##### 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 September 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 X   No

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

|                                 |  |                 
|-------------------------------- |  | ----------------
|Common stock, par value $.10     |  | 8,360,825 shares
|                                
|                                
|                                
|                                
|                                
|This report consists of 21 pages |  |                 

1



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TABLE OF CONTENTS



|                               |                                                                                              |  |  |  |  |  |  | 
|------------------------------ | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | Item 4 Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|                               | Item 6: Exhibits and Reports on Form 8-K                                                    
|CERTIFICATIONS                
|SIGNATURES                    
|Exhibit A                     
|Exhibit B                     
|Exhibit C                     



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##### Table of Contents



INDEX

|                             |  |                                                                                       |  |                                                                                                           |         |      |       | 
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ------- | ---- | ----- | 
|                             |  |                                                                                       |  |                                                                                                           |         | Page
|                             |  |                                                                                       |  |                                                                                                           |         |     
|PART I FINANCIAL INFORMATION |  |                                                                                       |  |                                                                                                          
|                            
|Item 1                       |  | Financial Statements                                                                  |  |                                                                                                           |         |     
|                            
|                            
|                            
|                            
|                            
|                             |  |                                                                                       |  | Condensed Consolidated Balance Sheets -
September 30, 2002 and December 31, 2001                          |         |      | 3 - 4 | 
|                            
|                            
|                            
|                            
|                            
|                             |  |                                                                                       |  | Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 2002 and 2001 |         |      | 5     | 
|                            
|                            
|                            
|                            
|                            
|                             |  |                                                                                       |  | Condensed Consolidated Statements of Cash
Flows - Nine Months Ended September 30, 2002 and 2001           |         |      | 6     | 
|                            
|                            
|                            
|                            
|                            
|                             |  |                                                                                       |  | Notes To Condensed Consolidated Financial Statements                                                      |         |      | 7 - 9 | 
|                            
|                            
|                            
|                            
|                            
|Item 2                       |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  |                                                                                                           | 10 - 14 |     
|                            
|                            
|                            
|                            
|                            
|Item 4                       |  | Controls and Procedures                                                               |  |                                                                                                           | 14      |     
|                            
|                            
|                            
|                            
|                            
|PART II OTHER INFORMATION    |  |                                                                                       |  |                                                                                                          
|                            
|                            
|                            
|                            
|                            
|Item 6                       |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                           | 15 - 21 |     

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION

VERAMARK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

|                       |                                                                                                            |                              |   |               |           |              |   |            |           | 
|---------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------- | - | ------------- | --------- | ------------ | - | ---------- | --------- | 
|                       |                                                                                                            |                              |   | September 30, |           | December 31,
|                       |                                                                                                            |                              |   | 2002          |           | 2001        
|                       |                                                                                                            |                              |   |               |           |             
|                       |                                                                                                            |                              |   | (Unaudited)   |           |              |   |           
|ASSETS                 |                                                                                                            |                              |   |               |           |              |   |           
|                      
|                      
|                      
|                      
|CURRENT ASSETS:        |                                                                                                            |                              |   |               |           |              |   |           
|                      
|                      
|                      
|                      
|                       | Cash and Cash Equivalents                                                                                  |                              | $ | 642,141       |           |              | $ | 633,138    |          
|                      
|                      
|                      
|                      
|                       | Investments                                                                                                |                              |   | 946,935       |           |              |   | 617,649    |          
|                      
|                      
|                      
|                      
|                       | Accounts Receivable, trade (net
of allowance for doubtful accounts
of $185,000 and $139,000, respectively) |                              |   | 1,389,754     |           |              |   | 1,622,846  |          
|                      
|                      
|                      
|                      
|                       | Inventories , net                                                                                          |                              |   | 138,104       |           |              |   | 155,159    |          
|                      
|                      
|                      
|                      
|                       | Prepaid Expenses                                                                                           |                              |   | 334,682       |           |              |   | 76,175     |          
|                       |                                                                                                            |                              |   |               |           |              |   |           
|                       |                                                                                                            | Total Current Assets         |   |               | 3,451,616 |              |   |            | 3,104,967 | 
|                      
|                      
|                      
|                      
|PROPERTY AND EQUIPMENT |                                                                                                            |                              |   |               |           |              |   |           
|                      
|                      
|                      
|                      
|                       | Cost                                                                                                       |                              |   | 6,663,985     |           |              |   | 6,660,276  |          
|                      
|                      
|                      
|                      
|                       | Less Accumulated Depreciation                                                                              |                              |   | (5,318,314    | )         |              |   | (4,911,570 | )        
|                       |                                                                                                            |                              |   |               |           |              |   |           
|                       |                                                                                                            | Property and Equipment (Net) |   |               | 1,345,671 |              |   |            | 1,748,706 | 
|                      
|                      
|                      
|                      
|OTHER ASSETS:          |                                                                                                            |                              |   |               |           |              |   |           
|                      
|                      
|                      
|                      
|                       | Software Development Costs (net of
accumulated amortization of $2,756,678
and $2,070,351, respectively)    |                              |   | 1,818,829     |           |              |   | 2,505,156  |          
|                      
|                      
|                      
|                      
|                       | Pension Assets                                                                                             |                              |   | 2,119,274     |           |              |   | 2,119,274  |          
|                      
|                      
|                      
|                      
|                       | Deposits and Other Assets                                                                                  |                              |   | 759,706       |           |              |   | 659,563    |          
|                       |                                                                                                            |                              |   |               |           |              |   |           
|                       | Total Other Assets                                                                                         |                              |   | 4,697,809     |           |              |   | 5,283,993  |          
|                       |                                                                                                            |                              |   |               |           |              |   |           
|                       | TOTAL ASSETS                                                                                               |                              | $ | 9,495,096     |           |              | $ | 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

|                                     |                                                                                                                                   |                           |   |               |           |              |   |             |           | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | ------------- | --------- | ------------ | - | ----------- | --------- | 
|                                     |                                                                                                                                   |                           |   | September 30, |           | December 31,
|                                     |                                                                                                                                   |                           |   | 2002          |           | 2001        
|                                     |                                                                                                                                   |                           |   |               |           |             
|                                     |                                                                                                                                   |                           |   | (Unaudited)   |           |              |   |            
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                   |                           |   |               |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|CURRENT LIABILITIES:                 |                                                                                                                                   |                           |   |               |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts Payable                                                                                                                  |                           | $ | 238,538       |           |              | $ | 190,783     |          
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued Compensation and Related Taxes                                                                                            |                           |   | 1,997,708     |           |              |   | 1,710,169   |          
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred Revenue                                                                                                                  |                           |   | 3,347,183     |           |              |   | 2,839,332   |          
|                                    
|                                    
|                                    
|                                    
|                                     | Capital Lease Obligation  Current                                                                                                |                           |   | 16,837        |           |              |   | 15,429      |          
|                                    
|                                    
|                                    
|                                    
|                                     | Other Accrued Liabilities                                                                                                         |                           |   | 171,983       |           |              |   | 235,678     |          
|                                     |                                                                                                                                   |                           |   |               |           |              |   |            
|                                     |                                                                                                                                   | Total Current Liabilities |   |               | 5,772,249 |              |   |             | 4,991,391 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Long Term Portion of Capital Leases                                                                                               |                           |   | 11,924        |           |              |   | 25,171      |          
|                                    
|                                    
|                                    
|                                    
|                                     | Pension Obligation                                                                                                                |                           |   | 3,624,775     |           |              |   | 3,470,039   |          
|                                     |                                                                                                                                   |                           |   |               |           |              |   |            
|                                     | Total Liabilities                                                                                                                 |                           |   | 9,408,948     |           |              |   | 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                                                                                                                  |                           |   | (20,563,087   | )         |              |   | (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                                                                                                        |                           |   | 86,148        |           |              |   | 1,651,065   |          
|                                     |                                                                                                                                   |                           |   |               |           |              |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                        |                           | $ | 9,495,096     |           |              | $ | 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 |           | Nine Months Ended
|                              |                                      |                                    |               |                 |           | September 30,      |           | September 30,    
|                              |                                      |                                    |               |                 |           |                    |           |                  
|                              |                                      |                                    |               |                 |           | 2002               |           | 2001              |           | 2002      |            | 2001     
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |          
|                              |                                      |                                    |               |                 |           | (Unaudited)        |           | (Unaudited)      
|NET SALES                     |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|                             
|                             
|                             
|                             
|                              |                                      |                                    | Product Sales |                 | $         | 1,024,305          |           |                   | $         | 1,359,166 |            |           | $         | 3,350,351 |            |           | $          | 4,772,464 |          
|                             
|                             
|                             
|                             
|                              |                                      |                                    | Service Sales |                 |           | 1,648,324          |           |                   |           | 1,644,272 |            |           |           | 5,029,223 |            |           |            | 4,853,008 |          
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|                              |                                      |                                    |               | Total Net Sales |           |                    | 2,672,629 |                   |           |           | 3,003,438  |           |           |           | 8,379,574  |           |            |           | 9,625,472 | 
|                             
|                             
|                             
|                             
|COSTS AND OPERATING EXPENSES: |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|                             
|                             
|                             
|                             
|                              | Cost of Sales                        |                                    |               | 557,569         |           |                    |           | 538,815           |           |           |            | 1,721,968 |           |           |            | 1,602,584 |           
|                             
|                             
|                             
|                             
|                              | Engineering and Software Development |                                    |               | 726,747         |           |                    |           | 601,020           |           |           |            | 2,170,085 |           |           |            | 2,086,672 |           
|                             
|                             
|                             
|                             
|                              | Selling, General and Administrative  |                                    |               | 2,020,180       |           |                    |           | 2,331,240         |           |           |            | 6,087,946 |           |           |            | 7,633,541 |           
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|                              |                                      | Total Costs and Operating Expenses |               |                 | 3,304,496 |                    |           |                   | 3,471,075 |           |            |           | 9,979,999 |           |            |           | 11,322,797 |          
|                             
|                             
|                             
|                             
|LOSS FROM OPERATIONS          |                                      |                                    | (631,867      | )               |           |                    | (467,637  | )                 |           |           | (1,600,425 | )         |           |           | (1,697,325 | )        
|                             
|                             
|                             
|                             
|NET INTEREST INCOME           |                                      |                                    | 4,061         |                 |           |                    | 24,419    |                   |           |           | 5,397      |           |           |           | 64,257     |          
|                             
|                             
|                             
|                             
|OTHER INCOME (NOTE 4)         |                                      |                                    |              |                 |           |                    |          |                   |           |           |           |           |           |           | 315,676    |          
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|LOSS BEFORE INCOME TAXES      |                                      |                                    | (627,806      | )               |           |                    | (443,218  | )                 |           |           | (1,595,028 | )         |           |           | (1,317,392 | )        
|                             
|                             
|                             
|                             
|INCOME TAXES                  |                                      |                                    |              |                 |           |                    |          |                   |           |           |           |           |           |           |           |          
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|NET LOSS                      |                                      | $                                  | (627,806      | )               |           | $                  | (443,218  | )                 |           | $         | (1,595,028 | )         |           | $         | (1,317,392 | )        
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|NET LOSS PER SHARE            |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|                             
|                             
|                             
|                             
|                              |                                      | Basic                              |               | $               | (0.07     | )                  |           | $                 | (0.05     | )         |            | $         | (0.19     | )         |            | $         | (0.16      | )        
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          
|                              |                                      | Diluted                            |               | $               | (0.07     | )                  |           | $                 | (0.05     | )         |            | $         | (0.19     | )         |            | $         | (0.16      | )        
|                              |                                      |                                    |               |                 |           |                    |           |                   |           |           |            |           |           |           |            |          

See notes to Condensed Consolidated Financial Statements.

5



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##### Table of Contents



VERAMARK TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                      |                                                         |                              |            |                                 |        |      |            |            |   | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------- | ---------------------------- | ---------- | ------------------------------- | ------ | ---- | ---------- | ---------- | - | 
|                                                                                      |                                                         |                              |            | Nine
Months Ended September 30,
|                                                                                      |                                                         |                              |            | 2002                            |        | 2001
|                                                                                      |                                                         |                              |            |                                 |        |     
|OPERATING ACTIVITIES:                                                                 |                                                         |                              |            |                                 |        |      |            |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net loss                                                                              |                                                         | $                            | (1,595,028 | )                               |        | $    | (1,317,392 | )         
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|Adjustments to reconcile net loss to net cash provided
(used) by operating activities
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Depreciation and amortization                           |                              |            | 1,116,878                       |        |      |            | 998,310    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Provision for losses on accounts receivable             |                              |            | 52,500                          |        |      |            | 22,500     |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Provision for inventory obsolescence                    |                              |            | 25,750                          |        |      |            | 18,750     |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Loss on disposal of fixed assets                        |                              |            | 18                              |        |      |            | 5,289      |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Gain on sale of VeraBill                                |                              |            |                                |        |      |            | (315,676   | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                                         | Repayment of note receivable |            |                                 | 11,171 |      |            |            |  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Changes in assets and liabilities                                                     |                                                         |                              |            |                                 |        |      |            |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Accounts receivable                                     |                              |            | 180,592                         |        |      |            | 277,658    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Inventories                                             |                              |            | (8,695                          | )      |      |            | 119,487    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Prepaid expenses                                        |                              |            | (258,507                        | )      |      |            | (129,399   | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Deposits and other assets                               |                              |            | (100,143                        | )      |      |            | 121,123    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Accounts payable                                        |                              |            | 47,755                          |        |      |            | (38,212    | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Accrued compensation and related taxes                  |                              |            | 287,539                         |        |      |            | 282,707    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Deferred revenue                                        |                              |            | 507,851                         |        |      |            | (241,445   | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Other accrued liabilities                               |                              |            | (63,695                         | )      |      |            | (12,465    | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Pension obligation                                      |                              |            | 154,736                         |        |      |            | 206,805    |  
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|Net adjustments                                                                       |                                                         |                              | 1,953,750  |                                 |        |      | 1,315,432  |           
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|Net cash flows provided (used) by operating activities                                |                                                         |                              | 358,722    |                                 |        |      | (1,960     | )         
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|                                                                                     
|INVESTING ACTIVITIES:                                                                 |                                                         |                              |            |                                 |        |      |            |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Net Purchase of investments                             |                              |            | (329,286                        | )      |      |            | 143,807    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Additions to property and equipment                     |                              |            | (27,534                         | )      |      |            | (9,824     | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Capitalized software development costs                  |                              |            |                                |        |      |            | (1,161,888 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Proceeds from sale of VeraBill, net of selling expenses |                              |            |                                |        |      |            | 941,000    |  
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|Net cash flows used by investing activities:                                          |                                                         |                              | (356,820   | )                               |        |      | (86,905    | )         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|FINANCING ACTIVITIES:                                                                 |                                                         |                              |            |                                 |        |      |            |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Repayment of capital lease obligation                   |                              |            | (11,839                         | )      |      |            | (10,204    | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Employee Stock Purchase Plan                            |                              |            | 18,940                          |        |      |            | 64,190     |  
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|Net cash flows provided by financing activities:                                      |                                                         |                              | 7,101      |                                 |        |      | 53,986     |           
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                  |                                                         |                              | 9,003      |                                 |        |      | (34,879    | )         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        |                                                         |                              | 633,138    |                                 |        |      | 1,072,421  |           
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                              |                                                         | $                            | 642,141    |                                 |        | $    | 1,037,542  |           
|                                                                                      |                                                         |                              |            |                                 |        |      |            |           

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 September 30, 2002 and the results of its operations
and cash flows for the three and nine months ended September 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 nine months ended September
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 September 30, 2002 and December 31, 2001
was as follows:

|                               |  |               |         |              |  |   |         | 
|------------------------------ |  | ------------- | ------- | ------------ |  | - | ------- | 
|                               |  | September 30, |         | December 31,
|                               |  | 2002          |         | 2001        
|                               |  |               |         |             
|Purchased parts and components |  | $             | 97,977  |              |  | $ | 119,107 | 
|                              
|                              
|                              
|                              
|Work in process                |  |               | 33,485  |              |  |   | 32,394  | 
|                              
|                              
|                              
|                              
|Finished goods                 |  |               | 6,642   |              |  |   | 3,658   | 
|                               |  |               |         |              |  |   |         | 
|                               |  | $             | 138,104 |              |  | $ | 155,159 | 
|                               |  |               |         |              |  |   |         | 



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

|                               |  |               |           |              |  |   |           | 
|------------------------------ |  | ------------- | --------- | ------------ |  | - | --------- | 
|                               |  | September 30, |           | December 31,
|                               |  | 2002          |           | 2001        
|                               |  |               |           |             
|Machinery and equipment        |  | $             | 787,131   |              |  | $ | 795,098   | 
|                              
|                              
|                              
|                              
|Computer hardware and software |  |               | 2,725,296 |              |  |   | 2,706,067 | 
|                              
|                              
|                              
|                              
|Furniture and fixtures         |  |               | 1,768,999 |              |  |   | 1,776,552 | 
|                              
|                              
|                              
|                              
|Leasehold improvements         |  |               | 1,382,559 |              |  |   | 1,382,559 | 
|                               |  |               |           |              |  |   |           | 
|                               |  | $             | 6,663,985 |              |  | $ | 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 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 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 $2,672,629 for the three months ended September 30, 2002 declined
from sales of $3,003,438 for the three months ended September 30, 2001. For
the nine months ended September 30, 2002, sales were $8,379,574 as compared to
sales of $9,625,472 for the same nine month period of 2001

The Company incurred a net loss of $627,806, or $0.07 per diluted share,
for the three months ended September 30, 2002. For the nine months ended
September 30, 2002, the Company has incurred a net loss of $1,595,028, or $0.19
per diluted share. For the three and nine months ended September 30, 2001, net
losses totaled $443,218, or $0.05 per diluted share and $1,317,392, or $0.16
per diluted share, respectively. Results for 2001 included a gain of $315,676
for the sale of the Companys former billing and customer care product line,
Verabill, completed in March of 2001.

Continuing a trend established in the first and second quarters of 2002,
the Company continues to experience growth in sales of core call accounting
products and services from prior year levels, but has seen these gains offset
by a decrease in the sale of its enterprise level products.

For the three and nine months ended September 30, 2002, the Company
realized increases of 15% and 14%, respectively, in sales of core call
accounting products and services from the same periods of 2001. The increased
sales are attributable to the Companys eCAS product, a web-based call
accounting platform. The release of eCAS in mid October of 2001, has allowed
the Company access to several new channels of distribution, as well as the
ability to broaden its appeal with existing customers and distribution
channels. Sales of call accounting products and services has accounted for 54%
of the Companys sales for the nine months ended September 30, 2002, versus 41%
of Company sales for the nine months ended September 30, 2001.

Sales of enterprise products, which consist of the Companys Quantum
Series and DNT product lines, continue to produce sales below 2001 levels. For
the three months ended September 30, 2002, sales of enterprise products
decreased 24% from the third quarter of 2001, and for the nine months ended
September 30, 2002, sales of enterprise products have declined 27%, as compared
to the same period of 2001. Enterprise level products continue to be adversely
impacted by customers delaying major capital projects in response to current
economic conditions.

During the last week of the quarter, the Company received an order from
Washington State University, valued at approximately $200,000, for several
Quantum Series modules, including Call-Master, Phone-Bill and Cable Master.
Installation of this order is currently scheduled for the fourth quarter of
2002. No revenue from this order was recognized during the third quarter of
2002.

10



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##### Table of Contents



Sales generated from service activities, which include training,
installation, maintenance and customization, accounted for 62% of sales for the
three months ended September 30, 2002 and 60% of sales for the nine months
ended September 30, 2002. For the same three and nine month periods of 2001,
services accounted for 55% and 50% of sales, respectively.

Gross profit margins for the three and nine months ended September 30,
2002, of $2,115,060 and $6,657,606, both representing 79% of sales, compare
with gross profit margins of $2,464,623 and $8,022,888, representing 82% and
83% of sales, respectively, for the three and nine months ended September 30,
2001. The lower percentage margins reflect increased amortization costs
associated with the development of eCAS, now being amortized and charged to
cost of sales.

Engineering and development costs, net of capitalized costs, of $726,747
and $2,170,085 for the three and nine months ended September 30, 2002
respectively, increased by 21% and 4%, respectively, from the same three and
nine months periods of 2001. Gross expenditures for engineering and
development expenses however, were reduced by 26% and 33% from prior year
levels. The chart below summarizes gross and net engineering and development
costs, amounts capitalized, and the resulting net engineering and development
costs included in the Companys consolidated Statement of Operations for the
three and nine months ended September 30, 2002 and 2001.

|                                          |  |                    |         |                   |  |      |          |      |  |   |           |   |  |   |            |  
|----------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | -------- | ---- |  | - | --------- | - |  | - | ---------- | -
|                                          |  | Three Months Ended |         | Nine Months Ended
|                                          |  | September 30,      |         | September 30,    
|                                          |  |                    |         |                  
|                                          |  | 2002               |         | 2001              |  | 2002 |          | 2001
|                                          |  |                    |         |                   |  |      |          |     
|Gross engineering and development expense |  | $                  | 726,747 |                   |  | $    | 984,627  |      |  | $ | 2,170,085 |   |  | $ | 3,248,560  |  
|                                         
|                                         
|                                         
|                                         
|Less: Development cost capitalized        |  |                    | (-      | )                 |  |      | (383,607 | )    |  |   | (-        | ) |  |   | (1,161,888 | )
|                                          |  |                    |         |                   |  |      |          |      |  |   |           |   |  |   |            |  
|Net engineering and development expense   |  | $                  | 726,747 |                   |  | $    | 601,020  |      |  | $ | 2,170,085 |   |  | $ | 2,086,672  |  
|                                          |  |                    |         |                   |  |      |          |      |  |   |           |   |  |   |            |  

All of the development costs capitalized in 2001 were associated with the
Companys development of the eCAS product line.

The company has continued to significantly reduce its expenditures for
selling, general, and administrative functions during 2002, as compared with
2001 levels. For the three months ended September 30, 2002, selling, general,
and administrative costs of $2,020,180 were 13% below the costs of $2,331,240,
incurred for the same quarter of 2001. For the nine months ended September 30,
2002, selling, general, and administrative cots of $6,087,946 have been reduced
by 20% from total costs of $7,633,541 for the same nine month period of 2001.
The cost reductions are primarily due to headcount reductions undertaken during
the second half of 2001 and the first half of 2002. As of September 30, 2002,
the Company employment level was 111 employees, versus 139 employees at
September 30, 2001.

The Company continues to carefully monitor its operating expenses in an
effort to keep expenses in line with expected future revenues.

11



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##### Table of Contents



Liquidity and Capital Resources

Despite the net operating losses incurred throughout 2002, the Company
continues to generate positive cash flows. As of September 30, 2002, the
Companys total cash position, which includes cash on hand plus short-term
investments, was $1,589,076. This represents positive cash flows of $266,002
from the June 30, 2002 total cash position of $1,323,074, and $338,289 from the
cash position of $1,250,787 at December 31, 2001. The cash and investment
positions noted above, do not include the cash surrender value of company-owned
life insurance policies of approximately $1,400,000 available to fund
operations, should it become necessary. As of September 30, 2002, the Company
remains free of debt and does not foresee the need to incur debt to support
current operations.

Accounts receivable as September 30, 2002, are $1,389,754, net of an
allowance for doubtful accounts of $185,000. This compares with accounts
receivable of $1,622,846, net of an allowance for doubtful accounts of $139,000
at December 31, 2001. There have been no significant write-offs of
uncollectible accounts during the first nine months of 2002.

Net inventories of $138,104 at September 30, 2002 are down from $155,159
at December 31, 2001. The Company expects that inventory will continue to
decrease in future quarters, as sales of products containing a hardware
component continue to be phased out.

The Company continues to monitor capital equipment expenditures carefully.
For the first nine months of 2002, capital spending totals $27,534, most of
which has been invested in upgrades to software development tools and
equipment.

The net value of development costs capitalized at September 30, 2002 is
$1,818,829, down from $2,505,156 at December 31, 2001, reflecting $686,327 of
previously capitalized costs being amortized and charged to cost of sales
during 2002. There have been no development costs capitalized in 2002, nor are
any expected to be capitalized through the balance of 2002.

The total current liabilities at September 30, 2002 are $5,772,249 versus
$4,991,391 at December 31, 2001, an increase of 16%. It should be noted
however, that the largest increase in current liabilities has occurred in
deferred revenues, which has increased from $2,839,332 at December 31, 2001 to
$3,347,183 at September 30, 2002. Deferred revenues 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 September 30,
2002, and essentially, represents backlog to the company. These services
typically include maintenance, training, installation and consulting services.
Substantially all of the current deferred revenue balance will be recorded as
sales revenue over the ensuing twelve months.

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.

12



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##### Table of Contents



While the Company has continued to incur operating losses through the
first three quarters of 2002, the Company feels that given its increasing cash
resources, reduced operating expense levels, and the access to cash surrender
values of current insurance policies, that more than adequate financial
resources are available to meet all 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 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

13



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##### Table of Contents



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.




Item 4 Controls and Procedures



| | (a) |  | Evaluation of disclosure controls and procedures. Based on
their evaluation as of a date within 90 days of the filing date of
this report, the Companys principal executive officer and principal
financial officer have concluded that the Companys disclosure
controls and procedures (as defined in rules 13A-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934 (the Exchange Act) are
effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in Securities and exchange Commission rules and forms.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Changes in internal controls. There were no significant
changes in the Companys internal controls or in other factors that
could significantly affect these controls subsequent to the date of
their evaluation. There were no significant deficiencies or material
weaknesses, and therefore there were no corrective actions taken.                                                                                                                                                                                                                                                                                                                                                  

14



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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 nine months ended September 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 nine months ended
September 30, 2002 and 2001, as set forth as Exhibit A.                                                                    
|   
|(3) |  | 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.                                           
|   
|(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 C.                                           

15



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##### Table of Contents






CERTIFICATIONS

I, David G. Mazzella, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Veramark
Technologies, Inc.                                                                                                                                                                                                                                             
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



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



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



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

|                        |  |                                                                                  |  | 
|----------------------- |  | -------------------------------------------------------------------------------- |  | 
|Date: November 12, 2002 |  | By: /s/ David G. MazzellaDavid G. Mazzella,
Chairman and Chief Executive Officer

16



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I, Ronald C. Lundy, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Veramark
Technologies, Inc.                                                                                                                                                                                                                                             
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



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



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



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

|                        |  |                                                   |  | 
|----------------------- |  | ------------------------------------------------- |  | 
|Date: November 12, 2002 |  | By: /s/ Ronald C. LundyRonald C. Lundy,
Treasurer

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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: November 12, 2002                                                
|                                                                       
|                                                                       
|/s/ David G. MazzellaDavid G. Mazzella
President and CEO               
|                                                                       
|                                                                       
|Date:   November 12, 2002                                              
|                                                                       
|                                                                       
|/s/ Ronald C. LundyRonald C. Lundy
Treasurer (Chief Accounting Officer)

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Exhibit A

VERAMARK TECHNOLOGIES, INC.

Calculations of Earnings (Loss) Per Share

|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|--------------------------------------------------- |  | ------------------ | --------- | ----------------- |  | ---- | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                    |  | Three Months Ended |           | Nine Months Ended
|                                                    |  | September 30,      |           | September 30,    
|                                                    |  |                    |           |                  
|                                                    |  | 2002               |           | 2001              |  | 2002 |           | 2001
|                                                   
|Basic                                               |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|                                                   
|                                                   
|                                                   
|                                                   
|Net Loss                                            |  | $                  | (627,806  | )                 |  | $    | (443,218  | )    |  | $ | (1,595,028 | ) |  | $ | (1,317,392 | )
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|Weighted Average Common Shares Outstanding          |  |                    | 8,360,825 |                   |  |      | 8,293,966 |      |  |   | 8,337,156  |   |  |   | 8,224,313  |  
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|Loss Per Common Share                               |  | $                  | (0.07     | )                 |  | $    | (0.05     | )    |  | $ | (0.19      | ) |  | $ | (0.16      | )
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|                                                   
|Diluted                                             |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Net Loss                                            |  | $                  | (627,806  | )                 |  | $    | (443,218  | )    |  | $ | (1,595,028 | ) |  | $ | (1,317,392 | )
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|                                                   
|Weighted Average Common Shares Outstanding          |  |                    | 8,360,825 |                   |  |      | 8,293,966 |      |  |   | 8,337,156  |   |  |   | 8,224,313  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Additional Dilutive Effect of Stock Options and     |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|                                                   
|                                                   
|                                                   
|                                                   
|Warrants after Application of Treasury Stock Method |  |                    |          |                   |  |      |          |      |  |   |           |   |  |   |           |  
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|Weighted Average Common Shares Outstanding          |  |                    | 8,360,825 |                   |  |      | 8,293,966 |      |  |   | 8,337,156  |   |  |   | 8,224,313  |  
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  
|Loss per Common Share and Common Equivalent Share   |  | $                  | (0.07     | )                 |  | $    | (0.05     | )    |  | $ | (0.19      | ) |  | $ | (0.16      | )
|                                                    |  |                    |           |                   |  |      |           |      |  |   |            |   |  |   |            |  

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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 September 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
November 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 September 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
November 12, 2002

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