##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|                                                  |  |                                                                                         
|------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(Mark One)                                       
|                                                  |  |                                                                                         
|[X]                                               |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
|                                                  |  |                                                                                         
|For the quarterly period ended September 30, 2002
|                                                  |  |                                                                                         
|OR                                               
|                                                  |  |                                                                                         
|[  ]                                              |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 0-27168

VIEWPOINT CORPORATION

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 95-4102687
(I.R.S. Employer Identification No.)

498 Seventh Avenue, Suite 1810, New York, NY 10018
(Address of principal executive offices and zip code)

(212) 201-0800
(Registrants telephone number, including area code)

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 Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [   ]

As of November 4, 2002, 40,998,913 shares of $0.001 par value common stock were
outstanding.





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TABLE OF CONTENTS



|                                |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I   FINANCIAL INFORMATION
|                                | Item 1. Consolidated Financial Statements                                                    
|                                |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION    
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|CERTIFICATIONS                 
|CERTIFICATION                  
|CERTIFICATION                  



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##### Table of Contents



TABLE OF CONTENTS

|                               |  |                                                                                       |  |                                                                                                 |    |      |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                               |  |                                                                                       |  |                                                                                                 |    | Page
|                               |  |                                                                                       |  |                                                                                                 |    |     
|PART I  FINANCIAL INFORMATION |  |                                                                                       |  |                                                                                                
|                              
|                              
|                              
|                              
|Item 1.                        |  | Consolidated Financial Statements                                                     |  |                                                                                                 |    |     
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Consolidated Balance Sheets  September 30, 2002
and December 31, 2001                          |    |      | 3  | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Consolidated Statements of Operations  Three and nine months
ended September 30, 2002 and 2001 |    |      | 4  | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Consolidated Statements of Cash Flows  Nine months ended
September 30, 2002 and 2001           |    |      | 5  | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Notes to Consolidated Financial Statements                                                      |    |      | 6  | 
|                              
|                              
|                              
|                              
|Item 2.                        |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |                                                                                                 | 11 |     
|                              
|                              
|                              
|                              
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                 | 21 |     
|                              
|                              
|                              
|                              
|Item 4.                        |  | Controls and Procedures                                                               |  |                                                                                                 | 21 |     
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION    |  |                                                                                       |  |                                                                                                
|                              
|                              
|                              
|                              
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                 | 22 |     
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Signatures                                                                                      |    |      | 23 | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Certifications                                                                                  |    |      | 24 | 

2



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##### Table of Contents






PART I   FINANCIAL INFORMATION




Item 1. Consolidated Financial Statements




VIEWPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)

|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |       |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------ | -------- | ------------- | ------ | ------------ | -------- | ----- | ------ | 
|                                                                                                                                                                                                                |                                                        |                                            |          | September 30, |        | December 31,
|                                                                                                                                                                                                                |                                                        |                                            |          | 2002          |        | 2001        
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |             
|ASSETS                                                                                                                                                                                                          |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Current assets:                                                                                                                                                                                                 |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Cash and cash equivalents                              |                                            | $        | 9,240         |        |              | $        | 8,345 |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Marketable securities                                  |                                            |          | 1,823         |        |              |          | 7,068 |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Accounts receivable, net                               |                                            |          | 3,297         |        |              |          | 4,096 |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Notes receivable, net                                  |                                            |          | 750           |        |              |          | 750   |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Prepaid expenses and other current assets              |                                            |          | 541           |        |              |          | 836   |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Current assets related to discontinued operations      |                                            |          |              |        |              |          | 141   |       
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                                |                                                        | Total current assets                       |          |               | 15,651 |              |          |       | 21,236 | 
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Property and equipment, net                                                                                                                                                                                     |                                                        |                                            | 3,866    |               |        |              | 4,662    |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Goodwill, net                                                                                                                                                                                                   |                                                        |                                            | 31,276   |               |        |              | 33,042   |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Intangible assets, net                                                                                                                                                                                          |                                                        |                                            | 163      |               |        |              | 2,361    |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Loans to officers                                                                                                                                                                                               |                                                        |                                            | 612      |               |        |              | 595      |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Other assets                                                                                                                                                                                                    |                                                        |                                            | 4        |               |        |              | 21       |      
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                                |                                                        | Total assets                               |          | $             | 51,572 |              |          | $     | 61,917 | 
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                            |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Current liabilities:                                                                                                                                                                                            |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Accounts payable                                       |                                            | $        | 1,578         |        |              | $        | 1,314 |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Accrued expenses                                       |                                            |          | 1,267         |        |              |          | 1,304 |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Due to related parties, net                            |                                            |          | 2,867         |        |              |          | 4,764 |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Deferred revenues                                      |                                            |          | 660           |        |              |          | 907   |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Accrued incentive compensation                         |                                            |          | 545           |        |              |          | 545   |       
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                                | Current liabilities related to discontinued operations |                                            |          | 231           |        |              |          | 346   |       
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                                |                                                        | Total current liabilities                  |          |               | 7,148  |              |          |       | 9,180  | 
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Stockholders equity:                                                                                                                                                                                           |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Preferred stock, $.001 par value; 5,000 shares authorized  no shares
issued and outstanding at September 30, 2002 and December 31, 2001                                                                        |                                                        |                                            |         |               |        |              |         |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Common stock, $.001 par value; 75,000 shares authorized 
41,159 shares issued and 40,999 shares outstanding at
September 30, 2002, and 39,620 shares issued and 39,460 shares
outstanding at December 31, 2001 |                                                        |                                            | 41       |               |        |              | 40       |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Paid-in capital                                                                                                                                                                                                 |                                                        |                                            | 268,059  |               |        |              | 263,157  |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Deferred compensation                                                                                                                                                                                           |                                                        |                                            | (5,886   | )             |        |              | (11,279  | )    
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Treasury stock at cost; 160 shares at September 30, 2002 and
December 31, 2001                                                                                                                                  |                                                        |                                            | (1,015   | )             |        |              | (1,015   | )    
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Accumulated
other comprehensive income (loss)                                                                                                                                                                   |                                                        |                                            | (15      | )             |        |              | 18       |      
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|                                                                                                                                                                                                               
|Accumulated deficit                                                                                                                                                                                             |                                                        |                                            | (216,760 | )             |        |              | (198,184 | )    
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                                |                                                        | Total stockholders equity                 |          |               | 44,424 |              |          |       | 52,737 | 
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      
|                                                                                                                                                                                                                |                                                        | Total liabilities and stockholders equity |          | $             | 51,572 |              |          | $     | 61,917 | 
|                                                                                                                                                                                                                |                                                        |                                            |          |               |        |              |          |      

The accompanying notes are an integral part of these consolidated financial statements.

3



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##### Table of Contents






VIEWPOINT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |        |  
|----------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | ----- | ------------- | - | ------- | ----- | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                  |                                                                                                                                                                                                                                                                        |   | Three Months  |       | Nine Months  
|                                                                  |                                                                                                                                                                                                                                                                        |   | Ended         |       | Ended        
|                                                                  |                                                                                                                                                                                                                                                                        |   | September 30, |       | September 30,
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |              
|                                                                  |                                                                                                                                                                                                                                                                        |   | 2002          |       | 2001          |   | 2002    |       | 2001
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |     
|Revenues:                                                         |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Licenses                                                                                                                                                                                                                                                               |   | $             | 3,657 |               |   | $       | 2,421 |      |   | $       | 11,058 |   |   | $       | 6,109  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Services                                                                                                                                                                                                                                                               |   |               | 1,669 |               |   |         | 1,546 |      |   |         | 4,430  |   |   |         | 3,400  |  
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Total revenues                                                    |                                                                                                                                                                                                                                                                        |   | 5,326         |       |               |   | 3,967   |       |      |   | 15,488  |        |   |   | 9,509   |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Cost of revenues:                                                 |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Licenses                                                                                                                                                                                                                                                               |   |               | 6     |               |   |         | 36    |      |   |         | 251    |   |   |         | 199    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Services                                                                                                                                                                                                                                                               |   |               | 1,125 |               |   |         | 933   |      |   |         | 2,947  |   |   |         | 2,311  |  
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Total cost of revenues                                            |                                                                                                                                                                                                                                                                        |   | 1,131         |       |               |   | 969     |       |      |   | 3,198   |        |   |   | 2,510   |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Gross profit                                                      |                                                                                                                                                                                                                                                                        |   | 4,195         |       |               |   | 2,998   |       |      |   | 12,290  |        |   |   | 6,999   |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Operating expenses:                                               |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Sales and marketing (including non-cash stock-based
compensation charges totaling $727 and $654 for
the three months ended September 30, 2002 and 2001,
respectively and $2,517 and $1,931 for the nine months
ended September 30, 2002 and 2001, respectively)        |   |               | 4,367 |               |   |         | 4,013 |      |   |         | 12,018 |   |   |         | 14,544 |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Research and development (including non-cash stock-based
compensation charges totaling $191 and $715 for
the three months ended September 30, 2002 and 2001,
respectively and $546 and $2,200 for the nine months ended
September 30, 2002 and 2001, respectively)     |   |               | 1,140 |               |   |         | 2,806 |      |   |         | 3,835  |   |   |         | 7,400  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | General and administrative (including non-cash stock-based
compensation charges totaling $282 and $428 for
the three months ended September 30, 2002 and 2001,
respectively and $1,110 and $1,223 for the nine months ended
September 30, 2002 and 2001, respectively) |   |               | 2,247 |               |   |         | 2,974 |      |   |         | 6,846  |   |   |         | 7,873  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Depreciation                                                                                                                                                                                                                                                           |   |               | 493   |               |   |         | 466   |      |   |         | 1,463  |   |   |         | 1,321  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Amortization of intangible assets                                                                                                                                                                                                                                      |   |               | 1     |               |   |         | 831   |      |   |         | 664    |   |   |         | 2,494  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Amortization of goodwill                                                                                                                                                                                                                                               |   |               |      |               |   |         | 3,673 |      |   |         |       |   |   |         | 10,430 |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Impairment of goodwill and other intangible assets                                                                                                                                                                                                                     |   |               |      |               |   |         |      |      |   |         | 6,275  |   |   |         |       |  
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Total operating expenses                                          |                                                                                                                                                                                                                                                                        |   | 8,248         |       |               |   | 14,763  |       |      |   | 31,101  |        |   |   | 44,062  |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Loss from operations                                              |                                                                                                                                                                                                                                                                        |   | (4,053        | )     |               |   | (11,765 | )     |      |   | (18,811 | )      |   |   | (37,063 | )     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other income                                                      |                                                                                                                                                                                                                                                                        |   | 44            |       |               |   | 226     |       |      |   | 133     |        |   |   | 943     |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Net loss from continuing operations                               |                                                                                                                                                                                                                                                                        |   | (4,009        | )     |               |   | (11,539 | )     |      |   | (18,678 | )      |   |   | (36,120 | )     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Adjustment to net loss on disposal of discontinued operations     |                                                                                                                                                                                                                                                                        |   | 9             |       |               |   |        |       |      |   | 102     |        |   |   | 730     |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Net loss                                                          |                                                                                                                                                                                                                                                                        | $ | (4,000        | )     |               | $ | (11,539 | )     |      | $ | (18,576 | )      |   | $ | (35,390 | )     
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Basic and diluted net loss per common share:                      |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Net loss per common share from continuing operations                                                                                                                                                                                                                   |   | $             | (0.10 | )             |   | $       | (0.29 | )    |   | $       | (0.46  | ) |   | $       | (0.93  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Net income per common share from discontinued
operations                                                                                                                                                                                                               |   |               |      |               |   |         |      |      |   |         |       |   |   |         | 0.02   |  
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|Net loss per common share                                         |                                                                                                                                                                                                                                                                        | $ | (0.10         | )     |               | $ | (0.29   | )     |      | $ | (0.46   | )      |   | $ | (0.91   | )     
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Weighted average number of shares outstanding  basic
and diluted |                                                                                                                                                                                                                                                                        |   | 40,987        |       |               |   | 39,801  |       |      |   | 40,677  |        |   |   | 38,755  |       
|                                                                  |                                                                                                                                                                                                                                                                        |   |               |       |               |   |         |       |      |   |         |        |   |   |         |       

The accompanying notes are an integral part of these consolidated financial statements.

4



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##### Table of Contents






VIEWPOINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |        |        |         |  
|--------------------------------------------------------------------------- | ----------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ----- | ----------------- | ------ | ------- | ------ | ------ | ------- | -
|                                                                            |                                                                   |                                              |                                           |       | Nine Months Ended
|                                                                            |                                                                   |                                              |                                           |       | September 30,    
|                                                                            |                                                                   |                                              |                                           |       |                  
|                                                                            |                                                                   |                                              |                                           |       | 2002              |        | 2001   
|                                                                            |                                                                   |                                              |                                           |       |                   |        |        
|Cash flows from operating activities:                                       |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Net loss                                                                    |                                                                   | $                                            | (18,576                                   | )     |                   | $      | (35,390 | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Adjustments to reconcile net loss to net cash used
in operating activities: |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Adjustment to net loss on disposal of discontinued operations     |                                              |                                           | (102  | )                 |        |         | (730   | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Non-cash stock-based compensation charges                         |                                              |                                           | 4,173 |                   |        |         | 5,354  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Depreciation and amortization                                     |                                              |                                           | 2,127 |                   |        |         | 14,245 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Provision for bad debt                                            |                                              |                                           | 570   |                   |        |         | 573    |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Impairment of goodwill and other intangible assets                |                                              |                                           | 6,275 |                   |        |         |       |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Recovery of notes receivable                                      |                                              |                                           |      |                   |        |         | (665   | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Loss on sale and disposal of equipment                            |                                              |                                           | 45    |                   |        |         |       |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Accrued interest income                                           |                                              |                                           | (17   | )                 |        |         |       |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Changes in operating assets and liabilities, net of acquisitions: |                                              |                                           |       |                   |        |         |        |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Accounts receivable                          |                                           |       | 229               |        |         |        | (2,180 | )      
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Prepaid expenses and other assets            |                                           |       | 312               |        |         |        | 946    |        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Accounts payable                             |                                           |       | 264               |        |         |        | (1,392 | )      
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Accrued expenses                             |                                           |       | (37               | )      |         |        | 335    |        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Due to/from related parties                  |                                           |       | (72               | )      |         |        | 279    |        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Deferred revenues                            |                                           |       | (247              | )      |         |        | 1,312  |        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                                                   | Net cash provided by discontinued operations |                                           |       | 128               |        |         |        | 5,978  |        
|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                            |                                                                   |                                              | Net cash used in operating activities     |       |                   | (4,928 | )       |        |        | (11,335 | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cash flows from investing activities:                                       |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Purchases of marketable securities                                          |                                                                   |                                              | (3,507                                    | )     |                   |        | (19,060 | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Proceeds from sales and maturities of marketable securities                 |                                                                   |                                              | 8,725                                     |       |                   |        | 30,885  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Repayment of notes receivable from related parties                          |                                                                   |                                              |                                          |       |                   |        | 520     |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Purchases of property and equipment                                         |                                                                   |                                              | (712                                      | )     |                   |        | (800    | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Purchases of patents and trademarks                                         |                                                                   |                                              | (47                                       | )     |                   |        | (99     | )     
|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                            |                                                                   |                                              | Net cash provided by investing activities |       |                   | 4,459  |         |        |        | 11,446  |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cash flows from financing activities:                                       |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Issuance of loans to officers                                               |                                                                   |                                              |                                          |       |                   |        | (575    | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Proceeds from exercise of stock options                                     |                                                                   |                                              | 1,370                                     |       |                   |        | 1,925   |       
|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |       
|                                                                            |                                                                   |                                              | Net cash provided by financing activities |       |                   | 1,370  |         |        |        | 1,350   |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Effect of exchange rate changes on cash and cash equivalents                |                                                                   |                                              | (6                                        | )     |                   |        | (16     | )     
|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |       
|Net increase in cash and cash equivalents                                   |                                                                   |                                              | 895                                       |       |                   |        | 1,445   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cash and cash equivalents at beginning of period                            |                                                                   |                                              | 8,345                                     |       |                   |        | 13,320  |       
|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |       
|Cash and cash equivalents at end of period                                  |                                                                   | $                                            | 9,240                                     |       |                   | $      | 14,765  |       
|                                                                            |                                                                   |                                              |                                           |       |                   |        |         |       

The accompanying notes are an integral part of these consolidated financial statements.

5



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##### Table of Contents






VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America, consistent in all material respects with those
applied in our Annual Report on Form 10-K for the year ended December 31, 2001.
The interim financial information is unaudited, but reflects all adjustments
which are, in the opinion of management, necessary for a fair presentation of
Viewpoint Corporations (Viewpoint or the Company) financial position and
operating results for the interim periods.

These unaudited consolidated financial statements have been prepared in
accordance with the instructions to Rule 10-01 of Regulations S-X and,
therefore, do not include all of the information and footnotes normally
provided in annual financial statements. As a result, these unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with managements
discussion and analysis of financial condition and results of operations,
contained in Viewpoints Annual Report on Form 10-K 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 year ending December 31, 2002.

Certain reclassifications have been made to the 2001 consolidated
financial statements to conform to the 2002 presentation.

Revenue Recognition

Revenue recognition rules for software companies are very complex. We
follow very specific and detailed guidelines in measuring revenue; however,
certain judgments affect the application of our revenue policy.

The Company recognizes revenue in accordance with Statement of Position
(SOP) 97-2, Software Revenue Recognition, as amended, and Staff Accounting
Bulletin (SAB) No. 101 Revenue Recognition in Financial Statements.

Viewpoint generates revenues through two sources: (a) software licenses
and (b) services. License revenues are generated from licensing the rights to
use our products directly to end-users and indirectly through value added
resellers (VARs). Service revenues are generated from fee-based professional
services, sales of customer support services (maintenance contracts), and
training services performed for customers that license our products.

License revenue includes sales of perpetual and term-based licenses for
broadcasting digital content in the Viewpoint format, and limited licenses for
our digital content library. License revenue is recognized over the term of
the license in a term-based broadcast license model where the term is less than
15 months, and up-front in a perpetual broadcast license model and a term-based
broadcast license model where the term is 15 months or longer, providing that
no significant vendor obligations remain and the resulting receivable is deemed
collectible by management.

Fee-based professional services are performed on a time-and-material basis
or on a fixed-fee basis, under separate service arrangements. Revenues related
to these services are recognized on a percentage-of-completion basis in
accordance with the provisions of SOP 81-1 Accounting For Performance of
Construction-Type and Certain Production-Type Contracts.
Percentage-of-completion for service contracts is measured principally by the
percentage of costs incurred and accrued to date for each contract to the
estimated total cost for each contract at completion. Revenues from customer
support services are recognized ratably over the term of the contract.
Revenues from training services are recognized as services are performed.

6



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##### Table of Contents



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Standard terms for license agreements call for payment within 90 days.
Probability of collection is based upon the assessment of the customers
financial condition through the review of their current financial statements or
credit reports. For follow-on sales to existing customers, prior payment
history is also used to evaluate probability of collection. Our agreements
with customers do not contain product return rights.

Fees from licenses sold together with fee-based professional services are
generally recognized upon delivery of the software, provided that the payment
of the license fees are not dependent upon the performance of the services, and
the services are not essential to the functionality of the licensed software.
If the services are essential to the functionality of the software or payment
of the license fees are dependent upon the performance of the services, both
the software license and service fees are recognized under the
percentage-of-completion method of contract accounting.

If the fee is not fixed or determinable, revenue is recognized as payments
become due from the customer. If a nonstandard acceptance period is required,
revenues are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period.

The Company periodically enters into nonmonetary arrangements whereby the
Companys licenses or services are exchanged for services of its customers.
Nonmonetary revenue is recognized at the estimated fair value of the services
received. Generally, nonmonetary revenues equal nonmonetary expenses; however,
due to timing, nonmonetary accounts receivable and accounts payable may result.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations. The statement requires entities to record the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred. The statement is effective for fiscal years beginning
after June 15, 2002. The adoption of SFAS No. 143 is not expected to have a
material impact on the Companys financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies 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). This Statement
requires recognition of a liability for a cost associated with an exit or
disposal activity when the liability is incurred, as opposed to when the entity
commits to an exit plan under EITF No. 94-3. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The adoption of SFAS No. 146 is not expected to have a material impact on the
Companys financial statements.

2. Basic and Diluted Net Loss Per Common Share

Basic net loss per common share is computed using the weighted average
number of shares of common stock and diluted net loss per common share is
computed using the weighted average number of shares of common stock and common
equivalent shares outstanding. Common equivalent shares related to stock
options totaling 4,491,104 and 8,450,976 for the three months ended September
30, 2002 and 2001, respectively, and 7,539,587 and 8,186,476 for the nine
months ended September 30, 2002 and 2001, respectively, are excluded from the
computation of diluted net loss per common share because their effect was
antidilutive.

Basic and diluted net loss per common share for the three and nine months
ended September 30, 2001, include the effect of 744,740 shares issued to
Computer Associates International, Inc. (Computer Associates) on June 24,
2002, as if the shares were issued and outstanding on June 8, 2001.

3. Agreements with Computer Associates

Pursuant to the purchase of all of the outstanding capital stock of
Viewpoint Digital, Inc. (Viewpoint Digital) on September 8, 2000, the Company
issued two contingent promissory notes to Computer Associates each in the
7Table of Contents

VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

maximum amount of $15,000,000, but subject to reduction on the basis of the
performance of the Viewpoint Digital assets. During 2001, the Company entered
into certain agreements with Computer Associates whereby Computer Associates
agreed to accept newly-issued shares of Viewpoint common stock having a value
of $4,000,000, in partial repayment of the first contingent promissory note due
June 8, 2001. In addition, Computer Associates agreed to accept, at the
Companys election, either cash or newly-issued shares of Viewpoint common
stock at an issue price of $4.00 per share in repayment of any additional
amounts due under the promissory note due June 8, 2001, and the first
$8,943,000 of the $15,000,000 contingent promissory note due April 30, 2002.

In June 2002, Viewpoint issued 909,093 shares of Viewpoint common stock to
Computer Associates in full satisfaction of the first contingent promissory
note due June 8, 2001. The amount due Computer Associates under the promissory
note due April 30, 2002 is approximately $2,928,000 and is reflected in due to
related parties in the Companys consolidated balance sheet at September 30,
2002.

4. Related Party Transactions

During the three and nine months ended September 30, 2002, the Company
recorded revenues totaling $3,088,000 and $8,686,000, respectively, related to
agreements, including reseller arrangements, with America Online, Inc. (AOL)
and Computer Associates, both of whom have representatives on the Companys
Board of Directors. The $8,686,000 of revenues for the nine months ended
September 30, 2002 includes approximately $3,384,000 due to a March 2002
amendment to a contract with AOL, which resulted in the Company recording
revenues when payments are due, as contrasted to the partial deferral of those
payments, which would otherwise have occurred. As of September 30, 2002, the
Company has $438,000 in accounts receivable and $404,000 in deferred revenue
relating to transactions entered into with these related parties.

During the three and nine months ended September 30, 2001, the Company
recorded revenues totaling $1,110,000 and $1,466,000, respectively, related to
agreements, including reseller arrangements, with AOL and Computer Associates.

5. Goodwill and Intangible Assets

Effective January 1, 2002, the Company completed the adoption of SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method of accounting. As
required by SFAS No. 142, the Company discontinued amortizing the remaining
balances of goodwill as of January 1, 2002. All remaining and future acquired
goodwill will be subject to impairment tests annually, or earlier if indicators
of potential impairment exist, using a fair-value-based approach. All other
intangible assets will continue to be amortized over their estimated useful
lives and assessed for impairment under SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. In conjunction with the
implementation of SFAS No. 142, the Company completed a goodwill impairment
review as of January 1, 2002 and found no impairment on that date.

Upon adoption of the new Business Combination rules, an assembled
workforce no longer met the definition of an identifiable intangible asset. As
a result, the net balance of $1,767,000, has been reclassified to goodwill on
January 1, 2002.

8



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##### Table of Contents



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with SFAS No. 142, the effect of this accounting change is
reflected prospectively. Supplemental comparative disclosure as if the change
had been retroactively applied to the prior year periods is as follows (in
thousands, except per share amounts):

|                                      |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |         |         |  
|------------------------------------- | --------------------------- | --------------------------------------------- | - | ------------- | ------ | ------------- | - | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                      |                             |                                               |   | Three Months  |        | Nine Months  
|                                      |                             |                                               |   | Ended         |        | Ended        
|                                      |                             |                                               |   | September 30, |        | September 30,
|                                      |                             |                                               |   |               |        |              
|                                      |                             |                                               |   | 2002          |        | 2001          |   | 2002    |        | 2001
|                                      |                             |                                               |   |               |        |               |   |         |        |     
|Net loss:                             |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Reported net loss           |                                               | $ | (4,000        | )      |               | $ | (11,539 | )      |      | $ | (18,576 | )       |   | $ | (35,390 | )      
|                                     
|                                     
|                                     
|                                     
|                                      | Goodwill amortization (1)   |                                               |   |              |        |               |   | 3,673   |        |      |   |        |         |   |   | 10,430  |        
|                                      |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |        
|                                      |                             | Adjusted net loss                             |   | $             | (4,000 | )             |   | $       | (7,866 | )    |   | $       | (18,576 | ) |   | $       | (24,960 | )
|                                      |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |        
|Basic and diluted net loss per share: |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Reported net loss per share |                                               | $ | (0.10         | )      |               | $ | (0.29   | )      |      | $ | (0.46   | )       |   | $ | (0.91   | )      
|                                     
|                                     
|                                     
|                                     
|                                      | Goodwill amortization       |                                               |   |              |        |               |   | 0.09    |        |      |   |        |         |   |   | 0.27    |        
|                                      |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |        
|                                      |                             | Adjusted basic and diluted net loss per share |   | $             | (0.10  | )             |   | $       | (0.20  | )    |   | $       | (0.46   | ) |   | $       | (0.64   | )
|                                      |                             |                                               |   |               |        |               |   |         |        |      |   |         |         |   |   |        

(1)  Includes amortization of an assembled workforce that has been reclassified
as goodwill effective January 1, 2002, amounting to $265 and $795 for the three
and nine months ended September 30, 2001, respectively.

The Company recorded $2,928,000 of additional goodwill during the first
quarter of 2002 in connection with a contingent promissory note due Computer
Associates on April 30, 2002 for the acquisition of Viewpoint Digital. As of
March 31, 2002, due to the persistence of unfavorable economic conditions along
with lower-than-expected revenues generated to date and reduced estimates of
future performance of the Viewpoint Digital assets, the Company performed an
additional impairment analysis on the goodwill and other intangible asset
balances recorded upon the acquisition of Viewpoint Digital. In accordance
with the provisions of SFAS No. 142 and SFAS No. 144, the Company recorded
impairment charges totaling $6,275,000. The fair value of the Viewpoint
Digital assets was estimated using the expected present value of future cash
flows. The assumptions supporting the cash flows, including the discount rate,
were determined using the Companys best estimates as of the date the
impairment was recorded.

The changes in the carrying amount of goodwill and intangible assets
during the nine months ended September 30, 2002 are as follows (in thousands):

|                                 |                         |   |          |        |                   |   |       |        |   |   |        |        |  
|-------------------------------- | ----------------------- | - | -------- | ------ | ----------------- | - | ----- | ------ | - | - | ------ | ------ | -
|                                 |                         |   | Goodwill |        | Intangible Assets |   | Total
|                                 |                         |   |          |        |                   |   |      
|Balance as of January 1, 2002    |                         | $ | 33,042   |        |                   | $ | 2,361 |        |   | $ | 35,403 |       
|                                
|                                
|                                
|                                
|                                 | Additions during period |   |          | 2,928  |                   |   |       | 47     |   |   |        | 2,975  |  
|                                
|                                
|                                
|                                
|                                 | Impairment losses       |   |          | (4,694 | )                 |   |       | (1,581 | ) |   |        | (6,275 | )
|                                
|                                
|                                
|                                
|                                 | Amortization            |   |          |       |                   |   |       | (664   | ) |   |        | (664   | )
|                                 |                         |   |          |        |                   |   |       |        |   |   |        |       
|Balance as of September 30, 2002 |                         | $ | 31,276   |        |                   | $ | 163   |        |   | $ | 31,439 |       
|                                 |                         |   |          |        |                   |   |       |        |   |   |        |       

As of September 30, 2002 and December 31, 2001, the Companys intangible
assets and related accumulated amortization consisted of the following (in
thousands):

|                                |  |                    |     |                   |  |             |    |       |  |              |     |     |  |   |       |             |  |   |        |   |  |   |       | 
|------------------------------- |  | ------------------ | --- | ----------------- |  | ----------- | -- | ----- |  | ------------ | --- | --- |  | - | ----- | ----------- |  | - | ------ | - |  | - | ----- | 
|                                |  | September 30, 2002 |     | December 31, 2001
|                                |  |                    |     |                  
|                                |  |                    |     |                   |  | Accumulated |    |       |  |              |     |     |  |   |       | Accumulated |  |   |        |  
|                                |  | Gross              |     | Amortization      |  | Net         |    | Gross |  | Amortization |     | Net
|                                |  |                    |     |                   |  |             |    |       |  |              |     |    
|Viewpoint Digital Technology    |  | $                  |    |                   |  | $           |   |       |  | $            |    |     |  | $ | 1,558 |             |  | $ | (519   | ) |  | $ | 1,039 | 
|                               
|                               
|                               
|                               
|Viewpoint Digital Customer List |  |                    |    |                   |  |             |   |       |  |              |    |     |  |   | 1,203 |             |  |   | (802   | ) |  |   | 401   | 
|                               
|                               
|                               
|                               
|Viewpoint Digital Trade Name    |  |                    |    |                   |  |             |   |       |  |              |    |     |  |   | 643   |             |  |   | (214   | ) |  |   | 429   | 
|                               
|                               
|                               
|                               
|Covenant Not To Compete         |  |                    |    |                   |  |             |   |       |  |              |    |     |  |   | 3,253 |             |  |   | (2,892 | ) |  |   | 361   | 
|                               
|                               
|                               
|                               
|Other Intangibles               |  |                    |    |                   |  |             |   |       |  |              |    |     |  |   | 18    |             |  |   | (6     | ) |  |   | 12    | 
|                               
|                               
|                               
|                               
|Patents and Trademarks          |  |                    | 165 |                   |  |             | (2 | )     |  |              | 163 |     |  |   | 119   |             |  |   |       |   |  |   | 119   | 
|                                |  |                    |     |                   |  |             |    |       |  |              |     |     |  |   |       |             |  |   |        |   |  |   |       | 
|Total Intangible Assets         |  | $                  | 165 |                   |  | $           | (2 | )     |  | $            | 163 |     |  | $ | 6,794 |             |  | $ | (4,433 | ) |  | $ | 2,361 | 
|                                |  |                    |     |                   |  |             |    |       |  |              |     |     |  |   |       |             |  |   |        |   |  |   |       | 

Amortization of patents and trademarks is estimated to be $2,000 a year for the
next five years.

9



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##### Table of Contents



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Comprehensive Loss

Total comprehensive loss for the three and nine months ended September 30,
2002 and 2001 consisted of the following (in thousands):

|                                                |  |               |        |               |  |      |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | ------------- | ------ | ------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                |  | THREE MONTHS  |        | NINE MONTHS  
|                                                |  | ENDED         |        | ENDED        
|                                                |  | SEPTEMBER 30, |        | SEPTEMBER 30,
|                                                |  |               |        |              
|                                                |  | 2002          |        | 2001          |  | 2002 |         | 2001
|                                                |  |               |        |               |  |      |         |     
|Net loss                                        |  | $             | (4,000 | )             |  | $    | (11,539 | )    |  | $ | (18,576 | ) |  | $ | (35,390 | )
|                                               
|                                               
|                                               
|                                               
|Foreign currency translation adjustment         |  |               | (5     | )             |  |      | (9      | )    |  |   | (6      | ) |  |   | (16     | )
|                                               
|                                               
|                                               
|                                               
|Unrealized gain (loss) on marketable securities |  |               | (87    | )             |  |      | (10     | )    |  |   | (27     | ) |  |   | 17      |  
|                                                |  |               |        |               |  |      |         |      |  |   |         |   |  |   |         |  
|Comprehensive loss                              |  | $             | (4,092 | )             |  | $    | (11,558 | )    |  | $ | (18,609 | ) |  | $ | (35,389 | )
|                                                |  |               |        |               |  |      |         |      |  |   |         |   |  |   |         |  

10



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##### Table of Contents






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

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements that involve risks and uncertainties that
could cause actual results to differ materially. Factors that might cause or
contribute to such differences include, but are not limited to, those discussed
in the section entitled Factors That May Affect Future Results of Operations.
You should carefully review the risks described in other documents we file
from time to time with the Securities and Exchange Commission, including any
future reports to be filed in 2002 and our Annual Report on Form 10-K for 2001.
When used in this report, the words expects, anticipates, intends,
plans, believes, seeks, targets, estimates, and similar expressions
are generally intended to identify forward-looking statements. You should not
place undue reliance on these forward-looking statements, which speak only as
of the date of this Quarterly Report on Form 10-Q. We undertake no obligation
to publicly release any revisions to the forward-looking statements or reflect
events or circumstances after the date of this document.

Overview

Viewpoint Corporation is a leading provider of interactive media
technologies and services. Its graphics operating system platform, Viewpoint
Media Player, has been licensed by Fortune 500 companies and others for use in
online, offline and embedded applications serving a wide variety of needs,
including: business process visualizations, marketing campaigns, rich media
advertising and product presentations. The Company also provides cross media
digital solutions for film, broadcast television and games.

The Companys primary initiatives include:



| |  |  | Licensing technology for specific marketing and e-commerce
visualization solutions;                                                                                                                                                      
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Providing a full range of fee-based digital asset content creation
and engineering professional services for implementing visualization
solutions for marketing and creating new and enhancing existing
enterprise software applications;
|
| |  |  | Proliferating the Viewpoint format into digital advertisements on
various digital media, primarily the Web and digital set-top cable
boxes;                                                                                              
|
| |  |  | Forging technological alliances with leading interactive agencies
and Web content providers; and                                                                                                                                         
|
| |  |  | Maximizing market penetration and name recognition, including
distribution of the Companys client-side software graphics operating
system, Viewpoint Media Player.                                                                      

Viewpoint believes that its success will depend largely on its ability to
proliferate its digital technologies into various media, including the
Internet, broadcast television, games, movies, print, closed intranets, new and
existing enterprise applications and television set-top boxes. Accordingly,
Viewpoint has invested and intends to continue investing in research and
development and sales and marketing. Revenues from continuing operations
primarily have been from the sale of technology licenses and fee based
professional services, including digital content creation services and
engineering services to enhance and create new enterprise software
applications.

Viewpoint has a limited operating history upon which an evaluation of the
Company and its prospects can be based. Viewpoints prospects must be
considered in light of the risks and difficulties frequently encountered by
early stage technology companies. There can be no assurance that Viewpoint
will achieve or sustain profitability. Viewpoint has had significant quarterly
and annual operating losses since its inception, and as of September 30, 2002,
had an accumulated deficit of $216,760,000.

11



---



##### Table of Contents



RESULTS OF OPERATIONS

The following table sets forth for the three and nine months ended
September 30, 2002 and 2001, the Companys consolidated statements of
operations expressed as a percentage of total revenues for the periods
indicated:

|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |     |  
|------------------------------------------------------------- | -------------------------------------------------------------------------------- |  | ------------- | -- | ------------- |  | ---- | --- | ---- |  | ---- | -- | - |  | ---- | --- | -
|                                                              |                                                                                  |  | Three Months  |    | Nine Months  
|                                                              |                                                                                  |  | Ended         |    | Ended        
|                                                              |                                                                                  |  | September 30, |    | September 30,
|                                                              |                                                                                  |  |               |    |              
|                                                              |                                                                                  |  | 2002          |    | 2001          |  | 2002 |     | 2001
|                                                              |                                                                                  |  |               |    |               |  |      |     |     
|Statement of Operations Data                                  |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|                                                             
|                                                             
|                                                             
|                                                             
|Revenues:                                                     |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Licenses                                                                         |  |               | 69 | %             |  |      | 61  | %    |  |      | 71 | % |  |      | 64  | %
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Services                                                                         |  |               | 31 |               |  |      | 39  |      |  |      | 29 |   |  |      | 36  |  
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Total revenues                                                |                                                                                  |  | 100           |    |               |  | 100  |     |      |  | 100  |    |   |  | 100  |    
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Cost of revenues:                                             |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Licenses                                                                         |  |               |   |               |  |      | 1   |      |  |      | 2  |   |  |      | 2   |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Services                                                                         |  |               | 21 |               |  |      | 23  |      |  |      | 19 |   |  |      | 24  |  
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Total cost of revenues                                        |                                                                                  |  | 21            |    |               |  | 24   |     |      |  | 21   |    |   |  | 26   |    
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Gross profit                                                  |                                                                                  |  | 79            |    |               |  | 76   |     |      |  | 79   |    |   |  | 74   |    
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Operating expenses:                                           |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Sales and marketing (including non-cash stock-based
compensation charges)        |  |               | 82 |               |  |      | 101 |      |  |      | 78 |   |  |      | 153 |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Research and development (including non-cash
stock-based compensation charges)   |  |               | 22 |               |  |      | 71  |      |  |      | 25 |   |  |      | 78  |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | General and administrative (including non-cash
stock-based compensation charges) |  |               | 42 |               |  |      | 75  |      |  |      | 44 |   |  |      | 83  |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Depreciation                                                                     |  |               | 9  |               |  |      | 12  |      |  |      | 9  |   |  |      | 14  |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Amortization of intangible assets                                                |  |               |   |               |  |      | 21  |      |  |      | 4  |   |  |      | 26  |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Amortization of goodwill                                                         |  |               |   |               |  |      | 92  |      |  |      |   |   |  |      | 109 |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Impairment of goodwill and other intangible assets                               |  |               |   |               |  |      |    |      |  |      | 41 |   |  |      |    |  
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Total operating expenses                                      |                                                                                  |  | 155           |    |               |  | 372  |     |      |  | 201  |    |   |  | 463  |    
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Loss from operations                                          |                                                                                  |  | (76           | )  |               |  | (296 | )   |      |  | (122 | )  |   |  | (389 | )  
|                                                             
|                                                             
|                                                             
|                                                             
|Other income                                                  |                                                                                  |  | 1             |    |               |  | 6    |     |      |  | 1    |    |   |  | 9    |    
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Net loss from continuing operations                           |                                                                                  |  | (75           | )  |               |  | (290 | )   |      |  | (121 | )  |   |  | (380 | )  
|                                                             
|                                                             
|                                                             
|                                                             
|Adjustment to net loss on disposal of
discontinued operations |                                                                                  |  |              |    |               |  |     |     |      |  | 1    |    |   |  | 8    |    
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    
|Net loss                                                      |                                                                                  |  | (75           | )% |               |  | (290 | )%  |      |  | (120 | )% |   |  | (372 | )% 
|                                                              |                                                                                  |  |               |    |               |  |      |     |      |  |      |    |   |  |      |    

Revenues

|                    |          |                |   |                        |        |               |   |        |       |  |  |    |    |  
|------------------- | -------- | -------------- | - | ---------------------- | ------ | ------------- | - | ------ | ----- |  |  | -- | -- | -
|                    |          |                |   | September 30,          |        | September 30, |   | %     
|                    |          |                |   | 2002                   |        | 2001          |   | Change
|                    |          |                |   |                        |        |               |   |       
|                    |          |                |   | (dollars in thousands) |        |               |   |       
|Three months ended: |          |                |   |                        |        |               |   |        |       |  |  |   
|                   
|                   
|                   
|                   
|                    | Licenses |                | $ | 3,657                  |        |               | $ | 2,421  |       |  |  | 51 | % 
|                   
|                   
|                   
|                   
|                    | Services |                |   | 1,669                  |        |               |   | 1,546  |       |  |  | 8  | % 
|                    |          |                |   |                        |        |               |   |        |       |  |  |   
|                    |          | Total revenues |   | $                      | 5,326  |               |   | $      | 3,967 |  |  |    | 34 | %
|                   
|                   
|                   
|                   
|Nine months ended:  |          |                |   |                        |        |               |   |        |       |  |  |   
|                   
|                   
|                   
|                   
|                    | Licenses |                | $ | 11,058                 |        |               | $ | 6,109  |       |  |  | 81 | % 
|                   
|                   
|                   
|                   
|                    | Services |                |   | 4,430                  |        |               |   | 3,400  |       |  |  | 30 | % 
|                    |          |                |   |                        |        |               |   |        |       |  |  |   
|                    |          | Total revenues |   | $                      | 15,488 |               |   | $      | 9,509 |  |  |    | 63 | %

The Company recognizes revenue in accordance with SOP 97-2, Software
Revenue Recognition, as amended, and SAB No. 101 Revenue Recognition in
Financial Statements.

Viewpoint generates revenues through two sources: (a) software licenses
and (b) services. License revenues are generated from licensing the rights to
use our products directly to end-users and indirectly through VARs. Service

12



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##### Table of Contents



revenues are generated from fee-based professional services, sales of
customer support services (maintenance contracts), and training services
performed for customers that license our products.

License revenue includes sales of perpetual and term-based licenses for
broadcasting digital content in the Viewpoint format, and limited licenses for
our digital content library. License revenue is recognized over the term of
the license in a term-based broadcast license model where the term is less than
15 months, and up-front in a perpetual broadcast license model and a term-based
broadcast license model where the term is 15 months or longer, providing that
no significant vendor obligations remain and the resulting receivable is deemed
collectible by management.

Fee-based professional services are performed on a time-and-material basis
or on a fixed-fee basis, under separate service arrangements. Revenues related
to these services are recognized on a percentage-of-completion basis in
accordance with the provisions of SOP 81-1 Accounting for Performance of
Construction-Type and Certain Production-Type Contracts.
Percentage-of-completion for service contracts is measured principally by the
percentage of costs incurred and accrued to date for each contract to the
estimated total cost for each contract at completion. Revenues from customer
support services are recognized ratably over the term of the contract.
Revenues from training services are recognized as services are performed.

License revenue increased approximately $1,236,000, or 51%, and
$4,949,000, or 81%, for the three months and nine months ended September 30,
2002, respectively, compared to the same periods last year. Service revenue
increased approximately $123,000, or 8%, and $1,030,000, or 30%, for the three
months and nine months ended September 30, 2002, respectively, compared to the
same periods last year. The increase in revenues is attributable to a number
of factors, most notably: our expanding relationship with AOL, the expansion
of our indirect channel partnerships, and the increased proliferation of our
technology through distribution of Viewpoint Media Player. The persistence of
unfavorable economic conditions, however, continue to negatively impact our
revenue growth.

During the three and nine months ended September 30, 2002, the Company
recorded revenues totaling $3,088,000 and $8,686,000, respectively, related to
agreements, including reseller arrangements, with AOL and Computer Associates,
both of whom have representatives on the Companys Board of Directors. The
$8,686,000 of revenues for the nine months ended September 30, 2002 includes
approximately $3,384,000 due to a March 2002 amendment to a contract with AOL,
which resulted in the Company recording revenues when payments are due, as
contrasted to the partial deferral of those payments which would otherwise have
occurred.

During the three and nine months ended September 30, 2001, the Company
recorded revenues totaling $1,110,000 and $1,466,000 respectively, related to
agreements, including reseller arrangements, with AOL and Computer Associates.

The Company expects its revenue to continue to increase through the end of
2002 based upon the visible increase in the market acceptance of our
technology.

Cost of revenues

|                    |          |                              |   |                        |       |               |   |        |       |   |  |     |    |  
|------------------- | -------- | ---------------------------- | - | ---------------------- | ----- | ------------- | - | ------ | ----- | - |  | --- | -- | -
|                    |          |                              |   | September 30,          |       | September 30, |   | %     
|                    |          |                              |   | 2002                   |       | 2001          |   | Change
|                    |          |                              |   |                        |       |               |   |       
|                    |          |                              |   | (dollars in thousands) |       |               |   |       
|Three months ended: |          |                              |   |                        |       |               |   |        |       |   |  |    
|                   
|                   
|                   
|                   
|                    | Licenses |                              | $ | 6                      |       |               | $ | 36     |       |   |  | (83 | )%
|                   
|                   
|                   
|                   
|                    | Services |                              |   | 1,125                  |       |               |   | 933    |       |   |  | 21  | % 
|                    |          |                              |   |                        |       |               |   |        |       |   |  |    
|                    |          | Total cost of revenues       |   | $                      | 1,131 |               |   | $      | 969   |   |  |     | 17 | %
|                   
|                   
|                   
|                   
|                    |          | Percentage of total revenues |   |                        | 21    | %             |   |        | 24    | % |  |     |    |  
|                   
|                   
|                   
|                   
|Nine months ended:  |          |                              |   |                        |       |               |   |        |       |   |  |    
|                   
|                   
|                   
|                   
|                    | Licenses |                              | $ | 251                    |       |               | $ | 199    |       |   |  | 26  | % 
|                   
|                   
|                   
|                   
|                    | Services |                              |   | 2,947                  |       |               |   | 2,311  |       |   |  | 28  | % 
|                    |          |                              |   |                        |       |               |   |        |       |   |  |    
|                    |          | Total cost of revenues       |   | $                      | 3,198 |               |   | $      | 2,510 |   |  |     | 27 | %
|                   
|                   
|                   
|                   
|                    |          | Percentage of total revenues |   |                        | 21    | %             |   |        | 26    | % |  |     |    |  

13



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##### Table of Contents



Costs of revenues consist primarily of salaries and consulting fees for
those who provide fee-based professional services. The increase in cost of
revenues is directly related to an increase in fee-based professional services.

The Company expects its cost of revenues to increase in absolute dollars,
while decreasing slightly as a percentage of total revenues, due to
continuously improving efficiencies and the mix of license and services
revenues.

Sales and marketing (including non-cash stock-based compensation charges
totaling $727 and $654 for the three months ended September 30, 2002 and 2001,
respectively and $2,517 and $1,931 for the nine months ended September 30, 2002
and 2001, respectively)

|                    |                              |  |                        |        |               |  |        |        |   |  |  |     |   
|------------------- | ---------------------------- |  | ---------------------- | ------ | ------------- |  | ------ | ------ | - |  |  | --- | --
|                    |                              |  | September 30,          |        | September 30, |  | %     
|                    |                              |  | 2002                   |        | 2001          |  | Change
|                    |                              |  |                        |        |               |  |       
|                    |                              |  | (dollars in thousands) |        |               |  |       
|Three months ended: |                              |  |                        |        |               |  |        |        |   |  |  |    
|                   
|                   
|                   
|                   
|                    | Sales and marketing          |  | $                      | 4,367  |               |  | $      | 4,013  |   |  |  | 9   | % 
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 82     | %             |  |        | 101    | % |  |  |     |   
|                   
|                   
|                   
|                   
|Nine months ended:  |                              |  |                        |        |               |  |        |        |   |  |  |    
|                   
|                   
|                   
|                   
|                    | Sales and marketing          |  | $                      | 12,018 |               |  | $      | 14,544 |   |  |  | (17 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 78     | %             |  |        | 153    | % |  |  |     |   

Sales and marketing expenses include salaries and benefits, sales
commissions, non-cash stock-based compensation charges, consulting fees and
travel and entertainment expenses for our sales and marketing personnel. Sales
and marketing expenses also include the cost of programs aimed at increasing
revenue, such as advertising, trade shows and public relations.

Sales and marketing expenses increased $354,000 or 9%, for the three
months ended September 30, 2002 compared to the same period last year primarily
due to an increase in marketing costs, and salaries and benefits of our sales
and marketing personnel.

Sales and marketing expenses decreased $2,526,000, or 17%, for the nine
months ended September 30, 2002 compared to the same period last year primarily
due to a decrease in salaries and benefits, marketing costs, and travel and
entertainment expenses offset by an increase in non-cash stock-based
compensation charges. Non-cash stock-based compensation charges increased as
certain personnel who were reflected in research and development during the
nine months ended September 30, 2001 are now reflected in sales and marketing
due to a change in the nature of their duties.

The Company expects sales and marketing expenses to decrease in 2002 as
compared to 2001 based on an overall reduction in headcount and the increased
utilization of creative services personnel, which will increase cost of
revenues, rather than sales and marketing expenses.

Research and development (including non-cash stock-based compensation charges
totaling $191 and $715 for the three months ended September 30, 2002 and 2001,
respectively and $546 and $2,200 for the nine months ended September 30, 2002
and 2001, respectively)

|                    |                              |  |                        |       |               |  |        |       |   |  |  |     |   
|------------------- | ---------------------------- |  | ---------------------- | ----- | ------------- |  | ------ | ----- | - |  |  | --- | --
|                    |                              |  | September 30,          |       | September 30, |  | %     
|                    |                              |  | 2002                   |       | 2001          |  | Change
|                    |                              |  |                        |       |               |  |       
|                    |                              |  | (dollars in thousands) |       |               |  |       
|Three months ended: |                              |  |                        |       |               |  |        |       |   |  |  |    
|                   
|                   
|                   
|                   
|                    | Research and development     |  | $                      | 1,140 |               |  | $      | 2,806 |   |  |  | (59 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 22    | %             |  |        | 71    | % |  |  |     |   
|                   
|                   
|                   
|                   
|Nine months ended:  |                              |  |                        |       |               |  |        |       |   |  |  |    
|                   
|                   
|                   
|                   
|                    | Research and development     |  | $                      | 3,835 |               |  | $      | 7,400 |   |  |  | (48 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 25    | %             |  |        | 78    | % |  |  |     |   

14



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##### Table of Contents



Research and development expenses consist primarily of salaries and
benefits for software developers, contracted development efforts, and non-cash
stock-based compensation charges related to the Companys product development
efforts. The Company expenses as incurred research and development costs
necessary to establish the technological feasibility of its internally
developed software products and technologies. To date, the establishment of
technological feasibility of the Companys products and general release have
substantially coincided. As a result, the Company has not capitalized any
internal software development costs since costs qualifying for such
capitalization have not been significant. Additionally, the Company capitalizes
costs of software, consulting services, hardware and payroll-related costs
incurred to purchase or develop internal-use software, when technological
feasibility has been established, it is probable that the project will be
completed and the software will be used as intended. The Company expenses costs
incurred during preliminary project assessment, research and development,
re-engineering, training and application maintenance.

Research and development expenses decreased $1,666,000, or 59%, and
$3,565,000, or 48%, for the three months and nine months ended September 30,
2002, respectively, compared to the same periods last year primarily due to a
decrease in salaries and benefits, contracted development, and non-cash
stock-based compensation charges. Salaries and benefits decreased due to
specific engineering salaries and benefits being classified as cost of revenues
as compared to research and development, as a result of revenue generating
customer-specific development work. In addition, salaries and benefits, and
non-cash stock-based compensation charges decreased as certain personnel which
were reflected in research and development during the three and nine months
ended September 30, 2001, are now reflected in sales and marketing due to a
change in the nature of their duties.

The Company expects research and development expenses to decrease in 2002,
as compared to 2001.

General and administrative (including non-cash stock-based compensation charges
totaling $282 and $428 for the three months ended September 30, 2002 and 2001,
respectively and $1,110 and $1,223 for the nine months ended September 30, 2002
and 2001, respectively)

|                    |                              |  |                        |       |               |  |        |       |   |  |  |     |   
|------------------- | ---------------------------- |  | ---------------------- | ----- | ------------- |  | ------ | ----- | - |  |  | --- | --
|                    |                              |  | September 30,          |       | September 30, |  | %     
|                    |                              |  | 2002                   |       | 2001          |  | Change
|                    |                              |  |                        |       |               |  |       
|                    |                              |  | (dollars in thousands) |       |               |  |       
|Three months ended: |                              |  |                        |       |               |  |        |       |   |  |  |    
|                   
|                   
|                   
|                   
|                    | General and administrative   |  | $                      | 2,247 |               |  | $      | 2,974 |   |  |  | (24 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 42    | %             |  |        | 75    | % |  |  |     |   
|                   
|                   
|                   
|                   
|Nine months ended:  |                              |  |                        |       |               |  |        |       |   |  |  |    
|                   
|                   
|                   
|                   
|                    | General and administrative   |  | $                      | 6,846 |               |  | $      | 7,873 |   |  |  | (13 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 44    | %             |  |        | 83    | % |  |  |     |   

General and administrative expenses primarily consist of corporate
overhead of the Company, which includes salaries and benefits related to
administrative personnel, facilities costs, and other administrative costs such
as legal, accounting and investor relation fees, and insurance expense.

General and administrative expenses decreased $727,000, or 24%, and
$1,027,000, or 13% for the three months and nine months ended September 30,
2002, respectively, compared to the same periods last year primarily due to a
decrease in facilities costs, salaries and benefits, non-cash stock-based
compensation charges, and accounting fees. These decreases were partially
offset by a rise in insurance expense.

General and administrative expenses are expected to decrease in 2002, as
compared to 2001.

15



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##### Table of Contents



Depreciation

|                    |                              |  |                        |       |               |  |        |       |   |  |  |    |  
|------------------- | ---------------------------- |  | ---------------------- | ----- | ------------- |  | ------ | ----- | - |  |  | -- | -
|                    |                              |  | September 30,          |       | September 30, |  | %     
|                    |                              |  | 2002                   |       | 2001          |  | Change
|                    |                              |  |                        |       |               |  |       
|                    |                              |  | (dollars in thousands) |       |               |  |       
|Three months ended: |                              |  |                        |       |               |  |        |       |   |  |  |   
|                   
|                   
|                   
|                   
|                    | Depreciation                 |  | $                      | 493   |               |  | $      | 466   |   |  |  | 6  | %
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 9     | %             |  |        | 12    | % |  |  |    |  
|                   
|                   
|                   
|                   
|Nine months ended:  |                              |  |                        |       |               |  |        |       |   |  |  |   
|                   
|                   
|                   
|                   
|                    | Depreciation                 |  | $                      | 1,463 |               |  | $      | 1,321 |   |  |  | 11 | %
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 9     | %             |  |        | 14    | % |  |  |    |  

Depreciation expense increased $27,000, or 6%, and $142,000, or 11%, during the
three months and nine months ended September 30, 2002, respectively, compared
to the same periods last year due to property and equipment additions.

Amortization of intangible assets

|                    |                                   |  |                        |     |               |  |        |       |   |  |  |      |   
|------------------- | --------------------------------- |  | ---------------------- | --- | ------------- |  | ------ | ----- | - |  |  | ---- | --
|                    |                                   |  | September 30,          |     | September 30, |  | %     
|                    |                                   |  | 2002                   |     | 2001          |  | Change
|                    |                                   |  |                        |     |               |  |       
|                    |                                   |  | (dollars in thousands) |     |               |  |       
|Three months ended: |                                   |  |                        |     |               |  |        |       |   |  |  |     
|                   
|                   
|                   
|                   
|                    | Amortization of intangible assets |  | $                      | 1   |               |  | $      | 831   |   |  |  | (100 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues      |  |                        |    | %             |  |        | 21    | % |  |  |      |   
|                   
|                   
|                   
|                   
|Nine months ended:  |                                   |  |                        |     |               |  |        |       |   |  |  |     
|                   
|                   
|                   
|                   
|                    | Amortization of intangible assets |  | $                      | 664 |               |  | $      | 2,494 |   |  |  | (73  | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues      |  |                        | 4   | %             |  |        | 26    | % |  |  |      |   

Amortization of intangible assets decreased $830,000 and $1,830,000, for
the three and nine months ended September 30, 2002, respectively, compared to
the same periods last year as all intangible assets acquired in the Viewpoint
Digital transaction were either fully amortized or written off in accordance
with SFAS No. 144 during the three months ended March 31, 2002.

Amortization of goodwill

|                    |                              |  |                        |   |               |  |        |        |   |  |  |      |   
|------------------- | ---------------------------- |  | ---------------------- | - | ------------- |  | ------ | ------ | - |  |  | ---- | --
|                    |                              |  | September 30,          |   | September 30, |  | %     
|                    |                              |  | 2002                   |   | 2001          |  | Change
|                    |                              |  |                        |   |               |  |       
|                    |                              |  | (dollars in thousands) |   |               |  |       
|Three months ended: |                              |  |                        |   |               |  |        |        |   |  |  |     
|                   
|                   
|                   
|                   
|                    | Amortization of goodwill     |  | $                      |  |               |  | $      | 3,673  |   |  |  | (100 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        |  | %             |  |        | 92     | % |  |  |      |   
|                   
|                   
|                   
|                   
|Nine months ended:  |                              |  |                        |   |               |  |        |        |   |  |  |     
|                   
|                   
|                   
|                   
|                    | Amortization of goodwill     |  | $                      |  |               |  | $      | 10,430 |   |  |  | (100 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        |  | %             |  |        | 109    | % |  |  |      |   

Amortization of goodwill decreased $3,673,000 and $10,430,000 for the
three and nine months ended September 30, 2002, respectively, compared to the
same periods last year due to the adoption of SFAS No. 142 on January 1, 2002.
As a result of SFAS 142, the Company ceased amortizing approximately
$33,042,000 of goodwill. In lieu of amortization, the Company is required to
test goodwill for impairment on an annual basis or earlier if indicators of
potential impairment exist.

Impairment of goodwill and other intangible assets

|                    |                                                    |  |                        |       |               |  |        |   |   |  |    |   |  
|------------------- | -------------------------------------------------- |  | ---------------------- | ----- | ------------- |  | ------ | - | - |  | -- | - | -
|                    |                                                    |  | September 30,          |       | September 30, |  | %     
|                    |                                                    |  | 2002                   |       | 2001          |  | Change
|                    |                                                    |  |                        |       |               |  |       
|                    |                                                    |  | (dollars in thousands) |       |               |  |       
|Three months ended: |                                                    |  |                        |       |               |  |        |   |   |  |    |  
|                   
|                   
|                   
|                   
|                    | Impairment of goodwill and other intangible assets |  | $                      |      |               |  | $      |  |   |  |    |  | %
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues                       |  |                        |      | %             |  |        |  | % |  |    |   |  
|                   
|                   
|                   
|                   
|Nine months ended:  |                                                    |  |                        |       |               |  |        |   |   |  |    |  
|                   
|                   
|                   
|                   
|                    | Impairment of goodwill and other intangible assets |  | $                      | 6,275 |               |  | $      |  |   |  | NA
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues                       |  |                        | 41    | %             |  |        |  | % |  |    |   |  

16



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In conjunction with the implementation of SFAS No. 142, the Company
completed a goodwill impairment review as of January 1, 2002 and found no
impairment on that date. As of March 31, 2002, due to the persistence of
unfavorable economic conditions along with lower-than-expected revenues
generated to date and reduced estimates of future performance of the Viewpoint
Digital assets, the Company performed an additional impairment analysis on the
goodwill and other intangible asset balances recorded upon the acquisition of
Viewpoint Digital. In accordance with the provisions of SFAS No. 142 and SFAS
No. 144, the Company recorded impairment charges totaling $6,275,000 during the
three months ended March 31, 2002. The fair value of the Viewpoint Digital
assets was estimated using the expected present value of future cash flows.
The assumptions supporting the cash flows, including the discount rate, were
determined using the Companys best estimates as of the date the impairment was
recorded.

Other income

|                    |                              |  |                        |     |               |  |        |     |   |  |  |     |   
|------------------- | ---------------------------- |  | ---------------------- | --- | ------------- |  | ------ | --- | - |  |  | --- | --
|                    |                              |  | September 30,          |     | September 30, |  | %     
|                    |                              |  | 2002                   |     | 2001          |  | Change
|                    |                              |  |                        |     |               |  |       
|                    |                              |  | (dollars in thousands) |     |               |  |       
|Three months ended: |                              |  |                        |     |               |  |        |     |   |  |  |    
|                   
|                   
|                   
|                   
|                    | Other income                 |  | $                      | 44  |               |  | $      | 226 |   |  |  | (81 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 1   | %             |  |        | 6   | % |  |  |     |   
|                   
|                   
|                   
|                   
|Nine months ended:  |                              |  |                        |     |               |  |        |     |   |  |  |    
|                   
|                   
|                   
|                   
|                    | Other income                 |  | $                      | 133 |               |  | $      | 943 |   |  |  | (86 | )%
|                   
|                   
|                   
|                   
|                    | Percentage of total revenues |  |                        | 1   | %             |  |        | 9   | % |  |  |     |   

Other income primarily consists of interest and investment income on cash,
cash equivalents and marketable securities. As a result, other income
fluctuates with changes in the Companys cash, cash equivalents and marketable
securities balances and market interest rates.

Other income decreased $182,000, or 81%, and $810,000, or 86%, for the
three months and nine months ended September 30, 2002, respectively, compared
to the same periods last year primarily due to a decrease in average cash, cash
equivalents and marketable securities balances as well as a decline in interest
rates.

Other income is expected to decrease in absolute dollars and as a
percentage of total revenues for 2002, as compared to 2001 due to a decline in
interest rates and an expected decrease in average cash, cash equivalents and
marketable securities balances.

Factors That May Affect Future Results of Operations

We believe that in the future our results of operations could be affected by various factors including:



| |  |  | We have a limited operating history that makes an evaluation of our business difficult;                                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We have a history of losses and expect to incur losses in the future;                                                                           
|
| |  |  | Our future revenues may be unpredictable and may cause our quarterly results to fluctuate;                                                      
|
| |  |  | We may be unable to meet our future capital requirements;                                                                                       
|
| |  |  | Our stock price is volatile and may continue to fluctuate in the future;                                                                        
|
| |  |  | If the Internet does not continue to expand as a widespread
commerce medium, demand for our products and technologies may decline
significantly;

17



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| |  |  | Our market is characterized by rapidly changing technology, and if
we do not respond in a timely manner, our products and technologies may
not succeed in the marketplace;                                                                                                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Potential delays in product releases could harm our business;                                                                                                                                                                                                                                   
|
| |  |  | Undetected errors in our products and technologies could result in
adverse publicity, reduced market acceptance or lawsuits by customers;                                                                                                                                                       
|
| |  |  | In order to increase market awareness of our products and generate
increased revenue we may need to expand our sales and marketing
capabilities;                                                                                                                                                
|
| |  |  | We may be unable to protect our intellectual property rights and we
may be liable for infringing the intellectual property rights of
others;                                                                                                                                                    
|
| |  |  | Security risks could limit the growth of e-commerce and expose us
to litigation or liability;                                                                                                                                                                                                   
|
| |  |  | Increasing government regulation could increase our cost of doing
business or increase our legal exposure;                                                                                                                                                                                      
|
| |  |  | We may need to enter into other business combinations and strategic
alliances which could be difficult to integrate and may disrupt our
business;                                                                                                                                               
|
| |  |  | The loss of any of our key personnel would harm our business;                                                                                                                                                                                                                                   
|
| |  |  | Our revenues could be negatively affected by the loss of resellers
and strategic partners and if we fail to establish, maintain or expand
our strategic relationships for the integration of our technology with
the services of third parties, the growth of our business may cease or
decline;
|
| |  |  | Our lengthy sales cycle and product implementation makes it
difficult to predict our quarterly results;                                                                                                                                                                                         
|
| |  |  | Our projects vary in size and scope; therefore, a client that
accounts for a large portion of our revenues in one period may not
generate similar amounts of revenue in subsequent periods;                                                                                                     
|
| |  |  | Our future success depends on our ability to identify, hire, train and retain highly qualified employees;                                                                                                                                                                                       
|
| |  |  | Our charter documents could make it more difficult for a third party to acquire us;                                                                                                                                                                                                             
|
| |  |  | Our business is subject to general economic conditions as well as
those specific to the Internet and related industries.                                                                                                                                                                        

Critical Accounting Policies And Estimates

Viewpoints discussion and analysis of its financial condition and results
of operations are based upon its consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an on-going basis, the Company
evaluates its critical accounting policies and estimates, including those
related to revenue recognition. We base our estimates on

18



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historical experience and on various other assumptions that we believe to
be reasonable under the circumstances though actual results may differ from
these estimates under different assumptions or conditions. For a complete
description of the Companys accounting policies, see the consolidated
financial statements included in our Annual Report on Form 10-K for the period
ended December 31, 2001.

We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

Revenue Recognition

Revenue recognition rules for software companies are very complex. We
follow very specific and detailed guidelines in measuring revenue; however,
certain judgments affect the application of our revenue policy. Revenue
results are difficult to predict, and any shortfall in revenue or delay in
recognizing revenue could cause our operating results to vary significantly
from quarter to quarter.

The Company recognizes revenue in accordance with SOP 97-2, Software
Revenue Recognition, as amended, and SAB No. 101 Revenue Recognition in
Financial Statements.

Viewpoint generates revenues through two sources: (a) software licenses
and (b) services. License revenues are generated from licensing the rights to
use our products directly to end-users and indirectly through VARs. Service
revenues are generated from fee-based professional services, sales of customer
support services (maintenance contracts), and training services performed for
customers that license our products.

License revenue includes sales of perpetual and term-based licenses for
broadcasting digital content in the Viewpoint format, and limited licenses for
our digital content library. License revenue is recognized over the term of
the license in a term-based broadcast license model where the term is less than
15 months, and up-front in a perpetual broadcast license model and a term-based
broadcast license model where the term is 15 months or longer, providing that
no significant vendor obligations remain and the resulting receivable is deemed
collectible by management.

Fee-based professional services are performed on a time-and-material basis
or on a fixed-fee basis, under separate service arrangements. Revenues related
to these services are recognized on a percentage-of-completion basis in
accordance with the provisions of SOP 81-1 Accounting for Performance of
Construction-Type and Certain Production-Type Contracts.
Percentage-of-completion for service contracts is measured principally by the
percentage of costs incurred and accrued to date for each contract to the
estimated total cost for each contract at completion. Revenues from customer
support services are recognized ratably over the term of the contract.
Revenues from training services are recognized as services are performed.

Standard terms for license agreements call for payment within 90 days.
Probability of collection is based upon the assessment of the customers
financial condition through the review of their current financial statements or
credit reports. For follow-on sales to existing customers, prior payment
history is also used to evaluate probability of collection. Our agreements
with customers do not contain product return rights.

Fees from licenses sold together with fee-based professional services are
generally recognized upon delivery of the software, provided that the payment
of the license fees are not dependent upon the performance of the services, and
the services are not essential to the functionality of the licensed software.
If the services are essential to the functionality of the software, or payment
of the license fees are dependent upon the performance of the services, both
the software license and service fees are recognized under the
percentage-of-completion method of contract accounting.

If the fee is not fixed or determinable, revenue is recognized as payments
become due from the customer. If a nonstandard acceptance period is required,
revenues are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period.

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The Company periodically enters into nonmonetary arrangements whereby the
Companys licenses or services are exchanged for services of its customer.
Nonmonetary revenue is recognized at the estimated fair value of the services
received. Generally, nonmonetary revenues equal nonmonetary expenses; however,
due to timing, nonmonetary accounts receivable and accounts payable may result.

Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. The statement requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. The statement is effective for fiscal years beginning after
June 15, 2002. The adoption of SFAS No. 143 is not expected to have a material
impact on the Companys financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies 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). This Statement
requires recognition of a liability for a cost associated with an exit or
disposal activity when the liability is incurred, as opposed to when the entity
commits to an exit plan under EITF No. 94-3. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The adoption of SFAS No. 146 is not expected to have a material impact on the
Companys financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents, and marketable securities totaled $11,063,000 at
September 30, 2002, down from $15,413,000 at December 31, 2001. Included in
cash and cash equivalents at September 30, 2002 and December 31, 2001, is
$293,000 and $291,000, respectively, of restricted cash, which was pledged as
collateral to secure a letter of credit, used for a security deposit on the
Companys New York facility.

Net cash used in operating activities of the Company totaled $4,928,000
and $11,335,000 for the nine months ended September 30, 2002 and 2001,
respectively. Net cash used in operating activities for the nine months ended
September 30, 2002 primarily resulted from a $18,678,000 net loss from
continuing operations, partially offset by $6,275,000 of impairment of goodwill
and other intangible assets, $4,173,000 in non-cash stock-based compensation
charges, $2,127,000 in depreciation and amortization, and $570,000 in
provision for bad debts. Net cash used in operating activities for the nine
months ended September 30, 2001 primarily resulted from a $36,120,000 net loss
from continuing operations, partially offset by $14,245,000 in depreciation and
amortization, $5,978,000 in net cash provided by discontinued operations, and
$5,354,000 in non-cash stock-based compensation charges.

Net cash provided by investing activities totaled $4,459,000 and
$11,446,000, for the nine months ended September 30, 2002 and 2001,
respectively. Net cash provided by investing activities for the nine months
ended September 30, 2002 primarily resulted from $5,218,000 in net proceeds
from sales and maturities of marketable securities partially offset by $712,000
for the purchase of property and equipment. Net cash provided by investing
activities for the nine months ended September 30, 2001 primarily resulted from
$11,825,000 in net proceeds from sales and maturities of marketable securities.

Net cash provided by financing activities totaled $1,370,000 and
$1,350,000 for the nine months ended September 30, 2002 and 2001, respectively,
primarily resulting from proceeds received from the exercise of stock options
by the Companys employees during the respective periods. During the nine
months ended September 30, 2001, net cash provided by financing activities was
partially offset by $575,000 of loans to officers.

Pursuant to the purchase of all of the outstanding capital stock of
Viewpoint Digital on September 8, 2000, the

20



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##### Table of Contents



Company issued two contingent promissory notes to Computer Associates each
in the maximum amount of $15,000,000, but subject to reduction on the basis of
the performance of the Viewpoint Digital assets. During 2001, the Company
entered into certain agreements with Computer Associates whereby Computer
Associates agreed to accept newly-issued shares of Viewpoint common stock
having a value of $4,000,000, in partial repayment of the first contingent
promissory note due June 8, 2001. In addition, Computer Associates agreed to
accept, at the Companys election, either cash or newly-issued shares of
Viewpoint common stock at an issue price of $4.00 per share in repayment of any
additional amounts due under the promissory note due June 8, 2001, and the
first $8,943,000 of the $15,000,000 contingent promissory note due April 30,
2002.

In June 2002, Viewpoint issued 909,093 shares of Viewpoint common stock to
Computer Associates in full satisfaction of the first contingent promissory
note due June 8, 2001. The amount due Computer Associates under the promissory
note due April 30, 2002 is approximately $2,928,000 and is reflected in due to
related parties in the Companys consolidated balance sheet at September 30,
2002.

The Company believes that its current cash, cash equivalents, and
marketable securities balances and cash provided by future operations, if any,
are sufficient to meet its operating cash flow needs and anticipated capital
expenditure requirements through at least the next twelve months. The Company
may seek additional funds before that time through public or private equity
financing or from other sources to fund our operations and pursue our growth
strategy. We have no commitment for additional financing, and we may
experience difficulty in obtaining additional financing on favorable terms, if
at all. Any financing we obtain may contain covenants that restrict our
freedom to operate our business or may have rights, preferences or privileges
senior to our common stock and may dilute our current shareholders ownership
interest in Viewpoint.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to concentration of credit risk and interest rate
risk related to cash, cash equivalents and marketable securities. The Company
does not have any derivative financial instruments as of September 30, 2002.
Credit risk is managed by limiting the amount of securities placed with any one
issuer, investing in high-quality marketable securities and securities of the
U.S. government and limiting the average maturity of the overall portfolio. The
majority of the Companys portfolio, which is classified as available-for-sale,
is comprised of fixed income securities that are subject to the risk of market
interest rate fluctuations, and all of the Companys securities are subject to
risks associated with the ability of the issuers to perform their obligations
under the instruments. The Company may suffer losses in principal if forced to
sell securities, which have declined in market value due to changes in interest
rates.




Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Within 90 days prior to the date of this report (the Evaluation Date), the
Companys President and Chief Executive Officer and Senior Vice President and
Chief Financial Officer, carried out an evaluation of the effectiveness of the
Companys disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)). Based on that evaluation,
these officers have concluded that as of the Evaluation Date, the Companys
disclosure controls and procedures were adequate and designed to ensure that
material information relating to the Company and the Companys consolidated
subsidiaries would be made known to them by others within those entities.

Changes in internal controls

There were no significant changes in the Companys internal controls, or to the
Companys knowledge, in other factors that could significantly affect the
Companys disclosure controls and procedures subsequent to the Evaluation Date.

21



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##### Table of Contents






PART II  OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

|               |  |                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Title                                                                                                          
|               |  |                                                                                                                        
|99.1           |  | Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|              
|              
|              
|              
|99.2           |  | Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

(b)  Reports on Form 8-K

None.

22



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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.

|                         |  |                       |  |                                                                   | 
|------------------------ |  | --------------------- |  | ----------------------------------------------------------------- | 
|                         |  | VIEWPOINT CORPORATION
|                        
|                        
|                        
|                        
|                         |  |                       |  |                                                                  
|                        
|                        
|                        
|                        
|Dated: November 14, 2002 |  | By:                   |  | /s/ ROBERT E. RICE                                               
|                         |  |                       |  |                                                                  
|                         |  |                       |  | Robert E. Rice
President and Chief Executive Officer             
|                        
|                        
|                        
|                        
|                         |  |                       |  |                                                                  
|                        
|                        
|                        
|                        
|Dated: November 14, 2002 |  | By:                   |  | /s/ ANTHONY L. PANE                                              
|                         |  |                       |  |                                                                  
|                         |  |                       |  | Anthony L. Pane
Senior Vice President and
Chief Financial Officer

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CERTIFICATIONS

I, Robert E. Rice, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Viewpoint
Corporation;

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.

|                         |  |     |  |                                                                        | 
|------------------------ |  | --- |  | ---------------------------------------------------------------------- | 
|Dated: November 14, 2002 |  | By: |  | /s/ ROBERT E. RICERobert E. Rice
President and Chief Executive Officer

24



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##### Table of Contents



I, Anthony L. Pane, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Viewpoint
Corporation;

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.

|                         |  |     |  |                                                                                      | 
|------------------------ |  | --- |  | ------------------------------------------------------------------------------------ | 
|Dated: November 14, 2002 |  | By: |  | /s/ ANTHONY L. PANEAnthony L. Pane
Senior Vice President and
Chief Financial Officer

25