##### 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 June 30, 2002

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 |  | XX |  | NO |  | 
|    |  |    |  |    |  | 

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of June 30, 2002

|                                 |  |                 
|-------------------------------- |  | ----------------
|Common stock, par value $.10     |  | 8,360,825 shares
|                                
|                                
|                                
|                                
|This report consists of 18 pages |  |                 

1



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TABLE OF CONTENTS



|                               |                                                                                              |                                                      |  |  |  |  |  | 
|------------------------------ | -------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1 Financial Statements                                                                 
|                               |                                                                                              | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                               |                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                               |                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                               |                                                                                              | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                               | Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II  OTHER INFORMATION   
|                               | Item 6: Exhibits and Reports on Form 8-K                                                    



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##### Table of Contents



INDEX

|        |  |                                                                                                     |  |      |         | 
|------- |  | --------------------------------------------------------------------------------------------------- |  | ---- | ------- | 
|        |  |                                                                                                     |  | Page
|        |  |                                                                                                     |  |     
|PART I  |  | FINANCIAL INFORMATION                                                                               |  |      |         | 
|       
|Item 1  |  | Financial Statements                                                                                |  |     
|       
|       
|       
|       
|       
|        |  | Condensed Consolidated Balance Sheets -
June 30, 2002 and December 31, 2001                         |  |      | 3  4   | 
|       
|       
|       
|       
|       
|        |  | Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 2002 and 2001 |  |      | 5       | 
|       
|       
|       
|       
|       
|        |  | Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2002 and 2001           |  |      | 6       | 
|       
|       
|       
|       
|       
|        |  | Notes To Condensed Consolidated Financial Statements                                                |  |      | 7  8   | 
|       
|       
|       
|       
|       
|Item 2  |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations               |  |      | 9  12  | 
|       
|       
|       
|       
|       
|PART II |  | OTHER INFORMATION                                                                                   |  |     
|       
|       
|       
|       
|       
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                    |  |      | 13  14 | 

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




VERAMARK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS




|                       |                                                                                                            |                              |   |             |           |              |   |            |           | 
|---------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------- | - | ----------- | --------- | ------------ | - | ---------- | --------- | 
|                       |                                                                                                            |                              |   | JUNE 30,    |           | DECEMBER 31,
|                       |                                                                                                            |                              |   | 2002        |           | 2001        
|                       |                                                                                                            |                              |   |             |           |             
|                       |                                                                                                            |                              |   | (Unaudited) |           |              |   |           
|ASSETS                 |                                                                                                            |                              |   |             |           |              |   |           
|                      
|                      
|                      
|                      
|CURRENT ASSETS:        |                                                                                                            |                              |   |             |           |              |   |           
|                      
|                      
|                      
|                      
|                       | Cash and Cash Equivalents                                                                                  |                              | $ | 647,162     |           |              | $ | 633,138    |          
|                      
|                      
|                      
|                      
|                       | Investments                                                                                                |                              |   | 675,912     |           |              |   | 617,649    |          
|                      
|                      
|                      
|                      
|                       | Accounts Receivable, trade (net
of allowance for doubtful accounts
of $172,000 and $139,000, respectively) |                              |   | 1,411,016   |           |              |   | 1,622,846  |          
|                      
|                      
|                      
|                      
|                       | Inventories , net                                                                                          |                              |   | 150,606     |           |              |   | 155,159    |          
|                      
|                      
|                      
|                      
|                       | Prepaid Expenses                                                                                           |                              |   | 295,733     |           |              |   | 76,175     |          
|                       |                                                                                                            |                              |   |             |           |              |   |           
|                       |                                                                                                            | Total Current Assets         |   |             | 3,180,429 |              |   |            | 3,104,967 | 
|                      
|                      
|                      
|                      
|PROPERTY AND EQUIPMENT |                                                                                                            |                              |   |             |           |              |   |           
|                      
|                      
|                      
|                      
|                       | Cost                                                                                                       |                              |   | 6,648,560   |           |              |   | 6,660,276  |          
|                      
|                      
|                      
|                      
|                       | Less Accumulated Depreciation                                                                              |                              |   | (5,198,989  | )         |              |   | (4,911,570 | )        
|                       |                                                                                                            |                              |   |             |           |              |   |           
|                       |                                                                                                            | Property and Equipment (Net) |   |             | 1,449,571 |              |   |            | 1,748,706 | 
|                      
|                      
|                      
|                      
|OTHER ASSETS:          |                                                                                                            |                              |   |             |           |              |   |           
|                      
|                      
|                      
|                      
|                       | Software Development Costs (net of
accumulated amortization of $2,527,902
and $2,070,351, respectively)    |                              |   | 2,047,605   |           |              |   | 2,505,156  |          
|                      
|                      
|                      
|                      
|                       | Pension Assets                                                                                             |                              |   | 2,119,274   |           |              |   | 2,119,274  |          
|                      
|                      
|                      
|                      
|                       | Deposits and Other Assets                                                                                  |                              |   | 758,372     |           |              |   | 659,563    |          
|                       |                                                                                                            |                              |   |             |           |              |   |           
|                       | Total Other Assets                                                                                         |                              |   | 4,925,251   |           |              |   | 5,283,993  |          
|                       |                                                                                                            |                              |   |             |           |              |   |           
|                       | TOTAL ASSETS                                                                                               |                              | $ | 9,555,251   |           |              | $ | 10,137,666 |          
|                       |                                                                                                            |                              |   |             |           |              |   |           

See notes to Condensed Consolidated Financial Statements.

3



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##### Table of Contents



VERAMARK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                     |                                                                                                                                   |                           |   |             |           |              |   |             |           | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | ----------- | --------- | ------------ | - | ----------- | --------- | 
|                                     |                                                                                                                                   |                           |   | JUNE 30,    |           | DECEMBER 31,
|                                     |                                                                                                                                   |                           |   | 2002        |           | 2001        
|                                     |                                                                                                                                   |                           |   |             |           |             
|                                     |                                                                                                                                   |                           |   | (Unaudited) |           |              |   |            
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                   |                           |   |             |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|CURRENT LIABILITIES:                 |                                                                                                                                   |                           |   |             |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts Payable                                                                                                                  |                           | $ | 327,489     |           |              | $ | 190,783     |          
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued Compensation and Related Taxes                                                                                            |                           |   | 1,779,174   |           |              |   | 1,710,169   |          
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred Revenue                                                                                                                  |                           |   | 2,969,601   |           |              |   | 2,839,332   |          
|                                    
|                                    
|                                    
|                                    
|                                     | Capital Lease Obligation  Current                                                                                                |                           |   | 16,354      |           |              |   | 15,429      |          
|                                    
|                                    
|                                    
|                                    
|                                     | Other Accrued Liabilities                                                                                                         |                           |   | 145,301     |           |              |   | 235,678     |          
|                                     |                                                                                                                                   |                           |   |             |           |              |   |            
|                                     |                                                                                                                                   | Total Current Liabilities |   |             | 5,237,919 |              |   |             | 4,991,391 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Long Term Portion of Capital Leases                                                                                               |                           |   | 16,319      |           |              |   | 25,171      |          
|                                    
|                                    
|                                    
|                                    
|                                     | Pension Obligation                                                                                                                |                           |   | 3,587,059   |           |              |   | 3,470,039   |          
|                                     |                                                                                                                                   |                           |   |             |           |              |   |            
|                                     | Total Liabilities                                                                                                                 |                           |   | 8,841,297   |           |              |   | 8,486,601   |          
|                                    
|                                    
|                                    
|                                    
|                                     | STOCKHOLDERS EQUITY:                                                                                                             |                           |   |             |           |              |   |             |          
|                                    
|                                    
|                                    
|                                    
|                                     | Common Stock, par value $.10; shares authorized,
40,000,000; shares issued and outstanding,
8,441,050 and 8,403,914, respectively |                           |   | 844,105     |           |              |   | 840,391     |          
|                                    
|                                    
|                                    
|                                    
|                                     | Additional Paid-in Capital                                                                                                        |                           |   | 20,278,716  |           |              |   | 20,263,490  |          
|                                    
|                                    
|                                    
|                                    
|                                     | Retained Deficit                                                                                                                  |                           |   | (19,935,281 | )         |              |   | (18,968,059 | )        
|                                    
|                                    
|                                    
|                                    
|                                     | Treasury Stock (80,225 shares, at cost)                                                                                           |                           |   | (385,757    | )         |              |   | (385,757    | )        
|                                    
|                                    
|                                    
|                                    
|                                     | Note Receivable for Common Stock                                                                                                  |                           |   | (87,829     | )         |              |   | (99,000     | )        
|                                     |                                                                                                                                   |                           |   |             |           |              |   |            
|                                     | Total Stockholders Equity                                                                                                        |                           |   | 713,954     |           |              |   | 1,651,065   |          
|                                     |                                                                                                                                   |                           |   |             |           |              |   |            
|                                     | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                        |                           | $ | 9,555,251   |           |              | $ | 10,137,666  |          
|                                     |                                                                                                                                   |                           |   |             |           |              |   |            

See notes to Condensed Consolidated Financial Statements.

4



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##### Table of Contents



VERAMARK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS




|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |           |       |           |           | 
|----------------------------- | ------------------------------------ | ------- | ---------------------------------- | --------------- | ----- | ------------------ | --------- | ---------------- | ----- | --------- | --------- | --------- | ----- | --------- | ---------- | --------- | ----- | --------- | --------- | 
|                              |                                      |         |                                    |                 |       | THREE MONTHS ENDED |           | SIX MONTHS ENDED
|                              |                                      |         |                                    |                 |       | JUNE 30,           |           | JUNE 30,        
|                              |                                      |         |                                    |                 |       |                    |           |                 
|                              |                                      |         |                                    |                 |       | 2002               |           | 2001             |       | 2002      |           | 2001     
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |          
|                              |                                      |         |                                    |                 |       | (Unaudited)        |           | (Unaudited)     
|NET SALES                     |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|                             
|                             
|                             
|                             
|                              |                                      |         |                                    | Product Sales   |       | $                  | 1,355,135 |                  |       | $         | 1,677,745 |           |       | $         | 2,326,047  |           |       | $         | 3,413,297 | 
|                             
|                             
|                             
|                             
|                              |                                      |         |                                    | Service Sales   |       |                    | 1,712,970 |                  |       |           | 1,619,974 |           |       |           | 3,380,898  |           |       |           | 3,208,737 | 
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|                              |                                      |         |                                    | Total Net Sales |       |                    | 3,068,105 |                  |       |           | 3,297,719 |           |       |           | 5,706,945  |           |       |           | 6,622,034 | 
|                             
|                             
|                             
|                             
|COSTS AND OPERATING EXPENSES: |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|                             
|                             
|                             
|                             
|                              | Cost of Sales                        |         |                                    | 624,539         |       |                    |           | 518,074          |       |           |           | 1,164,399 |       |           |            | 1,063,769 |      
|                             
|                             
|                             
|                             
|                              | Engineering and Software Development |         |                                    | 718,907         |       |                    |           | 713,435          |       |           |           | 1,443,338 |       |           |            | 1,485,652 |      
|                             
|                             
|                             
|                             
|                              | Selling, General and Administrative  |         |                                    | 2,048,781       |       |                    |           | 2,568,810        |       |           |           | 4,067,766 |       |           |            | 5,302,301 |      
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|                              |                                      |         | Total Costs and Operating Expenses |                 |       | 3,392,227          |           |                  |       | 3,800,319 |           |           |       | 6,675,503 |            |           |       | 7,851,722 |          
|                             
|                             
|                             
|                             
|LOSS FROM OPERATIONS          |                                      |         | (324,122                           | )               |       |                    | (502,600  | )                |       |           | (968,558  | )         |       |           | (1,229,688 | )        
|                             
|                             
|                             
|                             
|NET INTEREST INCOME (EXPENSE) |                                      |         | (9,971                             | )               |       |                    | 10,899    |                  |       |           | 1,336     |           |       |           | 39,838     |          
|                             
|                             
|                             
|                             
|OTHER INCOME (NOTE 4)         |                                      |         |                                   |                 |       |                    |          |                  |       |           |          |           |       |           | 315,676    |          
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|LOSS BEFORE INCOME TAXES      |                                      |         | (334,093                           | )               |       |                    | (491,701  | )                |       |           | (967,222  | )         |       |           | (874,174   | )        
|                             
|                             
|                             
|                             
|INCOME TAXES                  |                                      |         |                                   |                 |       |                    |          |                  |       |           |          |           |       |           |           |          
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|NET LOSS                      |                                      | $       | (334,093                           | )               |       | $                  | (491,701  | )                |       | $         | (967,222  | )         |       | $         | (874,174   | )        
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|NET LOSS PER SHARE           
|                              |                                      | Basic   |                                    | $               | (0.04 | )                  |           | $                | (0.06 | )         |           | $         | (0.12 | )         |            | $         | (0.11 | )        
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          
|                              |                                      | Diluted |                                    | $               | (0.04 | )                  |           | $                | (0.06 | )         |           | $         | (0.12 | )         |            | $         | (0.11 | )        
|                              |                                      |         |                                    |                 |       |                    |           |                  |       |           |           |           |       |           |            |          

See notes to Condensed Consolidated Financial Statements.

5



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##### Table of Contents



VERAMARK TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




|                                                                                      |                                                         |                              |           |                           |        |      |           |          |   | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------- | ---------------------------- | --------- | ------------------------- | ------ | ---- | --------- | -------- | - | 
|                                                                                      |                                                         |                              |           | Six Months Ended June 30,
|                                                                                      |                                                         |                              |           |                          
|                                                                                      |                                                         |                              |           | 2002                      |        | 2001
|                                                                                      |                                                         |                              |           |                           |        |     
|OPERATING ACTIVITIES:                                                                 |                                                         |                              |           |                           |        |      |           |         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net loss                                                                              |                                                         | $                            | (967,222  | )                         |        | $    | (874,174  | )       
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|Adjustments to reconcile net loss to net cash provided
(used) by operating activities |                                                         |                              |           |                           |        |      |           |         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Depreciation and amortization                           |                              |           | 768,777                   |        |      |           | 681,551  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Provision for losses on accounts receivable             |                              |           | 30,000                    |        |      |           | 15,000   |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Provision for inventory obsolescence                    |                              |           | 12,500                    |        |      |           | 12,500   |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Loss on disposal of fixed assets                        |                              |           | 18                        |        |      |           | 3,136    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Gain on sale of VeraBill                                |                              |           |                          |        |      |           | (315,676 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                                         | Repayment of note receivable |           |                           | 11,171 |      |           |          |  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Changes in assets and liabilities                                                     |                                                         |                              |           |                           |        |      |           |         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Accounts receivable                                     |                              |           | 181,830                   |        |      |           | (170,644 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Inventories                                             |                              |           | (7,947                    | )      |      |           | 100,049  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Prepaid expenses                                        |                              |           | (219,558                  | )      |      |           | (84,486  | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Deposits and other assets                               |                              |           | (98,809                   | )      |      |           | 123,299  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Accounts payable                                        |                              |           | 136,706                   |        |      |           | 39,708   |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Accrued compensation and related taxes                  |                              |           | 69,005                    |        |      |           | 15,292   |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Deferred revenue                                        |                              |           | 130,269                   |        |      |           | (365,470 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Other accrued liabilities                               |                              |           | (90,377                   | )      |      |           | (27,807  | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Pension obligation                                      |                              |           | 117,020                   |        |      |           | 120,309  |  
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|Net adjustments                                                                       |                                                         |                              | 1,040,605 |                           |        |      | 146,761   |         
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|Net cash flows provided (used) by operating activities                                |                                                         |                              | 73,383    |                           |        |      | (727,413  | )       
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|INVESTING ACTIVITIES:                                                                 |                                                         |                              |           |                           |        |      |           |         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Purchase of investments                                 |                              |           | (58,263                   | )      |      |           | (11,210  | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Additions to property and equipment                     |                              |           | (12,109                   | )      |      |           |         |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Capitalized software development costs                  |                              |           |                          |        |      |           | (778,281 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Proceeds from sale of VeraBill, net of selling expenses |                              |           |                          |        |      |           | 941,000  |  
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|Net cash flows (used) provided by investing activities:                               |                                                         |                              | (70,372   | )                         |        |      | 151,509   |         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|FINANCING ACTIVITIES:                                                                 |                                                         |                              |           |                           |        |      |           |         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Repayment of capital lease obligation                   |                              |           | (7,927                    | )      |      |           | (6,723   | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Employee Stock Purchase Plan                            |                              |           | 18,940                    |        |      |           | 64,190   |  
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|Net cash flows provided by investing activities:                                      |                                                         |                              | 11,013    |                           |        |      | 57,467    |         
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                  |                                                         |                              | 14,024    |                           |        |      | (518,437  | )       
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        |                                                         |                              | 633,138   |                           |        |      | 1,072,421 |         
|                                                                                      |                                                         |                              |           |                           |        |      |           |         
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                              |                                                         | $                            | 647,162   |                           |        | $    | 553,984   |         
|                                                                                      |                                                         |                              |           |                           |        |      |           |         

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 condensed 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 June 30, 2002 and the results of its operations and
cash flows for the three and six months ended June 30, 2002 and 2001.

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 unaudited condensed consolidated
financial statements should be read in conjunction with the supplemental
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, 2001.

The results of operations for the three and six months ended June 30, 2002
are not necessarily indicative of the results to be expected for the full
years operation.



|(2) |  | INVENTORIES, NET                                                                     
|--- |  | -------------------------------------------------------------------------------------
|   
|    |  | The composition of inventories at June 30, 2002 and December 31, 2001 was
as follows:
|   

|                               |  |          |         |              |  |   |         | 
|------------------------------ |  | -------- | ------- | ------------ |  | - | ------- | 
|                               |  | JUNE 30, |         | DECEMBER 31,
|                               |  | 2002     |         | 2001        
|                               |  |          |         |             
|Purchased parts and components |  | $        | 113,517 |              |  | $ | 119,107 | 
|                              
|                              
|                              
|                              
|Work in process                |  |          | 26,783  |              |  |   | 32,394  | 
|                              
|                              
|                              
|                              
|Finished goods                 |  |          | 10,306  |              |  |   | 3,658   | 
|                               |  |          |         |              |  |   |         | 
|                               |  | $        | 150,606 |              |  | $ | 155,159 | 
|                               |  |          |         |              |  |   |         | 

|(3) |  | PROPERTY AND EQUIPMENT                                                                           
|--- |  | -------------------------------------------------------------------------------------------------
|   
|    |  | The major classifications of property and equipment at June 30, 2002, and
December 31, 2001 were:

|                               |  |          |           |              |  |   |           | 
|------------------------------ |  | -------- | --------- | ------------ |  | - | --------- | 
|                               |  | June 30, |           | December 31,
|                               |  | 2002     |           | 2001        
|                               |  |          |           |             
|Machinery and equipment        |  | $        | 777,798   |              |  | $ | 795,098   | 
|                              
|                              
|                              
|                              
|Computer hardware and software |  |          | 2,724,333 |              |  |   | 2,706,067 | 
|                              
|                              
|                              
|                              
|Furniture and fixtures         |  |          | 1,763,870 |              |  |   | 1,776,552 | 
|                              
|                              
|                              
|                              
|Leasehold improvements         |  |          | 1,382,559 |              |  |   | 1,382,559 | 
|                               |  |          |           |              |  |   |           | 
|                               |  | $        | 6,648,560 |              |  | $ | 6,660,276 | 
|                               |  |          |           |              |  |   |           | 

7



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##### Table of Contents



|(4) |  | On March 26, 2001, the Company completed the sale of VeraBill, its
billing and customer care product line, to MIND CTI Ltd. of Yokneam,
Israel. The net proceeds from the sale were $941,000, representing cash
received at closing of $1,000,000, less transaction related fees and
expenses of $59,000. After all fees, expenses, and the write-off of
remaining capitalized software associated with the VeraBill product line,
the Company recognized a net gain on the transaction of $315,676.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(5) |  | NEW ACCOUNTING PROUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires that obligations
associated with the retirement of a tangible long-lived asset be recorded
as a liability when those obligations are incurred, with the amount of the
liability initially measured at fair value. Upon initially recognizing a
liability for an asset retirement obligation, an entity must capitalize
the cost by recognizing an increase in the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present
value each period and the capitalized cost is depreciated over the useful
life of the related asset. Upon settlement of the liability, an entity
either settles the obligation for its recorded amount or incurs a gain or
loss upon settlement. The provisions of SFAS No. 143 will be required to
be adopted by the Company in fiscal 2003. The Company does not currently
believe adoption of this statement will have a material effect on its
financial position or its results of operations.                                                                                                                                                                                                                                                         
|   
|    |  | In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement supercedes
SFAS No.121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. SFAS No. 144 addresses the
accounting model for long-lived assets to be disposed of by sale and
resulting implementation issues. This statement requires that those
long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no
longer be measured at net realizable value or include amounts for
operating losses that have not yet occurred. It also broadens the
reporting of discontinued operations to include all components of an
entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. This statement is effective for
financial statements issued for fiscal years beginning after December 15,
2001 and was adopted by the Company January 1, 2002. The Company does not
believe the adoption of SFAS No. 144 will have a material effect on its
financial position or its results of operations.
|   
|    |  | In May 2002, the FASB No. 145, Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS No. 145 eliminates the requirement that gains and losses from the
extinguishments of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. However, an
entity is not prohibited from classifying such gains and losses as
extraordinary items, so long as they meet the criteria outlined in
Accounting Principles Board Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS No. 145 also eliminates the inconsistency between the
accounting for sale-leaseback transactions and certain lease modifications
that have economic effects that are similar to sale-leaseback transaction.
This statement is effective for financial statements issued for fiscal
years beginning after May 15, 2002. The Company will adopt SFAS No. 145
in the fiscal year beginning                                                                                                                                                                                                           

8



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##### Table of Contents



| |  | January 1, 2003 and has determined that adoption will not have a material effect
on its financial position or its results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities
when they are incurred rather than at the date of a commitment to an exit
or disposal plan. Examples of costs covered by the standard included
lease terminations costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, plant closing, or
other exit or disposal activity. Previous accounting guidance was
provided by EITF Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS No. 146
replaces EITF Issue No. 94-3. This statement is to be applied
prospectively to exit or disposal activities initiated after December 31,
2002. The company will adopt SFAS No. 146 in the fiscal year beginning
January 1, 2003.

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 of $3,068,105 for the three months ended June 30, 2002, increased
16% from sales of $2,638,840 for the three months ended March 31, 2002, and
compared with sales of $3,297,719 for the same three month period of 2001.
Sales for the six months ended June 30, 2002 of $5,706,945 compare with sales
of $6,622,034 for the six months ended June 30, 2001.

The net loss for the three months ended June 30, 2002, was $334,093, or
$0.04 per diluted share, an improvement of $157,608 from the net loss of
$491,701, or $0.06 per diluted share for the three months ended June 30, 2001.
For the six months ended June 30, 2002, the Company incurred a net loss of
$967,222, or $0.12 per diluted share, versus a net loss of $874,174, or $0.11
per diluted share, for the first six months of 2001. Results for 2001 include
a one-time gain on the sale of the Companys former VeraBill product line, in
March of 2001. Excluding this gain for comparative purposes, the Companys net
loss for the first six months of 2002 was reduced by $222,628 from the loss
incurred for the first six months of 2001.

For the second consecutive quarter, the Company continued to recognize
growth in the sales of its core call accounting products. For the three months
ended June 30, 2002, sales of call accounting products increased 22% over the
three months ended June 30, 2001. For the six months ended June 30, 2002, call
accounting sales increased 14% from sales recognized for the first six months
ended June 30, 2001. The increase in call accounting sales is attributable to
the fourth quarter 2001 release of eCAS, the companys new web-based call
accounting platform. eCAS has quickly gained wide customer acceptance among
the Companys current client base and has been instrumental in allowing the
Company to aggressively pursue new channels of distribution.

Sales of enterprise level products, which primarily consist of the
Companys Quantum product line, continue to be effected by industry conditions
and the general economy. The Company sees a continuation of a trend, dating
back to 2001, of customers delaying major capital projects due to concerns
regarding the state of the economy. For the three and six months ended June
30, 2002, the Company has experienced decreases of 17% and 25%, respectively,
in Quantum product sales from the same three and six month period of 2001.
Second quarter 2002 sales of Quantum, however, did increase 21% from the level
recognized in the first quarter of 2002 and included an order from McChord Air
Force Base valued at approximately $450,000. This order included a number of
Quantum product modules including cable management, call accounting, directory
assistance, consolidated billing, phone bill reconciliation, work order/trouble
ticket and inventory. Approximately $190,000 attributable to this order is
included in second quarter sales, with the balance to be recognized over the
subsequent three quarters as the installation requirements and associated
services are provided.

For the three months ended June 30, 2002, sales generated from service
activities, which include training, installation, maintenance and
customization, accounted for 56% total sales, and for the six months

10



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##### Table of Contents



ended June
30, 2002, accounted for 59% of total sales. For the three and six months ended
June 30, 2001, service activities accounted for 49% and 48% respectively, of
total Company sales.

Gross profit margins for the three and six months ended June 30, 2002 of
$2,443,566 and $4,542,546, representing 80% of sales, compared with gross
profit margins $2,779,645 and $5,558,265, representing 84% of sales for the
three and six months ended June 30, 2001. The lower percentage gross margins
reflect an increase in the amortization of development costs associated with
eCAS, now being amortized and charged to cost of sales.

Net engineering and development expenses increased 1% for the three months
ended June 30, 2002, but decreased 3% for the six months ended June 30, 2002,
from the respective three and six month periods ended June 30, 2001. The table
below details gross engineering and developments costs, amounts capitalized and
the resulting net engineering and development costs included in the Companys
Condensed Consolidated Statement of Operations for the three and six months
ended June 30, 2002 and 2001.

|                                          |  |                    |         |                  |  |      |           |      |  |   |           |   |  |   |           |  
|----------------------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                          |  | Three Months Ended |         | Six Months Ended
|                                          |  | June 30,           |         | June 30,        
|                                          |  |                    |         |                 
|                                          |  | 2002               |         | 2001             |  | 2002 |           | 2001
|                                          |  |                    |         |                  |  |      |           |     
|Gross engineering and development expense |  | $                  | 718,907 |                  |  | $    | 1,064,695 |      |  | $ | 1,443,338 |   |  | $ | 2,263,933 |  
|                                         
|                                         
|                                         
|                                         
|Less: Development cost capitalized        |  |                    | (-      | )                |  |      | (351,260  | )    |  |   | (-        | ) |  |   | (778,281  | )
|                                          |  |                    |         |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Net engineering and development expense   |  | $                  | 718,907 |                  |  | $    | 713,435   |      |  | $ | 1,443,338 |   |  | $ | 1,485,652 |  
|                                          |  |                    |         |                  |  |      |           |      |  |   |           |   |  |   |           |  

Selling, general and administrative expense of $2,048,781 incurred for the
three months ended June 30, 2002, decreased 20% from $2,568,810 incurred for
the three months ended June 30, 2001. For the six months ended June 30, 2002,
selling, general, and administrative expense decreased 23% from $5,302,301 for
the six months ended June 30, 2001 to $4,067,766. The reduction in expense
incurred reflects a significant reduction in the Companys employment level and
the consolidation of certain functions undertaken as a result of the decline in
the Companys sales levels. As of June 30, 2002, the Company employs 115
full-time employees versus 148 full-time employees as of June 30, 2001.

Liquidity and Capital Resources

Despite the net operating losses incurred for the three and six months
ended June 30, 2002, total cash and investments of $1,323,074 have increased
from $1,112,372 at March 31, 2002, and $1,250,787 at December 31, 2001. The
cash and investment balances referenced above do not include the cash surrender
value of company-owned life insurance policies of approximately $1.3 million
available to fund operations should it become necessary. As of June 30, 2002,
the Company remains free of debt and does not foresee the need to incur debt to
support current operations.

Accounts receivable have declined from the December 31, 2001 balance of
$1,622,846, net of an allowance for doubtful accounts of $139,000 to
$1,411,016, net of an allowance for doubtful accounts of $172,000 at June 30,
2002. There have been no significant write-offs of uncollectible accounts
during the first six months of 2002.

11



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##### Table of Contents



Net inventories have remained stable throughout the year and are valued at
$150,606 at June 30, 2002, versus $155,159 at December 31, 2001. The Company
expects no significant changes in inventory levels for the balance of the year.

Prepaid expenses increased from $76,175 at December 31, 2001 to $295,733
at June 30, 2002. The increase reflects the renewal of several business
insurance policies during the second quarter of 2002. The prepaid balance will
decrease throughout the third and fourth quarters of 2002 as the associated
insurance expense is recorded for the appropriate periods covered by the
policies.

The Company continues to monitor its capital expenditures closely.
Through the first six months of 2002, the Company has made capital additions of
$12,109. It is expected that the level of capital expenditures will increase
during the second half of 2002 due to equipment upgrades required, primarily
for engineering, development, and test equipment.

The net value of software development costs capitalized has declined from
$2,505,156 at December 31, 2001 to $2,047,605 at June 30, 2002, reflecting the
amortization of $457,551 of previously capitalized development costs. There
have been no development costs capitalized during the first six months of 2002.

Total current liabilities of $5,237,919 at June 30, 2002, have increased
5% from the December 31, 2001 total of $4,991,391. The largest increases are
accounts payable, which have increased $136,706 since December 31, 2001,
accrued compensation, which has increased $69,005, and deferred revenues, which
have increased $130,269. Deferred revenues, the largest single component of
current liabilities, consist of services for which the Company has billed
customers, but has not yet performed the service, and accordingly has not
recorded the associated revenue as of June 30, 2002. These services typically
include maintenance, training, installation, and consulting services.

Total stockholders equity at June 30, 2002 is $713,954 versus $1,651,065
at December 31, 2001, primarily reflecting the net loss of $967,222 incurred
for the first six months of 2002.

The company maintains a private equity line of credit agreement with a
single institutional investor. Under the equity line, the Company has the
right to sell, to the investor, shares of the Companys common stock at a price
equal to 94% of the average bid price of the stock for the prior ten trading
days. During the term of the agreement, the Company may sell up to $6 million
of common stock to this investor with no more than $500,000 in any single
month. The term of this agreement extends through August 31, 2004.

Despite the operating loss incurred for the six months ended June 30,
2002, the Company generated an increase its cash position, and believes that at
its current reduced operating expense levels, and access to the cash surrender
value of current insurance policies, that sufficient resources are available to
meet the Companys financial obligations for the next twelve months.

New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires that obligations associated
with the retirement of a tangible long-lived asset be recorded as a liability
when those obligations are incurred, with the amount of the liability initially
measured at fair value. Upon initially recognizing a liability for an asset
retirement obligation, an entity must capitalize the cost by recognizing an
increase in the carrying amount of the related long-lived asset. Over time,
the liability is

12



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##### Table of Contents



accreted to its present value each period and the capitalized
cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, an entity either settles the obligation for its recorded
amount or incurs a gain or loss upon settlement. The provisions of SFAS No.
143 will be required to be adopted by the Company in fiscal 2003. The Company
does not currently believe adoption of this statement will have a material
effect on its financial position or its results of operations.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement supercedes SFAS
No.121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. SFAS No. 144 addresses the accounting model for
long-lived assets to be disposed of by sale and resulting implementation
issues. This statement requires that those long-lived assets be measured at the
lower of carrying amount or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations. Therefore, discontinued
operations will no longer be measured at net realizable value or include
amounts for operating losses that have not yet occurred. It also broadens the
reporting of discontinued operations to include all components of an entity
with operations that can be distinguished from the rest of the entity and that
will be eliminated from the ongoing operations of the entity in a disposal
transaction. This statement is effective for financial statements issued for
fiscal years beginning after December 15, 2001 and was adopted by the Company
January 1, 2002. The Company does not believe the adoption of SFAS No. 144
will have a material effect on its financial position or its results of
operations.

In May 2002, the FASB No. 145, Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS
No. 145 eliminates the requirement that gains and losses from the
extinguishments of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. However, an entity
is not prohibited from classifying such gains and losses as extraordinary
items, so long as they meet the criteria outlined in Accounting Principles
Board Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 145 also eliminates
the inconsistency between the accounting for sale-leaseback transactions and
certain lease modifications that have economic effects that are similar to
sale-leaseback transaction. This statement is effective for financial
statements issued for fiscal years beginning after May 15, 2002. The Company
will adopt SFAS No. 145 in the fiscal year beginning January 1, 2003 and has
determined that adoption will not have a material effect on its financial
position or its results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard included lease terminations costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity.
Previous accounting guidance was provided by EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). SFAS No.
146 replaces EITF Issue No. 94-3. This statement is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The company will adopt SFAS No. 146 in the fiscal year beginning January 1,
2003.

13



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##### Table of Contents






PART II  OTHER INFORMATION




Item 6: Exhibits and Reports on Form 8-K



|(1) |  | Registrants Condensed Consolidated Financial Statements for the three
and six months ended June 30, 2002 and 2001 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 and six months ended June 30,
2002 and 2001, as set forth as Exhibit A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) |  | On June 4, 2002, the Company filed a report on Form 8-K with the
Securities and Exchange Commission announcing that The Nasdaq Stock Market
had denied the Companys request for continued listing on the Nasdaq
SmallCap Market. As a result, the Common Stock of the Company was
delisted from the Nasdaq SmallCap Market with the opening of business on
June 6, 2002. The Company had previously been notified by Nasdaq that
they did not comply with the minimum net tangible assets or minimum
stockholder equity requirement for continued listing set forth in Nasdaq
Marketplace rule 4310 (c)(2)(b). The Companys Common Stock will remain
eligible for trading on the Nasdaq OTC Bulletin Board.
|   
|(4) |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002, as set forth in Exhibit B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(5) |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002, as set forth in Exhibit C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

14



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##### Table of Contents



Exhibit A:

VERAMARK TECHNOLOGIES, INC.

Calculations of Earnings (Loss) per Share

|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|--------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ---------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                                                    |  | THREE MONTHS ENDED |           | SIX MONTHS ENDED
|                                                                                                    |  | JUNE 30,           |           | JUNE 30,        
|                                                                                                    |  |                    |           |                 
|                                                                                                    |  | 2002               |           | 2001             |  | 2002 |           | 2001
|                                                                                                    |  |                    |           |                  |  |      |           |     
|Basic                                                                                               |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Net Loss                                                                                            |  | $                  | (334,093  | )                |  | $    | (491,701  | )    |  | $ | (967,222  | ) |  | $ | (874,174  | )
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted Average Common Shares Outstanding                                                          |  |                    | 8,326,954 |                  |  |      | 8,190,063 |      |  |   | 8,325,322 |   |  |   | 8,189,486 |  
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Loss Per Common Share                                                                               |  | $                  | (0.04     | )                |  | $    | (0.06     | )    |  | $ | (0.12     | ) |  | $ | (0.11     | )
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Diluted                                                                                             |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Net Loss                                                                                            |  | $                  | (334,093  | )                |  | $    | (491,701  | )    |  | $ | (967,222  | ) |  | $ | (874,174  | )
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted Average Common Shares Outstanding                                                          |  |                    | 8,326,954 |                  |  |      | 8,190,063 |      |  |   | 8,325,322 |   |  |   | 8,189,486 |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Additional Dilutive Effect of Stock Options and
Warrants after Application of Treasury Stock Method |  |                    |          |                  |  |      |          |      |  |   |          |   |  |   |          |  
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted Average Common Shares Outstanding                                                          |  |                    | 8,326,954 |                  |  |      | 8,190,063 |      |  |   | 8,325,322 |   |  |   | 8,189,486 |  
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Loss per Common Share and Common Equivalent Share                                                   |  | $                  | (0.04     | )                |  | $    | (0.06     | )    |  | $ | (0.12     | ) |  | $ | (0.11     | )
|                                                                                                    |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  

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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: August 12, 2002

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

Date: August 12, 2002

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

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Exhibit B

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Veramark Technologies, Inc., (the
Company) on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, David G.
Mazzella, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that:



| | (1) |  | The Report fully complies with the requirements of section 13
or 15(d) of the Securities Exchange Act of 1934; and                                 
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.

/s/ David G. Mazzella
David G. Mazzella
President, Chief Executive Officer
August 12, 2002

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Exhibit C

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Veramark Technologies, Inc., (the
Company) on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Ronald
C. Lundy, Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:



| | (3) |  | The Report fully complies with the requirements of section 13
or 15(d) of the Securities Exchange Act of 1934; and                                 
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (4) |  | The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.

/s/ Ronald C. Lundy
Ronald C. Lundy
Treasurer
August 12, 2002

18