosted Application Revenues

The Company offers its TrialMaster and TrialOne software products as hosted application solutions delivered through a standard web browser, with customer support and training services. The Company's TrialOne and Promasys solutions are primarily deployed on a technology transfer or off-the-shelf basis. To date, hosted applications revenues have been primarily related to TrialMaster. On April 30, 2019, OmniComm will decommission its eClinical Suite hosting platform as the eClinical Suite clients utilizing these hosting services have transitioned to TrialMaster, the eClinical Suite studies have been completed or the studies have transitioned to another hosting platform.

Revenues resulting from TrialMaster 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 component involves services required to close out, or lock, the database for the clinical trial.

9

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

Fees charged 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 typically 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 monthly or quarterly in advance.

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 three to five 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 to net 45 days.

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, running test data and documentation of procedures. Subsequent additions or extensions to license terms do not generally include additional professional services.

Maintenance Revenues

Maintenance includes telephone-based help desk support and software maintenance, including updates to the software through new software version releases. 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.

Pass-through Revenue and Expense

The Company accounts for pass-through revenue and expense (reimbursable revenue and reimbursable expense) in accordance with Accounting Standards Update 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), (“ASU 2016-08”). In accordance with ASU 2016-08 these amounts are recorded as revenue in the statement of operations with a corresponding expense recorded in cost of goods sold. Pass-through revenues and expenses include amounts associated with third-party services provided to our customers by our service and product partners. These third-party services are primarily comprised of Interactive Voice and Web Response software services (IVR and IWR), travel and shipping that are incurred on our clients’ behalf.

10

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

The fees associated with each business activity for the nine month periods ended September 30, 2018 and September 30, 2017, respectively, are:

	For the nine months ended
Revenue activity	September 30, 2018		September 30, 2017
Set-up fees	$	2,683,182	$	3,948,687
Change orders		1,090,333		1,054,288
Maintenance		4,163,138		3,749,897
Software licenses		8,423,355		7,951,228
Professional services		2,617,149		2,526,379
Hosting		1,355,792		945,321
Total	$	20,332,949	$	20,175,800

COST OF GOODS SOLD

Cost of goods sold 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 and bonuses for the Company’s professional services staff. Cost of goods sold also includes outside service provider costs. Cost of goods sold 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 $197,911 as of September 30, 2018 and $149,980 as of December 31, 2017.

The following table summarizes activity in the Company's allowance for doubtful accounts for the nine month period ended September 30, 2018 and the year ended December 31, 2017.

	September 30, 2018		December 31, 2017
Beginning of period	$	149,980	$	179,813
Bad debt expense		47,931		130,346
Write-offs		-0-		(160,179	)
End of period	$	197,911	$	149,980

11

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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 September 30, 2018, $1,404,402 was deposited in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal.

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, Europe and East Asia. 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 September 30, 2018. 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 September 30, 2018, 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 quarterly 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 12% of our revenues during the nine month period ended September 30, 2018 or approximately $2,339,000. One customer accounted for 10% of our revenues during the nine month period ended September 30, 2017 or approximately $2,021,000. 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 nine month periods ended September 30, 2018 and September 30, 2017 and the year ended December 31, 2017.

	Revenues		Accounts receivable
For the period ended	Number of customers	Percentage of total revenues	Number of customers	Percentage of accounts receivable
September 30, 2018	1	12%	1	13%
December 31, 2017	1	10%	1	24%
September 30, 2017	1	10%	2	38%

The table below provides revenues from European customers for the nine month periods ended September 30, 2018 and September 30, 2017.

European revenues
For the nine months ended
September 30, 2018		September 30, 2017
European revenues	% of Total revenues	European revenues	% of Total revenues
$3,513,571	17%	$2,514,601	12%

The Company serves its hosting customers from third-party web hosting facilities located in the United States and Germany. 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.

12

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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.

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.

FAIR VALUE MEASUREMENT

OmniComm’s capital structure includes the use of warrants and convertible debt features that are classified as derivative financial instruments. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value under ASC 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires that changes in the fair value of derivative financial instruments with no hedging designation be recognized as gains/(losses) in the earnings statement. The fair value measurement is determined in accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”).

DEFERRED REVENUE

Deferred revenue represents cash advances and amounts in accounts receivable as of the balance sheet date 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 September 30, 2018, the Company had $7,867,262 in deferred revenues relating to contracts for services to be performed over periods ranging from one month to 7 years. The Company had $6,209,198 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 $671,030 and $528,777 for the nine month periods ended September 30, 2018 and September 30, 2017, respectively, and are included under selling, general and administrative expenses in our unaudited condensed consolidated financial statements.

RESEARCH AND PRODUCT DEVELOPMENT EXPENSES

Software development costs are expensed as incurred. ASC 985-20, Software Industry Costs of Software to Be Sold, Leased or Marketed (“ASC 985-20”), 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 nine month periods ended September 30, 2018 and September 30, 2017 we spent $2,469,280 and $2,230,565, respectively, on research and product development activities, which include costs associated with the development of our software products and services for our clients’ projects and which are primarily comprised of salaries and related expenses for our software developers and consulting fees paid to third-party consultants. Research and product development costs are primarily included under Salaries, benefits and related taxes in our Statement of Operations.

13

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

EQUITY INCENTIVE PLANS

The OmniComm Systems, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) was approved at our Annual Meeting of Stockholders on June 16, 2016. The 2016 Plan initially provides for the issuance of up to 10,000,000 shares of our common stock. In addition, the number of shares of common stock available for issuance under the 2016 Plan automatically increases on January 1st of each year for a period of nine (9) years commencing on January 1, 2017 and ending on (and including) January 1, 2025, in an amount equal to five percent (5%) of the total number of shares authorized under the 2016 Plan. As of September 30, 2018 11,025,000 shares of our common stock were authorized for issuance under the 2016 Plan.

The predecessor plan, the OmniComm Systems, Inc. 2009 Equity Incentive Plan (the “2009 Plan”) was approved at our Annual Meeting of Stockholders on July 10, 2009 and terminated on June 16, 2016 upon the approval of the 2016 Plan. The 2009 Plan provided for the issuance of up to 7,500,000 shares to employees, directors and key consultants. The 2016 and 2009 Plans are more fully described in “Note 13, Equity Incentive Plans”.

The Company accounts for its employee equity incentive plans under ASC 718, Compensation – Stock Compensation, (“ASC 718”) 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.

EARNINGS PER SHARE

The Company accounts for Earnings per Share using ASC 260, Earnings per Share, (“ASC 260”). 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 with ASC 740, Income Taxes (“ASC 740”). 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 the first nine months of 2018, we adopted the following new accounting pronouncements:

In February 2016, the FASB issued Accounting Standard Update No. 2016-02, “Leases (Topic 842)”, (“ASU 2016-02”). ASU 2016-02 requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after December 15, 2018. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In April 2016, the FASB issued Accounting Standards Update 2016–10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. The Company adopted the new standard effective January 1, 2018 using the modified retrospective method. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.

14

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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: EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share were calculated using the weighted average number of shares outstanding of 150,282,732 and 147,805,410 for the nine month periods ended September 30, 2018 and September 30, 2017, respectively.

The outstanding share balance as of September 30, 2018 and September 30, 2017, respectively, includes 1,900,000 and -0- restricted shares that have been issued but are still at risk of forfeiture as the restrictions have not lapsed.

Antidilutive shares of 40,741,945 have been omitted from the calculation of dilutive earnings/(loss) per share for the nine month period ended September 30, 2018 and 31,924,411 for the nine month period ended September 30, 2017, as the shares were antidilutive. Provided below is the reconciliation between numerators and denominators of the basic and diluted earnings per share. The table below provides a reconciliation of anti-dilutive securities outstanding as of September 30, 2018 and September 30, 2017, respectively.

Anti-dilutive security	September 30, 2018		September 30, 2017
Employee stock options		2,670,000		4,050,000
Warrants		26,020,000		27,020,000
Convertible notes		11,940,000		740,000
Shares issuable for accrued interest		111,945		114,411
Total		40,741,945		31,924,411

The employee stock options are exercisable at prices ranging from $0.17 to $0.34 per share. The exercise prices on the warrants range from $0.25 to $0.60 per share. Shares issuable upon conversion of convertible debentures or accrued interest have a conversion price of $0.50 per share.

Some of the Company’s convertible debt has an anti-dilutive effect on net income/(loss) per share and was not included in the computation of diluted earnings per share.

	For the nine months ended
	September 30, 2018								September 30, 2017
	Income/(loss)			Shares		Per-share			Income/(loss)		Shares		Per-share
	numerator			denominator		amount			numerator		denominator		amount
Basic EPS	$	(539,428	)		150,282,732	$	(0.00	)	$	2,394,546		147,805,410	$	0.02
Effect of dilutive securities		-0-			-0-		-0-			-0-		45,476		-0-
Diluted EPS	$	(539,428	)		150,282,732	$	(0.00	)	$	2,394,546		147,850,886	$	0.02

	For the three months ended
	September 30, 2018								September 30, 2017
	Income/(loss)			Shares		Per-share			Income/(loss)			Shares		Per-share
	numerator			denominator		amount			numerator			denominator		amount
Basic EPS	$	(2,662,692	)		150,905,124	$	(0.02	)	$	(358,839	)		147,858,566	$	(0.00	)
Effect of dilutive securities		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(2,662,692	)		150,905,124	$	(0.02	)	$	(358,839	)		147,858,566	$	(0.00	)

15

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

NOTE 4: PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

	September 30, 2018						December 31, 2017
Description	Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value		Estimated useful life (years)
Computer & office equipment	$	3,046,561	$	2,129,785	$	916,776	$	2,322,833	$	1,949,982	$	372,851	5
Leasehold improvements		137,054		104,335		32,719		118,380		98,901		19,479	5
Computer software		2,305,155		1,957,405		347,750		2,010,999		1,886,342		124,657	3
Office furniture		169,122		135,623		33,499		162,799		127,248		35,551	5
Total	$	5,657,892	$	4,327,148	$	1,330,744	$	4,615,011	$	4,062,473	$	552,538

Depreciation expense for the nine month period ended September 30, 2018 was $279,532 and $249,801 for the nine month period ended September 30, 2017.

NOTE 5: INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

	September 30, 2018						December 31, 2017
Asset	Cost		Accumulated amortization		Net book value		Cost		Accumulated amortization		Net book value		Estimated useful life (years)
eClinical Suite customer lists	$	1,392,701	$	1,392,701	$	-0-	$	1,392,701	$	1,392,701	$	-0-	3
Promasys B.V. customer lists		114,877		114,877		-0-		118,780		32,994		85,786	15
Promasys B.V. software code		72,837		71,623		1,214		72,837		60,698		12,139	5
Promasys B.V. URLs/website		58,019		58,019		-0-		59,990		59,990		-0-	3
Acuity software code		1,052,403		233,867		818,536		-0-		-0-		-0-	3
Total	$	2,690,837	$	1,871,087	$	819,750	$	1,644,308	$	1,546,383	$	97,925

During the second quarter of 2018 we recognized an impairment loss of $79,634 on the Promasys B.V. customer list after performing a fair value analysis on the asset utilizing a discounted cash flow model. The impairment charge is separately presented on the Statement of Operations. 

Amortization expense for the nine month period ended September 30, 2018 was $248,790 and $16,455 for the nine month period ended September 30, 2017.

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

Year	Amortization
2018	$	88,914
2019		350,801
2020		350,801
2021		29,234
Total	$	819,750

16

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

NOTE 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

Account	September 30, 2018		December 31, 2017
Accounts payable	$	760,557	$	1,303,073
Accrued payroll and related costs		681,354		925,890
Other accrued expenses		168,675		184,131
Accrued interest		75,950		172,951
Total accounts payable and accrued expenses	$	1,686,536	$	2,586,045

NOTE 7: LINE OF CREDIT, NOTES PAYABLE AND LIQUIDITY

On March 18, 2013, the Company entered into a $2,000,000 revolving Line of Credit (“Line of Credit”) with The Northern Trust Company guaranteed by our then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”). Mr. Wit receives 2.0% interest (approximately $9,500 per month) from the Company 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. On April 7, 2017 the Company renewed the Line of Credit. The Line of Credit currently matures on April 7, 2020 and carries a variable interest rate based on the prime rate. At September 30, 2018, $3,200,000 was outstanding on the Line of Credit at an interest rate of 4.25%.

Our primary sources of working capital are funds from operations and borrowings under our revolving Line of Credit. In the event that the Line of Credit is called for any reason, Mr. Wit has pledged to replace the borrowing capacity under the Line of Credit with a promissory note that utilizes the same maturity date and interest rate as the Line of Credit.

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

The following table summarizes the notes payable outstanding as of September 30, 2018.

			Ending		Non related party					Related party
Origination	Maturity	Interest	principal				Long						Long
date	date	rate	September 30, 2018		Current		term			Current			term
2/29/2016	4/1/2019	12%	$	400,000	$	-0-	$	-0-		$	400,000		$	-0-
6/30/2016	4/1/2020	10%		420,000		-0-		420,000			-0-			-0-
6/30/2016	4/1/2020	12%		282,500		-0-		282,500			-0-			-0-
Discount on notes payable						-0-		(186,268	)		(46,946	)		-0-
Total			$	1,102,500	$	-0-	$	516,232		$	353,054		$	-0-

The following table summarizes the notes payable outstanding as of December 31, 2017.

			Ending		Non related party					Related party
Origination	Maturity	Interest	principal				Long					Long
date	date	rate	December 31, 2017		Current		term			Current		term
2/29/2016	4/1/2019	12%	$	400,000	$	-0-	$	-0-		$	-0-	$	400,000
6/30/2016	4/1/2020	10%		420,000		-0-		420,000			-0-		-0-
6/30/2016	4/1/2020	12%		282,500		-0-		282,500			-0-		-0-
Discount on notes payable						-0-		(279,402	)		-0-		(117,365	)
Total			$	1,102,500	$	-0-	$	423,098		$	-0-	$	282,635

On February 29, 2016, the Company issued a promissory note in the principal amount of $450,000 and warrants to purchase 1,800,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2019 to our then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”), in exchange for accrued interest in the amount of $450,000. The note carries an interest rate of 12% per annum and has a maturity date of April 1, 2019. On December 5, 2016, Mr. Wit sold 1,000,000 of the warrants to an employee of the Company. On August 31, 2017, the Company repaid $50,000 of the outstanding principal to Mr. Wit.

17

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

The 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 $325,689 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 $124,311. The warrant liability (discount) will be amortized over the 37 month duration of the note payable. The Company will continue to perform a fair value calculation quarterly 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 June 30, 2016, the Company issued promissory notes in the principal amount of $372,500 and warrants to purchase 1,490,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2020 to two investors in exchange for existing promissory notes in the same amount. The notes carry an interest rate of 12% per annum and have a maturity date of April 1, 2020. On August 31, 2017 a promissory note for $90,000 was repaid in full.

The 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 $246,921 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 $125,579. The warrant liability (discount) will be amortized over the 45 month duration of the note payables. The Company will continue to perform a fair value calculation quarterly 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 June 30, 2016, the Company issued promissory notes in the principal amount of $420,000 and warrants to purchase 1,680,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2020 to two investors, in exchange for existing promissory notes in the same amount. The notes carry an interest rate of 10% per annum and have a maturity date of April 1, 2020.

The 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 $278,408 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 $141,592. The warrant liability (discount) will be amortized over the 45 month duration of the note payables. The Company will continue to perform a fair value calculation quarterly 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.

NOTE 8: CONVERTIBLE NOTES PAYABLE

The following table summarizes the convertible debt outstanding as of September 30, 2018.

					Carrying amount
Date of	Maturity	Interest	Principal at		Short term				Long term
issuance	date	rate	September 30, 2018		Related		Non related		Related		Non related
8/29/2008	4/1/2020	10%	$	1,770,000	$	-0-	$	-0-	$	1,770,000	$	-0-
12/16/2008	4/1/2020	12%		4,000,000		-0-		-0-		4,000,000		-0-
12/16/2008	4/1/2021	12%		200,000		-0-		-0-		-0-		200,000
Total			$	5,970,000	$	-0-	$	-0-	$	5,770,000	$	200,000

18

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

The following table summarizes the convertible debt outstanding as of December 31, 2017. 

					Carrying amount
Date of	Maturity	Interest	Principal at		Short term				Long term
issuance	date	rate	December 31, 2017		Related		Non related		Related		Non related
8/1/1999	6/30/2004	10%	$	50,000	$	-0-	$	50,000	$	-0-	$	-0-
8/29/2008	4/1/2019	10%		150,000		-0-		-0-		-0-		150,000
8/29/2008	4/1/2020	10%		1,770,000		-0-		-0-		1,770,000		-0-
12/16/2008	4/1/2020	12%		4,000,000		-0-		-0-		4,000,000		-0-
12/16/2008	4/1/2021	12%		200,000		-0-		-0-		-0-		200,000
Total			$	6,170,000	$	-0-	$	50,000	$	5,770,000	$	350,000

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 10% 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. On September 30, 2018, the final $50,000 note was repaid in full along with the accrued interest of $96,949. As of September 30, 2018, $862,500 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 $-0-.

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 then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. 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 Debentures until April 1, 2013, including $1,100,000 in Debentures held by Mr. Wit. The Company also extended the expiration date of the warrants associated with the Debentures.

On February 22, 2013, the Company and two holders extended $1,200,000 of the Debentures until January 1, 2016, including $1,100,000 in Debentures held by Mr. Wit. Mr. Wit also waived all his rights to the security interest under his $1,100,000 of Debentures. 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 $1,100,000 of the Debentures to April 1, 2017. The expiration date of the warrants associated with the Debentures was also extended to April 1, 2017. On November 19, 2015, Mr. Wit converted $475,000 of the Debentures into 1,900,000 shares of our common stock. On November 19, 2015, the Company and Mr. Wit agreed to cancel the 1,900,000 warrants related to the $475,000 of Debentures and $475,000 of unrelated promissory notes in exchange for 1,900,000 shares of our common stock. On November 23, 2015, Mr. Wit sold the remaining $625,000 of Debentures and the related warrants to two unrelated non-affiliate stockholders.

On April 1, 2015, the Company and the holder extended the maturity date of $100,000 of Debentures to April 1, 2018. The expiration date of the warrants associated with the debentures was also extended to April 1, 2018. On June 30, 2017 the Company repaid the $100,000 of Debentures.

On June 30, 2016, the Company and two holders extended the maturity date of $625,000 of Debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. In August 2017 the Company repaid the $625,000 of Debentures in full.

19

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

Convertible Debentures

August 2008

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 then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”) and one of our then 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, the Company and 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. The expiration date of the warrants associated with the debentures was also extended to August 29, 2013.

On February 22, 2013, the Company and Mr. Wit extended the maturity date of $1,770,000 of the convertible debentures to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

On February 22, 2013, the Company and Mr. van Kesteren extended the maturity date of $150,000 of the convertible debentures due to our former Director, Guus van Kesteren (“Mr. 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 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 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.

On June 30, 2015, the Company and Mr. van Kesteren extended the maturity date of $150,000 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 June 30, 2016, the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020.

On June 30, 2016, the Company and Mr. van Kesteren extended the maturity date of $150,000 of convertible debentures to April 1, 2018. The expiration date of the warrants associated with the debentures was also extended to April 1, 2018.

On June 30, 2017, the Company and Mr. van Kesteren extended the maturity date of $150,000 of convertible debentures to April 1, 2019. The expiration date of the warrants associated with the debentures was also extended to April 1, 2019. The $150,000 of convertible debentures was repaid in full on June 30, 2018.

December 2008

On December 16, 2008, the Company sold $5,075,000 of convertible debentures and warrants to purchase an aggregate of 10,150,000 shares of common stock to eleven accredited investors, including our then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”), our then Chief Operating Officer and President, Stephen E. Johnson (“Mr. Johnson”), our then Chief Technology Officer, Randall G. Smith (“Mr. Smith”), our then Chief Financial Officer, Ronald T. Linares and four of our then 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, the Company and eight Affiliates of the Company extended $4,980,000 of the convertible debentures until December 16, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. The expiration date of the warrants associated with the convertible debentures was also extended to December 16, 2013.

20

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

On February 22, 2013, the Company and the holders agreed to extend the maturity date of $4,505,000 of the convertible debentures including $4,475,000 due to Mr. Wit, $25,000 due to Mr. Johnson and $5,000 due to Mr. 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 our former director Mr. Veatch extended the maturity date of $15,000 of the convertible debentures 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 the holder extended 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 the holder 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 holders agreed to extend the maturity date of $360,000 of the convertible debentures, including $160,000 due to our then director, Guus van Kesteren (“Mr. van Kesteren”), 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 April 28, 2014, the Company and the holder extended the maturity date of $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 January 31, 2015, the Company and Mr. Wit extended the maturity date of $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 November 19, 2015, the Company and Mr. Wit agreed to cancel $420,000 of the debentures and 1,680,000 of unrelated warrants in exchange for 1,680,000 shares of our common stock.

On April 27, 2015, the Company and the holder extended the maturity date of $200,000 of convertible debentures to April 1, 2018. The expiration date of the warrants associated with the debentures was also extended to April 1, 2018.

On April 30, 2015, the Company and Mr. Johnson extended the maturity date of $25,000 of convertible debentures to April 1, 2018. The expiration date of the warrants associated with the debentures was also extended to April 1, 2018. The convertible debentures were repaid in full on December 14, 2016.

On May 1, 2015, the Company and Mr. van Kesteren extended the maturity date of $160,000 of the convertible debentures to April 1, 2017. The expiration date of the warrants associated with the debentures was also extended to April 1, 2017.

On May 1, 2015, the Company repaid $5,000 of the convertible debentures to Mr. Smith.

On May 7, 2015, the Company and Mr. Veatch, extended the maturity date of $15,000 of the convertible debentures to April 1, 2018. The expiration date of the warrants associated with the debentures was also extended to April 1, 2018. The $15,000 of convertible debentures were repaid in full on December 14, 2016.

On June 30, 2015, the Company and the holder extended the maturity date of $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.

21

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

On June 30, 2016, the Company and Mr. Wit extended the maturity date of $4,055,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. On August 31, 2017, the Company repaid $55,000 of the convertible debentures to Mr. Wit.

On June 30, 2016, the Company and Mr. van Kesteren extended the maturity date of $160,000 of the convertible debentures to April 1, 2018. The expiration date of the warrants associated with the debentures was also extended to April 1, 2018. The $160,000 of convertible debentures was repaid in full on December 14, 2016.

On June 30, 2016, the Company and the holder extended the maturity date of $100,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. On August 31, 2017, the Company repaid $100,000 of convertible debentures to the holder.

On June 30, 2017, the Company and the holder extended the maturity date of $200,000 of the convertible debentures to April 1, 2021. The expiration date of the warrants associated with the debentures was also extended to April 1, 2021.

The principal payments required at maturity under the Company’s outstanding convertible debt at September 30, 2018 are as follows:

Year	Amount
2018	$	-0-
2019		-0-
2020		5,770,000
2021		200,000
Total	$	5,970,000

NOTE 9: 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 (“ASC 820”), 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.

 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 methods

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

22

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

The Company also adopted the provisions of ASC 825, Financial Instruments (“ASC 825”). 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.

The Company’s financial assets or liabilities subject to ASC 820 as of September 30, 2018 include the conversion feature and warrant liability associated with convertible debentures issued during 2008 and 2009 and the warrants issued during 2011 and 2016 that are associated with notes payable. 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 8 – Convertible Notes Payable.

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

A summary, as of September 30, 2018, of the fair value of liabilities measured at fair value on a recurring basis follows:

	Fair value at		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Derivatives: (1) (2)	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Conversion feature liability	$	1,840,512	$	-0-	$	-0-	$	1,840,512
Warrant liability		4,436,207		-0-		-0-		4,436,207
Total of derivative liabilities	$	6,276,719	$	-0-	$	-0-	$	6,276,719

(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 nine month period ended September 30, 2018.

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

Significant valuation assumptions for derivative instruments at September 30, 2018
Risk free interest rate	2.45%	to	2.45%
Dividend yield		0.00%
Expected volatility	85.7%	to	105.8%
Expected life (range in years)
Conversion feature liability	1.50	to	2.50
Warrant liability	0.25	to	2.50

A summary, as of December 31, 2017, of the fair value of liabilities measured at fair value on a recurring basis follows:

	Fair value at		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Derivatives: (1) (2)	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Conversion feature liability	$	1,685,947	$	-0-	$	-0-	$	1,685,947
Warrant liability		3,440,799		-0-		-0-		3,440,799
Total of derivative liabilities	$	5,126,746	$	-0-	$	-0-	$	5,126,746

(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, 2017.

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

Significant valuation assumptions for derivative instruments at December 31, 2017
Risk free interest rate	1.56%	to	1.81%
Dividend yield		0.00%
Expected volatility	87.0%	to	118.4%
Expected life (range in years)
Conversion feature liability	1.25	to	3.25
Warrant liability	0.25	to	3.25

23

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

A summary, as of September 30, 2018, of the fair value of assets measured at fair value on a non-recurring basis follows:

	Carrying amount		Carrying amount		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Acquired assets (1)	December 31, 2017		September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Promasys B.V. customer list (2) (3)	$	85,786	$	-0-	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (2)		12,139		1,214		-0-		-0-		72,943
Acuity software code (4)		-0-		818,536		-0-		-0-		1,052,403
Total	$	97,925	$	819,750	$	-0-	$	-0-	$	1,261,599

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

(2)  The acquired Promasys B.V. software code and customer list 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.

(3)  During the second quarter of 2018 we recognized an impairment loss of $79,634 on the Promasys B.V. Customer List after performing a fair value analysis on the asset utilizing a discounted cash flow model. The impairment charge is separately presented on the Statement of Operations.

(4)  The acquired Acuity software code is not measured on a recurring basis since the 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.

A summary, as of December 31, 2017, of the fair value of assets measured at fair value on a non-recurring basis follows:

	Carrying amount		Carrying amount		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Acquired assets (1)	December 30, 2016		December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Promasys B.V. customer list (2)	$	82,173	$	85,786	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (2)		26,707		12,139		-0-		-0-		72,943
Total	$	108,880	$	97,925	$	-0-	$	-0-	$	209,196

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

(2)  The acquired Promasys B.V. software code and customer list 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.

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 ASC 360, Property, Plant and Equipment 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.

24

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

The table below presents the unrealized gains/(losses) for the nine month periods ended September 30, 2018 and September 30, 2017.

	Other income/(expense)
	For the nine months ended
	September 30, 2018			September 30, 2017
The net amount of gains/(losses) for the period included in earnings attributable to the unrealized and realized gains/(losses) from changes in derivative liabilities at the reporting date	$	(1,160,473	)	$	723,532
Total unrealized and realized gains/(losses) included in earnings	$	(1,160,473	)	$	723,532

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 nine month period ended September 30, 2018 and the year ended December 31, 2017. The tables reflect changes for all financial liabilities at fair value categorized as Level 3 as of September 30, 2018 and December 31, 2017.

The table below presents the Level 3 financial liabilities at fair value for the nine month period ended September 30, 2018.

	Level 3 financial liabilities at fair value
									Net		Reclassification
									purchases,		of conversion
	Balance,								issuances		feature liability		Balance,
	beginning			Net realized		Net unrealized			and		associated with		end
Derivatives:	of year			gains/(losses)		gains/(losses)			settlements		convertible debt		of period
Conversion feature liability	$	(1,685,947	)	$	-0-	$	(165,065	)	$	-0-	$	10,500	$	(1,840,512	)
Warrant liability		(3,440,799	)		-0-		(995,408	)		-0-		-0-		(4,436,207	)
Total of derivative liabilities	$	(5,126,746	)	$	-0-	$	(1,160,473	)	$	-0-	$	10,500	$	(6,276,719	)

The table below presents the Level 3 financial liabilities at fair value for the year ended December 31, 2017.

	Level 3 financial liabilities at fair value
								Net		Reclassification
								purchases,		of conversion
	Balance,							issuances		feature liability		Balance,
	beginning			Net realized		Net unrealized		and		associated with		end
Derivatives:	of year			gains/(losses)		gains/(losses)		settlements		convertible debt		of year
Conversion feature liability	$	(2,325,730	)	$	48,375	$	188,841	$	-0-	$	402,567	$	(1,685,947	)
Warrant liability		(3,999,362	)		-0-		558,563		-0-		-0-		(3,440,799	)
Total of derivative liabilities	$	(6,325,092	)	$	48,375	$	747,404	$	-0-	$	402,567	$	(5,126,746	)

NOTE 10: COMMITMENTS AND CONTINGENCIES

The Company currently leases office space under operating leases for most of its office locations and has 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 September 30, 2018 are as follows:

Year	Payments
2018	$	226,880
2019		654,275
2020		413,574
2021		337,397
2022		337,480
Thereafter		75,052
Total	$	2,044,658

25

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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 $930,972 and $841,718 for the nine month periods ended September 30, 2018 and September 30, 2017, respectively.

The Company’s Fort Lauderdale, Florida corporate office lease expires in February 2023. The Company’s lease on its New Jersey field office expires in March 2021. The Company currently operates its wholly-owned subsidiary, OmniComm Ltd., in the United Kingdom under the terms of a lease that expires in September 2020. The Company currently operates its wholly-owned subsidiary, OmniComm Europe, GmbH, in Germany under the terms of a lease that expires in July 2019. The Company currently operates its wholly-owned subsidiary, OmniComm Systems B.V, in the Netherlands under the terms of a lease that expires in October 2018. Our offices in Barcelona, Spain, Tokyo, Japan and Bengaluru, India are administered under service agreements that include the use of office space and other services. 

The Company currently leases computer hardware for its operations under leases classified as capital leases. The leased equipment is amortized on a straight line basis over five years. The minimum future lease payments required under the Company’s capital leases at September 30, 2018 are as follows:

Year	Payments
2018	$	32,958
2019		131,832
2020		131,832
2021		52,779
Total minimum capital lease payments		349,401
Less: Amount representing interest		(28,797	)
Present value of minimum capital lease payments	$	320,604

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 September 30, 2018, there were no pending legal proceedings to which the Company or its subsidiaries are a party or to which any of its property is subject that could reasonably be expected to have a material effect on the results of our operations.

PATENT LITIGATION SETTLEMENT

Effective April 9, 2009, we entered into a Settlement and License Agreement with DataSci, LLC (“DataSci”). DataSci granted us a worldwide, non-exclusive non-transferable right and license under the Licensed Patent and the right to sublicense TrialMaster on a Technology Transfer and Technology Transition basis. Under the terms of the Settlement and License Agreement, as amended, we are obligated to pay royalties quarterly for sales of Licensed Products, as defined therein, from January 1, 2009 until the termination of the Settlement and License Agreement on December 31, 2017 equal to two percent (2%) of OmniComm’s annual Gross Revenues or, alternatively, the annual minimum royalty payment(s), whichever is greater. In addition to the payment of royalties, the Settlement and Licensing Agreement imposes certain obligations on us including commercialization, certain sublicensing, other payments, insurance and confidentiality. In addition and as a license fee for past use of the Licensed Patent which may have occurred prior to the effective date of the Settlement and Licensing Agreement, we issued a warrant to DataSci to purchase 1,000,000 shares of our common stock at an exercise price of $.01 per share. The Settlement and Licensing Agreement provides that upon the expiration date of the warrant, at DataSci’s sole discretion, DataSci shall exercise its option under the warrant or licensee shall pay DataSci $300,000. The warrant was exercisable commencing on the second anniversary of the Settlement and Licensing Agreement, April 2, 2011, through the expiration date of the warrant on December 31, 2017. On December 31, 2017, DataSci exercised 50% of the warrant for 500,000 common shares and requested cash payment on 50% of the warrant. As a result of the exercise, DataSci received 500,000 restricted common shares and a net cash payment of $145,000.

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, (i) to include the eResearch Technology EDC assets acquired within the definition of Licensed Products, and as such subject to the royalty payment(s), under and in accordance with the Settlement and Licensing Agreement, and (ii) provide a release by DataSci of any and all claims of infringement of the Licensed Patent in connection with the eResearch Technology EDC assets acquired which may have occurred prior to the effective date of the First Amendment to Settlement and Licensing Agreement for an aggregate amount of $300,000.

26

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

No further payments are due under the Settlement and Licensing Agreement. 

During the nine month period ended September 30, 2017 the Company recorded a charge to earnings of ($111,979), which amount represented (i) the amount of additional license expense incurred above the stipulated minimum in the DataSci Settlement and License Agreement during the nine month period ended September 30, 2017 and (ii) 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.

EMPLOYMENT AGREEMENTS

We have employment agreements in place with the following members of our executive management team:

Cornelis F. Wit, Executive Chairman

Randall G. Smith, Executive Vice Chairman

Stephen E. Johnson, Chief Executive Officer and President

Thomas E. Vickers, Chief Financial Officer

The employment agreements provide, among other things, for participation in employee benefits available to employees and executives. Each of the agreements will renew for successive one-year terms unless the agreement is expressly terminated by either the employee or the Company prior to the end of the then current term as provided for in the employment agreement. Under the terms of the agreement, we may terminate the employee’s employment upon 30 or 60 days notice of a material breach and the employee may terminate the agreement under the same terms and conditions. The employment agreements contain non-disclosure provisions, as well as non-compete clauses. The agreements for Mr. Smith, Mr. Johnson and Mr. Vickers contain severance provisions which entitles the employee to severance pay equal to one (1) year's salary and benefits in the event of the employee's termination by the Company for any reason other than for cause, as described in the employment agreement, or termination by the employee pursuant to a material breach of the agreement by the Company.

NOTE 11: RELATED PARTY TRANSACTIONS

As of September 30, 2018, we have an aggregate of $5,770,000 of convertible debentures and $400,000 of promissory notes outstanding to our Executive Chairman and Chairman of the Board, Cornelis F. Wit (“Mr. Wit”) 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. The expiration date of the warrants associated with the debentures was also extended to August 29, 2013.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. On June 30, 2016, the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020.

● 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. The expiration date of the warrants associated with the debentures was also extended to December 16, 2013. 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. On November 19, 2015, the Company and Mr. Wit agreed to cancel $420,000 of the debentures and 1,680,000 of unrelated warrants in exchange for 1,680,000 shares of our common stock. On June 30, 2016, the Company and Mr. Wit extended the maturity date of the $4,055,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. On August 31, 2017, the Company repaid $55,000 to Mr. Wit.

● On February 29, 2016, the Company issued a promissory note in the principal amount of $450,000 and warrants to purchase 1,800,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2019 to Mr. Wit in exchange for accrued interest in the amount of $450,000. The note carries an interest rate of 12% per annum and has a maturity date of April 1, 2019. On Aug 31, 2017, the Company repaid $50,000 to Mr. Wit.

27

On March 18, 2013, the Company entered into a $2,000,000 revolving Line of Credit (“Line of Credit”) with The Northern Trust Company guaranteed by our then Chief Executive Officer and Director, Cornelis F. Wit. Mr. Wit receives 2.0% interest (approximately $9,500 per month) from the Company 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. On April 7, 2017, the Company renewed the Line of Credit. The Line of Credit currently matures on April 7, 2020 and carries a variable interest rate based on the prime rate. At September 30, 2018, $3,200,000 was outstanding on the Line of Credit at an interest rate of 4.25%.

For the nine month period ended September 30, 2018 we incurred $682,986 in interest expense payable to related parties and $717,782 for the nine month period ended September 30, 2017.

NOTE 12: STOCKHOLDERS’ (DEFICIT)

Our authorized capital stock consists of 500,000,000 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 Stock, 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.

As of September 30, 2018 we had the following outstanding securities:

○ 152,309,472 shares of common stock issued and outstanding;

○ 26,020,000 warrants issued and outstanding to purchase shares of our common stock;

○ 2,670,000 options issued and outstanding to purchase shares of our common stock;

○ 250,000 shares of our Series D Preferred Stock issued and outstanding; and

○ $5,970,000 principal amount  of Convertible Debentures and $55,973 of accrued interest convertible into 11,940,000 and 111,945 shares of common stock, respectively.

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 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.

Preferred Stock

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

○ dividend and liquidation preferences;

○ voting rights;

○ conversion privileges; and

○ redemption terms.

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

28

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

The following table presents the cumulative arrearage of undeclared dividends by class of preferred stock as of September 30, 2018 and September 30, 2017, respectively, and the per share amount by class of preferred stock.

	Cumulative arrearage as of				Cumulative arrearage per share as of
	September 30,				September 30,
Series of preferred stock	2018		2017		2018		2017
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	$	2,081,980	$	2,081,980

Warrants Issued in Capital Transactions

The following tables summarize all outstanding warrants for the nine month period ended September 30, 2018 and the year ended December 31, 2017, and the related changes during these periods.

September 30, 2018							September 30, 2018
Warrants outstanding							Warrants exercisable
				Weighted average	Weighted average			Weighted average
Range of exercise price			Number outstanding	remaining contractual life	exercise price		Number exercisable	exercise price
$0.25	–	$0.60	26,020,000	1.15	$	0.42	26,020,000	$	0.42

December 31, 2017							December 31, 2017
Warrants outstanding							Warrants exercisable
				Weighted average	Weighted average			Weighted average
Range of exercise price			Number outstanding	remaining contractual life	exercise price		Number exercisable	exercise price
$0.25	–	$0.60	27,020,000	1.84	$	0.42	27,020,000	$	0.42

Warrants
Balance at December 31, 2016	27,860,000
Issued	-0-
Exercised	-0-
Expired/forfeited	(840,000	)
Balance at December 31, 2017	27,020,000
Issued	-0-
Exercised	-0-
Expired/forfeited	(1,000,000	)
Balance at September 30, 2018	26,020,000
Warrants exercisable at September 30, 2018	26,020,000
Weighted average fair value of warrants granted during 2018	n/a

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, activity and ending balance of the components of accumulated other comprehensive (loss).

	Foreign currency translation			Accumulated other comprehensive (loss)
Balance at December 31, 2016	$	(410,505	)	$	(410,505	)
2017 Activity		13,268			13,268
Balance at December 31, 2017		(397,237	)		(397,237	)
2018 Activity		(34,424	)		(34,424	)
Balance at September 30, 2018	$	(431,661	)	$	(431,661	)

 

29

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

NOTE 13: EQUITY INCENTIVE PLANS

Stock Option Plans

Description of 2016 Equity Incentive Plan

In 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 initially 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 automatically increases on January 1st of each year for a period of nine (9) years commencing on January 1, 2017 and ending on (and including) January 1, 2025, in an amount equal to five percent (5%) of the total number of shares authorized under the 2016 Plan. As of September 30, 2018 11,025,000 shares of our common stock were authorized for issuance under the 2016 Plan. Unless earlier terminated by the Board, the 2016 Plan shall terminate on June 29, 2026.

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 to employees generally vest either upon grant or in two installments. 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 to employees 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.

On September 6, 2018, the Company entered into restricted stock agreements (“RSAs”) with its Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technology Officer intended to provide incentive to the executives to ensure certain economic performance of the Company. The shares issuable under the RSAs were valued as of the grant date at $0.33 per share. The RSAs provided for the issuance of up to 225,000 performance related shares of the Company's common stock to each of the executives provided certain milestones were met as follows: a) 75,000 performance related shares are subject to individual performance. b) If the Company's 2018 Revenue equals or exceeds $30 million and the Company’s 2018 EBITDA equals or exceeds $6 million, the Company would award 75,000 shares of common stock; c) If the Company's 2018 Revenue equals or exceeds $32 million and the Company’s 2018 EBITDA equals or exceeds $7 million, the Company would award an additional 75,000 shares of common stock. The restrictions on 1/3 of the awarded performance shares will lapse on the first, second and third anniversaries of the 2018 Annual Stockholder Meeting, which was held on June 7, 2018. As of November 12, 2018 the Company had not achieved the milestones.

On September 6, 2018, the Company entered into restricted stock agreements (“RSAs”) with its Board of Directors intended to provide incentive to ensure certain economic performance of the Company. The shares issuable under the RSAs were valued as of the grant date at $0.33 per share. The RSAs provided for the issuance of a total of 200,000 restricted shares with the restrictions lapsing on the day prior to the the 2019 Annual Stockholder Meeting to each director. The RSAs include 75,000 performance related shares of the Company's common stock that are subject to the Company's 2018 Revenue equaling or exceeding $30 million and the Company’s 2018 EBITDA equaling or exceeding $6 million. As of November 12, 2018 the Company had not achieved the milestones.

The total combined restricted stock compensation expense recognized, in the statement of operations, during the quarter ended September 30, 2018 was $41,735.

As of September 30, 2018, there were 2,495,000 options and 1,900,000 restricted stock shares that have been granted under the 2016 Plan. At September 30, 2018, there were 6,630,000 shares available for grant as options or other forms of share-based compensation under the 2016 Plan.

Description of 2009 Equity Incentive Plan

In 2009, the Company’s Board of Directors and stockholders approved the OmniComm Systems, Inc. 2009 Equity Incentive Plan (the “2009 Plan”). On June 16, 2016, the 2009 Plan terminated upon the approval of the 2016 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 option 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. Options granted to employees generally vested either upon grant or in two installments. The first vesting, which was equal to 50% of the granted stock options, usually occurred upon completion of one full year of employment from the date of grant and the second vesting usually occurred on the second anniversary of the date of grant. 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 to employees 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.

As of September 30, 2018, there were 275,000 outstanding options and 3,876,662 restricted stock shares that have been granted under the 2009 Plan. At September 30, 2018, there were -0- shares available for grant as options or other forms of share-based compensation under the 2009 Plan.

30

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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, 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
Granted		570,000			0.28
Exercised		(200,000	)		0.22
Forfeited/cancelled/expired		(2,975,000	)		0.25
Outstanding at September 30, 2018		2,670,000		$	0.27	3.58	$	396,500
Vested and exercisable at September 30, 2018		800,000		$	0.22	2.57	$	158,425

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price at quarter-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 September 30, 2018.

The total number of shares vesting and the fair value of shares vesting for the nine month periods ended September 30, 2018 and September 30, 2017, respectively, was:

Fair value of options vesting for the period ended	Number of options vested		Fair value of options vested
September 30, 2018		625,000	$	125,190
September 30, 2017		62,500	$	12,742

Cash received for stock option exercises for the nine month periods ended September 30, 2018 and September 30, 2017 was $45,000 and $35,250, respectively. Due to the Company’s net loss position, no income tax benefit has been realized during the nine month periods ended September 30, 2018 and September 30, 2017.

The following table summarizes information concerning options outstanding at September 30, 2018:

Awards breakdown by price range at September 30, 2018
			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		250,000		0.74	$	0.17		250,000		0.74	$	0.17
0.21	to	0.30		1,695,000		3.79		0.26		550,000		3.40		0.25
0.31	to	0.50		725,000		4.07		0.34		-0-		0.00		0.00
0.00	to	0.50		2,670,000		3.58	$	0.27		800,000		2.57	$	0.22

31

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

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 weighted average fair value (per share) of options granted during the nine month period ended September 30, 2018 was $0.23 and $0.19 during the nine month period ended September 30, 2017. The Black Scholes option-pricing model was utilized to calculate these values.

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 that have been granted. 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.

Below are the assumptions for the fair value of share-based payments for the nine month period ended September 30, 2018 and the year ended December 31, 2017.

	Stock option assumptions for the period ended
Stock option assumptions	September 30, 2018	December 31, 2017
Risk-free interest rate	2.71%	1.81%
Expected dividend yield	0.0%	0.0%
Expected volatility	110.3%	127.1%
Expected life of options (in years)	5	5

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

	Weighted average grant date fair value
	for the period ended September 30,
	2018		2017
Stock options granted during the period	$	0.23	$	0.19
Stock options vested during the period	$	0.20	$	0.20
Stock options forfeited during the period	$	0.19	$	0.13

32

OMNICOMM SYSTEMS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(unaudited)

A summary of the status of the Company’s non-vested shares underlying stock options as of September 30, 2018 and changes during the nine month period ended September 30, 2018 is as follows:

	Shares underlying stock options		Weighted average grant date fair value
Nonvested shares at January 1, 2018		4,875,000	$	0.21
Nonvested shares at September 30, 2018		1,870,000	$	0.24

As of September 30, 2018, $309,142 of total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted-average period of 1.9 years.

NOTE 14: SUBSEQUENT EVENTS

Subsequent to September 30, 2018 the Company repaid $900,000 on its revolving Line of Credit.

Subsequent to September 30, 2018, John Fontenault, our Chief Operating Officer, exercised options that had been granted to him. As a result 34,175 common shares were issued to him.

Subsequent to September 30, 2018 the Company extended the lease for the office in Leiden, the Netherlands until October 2019.

33

ITEM 2. 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 unaudited condensed 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-Q 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-Q regarding matters that are not historical facts, are only predictions and are based on information available at the time and/or management’s good faith belief with respect to future events. 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-Q. 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. Forward-looking statements speak only as of the date the statement was made. 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 software applications: TrialMaster^®; TrialOne^®; eClinical Suite; Promasys^®, IRTMaster, AutoEncoder and Acuity Analytics (the “EDC Software”), allow clinical trial sponsors and investigative sites to securely collect, validate, transmit and analyze clinical trial data electronically (“eClinical”).

In 2018, the primary focus of our strategy includes:

● Increasing our penetration of the Phase I trial market with our dedicated Phase I solution, TrialOne

● Stimulating demand by providing clinical trial sponsors with high value eClinical applications and services including our new AutoEncoder, coding solution as well as Acuity Analytics our new data analytics solution

● Expanding our penetration of the large pharmaceutical sponsor market

● Broadening our suite of services and software applications on an organic research and product development 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 those geographic markets

Our operating focus is first, to increase our sales and marketing capabilities and penetration rate and secondly, to continue developing and improving our software solutions and services to ensure our services and products remain an attractive, high-value EDC choice. Our ability to compete within the EDC and eClinical industries is predicated on our ability to continue enhancing and broadening the scope of solutions we offer. Our research and product development efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality. We spent $2,469,280 and $2,230,565 on research and product development activities during the nine months ended September 30, 2018 and September 30, 2017, respectively. The majority of these expenses represent salaries and related benefits to our developers which include the costs associated with the continued development of our EDC Software applications to meet current customer requirements and with our efforts at enhancing our suite of products by incorporating new features and services we believe will improve the products and consequently improve our market position. Our research and product development team is comprised of software programmers, engineers and related support personnel. 

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Our clients are able to partially or completely license our EDC solutions. The licensing business model provides our clients with a more cost effective means of deploying our EDC solutions on a large-scale basis. Our licensed products, falling under the auspices of either a Tech Transition (partial transfer with some services performed by OmniComm) or Tech Transfer, allows us to broaden our potential client base, provides us with a high-margin revenue source and affords us the ability to improve our competitive position within the EDC industry.

We feel that the momentum established from new client acquisitions in 2017 and the first nine months of 2018 coupled with our ability to retain clients for repeat engagements provide a good operating base from which to build during the remainder of 2018. We expect to continue increasing the level of resources deployed in our sales and marketing efforts through the addition of sales personnel and by increasing our marketing efforts. We feel that a combination of our existing infrastructure, broadened array of eClinical products and services and increased success in new client acquisition, coupled with our ability to retain our existing clients will allow us to compete effectively within the EDC market. 

The nine months ended September 30, 2018 compared to the nine months ended September 30, 2017

RESULTS OF OPERATIONS

A summarized version of our results of operations for the nine months ended September 30, 2018 and September 30, 2017 is included in the table below.

Summarized Statement of Operations

For the nine months ended

September 30,

				% of				% of	$			%
	2018			Revenues	2017			Revenues	Change			Change
Total revenues	$	20,332,949			$	20,175,800			$	157,149			0.8	%
Cost of goods sold		3,608,991		17.7%		4,123,165		20.4%		(514,174	)		-12.5	%
Gross margin		16,723,958		82.3%		16,052,635		79.6%		671,323			4.2	%
Salaries, benefits and related taxes		10,695,132		52.6%		9,906,293		49.1%		788,839			8.0	%
Rent		930,972		4.6%		841,718		4.2%		89,254			10.6	%
Consulting services		219,856		1.1%		185,222		0.9%		34,634			18.7	%
Legal and professional fees		381,648		1.9%		367,403		1.8%		14,245			3.9	%
Other expenses		1,358,830		6.7%		1,102,051		5.5%		256,779			23.3	%
Selling, general and administrative		1,297,008		6.4%		937,313		4.6%		359,695			38.4	%
Total operating expenses		14,883,446		73.3%		13,340,000		66.1%		1,543,446			11.6	%
Operating income/(loss)		1,840,512		9.1%		2,712,635		13.4%		(872,123	)		-32.2	%
Interest expense		(966,393	)	-4.8%		(1,060,022	)	-5.3%		93,629			8.8	%
Interest income		16		0.0%		589		0.0%		(573	)		-97.3	%
Change in derivatives		(1,160,473	)	-5.7%		723,532		3.6%		(1,884,005	)		-260.4	%
Transaction gain/(loss)		(97,984	)	-0.5%		19,006		0.1%		(116,990	)		-615.5	%
Income/(loss) before income taxes and dividends		(384,322	)	-1.9%		2,395,740		11.9%		(2,780,062	)		-116.0	%
Income tax (expense)		(155,106	)	-0.8%		(1,194	)	0.0%		(153,912	)		-12890.5	%
Net income/(loss) attributable to common stockholders	$	(539,428	)	-2.7%	$	2,394,546		11.9%	$	(2,933,974	)		-122.5	%

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The table below provides a comparison of our recognized revenues for the nine months ended September 30, 2018 and September 30, 2017.

	For the nine months ended
Revenue activity	September 30, 2018			September 30, 2017			$ Change			% Change
Set-up fees	$	2,683,182	13.2%	$	3,948,687	19.6%	$	(1,265,505	)		-32.0	%
Change orders		1,090,333	5.4%		1,054,288	5.2%		36,045			3.4	%
Maintenance		4,163,138	20.4%		3,749,897	18.6%		413,241			11.0	%
Software licenses		8,423,355	41.4%		7,951,228	39.4%		472,127			5.9	%
Professional services		2,617,149	12.9%		2,526,379	12.5%		90,770			3.6	%
Hosting		1,355,792	6.7%		945,321	4.7%		410,471			43.4	%
Total	$	20,332,949	100.0%	$	20,175,800	100.0%	$	157,149			0.8	%

Overall revenue increased by $157,149 or 0.8% for the nine months ended September 30, 2018 compared with revenue for the nine months ended September 30, 2017. This increase is primarily the result of increases in software licenses, maintenance and hosting offset by a decrease in set-up fees.

We recorded revenue of $13,401,543 including $4,000,779 from software licensing, $2,678,656 from set-up fees and $2,784,867 from maintenance revenues associated with TrialMaster during the nine months ended September 30, 2018 compared with revenue of $15,184,340 that included $4,838,537 from software licensing, $3,948,687 in set-up fees and $2,557,261 in maintenance revenues during the nine months ended September 30, 2017.

We recorded $823,082 in revenues associated with clients using the eClinical Suite during the nine months ended September 30, 2018 compared with revenue of $1,329,257 for the nine months ended September 30, 2017. eClinical Suite revenues are primarily comprised of license subscriptions and revenues associated with maintenance services.

We recorded $643,424 in revenues in maintenance and $47,700 from hosting activities associated with the eClinical Suite during the nine months ended September 30, 2018 compared with revenue of $682,135 from maintenance and $188,367 from hosting activities for the nine months ended September 30, 2017. Generally, these revenues are paid quarterly and are connected to hosting and client support for clients licensing the eClinical Suite. On April 30, 2019, OmniComm will decommission its eClinical Suite hosting platform as the eClinical Suite clients utilizing these hosting services have transitioned to TrialMaster, the eClinical Suite studies have been completed or the studies have transitioned to another hosting platform.

We recorded revenue of $5,402,178 including $4,053,847 from software licensing and $593,868 for maintenance for clients utilizing our TrialOne EDC software for the nine months ended September 30, 2018 compared with revenue of $3,286,129 including $2,573,361 from software licensing and $313,551 for maintenance for the nine months ended September 30, 2017. TrialOne revenues are primarily comprised of license subscriptions, professional services and maintenance services.

We recorded revenue of $450,506 for the nine months ended September 30, 2018 including $67,491 from software licensing and $140,979 from maintenance associated with clients utilizing the Promasys EDC solution as compared to revenue of $376,074 for the nine months ended September 30, 2017 including $90,274 from software licensing and $196,950 from maintenance.

Our TrialMaster EDC application has historically been primarily 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 eResearch EDC Assets and TrialOne, in 2013 we acquired Promasys and in 2018 we acquired Acuity Analytics (collectively the “Acquired Software”). These 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 the Acquired Software applications to continue to be sold primarily on a licensed basis.

TrialMaster contracts for ASP services provide for pricing that is based on both the size and duration of the clinical trial. Size parameters include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee at the beginning of a project based on the previously mentioned factors and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial.

Generally, ASP contracts will range in duration from one month to several years. ASP setup fees are generally recognized in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606 (“ASC 606"). ASC 606, which requires that the revenues be recognized when or as performance obligations are satisfied. ASP maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized as incurred.

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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 both on a term and on a perpetual license basis with hosting and maintenance charges being paid quarterly. The Company expects most licenses it sells of its software products to be sold under three to five year term licenses.

Our top five customers accounted for approximately 34% of our revenues during the nine month period ended September 30, 2018 and approximately 35% of our revenues during the nine month period ended September 30, 2017. One customer accounted for approximately 12% of our revenues during the nine month period ended September 30, 2018. One customer accounted for approximately 10% of our revenues during the nine month period ended September 30, 2017. The loss of any of these contracts or these customers in the future could adversely affect our results of operations. 

Our international customers, who are principally located in Europe and East Asia, accounted for approximately 30% of our total revenues for the nine month period ended September 30, 2018 and approximately 21% of our total revenues for the nine month period ended September 30, 2017.

One customer accounted for approximately 13% of our accounts receivables as of September 30, 2018. One customer accounted for approximately 27% and another customer accounted for approximately 11% of our accounts receivable as of September 30, 2017.

Cost of goods sold decreased approximately 12% or $514,174 from $4,123,165 for the nine months ended September 30, 2017 as compared to $3,608,991 for the nine months ended September 30, 2018. Cost of goods sold were approximately 18% of revenues for the nine months ended September 30, 2018 compared to approximately 20% for the nine months ended September 30, 2017. Cost of goods sold relates primarily to (i) salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients and (ii) the costs associated with pass-through revenues (reimbursable revenues). Cost of goods sold decreased during the nine months ended September 30, 2018 primarily due to a decrease in the costs associated with pass-through revenues (reimbursable revenues). The pass-through revenue and expense primarily relate to specific work being performed for a few clients. At this time we do not expect the volume of the pass-through revenue and expense to grow significantly and therefore we do not expect any significant degradation of our gross margin.

Overall, total operating expenses increased approximately 12% for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. The increase in operating expenses is primarily the result of an increase in salaries, benefits and related taxes as well as an increase in selling, general and administrative expenses.

Salaries and related expenses were our biggest operating expense at 72% of total operating expenses for the nine months ended September 30, 2018 compared to 74% of total operating expenses for the nine months ended September 30, 2017. Salaries and related expenses increased by approximately 8% for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. The table below provides a summary of the significant components of salaries and related expenses by primary cost category.

	For the nine months ended
Expense category	September 30, 2018		September 30, 2017		$ Change			% Change
OmniComm corporate operations	$	7,722,487	$	6,815,015	$	907,472			13.3	%
New Jersey operations office		817,044		814,050		2,994			0.4	%
OmniComm Europe, GmbH		501,030		481,792		19,238			4.0	%
OmniComm Ltd.		895,071		655,418		239,653			36.6	%
OmniComm Spain S.L.		261,984		295,138		(33,154	)		-11.2	%
OmniComm Systems B.V.		269,112		376,950		(107,838	)		-28.6	%
OmniComm eClinical Solutions Pvt. Ltd.		29,041		-0-		29,041			n/a
Employee stock compensation		199,363		467,930		(268,567	)		-57.4	%
Total salaries and related expenses	$	10,695,132	$	9,906,293	$	788,839			8.0	%

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As of September 30, 2018, we employed 162 employees and consultants Company-wide as follows: 66 out of our headquarters in Fort Lauderdale, Florida, 8 out of a regional operating office in Somerset, New Jersey, 27 in remote locations throughout the United States and Canada. Our wholly-owned subsidiary, OmniComm Europe, GmbH, employs 19 in Bonn, Germany. Our wholly-owned subsidiary, OmniComm Ltd., employs 13 in Southampton, England. Our wholly-owned subsidiary, OmniComm Spain, S. L. employs 2 in Barcelona, Spain. Our wholly-owned subsidiary, OmniComm Systems B.V. employs 3 in the Netherlands and 2 in Japan. Our wholly-owned subsidiary, OmniComm eClinical Solutions Pvt. Ltd. employs 22 in the Bengaluru, India. We believe that relations with our employees are good. None of our employees are represented by a collective bargaining agreement.

During the nine months ended September 30, 2018 and the nine months ended September 30, 2017 we incurred $199,363 and $467,930, respectively, in salary expense in connection with ASC 718, Compensation – Stock Compensation, (“ASC 718”) 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 increased by approximately 11% during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. The table below details the significant portions of our rent expense. Our primary data site is located at a 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 also utilize 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. In 2018 we added a new co-location facility in Frankfurt, Germany. We currently lease office space in Bonn, Germany for our European subsidiary, OmniComm Europe, GmbH under a lease that expires in July 2019. We currently lease office space for a regional operating office in New Jersey under a lease that expires in March 2021. Our OmniComm Ltd. subsidiary leases office space in Southampton, UK under a lease that expires in September 2020. Our OmniComm Systems 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 February 2023. Our offices in Barcelona, Spain, Tokyo, Japan and Bengaluru, India are administered under service agreements that include the use of office space and other services.   The table below provides the significant components of our rent related expenses by location or subsidiary. Included in rent during the nine months ended September 30, 2018 was a decrease in expense of $5,592 in non-cash, straight line rent recorded to give effect to contractual, inflation-based rent increases in our leases compared to a decrease in expense of $2,882 for the nine months ended September 30, 2017.

	For the nine months ended
Expense category	September 30, 2018			September 30, 2017			$ Change			% Change
Corporate office	$	343,399		$	310,813		$	32,586			10.5	%
Co-location and disaster recovery facilities		413,134			379,856			33,278			8.8	%
New Jersey operations office		39,444			39,444			-0-			0.0	%
OmniComm Europe, GmbH		66,845			58,254			8,591			14.7	%
OmniComm Ltd.		50,862			43,463			7,399			17.0	%
OmniComm Spain S.L.		8,400			5,958			2,442			41.0	%
OmniComm Systems B.V.		5,547			6,812			(1,265	)		-18.6	%
OmniComm eClinical Solutions Pvt. Ltd.		8,933			-0-			8,933			n/a
Straight-line rent expense		(5,592	)		(2,882	)		(2,710	)		-94.0	%
Total	$	930,972		$	841,718		$	89,254			10.6	%

Consulting services expense increased to $219,856 for the nine months ended September 30, 2018 compared with $185,222 for the nine months ended September 30, 2017. Consulting services are comprised of fees paid to consultants for help with product development and for services related to our sales and marketing efforts. Product development consulting expenses increased year over year as we utilized the services of additional consultants during the nine month period ended September 30, 2018. The table provided below provides the significant components of the expenses incurred related to consulting services.

	For the nine months ended
Expense category	September 30, 2018		September 30, 2017		$ Change			% Change
Sales and marketing	$	45,549	$	56,000	$	(10,451	)		-18.7	%
Product development		174,307		129,222		45,085			34.9	%
Total	$	219,856	$	185,222	$	34,634			18.7	%

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Legal and professional fees increased approximately 4% for the nine months ended September 30, 2018 compared with the nine months ended September 30, 2017. Professional fees include fees paid to our auditors for services rendered on a quarterly and annual basis in connection with our filings with the Securities and Exchange Commission (“SEC”) 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. The table below compares the significant components of our legal and professional fees for the nine months ended September 30, 2018 and September 30, 2017, respectively.

	For the nine months ended
Expense category	September 30, 2018		September 30, 2017		$ Change			% Change
Financial advisory	$	27,633	$	52,974	$	(25,341	)		-47.8	%
Audit and related		48,222		39,777		8,445			21.2	%
Accounting services		159,405		178,588		(19,183	)		-10.7	%
Legal-employment related		11,439		21,778		(10,339	)		-47.5	%
Legal-financial related		108,605		67,122		41,483			61.8	%
General legal		26,344		7,164		19,180			267.7	%
Total	$	381,648	$	367,403	$	14,245			3.9	%

Selling, general and administrative expenses (“SG&A”) increased by $359,695 or approximately 38% from $937,313 for the nine months ended September 30, 2017 compared to $1,297,008 for the nine months ended September 30, 2018. SG&A expenses relate primarily to costs incurred in running our offices in Fort Lauderdale, Florida, Somerset, New Jersey, Southampton, England, Barcelona, Spain, Bonn, Germany, Leiden, the Netherlands, Tokyo, Japan and Bengaluru, India 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. 

During the nine months ended September 30, 2018 we recognized bad debt expense of $47,931 compared to bad debt expense of $40,369 for the nine months ended September 30, 2017. This change was primarily the result of a increase in aged receivable balances that caused us to increase our reserve. During the remainder of 2018 we will continue 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 have been very successful in managing and collecting our outstanding accounts receivable. We believe that our current allowance for uncollectible accounts accurately reflects any accounts which may prove uncollectible during the remainder of 2018.

Interest expense was $966,393 for the nine months ended September 30, 2018 compared to $1,060,022 for the nine months ended September 30, 2017, a decrease of $93,629. Interest incurred to related parties was $682,986 during the nine months ended September 30, 2018 and $717,782 for the nine months ended September 30, 2017. Included in interest expense is the accretion of discounts recorded related to financial instrument derivatives that were deemed a part of the financings we undertook in 2008 and 2009 and relating to warrants issued during 2011 and 2016. Interest expense decreased year over year primarily due to the repayment of outstanding debt. The table below provides detail on the significant components of interest expense for the nine months ended September 30, 2018 and September 30, 2017.

	For the nine months ended
Debt description	September 30, 2018		September 30, 2017		$ Change			% Change
Accretion of discount from derivatives	$	163,553	$	241,664	$	(78,111	)		-32.3	%
August 2008 convertible notes		139,825		143,605		(3,780	)		-2.6	%
December 2008 convertible notes		376,964		389,347		(12,383	)		-3.2	%
September 2009 secured convertible debentures		-0-		54,962		(54,962	)		-100.0	%
General interest		164,884		105,282		59,602			56.6	%
Related party notes payable		121,167		125,162		(3,995	)		-3.2	%
Total	$	966,393	$	1,060,022	$	(93,629	)		-8.8	%

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 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 2016 and 2017 were obtained at the best terms available to the Company.

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We record unrealized gains/losses related to changes in our derivative liabilities associated with the issuance of convertible debt that occurred during 2008 and 2009 and warrants associated with promissory notes issued in 2011 and 2016. We recorded a net unrealized loss of $1,160,473 during the nine month period ended September 30, 2018 compared with a net unrealized gain of $723,532 during the nine month period ended September 30, 2017. 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 and promissory notes were issued. Accordingly the warrant and conversion feature liabilities are increased or decreased based on the fair value calculations made at each quarterly balance sheet date. These non-cash gains and losses have materially impacted our results of operations during the nine month periods ended September 30, 2018 and September 30, 2017 and can be reasonably anticipated to materially affect our net loss or net income in future periods. The fair value calculations are heavily reliant on the value of our common stock and on the calculated volatility of the price of our common stock on the OTCQX Marketplace. Accordingly, significant changes in our stock price will create large unrealized gains and losses on our financial statements. 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 in the future 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 below table contains the cumulative arrearage for each series of preferred stock as of September 30, 2018.

Series of Preferred Stock	Cumulative Arrearage
Series B	$	609,887
Series C		1,472,093
Total preferred stock arrearages	$	2,081,980

 The three months ended September 30, 2018 compared to the three months ended September 30, 2017

RESULTS OF OPERATIONS

A summarized version of our results of operations for the three months ended September 30, 2018 and September 30, 2017 is included in the table below.

Summarized Statement of Operations

For the three months ended

September 30,

				% of					% of		$			%
	2018			Revenues		2017			Revenues		Change			Change
Total revenues	$	6,842,824				$	6,715,913				$	126,911			1.9	%
Cost of goods sold		1,297,813			19.0%		1,315,445			19.6%		(17,632	)		-1.3	%
Gross margin		5,545,011			81.0%		5,400,468			80.4%		144,543			2.7	%
Salaries, benefits and related taxes		3,483,627			50.9%		3,393,915			50.5%		89,712			2.6	%
Rent		337,824			4.9%		292,669			4.4%		45,155			15.4	%
Consulting services		55,736			0.8%		64,488			1.0%		(8,752	)		-13.6	%
Legal and professional fees		72,776			1.1%		126,959			1.9%		(54,183	)		-42.7	%
Other expenses		463,176			6.8%		408,520			6.1%		54,656			13.4	%
Selling, general and administrative		383,958			5.6%		277,047			4.1%		106,911			38.6	%
Total operating expenses		4,797,097			70.1%		4,563,598			68.0%		233,499			5.1	%
Operating income/(loss)		747,914			10.9%		836,870			12.5%		(88,956	)		-10.6	%
Interest expense		(325,528	)		-4.8%		(380,073	)		-5.7%		54,545			14.4	%
Interest income		7			0.0%		3			0.0%		4			133.3	%
Change in derivatives		(2,918,886	)		-42.7%		(812,535	)		-12.1%		(2,106,351	)		-259.2	%
Transaction gain/(loss)		(12,128	)		-0.2%		(3,104	)		0.0%		(9,024	)		-290.7	%
Income/(loss) before income taxes and dividends		(2,508,621	)		-36.7%		(358,839	)		-5.3%		(2,149,782	)		-599.1	%
Income tax (expense)		(154,071	)		-2.3%		-0-			0.0%		(154,071	)		n/a
Net income/(loss) attributable to common stockholders	$	(2,662,692	)		-38.9%	$	(358,839	)		-5.3%	$	(2,303,853	)		-642.0	%

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The table below provides a comparison of our recognized revenues for the three months ended September 30, 2018 and September 30, 2017.

	For the three months ended
Revenue activity	September 30, 2018			September 30, 2017			$ Change			% Change
Set-up fees	$	692,995	10.1%	$	1,256,579	18.7%	$	(563,584	)		-44.9	%
Change orders		320,622	4.7%		352,782	5.3%		(32,160	)		-9.1	%
Maintenance		1,380,780	20.1%		1,371,203	20.4%		9,577			0.7	%
Software licenses		2,920,623	42.7%		2,444,604	36.4%		476,019			19.5	%
Professional services		1,106,940	16.2%		919,821	13.7%		187,119			20.3	%
Hosting		420,864	6.2%		370,924	5.5%		49,940			13.5	%
Total	$	6,842,824	100.0%	$	6,715,913	100.0%	$	126,911			1.9	%

Overall revenue increased by $126,911 or 1.9% for the three months ended September 30, 2018 compared with revenue for the three months ended September 30, 2017. This increase is primarily the result of increases in software licenses and consulting offset by a decrease in set-up fees.

We recorded revenue of $4,324,630 including $1,201,670 from software licensing, $688,834 from set-up fees and $928,964 from maintenance revenues associated with TrialMaster during the three months ended September 30, 2018 compared with revenue of $5,077,629 that included $1,525,942 from software licensing, $1,256,579 in set-up fees and $1,001,970 in maintenance revenues during the three months ended September 30, 2017.

We recorded $237,881 in revenues associated with clients using the eClinical Suite during the three months ended September 30, 2018 compared with revenue of $469,712 for the three months ended September 30, 2017. eClinical Suite revenues are primarily comprised of license subscriptions and revenues associated with maintenance services.

We recorded $181,278 in revenues in maintenance and $18,700 from hosting activities associated with the eClinical Suite during the three months ended September 30, 2018 compared with revenue of $190,758 from maintenance and $54,900 from hosting activities for the three months ended September 30, 2017. Generally, these revenues are paid quarterly and are connected to hosting and client support for clients licensing the eClinical Suite. On April 30, 2019, OmniComm will decommission its eClinical Suite hosting platform as the eClinical Suite clients utilizing these hosting services have been transitioned to TrialMaster, the eClinical Suite studies have completed or the studies have transitioned to another hosting platform.

We recorded revenue of $1,931,107 including $1,516,629 from software licensing and $225,521 for maintenance for clients utilizing our TrialOne EDC software for the three months ended September 30, 2018 compared with revenue of $1,033,981 including $680,864 from software licensing and $132,481 for maintenance for the three months ended September 30, 2017. TrialOne revenues are primarily comprised of license subscriptions, professional services and maintenance services.

We recorded revenue of $135,678 for the three months ended September 30, 2018 including $34,888 from software licensing and $45,017 from maintenance associated with clients utilizing the Promasys EDC solution as compared to revenue of $134,591 for the three months ended September 30, 2017 including $13,744 from software licensing and $45,995 from maintenance.

Our TrialMaster EDC application has historically been primarily 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 eResearch EDC Assets and TrialOne, in 2013 we acquired Promasys and in 2018 we acquired Acuity Analytics (collectively the “Acquired Software”). These 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 the Acquired Software applications to continue to be sold primarily on a licensed basis.

TrialMaster contracts for ASP services provide for pricing that is based on both the size and duration of the clinical trial. Size parameters include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee at the beginning of a project based on the previously mentioned factors and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial.

Generally, ASP contracts will range in duration from one month to several years. ASP setup fees are generally recognized in accordance with ASC 606, which requires that the revenues be recognized when or as performance obligations are satisfied. ASP maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized as incurred.

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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. The Company expects most licenses it sells of its software products to be sold under three to five year term licenses.

Our top five customers accounted for approximately 39% of our revenues during the three months ended September 30, 2018 and approximately 35% of our revenues during the three months ended September 30, 2017. One customer accounted for approximately 13% of our revenues and another customer accounted for approximately 11% of our revenues during the three months ended September 30, 2018. One customer accounted for approximately 14% of our revenues and another customer accounted for approximately 10% of our revenues during the three months ended September 30, 2017. The loss of any of these contracts or these customers in the future could adversely affect our results of operations. 

Our international customers, who are principally located in Europe and East Asia, accounted for approximately 28% of our total revenues for the three month period ended September 30, 2018 and approximately 21% of our total revenues for the three months ended September 30, 2017.

One customer accounted for approximately 13% of our accounts receivables as of September 30, 2018. One customer accounted for approximately 27% and another customer accounted for approximately 11% of our accounts receivable as of September 30, 2017.

Cost of goods sold decreased approximately 1% or $17,632 from $1,315,445 for the three months ended September 30, 2017 as compared to $1,297,813 for the three months ended September 30, 2018. Cost of goods sold were approximately 19% of revenues for the three months ended September 30, 2018 compared to approximately 20% for the three months ended September 30, 2017. Cost of goods sold relates primarily to (i) salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients and (ii) the costs associated with pass-through revenues (reimbursable revenues). Cost of goods sold decreased during the three months ended September 30, 2018 primarily due to a decrease in the costs associated with salaries and related costs. The pass-through revenue and expense primarily relate to specific work being performed for a few clients. At this time we do not expect the volume of the pass-through revenue and expense to grow significantly and therefore we do not expect any significant degradation of our gross margin.

Overall, total operating expenses increased approximately 5% for the three months ended September 30, 2018 compared to the three months ended September 30, 2017. The increase in operating expenses is primarily the result of an increase in salaries, benefits and related taxes as well as an increase in selling, general and administrative expenses.

Salaries and related expenses were our biggest operating expense at 73% of total operating expenses for the three months ended September 30, 2018 compared to 74% of total operating expenses for the three months ended September 30, 2017. Salaries and related expenses increased by approximately 3% for the three months ended September 30, 2018 compared to the three months ended September 30, 2017. The table below provides a summary of the significant components of salaries and related expenses by primary cost category.

	For the three months ended
Expense category	September 30, 2018		September 30, 2017		$ Change			% Change
OmniComm corporate operations	$	2,518,326	$	2,345,258	$	173,068			7.4	%
New Jersey operations office		256,526		255,625		901			0.4	%
OmniComm Europe, GmbH		161,659		165,778		(4,119	)		-2.5	%
OmniComm Ltd.		272,246		222,079		50,167			22.6	%
OmniComm Spain S.L.		74,006		119,543		(45,537	)		-38.1	%
OmniComm Systems B.V.		79,535		79,628		(93	)		-0.1	%
OmniComm eClinical Solutions Pvt. Ltd.		29,041		-0-		29,041			n/a
Employee stock compensation		92,288		206,004		(113,716	)		-55.2	%
Total salaries and related expenses	$	3,483,627	$	3,393,915	$	89,712			2.6	%

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As of September 30, 2018, we employed 162 employees and consultants Company-wide as follows: 66 out of our headquarters in Fort Lauderdale, Florida, 8 out of a regional operating office in Somerset, New Jersey, 27 in remote locations throughout the United States and Canada. Our wholly-owned subsidiary, OmniComm Europe, GmbH, employs 19 in Bonn, Germany. Our wholly-owned subsidiary, OmniComm Ltd., employs 13 in Southampton, England. Our wholly-owned subsidiary, OmniComm Spain, S. L. employs 2 in Barcelona, Spain. Our wholly-owned subsidiary, OmniComm Systems B.V. employs 3 in the Netherlands and 2 in Japan. Our wholly-owned subsidiary, OmniComm eClinical Solutions Pvt. Ltd. employs 22 in the Bengaluru, India. We believe that relations with our employees are good. None of our employees are represented by a collective bargaining agreement.

During the three months ended September 30, 2018 and the three months ended September 30, 2017 we incurred $92,288 and $206,004, 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 increased by approximately 15% during the three months ended September 30, 2018 compared to the three months ended September 30, 2017. The table below details the significant portions of our rent expense. Our primary data site is located at a 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 also utilize 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. In 2018 we added a new co-location facility in Frankfurt, Germany. We currently lease office space in Bonn, Germany for our European subsidiary, OmniComm Europe, GmbH under a lease that expires in July 2019. We currently lease office space for a regional operating office in New Jersey under a lease that expires in March 2021. Our OmniComm Ltd. subsidiary leases office space in Southampton, UK under a lease that expires in September 2020. Our OmniComm Systems 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 February 2023. Our offices in Barcelona, Spain, Tokyo, Japan and Bengaluru, India are administered under service agreements that include the use of office space and other services.The table below provides the significant components of our rent related expenses by location or subsidiary. Included in rent during the three months ended September 30, 2018 was a decrease in expense of $433 in non-cash, straight line rent recorded to give effect to contractual, inflation-based rent increases in our leases compared to a decrease in expense of $1,363 for the three months ended September 30, 2017.

	For the three months ended
Expense category	September 30, 2018			September 30, 2017			$ Change			% Change
Corporate office	$	130,827		$	104,652		$	26,175			25.0	%
Co-location and disaster recovery facilities		137,856			136,300			1,556			1.1	%
New Jersey operations office		13,148			13,148			-0-			0.0	%
OmniComm Europe, GmbH		23,871			20,751			3,120			15.0	%
OmniComm Ltd.		19,120			14,821			4,299			29.0	%
OmniComm Spain S.L.		2,452			2,463			(11	)		-0.4	%
OmniComm Systems B.V.		2,050			1,897			153			8.1	%
OmniComm eClinical Solutions Pvt. Ltd.		8,933			-0-			8,933			n/a
Straight-line rent expense		(433	)		(1,363	)		930			68.2	%
Total	$	337,824		$	292,669		$	45,155			15.4	%

Consulting services expense decreased to $55,736 for the three months ended September 30, 2018 compared with $64,488 for the three months ended September 30, 2017. Consulting services are comprised of fees paid to consultants for help with product development and for services related to our sales and marketing efforts. Product development consulting expenses decreased year over year as we reduced the utilization of the services of consultants during the three month period ended September 30, 2018. The table provided below provides the significant components of the expenses incurred related to consulting services.

	For the three months ended
Expense category	September 30, 2018		September 30, 2017		$ Change			% Change
Sales and marketing	$	18,968	$	18,000	$	968			5.4	%
Product development		36,768		46,488		(9,720	)		-20.9	%
Total	$	55,736	$	64,488	$	(8,752	)		-13.6	%

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Legal and professional fees decreased approximately 43% for the three months ended September 30, 2018 compared with the three months ended September 30, 2017. Professional fees include fees paid to our auditors for services rendered on a quarterly and annual basis in connection with our filings with the Securities and Exchange Commission (“SEC”) 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. The table below compares the significant components of our legal and professional fees for the three months ended September 30, 2018 and September 30, 2017, respectively.

	For the three months ended
Expense category	September 30, 2018		September 30, 2017			$ Change			% Change
Financial advisory	$	-0-	$	25,500		$	(25,500	)		-100.0	%
Audit and related		6,500		7,018			(518	)		-7.4	%
Accounting services		48,434		82,970			(34,536	)		-41.6	%
Legal-employment related		1,291		(1,176	)		2,467			209.8	%
Legal-financial related		15,751		11,235			4,516			40.2	%
General legal		800		1,412			(612	)		-43.3	%
Total	$	72,776	$	126,959		$	(54,183	)		-42.7	%

Selling, general and administrative expenses (“SG&A”) increased by $106,911 or approximately 39% from $277,047 for the three months ended September 30, 2017 compared to $383,958 for the three months ended September 30, 2018. SG&A expenses relate primarily to costs incurred in running our offices in Fort Lauderdale, Florida, Somerset, New Jersey, Southampton, England, Barcelona, Spain, Bonn, Germany, Leiden, the Netherlands, Tokyo, Japan and Bengaluru, India 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.

During the three months ended September 30, 2018 we recognized a bad debt expense of $21,679 compared to bad debt expense of $87,366 for the three months ended September 30, 2017. This change was primarily the result of a decrease in aged receivable balances that enabled us to decrease our reserve. During the remainder of 2018 we will continue 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 have been very successful in managing and collecting our outstanding accounts receivable. We believe that our current allowance for uncollectible accounts accurately reflects any accounts which may prove uncollectible during the remainder of 2018.

Interest expense was $325,528 for the three months ended September 30, 2018 compared to $380,073 for the three months ended September 30, 2017, a decrease of $54,545. Interest incurred to related parties was $229,906 during the three months ended September 30, 2018 and $252,585 for the three months ended September 30, 2017. Included in interest expense is the accretion of discounts recorded related to financial instrument derivatives that were deemed a part of the financings we undertook in 2008 and 2009 and relating to warrants issued during 2011 and 2016. Interest expense decreased year over year primarily due to the repayment of outstanding debt. The table below provides detail on the significant components of interest expense for the three months ended September 30, 2018 and September 30, 2017.

	For the three months ended
Debt description	September 30, 2018		September 30, 2017		$ Change			% Change
Accretion of discount from derivatives	$	54,518	$	118,806	$	(64,288	)		-54.1	%
August 2008 convertible notes		44,614		48,394		(3,780	)		-7.8	%
December 2008 convertible notes		127,035		130,195		(3,160	)		-2.4	%
September 2009 secured convertible debentures		-0-		11,820		(11,820	)		-100.0	%
General interest		58,528		29,006		29,522			101.8	%
Related party notes payable		40,833		41,852		(1,019	)		-2.4	%
Total	$	325,528	$	380,073	$	(54,545	)		-14.4	%

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 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 2016 and 2017 were obtained at the best terms available to the Company.

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We record unrealized gains/losses related to changes in our derivative liabilities associated with the issuance of convertible debt that occurred during 2008 and 2009 and warrants associated with promissory notes issued in 2011 and 2016. We recorded a net unrealized loss of $2,918,886 during the three month period ended September 30, 2018 compared with a net unrealized loss of $812,535 during the three month period ended September 30, 2017. 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 and promissory notes were issued. Accordingly the warrant and conversion feature liabilities are increased or decreased based on the fair value calculations made at each quarterly balance sheet date. These non-cash gains and losses have materially impacted our results of operations during the three month periods ended September 30, 2018 and September 30, 2017 and can be reasonably anticipated to materially affect our net loss or net income in future periods. The fair value calculations are heavily reliant on the value of our common stock and on the calculated volatility of the price of our common stock on the OTCQX Marketplace. Accordingly, significant changes in our stock price will create large unrealized gains and losses on our financial statements. 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 in the future 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.

 LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate adequate amounts of cash to meet its operating, investing and financing 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. At September 30, 2018, we had working capital deficit of $7,741,253.

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

Liquidity and Capital Resources

Summarized Balance Sheet Disclosure

	September 30, 2018			December 31, 2017			$ Change			% Change
Cash	$	1,371,962		$	1,176,551		$	195,411			16.6	%
Accounts receivable, net of allowance for doubtful accounts		5,124,404			7,492,597			(2,368,193	)		-31.6	%
Prepaid expenses		390,565			297,131			93,434			31.4	%
Other current assets		11,917			11,463			454			4.0	%
Current assets		6,898,848			8,977,742			(2,078,894	)		-23.2	%
Accounts payable and accrued expenses		1,686,536			2,586,045			(899,509	)		-34.8	%
Notes payable, related parties, current portion, net of discount		353,054			-0-			353,054			n/a
Convertible notes payable, current portion, net of discount		-0-			50,000			(50,000	)		-100.0	%
Deferred revenue, current portion		6,209,198			7,564,587			(1,355,389	)		-17.9	%
Capital lease liability		114,594			-0-			114,594			n/a
Patent litigation settlement liability, current portion		-0-			112,500			(112,500	)		-100.0	%
Conversion feature liability, related parties		1,744,002			1,604,723			139,279			8.7	%
Conversion feature liability		96,510			81,224			15,286			18.8	%
Warrant liability, related parties		2,754,207			2,196,570			557,637			25.4	%
Warrant liability		1,682,000			1,244,229			437,771			35.2	%
Current liabilities		14,640,101			15,439,878			(799,777	)		-5.2	%
Working capital (deficit)	$	(7,741,253	)	$	(6,462,136	)	$	(1,279,117	)		-19.8	%

 Statement of Cash Flows Disclosure

	For the nine months ended
	September 30, 2018			September 30, 2017			$ Change			% Change
Net cash provided by/(used in) operating activities	$	1,122,218		$	1,279,921		$	(157,703	)		-12.3	%
Net cash provided by/(used in) investing activities		(1,252,431	)		(212,173	)		(1,040,258	)		-490.3	%
Net cash provided by/(used in) financing activities		356,936			(1,184,750	)		1,541,686			130.1	%
Net increase/(decrease) in cash and cash equivalents		195,411			(121,741	)		317,152			260.5	%
Changes in operating accounts		(517,630	)		(1,407,312	)		889,682			63.2	%
Effect of non-cash transactions on cash and cash equivalents	$	2,179,276		$	292,687		$	1,886,589			644.6	%

Cash and Cash Equivalents

Cash and cash equivalents increased by $195,411 to $1,371,962 at September 30, 2018 from $1,176,551 at December 31, 2017. The decrease is primarily comprised of a net loss of ($539,428), changes in working capital accounts of ($517,630) and a increase from non-cash transactions of $2,179,276. During the nine months ended September 30, 2018 we had investing activities of ($1,252,431). We had financing activities that included proceeds of $550,000 from our revolving line of credit, repayment of notes payable of $200,000, proceeds of $45,000 from stock option exercises and payment of $38,064 for capital leases during the nine month period ended September 30, 2018.

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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 primarily 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 $300,000 planned for capital expenditures to further develop our infrastructure to allow for growth in our operations during the remainder of 2018. 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.

Contractual Obligations

The following table sets forth our contractual obligations as of September 30, 2018:

Contractual obligation			Payments due by period
	Total		Less than 1 year			1-2 Years			2-3 Years			3+ Years
Promissory notes (1)	$	1,102,500	$	400,000	(2)	$	702,500	(3)	$	-0-		$	-0-
Convertible notes (1)		5,970,000		-0-			5,770,000	(4)		200,000	(5)		-0-
Lines of credit (6)		3,200,000		-0-			3,200,000			-0-			-0-
Operating lease obligations (7)		2,044,658		770,411			433,332			346,239			494,676	(8)
Capital lease obligations (9)		320,604		114,594			122,213			83,797			-0-
Total	$	12,637,762	$	1,285,005		$	10,228,045		$	630,036		$	494,676

1.	Amounts do not include interest to be paid.
2.	Includes $400,000 in 12% notes payable that mature in April 2019.
3.	Includes $420,000 in 10% notes payable that mature in April 2020 and $282,500 in 12% notes payable that mature in April 2020.
4.	Includes $1,770,000 in 10% convertible notes that mature in April 2020 and $4,000,000 in 12% convertible notes that mature in April 2020.
5.	Includes $200,000 in 12% convertible notes that mature in April 2021.
6.	Includes $3,200,000 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, Florida and Germany, our office in England, our office in the Netherlands and our European headquarters in Germany.
8.	Includes office lease obligations through 2023.
9.	Includes capital lease obligations for hardware located in our co-location sites in Ohio and Germany.

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

On February 29, 2016, the Company issued a promissory note in the principal amount of $450,000 and warrants to purchase 1,800,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2019 to Mr. Wit in exchange for accrued interest in the amount of $450,000. The note carries an interest rate of 12% per annum and has a maturity date of April 1, 2019. On August 31, 2017, the Company repaid $50,000 to Mr. Wit.

On June 30, 2016, the Company and Mr. Wit extended the maturity date of $4,055,000 of convertible debentures originally issued in December 2008. The debentures carry an interest rate of 12% and have a maturity date of April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. On August 31, 2017 the Company repaid $55,000 to Mr. Wit.

On June 30, 2016, the Company and Mr. Wit extended the maturity date of $1,770,000 of convertible debentures originally issued in August 2008. The debentures carry an interest rate of 10% and have a maturity date of April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. 

On June 30, 2016, the Company issued promissory notes in the principal amount of $420,000 and warrants to purchase 1,680,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2020 to two investors, in exchange for existing promissory notes in the same amount. The notes carry an interest rate of 10% per annum and have a maturity date of April 1, 2020.

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On June 30, 2016, the Company issued promissory notes in the principal amount of $372,500 and warrants to purchase 1,490,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2020 to two investors, in exchange for existing promissory notes in the same amount. The notes carry an interest rate of 12% per annum and have a maturity date of April 1, 2020. On August 31, 2017, the Company repaid $90,000 to one of the holders.

On April 7, 2017, the Company renewed the Line of Credit. The Line of Credit currently matures on April 7, 2020 and carries a variable interest rate based on the prime rate. At September 30, 2018, $3,200,000 was outstanding on the Line of Credit at an interest rate of 4.25%.

On June 30, 2017, the Company and our former director, Mr. van Kesteren ("Mr. van Kesteren") extended the maturity date of $150,000 of convertible debentures originally issued in August 2008. The debentures carry an interest rate of 10% and have a maturity date of April 1, 2019. The expiration date of the warrants associated with the debentures was also extended to April 1, 2019. The $150,000 of convertible debentures was repaid in full on June 30, 2018.

On June 30, 2017, the Company and the holder 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 April 1, 2021. The expiration date of the warrants associated with the debentures was also extended to April 1, 2021.

During the next twelve months we expect debt in the aggregate amount of $400,000 to mature as follows:

● $400,000 of 12% promissory notes.

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 issuance of debt and the sale of 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, the $5,000,000 revolving line of credit with The Northern Trust Company $3,200,000 of which is outstanding as of September 30, 2018) or short-term bridge loans, we do not have any additional sources of working capital.

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

While we have not sought capital from venture capital or private equity sources we believe that those sources of capital remain available although possibly under terms and conditions that might be disadvantageous to existing investors.

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

47

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.

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 Condensed Consolidated Financial Statements describes the significant accounting policies used in the preparation of the condensed 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 condensed 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 condensed 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 and Intangible Assets

We account for asset acquisitions in accordance with ASC 350, Intangibles-Goodwill and Other. 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.

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.

48

FAIR VALUE MEASUREMENT

OmniComm’s capital structure includes the use of warrants and convertible debt features that are classified as derivative financial instruments. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value under ASC 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires that changes in the fair value of derivative financial instruments with no hedging designation be recognized as gains/(losses) in the earnings statement. The fair value measurement is determined in accordance with ASC 820, Fair Value Measurements and Disclosures.

DEFERRED REVENUE

Deferred revenue represents cash advances and accounts receivable 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 such as a pharmaceutical company. 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; and 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 programmer salaries and taxes and is expensed as incurred.

The Company recognizes revenues in accordance with FASB Accounting Standards Codification 606. A five-step analysis must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered.

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 Operations. The Company currently uses the Black-Scholes option pricing model to determine grant date fair value.

49

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

During the first nine months of 2018, we adopted the following new accounting pronouncements:

In February 2016, the FASB issued Accounting Standard Update No. 2016-02, “Leases (Topic 842)”, (“ASU 2016-02”). ASU 2016-02 requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after December 15, 2018. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In April 2016, the FASB issued Accounting Standards Update 2016–10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. The Company adopted the new standard effective January 1, 2018 using the modified retrospective method. The adoption of the new standard did not have a material impact on the Company’s 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 10-K for the year ended December 31, 2017 to determine their impact, if any, on our financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, being September 30, 2018, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures, as such term is 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.

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 quarter ended September 30, 2018 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.

PART II. OTHER INFORMATION

ITEM 1. 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 September 30, 2018, there were no pending legal proceedings to which the Company or its subsidiaries are a party or to which any of its property is subject that could reasonably be expected to have a material effect on the results of our operations.

ITEM 1A. RISK FACTORS

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our most recent Annual Report on Form 10-K, which could materially affect our business, financial condition, or future results.

50

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

EXHIBIT NO.	DESCRIPTION
31.1*	Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Principal Executive Officer and Chief Financial Officer 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 Document
101.DEF*	XBRL Taxonomy Extension Definition Document
101.LAB*	XBRL Taxonomy Extension Label Document
101.PRE*	XBRL Taxonomy Extension Presentation Document

 * Filed herewith

** Furnished herewith

51

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: November 13, 2018

OMNICOMM SYSTEMS, INC.

By: /s/ Cornelis F. Wit

Cornelis F. Wit, Executive Chairman

(Principal Executive Officer)

By: /s/ Thomas E. Vickers

Thomas E. Vickers, Chief Financial Officer

(Principal Financial Officer)

52

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, CORNELIS F. WIT, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2018 of OmniComm Systems, Inc.;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

November 13, 2018

By: /s/ Cornelis F. Wit

Cornelis F. Wit

Principal Executive Officer

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

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, THOMAS E. VICKERS, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2018 of OmniComm Systems, Inc.;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

November 13, 2018

By: /s/ Thomas E. Vickers

Thomas E. Vickers

Chief Financial Officer

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

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of OmniComm Systems, Inc. (the “Company”) for the period ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Cornelis F. Wit, Principal Executive Officer of the Company, and Thomas E. Vickers, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

November 13, 2018

/s/ Cornelis F. Wit

Cornelis F. Wit

Principal Executive Officer

November 13, 2018

/s/ Thomas E. Vickers

Thomas E. Vickers

Chief Financial Officer

The foregoing certification is being furnished pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, regardless of any general incorporation language in such filing.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 12, 2018
Document Information [Line Items]
Entity Registrant Name	OMNICOMM SYSTEMS INC
Entity Central Index Key	0001034592
Trading Symbol	omcm
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		152,343,647
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
CURRENT ASSETS
Cash	$ 1,371,962	$ 1,176,551
Accounts receivable, net of allowance for doubtful accounts of $197,911 and $149,980, respectively	5,124,404	7,492,597
Prepaid expenses	390,565	297,131
Other current assets	11,917	11,463
Total current assets	6,898,848	8,977,742
Property and equipment, net	1,330,744	552,538
Intangible assets, net	819,750	97,925
Other assets	129,018	46,714
TOTAL ASSETS	9,178,360	9,674,919
CURRENT LIABILITIES
Accounts payable and accrued expenses	1,686,536	2,586,045
Notes payable, related parties, current portion, net of discount of $46,946 and $-0-, respectively	353,054	0
Convertible notes payable, current portion	0	50,000
Deferred revenue, current portion	6,209,198	7,564,587
Capital lease liability, current portion	114,594	0
Patent settlement liability, current portion	0	112,500
Total current liabilities	14,640,101	15,439,878
LONG TERM LIABILITIES
Line of credit, long term	3,200,000	2,650,000
Notes payable, related parties, long term, net of current portion, net of discount of $-0- and $117,365, respectively	0	282,635
Notes payable, long term, net of current portion, net of discount of $186,268 and $279,402, respectively	516,232	423,098
Convertible notes payable, related parties, long term, net of current portion	5,770,000	5,770,000
Convertible notes payable, long term, net of current portion	200,000	350,000
Deferred revenue, long term, net of current portion	1,658,064	1,952,366
Capital lease liability, long term, net of current portion	206,010	0
TOTAL LIABILITIES	26,190,407	26,867,977
COMMITMENTS AND CONTINGENCIES (See Note 10)
Common stock, 500,000,000 shares authorized, 152,309,472 and 148,542,805 issued and outstanding, respectively, at $0.001 par value	152,311	148,544
Additional paid in capital - preferred	999,750	999,750
Additional paid in capital - common	55,130,550	54,379,454
Accumulated other comprehensive (loss)	(431,661)	(397,237)
Accumulated (deficit)	(72,863,247)	(72,323,819)
TOTAL SHAREHOLDERS' (DEFICIT)	(17,012,047)	(17,193,058)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)	9,178,360	9,674,919
Series A Preferred Stock [Member]
LONG TERM LIABILITIES
Preferred stock	0	0
Series B Preferred Stock [Member]
LONG TERM LIABILITIES
Preferred stock	0	0
Series C Preferred Stock [Member]
LONG TERM LIABILITIES
Preferred stock	0	0
Series D Preferred Stock [Member]
LONG TERM LIABILITIES
Preferred stock	250	250
Conversion Feature Liability Related Parties [Member]
CURRENT LIABILITIES
Derivative liabilities, current	1,744,002	1,604,723
Conversion Feature Liability [Member]
CURRENT LIABILITIES
Derivative liabilities, current	96,510	81,224
Warrant Liability Related Parties [Member]
CURRENT LIABILITIES
Derivative liabilities, current	2,754,207	2,196,570
Warrant Liability [Member]
CURRENT LIABILITIES
Derivative liabilities, current	$ 1,682,000	$ 1,244,229

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Allowance for doubtful accounts	$ 197,911	$ 149,980
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares undesignated	$ 3,772,500	$ 3,772,500
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	152,309,472	148,542,805
Common stock, shares outstanding (in shares)	152,309,472	148,542,805
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Preferred stock, liquidation preference	$ 0	$ 0
Series B Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	230,000	230,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Preferred stock, liquidation preference	$ 0	$ 0
Series C Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	747,500	747,500
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Preferred stock, liquidation preference	$ 0	$ 0
Series D Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	250,000	250,000
Preferred stock, shares issued (in shares)	250,000	250,000
Preferred stock, shares outstanding (in shares)	250,000	250,000
Related Party Long Term [Member]
Notes payable discount, current	$ 46,946	$ 0
Notes payable discount, noncurrent	0	117,365
Notes Payable, Other Payables [Member]
Notes payable discount	$ 186,268	$ 279,402

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues	$ 6,379,641	$ 6,490,147	$ 19,557,161	$ 19,420,456
Reimbursable revenues	463,183	225,766	775,788	755,344
Total revenues	6,842,824	6,715,913	20,332,949	20,175,800
Cost of goods sold	1,044,020	1,133,480	3,240,449	3,320,190
Reimbursable expenses-cost of goods sold	253,793	181,965	368,542	802,975
Total cost of goods sold	1,297,813	1,315,445	3,608,991	4,123,165
Gross margin	5,545,011	5,400,468	16,723,958	16,052,635
Operating expenses
Salaries, benefits and related taxes	3,483,627	3,393,915	10,695,132	9,906,293
Rent and occupancy expenses	337,824	292,669	930,972	841,718
Consulting services	55,736	64,488	219,856	185,222
Legal and professional fees	72,776	126,959	381,648	367,403
Travel	190,785	188,406	588,247	679,766
Telephone and internet	43,682	39,786	114,696	115,660
Selling, general and administrative	383,958	277,047	1,297,008	937,313
Bad debt expense	21,679	87,366	47,931	40,369
Intangible asset impairment	0	0	79,634	0
Depreciation expense	115,687	87,382	279,532	249,801
Amortization expense	91,343	5,580	248,790	16,455
Total operating expenses	4,797,097	4,563,598	14,883,446	13,340,000
Operating income/(loss)	747,914	836,870	1,840,512	2,712,635
Other income/(expense)
Interest expense, related parties	(229,906)	(252,585)	(682,986)	(717,782)
Interest expense	(95,622)	(127,488)	(283,407)	(342,240)
Interest income	7	3	16	589
Change in derivative liabilities	(2,918,886)	(812,535)	(1,160,473)	723,532
Transaction gain/(loss)	(12,128)	(3,104)	(97,984)	19,006
Income/(loss) before income taxes	(2,508,621)	(358,839)	(384,322)	2,395,740
Income tax (expense)	(154,071)	0	(155,106)	(1,194)
Net income/(loss) attributable to common stockholders	$ (2,662,692)	$ (358,839)	$ (539,428)	$ 2,394,546
Net income/(loss) per share
Basic (in dollars per share)	$ (0.02)	$ 0	$ 0	$ 0.02
Diluted (in dollars per share)	$ (0.02)	$ 0	$ 0	$ 0.02
Weighted average number of shares outstanding
Basic (in shares)	150,905,124	147,858,566	150,282,732	147,805,410
Diluted (in shares)	150,905,124	147,858,566	150,282,732	147,850,886

XML

Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net income/(loss) attributable to common stockholders	$ (2,662,692)	$ (358,839)	$ (539,428)	$ 2,394,546
Other comprehensive income/(loss)
Change in foreign currency translation adjustment	(13,256)	1,310	(34,424)	13,386
Other comprehensive income/(loss)	(13,256)	1,310	(34,424)	13,386
Comprehensive income/(loss)	$ (2,675,948)	$ (357,529)	$ (573,852)	$ 2,407,932

XML

Condensed Consolidated Statement of Shareholders' (Deficit) (Current Period Unaudited) - USD ($)	Series D Preferred Stock [Member] Preferred Stock [Member]	Additional Paid In Capital Preferred [Member]	Common Stock [Member]	Additional Paid In Capital Common [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2016	250,000		147,786,917
Balance at Dec. 31, 2016	$ 250	$ 999,750	$ 147,788	$ 53,425,956	$ (75,291,037)	$ (410,505)	$ (21,127,798)
Employee stock option expense				364,271			364,271
Foreign currency translation adjustment						13,268	13,268
Restricted stock issuance/(forfeiture) (in shares)			(16,668)
Restricted stock issuance/(forfeiture)			$ (17)	(2,817)			(2,834)
Cashless issuance of common stock, stock option exercise (in shares)			22,556
Cashless issuance of common stock, stock option exercise			$ 23	(23)			$ 0
Issuance of common stock, stock option exercise (in shares)			250,000				300,000
Issuance of common stock, stock option exercise			$ 250	35,000			$ 35,250
Issuance of common stock, warrant exercise (in shares)			500,000
Issuance of common stock, warrant exercise			$ 500	154,500			155,000
Reclassification of conversion feature liability associated with convertible debt				402,567			402,567
Net income/(loss)	$ 0	0	$ 0	0	2,967,218	0	2,967,218
Balance (in shares) at Dec. 31, 2017	250,000		148,542,805
Balance at Dec. 31, 2017	$ 250	999,750	$ 148,544	54,379,454	(72,323,819)	(397,237)	(17,193,058)
Employee stock option expense				157,628			157,628
Foreign currency translation adjustment						(34,424)	(34,424)
Restricted stock issuance/(forfeiture) (in shares)			1,900,000
Restricted stock issuance/(forfeiture)			$ 1,900	39,835			$ 41,735
Issuance of common stock, stock option exercise (in shares)			200,000				200,000
Issuance of common stock, stock option exercise			$ 200	44,800			$ 45,000
Reclassification of conversion feature liability associated with convertible debt				10,500			10,500
Net income/(loss)	$ 0	0	$ 0	0	(539,428)	0	(539,428)
Issuance of common stock, purchase of Acuity software (in shares)			1,666,667
Issuance of common stock, purchase of Acuity software			$ 1,667	498,333			500,000
Balance (in shares) at Sep. 30, 2018	250,000		152,309,472
Balance at Sep. 30, 2018	$ 250	$ 999,750	$ 152,311	$ 55,130,550	$ (72,863,247)	$ (431,661)	$ (17,012,047)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)			$ (539,428)	$ 2,394,546	$ 2,967,218
Adjustment to reconcile net income/(loss) to net cash provided by/(used in) operating activities
Change in derivative liabilities	$ 2,918,886	$ 812,535	1,160,473	(723,532)
Intangible asset impairment	0	0	79,634	0
Interest expense from derivative instruments			163,553	241,664
Employee stock compensation			199,363	467,930
Provision for doubtful accounts	21,679	87,366	47,931	40,369	130,346
Depreciation and amortization			528,322	266,256
Changes in operating assets and liabilities
Accounts receivable			2,320,262	(889)
Prepaid expenses			(93,434)	(47,519)
Other current assets			(454)	2,915
Other assets			(82,304)	4,843
Accounts payable and accrued expenses			(899,509)	(510,316)
Patent settlement liability			(112,500)	(449,479)
Deferred revenue			(1,649,691)	(406,867)
Net cash provided by/(used in) operating activities			1,122,218	1,279,921
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(700,028)	(212,173)
Purchase of Acuity software			(552,403)	0
Net cash provided by/(used in) investing activities			(1,252,431)	(212,173)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable			(200,000)	(1,020,000)
Proceeds/(repayments) from revolving line of credit			550,000	(200,000)
Proceeds from exercise of stock options			45,000	35,250
Principal repayment of capital lease obligation			(38,064)	0
Net cash provided by/(used in) financing activities			356,936	(1,184,750)
Effect of exchange rate changes on fixed and intangible assets			3,112	(18,125)
Effect of exchange rate changes on cash and cash equivalents			(34,424)	13,386
Net increase/(decrease) in cash and cash equivalents			195,411	(121,741)
Cash and cash equivalents at beginning of period			1,176,551	1,439,332	1,439,332
Cash and cash equivalents at end of period	$ 1,371,962	$ 1,317,591	1,371,962	1,317,591	$ 1,176,551
Supplemental disclosures of cash flow information:
Income taxes			1,035	1,194
Interest Paid, Excluding Capitalized Interest, Operating Activities			889,984	802,327
Non-cash transactions:
Notes payable issued in exchange for existing notes payable			0	350,000
Restricted stock issuance/(forfeiture)			41,735	(2,834)
Common stock issued for the purchase of Acuity software			500,000	0
Capital expenditures funded by capital lease borrowing			359,603	0
Reclassification of conversion feature liability associated with convertible debt			$ 10,500	$ 402,567

XML

Note 1 - Organization and Nature of Operations

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Nature of Operations [Text Block]

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, contract research organizations (“CROs”) and other clinical trial sponsors principally located in the United States, Europe and East Asia. Our proprietary software applications: TrialMaster

®

, TrialOne

®

, eClinical Suite, Promasys

®

, IRTMaster, AutoEncoder and Acuity Analytics (the “EDC Software”) 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 product development 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

nine

month periods ended

September 30, 2018

and

September 30, 2017

we spent

$2,469,280

and

$2,230,565,

respectively, on research and product development activities, which are primarily comprised of salaries to our developers and other research and product development personnel and related costs associated with the development of our software products.

XML

Note 2 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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, which are more fully described in the Company’s

2017

Annual Report filed on Form

10

-K with the Securities and Exchange Commission, and have been prepared in conformity with (i) accounting principles generally accepted in the United States of America; and (ii) the rules and regulations of the United States Securities and Exchange Commission. All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

UNAUDITED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the consolidated financial statements have been condensed or omitted. The results for the

nine

month periods ended

September 30, 2018

and

September 30, 2017 

are unaudited, but reflect all adjustments (consisting only of normally recurring adjustments) which management considers necessary for a fair presentation of operating results.

The operating results for the

nine

month period ended

September 30, 2018

are

not

necessarily indicative of the results that

may

be expected for the year-ended

December 

31,

2018.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form

10

-K for the year-ended

December 31, 2017.

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of the unaudited condensed 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

2017

financial statements to conform to the

2018

presentation. These reclassifications did

not

have any effect on our net income/(loss) or shareholders’ deficit.

foreign currency translation

The financial statements of the Company’s foreign subsidiaries are translated in accordance with Accounting Standards Codification (“ASC”)

830

-

30,

Foreign Currency Matters—Translation of Financial Statements

("ASC

830

-

30"

). 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 Systems 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. The functional currency of the Company’s subsidiary, OmniComm eClinical Solutions Pvt. Ltd. in India, is the Indian Rupee. 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

$34,424

 and a translation gain of

$13,386

 for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively.

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, eClinical Suite and Promasys. Service revenues are derived principally from the Company's delivery of the hosted solutions of its TrialMaster software product, and consulting services and customer support, including training, for all of the Company's products.

For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")

606

(“ASC 

606"

). A

five

-step analysis must be met as outlined in ASC 

606:

(i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has

not

been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or

no

refund will be required.

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, including hosted applications, licensing, professional services and maintenance-related services.

Hosted Application Revenues

The Company offers its TrialMaster and TrialOne software products as hosted application solutions delivered through a standard web browser, with customer support and training services. The Company's TrialOne and Promasys solutions are primarily deployed on a technology transfer or off-the-shelf basis. To date, hosted applications revenues have been primarily related to TrialMaster. On

April 30, 2019,

OmniComm will decommission its eClinical Suite hosting platform as the eClinical Suite clients utilizing these hosting services have transitioned to TrialMaster, the eClinical Suite studies have been completed or the studies have transitioned to another hosting platform.

Revenues resulting from TrialMaster 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

component involves services required to close out, or lock, the database for the clinical trial.

Fees charged 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 typically 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 monthly or quarterly in advance.

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

three

to

five

 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

to net

45

 days.

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, running test data and documentation of procedures. Subsequent additions or extensions to license terms do

not

generally include additional professional services.

Maintenance Revenues

Maintenance includes telephone-based help desk support and software maintenance, including updates to the software through new software version releases. 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.

Pass-through Revenue and Expense

The Company accounts for pass-through revenue and expense (reimbursable revenue and reimbursable expense) in accordance with Accounting Standards Update

2016

-

08,

Principal versus Agent Considerations (Reporting Revenue Gross versus Net), 

(“ASU 

2016

-

08”

). In accordance with ASU 

2016

-

08

 these amounts are recorded as revenue in the statement of operations with a corresponding expense recorded in cost of goods sold. Pass-through revenues and expenses include amounts associated with

third

-party services provided to our customers by our service and product partners. These

third

-party services are primarily comprised of Interactive Voice and Web Response software services (IVR and IWR), travel and shipping that are incurred on our clients’ behalf.

The fees associated with each business activity for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively, are:

	For the nine months ended
Revenue activity	September 30, 2018		September 30, 2017
Set-up fees	$	2,683,182	$	3,948,687
Change orders		1,090,333		1,054,288
Maintenance		4,163,138		3,749,897
Software licenses		8,423,355		7,951,228
Professional services		2,617,149		2,526,379
Hosting		1,355,792		945,321
Total	$	20,332,949	$	20,175,800

COST OF GOODS SOLD

Cost of goods sold 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 and bonuses for the Company’s professional services staff. Cost of goods sold also includes outside service provider costs

.

Cost of goods sold 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

$197,911

 as of

September 30, 2018

and

$149,980

as of

December 31, 2017.

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

nine

month period ended

September 30, 2018

and the year ended

December 31, 2017.

	September 30, 2018		December 31, 2017
Beginning of period	$	149,980	$	179,813
Bad debt expense		47,931		130,346
Write-offs		-0-		(160,179	)
End of period	$	197,911	$	149,980

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

September 30, 2018,

$1,404,402

 was deposited in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal.

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, Europe and East Asia. 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

September 30, 2018.

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

September 30, 2018,

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 quarterly 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

12%

of our revenues during the

nine

month period ended

September 30, 2018

or approximately

$2,339,000.

One customer accounted for

10%

of our revenues during the

nine

month period ended

September 30, 2017

or approximately

$2,021,000.

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

nine

month periods ended

September 30, 2018

and

September 30, 2017

and the year ended

December 31, 2017.

	Revenues		Accounts receivable
For the period ended	Number of customers	Percentage of total revenues	Number of customers	Percentage of accounts receivable
September 30, 2018	1	12%	1	13%
December 31, 2017	1	10%	1	24%
September 30, 2017	1	10%	2	38%

The table below provides revenues from European customers for the

nine

month periods ended

September 30, 2018

and

September 30, 2017.

European revenues
For the nine months ended
September 30, 2018		September 30, 2017
European revenues	% of Total revenues	European revenues	% of Total revenues
$3,513,571	17%	$2,514,601	12%

The Company serves its hosting customers from

third

-party web hosting facilities located in the United States and Germany. 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.

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.

FAIR VALUE MEASUREMENT

OmniComm’s capital structure includes the use of warrants and convertible debt features that are classified as derivative financial instruments. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value under ASC

815,

Derivatives and Hedging

(“ASC

815”

)

.

ASC

815

requires that changes in the fair value of derivative financial instruments with

no

hedging designation be recognized as gains/(losses) in the earnings statement. The fair value measurement is determined in accordance with ASC

820,

Fair Value Measurements and Disclosures

(“ASC

820”

).

DEFERRED REVENUE

Deferred revenue represents cash advances and amounts in accounts receivable as of the balance sheet date 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

September 30, 2018,

the Company had

$7,867,262

 in deferred revenues relating to contracts for services to be performed over periods ranging from

one

month to

7

years. The Company had

$6,209,198

 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

$671,030

and

$528,777

for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively, and are included under selling, general and administrative expenses in our unaudited condensed consolidated financial statements.

RESEARCH AND PRODUCT DEVELOPMENT EXPENSES

Software development costs are expensed as incurred. ASC

985

-

20,

Software Industry Costs of Software to Be Sold, Leased or Marketed

(“ASC

985

-

20”

), 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

nine

month periods ended

September 30, 2018

and

September 30, 2017

we spent

$2,469,280

and

$2,230,565,

respectively, on research and product development activities, which include costs associated with the development of our software products and services for our clients’ projects and which are primarily comprised of salaries and related expenses for our software developers and consulting fees paid to

third

-party consultants. Research and product development costs are primarily included under Salaries, benefits and related taxes in our Statement of Operations.

EQUITY INCENTIVE PLANS

The OmniComm Systems, Inc.

2016

Equity Incentive Plan (the

“2016

Plan”) was approved at our Annual Meeting of Stockholders on

June 16, 2016.

The

2016

Plan initially provides for the issuance of up to

10,000,000

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

2016

Plan automatically increases on

January

1st

of each year for a period of

nine

(

9

) years commencing on

January 1, 2017

and ending on (and including)

January 1, 2025,

in an amount equal to

five

percent (

5%

) of the total number of shares authorized under the

2016

Plan. As of

September 30, 2018

11,025,000

shares of our common stock were authorized for issuance under the

2016

Plan.

The predecessor plan, the OmniComm Systems, Inc.

2009

Equity Incentive Plan (the

“2009

Plan”) was approved at our Annual Meeting of Stockholders on

July 10, 2009

and terminated on

June 16, 2016

upon the approval of the

2016

Plan. The

2009

Plan provided for the issuance of up to

7,500,000

shares to employees, directors and key consultants. The

2016

and

2009

Plans are more fully described in “Note

13,

Equity Incentive Plans”.

The Company accounts for its employee equity incentive plans underASC

718,

Compensation – Stock Compensation

, (“ASC

718”

) 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.

EARNINGS PER SHARE

The Company accounts for Earnings per Share using ASC

260,

Earnings per Share,

(“ASC

260”

). 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 with ASC

740,

Income Taxes

(“ASC

740”

)

.

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 the

first

nine

months of

2018,

we adopted the following new accounting pronouncements:

In

February 2016,

the FASB issued Accounting Standard Update

No.

2016

-

02,

“Leases (Topic

842

)”, (“ASU

2016

-

02”

). ASU

2016

-

02

requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than

12

months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after 

December 15, 2018.

Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In

April 2016,

the FASB issued Accounting Standards Update

2016–10

“Revenue from Contracts with Customers

(Topic

606

):

Identifying Performance Obligations and Licensing.”

The amendments in this Update do

not

change the core principle of the guidance in Topic

606.

Rather, the amendments in this Update clarify the following

two

aspects of Topic

606:

identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic

606

includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic

606.

The Company adopted the new standard effective

January 1, 2018

using the modified retrospective method. Therefore, the comparative financial information has

not

been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the new standard did

not

have a material impact on the Company’s 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.

XML

Note 3 - Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE 3: EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share were calculated using the weighted average number of shares outstanding of

150,282,732

and

147,805,410

for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively.

The outstanding share balance as of

September 30, 2018

and

September 30, 2017,

respectively, includes

1,900,000

 and -

0

- restricted shares that have been issued but are still at risk of forfeiture as the restrictions have

not

lapsed.

Antidilutive shares of

40,741,945

 have been omitted from the calculation of dilutive earnings/(loss) per share for the

nine

month period ended

September 30, 2018

and

31,924,411

for the

nine

month period ended

September 30, 2017,

as the shares were antidilutive. Provided below is the reconciliation between numerators and denominators of the basic and diluted earnings per share. The table below provides a reconciliation of anti-dilutive securities outstanding as of

September 30, 2018

and

September 30, 2017,

respectively.

Anti-dilutive security	September 30, 2018		September 30, 2017
Employee stock options		2,670,000		4,050,000
Warrants		26,020,000		27,020,000
Convertible notes		11,940,000		740,000
Shares issuable for accrued interest		111,945		114,411
Total		40,741,945		31,924,411

The employee stock options are exercisable at prices ranging from

$0.17

 to

$0.34

per share. The exercise prices on the warrants range from

$0.25

to

$0.60

per share. Shares issuable upon conversion of convertible debentures or accrued interest have a conversion price of

$0.50

per share.

Some of the Company’s convertible debt has an anti-dilutive effect on net income/(loss) per share and was

not

included in the computation of diluted earnings per share.

	For the nine months ended
	September 30, 2018								September 30, 2017
	Income/(loss)			Shares		Per-share			Income/(loss)		Shares		Per-share
	numerator			denominator		amount			numerator		denominator		amount
Basic EPS	$	(539,428	)		150,282,732	$	(0.00	)	$	2,394,546		147,805,410	$	0.02
Effect of dilutive securities		-0-			-0-		-0-			-0-		45,476		-0-
Diluted EPS	$	(539,428	)		150,282,732	$	(0.00	)	$	2,394,546		147,850,886	$	0.02

	For the three months ended
	September 30, 2018								September 30, 2017
	Income/(loss)			Shares		Per-share			Income/(loss)			Shares		Per-share
	numerator			denominator		amount			numerator			denominator		amount
Basic EPS	$	(2,662,692	)		150,905,124	$	(0.02	)	$	(358,839	)		147,858,566	$	(0.00	)
Effect of dilutive securities		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(2,662,692	)		150,905,124	$	(0.02	)	$	(358,839	)		147,858,566	$	(0.00	)

XML

Note 4 - Property and Equipment, Net

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

NOTE 4: PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

	September 30, 2018						December 31, 2017
Description	Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value		Estimated useful life (years)
Computer & office equipment	$	3,046,561	$	2,129,785	$	916,776	$	2,322,833	$	1,949,982	$	372,851	5
Leasehold improvements		137,054		104,335		32,719		118,380		98,901		19,479	5
Computer software		2,305,155		1,957,405		347,750		2,010,999		1,886,342		124,657	3
Office furniture		169,122		135,623		33,499		162,799		127,248		35,551	5
Total	$	5,657,892	$	4,327,148	$	1,330,744	$	4,615,011	$	4,062,473	$	552,538

Depreciation expense for the

nine

month period ended

September 30, 2018

was

$279,532

 and

$249,801

for the

nine

month period ended

September 30, 2017.

XML

Note 5 - Intangible Assets, Net

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

NOTE 5: INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

	September 30, 2018						December 31, 2017
Asset	Cost		Accumulated amortization		Net book value		Cost		Accumulated amortization		Net book value		Estimated useful life (years)
eClinical Suite customer lists	$	1,392,701	$	1,392,701	$	-0-	$	1,392,701	$	1,392,701	$	-0-	3
Promasys B.V. customer lists		114,877		114,877		-0-		118,780		32,994		85,786	15
Promasys B.V. software code		72,837		71,623		1,214		72,837		60,698		12,139	5
Promasys B.V. URLs/website		58,019		58,019		-0-		59,990		59,990		-0-	3
Acuity software code		1,052,403		233,867		818,536		-0-		-0-		-0-	3
Total	$	2,690,837	$	1,871,087	$	819,750	$	1,644,308	$	1,546,383	$	97,925

During the

second

quarter of

2018

we recognized an impairment loss of

$79,634

on the Promasys B.V. customer list after performing a fair value analysis on the asset utilizing a discounted cash flow model. The impairment charge is separately presented on the Statement of Operations. 

Amortization expense for the

nine

month period ended

September 30, 2018

was

$248,790

 and

$16,455

for the

nine

month period ended

September 30, 2017.

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

Year	Amortization
2018	$	88,914
2019		350,801
2020		350,801
2021		29,234
Total	$	819,750

XML

Note 6 - Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

NOTE 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

Account	September 30, 2018		December 31, 2017
Accounts payable	$	760,557	$	1,303,073
Accrued payroll and related costs		681,354		925,890
Other accrued expenses		168,675		184,131
Accrued interest		75,950		172,951
Total accounts payable and accrued expenses	$	1,686,536	$	2,586,045

XML

Note 7 - Line of Credit, Notes Payable and Liquidity

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 7: LINE OF CREDIT, NOTES PAYABLE AND LIQUIDITY

On

March 18, 2013,

the Company entered into a

$2,000,000

revolving Line of Credit (“Line of Credit”) with The Northern Trust Company guaranteed by our then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”). Mr. Wit receives

2.0%

interest (approximately

$9,500

per month) from the Company 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.

On

April 7, 2017

the Company renewed the Line of Credit. The Line of Credit currently matures on

April 7, 2020

and carries a variable interest rate based on the prime rate. At

September 30, 2018,

$3,200,000

was outstanding on the Line of Credit at an interest rate of

4.25%.

Our primary sources of working capital are funds from operations and borrowings under our revolving Line of Credit. In the event that the Line of Credit is called for any reason, Mr. Wit has pledged to replace the borrowing capacity under the Line of Credit with a promissory note that utilizes the same maturity date and interest rate as the Line of Credit.

To satisfy our capital requirements, we

may

seek additional financing. There can be

no

assurance that any such funding will be available to us on favorable terms or at all. If adequate funds are

not

available when needed, we

may

be required to delay, scale back or eliminate some or all of our research and product development and marketing programs. If we are successful in obtaining additional financings, the terms of such financings

may

have the effect of diluting or adversely affecting the holdings or the rights of the holders of our securities or result in increased interest expense in future periods.

The following table summarizes the notes payable outstanding as of

September 30, 2018.

			Ending		Non related party					Related party
Origination	Maturity	Interest	principal				Long						Long
date	date	rate	September 30, 2018		Current		term			Current			term
2/29/2016	4/1/2019	12%	$	400,000	$	-0-	$	-0-		$	400,000		$	-0-
6/30/2016	4/1/2020	10%		420,000		-0-		420,000			-0-			-0-
6/30/2016	4/1/2020	12%		282,500		-0-		282,500			-0-			-0-
Discount on notes payable						-0-		(186,268	)		(46,946	)		-0-
Total			$	1,102,500	$	-0-	$	516,232		$	353,054		$	-0-

The following table summarizes the notes payable outstanding as of

December 31, 2017.

			Ending		Non related party					Related party
Origination	Maturity	Interest	principal				Long					Long
date	date	rate	December 31, 2017		Current		term			Current		term
2/29/2016	4/1/2019	12%	$	400,000	$	-0-	$	-0-		$	-0-	$	400,000
6/30/2016	4/1/2020	10%		420,000		-0-		420,000			-0-		-0-
6/30/2016	4/1/2020	12%		282,500		-0-		282,500			-0-		-0-
Discount on notes payable						-0-		(279,402	)		-0-		(117,365	)
Total			$	1,102,500	$	-0-	$	423,098		$	-0-	$	282,635

On

February

29,

2016,

the Company issued a promissory note in the principal amount of

$450,000

and warrants to purchase

1,800,000

shares of common stock of the Company at an exercise price of

$0.25

per share with an expiration date of

April 1, 2019

to our then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”), in exchange for accrued interest in the amount of

$450,000.

The note carries an interest rate of

12%

per annum and has a maturity date of

April 1, 2019. 

On

December 5, 2016,

Mr. Wit sold

1,000,000

of the warrants to an employee of the Company. On

August 31, 2017,

the Company repaid

$50,000

of the outstanding principal to Mr. Wit.

The 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

$325,689

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

$124,311.

The warrant liability (discount) will be amortized over the

37

month duration of the note payable. The Company will continue to perform a fair value calculation quarterly 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

June 30, 2016,

the Company issued promissory notes in the principal amount of

$372,500

and warrants to purchase

1,490,000

shares of common stock of the Company at an exercise price of

$0.25

per share with an expiration date of

April 1, 2020

to

two

investors in exchange for existing promissory notes in the same amount. The notes carry an interest rate of

12%

per annum and have a maturity date of

April 1, 2020. 

On

August 31, 2017

a promissory note for

$90,000

was repaid in full.

The 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

$246,921

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

$125,579.

The warrant liability (discount) will be amortized over the

45

month duration of the note payables. The Company will continue to perform a fair value calculation quarterly 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

June 30, 2016,

the Company issued promissory notes in the principal amount of

$420,000

and warrants to purchase

1,680,000

shares of common stock of the Company at an exercise price of

$0.25

per share with an expiration date of

April 1, 2020

to

two

investors, in exchange for existing promissory notes in the same amount. The notes carry an interest rate of

10%

per annum and have a maturity date of

April 1, 2020.

The 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

$278,408

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

$141,592.

The warrant liability (discount) will be amortized over the

45

month duration of the note payables. The Company will continue to perform a fair value calculation quarterly 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.

XML

Note 8 - Convertible Notes Payable

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Convertible Debt Disclosure [Text Block]

NOTE 8: CONVERTIBLE NOTES PAYABLE

The following table summarizes the convertible debt outstanding as of

September 30, 2018.

					Carrying amount
Date of	Maturity	Interest	Principal at		Short term				Long term
issuance	date	rate	September 30, 2018		Related		Non related		Related		Non related
8/29/2008	4/1/2020	10%	$	1,770,000	$	-0-	$	-0-	$	1,770,000	$	-0-
12/16/2008	4/1/2020	12%		4,000,000		-0-		-0-		4,000,000		-0-
12/16/2008	4/1/2021	12%		200,000		-0-		-0-		-0-		200,000
Total			$	5,970,000	$	-0-	$	-0-	$	5,770,000	$	200,000

The following table summarizes the convertible debt outstanding as of

December 31, 2017. 

					Carrying amount
Date of	Maturity	Interest	Principal at		Short term				Long term
issuance	date	rate	December 31, 2017		Related		Non related		Related		Non related
8/1/1999	6/30/2004	10%	$	50,000	$	-0-	$	50,000	$	-0-	$	-0-
8/29/2008	4/1/2019	10%		150,000		-0-		-0-		-0-		150,000
8/29/2008	4/1/2020	10%		1,770,000		-0-		-0-		1,770,000		-0-
12/16/2008	4/1/2020	12%		4,000,000		-0-		-0-		4,000,000		-0-
12/16/2008	4/1/2021	12%		200,000		-0-		-0-		-0-		200,000
Total			$	6,170,000	$	-0-	$	50,000	$	5,770,000	$	350,000

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

10%

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. On

September 30, 2018,

the final

$50,000

note was repaid in full along with the accrued interest of

$96,949.

As of

September 30, 2018,

$862,500

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 $-

0

-.

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 then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. 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 Debentures until

April 1, 2013,

including

$1,100,000

in Debentures held by Mr. Wit. The Company also extended the expiration date of the warrants associated with the Debentures.

On

February 22, 2013,

the Company and

two

holders extended

$1,200,000

of the Debentures until

January 1, 2016,

including

$1,100,000

in Debentures held by Mr. Wit. Mr. Wit also waived all his rights to the security interest under his

$1,100,000

of Debentures. 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

$1,100,000

of the Debentures to

April 1, 2017.

The expiration date of the warrants associated with the Debentures was also extended to

April 1, 2017.

On

November 19, 2015,

Mr. Wit converted

$475,000

of the Debentures into

1,900,000

shares of our common stock. On

November 19, 2015,

the Company and Mr. Wit agreed to cancel the

1,900,000

warrants related to the

$475,000

of Debentures and

$475,000

of unrelated promissory notes in exchange for

1,900,000

shares of our common stock. On

November 23, 2015,

Mr. Wit sold the remaining

$625,000

of Debentures and the related warrants to

two

unrelated non-affiliate stockholders.

On

April 1, 2015,

the Company and the holder extended the maturity date of

$100,000

of Debentures to

April 1, 2018.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2018.

On

June 30, 2017

the Company repaid the

$100,000

of Debentures.

On

June 30, 2016,

the Company and

two

holders extended the maturity date of

$625,000

of Debentures to

April 1, 2020.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2020.

In

August 2017

the Company repaid the

$625,000

of Debentures in full.

Convertible Debentures

August 2008

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 then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”) and

one

of our then 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,

the Company and

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. The expiration date of the warrants associated with the debentures was also extended to

August 29, 2013.

On

February 22, 2013, 

the Company and Mr. Wit extended the maturity date of

$1,770,000

of the convertible debentures to

January 1, 2016.

The expiration date of the warrants associated with the debentures was also extended to

January 1, 2016.

On

February 22, 2013,

the Company and Mr. van Kesteren extended the maturity date of

$150,000

of the convertible debentures due to our former Director, Guus van Kesteren (“Mr. 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 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

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.

On

June 30, 2015,

the Company and Mr. van Kesteren extended the maturity date of

$150,000

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

June 30, 2016,

the Company and Mr. Wit extended the maturity date of the

$1,770,000

of convertible debentures to

April 1, 2020.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2020.

On

June 30, 2016,

the Company and Mr. van Kesteren extended the maturity date of

$150,000

of convertible debentures to

April 1, 2018.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2018.

On

June 30, 2017,

the Company and Mr. van Kesteren extended the maturity date of

$150,000

of convertible debentures to

April 1, 2019.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2019.

The

$150,000

of convertible debentures was repaid in full on

June 30, 2018.

December 2008

On

December 16, 2008, 

the Company sold

$5,075,000

of convertible debentures and warrants to purchase an aggregate of

10,150,000

shares of common stock to

eleven

accredited investors, including our then Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”), our then Chief Operating Officer and President, Stephen E. Johnson (“Mr. Johnson”), our then Chief Technology Officer, Randall G. Smith (“Mr. Smith”), our then Chief Financial Officer, Ronald T. Linares and

four

of our then 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,

the Company and

eight

Affiliates of the Company extended

$4,980,000

of the convertible debentures until

December 16, 2013

in accordance with the terms of a Secured Convertible Debenture issued on that date. The expiration date of the warrants associated with the convertible debentures was also extended to

December 16, 2013.

On

February 22, 2013,

the Company and the holders agreed to extend the maturity date of

$4,505,000

of the convertible debentures including

$4,475,000

due to Mr. Wit,

$25,000

due to Mr. Johnson and

$5,000

due to Mr. 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 our former director Mr. Veatch extended the maturity date of

$15,000

of the convertible debentures 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 the holder extended 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 the holder 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

 holders agreed to extend the maturity date of

$360,000

of the convertible debentures, including

$160,000

due to our then director, Guus van Kesteren (“Mr. van Kesteren”), 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

April 28, 2014,

the Company and the holder extended the maturity date of

$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

January 31, 2015,

the Company and Mr. Wit extended the maturity date of

$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

November 19, 2015,

the Company and Mr. Wit agreed to cancel

$420,000

of the debentures and

1,680,000

of unrelated warrants in exchange for

1,680,000

shares of our common stock.

On

April 27, 2015,

the Company and the holder extended the maturity date of

$200,000

of convertible debentures to

April 1, 2018.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2018.

On

April 30, 2015,

the Company and Mr. Johnson extended the maturity date of

$25,000

 of convertible debentures to

April 1, 2018.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2018.

The convertible debentures were repaid in full on

December 14, 2016.

On

May 1, 2015,

the Company and Mr. van Kesteren extended the maturity date of

$160,000

of the convertible debentures to

April 1, 2017.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2017.

On

May 1, 2015,

the Company repaid

$5,000

of the convertible debentures to Mr. Smith.

On

May 7, 2015,

the Company and Mr. Veatch, extended the maturity date of

$15,000

of the convertible debentures to

April 1, 2018.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2018.

The

$15,000

of convertible debentures were repaid in full on

December 14, 2016.

On

June 30, 2015,

the Company and the holder extended the maturity date of

$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.

On

June 30, 2016,

the Company and Mr. Wit extended the maturity date of

$4,055,000

of convertible debentures to

April 1, 2020.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2020.

On

August 31, 2017,

the Company repaid

$55,000

of the convertible debentures to Mr. Wit.

On 

June 30, 2016,

the Company and Mr. van Kesteren extended the maturity date of

$160,000

of the convertible debentures to

April 1, 2018.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2018.

The

$160,000

of convertible debentures was repaid in full on

December 14, 2016.

On

June 30, 2016,

the Company and the holder extended the maturity date of

$100,000

of convertible debentures to

April 1, 2020.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2020.

On

August 31, 2017,

the Company repaid

$100,000

of convertible debentures to the holder.

On

June 30, 2017,

the Company and the holder extended the maturity date of

$200,000

of the convertible debentures to

April 1, 2021.

The expiration date of the warrants associated with the debentures was also extended to

April 1, 2021.

The principal payments required at maturity under the Company’s outstanding convertible debt at

September 30, 2018

are as follows:

Year	Amount
2018	$	-0-
2019		-0-
2020		5,770,000
2021		200,000
Total	$	5,970,000

XML

Note 9 - Fair Value Measurement

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 9: 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

(“ASC

820”

), 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.

 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 methods

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”

). 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.

The Company’s financial assets or liabilities subject to ASC

820

as of

September 30, 2018

include the conversion feature and warrant liability associated with convertible debentures issued during

2008

and

2009

and the warrants issued during

2011

and

2016

that are associated with notes payable. 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

8

– Convertible Notes Payable.

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

A summary, as of

September 30, 2018,

of the fair value of liabilities measured at fair value on a recurring basis follows:

	Fair value at		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Derivatives: (1) (2)	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Conversion feature liability	$	1,840,512	$	-0-	$	-0-	$	1,840,512
Warrant liability		4,436,207		-0-		-0-		4,436,207
Total of derivative liabilities	$	6,276,719	$	-0-	$	-0-	$	6,276,719

(

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

nine

month period ended

September 30, 2018.

(

2

)    The fair value at the measurement date is equal to the carrying value on the balance sheet.

Significant valuation assumptions for derivative instruments at September 30, 2018
Risk free interest rate	2.45%	to	2.45%
Dividend yield		0.00%
Expected volatility	85.7%	to	105.8%
Expected life (range in years)
Conversion feature liability	1.50	to	2.50
Warrant liability	0.25	to	2.50

A summary, as of

December 31, 2017,

of the fair value of liabilities measured at fair value on a recurring ba

s

is follows:

	Fair value at		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Derivatives: (1) (2)	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Conversion feature liability	$	1,685,947	$	-0-	$	-0-	$	1,685,947
Warrant liability		3,440,799		-0-		-0-		3,440,799
Total of derivative liabilities	$	5,126,746	$	-0-	$	-0-	$	5,126,746

(

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, 2017.

(

2

)    The fair value at the measurement date is equal to the carrying value on the balance sheet.

Significant valuation assumptions for derivative instruments at December 31, 2017
Risk free interest rate	1.56%	to	1.81%
Dividend yield		0.00%
Expected volatility	87.0%	to	118.4%
Expected life (range in years)
Conversion feature liability	1.25	to	3.25
Warrant liability	0.25	to	3.25

A summary, as of

September 30, 2018,

of the fair value of assets measured at fair value on a non-recurring basis follows:

	Carrying amount		Carrying amount		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Acquired assets (1)	December 31, 2017		September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Promasys B.V. customer list (2) (3)	$	85,786	$	-0-	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (2)		12,139		1,214		-0-		-0-		72,943
Acuity software code (4)		-0-		818,536		-0-		-0-		1,052,403
Total	$	97,925	$	819,750	$	-0-	$	-0-	$	1,261,599

(

1

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

(

2

)  The acquired Promasys B.V. software code and customer list 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.

(

3

)  During the

second

quarter of

2018

we recognized an impairment loss of

$79,634

on the Promasys B.V. Customer List after performing a fair value analysis on the asset utilizing a discounted cash flow model. The impairment charge is separately presented on the Statement of Operations.

(

4

)  The acquired Acuity software code is

not

measured on a recurring basis since the 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.

A summary, as of

December 31, 2017,

of the fair value of assets measured at fair value on a non-recurring basis follows:

	Carrying amount		Carrying amount		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Acquired assets (1)	December 30, 2016		December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Promasys B.V. customer list (2)	$	82,173	$	85,786	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (2)		26,707		12,139		-0-		-0-		72,943
Total	$	108,880	$	97,925	$	-0-	$	-0-	$	209,196

(

1

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

(

2

)  The acquired Promasys B.V. software code and customer list 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.

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 ASC

360,

Property, Plant and Equipment

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.

The table below presents the unrealized gains/(losses) for the

nine

month periods ended

September 30, 2018

and

September 30, 2017.

	Other income/(expense)
	For the nine months ended
	September 30, 2018			September 30, 2017
The net amount of gains/(losses) for the period included in earnings attributable to the unrealized and realized gains/(losses) from changes in derivative liabilities at the reporting date	$	(1,160,473	)	$	723,532
Total unrealized and realized gains/(losses) included in earnings	$	(1,160,473	)	$	723,532

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

nine

month period ended

September 30, 2018

and the year ended

December 31, 2017.

The tables reflect changes for all financial liabilities at fair value categorized as Level

3

as of

September 30, 2018

and

December 31, 2017.

The table below presents the Level

3

financial liabilities at fair value for the

nine

month period ended

September 30, 2018.

	Level 3 financial liabilities at fair value
									Net		Reclassification
									purchases,		of conversion
	Balance,								issuances		feature liability		Balance,
	beginning			Net realized		Net unrealized			and		associated with		end
Derivatives:	of year			gains/(losses)		gains/(losses)			settlements		convertible debt		of period
Conversion feature liability	$	(1,685,947	)	$	-0-	$	(165,065	)	$	-0-	$	10,500	$	(1,840,512	)
Warrant liability		(3,440,799	)		-0-		(995,408	)		-0-		-0-		(4,436,207	)
Total of derivative liabilities	$	(5,126,746	)	$	-0-	$	(1,160,473	)	$	-0-	$	10,500	$	(6,276,719	)

The table below presents the Level

3

financial liabilities at fair value for the year ended

December 31, 2017.

	Level 3 financial liabilities at fair value
								Net		Reclassification
								purchases,		of conversion
	Balance,							issuances		feature liability		Balance,
	beginning			Net realized		Net unrealized		and		associated with		end
Derivatives:	of year			gains/(losses)		gains/(losses)		settlements		convertible debt		of year
Conversion feature liability	$	(2,325,730	)	$	48,375	$	188,841	$	-0-	$	402,567	$	(1,685,947	)
Warrant liability		(3,999,362	)		-0-		558,563		-0-		-0-		(3,440,799	)
Total of derivative liabilities	$	(6,325,092	)	$	48,375	$	747,404	$	-0-	$	402,567	$	(5,126,746	)

XML

Note 10 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 10: COMMITMENTS AND CONTINGENCIES

The Company currently leases office space under operating leases for most of its office locations and has 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

September 30, 2018

are as follows:

Year	Payments
2018	$	226,880
2019		654,275
2020		413,574
2021		337,397
2022		337,480
Thereafter		75,052
Total	$	2,044,658

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

$930,972

and

$841,718

for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively.

The Company’s Fort Lauderdale, Florida corporate office lease expires in

February 2023.

The Company’s lease on its New Jersey field office expires in

March 2021.

The Company currently operates its wholly-owned subsidiary, OmniComm Ltd., in the United Kingdom under the terms of a lease that expires in

September 2020.

The Company currently operates its wholly-owned subsidiary, OmniComm Europe, GmbH, in Germany under the terms of a lease that expires in

July 2019.

The Company currently operates its wholly-owned subsidiary, OmniComm Systems B.V, in the Netherlands under the terms of a lease that expires in

October 2018. 

Our offices in Barcelona, Spain, Tokyo, Japan and Bengaluru, India are administered under service agreements that include the use of office space and other services. 

The Company currently leases computer hardware for its operations under leases classified as capital leases. The leased equipment is amortized on a straight line basis over

five

 years. The minimum future lease payments required under the Company’s capital leases at

September 30, 2018

are as follows:

Year	Payments
2018	$	32,958
2019		131,832
2020		131,832
2021		52,779
Total minimum capital lease payments		349,401
Less: Amount representing interest		(28,797	)
Present value of minimum capital lease payments	$	320,604

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 

September 30, 2018,

there were

no

pending legal proceedings to which the Company or its subsidiaries are a party or to which any of its property is subject that could reasonably be expected to have a material effect on the results of our operations.

PATENT LITIGATION SETTLEMENT

Effective 

April 9, 2009,

we entered into a Settlement and License Agreement with DataSci, LLC (“DataSci”). DataSci granted us a worldwide, non-exclusive non-transferable right and license under the Licensed Patent and the right to sublicense TrialMaster on a Technology Transfer and Technology Transition basis. Under the terms of the Settlement and License Agreement, as amended, we are obligated to pay royalties quarterly for sales of Licensed Products, as defined therein, from

January 1, 2009

until the termination of the Settlement and License Agreement on

December 31, 2017 

equal to

two

percent (

2%

) of OmniComm’s annual Gross Revenues or, alternatively, the annual minimum royalty payment(s), whichever is greater. In addition to the payment of royalties, the Settlement and Licensing Agreement imposes certain obligations on us including commercialization, certain sublicensing, other payments, insurance and confidentiality. In addition and as a license fee for past use of the Licensed Patent which

may

have occurred prior to the effective date of the Settlement and Licensing Agreement, we issued a warrant to DataSci to purchase

1,000,000

shares of our common stock at an exercise price of

$.01

per share. The Settlement and Licensing Agreement provides that upon the expiration date of the warrant, at DataSci’s sole discretion, DataSci shall exercise its option under the warrant or licensee shall pay DataSci

$300,000.

The warrant was exercisable commencing on the

second

anniversary of the Settlement and Licensing Agreement,

April 2, 2011,

through the expiration date of the warrant on

December 31, 2017. 

On

December 31, 2017,

DataSci exercised

50%

of the warrant for

500,000

common shares and requested cash payment on

50%

of the warrant. As a result of the exercise, DataSci received

500,000

restricted common shares and a net cash payment of

$145,000.

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, (i) to include the eResearch Technology EDC assets acquired within the definition of Licensed Products, and as such subject to the royalty payment(s), under and in accordance with the Settlement and Licensing Agreement, and (ii) provide a release by DataSci of any and all claims of infringement of the Licensed Patent in connection with the eResearch Technology EDC assets acquired which

may

have occurred prior to the effective date of the First Amendment to Settlement and Licensing Agreement for an aggregate amount of

$300,000.

No

further payments are due under the Settlement and Licensing Agreement. 

During the 

nine

month period ended

September 30, 2017

the Company recorded a charge to earnings of (

$111,979

), which amount represented (i) the amount of additional license expense incurred above the stipulated minimum in the DataSci Settlement and License Agreement during the

nine

month period ended

September 30, 2017

and (ii) 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.

EMPLOYMENT AGREEMENTS

We have employment agreements in place with the following members of our executive management team:

Cornelis F. Wit, Executive Chairman

Randall G. Smith, Executive Vice Chairman

Stephen E. Johnson, Chief Executive Officer and President

Thomas E. Vickers, Chief Financial Officer

The employment agreements provide, among other things, for participation in employee benefits available to employees and executives. Each of the agreements will renew for successive

one

-year terms unless the agreement is expressly terminated by either the employee or the Company prior to the end of the then current term as provided for in the employment agreement. Under the terms of the agreement, we

may

terminate the employee’s employment upon

30

or

60

days notice of a material breach and the employee

may

terminate the agreement under the same terms and conditions. The employment agreements contain non-disclosure provisions, as well as non-compete clauses. The agreements for Mr. Smith, Mr. Johnson and Mr. Vickers contain severance provisions which entitles the employee to severance pay equal to

one

(

1

) year's salary and benefits in the event of the employee's termination by the Company for any reason other than for cause, as described in the employment agreement, or termination by the employee pursuant to a material breach of the agreement by the Company.

XML

Note 11 - Related Party Transactions

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 11: RELATED PARTY TRANSACTIONS

As of

September 30, 2018,

we have an aggregate of

$5,770,000

of convertible debentures and

$400,000

of promissory notes outstanding to our Executive Chairman and Chairman of the Board, Cornelis F. Wit (“Mr. Wit”) 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. The expiration date of the warrants associated with the debentures was also extended to August 29, 2013.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. On June 30, 2016, the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020.

● 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. The expiration date of the warrants associated with the debentures was also extended to December 16, 2013. 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. On November 19, 2015, the Company and Mr. Wit agreed to cancel $420,000 of the debentures and 1,680,000 of unrelated warrants in exchange for 1,680,000 shares of our common stock. On June 30, 2016, the Company and Mr. Wit extended the maturity date of the $4,055,000 of convertible debentures to April 1, 2020. The expiration date of the warrants associated with the debentures was also extended to April 1, 2020. On August 31, 2017, the Company repaid $55,000 to Mr. Wit.

● On February 29, 2016, the Company issued a promissory note in the principal amount of $450,000 and warrants to purchase 1,800,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2019 to Mr. Wit in exchange for accrued interest in the amount of $450,000. The note carries an interest rate of 12% per annum and has a maturity date of April 1, 2019. On Aug 31, 2017, the Company repaid $50,000 to Mr. Wit.

On

March 18, 2013,

the Company entered into a

$2,000,000

revolving Line of Credit (“Line of Credit”) with The Northern Trust Company guaranteed by our then Chief Executive Officer and Director, Cornelis F. Wit. Mr. Wit receives

2.0%

interest (approximately

$9,500

per month) from the Company 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.

On

April 7, 2017,

the Company renewed the Line of Credit. The Line of Credit currently matures on

April 7, 2020 

and carries a variable interest rate based on the prime rate. At

September 30, 2018,

$3,200,000

was outstanding on the Line of Credit at an interest rate of

4.25%.

For the

nine

month period ended

September 30, 2018

we incurred

$682,986

in interest expense payable to related parties and

$717,782

for the

nine

month period ended

September 30, 2017.

XML

Note 12 - Stockholders' (Deficit)

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE 12: STOCKHOLDERS’ (DEFICIT)

Our authorized capital stock consists of

500,000,000

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 Stock,

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.

As of

September 30, 2018

we had the following outstanding securities:

○ 152,309,472 shares of common stock issued and outstanding;

○ 26,020,000 warrants issued and outstanding to purchase shares of our common stock;

○ 2,670,000 options issued and outstanding to purchase shares of our common stock;

○ 250,000 shares of our Series D Preferred Stock issued and outstanding; and

○ $5,970,000 principal amount  of Convertible Debentures and $55,973 of accrued interest convertible into 11,940,000 and 111,945 shares of common stock, respectively.

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 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.

Preferred Stock

Our Board of Directors, without further stockholder approval,

may

issue preferred stock in

one

or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. In addition, the Board of Directors

may

fix and determine all privileges and rights of the authorized preferred stock series including:

○ dividend and liquidation preferences;

○ voting rights;

○ conversion privileges; and

○ redemption terms.

Our Board of Directors

may

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

The following table presents the cumulative arrearage of undeclared dividends by class of preferred stock as of

September 30, 2018

and

September 30, 2017,

respectively, and the per share amount by class of preferred stock.

	Cumulative arrearage as of				Cumulative arrearage per share as of
	September 30,				September 30,
Series of preferred stock	2018		2017		2018		2017
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	$	2,081,980	$	2,081,980

Warrants Issued in Capital Transactions

The following tables summarize all outstanding warrants for the

nine

month period ended

September 30, 2018

and the year ended

December 31, 2017,

and the related changes during these periods.

September 30, 2018							September 30, 2018
Warrants outstanding							Warrants exercisable
				Weighted average	Weighted average			Weighted average
Range of exercise price			Number outstanding	remaining contractual life	exercise price		Number exercisable	exercise price
$0.25	–	$0.60	26,020,000	1.15	$	0.42	26,020,000	$	0.42

December 31, 2017							December 31, 2017
Warrants outstanding							Warrants exercisable
				Weighted average	Weighted average			Weighted average
Range of exercise price			Number outstanding	remaining contractual life	exercise price		Number exercisable	exercise price
$0.25	–	$0.60	27,020,000	1.84	$	0.42	27,020,000	$	0.42

Warrants
Balance at December 31, 2016	27,860,000
Issued	-0-
Exercised	-0-
Expired/forfeited	(840,000	)
Balance at December 31, 2017	27,020,000
Issued	-0-
Exercised	-0-
Expired/forfeited	(1,000,000	)
Balance at September 30, 2018	26,020,000
Warrants exercisable at September 30, 2018	26,020,000
Weighted average fair value of warrants granted during 2018	n/a

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, activity and ending balance of the components of accumulated other comprehensive (loss).

	Foreign currency translation			Accumulated other comprehensive (loss)
Balance at December 31, 2016	$	(410,505	)	$	(410,505	)
2017 Activity		13,268			13,268
Balance at December 31, 2017		(397,237	)		(397,237	)
2018 Activity		(34,424	)		(34,424	)
Balance at September 30, 2018	$	(431,661	)	$	(431,661	)

XML

Note 13 - Equity Incentive Plans

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 13: EQUITY INCENTIVE PLANS

Stock Option Plans

Description of

2016

Equity Incentive Plan

In

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 initially 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 automatically increases on

January

1st

of each year for a period of

nine

(

9

) years commencing on

January 1, 2017

and ending on (and including)

January 1, 2025,

in an amount equal to

five

percent (

5%

) of the total number of shares authorized under the

2016

Plan. As of

September 30, 2018

11,025,000

shares of our common stock were authorized for issuance under the

2016

Plan. Unless earlier terminated by the Board, the

2016

Plan shall terminate on

June 29, 2026.

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 to employees generally vest either upon grant or in

two

installments. 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 to employees 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.

On

September 6, 2018,

the Company entered into restricted stock agreements (“RSAs”) with its Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technology Officer intended to provide incentive to the executives to ensure certain economic performance of the Company. The shares issuable under the RSAs were valued as of the grant date at

$0.33

per share. The RSAs provided for the issuance of up to

225,000

performance related shares of the Company's common stock to each of the executives provided certain milestones were met as follows: a)

75,000

performance related shares are subject to individual performance. b) If the Company's

2018

Revenue equals or exceeds 

$30

million and the Company’s

2018

EBITDA equals or exceeds 

$6

million, the Company would award

75,000

shares of common stock; c) If the Company's

2018

Revenue equals or exceeds 

$32

million and the Company’s

2018

EBITDA equals or exceeds 

$7

million, the Company would award an additional

75,000

shares of common stock. The restrictions on

1/3

of the awarded performance shares will lapse on the first,

second

and

third

anniversaries of the

2018

 Annual Stockholder Meeting, which was held on

June 7, 2018. 

As of

November 12, 2018

the Company had

not

achieved the milestones.

On

September 6, 2018,

the Company entered into restricted stock agreements (“RSAs”) with its Board of Directors intended to provide incentive to ensure certain economic performance of the Company. The shares issuable under the RSAs were valued as of the grant date at

$0.33

per share. The RSAs provided for the issuance of a total of

200,000

restricted shares with the restrictions lapsing on the day prior to the the

2019

Annual Stockholder Meeting to each director. The RSAs include 

75,000

performance related shares of the Company's common stock that are subject to the Company's

2018

Revenue equaling or exceeding 

$30

million and the Company’s

2018

EBITDA equaling or exceeding 

$6

million. As of

November 12, 2018

the Company had

not

achieved the milestones.

The total combined restricted stock compensation expense recognized, in the statement of operations, during the quarter ended

September 30, 2018

was

$41,735.

As of

September 30, 2018,

there were

2,495,000

options and

1,900,000

restricted stock shares that have been granted under the

2016

Plan. At

September 30, 2018,

there were

6,630,000

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

2016

Plan.

Description of

2009

Equity Incentive Plan

In

2009,

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

2009

Equity Incentive Plan (the

“2009

Plan”). On

June 16, 2016,

the

2009

Plan terminated upon the approval of the

2016

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 option 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. Options granted to employees generally vested either upon grant or in

two

installments. The

first

vesting, which was equal to

50%

of the granted stock options, usually occurred upon completion of

one

full year of employment from the date of grant and the

second

vesting usually occurred on the

second

anniversary of the date of grant. 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 to employees 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.

As of

September 30, 2018,

there were

275,000

outstanding options and

3,876,662

restricted stock shares that have been granted under the

2009

Plan. At

September 30, 2018,

there were -

0

- 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, 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
Granted		570,000			0.28
Exercised		(200,000	)		0.22
Forfeited/cancelled/expired		(2,975,000	)		0.25
Outstanding at September 30, 2018		2,670,000		$	0.27	3.58	$	396,500
Vested and exercisable at September 30, 2018		800,000		$	0.22	2.57	$	158,425

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price at quarter-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

September 30, 2018.

The total number of shares vesting and the fair value of shares vesting for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively, was:

Fair value of options vesting for the period ended	Number of options vested		Fair value of options vested
September 30, 2018		625,000	$	125,190
September 30, 2017		62,500	$	12,742

Cash received for stock option exercises for the

nine

month periods ended

September 30, 2018

and

September 30, 2017

was

$45,000

and

$35,250,

respectively. Due to the Company’s net loss position,

no

income tax benefit has been realized during the

nine

month periods ended

September 30, 2018

and

September 30, 2017.

The following table summarizes information concerning options outstanding at

September 30, 2018:

Awards breakdown by price range at September 30, 2018
			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		250,000		0.74	$	0.17		250,000		0.74	$	0.17
0.21	to	0.30		1,695,000		3.79		0.26		550,000		3.40		0.25
0.31	to	0.50		725,000		4.07		0.34		-0-		0.00		0.00
0.00	to	0.50		2,670,000		3.58	$	0.27		800,000		2.57	$	0.22

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 weighted average fair value (per share) of options granted during the 

nine

month period ended

September 30, 2018

was

$0.23

and

$0.19

 during the

nine

month period ended

September 30, 2017. 

The Black Scholes option-pricing model was utilized to calculate these values.

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 that have been granted. 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.

Below are the assumptions for the fair value of share-based payments for the

nine

month period ended

September 30, 2018

and the year ended

December 31, 2017.

	Stock option assumptions for the period ended
Stock option assumptions	September 30, 2018	December 31, 2017
Risk-free interest rate	2.71%	1.81%
Expected dividend yield	0.0%	0.0%
Expected volatility	110.3%	127.1%
Expected life of options (in years)	5	5

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

	Weighted average grant date fair value
	for the period ended September 30,
	2018		2017
Stock options granted during the period	$	0.23	$	0.19
Stock options vested during the period	$	0.20	$	0.20
Stock options forfeited during the period	$	0.19	$	0.13

A summary of the status of the Company’s non-vested shares underlying stock options as of

September 30, 2018 

and changes during the

nine

month period ended

September 30, 2018

is as follows:

	Shares underlying stock options		Weighted average grant date fair value
Nonvested shares at January 1, 2018		4,875,000	$	0.21
Nonvested shares at September 30, 2018		1,870,000	$	0.24

As of

September 30, 2018,

$309,142

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

1.9

 years.

XML

Note 14 - Subsequent Events

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE 14: SUBSEQUENT EVENTS

Subsequent to

September 30, 2018

the Company repaid

$900,000

on its revolving Line of Credit.

Subsequent to

September 30, 2018,

John Fontenault, our Chief Operating Officer, exercised options that had been granted to him. As a result

34,175

common shares were issued to him.

Subsequent to

September 30, 2018

the Company extended the lease for the office in Leiden, the Netherlands until

October 2019.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The Company’s accounts include those of all its wholly-owned subsidiaries, which are more fully described in the Company’s

2017

Annual Report filed on Form

10

-K with the Securities and Exchange Commission, 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.

Use of Estimates, Policy [Policy Text Block]

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of the unaudited condensed 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.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain reclassifications have been made in the

2017

financial statements to conform to the

2018

presentation. These reclassifications did

not

have any effect on our net income/(loss) or shareholders’ deficit.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

foreign currency translation

The financial statements of the Company’s foreign subsidiaries are translated in accordance with Accounting Standards Codification (“ASC”)

830

-

30,

Foreign Currency Matters—Translation of Financial Statements

("ASC

830

-

30"

). 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 Systems 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. The functional currency of the Company’s subsidiary, OmniComm eClinical Solutions Pvt. Ltd. in India, is the Indian Rupee. 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

$34,424

 and a translation gain of

$13,386

 for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively.

Revenue Recognition, Policy [Policy Text Block]

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, eClinical Suite and Promasys. Service revenues are derived principally from the Company's delivery of the hosted solutions of its TrialMaster software product, and consulting services and customer support, including training, for all of the Company's products.

For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")

606

(“ASC 

606"

). A

five

-step analysis must be met as outlined in ASC 

606:

(i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has

not

been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or

no

refund will be required.

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, including hosted applications, licensing, professional services and maintenance-related services.

Hosted Application Revenues

The Company offers its TrialMaster and TrialOne software products as hosted application solutions delivered through a standard web browser, with customer support and training services. The Company's TrialOne and Promasys solutions are primarily deployed on a technology transfer or off-the-shelf basis. To date, hosted applications revenues have been primarily related to TrialMaster. On

April 30, 2019,

OmniComm will decommission its eClinical Suite hosting platform as the eClinical Suite clients utilizing these hosting services have transitioned to TrialMaster, the eClinical Suite studies have been completed or the studies have transitioned to another hosting platform.

Revenues resulting from TrialMaster 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

component involves services required to close out, or lock, the database for the clinical trial.

Fees charged 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 typically 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 monthly or quarterly in advance.

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

three

to

five

 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

to net

45

 days.

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, running test data and documentation of procedures. Subsequent additions or extensions to license terms do

not

generally include additional professional services.

Maintenance Revenues

Maintenance includes telephone-based help desk support and software maintenance, including updates to the software through new software version releases. 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.

Pass-through Revenue and Expense

The Company accounts for pass-through revenue and expense (reimbursable revenue and reimbursable expense) in accordance with Accounting Standards Update

2016

-

08,

Principal versus Agent Considerations (Reporting Revenue Gross versus Net), 

(“ASU 

2016

-

08”

). In accordance with ASU 

2016

-

08

 these amounts are recorded as revenue in the statement of operations with a corresponding expense recorded in cost of goods sold. Pass-through revenues and expenses include amounts associated with

third

-party services provided to our customers by our service and product partners. These

third

-party services are primarily comprised of Interactive Voice and Web Response software services (IVR and IWR), travel and shipping that are incurred on our clients’ behalf.

The fees associated with each business activity for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively, are:

	For the nine months ended
Revenue activity	September 30, 2018		September 30, 2017
Set-up fees	$	2,683,182	$	3,948,687
Change orders		1,090,333		1,054,288
Maintenance		4,163,138		3,749,897
Software licenses		8,423,355		7,951,228
Professional services		2,617,149		2,526,379
Hosting		1,355,792		945,321
Total	$	20,332,949	$	20,175,800

Cost of Sales, Policy [Policy Text Block]

COST OF GOODS SOLD

Cost of goods sold 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 and bonuses for the Company’s professional services staff. Cost of goods sold also includes outside service provider costs

.

Cost of goods sold is expensed as incurred.

Cash and Cash Equivalents, Policy [Policy Text Block]

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.

Receivables, Policy [Policy Text Block]

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

$197,911

 as of

September 30, 2018

and

$149,980

as of

December 31, 2017.

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

nine

month period ended

September 30, 2018

and the year ended

December 31, 2017.

	September 30, 2018		December 31, 2017
Beginning of period	$	149,980	$	179,813
Bad debt expense		47,931		130,346
Write-offs		-0-		(160,179	)
End of period	$	197,911	$	149,980

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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

September 30, 2018,

$1,404,402

 was deposited in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal.

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, Europe and East Asia. 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

September 30, 2018.

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

September 30, 2018,

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 quarterly 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

12%

of our revenues during the

nine

month period ended

September 30, 2018

or approximately

$2,339,000.

One customer accounted for

10%

of our revenues during the

nine

month period ended

September 30, 2017

or approximately

$2,021,000.

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

nine

month periods ended

September 30, 2018

and

September 30, 2017

and the year ended

December 31, 2017.

	Revenues		Accounts receivable
For the period ended	Number of customers	Percentage of total revenues	Number of customers	Percentage of accounts receivable
September 30, 2018	1	12%	1	13%
December 31, 2017	1	10%	1	24%
September 30, 2017	1	10%	2	38%

The table below provides revenues from European customers for the

nine

month periods ended

September 30, 2018

and

September 30, 2017.

European revenues
For the nine months ended
September 30, 2018		September 30, 2017
European revenues	% of Total revenues	European revenues	% of Total revenues
$3,513,571	17%	$2,514,601	12%

The Company serves its hosting customers from

third

-party web hosting facilities located in the United States and Germany. 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, Plant and Equipment, Policy [Policy Text Block]

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.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

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.

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.

Fair Value Measurement, Policy [Policy Text Block]

FAIR VALUE MEASUREMENT

OmniComm’s capital structure includes the use of warrants and convertible debt features that are classified as derivative financial instruments. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value under ASC

815,

Derivatives and Hedging

(“ASC

815”

)

.

ASC

815

requires that changes in the fair value of derivative financial instruments with

no

hedging designation be recognized as gains/(losses) in the earnings statement. The fair value measurement is determined in accordance with ASC

820,

Fair Value Measurements and Disclosures

(“ASC

820”

).

Revenue Recognition, Deferred Revenue [Policy Text Block]

DEFERRED REVENUE

Deferred revenue represents cash advances and amounts in accounts receivable as of the balance sheet date 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

September 30, 2018,

the Company had

$7,867,262

 in deferred revenues relating to contracts for services to be performed over periods ranging from

one

month to

7

years. The Company had

$6,209,198

 in deferred revenues that are expected to be recognized in the next

twelve

fiscal months.

Advertising Costs, Policy [Policy Text Block]

ADVERTISING

Advertising costs are expensed as incurred. Advertising costs were

$671,030

and

$528,777

for the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively, and are included under selling, general and administrative expenses in our unaudited condensed consolidated financial statements.

Research, Development, and Computer Software, Policy [Policy Text Block]

RESEARCH AND PRODUCT DEVELOPMENT EXPENSES

Software development costs are expensed as incurred. ASC

985

-

20,

Software Industry Costs of Software to Be Sold, Leased or Marketed

(“ASC

985

-

20”

), 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

nine

month periods ended

September 30, 2018

and

September 30, 2017

we spent

$2,469,280

and

$2,230,565,

respectively, on research and product development activities, which include costs associated with the development of our software products and services for our clients’ projects and which are primarily comprised of salaries and related expenses for our software developers and consulting fees paid to

third

-party consultants. Research and product development costs are primarily included under Salaries, benefits and related taxes in our Statement of Operations.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

EQUITY INCENTIVE PLANS

The OmniComm Systems, Inc.

2016

Equity Incentive Plan (the

“2016

Plan”) was approved at our Annual Meeting of Stockholders on

June 16, 2016.

The

2016

Plan initially provides for the issuance of up to

10,000,000

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

2016

Plan automatically increases on

January

1st

of each year for a period of

nine

(

9

) years commencing on

January 1, 2017

and ending on (and including)

January 1, 2025,

in an amount equal to

five

percent (

5%

) of the total number of shares authorized under the

2016

Plan. As of

September 30, 2018

11,025,000

shares of our common stock were authorized for issuance under the

2016

Plan.

The predecessor plan, the OmniComm Systems, Inc.

2009

Equity Incentive Plan (the

“2009

Plan”) was approved at our Annual Meeting of Stockholders on

July 10, 2009

and terminated on

June 16, 2016

upon the approval of the

2016

Plan. The

2009

Plan provided for the issuance of up to

7,500,000

shares to employees, directors and key consultants. The

2016

and

2009

Plans are more fully described in “Note

13,

Equity Incentive Plans”.

The Company accounts for its employee equity incentive plans underASC

718,

Compensation – Stock Compensation

, (“ASC

718”

) 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.

Earnings Per Share, Policy [Policy Text Block]

EARNINGS PER SHARE

The Company accounts for Earnings per Share using ASC

260,

Earnings per Share,

(“ASC

260”

). Unlike diluted earnings per share basic earnings per share excludes any dilutive effects of options, warrants and convertible securities.

Income Tax, Policy [Policy Text Block]

INCOME TAXES

The Company accounts for income taxes in accordance with ASC

740,

Income Taxes

(“ASC

740”

)

.

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.

New Accounting Pronouncements, Policy [Policy Text Block]

IMPACT OF NEW ACCOUNTING

STANDARDS

During the

first

nine

months of

2018,

we adopted the following new accounting pronouncements:

In

February 2016,

the FASB issued Accounting Standard Update

No.

2016

-

02,

“Leases (Topic

842

)”, (“ASU

2016

-

02”

). ASU

2016

-

02

requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than

12

months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after 

December 15, 2018.

Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In

April 2016,

the FASB issued Accounting Standards Update

2016–10

“Revenue from Contracts with Customers

(Topic

606

):

Identifying Performance Obligations and Licensing.”

The amendments in this Update do

not

change the core principle of the guidance in Topic

606.

Rather, the amendments in this Update clarify the following

two

aspects of Topic

606:

identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic

606

includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic

606.

The Company adopted the new standard effective

January 1, 2018

using the modified retrospective method. Therefore, the comparative financial information has

not

been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the new standard did

not

have a material impact on the Company’s 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.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Revenue Recognition, Multiple-deliverable Arrangements [Table Text Block]

	For the nine months ended
Revenue activity	September 30, 2018		September 30, 2017
Set-up fees	$	2,683,182	$	3,948,687
Change orders		1,090,333		1,054,288
Maintenance		4,163,138		3,749,897
Software licenses		8,423,355		7,951,228
Professional services		2,617,149		2,526,379
Hosting		1,355,792		945,321
Total	$	20,332,949	$	20,175,800

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	September 30, 2018		December 31, 2017
Beginning of period	$	149,980	$	179,813
Bad debt expense		47,931		130,346
Write-offs		-0-		(160,179	)
End of period	$	197,911	$	149,980

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Revenues		Accounts receivable
For the period ended	Number of customers	Percentage of total revenues	Number of customers	Percentage of accounts receivable
September 30, 2018	1	12%	1	13%
December 31, 2017	1	10%	1	24%
September 30, 2017	1	10%	2	38%

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

European revenues
For the nine months ended
September 30, 2018		September 30, 2017
European revenues	% of Total revenues	European revenues	% of Total revenues
$3,513,571	17%	$2,514,601	12%

XML

Note 3 - Earnings (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

Anti-dilutive security	September 30, 2018		September 30, 2017
Employee stock options		2,670,000		4,050,000
Warrants		26,020,000		27,020,000
Convertible notes		11,940,000		740,000
Shares issuable for accrued interest		111,945		114,411
Total		40,741,945		31,924,411

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the nine months ended
	September 30, 2018								September 30, 2017
	Income/(loss)			Shares		Per-share			Income/(loss)		Shares		Per-share
	numerator			denominator		amount			numerator		denominator		amount
Basic EPS	$	(539,428	)		150,282,732	$	(0.00	)	$	2,394,546		147,805,410	$	0.02
Effect of dilutive securities		-0-			-0-		-0-			-0-		45,476		-0-
Diluted EPS	$	(539,428	)		150,282,732	$	(0.00	)	$	2,394,546		147,850,886	$	0.02

	For the three months ended
	September 30, 2018								September 30, 2017
	Income/(loss)			Shares		Per-share			Income/(loss)			Shares		Per-share
	numerator			denominator		amount			numerator			denominator		amount
Basic EPS	$	(2,662,692	)		150,905,124	$	(0.02	)	$	(358,839	)		147,858,566	$	(0.00	)
Effect of dilutive securities		-0-			-0-		-0-			-0-			-0-		-0-
Diluted EPS	$	(2,662,692	)		150,905,124	$	(0.02	)	$	(358,839	)		147,858,566	$	(0.00	)

XML

Note 4 - Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 30, 2018						December 31, 2017
Description	Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value		Estimated useful life (years)
Computer & office equipment	$	3,046,561	$	2,129,785	$	916,776	$	2,322,833	$	1,949,982	$	372,851	5
Leasehold improvements		137,054		104,335		32,719		118,380		98,901		19,479	5
Computer software		2,305,155		1,957,405		347,750		2,010,999		1,886,342		124,657	3
Office furniture		169,122		135,623		33,499		162,799		127,248		35,551	5
Total	$	5,657,892	$	4,327,148	$	1,330,744	$	4,615,011	$	4,062,473	$	552,538

XML

Note 5 - Intangible Assets, Net (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	September 30, 2018						December 31, 2017
Asset	Cost		Accumulated amortization		Net book value		Cost		Accumulated amortization		Net book value		Estimated useful life (years)
eClinical Suite customer lists	$	1,392,701	$	1,392,701	$	-0-	$	1,392,701	$	1,392,701	$	-0-	3
Promasys B.V. customer lists		114,877		114,877		-0-		118,780		32,994		85,786	15
Promasys B.V. software code		72,837		71,623		1,214		72,837		60,698		12,139	5
Promasys B.V. URLs/website		58,019		58,019		-0-		59,990		59,990		-0-	3
Acuity software code		1,052,403		233,867		818,536		-0-		-0-		-0-	3
Total	$	2,690,837	$	1,871,087	$	819,750	$	1,644,308	$	1,546,383	$	97,925

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Year	Amortization
2018	$	88,914
2019		350,801
2020		350,801
2021		29,234
Total	$	819,750

XML

Note 6 - Accounts Payable and Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

Account	September 30, 2018		December 31, 2017
Accounts payable	$	760,557	$	1,303,073
Accrued payroll and related costs		681,354		925,890
Other accrued expenses		168,675		184,131
Accrued interest		75,950		172,951
Total accounts payable and accrued expenses	$	1,686,536	$	2,586,045

XML

Note 7 - Line of Credit, Notes Payable and Liquidity (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Debt [Table Text Block]

			Ending		Non related party					Related party
Origination	Maturity	Interest	principal				Long						Long
date	date	rate	September 30, 2018		Current		term			Current			term
2/29/2016	4/1/2019	12%	$	400,000	$	-0-	$	-0-		$	400,000		$	-0-
6/30/2016	4/1/2020	10%		420,000		-0-		420,000			-0-			-0-
6/30/2016	4/1/2020	12%		282,500		-0-		282,500			-0-			-0-
Discount on notes payable						-0-		(186,268	)		(46,946	)		-0-
Total			$	1,102,500	$	-0-	$	516,232		$	353,054		$	-0-

			Ending		Non related party					Related party
Origination	Maturity	Interest	principal				Long					Long
date	date	rate	December 31, 2017		Current		term			Current		term
2/29/2016	4/1/2019	12%	$	400,000	$	-0-	$	-0-		$	-0-	$	400,000
6/30/2016	4/1/2020	10%		420,000		-0-		420,000			-0-		-0-
6/30/2016	4/1/2020	12%		282,500		-0-		282,500			-0-		-0-
Discount on notes payable						-0-		(279,402	)		-0-		(117,365	)
Total			$	1,102,500	$	-0-	$	423,098		$	-0-	$	282,635

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Note 8 - Convertible Notes Payable (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Maturities of Long-term Debt [Table Text Block]

Year	Amount
2018	$	-0-
2019		-0-
2020		5,770,000
2021		200,000
Total	$	5,970,000

Convertible Debt [Member]

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

					Carrying amount
Date of	Maturity	Interest	Principal at		Short term				Long term
issuance	date	rate	September 30, 2018		Related		Non related		Related		Non related
8/29/2008	4/1/2020	10%	$	1,770,000	$	-0-	$	-0-	$	1,770,000	$	-0-
12/16/2008	4/1/2020	12%		4,000,000		-0-		-0-		4,000,000		-0-
12/16/2008	4/1/2021	12%		200,000		-0-		-0-		-0-		200,000
Total			$	5,970,000	$	-0-	$	-0-	$	5,770,000	$	200,000

					Carrying amount
Date of	Maturity	Interest	Principal at		Short term				Long term
issuance	date	rate	December 31, 2017		Related		Non related		Related		Non related
8/1/1999	6/30/2004	10%	$	50,000	$	-0-	$	50,000	$	-0-	$	-0-
8/29/2008	4/1/2019	10%		150,000		-0-		-0-		-0-		150,000
8/29/2008	4/1/2020	10%		1,770,000		-0-		-0-		1,770,000		-0-
12/16/2008	4/1/2020	12%		4,000,000		-0-		-0-		4,000,000		-0-
12/16/2008	4/1/2021	12%		200,000		-0-		-0-		-0-		200,000
Total			$	6,170,000	$	-0-	$	50,000	$	5,770,000	$	350,000

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Note 9 - Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Fair Value, Liabilities Measured on Recurring Basis [Table Text Block]

	Fair value at		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Derivatives: (1) (2)	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Conversion feature liability	$	1,840,512	$	-0-	$	-0-	$	1,840,512
Warrant liability		4,436,207		-0-		-0-		4,436,207
Total of derivative liabilities	$	6,276,719	$	-0-	$	-0-	$	6,276,719

	Fair value at		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Derivatives: (1) (2)	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Conversion feature liability	$	1,685,947	$	-0-	$	-0-	$	1,685,947
Warrant liability		3,440,799		-0-		-0-		3,440,799
Total of derivative liabilities	$	5,126,746	$	-0-	$	-0-	$	5,126,746

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

Significant valuation assumptions for derivative instruments at September 30, 2018
Risk free interest rate	2.45%	to	2.45%
Dividend yield		0.00%
Expected volatility	85.7%	to	105.8%
Expected life (range in years)
Conversion feature liability	1.50	to	2.50
Warrant liability	0.25	to	2.50

Significant valuation assumptions for derivative instruments at December 31, 2017
Risk free interest rate	1.56%	to	1.81%
Dividend yield		0.00%
Expected volatility	87.0%	to	118.4%
Expected life (range in years)
Conversion feature liability	1.25	to	3.25
Warrant liability	0.25	to	3.25

Fair Value Measurements, Nonrecurring [Table Text Block]

	Carrying amount		Carrying amount		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Acquired assets (1)	December 31, 2017		September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Promasys B.V. customer list (2) (3)	$	85,786	$	-0-	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (2)		12,139		1,214		-0-		-0-		72,943
Acuity software code (4)		-0-		818,536		-0-		-0-		1,052,403
Total	$	97,925	$	819,750	$	-0-	$	-0-	$	1,261,599

	Carrying amount		Carrying amount		Quoted prices in active markets for identical assets/ liabilities		Significant other observable inputs		Significant unobservable inputs
Acquired assets (1)	December 30, 2016		December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Promasys B.V. customer list (2)	$	82,173	$	85,786	$	-0-	$	-0-	$	136,253
Promasys B.V. software code (2)		26,707		12,139		-0-		-0-		72,943
Total	$	108,880	$	97,925	$	-0-	$	-0-	$	209,196

Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings [Table Text Block]

	Other income/(expense)
	For the nine months ended
	September 30, 2018			September 30, 2017
The net amount of gains/(losses) for the period included in earnings attributable to the unrealized and realized gains/(losses) from changes in derivative liabilities at the reporting date	$	(1,160,473	)	$	723,532
Total unrealized and realized gains/(losses) included in earnings	$	(1,160,473	)	$	723,532

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

	Level 3 financial liabilities at fair value
									Net		Reclassification
									purchases,		of conversion
	Balance,								issuances		feature liability		Balance,
	beginning			Net realized		Net unrealized			and		associated with		end
Derivatives:	of year			gains/(losses)		gains/(losses)			settlements		convertible debt		of period
Conversion feature liability	$	(1,685,947	)	$	-0-	$	(165,065	)	$	-0-	$	10,500	$	(1,840,512	)
Warrant liability		(3,440,799	)		-0-		(995,408	)		-0-		-0-		(4,436,207	)
Total of derivative liabilities	$	(5,126,746	)	$	-0-	$	(1,160,473	)	$	-0-	$	10,500	$	(6,276,719	)

	Level 3 financial liabilities at fair value
								Net		Reclassification
								purchases,		of conversion
	Balance,							issuances		feature liability		Balance,
	beginning			Net realized		Net unrealized		and		associated with		end
Derivatives:	of year			gains/(losses)		gains/(losses)		settlements		convertible debt		of year
Conversion feature liability	$	(2,325,730	)	$	48,375	$	188,841	$	-0-	$	402,567	$	(1,685,947	)
Warrant liability		(3,999,362	)		-0-		558,563		-0-		-0-		(3,440,799	)
Total of derivative liabilities	$	(6,325,092	)	$	48,375	$	747,404	$	-0-	$	402,567	$	(5,126,746	)

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Note 10 - Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Year	Payments
2018	$	226,880
2019		654,275
2020		413,574
2021		337,397
2022		337,480
Thereafter		75,052
Total	$	2,044,658

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

Year	Payments
2018	$	32,958
2019		131,832
2020		131,832
2021		52,779
Total minimum capital lease payments		349,401
Less: Amount representing interest		(28,797	)
Present value of minimum capital lease payments	$	320,604

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Note 12 - Stockholders' (Deficit) (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule Of Dividends In Arrears [Table Text Block]

	Cumulative arrearage as of				Cumulative arrearage per share as of
	September 30,				September 30,
Series of preferred stock	2018		2017		2018		2017
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	$	2,081,980	$	2,081,980

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

September 30, 2018							September 30, 2018
Warrants outstanding							Warrants exercisable
				Weighted average	Weighted average			Weighted average
Range of exercise price			Number outstanding	remaining contractual life	exercise price		Number exercisable	exercise price
$0.25	–	$0.60	26,020,000	1.15	$	0.42	26,020,000	$	0.42

December 31, 2017							December 31, 2017
Warrants outstanding							Warrants exercisable
				Weighted average	Weighted average			Weighted average
Range of exercise price			Number outstanding	remaining contractual life	exercise price		Number exercisable	exercise price
$0.25	–	$0.60	27,020,000	1.84	$	0.42	27,020,000	$	0.42

Share-based Compensation, Activity [Table Text Block]

	Weighted average grant date fair value
	for the period ended September 30,
	2018		2017
Stock options granted during the period	$	0.23	$	0.19
Stock options vested during the period	$	0.20	$	0.20
Stock options forfeited during the period	$	0.19	$	0.13

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Foreign currency translation			Accumulated other comprehensive (loss)
Balance at December 31, 2016	$	(410,505	)	$	(410,505	)
2017 Activity		13,268			13,268
Balance at December 31, 2017		(397,237	)		(397,237	)
2018 Activity		(34,424	)		(34,424	)
Balance at September 30, 2018	$	(431,661	)	$	(431,661	)

Warrant [Member]

Notes Tables

Share-based Compensation, Activity [Table Text Block]

Warrants
Balance at December 31, 2016	27,860,000
Issued	-0-
Exercised	-0-
Expired/forfeited	(840,000	)
Balance at December 31, 2017	27,020,000
Issued	-0-
Exercised	-0-
Expired/forfeited	(1,000,000	)
Balance at September 30, 2018	26,020,000
Warrants exercisable at September 30, 2018	26,020,000
Weighted average fair value of warrants granted during 2018	n/a

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Note 13 - Equity Incentive Plans (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of options			Weighted average exercise price (per share)		Weighted average remaining contractual term (in years)	Aggregate intrinsic value
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
Granted		570,000			0.28
Exercised		(200,000	)		0.22
Forfeited/cancelled/expired		(2,975,000	)		0.25
Outstanding at September 30, 2018		2,670,000		$	0.27	3.58	$	396,500
Vested and exercisable at September 30, 2018		800,000		$	0.22	2.57	$	158,425

Share-based Compensation Arrangements by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding [Table Text Block]

Fair value of options vesting for the period ended	Number of options vested		Fair value of options vested
September 30, 2018		625,000	$	125,190
September 30, 2017		62,500	$	12,742

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

Awards breakdown by price range at September 30, 2018
			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		250,000		0.74	$	0.17		250,000		0.74	$	0.17
0.21	to	0.30		1,695,000		3.79		0.26		550,000		3.40		0.25
0.31	to	0.50		725,000		4.07		0.34		-0-		0.00		0.00
0.00	to	0.50		2,670,000		3.58	$	0.27		800,000		2.57	$	0.22

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

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Stock option assumptions for the period ended
Stock option assumptions	September 30, 2018	December 31, 2017
Risk-free interest rate	2.71%	1.81%
Expected dividend yield	0.0%	0.0%
Expected volatility	110.3%	127.1%
Expected life of options (in years)	5	5

Share-based Compensation, Activity [Table Text Block]

	Weighted average grant date fair value
	for the period ended September 30,
	2018		2017
Stock options granted during the period	$	0.23	$	0.19
Stock options vested during the period	$	0.20	$	0.20
Stock options forfeited during the period	$	0.19	$	0.13

Schedule of Nonvested Share Activity [Table Text Block]

	Shares underlying stock options		Weighted average grant date fair value
Nonvested shares at January 1, 2018		4,875,000	$	0.21
Nonvested shares at September 30, 2018		1,870,000	$	0.24

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Note 1 - Organization and Nature of Operations (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Research and Development Expense, Total	$ 2,469,280	$ 2,230,565

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Note 2 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($) shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) shares	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Jun. 16, 2016 shares	Jul. 10, 2009 shares
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Total	$ (13,256)	$ 1,310	$ (34,424)	$ 13,386	$ 13,268
Number of Reportable Segments			1
Number of Revenue Producing Activities	4		4
Allowance for Doubtful Accounts Receivable, Current, Ending Balance	$ 197,911		$ 197,911		149,980
Cash, Uninsured Amount	1,404,402		1,404,402
Revenues, Total	6,842,824	$ 6,715,913	20,332,949	20,175,800
Deferred Revenue	7,867,262		7,867,262
Deferred Revenue, Current	$ 6,209,198		6,209,198		$ 7,564,587
Advertising Expense			671,030	528,777
Research and Development Expense, Total			$ 2,469,280	$ 2,230,565
The 2016 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares	11,025,000		11,025,000			10,000,000
Common Stock Available for Issuance Increasing Period			9 years
Common Stock Available for Issuance, Annual Increase Percent			5.00%
Plan 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares							7,500,000
Leasehold Improvements Computers Equipment And Furniture [Member]
Property, Plant and Equipment, Useful Life			5 years
Software Development [Member]
Property, Plant and Equipment, Useful Life			3 years
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage			12.00%	10.00%	10.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Customer 1 [Member]
Concentration Risk, Percentage			12.00%	10.00%
Revenues, Total			$ 2,339,000	$ 2,021,000
Minimum [Member]
Term Of Software License			3 years
Deferred Revenue, Service Contract Term			30 days
Maximum [Member]
Term Of Software License			5 years
Deferred Revenue, Service Contract Term			7 years

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Note 2 - Summary of Significant Accounting Policies - Revenue by Business Activity (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues, Total	$ 6,842,824	$ 6,715,913	$ 20,332,949	$ 20,175,800
Set Up Fees [Member]
Revenues, Total			2,683,182	3,948,687
Change Orders [Member]
Revenues, Total			1,090,333	1,054,288
Maintenance 1 [Member]
Revenues, Total			4,163,138	3,749,897
Software Licenses [Member]
Revenues, Total			8,423,355	7,951,228
Professional Services [Member]
Revenues, Total			2,617,149	2,526,379
Hosting [Member]
Revenues, Total			$ 1,355,792	$ 945,321

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Note 2 - Summary of Significant Accounting Policies - Allowance for Doubtful Account Summary (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Beginning of period			$ 149,980	$ 179,813	$ 179,813
Bad debt expense	$ 21,679	$ 87,366	47,931	$ 40,369	130,346
Write-offs			0		(160,179)
End of period	$ 197,911		$ 197,911		$ 149,980

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Note 2 - Summary of Significant Accounting Policies - Customer Concentration (Details) - Customer Concentration Risk [Member]	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Sales Revenue, Net [Member]
Number of customers	1	1	1
Concentration risk, percentage	12.00%	10.00%	10.00%
Accounts Receivable [Member]
Number of customers	1	2	1
Concentration risk, percentage	13.00%	38.00%	24.00%

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Note 2 - Summary of Significant Accounting Policies - Revenue From European Operations (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues	$ 6,842,824	$ 6,715,913	$ 20,332,949	$ 20,175,800
Reportable Geographical Components [Member] | Europe [Member]
Revenues			$ 17	$ 12
Concentration risk, percentage			2514601.00%

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Note 3 - Earnings (Loss) Per Share (Details Textual) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Weighted Average Number of Shares Outstanding, Basic, Total	150,905,124	147,858,566	150,282,732	147,805,410
Common Stock, Shares, Outstanding, Ending Balance	152,309,472		152,309,472		148,542,805
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount			40,741,945	31,924,411
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 0.22		$ 0.22
Debt Instrument, Convertible, Conversion Price	0.50		0.50
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	0.17		0.17
Class of Warrant or Right, Exercise Price of Warrants or Rights	0.25		0.25		$ 0.25
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	0.34		0.34
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.60		$ 0.60		$ 0.60
Restricted Stock [Member]
Common Stock, Shares, Outstanding, Ending Balance	1,900,000	0	1,900,000	0

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Note 3 - Earnings (Loss) Per Share - Reconciliation of Anti-dilutive Securities (Details) - shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Anti-dilutive Security (in shares)	40,741,945	31,924,411
Employee Stock Option [Member]
Anti-dilutive Security (in shares)	2,670,000	4,050,000
Warrant [Member]
Anti-dilutive Security (in shares)	26,020,000	27,020,000
Convertible Debt Securities [Member]
Anti-dilutive Security (in shares)	11,940,000	740,000
Shares Issuable For Accrued Interest [Member]
Anti-dilutive Security (in shares)	111,945	114,411

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Note 3 - Earnings (Loss) Per Share - Computation of Diluted Earnings Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Basic EPS, Income (loss) numerator	$ (2,662,692)	$ (358,839)	$ (539,428)	$ 2,394,546
Weighted Average Number of Shares Outstanding, Basic, Total	150,905,124	147,858,566	150,282,732	147,805,410
Basic EPS, Per-share amount (in dollars per share)	$ (0.02)	$ 0	$ 0	$ 0.02
Effect of dilutive securities, Income (loss) numerator	$ 0	$ 0	$ 0	$ 0
Effect of dilutive securities, Shares denominator (in shares)	0	0	0	45,476
Effect of dilutive securities, Per-share amount (in dollars per share)	$ 0	$ 0	$ 0	$ 0
Diluted EPS, Income (loss) numerator	$ (2,662,692)	$ (358,839)	$ (539,428)	$ 2,394,546
Diluted EPS, Shares denominator (in shares)	150,905,124	147,858,566	150,282,732	147,850,886
Diluted EPS, Per-share amount (in dollars per share)	$ (0.02)	$ 0	$ 0	$ 0.02

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Note 4 - Property and Equipment, Net (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Depreciation, Total	$ 279,532	$ 249,801

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Note 4 - Property and Equipment, Net - Property and Equipment (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Cost	$ 5,657,892	$ 4,615,011
Accumulated Depreciation	4,327,148	4,062,473
Net Book Value	1,330,744	552,538
Computer And Office Equipment [Member]
Cost	3,046,561	2,322,833
Accumulated Depreciation	2,129,785	1,949,982
Net Book Value	$ 916,776	372,851
Estimated Useful Lives (Year)	5 years
Leasehold Improvements [Member]
Cost	$ 137,054	118,380
Accumulated Depreciation	104,335	98,901
Net Book Value	$ 32,719	19,479
Estimated Useful Lives (Year)	5 years
Computer Equipment [Member]
Cost	$ 2,305,155	2,010,999
Accumulated Depreciation	1,957,405	1,886,342
Net Book Value	$ 347,750	124,657
Estimated Useful Lives (Year)	3 years
Furniture and Fixtures [Member]
Cost	$ 169,122	162,799
Accumulated Depreciation	135,623	127,248
Net Book Value	$ 33,499	$ 35,551
Estimated Useful Lives (Year)	5 years

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Note 5 - Intangible Assets, Net (Details Textual) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Impairment of Intangible Assets, Finite-lived	$ 0	$ 79,634	$ 0	$ 79,634	$ 0
Amortization of Intangible Assets, Total	$ 91,343		$ 5,580	$ 248,790	$ 16,455

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Note 5 - Intangible Assets, Net - Intangible Assets (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Cost	$ 2,690,837	$ 1,644,308
Accumulated Amortization	1,871,087	1,546,383
Net Book Value	819,750	97,925
eClinical Customer List [Member]
Cost	1,392,701	1,392,701
Accumulated Amortization	1,392,701	1,392,701
Net Book Value	$ 0	0
Finite-Lived Intangible Asset, Useful Life	3 years
Promasys B.V. Customer List [Member]
Cost	$ 114,877	118,780
Accumulated Amortization	114,877	32,994
Net Book Value	$ 0	85,786
Finite-Lived Intangible Asset, Useful Life	15 years
Promasys B.V. Software Code [Member]
Cost	$ 72,837	72,837
Accumulated Amortization	71,623	60,698
Net Book Value	$ 1,214	12,139
Finite-Lived Intangible Asset, Useful Life	5 years
Promasys B.V. URLs/Website [Member]
Cost	$ 58,019	59,990
Accumulated Amortization	58,019	59,990
Net Book Value	$ 0	0
Finite-Lived Intangible Asset, Useful Life	3 years
Acuity Software Code [Member]
Cost	$ 1,052,403	0
Accumulated Amortization	233,867	0
Net Book Value	$ 818,536	$ 0
Finite-Lived Intangible Asset, Useful Life	3 years

XML

Note 5 - Intangible Assets, Net - Intangible Assets, Future Amortization Expense (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
2018	$ 88,914
2019	350,801
2020	350,801
2021	29,234
Total	$ 819,750	$ 97,925

XML

Note 6 - Accounts Payable and Accrued Expenses - Accounts Payable and Accrued Expenses (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Accounts payable	$ 760,557	$ 1,303,073
Accrued payroll and related costs	681,354	925,890
Other accrued expenses	168,675	184,131
Accrued interest	75,950	172,951
Total accounts payable and accrued expenses	$ 1,686,536	$ 2,586,045

XML

Note 7 - Line of Credit, Notes Payable and Liquidity (Details Textual) - USD ($)	Aug. 31, 2017	Dec. 05, 2016	Jun. 30, 2016	Feb. 29, 2016	Mar. 18, 2013	Sep. 30, 2018	Feb. 03, 2015	Dec. 18, 2013
Line of Credit Facility, Maximum Borrowing Capacity					$ 2,000,000		$ 5,000,000	$ 4,000,000
Debt Instrument, Interest Rate, Stated Percentage					2.00%
Debt Instrument, Periodic Payment, Interest					$ 9,500
Long-term Line of Credit, Total						$ 3,200,000
Line of Credit Facility, Interest Rate at Period End						4.25%
Matures on April 1, 2019 [Member] | Chief Executive Officer and Director Mr. Wit [Member]
Debt Instrument, Interest Rate, Stated Percentage				12.00%
Debt Instrument, Face Amount				$ 450,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				1,800,000
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 0.25
Extinguishment of Debt, Amount				$ 450,000
Warrants Sold During the Period		1,000,000
Repayments of Long-term Debt, Total	$ 50,000
Warrants and Rights Outstanding				325,689
Debt Instrument, Fair Value Disclosure, Total				$ 124,311
Amortization Period of Warrant Liabilities				3 years 30 days
Matures April 1, 2020 I [Member] | Investor [Member]
Debt Instrument, Interest Rate, Stated Percentage			12.00%
Debt Instrument, Face Amount			$ 372,500
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			1,490,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.25
Repayments of Long-term Debt, Total	$ 90,000
Warrants and Rights Outstanding			$ 246,921
Debt Instrument, Fair Value Disclosure, Total			$ 125,579
Amortization Period of Warrant Liabilities			3 years 270 days
Matures April 1, 2020 II [Member] | Investor [Member]
Debt Instrument, Interest Rate, Stated Percentage			10.00%
Debt Instrument, Face Amount			$ 420,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			1,680,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.25
Warrants and Rights Outstanding			$ 278,408
Debt Instrument, Fair Value Disclosure, Total			$ 141,592
Amortization Period of Warrant Liabilities			3 years 270 days

XML

Note 7 - Line of Credit, Notes Payable and Liquidity - Notes Payable (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Mar. 18, 2013
Debt Instrument, Interest Rate, Stated Percentage			2.00%
Ending principal	$ 1,102,500	$ 1,102,500
Short-term Debt [Member] | Related Party [Member]
Ending principal	353,054	0
Discount on notes payable	(46,946)	0
Short-term Debt [Member] | Non-Related Party [Member]
Ending principal	0	0
Discount on notes payable	0	0
Long-term Debt [Member] | Related Party [Member]
Ending principal	0	282,635
Discount on notes payable	0	(117,365)
Long-term Debt [Member] | Non-Related Party [Member]
Ending principal	516,232	423,098
Discount on notes payable	$ (186,268)	$ (279,402)
Notes Payable, Matures April 1, 2019 [Member]
Maturity date	Apr. 01, 2019	Apr. 01, 2019
Debt Instrument, Interest Rate, Stated Percentage	12.00%	12.00%
Ending principal	$ 400,000	$ 400,000
Notes Payable, Matures April 1, 2019 [Member] | Short-term Debt [Member] | Non-Related Party Current [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2019 [Member] | Short-term Debt [Member] | Related Party [Member]
Ending principal	400,000	0
Notes Payable, Matures April 1, 2019 [Member] | Long-term Debt [Member] | Non-Related Party Current [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2019 [Member] | Long-term Debt [Member] | Related Party [Member]
Ending principal	$ 0	$ 400,000
Notes Payable, Matures April 1, 2020 I [Member]
Maturity date	Apr. 01, 2020	Apr. 01, 2020
Debt Instrument, Interest Rate, Stated Percentage	10.00%	10.00%
Ending principal	$ 420,000	$ 420,000
Notes Payable, Matures April 1, 2020 I [Member] | Short-term Debt [Member] | Related Party [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2020 I [Member] | Short-term Debt [Member] | Non-Related Party [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2020 I [Member] | Long-term Debt [Member] | Related Party [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2020 I [Member] | Long-term Debt [Member] | Non-Related Party [Member]
Ending principal	$ 420,000	$ 420,000
Notes Payable, Matures April 1, 2020 II [Member]
Maturity date	Apr. 01, 2020	Apr. 01, 2020
Debt Instrument, Interest Rate, Stated Percentage	12.00%	12.00%
Ending principal	$ 282,500	$ 282,500
Notes Payable, Matures April 1, 2020 II [Member] | Short-term Debt [Member] | Related Party [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2020 II [Member] | Short-term Debt [Member] | Non-Related Party [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2020 II [Member] | Long-term Debt [Member] | Related Party [Member]
Ending principal	0	0
Notes Payable, Matures April 1, 2020 II [Member] | Long-term Debt [Member] | Non-Related Party [Member]
Ending principal	$ 282,500	$ 282,500

XML

Note 8 - Convertible Notes Payable (Details Textual) - USD ($)													1 Months Ended		9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Aug. 31, 2017	Jun. 30, 2017	Dec. 14, 2016	Feb. 29, 2016	Nov. 23, 2015	Nov. 19, 2015	May 01, 2015	Mar. 30, 2011	Sep. 30, 2009	Dec. 31, 1999	Aug. 31, 2017	Aug. 29, 2008	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Jun. 30, 2016	Jun. 30, 2015	May 07, 2015	Apr. 30, 2015	Apr. 27, 2015	Apr. 01, 2015	Jan. 31, 2015	Jul. 31, 2014	Apr. 28, 2014	Apr. 21, 2014	Dec. 31, 2013	Mar. 18, 2013	Mar. 12, 2013	Mar. 06, 2013	Feb. 27, 2013	Feb. 22, 2013	Dec. 16, 2008	Jun. 30, 2008	Jun. 30, 2004
Debt Instrument, Interest Rate, Stated Percentage																													2.00%
Convertible Notes Payable, Total	$ 5,970,000														$ 5,970,000		$ 6,170,000
Debt Instrument, Convertible, Conversion Price	$ 0.50														$ 0.50
Interest Paid, Excluding Capitalized Interest, Operating Activities															$ 889,984	$ 802,327
Repayments of Notes Payable															200,000	$ 1,020,000
Director Mr. Wit [Member]
Class of Warrant or Right Cancelled During the Period								1,900,000
Chief Executive Officer [Member]
Debt Instrument, Interest Rate, Stated Percentage						12.00%
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						1,800,000
Class of Warrant or Right, Exercise Price of Warrants or Rights						$ 0.25
Repayments of Notes Payable			$ 50,000
Mr. Smith [Member]
Repayments of Convertible Debt									$ 5,000
Convertible Notes 10% [Member]
Debt Instrument, Interest Rate, Stated Percentage												10.00%
Convertible Notes Payable, Total												$ 862,500
Payments of Debt Issuance Costs												119,625
Proceeds from Issuance of Debt												$ 742,875
Debt Instrument, Convertible, Conversion Price																																				$ 1.25
Repayments of Convertible Debt	$ 50,000
Interest Paid, Excluding Capitalized Interest, Operating Activities	96,949
Debt Conversion, Converted Instrument, Amount															$ 862,500
Debt Conversion, Converted Instrument, Shares Issued															1,495,179
Long-term Debt, Gross	$ 0														$ 0
Secured Convertible Debenture [Member]
Debt Instrument, Interest Rate, Stated Percentage											12.00%
Convertible Notes Payable, Total											$ 1,400,000
Proceeds from Issuance of Secured Debt											$ 1,400,000
Repayments of Notes Payable										$ 200,000
Secured Convertible Debenture [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total										1,200,000
Secured Convertible Debenture [Member] | Chief Executive Officer and Director Mr. Wit [Member]
Convertible Notes Payable, Total										$ 1,100,000														$ 1,100,000									$ 1,100,000
Debt Instrument, Convertible, Conversion Price											$ 0.25
Class of Warrant or Right, Number of Securities Called by Warrants or Rights											5,600,000
Class of Warrant or Right, Exercise Price of Warrants or Rights											$ 0.25
Secured Convertible Debenture [Member] | Lenders [Member]
Repayments of Convertible Debt				$ 100,000									$ 625,000
Secured Convertible Debenture [Member] | Lenders [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																		$ 625,000					$ 100,000										1,200,000
Secured Convertible Debenture [Member] | Director Mr. Wit [Member]
Debt Conversion, Converted Instrument, Amount								$ 475,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights								1,900,000
Extinguishment of Debt, Amount								$ 475,000
Stock Issued During Period Converted Cancelled Debt and Cancelled Warrants Shares								1,900,000
Increase (Decrease) in Notes Payable, Related Parties							$ 625,000
Convertible Debentures Issued August 2008 [Member]
Convertible Notes Payable, Total														$ 2,270,000
Convertible Debentures Issued August 2008 [Member] | Director Mr. Wit [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																								1,770,000									1,770,000
Convertible Debentures Issued August 2008 [Member] | Chief Officer, Mr. Wit and Mr. Van Kesteren [Member]
Debt Instrument, Interest Rate, Stated Percentage														10.00%
Debt Instrument, Convertible, Conversion Price														$ 0.50
Class of Warrant or Right, Number of Securities Called by Warrants or Rights														4,540,000
Convertible Debentures Issued August 2008 [Member] | Mr. van Kesteren and Mr. Wit [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total											$ 1,920,000																						150,000
Convertible Debentures Issued August 2008 [Member] | Director Mr. van Kesteren [Member] | Non-Related Party [Member]
Convertible Notes Payable, Total																									$ 150,000
Convertible Debentures Issued August 2008 [Member] | Director Mr. van Kesteren [Member] | Extended Maturity Debentures 2 [Member]
Convertible Notes Payable, Total																			$ 150,000
Convertible Debentures [Member] | Director Mr. Wit [Member]
Convertible Notes Payable, Total																																			$ 510,000
Debt Conversion, Converted Instrument, Amount														$ 510,000
Convertible Debentures [Member] | Chief Officer, Mr. Wit and Mr. Van Kesteren [Member]
Convertible Notes Payable, Total																											$ 150,000
Matures April 1, 2020 I [Member] | Director Mr. Wit [Member]
Convertible Notes Payable, Total																		4,055,000
Repayments of Convertible Debt			55,000
Matures April 1, 2020 I [Member] | Director Mr. Wit [Member] | Extended Maturity Debentures 2 [Member]
Convertible Notes Payable, Total																		1,770,000
Notes Payable, Matures April 1, 2018 [Member] | Chief Officer, Mr. Wit and Mr. Van Kesteren [Member]
Convertible Notes Payable, Total																		160,000
Repayments of Convertible Debt					$ 160,000
Notes Payable, Matures April 1, 2018 [Member] | Chief Officer, Mr. Wit and Mr. Van Kesteren [Member] | Extended Maturity Debentures 2 [Member]
Convertible Notes Payable, Total																		150,000
Matures on April 1, 2019 [Member] | Chief Executive Officer and Director Mr. Wit [Member]
Debt Instrument, Interest Rate, Stated Percentage						12.00%
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						1,800,000
Class of Warrant or Right, Exercise Price of Warrants or Rights						$ 0.25
Extinguishment of Debt, Amount						$ 450,000
Matures on April 1, 2019 [Member] | Chief Officer, Mr. Wit and Mr. Van Kesteren [Member] | Extended Maturity Debentures 2 [Member]
Convertible Notes Payable, Total				150,000
Repayments of Convertible Debt		$ 150,000
Convertible Debentures Issued December 2008 [Member]
Convertible Notes Payable, Total																																		$ 5,075,000
Convertible Debentures Issued December 2008 [Member] | Non-Related Party [Member]
Convertible Notes Payable, Total																									$ 160,000
Convertible Debentures Issued December 2008 [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																												$ 360,000
Convertible Debentures Issued December 2008 [Member] | Chief Executive Officer and Director Mr. Wit [Member]
Repayments of Notes Payable			55,000
Convertible Debentures Issued December 2008 [Member] | Lenders [Member]
Convertible Notes Payable, Total																			$ 100,000			$ 200,000
Convertible Debentures Issued December 2008 [Member] | Lenders [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																										$ 100,000				$ 100,000	$ 200,000		4,505,000
Convertible Debentures Issued December 2008 [Member] | Director Mr. Wit [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights								1,680,000
Class of Warrant or Right Cancelled During the Period								1,680,000
Extinguishment of Debt, Amount								$ 420,000
Convertible Debentures Issued December 2008 [Member] | Director Mr. Wit [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																								$ 4,475,000
Convertible Debentures Issued December 2008 [Member] | Director Mr. van Kesteren [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total									$ 160,000																			$ 160,000
Convertible Debentures Issued December 2008 [Member] | Chief Executive Officer, Director, Chief Operating Officer, Chairman, Chief Technology Officer, Chief Financial Officer and Directors [Member]
Debt Instrument, Interest Rate, Stated Percentage																																		12.00%
Debt Instrument, Convertible, Conversion Price																																		$ 0.50
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																																		10,150,000
Convertible Debentures Issued December 2008 [Member] | Officers, Directors and Affiliate [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total											$ 4,980,000
Convertible Debentures Issued December 2008 [Member] | Chief Executive Officer [Member]
Convertible Notes Payable, Total																																	4,475,000
Convertible Debentures Issued December 2008 [Member] | Chief Operating Officer [Member]
Convertible Notes Payable, Total																																	25,000
Convertible Debentures Issued December 2008 [Member] | Chairman and Chief Technology Officer [Member]
Convertible Notes Payable, Total																																	$ 5,000
Convertible Debentures Issued December 2008 [Member] | Former Director [Member]
Convertible Notes Payable, Total																				$ 15,000
Repayments of Convertible Debt					$ 15,000
Convertible Debentures Issued December 2008 [Member] | Former Director [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																																$ 15,000
Convertible Debentures Issued December 2008 [Member] | President [Member]
Convertible Notes Payable, Total																					$ 25,000
Matures April 1, 2020 II [Member] | Lenders [Member]
Convertible Notes Payable, Total																		$ 100,000
Repayments of Debt			$ 100,000
Matures April 2021 [Member] | Lenders [Member]
Convertible Notes Payable, Total				$ 200,000

XML

Note 8 - Convertible Notes Payable - Convertible Debt (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Mar. 18, 2013
Debt Instrument, Interest Rate, Stated Percentage			2.00%
Convertible Notes Payable, Total	$ 5,970,000	$ 6,170,000
Convertible notes payable, short term	0	50,000
Convertible notes payable, related parties, long term	5,770,000	5,770,000
Convertible notes payable, long term	200,000	350,000
Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, related parties, long term	5,770,000	5,770,000
Non-Related Party [Member]
Convertible notes payable, short term	0	50,000
Convertible notes payable, long term	$ 200,000	$ 350,000
Convertible Notes Payable 10% $150,000 [Member]
Maturity date	Apr. 01, 2020	Apr. 01, 2019
Debt Instrument, Interest Rate, Stated Percentage	10.00%	10.00%
Convertible Notes Payable, Total	$ 1,770,000	$ 150,000
Convertible Notes Payable 10% $150,000 [Member] | Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, related parties, long term	1,770,000	0
Convertible Notes Payable 10% $150,000 [Member] | Non-Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, long term	$ 0	$ 150,000
Convertible Notes Payable 10% $50,000 [Member]
Maturity date		Jun. 30, 2004
Debt Instrument, Interest Rate, Stated Percentage		10.00%
Convertible Notes Payable, Total		$ 50,000
Convertible Notes Payable 10% $50,000 [Member] | Related Party [Member]
Convertible notes payable, short term		0
Convertible notes payable, related parties, long term		0
Convertible Notes Payable 10% $50,000 [Member] | Non-Related Party [Member]
Convertible notes payable, short term		50,000
Convertible notes payable, long term		$ 0
Convertible Notes Payable12 Percent, 200,000 [Member]
Maturity date	Apr. 01, 2020	Apr. 01, 2020
Debt Instrument, Interest Rate, Stated Percentage	12.00%	12.00%
Convertible Notes Payable, Total	$ 4,000,000	$ 4,000,000
Convertible Notes Payable12 Percent, 200,000 [Member] | Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, related parties, long term	4,000,000	4,000,000
Convertible Notes Payable12 Percent, 200,000 [Member] | Non-Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, long term	$ 0	$ 0
Convertible Notes Payable 12 Percent,100,000 [Member]
Maturity date	Apr. 01, 2021	Apr. 01, 2021
Debt Instrument, Interest Rate, Stated Percentage	12.00%	12.00%
Convertible Notes Payable, Total	$ 200,000	$ 200,000
Convertible Notes Payable 12 Percent,100,000 [Member] | Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, related parties, long term	0	0
Convertible Notes Payable 12 Percent,100,000 [Member] | Non-Related Party [Member]
Convertible notes payable, short term	0	0
Convertible notes payable, long term	$ 200,000	$ 200,000
Convertible Notes Payable 10% $1,770,000 [Member]
Maturity date		Apr. 01, 2020
Debt Instrument, Interest Rate, Stated Percentage		10.00%
Convertible Notes Payable, Total		$ 1,770,000
Convertible Notes Payable 10% $1,770,000 [Member] | Related Party [Member]
Convertible notes payable, short term		0
Convertible notes payable, related parties, long term		1,770,000
Convertible Notes Payable 10% $1,770,000 [Member] | Non-Related Party [Member]
Convertible notes payable, short term		0
Convertible notes payable, long term		$ 0

XML

Note 8 - Convertible Notes Payable - Convertible Debt Maturity Payments (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Total	$ 5,970,000	$ 6,170,000
Convertible Debt [Member]
2018	0
2019	0
2020	5,770,000
2021	200,000
Total	$ 5,970,000

XML

Note 9 - Fair Value Measurement (Details Textual) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Impairment of Intangible Assets, Finite-lived	$ 0	$ 79,634	$ 0	$ 79,634	$ 0
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life				3 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life				15 years

XML

Note 9 - Fair Value Measurement - Fair Value of Liabilities Measured on a Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member] - USD ($)		Sep. 30, 2018	[2]	Dec. 31, 2017	[3]
Derivative Liability fair value	[1]	$ 6,276,719		$ 5,126,746
Fair Value, Inputs, Level 1 [Member]
Derivative Liability fair value	[1]	0		0
Fair Value, Inputs, Level 2 [Member]
Derivative Liability fair value	[1]	0		0
Fair Value, Inputs, Level 3 [Member]
Derivative Liability fair value	[1]	6,276,719		5,126,746
Conversion Feature Liability [Member]
Derivative Liability fair value	[1]	1,840,512		1,685,947
Conversion Feature Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Derivative Liability fair value	[1]	0		0
Conversion Feature Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Derivative Liability fair value	[1]	0		0
Conversion Feature Liability [Member] | Fair Value, Inputs, Level 3 [Member]
Derivative Liability fair value	[1]	1,840,512		1,685,947
Warrant Liability [Member]
Derivative Liability fair value	[1]	4,436,207		3,440,799
Warrant Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Derivative Liability fair value	[1]	0		0
Warrant Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Derivative Liability fair value	[1]	0		0
Warrant Liability [Member] | Fair Value, Inputs, Level 3 [Member]
Derivative Liability fair value	[1]	$ 4,436,207		$ 3,440,799

[1] The fair value at the measurement date is equal to the carrying value on the balance sheet

[2] 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 nine month period ended September 30, 2018

[3] 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, 2017

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Note 9 - Fair Value Measurement - Fair Value Assumptions (Details)	Sep. 30, 2018	Dec. 31, 2017
Measurement Input, Expected Dividend Rate [Member]
Risk free interest rate	0	0
Minimum [Member] | Measurement Input, Risk Free Interest Rate [Member]
Risk free interest rate	0.0245	0.0156
Minimum [Member] | Measurement Input, Price Volatility [Member]
Risk free interest rate	0.857	0.87
Minimum [Member] | Measurement Input, Expected Term [Member] | Conversion Feature Liability [Member]
Risk free interest rate	1.5	1.25
Minimum [Member] | Measurement Input, Expected Term [Member] | Warrant Liability [Member]
Risk free interest rate	0.25	0.25
Maximum [Member] | Measurement Input, Risk Free Interest Rate [Member]
Risk free interest rate	0.0245	0.0181
Maximum [Member] | Measurement Input, Price Volatility [Member]
Risk free interest rate	1.058	1.184
Maximum [Member] | Measurement Input, Expected Term [Member] | Conversion Feature Liability [Member]
Risk free interest rate	2.5	3.25
Maximum [Member] | Measurement Input, Expected Term [Member] | Warrant Liability [Member]
Risk free interest rate	2.5	3.25

XML

Note 9 - Fair Value Measurement - Fair Value of Assets Acquired on Non-recurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($)		Sep. 30, 2018		Dec. 31, 2017	Dec. 31, 2016
Reported Value Measurement [Member]
Acquired assets	[1]	$ 819,750		$ 97,925	$ 108,880
Reported Value Measurement [Member] | Promasys B.V. Customer List [Member]
Acquired assets	[1],[3]	0	[2]	85,786	82,173
Reported Value Measurement [Member] | Promasys B.V. Software Code [Member]
Acquired assets	[1],[3]	1,214		12,139	$ 26,707
Reported Value Measurement [Member] | Acuity Software Code [Member]
Acquired assets	[1],[4]	818,536		0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Acquired assets	[1]	0		0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Acquired assets	[1]	0		0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Acquired assets	[1]	1,261,599		209,196
Estimate of Fair Value Measurement [Member] | Promasys B.V. Customer List [Member] | Fair Value, Inputs, Level 1 [Member]
Acquired assets	[1],[3]	0	[2]	0
Estimate of Fair Value Measurement [Member] | Promasys B.V. Customer List [Member] | Fair Value, Inputs, Level 2 [Member]
Acquired assets	[1],[3]	0	[2]	0
Estimate of Fair Value Measurement [Member] | Promasys B.V. Customer List [Member] | Fair Value, Inputs, Level 3 [Member]
Acquired assets	[1],[3]	136,253	[2]	136,253
Estimate of Fair Value Measurement [Member] | Promasys B.V. Software Code [Member] | Fair Value, Inputs, Level 1 [Member]
Acquired assets	[1],[3]	0		0
Estimate of Fair Value Measurement [Member] | Promasys B.V. Software Code [Member] | Fair Value, Inputs, Level 2 [Member]
Acquired assets	[1],[3]	0		0
Estimate of Fair Value Measurement [Member] | Promasys B.V. Software Code [Member] | Fair Value, Inputs, Level 3 [Member]
Acquired assets	[1],[3]	72,943		$ 72,943
Estimate of Fair Value Measurement [Member] | Acuity Software Code [Member] | Fair Value, Inputs, Level 1 [Member]
Acquired assets	[1],[4]	0
Estimate of Fair Value Measurement [Member] | Acuity Software Code [Member] | Fair Value, Inputs, Level 2 [Member]
Acquired assets	[1],[4]	0
Estimate of Fair Value Measurement [Member] | Acuity Software Code [Member] | Fair Value, Inputs, Level 3 [Member]
Acquired assets	[1],[4]	$ 1,052,403

[1] The fair value of the acquired assets was estimated using the Income Approach with a discounted cash flow valuation methodology applied.

[2] During the second quarter of 2018 we recognized an impairment loss of $79,634 on the Promasys B.V. Customer List after performing a fair value analysis on the asset utilizing a discounted cash flow model. The impairment charge is separately presented on the Statement of Operations.

[3] The acquired Promasys B.V. software code and customer list 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.

[4] The acquired Acuity software code is not measured on a recurring basis since the 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.

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Note 9 - Fair Value Measurement - Unrealized Gain or Loss Included in Earnings (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
The net amount of gains/(losses) for the period included in earnings attributable to the unrealized and realized gains/(losses) from changes in derivative liabilities at the reporting date	$ (1,160,473)	$ 723,532

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Note 9 - Fair Value Measurement - Change in Level 3 Financial Liabilities Fair Value (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Balance, beginning of year	$ (5,126,746)	$ (6,325,092)
Net realized gains/(losses)	0	48,375
Net unrealized gains/(losses) relating to instruments still held at the reporting date	(1,160,473)	747,404
Net purchases, issuances and settlements	0	0
Net transfers in and/or out of Level 3	10,500	402,567
Balance, end of period	(6,276,719)	(5,126,746)
Conversion Feature Liability [Member]
Balance, beginning of year	(1,685,947)	(2,325,730)
Net realized gains/(losses)	0	48,375
Net unrealized gains/(losses) relating to instruments still held at the reporting date	(165,065)	188,841
Net purchases, issuances and settlements	0	0
Net transfers in and/or out of Level 3	10,500	402,567
Balance, end of period	(1,840,512)	(1,685,947)
Warrant Liability [Member]
Balance, beginning of year	(3,440,799)	(3,999,362)
Net realized gains/(losses)	0	0
Net unrealized gains/(losses) relating to instruments still held at the reporting date	(995,408)	558,563
Net purchases, issuances and settlements	0	0
Net transfers in and/or out of Level 3	0	0
Balance, end of period	$ (4,436,207)	$ (3,440,799)

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Note 10 - Commitments and Contingencies (Details Textual) - USD ($)			9 Months Ended		108 Months Ended
	Dec. 31, 2017	Jun. 23, 2009	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Operating Leases, Rent Expense, Total			$ 930,972	$ 841,718
Stock Issued During Period, Shares, Exercise of Warrants	500,000
License Payments		$ 300,000
Additional Income (Expense) Related to Settlement Agreement				$ 111,979
Settlement and Licensing Agreement [Member]
Patent Royalty Percentage Obligation					2.00%
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	1,000,000				1,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.01				$ 0.01
Loss Contingency, Estimate of Possible Loss	$ 300,000				$ 300,000
Class of Warrant or Right, Percentage, Exercised for Stock	50.00%
Stock Issued During Period, Shares, Exercise of Warrants	500,000
Class of Warrant or Right, Percentage, Exercised for Cash Payment	50.00%
Proceeds from Warrant Exercises	$ 145,000

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Note 10 - Commitments and Contingencies - Future Minimum Lease Payments (Details)	Sep. 30, 2018 USD ($)
2018	$ 226,880
2019	654,275
2020	413,574
2021	337,397
2022	337,480
Thereafter	75,052
Total	$ 2,044,658

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Note 10 - Commitments and Contingencies - Future Minimum Capital Lease Payments (Details)	Sep. 30, 2018 USD ($)
2018	$ 32,958
2019	131,832
2020	131,832
2021	52,779
Total minimum capital lease payments	349,401
Less: Amount representing interest	(28,797)
Present value of minimum capital lease payments	$ 320,604

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Note 11 - Related Party Transactions (Details Textual) - USD ($)					1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2017	Nov. 19, 2015	Mar. 18, 2013	Dec. 16, 2008	Aug. 29, 2008	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2016	Feb. 29, 2016	Feb. 03, 2015	Jan. 31, 2015	Dec. 31, 2013	Dec. 18, 2013	Feb. 22, 2013	Oct. 16, 2012	Sep. 30, 2009	Jun. 30, 2008	Feb. 29, 2008
Convertible Notes Payable, Total						$ 5,970,000		$ 5,970,000			$ 6,170,000
Debt Instrument, Interest Rate, Stated Percentage			2.00%
Debt Instrument, Convertible, Conversion Price						$ 0.50		$ 0.50
Repayments of Notes Payable								$ 200,000	$ 1,020,000
Line of Credit Facility, Maximum Borrowing Capacity			$ 2,000,000											$ 5,000,000			$ 4,000,000
Long-term Line of Credit, Total						$ 3,200,000		$ 3,200,000
Line of Credit Facility, Interest Rate at Period End						4.25%		4.25%
Interest Expense, Related Party						$ 229,906	$ 252,585	$ 682,986	$ 717,782
The Northern Trust Company [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 2,000,000											$ 5,000,000			$ 4,000,000
Line of Credit Facility, Interest Rate During Period			2.00%
Long-term Line of Credit, Total										$ 3,200,000
Line of Credit Facility, Interest Rate at Period End										4.25%
Director Mr. Wit [Member]
Class of Warrant or Right Cancelled During the Period		1,900,000
Interest Expense, Related Party Approximately Monthly Amount			$ 9,500
Chief Executive Officer [Member]
Notes Payable, Related Parties													$ 450,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights													1,800,000
Debt Instrument, Interest Rate, Stated Percentage													12.00%
Repayments of Notes Payable	$ 50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights													$ 0.25
Interest Payable													$ 450,000
Convertible Debentures [Member] | Director Mr. Wit [Member]
Due to Related Parties, Total						5,770,000		5,770,000
Convertible Notes Payable, Total																					$ 510,000
Debt Conversion, Converted Instrument, Amount					$ 510,000
Promissory Notes [Member] | CEO And Director [Member]
Notes Payable, Related Parties						$ 400,000		$ 400,000
Convertible Debenture Initiated In June 2008 [Member] | Director Mr. Wit [Member]
Convertible Notes Payable, Total					$ 1,260,000							$ 1,770,000			$ 1,770,000			$ 1,770,000		$ 1,770,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					3,540,000
Debt Instrument, Interest Rate, Stated Percentage					10.00%
Debt Instrument, Convertible, Conversion Price					$ 0.50
Convertible Debenture Initiated In February 2008 [Member] | Director Mr. Wit [Member]
Notes Payable, Related Parties																						$ 150,000
Convertible Notes Payable, Total															4,475,000			4,475,000	$ 125,000	$ 4,350,000		$ 4,200,000
Debt Conversion, Converted Instrument, Amount				$ 4,350,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		1,680,000		8,700,000															250,000
Debt Instrument, Convertible, Conversion Price				$ 0.50
Debt Conversion, Converted Instrument, Rate				12.00%
Extinguishment of Debt, Amount		$ 420,000
Class of Warrant or Right Cancelled During the Period		1,680,000
Convertible Debenture Initiated In February 2008 [Member] | Director Mr. Wit [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total												$ 4,055,000
Convertible Debentures Issued December 2008 [Member]
Convertible Notes Payable, Total				$ 5,075,000
Convertible Debentures Issued December 2008 [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total																$ 360,000
Convertible Debentures Issued December 2008 [Member] | Director Mr. Wit [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		1,680,000
Extinguishment of Debt, Amount		$ 420,000
Class of Warrant or Right Cancelled During the Period		1,680,000
Convertible Debentures Issued December 2008 [Member] | Director Mr. Wit [Member] | Extended Maturity Debentures [Member]
Convertible Notes Payable, Total															$ 4,475,000
Convertible Debentures Issued December 2008 [Member] | Chief Executive Officer and Director Mr. Wit [Member]
Repayments of Notes Payable	$ 55,000
Convertible Debentures Issued December 2008 [Member] | Chief Executive Officer [Member]
Convertible Notes Payable, Total																		$ 4,475,000

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Note 12 - Stockholders' (Deficit) (Details Textual)	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares shares	Dec. 31, 2016 shares
Common Stock, Shares Authorized	500,000,000	500,000,000
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.001	$ 0.001
Common Stock, Shares, Issued, Total	152,309,472	148,542,805
Common Stock, Shares, Outstanding, Ending Balance	152,309,472	148,542,805
Class of Warrant or Right, Issued	26,020,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	2,670,000	5,275,000	1,225,000
Convertible Debt, Total | $	$ 5,970,000
Class of Warrant or Right, Outstanding	26,020,000	27,020,000	27,860,000
Conversion of Conversion Debt into Common Stock [Member]
Debt Instrument, Convertible, Number of Equity Instruments	11,940,000
Conversion of Accrued Interest into Common Stock [Member]
Debt Instrument, Convertible, Number of Equity Instruments	111,945
Convertible Debt [Member]
Interest Payable | $	$ 55,973
Series A Preferred Stock [Member]
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.001	$ 0.001
Preferred Stock, Dividend Rate, Percentage	5.00%
Preferred Stock, Shares Outstanding, Ending Balance	0	0
Preferred Stock, Shares Issued, Total	0	0
Series B Preferred Stock [Member]
Preferred Stock, Shares Authorized	230,000	230,000
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.001	$ 0.001
Preferred Stock, Shares Outstanding, Ending Balance	0	0
Preferred Stock, Shares Issued, Total	0	0
Series C Preferred Stock [Member]
Preferred Stock, Shares Authorized	747,500	747,500
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.001	$ 0.001
Preferred Stock, Shares Outstanding, Ending Balance	0	0
Preferred Stock, Shares Issued, Total	0	0
Series D Preferred Stock [Member]
Preferred Stock, Shares Authorized	250,000	250,000
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.001	$ 0.001
Preferred Stock, Shares Outstanding, Ending Balance	250,000	250,000
Preferred Stock, Shares Issued, Total	250,000	250,000

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Note 12 - Stockholders' (Deficit) - Cumulative Arrearage of Undeclared Dividends (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Preferred Stock, Dividend, Cumulative Arrearage	$ 2,081,980	$ 2,081,980
Preferred Stock, Dividend, Cumulative Arrearage Per Share (in dollars per share)
Series B Preferred Stock [Member]
Preferred Stock, Dividend, Cumulative Arrearage	$ 609,887	$ 609,887
Preferred Stock, Dividend, Cumulative Arrearage Per Share (in dollars per share)	$ 3.05	$ 3.05
Series C Preferred Stock [Member]
Preferred Stock, Dividend, Cumulative Arrearage	$ 1,472,093	$ 1,472,093
Preferred Stock, Dividend, Cumulative Arrearage Per Share (in dollars per share)	$ 4.37	$ 4.37

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Note 12 - Stockholders' (Deficit) - Warrants (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Number outstanding (in shares)	26,020,000	27,020,000	27,860,000
Weighted average remaining contractual life (Year)	1 year 54 days	1 year 306 days
Weighted average exercise price (in dollars per share)	$ 0.42	$ 0.42
Class of Warrant or Right, Exercisable (in shares)	26,020,000	27,020,000
Warrants exercisable, weighted average exercise price (in dollars per share)	$ 0.42	$ 0.42
Minimum [Member]
Range of exercise price (in dollars per share)	0.25	0.25
Maximum [Member]
Range of exercise price (in dollars per share)	$ 0.60	$ 0.60

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Note 12 - Stockholders' (Deficit) - Warrants Activity (Details) - shares	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Balance (in shares)	27,020,000	27,860,000
Issued (in shares)	0	0
Exercised (in shares)	0	0
Expired/forfeited (in shares)	(1,000,000)	(840,000)
Balance (in shares)	26,020,000	27,020,000
Warrants exercisable at September 30, 2018 (in shares)	26,020,000	27,020,000

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Note 12 - Stockholders' (Deficit) - Accumulated Other Comprehensive Gain (Loss) (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Balance	$ (17,193,058)	$ (21,127,798)
Balance	(17,012,047)	(17,193,058)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Balance	(397,237)	(410,505)
Activity	(34,424)	13,268
Balance	(431,661)	(397,237)
AOCI Attributable to Parent [Member]
Balance	(397,237)	(410,505)
Activity	(34,424)	13,268
Balance	$ (431,661)	$ (397,237)

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Note 13 - Equity Incentive Plans (Details Textual) - USD ($)		3 Months Ended	9 Months Ended
	Sep. 06, 2018	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016	Jun. 16, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance		2,670,000	2,670,000		5,275,000	1,225,000
Proceeds from Stock Options Exercised			$ 45,000	$ 35,250
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense			$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value			$ 0.23	$ 0.19
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options		$ 309,142	$ 309,142
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			1 year 328 days
Restricted Stock [Member]
Allocated Share-based Compensation Expense, Total		$ 41,735
The 2016 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		11,025,000	11,025,000				10,000,000
Common Stock Available for Issuance Increasing Period			9 years
Common Stock Available for Issuance, Annual Increase Percent			5.00%
Common Stock, Capital Shares Reserved for Future Issuance		11,025,000	11,025,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			5 years
Share-based Compensation Arrangement, Restricted Shares Granted to Employees, Number of Installments in Which Restrictions Lapse			3
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance		2,495,000	2,495,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		6,630,000	6,630,000
The 2016 Plan [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period			1 year
The 2016 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement, Installments for Vesting			2
The 2016 Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number, Ending Balance		1,900,000	1,900,000
The 2016 Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
RSAs [Member] | Restricted Stock [Member] | Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technology Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value, Ending Balance	$ 0.33
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant Subject to Individual Performance	75,000
Share-based Compensation Arrangement by Share-based Payment Award, Minimum Revenues to be Recognized	$ 30,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Minimum EBITDA to be Recognized	$ 6,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issubable upon Milestones Achieved	75,000
Share-based Compensation Arrangement by Share-based Payment Award, Minimum Revenues to be Recognized for Additional Shares	$ 32,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Minimum EBITDA to be Recognized for Additional Shares	$ 7,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Additional Shares Issubable upon Milestones Achieved	75,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
RSAs [Member] | Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value, Ending Balance	$ 0.33
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant For Each Recipient	200,000
Share-based Compensation Arrangement by Share-based Payment Award, Minimum Revenues to be Recognized	$ 30,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Minimum EBITDA to be Recognized	$ 6,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issubable upon Milestones Achieved	75,000
RSAs [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche Two [Member] | Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technology Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	33.00%
RSAs [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche Three [Member] | Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technology Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	33.00%
RSAs [Member] | Maximum [Member] | Restricted Stock [Member] | Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technology Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant For Each Recipient	225,000
Equity Incentive Plan 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		7,500,000	7,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			5 years
Share-based Compensation Arrangement, Installments for Vesting			2
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number, Ending Balance		275,000	275,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		0	0
Equity Incentive Plan 2009 [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period			1 year
Equity Incentive Plan 2009 [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number, Ending Balance		3,876,662	3,876,662
Equity Incentive Plan 2009 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years

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Note 13 - Equity Incentive Plans - Stock Option Activity (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Number of shares (in shares)	5,275,000	1,225,000
Weighted average exercise price (per share) (in dollars per share)	$ 0.26	$ 0.17
Weighted average remaining contractual term (in years) (Year)	3 years 211 days	4 years 32 days	2 years 226 days
Aggregate intrinsic value	$ 396,500	$ 130,475	$ 83,425
Number of shares, granted (in shares)	570,000	4,650,000
Weighted average exercise price (per share), granted (in dollars per share)	$ 0.28	$ 0.26
Number of shares, exercised (in shares)	(200,000)	(300,000)
Weighted average exercise price (per share), exercised (in dollars per share)	$ 0.22	$ 0.13
Number of shares, forfeited/cancelled/expired (in shares)	(2,975,000)	(300,000)
Weighted average exercise price (per share), forfeited/cancelled/expired (in dollars per share)	$ 0.25	$ 0.14
Number of shares (in shares)	2,670,000	5,275,000	1,225,000
Weighted average exercise price (per share) (in dollars per share)	$ 0.27	$ 0.26	$ 0.17
Vested and exercisable at September 30, 2018 (in shares)	800,000
Vested and exercisable at September 30, 2018 (in dollars per share)	$ 0.22
Vested and exercisable at September 30, 2018 (Year)	2 years 208 days
Vested and exercisable at September 30, 2018	$ 158,425

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Note 13 - Equity Incentive Plans - Vested Shares (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Number of options vested (in shares)	625,000	62,500
Fair value of options vested	$ 125,190	$ 12,742

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Note 13 - Equity Incentive Plans - Stock Options Outstanding (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Low price range (in dollars per share)	$ 0	$ 0
High price range (in dollars per share)	$ 0.50	$ 0.50
Outstanding stock options (in shares)	2,670,000	5,275,000
Weighted average remaining contractual life - outstanding (Year)	3 years 211 days	4 years 32 days
Weighted average outstanding strike price - outstanding (in dollars per share)	$ 0.27	$ 0.26
Vested stock options (in shares)	800,000	400,000
Weighted average remaining contractual life - vested (Year)	2 years 208 days	1 year 153 days
Weighted average outstanding strike price - vested (in dollars per share)	$ 0.22	$ 0.19
Range One [Member]
Low price range (in dollars per share)	0	0
High price range (in dollars per share)	$ 0.20	$ 0.20
Outstanding stock options (in shares)	250,000	300,000
Weighted average remaining contractual life - outstanding (Year)	270 days	1 year 339 days
Weighted average outstanding strike price - outstanding (in dollars per share)	$ 0.17	$ 0.18
Vested stock options (in shares)	250,000	250,000
Weighted average remaining contractual life - vested (Year)	270 days	1 year 175 days
Weighted average outstanding strike price - vested (in dollars per share)	$ 0.17	$ 0.17
Range Two [Member]
Low price range (in dollars per share)	0.21	0.21
High price range (in dollars per share)	$ 0.30	$ 0.30
Outstanding stock options (in shares)	1,695,000	4,250,000
Weighted average remaining contractual life - outstanding (Year)	3 years 288 days	4 years 43 days
Weighted average outstanding strike price - outstanding (in dollars per share)	$ 0.26	$ 0.25
Vested stock options (in shares)	550,000	150,000
Weighted average remaining contractual life - vested (Year)	3 years 146 days	1 year 109 days
Weighted average outstanding strike price - vested (in dollars per share)	$ 0.25	$ 0.22
Range Three [Member]
Low price range (in dollars per share)	0.31	0.31
High price range (in dollars per share)	$ 0.50	$ 0.50
Outstanding stock options (in shares)	725,000	725,000
Weighted average remaining contractual life - outstanding (Year)	4 years 25 days	4 years 299 days
Weighted average outstanding strike price - outstanding (in dollars per share)	$ 0.34	$ 0.34
Vested stock options (in shares)	0	0
Weighted average remaining contractual life - vested (Year)	0 years	0 years
Weighted average outstanding strike price - vested (in dollars per share)	$ 0	$ 0

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Note 13 - Equity Incentive Plans - Fair Value Assumptions of Share-based Payments (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Risk-free interest rate	2.71%	1.81%
Expected dividend yield	0.00%	0.00%
Expected volatility	110.30%	127.10%
Expected life of options (Year)	5 years	5 years

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Note 13 - Equity Incentive Plans - Weighted Average Grant Date Fair Value Activity (Details) - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Stock options granted during the period (in dollars per share)	$ 0.23	$ 0.19
Stock options vested during the period (in dollars per share)	0.20	0.20
Stock options forfeited during the period (in dollars per share)	$ 0.19	$ 0.13

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Note 13 - Equity Incentive Plans - Status of Non-vested Shares (Details) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Shares underlying stock options (in shares)	1,870,000	4,875,000
Weighted average grant date fair value (in dollars per share)	$ 0.24	$ 0.21

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Note 14 - Subsequent Events (Details Textual) - USD ($)	1 Months Ended	9 Months Ended	12 Months Ended
	Nov. 12, 2018	Sep. 30, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		200,000	300,000
Subsequent Event [Member]
Repayments of Lines of Credit	$ 900,000
Subsequent Event [Member] | Chief Operating Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	34,175