##### Table of Contents



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2003

Commission File Number 0-13898

Veramark Technologies, Inc.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 16-1192368                          
|                                                               |  |                                     
|(State or other jurisdiction of Incorporation
or Organization) |  | (IRS Employer Identification Number)
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|3750 Monroe Avenue, Pittsford, NY                              |  | 14534                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          



(585) 381-6000
(Registrants telephone number, including area code)




N.A.
(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 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
requirement for the past 90 days.

Yes X   No

Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act).

Yes    NoX

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of March 31, 2003

|                                 |  |                  |  | 
|-------------------------------- |  | ---------------- |  | 
|Common stock, par value $.10     |  | 8,390,734 shares
|                                
|This report consists of 20 pages

1



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##### Table of Contents



INDEX

|        |  |                                                                                       |  |                                                                                             |         |      |       | 
|------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | ------- | ---- | ----- | 
|        |  |                                                                                       |  |                                                                                             |         | Page
|        |  |                                                                                       |  |                                                                                             |         |     
|PART I  |  | FINANCIAL INFORMATION                                                                 |  |                                                                                             |         |     
|       
|       
|       
|       
|       
|Item 1  |  | Financial Statements                                                                  |  |                                                                                             |         |     
|       
|       
|       
|       
|       
|        |  |                                                                                       |  | Condensed
Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002                |         |      | 3 - 4 | 
|       
|       
|       
|       
|       
|        |  |                                                                                       |  | Condensed
Consolidated Statements of Operations -Three Months Ended March 31, 2003 and 2002 |         |      | 5     | 
|       
|       
|       
|       
|       
|        |  |                                                                                       |  | Condensed
Consolidated Statements of Cash Flows -Three Months Ended March 31, 2003 and 2002 |         |      | 6     | 
|       
|       
|       
|       
|       
|        |  |                                                                                       |  | Notes To Condensed Consolidated Financial Statements                                        |         |      | 7 - 9 | 
|       
|       
|       
|       
|       
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |                                                                                             | 10 - 13 |     
|       
|       
|       
|       
|       
|Item 3  |  | Quantative and Qualitative Disclosures About Market Risk                              |  |                                                                                             | 13      |     
|       
|       
|       
|       
|       
|Item 4  |  | Controls and Procedures                                                               |  |                                                                                             | 13      |     
|       
|       
|       
|       
|       
|PART II |  | OTHER INFORMATION                                                                     |  |                                                                                             |         |     
|       
|       
|       
|       
|       
|Item 6  |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                             | 14      |     

2



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TABLE OF CONTENTS



|                                                                                             |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                              
|CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)                                           
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                             
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)                                 
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                        
|Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3 Quantitative and Qualitative Disclosures About Market Risk                           
|Item 4 Controls and Procedures                                                              
|PART II  OTHER INFORMATION                                                                 
|Item 6: Exhibits and Reports on Form 8-K                                                    
|EX-99.1  CERTIFICATION OF DAVID G. MAZZELLA                                                 
|EX-99.2  CERTIFICATION OF RONALD C. LUNDY                                                   



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##### Table of Contents






PART I  FINANCIAL INFORMATION

VERAMARK TECHNOLOGIES, INC.




CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

|                       |                                                                                                          |                              |   |            |           |              |   |            |           | 
|---------------------- | -------------------------------------------------------------------------------------------------------- | ---------------------------- | - | ---------- | --------- | ------------ | - | ---------- | --------- | 
|                       |                                                                                                          |                              |   | March 31,  |           | December 31,
|                       |                                                                                                          |                              |   | 2003       |           | 2002        
|                       |                                                                                                          |                              |   |            |           |             
|ASSETS                 |                                                                                                          |                              |   |            |           |              |   |           
|                      
|                      
|                      
|                      
|                      
|CURRENT ASSETS:        |                                                                                                          |                              |   |            |           |              |   |           
|                      
|                      
|                      
|                      
|                      
|                       | Cash and cash equivalents                                                                                |                              | $ | 654,713    |           |              | $ | 623,194    |          
|                      
|                      
|                      
|                      
|                       | Investments                                                                                              |                              |   | 969,515    |           |              |   | 924,682    |          
|                      
|                      
|                      
|                      
|                       | Accounts receivable, trade (net
of allowance for doubtful accounts
of $95,000 and $80,000, respectively) |                              |   | 1,233,289  |           |              |   | 1,135,776  |          
|                      
|                      
|                      
|                      
|                       | Inventories , net                                                                                        |                              |   | 78,019     |           |              |   | 92,276     |          
|                      
|                      
|                      
|                      
|                       | Prepaid expenses                                                                                         |                              |   | 195,892    |           |              |   | 182,630    |          
|                       |                                                                                                          |                              |   |            |           |              |   |           
|                       |                                                                                                          | Total Current Assets         |   |            | 3,131,428 |              |   |            | 2,958,558 | 
|                      
|                      
|                      
|                      
|                      
|PROPERTY AND EQUIPMENT |                                                                                                          |                              |   |            |           |              |   |           
|                      
|                      
|                      
|                      
|                      
|                       | Cost                                                                                                     |                              |   | 5,812,034  |           |              |   | 6,656,249  |          
|                      
|                      
|                      
|                      
|                       | Less accumulated depreciation                                                                            |                              |   | (4,625,450 | )         |              |   | (5,404,203 | )        
|                       |                                                                                                          |                              |   |            |           |              |   |           
|                       |                                                                                                          | Property and Equipment (Net) |   |            | 1,186,584 |              |   |            | 1,252,046 | 
|                      
|                      
|                      
|                      
|                      
|OTHER ASSETS:          |                                                                                                          |                              |   |            |           |              |   |           
|                      
|                      
|                      
|                      
|                      
|                       | Software development costs (net of
accumulated amortization of $619,280
and $2,985,453, respectively)    |                              |   | 1,444,987  |           |              |   | 1,590,054  |          
|                      
|                      
|                      
|                      
|                       | Pension assets                                                                                           |                              |   | 2,327,403  |           |              |   | 2,303,580  |          
|                      
|                      
|                      
|                      
|                       | Deposits and other assets                                                                                |                              |   | 741,424    |           |              |   | 742,474    |          
|                       |                                                                                                          |                              |   |            |           |              |   |           
|                       | Total other assets                                                                                       |                              |   | 4,513,814  |           |              |   | 4,636,108  |          
|                       |                                                                                                          |                              |   |            |           |              |   |           
|                       | TOTAL ASSETS                                                                                             |                              | $ | 8,831,826  |           |              | $ | 8,846,712  |          
|                       |                                                                                                          |                              |   |            |           |              |   |           

|                                                         |  |            
|-------------------------------------------------------- |  | -----------
|See notes to Condensed Consolidated Financial Statements |  | (Continued)

3



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##### Table of Contents



VERAMARK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

|                                     |                                                                                                                        |                           |   |             |           |              |   |             |           | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | ----------- | --------- | ------------ | - | ----------- | --------- | 
|                                     |                                                                                                                        |                           |   | March 31,   |           | December 31,
|                                     |                                                                                                                        |                           |   | 2003        |           | 2002        
|                                     |                                                                                                                        |                           |   |             |           |             
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                        |                           |   |             |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|                                    
|CURRENT LIABILITIES:                 |                                                                                                                        |                           |   |             |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                       |                           | $ | 286,851     |           |              | $ | 265,184     |          
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued compensation and related taxes                                                                                 |                           |   | 467,870     |           |              |   | 392,808     |          
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred revenue                                                                                                       |                           |   | 3,235,454   |           |              |   | 3,200,145   |          
|                                    
|                                    
|                                    
|                                    
|                                     | Capital lease obligation  current                                                                                     |                           |   | 17,843      |           |              |   | 17,334      |          
|                                    
|                                    
|                                    
|                                    
|                                     | Other accrued liabilities                                                                                              |                           |   | 126,862     |           |              |   | 167,808     |          
|                                     |                                                                                                                        |                           |   |             |           |              |   |            
|                                     |                                                                                                                        | Total Current Liabilities |   |             | 4,134,880 |              |   |             | 4,043,279 | 
|                                    
|                                    
|                                    
|                                    
|                                    
|                                     | Long term portion of capital leases                                                                                    |                           |   | 2,113       |           |              |   | 7,400       |          
|                                    
|                                    
|                                    
|                                    
|                                     | Pension obligation                                                                                                     |                           |   | 3,685,215   |           |              |   | 3,625,000   |          
|                                     |                                                                                                                        |                           |   |             |           |              |   |            
|                                     | Total Liabilities                                                                                                      |                           |   | 7,822,208   |           |              |   | 7,675,679   |          
|                                    
|                                    
|                                    
|                                    
|                                    
|                                     | STOCKHOLDERS EQUITY:                                                                                                  |                           |   |             |           |              |   |             |          
|                                    
|                                    
|                                    
|                                    
|                                     | Common Stock, par value $.10; shares authorized,
40,000,000; shares issued and outstanding
for both periods, 8,470,959 |                           |   | 847,096     |           |              |   | 847,096     |          
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                                                             |                           |   | 21,716,196  |           |              |   | 21,686,196  |          
|                                    
|                                    
|                                    
|                                    
|                                     | Retained deficit                                                                                                       |                           |   | (21,181,580 | )         |              |   | (20,976,502 | )        
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive income                                                                                 |                           |   | 13,663      |           |              |   |            |          
|                                    
|                                    
|                                    
|                                    
|                                     | Treasury stock (80,225 shares, at cost)                                                                                |                           |   | (385,757    | )         |              |   | (385,757    | )        
|                                     |                                                                                                                        |                           |   |             |           |              |   |            
|                                     | Total Stockholders Equity                                                                                             |                           |   | 1,009,618   |           |              |   | 1,171,033   |          
|                                     |                                                                                                                        |                           |   |             |           |              |   |            
|                                     | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                             |                           | $ | 8,831,826   |           |              | $ | 8,846,712   |          
|                                     |                                                                                                                        |                           |   |             |           |              |   |            

|                                                         |  |            
|-------------------------------------------------------- |  | -----------
|See notes to Condensed Consolidated Financial Statements |  | (Concluded)

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##### Table of Contents



VERAMARK TECHNOLOGIES, INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                              |                                      |                                    |               |                 |           |                    |           |           |           |           |           | 
|----------------------------- | ------------------------------------ | ---------------------------------- | ------------- | --------------- | --------- | ------------------ | --------- | --------- | --------- | --------- | --------- | 
|                              |                                      |                                    |               |                 |           | Three Months Ended
|                              |                                      |                                    |               |                 |           | March 31,         
|                              |                                      |                                    |               |                 |           | 2003               |           | 2002     
|                              |                                      |                                    |               |                 |           |                    |           |          
|NET SALES                     |                                      |                                    |               |                 |           |                    |           |          
|                             
|                             
|                             
|                             
|                              |                                      |                                    | Product Sales |                 | $         | 964,388            |           |           | $         | 970,912   |          
|                             
|                             
|                             
|                             
|                              |                                      |                                    | Service Sales |                 |           | 1,785,633          |           |           |           | 1,667,928 |          
|                              |                                      |                                    |               |                 |           |                    |           |          
|                              |                                      |                                    |               | Total Net Sales |           |                    | 2,750,021 |           |           |           | 2,638,840 | 
|                             
|                             
|                             
|                             
|                             
|COSTS AND OPERATING EXPENSES: |                                      |                                    |               |                 |           |                    |           |          
|                             
|                             
|                             
|                             
|                              | Cost of sales                        |                                    |               | 460,577         |           |                    |           | 539,860   |          
|                             
|                             
|                             
|                             
|                              | Engineering and software development |                                    |               | 619,998         |           |                    |           | 724,431   |          
|                             
|                             
|                             
|                             
|                              | Selling, general and administrative  |                                    |               | 1,877,532       |           |                    |           | 2,018,985 |          
|                              |                                      |                                    |               |                 |           |                    |           |          
|                              |                                      | Total Costs and Operating Expenses |               |                 | 2,958,107 |                    |           |           | 3,283,276 |          
|                             
|                             
|                             
|                             
|                             
|LOSS FROM OPERATIONS          |                                      |                                    | (208,086      | )               |           |                    | (644,436  | )        
|                             
|                             
|                             
|                             
|                             
|NET INTEREST INCOME           |                                      |                                    | 3,008         |                 |           |                    | 11,307    |          
|                              |                                      |                                    |               |                 |           |                    |           |          
|LOSS BEFORE INCOME TAXES      |                                      |                                    | (205,078      | )               |           |                    | (633,129  | )        
|                             
|                             
|                             
|                             
|                             
|INCOME TAXES                  |                                      |                                    |              |                 |           |                    |          |          
|                              |                                      |                                    |               |                 |           |                    |           |          
|NET LOSS                      |                                      | $                                  | (205,078      | )               |           | $                  | (633,129  | )        
|                              |                                      |                                    |               |                 |           |                    |           |          
|NET LOSS PER SHARE            |                                      |                                    |               |                 |           |                    |           |          
|                             
|                             
|                             
|                             
|                              |                                      | Basic                              |               | $               | (0.02     | )                  |           | $         | (0.08     | )        
|                              |                                      |                                    |               |                 |           |                    |           |          
|                              |                                      | Diluted                            |               | $               | (0.02     | )                  |           | $         | (0.08     | )        
|                              |                                      |                                    |               |                 |           |                    |           |          

See notes to Condensed Consolidated Financial Statements.

5



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##### Table of Contents






VERAMARK TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                                            |                                        |   |                              |          |      |   |          |          |  
|------------------------------------------------------------------------------------------- | -------------------------------------- | - | ---------------------------- | -------- | ---- | - | -------- | -------- | -
|                                                                                            |                                        |   | Three Months Ended March 31,
|                                                                                            |                                        |   |                             
|                                                                                            |                                        |   | 2003                         |          | 2002
|                                                                                            |                                        |   |                              |          |     
|OPERATING ACTIVITIES:                                                                       |                                        |   |                              |          |      |   |          |         
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net loss                                                                                    |                                        | $ | (205,078                     | )        |      | $ | (633,129 | )       
|                                                                                            |                                        |   |                              |          |      |   |          |         
|Adjustments to reconcile net loss to net cash flows provided
(used) by operating activities |                                        |   |                              |          |      |   |          |         
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Depreciation and amortization          |   |                              | 235,546  |      |   |          | 396,002  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Provision for bad debts                |   |                              | 12,501   |      |   |          | 7,500    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Provision for inventory obsolescence   |   |                              | 12,498   |      |   |          | 6,250    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Loss on disposal of fixed assets       |   |                              | 1,003    |      |   |          | 19       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Compensation expense-stock options     |   |                              | 30,000   |      |   |          | 96,000   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Changes in assets and liabilities                                                           |                                        |   |                              |          |      |   |          |         
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts receivable                    |   |                              | (110,014 | )    |   |          | (81,077  | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Inventories                            |   |                              | 1,759    |      |   |          | 4,460    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Prepaid expenses                       |   |                              | (13,262  | )    |   |          | (21,471  | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Deposits and other assets              |   |                              | (22,773  | )    |   |          | (2,266   | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts payable                       |   |                              | 21,667   |      |   |          | 56,894   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accrued compensation and related taxes |   |                              | 75,062   |      |   |          | (5,169   | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Deferred revenue                       |   |                              | 35,309   |      |   |          | 78,694   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other accrued liabilities              |   |                              | (40,946  | )    |   |          | (112,562 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Pension obligation                     |   |                              | 60,215   |      |   |          | 78,265   |  
|                                                                                            |                                        |   |                              |          |      |   |          |         
|Net cash flows provided (used) by operating activities                                      |                                        |   | 93,487                       |          |      |   | (131,590 | )       
|                                                                                            |                                        |   |                              |          |      |   |          |         
|INVESTING ACTIVITIES:                                                                       |                                        |   |                              |          |      |   |          |         
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Purchase of investments                |   |                              | (31,170  | )    |   |          | (70,772  | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Additions to property and equipment    |   |                              | (26,020  | )    |   |          | (2,902   | )
|                                                                                            |                                        |   |                              |          |      |   |          |         
|Net cash flows used by investing activities:                                                |                                        |   | (57,190                      | )        |      |   | (73,674  | )       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|FINANCING ACTIVITY:                                                                         |                                        |   |                              |          |      |   |          |         
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Repayment of capital lease obligation  |   |                              | (4,778   | )    |   |          | (3,923   | )
|                                                                                            |                                        |   |                              |          |      |   |          |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        |                                        |   | 31,519                       |          |      |   | (209,187 | )       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                              |                                        |   | 623,194                      |          |      |   | 633,138  |         
|                                                                                            |                                        |   |                              |          |      |   |          |         
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                    |                                        | $ | 654,713                      |          |      | $ | 423,951  |         
|                                                                                            |                                        |   |                              |          |      |   |          |         

See notes to Condensed Consolidated Financial Statements.

6



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##### Table of Contents






NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) GENERAL

The accompanying unaudited consolidated financial statements include all
adjustments of a normal and recurring nature which, in the opinion of Companys
management, are necessary to present fairly the Companys financial position as
of March 31, 2003 and the results of its operations and cash flows for the
three months ended March 31, 2003 and 2002.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes contained in the Companys annual report on Form
10-K to the Securities and Exchange Commission for the year ended December 31,
2002.

The results of operations for the three months ended March 31, 2003 are
not necessarily indicative of the results to be expected for the full years
operation.

(2)  INVENTORIES, NET

The composition of inventories at March 31, 2003 and December 31, 2002 was
as follows:

|                               |  |           |        |              |  |   |        | 
|------------------------------ |  | --------- | ------ | ------------ |  | - | ------ | 
|                               |  | March 31, |        | December 31,
|                               |  | 2003      |        | 2002        
|                               |  |           |        |             
|Purchased parts and components |  | $         | 64,496 |              |  | $ | 75,402 | 
|                              
|                              
|                              
|                              
|Work in process                |  |           | 8,021  |              |  |   | 10,344 | 
|                              
|                              
|                              
|                              
|Finished goods                 |  |           | 5,502  |              |  |   | 6,530  | 
|                               |  |           |        |              |  |   |        | 
|                               |  | $         | 78,019 |              |  | $ | 92,276 | 
|                               |  |           |        |              |  |   |        | 

(3) PROPERTY AND EQUIPMENT

The major classifications of property and equipment at March 31, 2003, and
December 31, 2002 were:

|                               |  |           |           |              |  |   |           | 
|------------------------------ |  | --------- | --------- | ------------ |  | - | --------- | 
|                               |  | March 31, |           | December 31,
|                               |  | 2003      |           | 2002        
|                               |  |           |           |             
|Machinery and equipment        |  | $         | 789,131   |              |  | $ | 788,131   | 
|                              
|                              
|                              
|                              
|Computer hardware and software |  |           | 1,871,532 |              |  |   | 2,715,527 | 
|                              
|                              
|                              
|                              
|Furniture and fixtures         |  |           | 1,768,812 |              |  |   | 1,770,032 | 
|                              
|                              
|                              
|                              
|Leasehold improvements         |  |           | 1,382,559 |              |  |   | 1,382,559 | 
|                               |  |           |           |              |  |   |           | 
|                               |  | $         | 5,812,034 |              |  | $ | 6,656,249 | 
|                               |  |           |           |              |  |   |           | 

7



---



##### Table of Contents





|(4) |  | STOCK-BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In 2002, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 148, Accounting for Stock-Based Compensation  Transition
and Disclosure. This standard provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. Additionally, the standard also
requires prominent disclosures in the Companys financial statements about
the method of accounting used for stock-based employee compensation, and
the effect of the method used when reporting financial results.                                                                                                                   
|   
|    |  | The Company accounts for stock-based compensation in accordance with SFAS
No. 123, Accounting for Stock-Based Compensation. As permitted by SFAS
No. 123, the Company continues to measure compensation for such plans
using the intrinsic value based method of accounting, prescribed by
Accounting Principles Board (APB), Opinion No. 25, Accounting for Stock
Issued to Employees. Had compensation cost for the Companys stock-based
compensation plans been determined based on the fair value at the grant
dates for awards consistent with the method of SFAS No. 123, the Companys
net loss and net loss per common share would have been adjusted to the pro
forma amounts indicated below:

|                          |  |             |  |           |          |                    |          |      |          |   |          |  
|------------------------- |  | ----------- |  | --------- | -------- | ------------------ | -------- | ---- | -------- | - | -------- | -
|                          |  |             |  |           |          | Three Months Ended
|                          |  |             |  |           |          | March 31,         
|                          |  |             |  |           |          |                   
|                          |  |             |  |           |          | 2003               |          | 2002
|                          |  |             |  |           |          |                    |          |     
|Net loss                  |  | As reported |  | $         | (205,078 | )                  |          | $    | (633,129 | )
|                         
|                         
|                         
|                         
|                          |  |             |  | Pro forma |          | $                  | (375,601 | )    |          | $ | (714,076 | )
|                         
|                         
|                         
|                         
|Net loss per common share |  | As reported |  |           |          |                    |          |      |          |  
|                         
|                         
|                         
|                         
|                          |  |             |  | Basic     |          | $                  | (0.02    | )    |          | $ | (0.08    | )
|                         
|                         
|                         
|                         
|                          |  |             |  | Diluted   |          | $                  | (0.02    | )    |          | $ | (0.08    | )
|                         
|                         
|                         
|                         
|                          |  |             |  | Pro forma |          |                    |          |      |          |   |          |  
|                         
|                         
|                         
|                         
|                          |  |             |  | Basic     |          | $                  | (0.04    | )    |          |   | ($0.09   | )
|                         
|                         
|                         
|                         
|                          |  |             |  | Diluted   |          | $                  | (0.04    | )    |          |   | ($0.09   | )



| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For purposes of the disclosure above, the fair value of each option grant is
estimated on the date of the grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants in
2003 and 2002:

|                        |  |         |        |         |  |  |        |  
|----------------------- |  | ------- | ------ | ------- |  |  | ------ | -
|                        |  | 2003    |        | 2002   
|                        |  |         |        |        
|Dividend yield          |  |         |       |         |  |  |       |  
|                       
|                       
|                       
|                       
|Expected volatility     |  |         | 138.54 | %       |  |  | 137.65 | %
|                       
|                       
|                       
|                       
|Risk-free interest rate |  |         | 3.07   | %       |  |  | 4.64   | %
|                       
|                       
|                       
|                       
|Expected life           |  | 5 years |        | 5 years

8



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##### Table of Contents





|(5) |  | TOTAL COMPREHENSIVE INCOME (LOSS)                                              
|--- |  | -------------------------------------------------------------------------------
|   
|    |  | Total comprehensive loss for the first quarter of 2003 and 2002 was as
follows:

|                                       |  |                         |          |      |  |   |          |  
|-------------------------------------- |  | ----------------------- | -------- | ---- |  | - | -------- | -
|                                       |  | Quarter Ended March 31,
|                                       |  | 2003                    |          | 2002
|                                       |  |                        
|Net loss                               |  | $                       | (205,078 | )    |  | $ | (633,129 | )
|                                      
|                                      
|                                      
|                                      
|Accumulated other comprehensive income |  |                         | 13,663   |      |  |   |         |  
|                                       |  |                         |          |      |  |   |          |  
|Total comprehensive loss               |  | $                       | (194,415 | )    |  | $ | (633,129 | )
|                                       |  |                         |          |      |  |   |          |  

9



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##### Table of Contents






Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations

Except for the historical information contained herein, the matters
discussed in this report are forward-looking statements, which involve risks
and uncertainties including, but not limited to, economic, competitive,
governmental and technological factors, affecting the Companys operations,
markets, products, services and prices, as well as other factors discussed in
the Companys filings with the Securities and Exchange Commission.

Results of Operations

Sales for the quarter ended March 31, 2003 of $2,750,021 increased 4% from
sales of $2,638,840 recognized for the quarter ended March 31, 2002. The
increased sales reflect significant growth in sales of the Companys core call
accounting products and services, partially offset by a reduction in sales of
the Companys larger enterprise series products. For the quarter ended March
31, 2003, sales of core call accounting products and services increased 18%
from the sales recognized for the quarter ended March 31, 2002, reflecting an
increase in sales to both prior existing customers, as well as new sales to
channels of distribution developed during 2002. This broadening of the
Companys distribution base is directly attributable to the wide acceptance of
the Companys web-based eCAS product line released late in 2001. For the
quarter ended March 31, 2003, sales of core call accounting products accounted
for 61% of total revenues versus 54% the prior year.

Sales of the Companys enterprise level products, primarily the Quantum
Series, continue to be negatively impacted by the current recession,
particularly as being experienced in the telecom market. As was the case
during the prior two years, customers continue to delay significant capital
expenditures. For the quarter ended March 31, 2003, sales of enterprise level
products and services decreased by 10% from the same quarter of 2002,
representing 33% of the Companys total sales in 2003, versus 38% of sales for
the first quarter of 2002.

Revenues generated by the Companys Service Bureau, which provides
outsourced telemanagement solutions, remained relatively unchanged from prior
year levels and accounted for 4% of total Company revenues for both the
quarters ended March 31, 2003 and 2002. The Company expects revenues from the
Service Bureau to increase throughout the remainder of 2003 as compared with
the comparable periods of a year ago. In December 2002, the Company signed a
two-year agreement with a large commercial bank to provide a number of call
accounting services and related processing services in its operations. These
services were only partially implemented during the first quarter of 2003, with
full implementation expected during the second quarter. In addition,
subsequent to the end of the first quarter, the Company announced that one of
the nations leading insurance companies had renewed their call account Service
Bureau contract with the Company for a new three-year term.

For the quarter ended March 31, 2003, sales generated from service and
support activities accounted for 65% of total Company sales versus 63% of total
sales for the quarter ended March 31, 2002. These service and support
activities include installation services, training, customization and
consulting services, as well as product maintenance and support.

The Company gross profit margin increased 9% to $2,289,444, or 83% of
sales, for the quarter ended March 31, 2003, from a gross profit margin of
$2,098,980, or 80% of sales, for the quarter ended March 31, 2002. The
increased margin reflects a reduction in amortization costs associated with
previously capitalized product development costs charged to cost of sales.

10



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##### Table of Contents



The Company continues to closely monitor its operating expenses in light
of current economic conditions and revenue streams. As of March 31, 2003, the
Company employed 101 full-time personnel, as compared with 119 full-time
personnel at March 31, 2002. As a result, operating expenses in total for the
quarter ended March 31, 2003 were 9% lower than for the same three-month period
of 2002, with the most significant reductions realized, being payroll, fringe
benefit and travel costs. The Company continues to look at ways of
streamlining and consolidating functional areas.

Engineering and software development expenses for the quarter ended March
31, 2003 totaled $619,998, a 14% reduction from the engineering and software
development expense of $724,431 incurred for the quarter ended March 31, 2002.
There were no development costs capitalized during either the first quarter of
2003 or the first quarter of 2002.

Selling, general, and administrative expenses of $1,877,532 for the
quarter ended March 31, 2003, compared with selling, general, and
administrative expenses of $2,018,985 for the quarter ended March 31, 2002, a
reduction of 7%.

The Companys net loss of $205,078, or $0.02 per share, for the quarter
ended March 31, 2003, represented a significant reduction from the net loss of
$633,129, or $0.08 per share, incurred for the first quarter of 2002.

Liquidity and Capital Resources

At March 31, 2003, the Companys total cash and investment position was
$1,624,228, up from $1,547,876 at December 31, 2002, and $1,112,372 at March
31, 2002. Not included in the current cash and investment balance is
approximately $1.6 million of accessible cash surrender values associated with
Company-owned insurance policies, if that should become necessary.

Accounts receivable of $1,233,289 at March 31, 2003, increased 9% from the
December 31, 2002 balance of $1,135,776. There were no significant changes in
payment trends from customers noted during the first quarter of 2003.

Inventories continue to decline, decreasing to $78,019 at March 31, 2003
as compared with a net inventory of $92,276 at December 31, 2002. The Company
expects to see only minor fluctuations in inventory balances through the
remainder of 2003.

Prepaid expenses of $195,892 at March 31, 2003, increased from $182,630 at
December 31, 2002. Prepaid expenses consist primarily of business insurance
policies and maintenance contracts that have been fully paid, but for which
portions of the economic benefit extend over the next three to twelve months.
The increase is attributable to the renewal of various business insurance
premiums for 2003.

The cost value of property and equipment at March 31, 2003, totals
$5,812,034, as compared to $6,656,249 at December 31, 2002. The change from
the December 31, 2002 balance includes $26,020 of new capital spending incurred
during the first quarter of 2003, and the write-off of $870,235 of nearly fully
depreciated equipment, particularly obsolete computer hardware no longer in
use. The Company realized a loss on the disposal of the equipment of
approximately $1,000 from the write-off, which has been charged against income
in the first quarter of 2003.

11



---



##### Table of Contents



Software development costs, net of accumulated amortization of $1,444,987
at March 31, 2003, decreased from $1,590,054 at December 31, 2002, reflecting
the amortization of $145,067 of previously capitalized development costs.
There were no new development costs capitalized during the quarter.

Pension assets which consist of the cash surrender value of life insurance
policies referenced above and an intangible asset required to account for past
service costs associated with the Companys executive retirement plan,
increased from $2,303,580 at December 31, 2002, to $2,327,403 at March 31,
2003. The increase is attributable to a growth in the cash surrender value of
those policies.

Total current liabilities at March 31, 2003, of $4,134,880 are 2% higher
than the balance of $4,043,279 at December 31, 2002. Accounts payable
increased $21,667 due to the timing of payment to suppliers. There have been
no significant changes in Company policy with regard to the payment terms with
vendors and suppliers.

Accrued compensation rose $75,062 from $392,808 at December 31, 2002 to
$467,870 at March 31, 2003. The increase reflects higher accruals for salaries
payable and fringe benefits due to the timing of the of the Companys bi-weekly
payroll.

Deferred revenue, which represents services for which the Company has
billed customers, but for which has not yet performed the associated service,
increased $35,309 during the quarter to $3,235,454 at March 31, 2003. These
services typically include training, installation and maintenance and support.
All services currently deferred, are expected to be provided over the next
twelve months, and recorded as sales revenue at that time.

Other accrued liabilities total $126,862 at March 31, 2003, down from
$167,808 at December 31, 2002. The decrease represents a reduction in
provisions required for legal and accounting fees, expected warranty costs, and
state sales taxes payable.

Long-term liabilities increased $54,928 during the first quarter of 2003
primarily due to the accrual of pension expense required by the Companys
executive retirement program. At March 31, 2003 the Company remains free of
borrowed bank debt and has no current plans to acquire debt to finance current
operations.

Stockholders Equity decreased from $1,171,033 at December 31, 2002 to
$1,009,618 at March 31, 2003 primarily as a result of the operating loss
incurred for the first quarter.

Despite the operating loss incurred for the quarter ended March 31, 2003,
the Company believes that at its current operating expense levels, and with its
current cash and investments on hand, sufficient resources are available to
meet all financial obligations, as well as support current operating plans.

Accounting Prouncements

None.

Critical Accounting Policies

The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported therein. The most
significant of these involving difficult or complex judgments in 2003 include:

12



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##### Table of Contents





| |  |  | Revenue recognition; and                    
| | - |  | --------------------------------------------
|
| |  |  | Capitalization of software development costs

In each situation, management is required to make estimates about the
effects of matters or future events that are inherently uncertain.

The Companys overall policies with regard to revenue recognition is based
on the terms of sale with the customer. The terms and arrangements vary by
product and services provided, owing to the differing nature of the customers
and channels. The Company believes its revenue recognition policies are
appropriate in all circumstances, and that its policies are reflective of
complexities arising from customer arrangements involving such features as
maintenance, warranty agreements, license agreements, and other normal course
of business arrangements.

The Company capitalizes software development costs when technological
feasibility has been established for the software in accordance with Statement
of Financial Accounting Standards (SFAS) No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed. Such capitalized
costs are amortized on a product-by-product basis over their economic life or
the ratio of current revenues to current and anticipated revenues from such
software, whichever provides the greater amortization. Should the Company
inaccurately determine when a product reaches technological feasibility or the
economic life of a product, results could differ materially from those
reported. The Company used what it believes are reasonable assumptions and
where applicable, established valuation techniques in making its estimates.




Item 3 Quantitative and Qualitative Disclosures About Market Risk

The Company has no long-term bank debt obligations. The Company has no
foreign currency exchange risk and has no foreign currency exchange contracts.




Item 4 Controls and Procedures

Based upon an evaluation completed within 90 days prior to the filing of
this quarterly report, the Companys Chief Executive Officer and Treasurer
(Chief Accounting Officer) concluded that the Companys disclosure controls are
effective for gathering and disclosing information as required for reports
filed under the Securities and Exchange Act of 1934. There have been no
significant changes in the Companys internal controls or in other factors that
could significantly affect these controls subsequent to the date of this
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

The Companys disclosure controls and procedures and internal controls
provide reasonable, but not absolute, assurance that all deficiencies in design
or operation of these control systems, or all instances of errors or fraud,
will be prevented or detected. These control systems are designed to provide
reasonable assurance of achieving the goals of these systems in light of our
resources and nature of our business operations. These control systems remain
subject to risks of human error and the risk that controls can be circumvented
for wrongful purposes by one or more individuals in management or
non-management positions.

13



---



##### Table of Contents






PART II  OTHER INFORMATION




Item 6: Exhibits and Reports
on Form 8-K



| | (1) |  | Registrants Condensed Financial Statements for the three months
ended March 31, 2003 and 2002 are set forth in Part I, Item 1 of this
Quarterly Report on Form 10-Q.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Calculation of loss per share for the three months ended March 31,
2003 and 2002, as set forth as Exhibit II.                                                      
|
| | (3) |  | Certification by Companys CEO pursuant to 18 U.S.C. Section 1350,
attached as Exhibit (99.1)                                                                        
|
| | (4) |  | Certification by Companys Treasurer pursuant to 18 U.S.C. Section
1350, attached as Exhibit (99.2)                                                                  

14



---



##### Table of Contents



Exhibit II:

VERAMARK TECHNOLOGIES, INC.

Calculations of Earnings (Loss) Per Share

|                                                      |  |                    |           |      |  |   |           |  
|----------------------------------------------------- |  | ------------------ | --------- | ---- |  | - | --------- | -
|                                                      |  | Three Months Ended
|                                                      |  | March 31,         
|                                                      |  |                   
|                                                      |  | 2003               |           | 2002
|                                                      |  |                    |           |     
|Basic                                                 |  |                    |           |      |  |   |           |  
|                                                     
|                                                     
|                                                     
|                                                     
|Net Loss                                              |  | $                  | (205,078  | )    |  | $ | (633,129  | )
|                                                      |  |                    |           |      |  |   |           |  
|Weighted Average Common Shares Outstanding            |  |                    | 8,390,734 |      |  |   | 8,323,689 |  
|                                                      |  |                    |           |      |  |   |           |  
|Net Loss Per Common Share                             |  | $                  | (0.02     | )    |  | $ | (0.08     | )
|                                                      |  |                    |           |      |  |   |           |  
|Diluted                                               |  |                    |           |      |  |   |           |  
|                                                     
|                                                     
|                                                     
|                                                     
|Net Loss                                              |  | $                  | (205,078  | )    |  | $ | (633,129  | )
|                                                      |  |                    |           |      |  |   |           |  
|Weighted Average Common Shares Outstanding            |  |                    | 8,390,734 |      |  |   | 8,323,689 |  
|                                                     
|                                                     
|                                                     
|                                                     
|Additional Dilutive Effect of Stock Options and       |  |                    |           |      |  |   |           |  
|                                                     
|                                                     
|                                                     
|                                                     
|Warrants after Application of Treasury Stock Method   |  |                    |          |      |  |   |          |  
|                                                      |  |                    |           |      |  |   |           |  
|Weighted Average Common Shares Outstanding            |  |                    | 8,390,734 |      |  |   | 8,323,689 |  
|                                                      |  |                    |           |      |  |   |           |  
|Net Loss per Common Share and Common Equivalent Share |  | $                  | (0.02     | )    |  | $ | (0.08     | )
|                                                      |  |                    |           |      |  |   |           |  

15



---



##### Table of Contents



SIGNATURES

Pursuant to the requirements 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.

VERAMARK TECHNOLOGIES, INC.

REGISTRANT

Date: May 14, 2003

/s/ David G. Mazzella
David G. Mazzella
President and CEO

Date: May 14, 2003

/s/ Ronald C. Lundy
Ronald C. Lundy
Treasurer (Chief Accounting Officer)

16



---



##### Table of Contents



CERTIFICATIONS

I, David G. Mazzella, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Veramark
Technologies, Inc.                                                                                                                                                                                                                                             
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures 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 quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |  |  |                                                        
|------------------ |  |  |  | -------------------------------------------------------
|Date: May 14, 2003 |  |  |  | By: /s/David G. Mazzella                               
|                   |  |  |  |                                                        
|                   |  |  |  | David G. Mazzella,
Chairman and Chief Executive Officer

17



---



##### Table of Contents



I, Ronald C. Lundy, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Veramark
Technologies, Inc.                                                                                                                                                                                                                                             
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures 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 quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |  |  |                           
|------------------ |  |  |  | --------------------------
|Date: May 14, 2003 |  |  |  | By: /s/Ronald C. Lundy    
|                   |  |  |  |                           
|                   |  |  |  | Ronald C. Lundy,
Treasurer

18