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OmniComm Systems, Inc. Reports Financial Results for the Year-to-Date and Quarter Ending September 30, 2018

November 13, 2018


Kuno van der Post
OmniComm Systems, Inc.

Fort Lauderdale, FL - OmniComm Systems, Inc. (OmniComm) (OTCQX: OMCM), a global leading provider of clinical data management technology, today announced financial results for the nine- and three-month periods ending September 30, 2018.

For the nine-month period ending September 30, 2018, OmniComm reported revenue of $20.33 million, as compared to revenue of $20.18 million for the nine-month period ending September 30, 2017. Gross margin improved by $0.67 million to $16.72 million, a 4% increase. Operating expenses increased by $1.54 million to $14.88 million. Year-to-date operating income is $1.84 million, as compared to operating income of $2.71 million for the nine months ending September 30, 2017. EBITDA, a non-GAAP financial measure that OmniComm uses as an additional financial measure, was $2.37 million for the nine months ending September 30, 2018, as compared to EBITDA of $2.98 million for the nine months ending September 30, 2017.

“Our decision in the beginning of 2018 to transition from perpetual licensing to subscription or term licensing has had a negative impact on our recognized revenue through the first three quarters,” said Kuno van der Post, chief commercial officer of OmniComm, “but the long-term positive impact can already be seen in our backlog, which has risen significantly to over $50 million. Our contract bookings through the first three quarters of 2018 are a record $28.3 million, compared to our previous best year of $24.8 million through Q3 in 2017. Despite the 14.1% increase in year-over-year bookings, this increase has only generated a modest increase in year-over-year revenue, due to the change. However, it does put us in a better position for future growth.”

In 2018, 65% of OmniComm’s contracts are now subscription based, compared to 26% in 2017, and only 9% of OmniComm’s contracts are perpetual, compared to 52% in 2017 (the remaining part of OmniComm’s business are consulting and service contracts). Perpetual licenses generally offer a much better short-term revenue benefit since they typically include a large one-time upfront license payment that allows for expedited revenue recognition in the first year the agreement was signed, but have a negative long-term effect on future revenue due to much smaller annual maintenance fees, which are typically only 20% of the initial license fees.

“Subscription licenses offer a more consistent revenue model in that the license fees are evenly spread out over the term of the agreement and the term is typically guaranteed, unlike with perpetual license deals,” added Stephen Johnson, chief executive officer and president of OmniComm. “This does offer a more negative short-term effect on revenue in the first year of the agreement because there is not typically a larger upfront license payment, but it gives us a much smoother and more predictable revenue stream over the long-term.”

This licensing transition, coupled with the addition of three new product lines, has also had a negative impact on EBITDA this year. A significant portion of the increase in operating expense was directly attributed to the increased headount to support the new AutoEncoder and IRTMaster solutions developed by OmniComm and the addition of the 15 new employees that were part of the Algorics acquisition that introduced the Acuity Analytics product line. OmniComm also opened up a new office in Bengaluru, India to further enhance global support, especially for our AsiaPac clients.

“We are continually looking to release new products and acquire new technologies that bolster our current technology offering,” said Keith Howells, chief technology officer at OmniComm. “The addition of a coding solution, randomization and supply tracking, and a comprehensive analytics platform were a good investment for our clients and the long-term growth of OmniComm.”

OmniComm provides EBITDA, a non-GAAP financial measure as additional information to its financial results. Non-GAAP EBITDA excludes the impact of depreciation and amortization expenses that are included in operating income. Non-GAAP EBITDA is not an alternative or substitute for the financial measure prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) of operating income. The non-GAAP EBITDA financial measure presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define this non-GAAP financial measure in the same way. OmniComm’s management uses non-GAAP EBITDA as a measure of operational efficiency and as a goal for incentive compensation. Management believes non-GAAP EBITDA is a useful measure investors may use as an additional factor in their analysis of OmniComm’s performance. Please review the below reconciliation of the non-GAAP financial measure EBITDA to the GAAP financial measure operating income, as well as OmniComm’s financial statements as filed with the Securities and Exchange Commission.

Q3 chart 2018

Forward-Looking Statements

Statements contained in this press release that are not historical facts 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 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 press release. 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. OmniComm 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.


        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


          September 30, 2018   December 31, 2017
    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
    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
    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
    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
          For the nine months ended
          September 30,
          2018   2017
  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
    Purchase of property and equipment        (700,028)        (212,173)
    Purchase of Acuity software        (552,403)   -0-
  Net cash (used in) investing activities     (1,252,431)        (212,173)
    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

About OmniComm Systems, Inc

OmniComm Systems, Inc. is a leading strategic software solutions provider to the life sciences industry. OmniComm is dedicated to helping the world’s pharmaceutical, biotechnology, contract research organizations, diagnostic and device firms, and academic medical centers maximize the value of their clinical research investments. Through the use of innovative and progressive technologies, these organizations drive efficiency in clinical development, better manage their risks, ensure regulatory compliance and manage their clinical operations performance. With an extensive global experience from more than 6,000 clinical trials, OmniComm provides comprehensive solutions for clinical research. Please visit www.omnicomm.com for more information.

OmniComm, TrialMaster, TrialOne, IRTMaster and Promasys are registered trademarks of OmniComm Systems, Inc. Other names may be trademarks of their respective owners.

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