General

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

Forward-Looking Statements

Statements contained in this Form 10-K that are not historical fact are "forward looking statements". These statements can often be identified by the use of forward-looking terminology such as "estimate", "project", "believe", "expect", "may", "will", "should", "intends", or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. We wish to caution the reader that these forward-looking statements, contained in this Form 10-K regarding matters that are not historical facts, are only predictions. No assurance can be given that plans for the future will be consummated or that the future results indicated, whether expressed or implied, will be achieved. While sometimes presented with numerical specificity, these plans and projections and other forward-looking statements are based upon a variety of assumptions, which we consider reasonable, but which nevertheless may not be realized. Because of the number and range of the assumptions

underlying our projections and forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond our reasonable control, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may occur subsequent to the date of this Form 10-K. Therefore, our actual experience and results achieved during the period covered by any particular projections or forward-looking statements may differ substantially from those projected. Consequently, the inclusion of projections and other forward- looking statements should not be regarded as a representation by us or any other person that these plans will be consummated or that estimates and projections will be realized, and actual results may vary materially. There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate. The Company does not undertake any obligation to update or revise any forward-looking statement made by it or on its behalf, whether as a result of new information, future events or otherwise.

Overview

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

During fiscal 2008 we continued our efforts in executing its strategy. The primary focus of our strategy includes:

• Stimulating demand by providing clinical trial Sponsors with high value eClinical applications and services;

• Emphasizing low operating costs;

• Expanding our business model by offering our software solution, TrialMaster, on a licensed basis in addition to our existing hosted-services solutions;

• Providing EDC services to small and midsize Pharma, Bio-Tech, Medical Device Companies and CROs (Clinical Research Organizations); and

• Differentiation through service.

According to a 2008 EvaluatePharma report, global R & D expenditures by the pharmaceutical and BioTech industries were approximately $120 billion in 2008, with approximately 50% of that amount spent by North American-based pharmaceutical, biotechnology and medical device companies. A 2007 report by Health Industry Insights states that by the end of 2007, approximately 45% of all new Phase I-III studies were initiated using EDC. The report also states that the total addressable market for EDC and eClinical services is expected to grow from approximately $600MM currently to $1.8B in 2010. Our operating focus is first to increase our sales and marketing capabilities and penetration rate and secondly, to continue developing and improving TrialMaster to ensure our services and products remain an attractive, high-value EDC choice. During 2009 we anticipate continuing to increasing our marketing and sales personnel and will look to aggressively expand the scope of our CRO Preferred Program in order to increase our penetration of the domestic CRO market. Additionally, we believe we have established an effective presence in the European clinical trial market and will seek to aggressively expand the scope of our sales and marketing operations there.

Our ability to compete within the EDC industry is predicated on our ability to continue enhancing and broadening the scope of solutions offered through TrialMaster. Our R & D efforts are focused on developing new, complementary software solutions, as well as enhancing our existing software solutions through the addition of increased functionality. During fiscal 2007 and 2008, we spent approximately $917,000 and $897,000 respectively, on R & D activities, the majority of which represented salaries to our developers which include costs associated with customization of the TrialMaster software for our client's projects.

The Year-ended December 31, 2008 Compared With the Year-ended December 31, 2007

Results of Operations

A summarized version of our results of operations for the years ended December 31, 2008 and December 31, 2007 is included in the table below.

                       Summarized Statement of Operations



                                                     For the years ended
                                                         December 31,
                                                       % of                          % of            $             %
                                       2008          Revenues         2007         Revenues        Change        Change
Total revenues                     $   6,269,614                  $  3,723,841                  $  2,545,773       68.4 %

Cost of sales                          1,351,564         21.6 %      1,033,824         27.8 %        317,740       30.7 %


Gross margin                           4,918,050         78.4 %      2,690,017         72.2 %      2,228,033       82.8 %

Salaries, benefits and related
taxes                                  8,825,032        140.8 %      5,886,663        158.1 %      2,938,369       49.9 %
Rent                                     554,475          8.8 %        342,255          9.2 %        212,220       62.0 %
Consulting                               302,502          4.8 %        320,360          8.6 %        (17,858 )     -5.6 %

Legal and professional fees              612,634          9.8 %        291,959          7.8 %        320,675      109.8 %

Selling, general and
administrative                           544,012          8.7 %        522,565         14.0 %         21,447        4.1 %


Total Operating Expenses              12,116,899        193.3 %      7,906,033        212.3 %      4,210,866       53.3 %


Operating income (loss)               (7,198,849 )     -114.8 %     (5,216,016 )     -140.1 %     (1,982,833 )     38.0 %

Interest Expense                      (3,300,654 )      -52.6 %        (57,777 )       -1.6 %     (3,242,877 )   5612.7 %
Interest income                            7,112          0.1 %         20,085          0.5 %        (12,973 )    -64.6 %
Patent litigation settlement          (2,170,483 )      -34.6 %             -           0.0 %     (2,170,483 )      n/m
Unrealized Gain on Derivatives         2,114,194         33.7 %             -           0.0 %      2,114,194        n/m


Net (loss)                           (10,594,561 )     -169.0 %     (5,253,708 )     -141.1 %     (5,340,853 )    101.7 %
Total preferred stock dividends         (283,960 )       -4.5 %       (519,761 )      -14.0 %        235,801      -45.4 %

Net (loss) attributable to
common stockholders                $ (10,878,521 )     -173.5 %   $ (5,773,469 )     -155.0 %   $ (5,105,052 )     88.4 %

Results of Operations

Revenues for the year-ended December 31, 2008 were $6,269,614 compared to $3,723,841 for the year-ended December 31, 2007, an increase of 68.4%. Industry acceptance of EDC continues to increase. Industry estimates from Health Industry Insights are that EDC was a $500 million market in 2008, with an annualized 15% growth rate for the next three-to-five years. TrialMaster is currently sold primarily as an application service provider ("ASP") that provides EDC and other services such as an enterprise management suite which assists its clients in the pharmaceutical, biotechnology and medical device industries in accelerating the completion of clinical trials. As we continue developing TrialMaster and our client relationships mature we expect some of our clients to deploy TrialMaster on a licensed, rather than ASP hosted basis. TrialMaster contracts provide for pricing that is based on both the size and duration of the

clinical trial. Size parameters include the number of case report forms used to collect data and the number of sites utilizing TrialMaster. The client will pay a trial setup fee based on the previously mentioned factors, and then pay an on-going maintenance fee for the duration of the clinical trial that provides software, network and site support during the trial. During the year-ended 2007 approximately 63.2% of revenues were generated by trial setup activities, 27.9% were generated from on-going maintenance fees and approximately 8.9% was generated from fees charged for changes to on-going clinical trial engagements. During the year-ended 2008 we generated 74.0% of revenues from setup fees, 19.2% from on-going maintenance fees and 6.8% from project change orders. Generally, these contracts will range in duration from one month to several years. Setup fees are generally earned prior to the inception of a trial, however, the revenues will be recognized in accordance with SEC Staff Accounting Bulletin No. 104 "Revenue Recognition" which requires that the revenues be recognized ratably over the life of the contract. The maintenance fee revenues are earned and recognized monthly. Costs associated with contract revenues are recognized as incurred.

Our top five customers accounted for approximately 45% of our revenues during the year-ended December 31, 2007 and approximately 54% of our revenues during the year-ended December 31, 2008. One customer accounted for 13% and another accounted for 10% of our revenues during fiscal 2007. One customer accounted individually for 36% of our revenues during fiscal 2008. The loss of any of these contracts or these customers in the future could adversely affect our results of operations.

Cost of goods sold increased from $1,033,824 for the year-ended December 31, 2007 to $1,351,564 for the year-ended December 31, 2008, an increase of 30.7%. Cost of goods sold were approximately 27.8% of sales for the year-ended December 31, 2007 compared to 21.6% for the year-ended December 31, 2008. Cost of goods sold relates primarily to salaries and related benefits associated with the programmers, developers and systems analysts producing clinical trials on behalf of our clients. Salaries increased during 2008 due to the addition of four additional programmers and two additional quality analysts as part of our clinical trial operations.

We expect to increase development programming labor costs on an absolute basis as our trial revenues increase. We expect our cost of goods sold to approximate 25% of sales during fiscal 2009. We expect to continue to increase follow-on engagements from existing clients and expect to increase the phase I and CRO portions of our client base. In addition, we expect the cost of service for our licensing business to approximate 25% of revenues. TrialMaster, (V4.0) increased the efficiency of our trial building operations by approximately 20% through the use of additional automated tools, the ability to use our library of pre-existing CRFs and through the use of our "drag and drop" clinical trial building too. V4.0 was designed using Microsoft's .NET framework. Microsoft ® .NET is described by Microsoft as a set of software technologies for connecting information, people, systems, and devices. This new generation of technology is based on Web services-small building-block applications that can connect to each other as well as to other, larger applications over the Internet.

Salaries and related expenses are our biggest expense at 74.5% of total Operating Expenses for the year-ended December 31, 2007 compared with 72.8% of total Operating Expenses for the year-ended December 31, 2008. Salaries and related expenses totaled $5,886,663 for the year-ended December 31, 2007 compared to $8,825,032 for the year-ended December 31, 2008, an increase of 49.9%. We currently employ approximately 61 employees out of our Ft. Lauderdale, Florida corporate office, 12 out-of-state employees and 14 employees out of a wholly-owned subsidiary in Bonn, Germany. We expect to increase personnel within our production and quality analysis functions in concert with anticipated increases in TrialMaster engagements during fiscal 2009. We will look to selectively add experienced sales and marketing personnel in fiscal 2009 in an effort to increase our market penetration, particularly in Europe, and to continue broadening our client base domestically. During the years ended December 31, 2007 and December 31, 2008 we incurred $980,823 and $1,321,004, respectively, in salary expense in connection with our adoption of SFAS No. 123(R), Share-Based Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. We expect that the adoption of SFAS 123R will continue to have an impact on our results of operations in the future.

Rent and related expenses increased by $212,220 during the year-ended December 31, 2008 when compared to the year-ended December 31, 2007. We expanded our corporate office lease that runs through July 2011 to include a total of approximately 10,000 square feet. We established a disaster recovery site at a Cincinnati Bell owned Co-Location facility in Cincinnati, Ohio and will continue utilizing this facility for the foreseeable future since it is designed to ensure 100% production system up-time and to provide system redundancy. We lease co-location and disaster recovery space and services from Gold Coast 1-Vault in the Ft. Lauderdale, Florida area. This facility provides us with disaster recovery and business continuity services for our operations. This lease expires in August 2011. We currently lease office space in Bonn, Germany for our European subsidiary, OmniComm Europe, GmbH. That lease expires in December 2010.

Consulting services expense was $320,360 for the year ended December 31, 2007 compared with $302,502 for the year ended December 31, 2008. Consulting services were comprised of fees paid to consultants for help with developing our computer applications and for fees incurred as part of our employee recruiting programs.

Legal and professional fees totaled $291,959 for the year-ended December 31, 2007 compared with $612,634 for the year-ended December 31, 2008, an increase of approximately $320,675. Professional fees include fees paid to our auditors for services rendered on a quarterly and annual basis in connection with our SEC filings and fees paid to our attorneys in connection with representation in matters involving litigation or for services rendered to us related to securities and SEC related matters. During 2008, we spent approximately $171,250 on legal fees associated with our defense in an alleged patent infringement lawsuit.

Selling, general and administrative expenses ("SGA") were $522,565 for the year-ended December 31, 2007 compared to $544,012 for the year-ended December 31, 2008, an increase of 4.1%. These expenses relate primarily to costs incurred in running our offices in Fort Lauderdale and Bonn, Germany on a day-to-day basis and other costs not directly related to other captioned items in our income statement, and include the cost of office equipment and supplies, the costs of attending conferences and seminars and other expenses incurred in the normal course of business. The Company increased its marketing, sales and advertising expenditures by $133,974 from $150,139 for the year-ended December 31, 2007 to $284,113 for the year-ended December 31, 2008, an increase of approximately 89.2%. We expect SGA expenses to continue increasing as we intensify and extend our selling and marketing efforts.

Interest expense was $3,300,654 during the year ended December 31, 2008 compared to $57,777 for the year ended December 31, 2007, an increase of $3,242,877. Interest incurred to related parties was $216,810 during the year ended December 31, 2008 and $16,650 for the year ended December 31, 2007. The increase in interest expense can be attributed to debt financings that were completed during fiscal 2008. Included in interest expense during fiscal 2008 is the accretion of discounts recorded related to financial instrument derivatives that were deemed a part of those financings. The table below provides detail on the amounts of interest attributed to each of the financings.

                                                                                              Change 2008
Debt Description                       2008 Interest Expense       2007 Interest Expense        vs. 2007
Accretion of Discount from
Derivatives                           $             2,937,497     $                   -0-     $  2,937,497
Feb. 2008 Secured Convertible
Debentures                                            155,808                         -0-          155,808
August 2008 Convertible Notes                          77,117                         -0-           77,117
December 2008 Convertible Notes                        26,695                         -0-           26,695

Total                                 $             3,197,117     $                   -0-     $  3,197,117

We evaluate the cost of capital available to us in combination with our overall capital structure and the prevailing market conditions in deciding what financing best fulfills our short and long-term capital needs. Given the difficult overall economic climate and in particular the difficulties micro-cap firms have experienced in obtaining financing, we believe the structure and terms of the transactions we entered into during 2008 were obtained at the best terms available to the Company. During the year ended December 31, 2008 we issued $9,340,000 in notes payable and Convertible Debt, including $7,070,000 to members of our Board of Directors and Officers of the Company. During the year ended December 31, 2007, we issued $211,800 in promissory notes.

We recorded unrealized gains on derivative liabilities associated with the issuance of convertible debt that occurred during fiscal 2008. We recorded $2,114,194 during the year ended December 31, 2008 compared with $0 during the year ended December 31, 2007. The unrealized gains can be attributed to fair value calculations undertaken periodically on the warrant and conversion feature liabilities (discounts) recorded by us at the time the convertible debt was issued. Accordingly the warrant and conversion feature liabilities are increased or decreased based on the fair value calculation made.

There were arrearages of $210,574 in 5% Series A Preferred Stock dividends, $39,467 in Series B Preferred Stock dividends and $269,720 in Series C Preferred Stock dividends for the year-ended December 31, 2007, compared with arrearages of $206,692 in 5% Series A Preferred Stock dividends, $9,753 in Series B Preferred Stock dividends and $67,245 in Series C Preferred Stock dividends for the year-ended December 31, 2008. We deducted $519,761 and $283,960 from Net Income (Loss) Attributable to Common Stockholders' for the year-ended December 31, 2007 and December 31, 2008, respectively, relating to undeclared Series A, B and C Convertible Preferred Stock dividends.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. We have historically experienced negative cash flows and have relied on the proceeds from the sale of debt and equity securities to fund our operations. In addition, we have utilized stock-based compensation as a means of paying for consulting and salary related expenses.

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

                        Liquidity and Capital Resources



                                            December 31, 2008      December 31, 2007       Change
Cash                                                2,035,818                481,961      1,553,857

Accounts Receivable, net of allowance
for doubtful accounts                               2,607,893                769,325      1,838,568
Current Assets                                      4,742,273              1,288,914      3,453,359

Accounts Payable and accrued expenses               1,085,700                696,281        389,419
Notes payable, current portion                        111,800                     -         111,800
Patent litigation settlement liability,
current portion                                       241,464                     -         241,464
Deferred revenue, current portion                   3,549,058              1,560,370      1,988,688
Convertible notes payable, current
portion                                               384,043                 87,500        296,543
Current Liabilities                                 5,372,065              2,344,151      3,027,914

Working Capital (Deficit)                            (629,792 )           (1,055,237 )      425,445

                                                       Disclosure for the
                                                          years ended
                                            December 31, 2008      December 31, 2007
Net cash provided by (used in) operating
activities                                         (5,293,720 )           (3,594,090 )
Net cash provided by (used in) investing
activities                                           (539,428 )             (322,483 )
Net cash provided by financing
activities                                          7,393,973              4,350,282

Net increase (decrease) in cash and cash
equivalents                                         1,553,857                443,707

Cash and cash equivalents increased by $1,553,857 to $2,035,818 at December 31, 2008 from $481,961 at December 31, 2007. This was the result of cash provided by financing activities of $7,393,973 offset by cash used in operating activities of approximately $5,293,720 and $539,428 used in investing activities. The significant components of the activity include a loss from operations of approximately $10,594,561 offset by non-cash items of $4,893,069 and a net amount after repayments of debt of $7,393,973 we raised through the issuance of debt and equity securities offset by $539,428 used in investing activities and increases in cash of $407,773 from changes in working capital accounts.

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

Presently, we have approximately $650,000 planned for capital expenditures to further the Company's growth during fiscal 2009 which will be funded through cash from operations.

Contractual Obligations

The following table sets forth our contractual obligations during the next five
years as of December 31, 2008:



Contractual Obligations                                              Payments Due by Period
                                                    Less than          1-2                             3-5
                                         Total       1 year           Years          2-3 Years        Years
Long Term Debt (1)                        309,300    111,800  (2)            0        197,500  (3)         0
Secured Convertible Debt (1)              300,000    300,000  (4)            0               0             0
Convertible Notes (1)                   7,432,500     87,500  (5)   7,345,000  (6)
Operating Lease Obligations             1,162,167     450,596          463,471         248,100            -
Patent Litigation Settlement            1,955,392    255,392  (7)      500,000         300,000       900,000
Financial Advisory Agreement               90,000     90,000  (8)            0               0             0


Total                                  11,249,359   1,295,288        8,308,471         745,600       900,000

1. Amounts do not include interest to be paid.

2. Includes $111,800 of 9% notes payable that mature in January 2009.

3. Includes $197,500 of 9% notes payable that mature in January 2011.

4. Includes $300,000 of 12% Convertible Notes that mature in January 2009.

5. Includes $87,500 of 10% convertible notes currently in default and due that are convertible into shares of common stock at the option of the debenture holder at a conversion rate of $1.25 per share.

6. Includes $2,270,000 in 10% Convertible Notes that mature in August 2010 and $5,075,000 in 12% Convertible Notes that mature in December 2010.

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

8. Relates to Financial Advisory fees paid to Noesis Capital Corp., our Placement Agent and a 5% shareholder in our Company.

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

We are currently in arrears on principal and interest payments owed totaling $159,752 on our 10% Convertible Notes. We were in default effective January 30, 2002.

On February 29, 2008, we sold an aggregate of $2,325,000 principal amount 10% . . .