Veramark Technologies, Inc. 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2006
Commission File Number 0-13898
Veramark Technologies, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
16-1192368 |
|
|
|
(State or other jurisdiction of
Incorporation or Organization)
|
|
(IRS Employer Identification Number) |
3750 Monroe Avenue, Pittsford, NY 14534
(Address of principal executive offices)(Zip Code)
(585) 381-6000
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer
o Accelerated filer o Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
YES o NO þ
The number of shares of Common Stock, $.10 par value, outstanding as of March 31, 2006 was
8,839,365.
INDEX
|
|
|
|
|
|
|
Page |
|
PART I FINANCIAL INFORMATION |
|
|
|
|
|
Item 1 Financial Statements |
|
|
|
|
|
Condensed Balance Sheets -
March 31, 2006 (Unaudited) and December 31, 2005 |
|
|
3 - 4 |
|
|
Condensed Statements of Operations (Unaudited)
Three Months Ended March 31, 2006 and 2005 |
|
|
5 |
|
|
Condensed Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2006 and 2005 |
|
|
6 - 7 |
|
|
Notes To Condensed Financial Statements (Unaudited) |
|
|
8 - 12 |
|
|
Item 2 Managements Discussion and Analysis of Financial
Condition and Results of Operations |
|
|
12 - 20 |
|
|
Item 3 Quantative and Qualitative Disclosures About Market Risk |
|
|
20 |
|
|
Item 4 Controls and Procedures |
|
|
20 |
|
|
PART II OTHER INFORMATION |
|
|
|
|
|
Item 5 Certification of Chief Executive Officer and Chief Accounting Officer |
|
|
21 |
|
|
Item 6 Exhibits |
|
|
21 |
|
|
Officers Certifications and Signatures |
|
|
22 - 26 |
|
2
VERAMARK TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
| |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
824,171 |
|
|
$ |
911,310 |
|
Investments |
|
|
611,459 |
|
|
|
600,324 |
|
Accounts receivable, trade (net
of allowance for doubtful accounts
of $43,000 and $32,000, respectively) |
|
|
1,581,928 |
|
|
|
1,522,190 |
|
Inventories, net |
|
|
57,176 |
|
|
|
31,724 |
|
Prepaid expenses and other current assets |
|
|
205,735 |
|
|
|
161,127 |
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
3,280,469 |
|
|
|
3,226,675 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
5,835,171 |
|
|
|
5,796,427 |
|
Less accumulated depreciation |
|
|
(5,078,552 |
) |
|
|
(5,025,761 |
) |
|
|
|
|
|
|
|
Property and Equipment (Net) |
|
|
756,619 |
|
|
|
770,666 |
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software development costs (net of
accumulated amortization of $2,622,409
and $2,373,896, respectively) |
|
|
2,951,222 |
|
|
|
2,826,644 |
|
Pension assets |
|
|
2,525,459 |
|
|
|
2,501,636 |
|
Deposits and other assets |
|
|
797,745 |
|
|
|
797,745 |
|
|
|
|
|
|
|
|
Total Other Assets |
|
|
6,274,426 |
|
|
|
6,126,025 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
10,311,514 |
|
|
$ |
10,123,366 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
3
VERAMARK
TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
224,048 |
|
|
$ |
275,756 |
|
Accrued compensation and related taxes |
|
|
428,314 |
|
|
|
565,096 |
|
Deferred revenue |
|
|
3,230,144 |
|
|
|
2,936,466 |
|
Other accrued liabilities |
|
|
143,593 |
|
|
|
135,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
4,026,099 |
|
|
|
3,912,748 |
|
|
|
|
|
|
|
|
|
|
Pension obligation |
|
|
4,547,770 |
|
|
|
4,424,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
8,573,869 |
|
|
|
8,337,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Common Stock, par value $.10; shares authorized,
40,000,000; shares issued and outstanding
8,919,590 and 8,917,840 |
|
|
891,959 |
|
|
|
891,784 |
|
Additional paid-in capital |
|
|
21,696,910 |
|
|
|
21,686,152 |
|
Accumulated deficit |
|
|
(20,470,872 |
) |
|
|
(20,413,395 |
) |
Treasury stock (80,225 shares, at cost) |
|
|
(385,757 |
) |
|
|
(385,757 |
) |
Accumulated other comprehensive income |
|
|
5,405 |
|
|
|
7,530 |
|
|
|
|
|
|
|
|
Total Stockholders Equity |
|
|
1,737,645 |
|
|
|
1,786,314 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
$ |
10,311,514 |
|
|
$ |
10,123,366 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
4
VERAMARK TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
NET SALES |
|
|
|
|
|
|
|
|
Product sales |
|
$ |
739,644 |
|
|
$ |
954,583 |
|
Service sales |
|
|
1,704,552 |
|
|
|
1,671,789 |
|
|
|
|
|
|
|
|
Total Net Sales |
|
|
2,444,196 |
|
|
|
2,626,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
524,339 |
|
|
|
440,051 |
|
Engineering and software development |
|
|
152,709 |
|
|
|
301,792 |
|
Selling, general and administrative |
|
|
1,832,639 |
|
|
|
1,971,107 |
|
|
|
|
|
|
|
|
Total Costs and Operating Expenses |
|
|
2,509,687 |
|
|
|
2,712,950 |
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(65,491 |
) |
|
|
(86,578 |
) |
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
|
|
8,014 |
|
|
|
1,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
|
(57,477 |
) |
|
|
(85,286 |
) |
|
|
|
|
|
|
|
|
|
INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(57,477 |
) |
|
$ |
(85,286 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
Diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
5
VERAMARK TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2006 |
|
|
2005 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(57,477 |
) |
|
$ |
(85,286 |
) |
Adjustments to reconcile net loss to net cash flows
provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
315,707 |
|
|
|
269,018 |
|
Expense (recovery) of bad debts |
|
|
11,000 |
|
|
|
(5,512 |
) |
Compensation expense-stock options (net of forfeitures) |
|
|
10,000 |
|
|
|
4,043 |
|
Increase in cash surrender value of company-owned life insurance
policies |
|
|
(23,823 |
) |
|
|
(23,822 |
) |
Realized gain (loss) on sale of investments |
|
|
(2,125 |
) |
|
|
1,537 |
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(70,738 |
) |
|
|
(68,443 |
) |
Inventories |
|
|
(25,452 |
) |
|
|
(5,668 |
) |
Prepaid expenses and other current assets |
|
|
(44,608 |
) |
|
|
(35,658 |
) |
Accounts payable |
|
|
(51,708 |
) |
|
|
(20,004 |
) |
Accrued compensation and related taxes |
|
|
(136,782 |
) |
|
|
(110,055 |
) |
Deferred revenue |
|
|
293,678 |
|
|
|
104,471 |
|
Other accrued liabilities |
|
|
8,163 |
|
|
|
(16,647 |
) |
Pension obligation |
|
|
123,466 |
|
|
|
160,969 |
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities |
|
|
349,301 |
|
|
|
168,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of investments |
|
|
(11,135 |
) |
|
|
(6,123 |
) |
Capitalized software development costs |
|
|
(373,091 |
) |
|
|
(280,454 |
) |
Additions to property and equipment |
|
|
(53,147 |
) |
|
|
(24,589 |
) |
|
|
|
|
|
|
|
Net cash flows used by investing activities: |
|
|
(437,373 |
) |
|
|
(311,166 |
) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITY: |
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
933 |
|
|
|
11,105 |
|
|
|
|
|
|
|
|
Net cash flows provided by financing activities |
|
|
933 |
|
|
|
11,105 |
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(87,139 |
) |
|
|
(131,118 |
) |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
911,310 |
|
|
|
722,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
824,171 |
|
|
$ |
590,902 |
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
Cash Transactions: |
|
|
|
|
|
|
|
|
Income taxes paid (received), net |
|
$ |
500 |
|
|
$ |
(3,000 |
) |
Interest paid |
|
$ |
83 |
|
|
$ |
|
|
The accompanying notes are an integral part of these financial statements.
7
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements include all adjustments of a normal and
recurring nature which, in the opinion of Companys management, are necessary to present fairly the
Companys financial position as of March 31, 2006, the results of its operations for the three
months ended March 31, 2006 and 2005, and cash flows for the three months ended March 31, 2006 and
2005.
Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. These condensed financial
statements should be read in conjunction with the financial statements and related notes contained
in the Companys annual report on Form 10-K to the Securities and Exchange Commission for the year
ended December 31, 2005.
The results of operations and cash flows for the three months ended March 31, 2006 are not
necessarily indicative of the results to be expected for the full years operation.
(2) PROPERTY AND EQUIPMENT
The major classifications of property and equipment at March 31, 2006, and December 31, 2005
were:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Machinery and equipment |
|
$ |
795,606 |
|
|
$ |
794,314 |
|
Computer hardware and software |
|
|
2,004,565 |
|
|
|
1,991,877 |
|
Furniture and fixtures |
|
|
1,652,441 |
|
|
|
1,627,677 |
|
Leasehold improvements |
|
|
1,382,559 |
|
|
|
1,382,559 |
|
|
|
|
|
|
|
|
|
|
$ |
5,835,171 |
|
|
$ |
5,796,427 |
|
|
|
|
|
|
|
|
For the quarter ended March 31, 2006, the Company recorded depreciation expense of $67,194.
Depreciation expense for the quarter ended March 31, 2005 was $67,755.
(3) |
|
STOCK-BASED COMPENSATION |
|
|
|
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R
requires all share-based payments to employees, including grants of employee stock options, to
be recognized as compensation expense in the financial statements based on their fair values.
That expense will be recognized over the period during which an employee is required to
provide services in exchange for the award, known as the requisite service period (usually the
vesting period). We adopted SFAS No. 123R effective beginning January 1, 2006, using the
Modified Prospective Application. SFAS No. 123R applies to the new awards modified,
repurchased or cancelled after the effective date. The impact of adopting SFAS No. 123R was
an increase of $10,000 to operating expenses for three months ended March 31, 2006. |
8
|
|
For the three months ended March 31, 2005, the following table includes disclosures required
by SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation Transition and Disclosure, and illustrates the
effect on net earnings and net earnings per share as if we had applied the fair value
recognition provisions of SFAS No. 123: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
2005 |
|
|
Net loss |
|
As reported |
|
$ |
(85,286 |
) |
Add: total stock-based
compensation expense included
in net income, net of
forfeitures and related tax
effects |
|
|
|
|
|
|
4,044 |
|
Deduct: total stock-based
compensation expense
determined under fair value,
net of forfeitures and related
tax effects |
|
|
|
|
|
|
(35,546 |
) |
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
$ |
(116,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share |
|
As reported |
|
|
|
|
|
| |
Basic |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
| |
Diluted |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
|
|
|
|
| |
Basic |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
| |
Diluted |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
Currently, the Companys primary type of share-based compensation consists of stock options,
generally vesting over four years. For the quarters ended March 31, 2006 and 2005, the company did
not issue any stock options.
A summary of the status of the Companys stock option plan as of March 31, 2006 is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Grant-Date |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
Fair Value |
|
|
Term (Yrs) |
|
|
Value |
|
Outstanding as of December 31, 2005 |
|
|
2,865,028 |
|
|
$ |
2.37 |
|
|
$ |
1.93 |
|
|
|
4.3 |
|
|
$ |
1,198,974 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,750 |
) |
|
|
0.53 |
|
|
|
|
|
|
|
|
|
|
|
(170 |
) |
Canceled |
|
|
(5,100 |
) |
|
|
2.76 |
|
|
|
|
|
|
|
|
|
|
|
(2,489 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2006 |
|
|
2,858,178 |
|
|
$ |
2.37 |
|
|
$ |
1.93 |
|
|
|
4.1 |
|
|
$ |
1,196,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at March 31, 2006 |
|
|
2,718,453 |
|
|
$ |
2.46 |
|
|
$ |
2.00 |
|
|
|
3.9 |
|
|
$ |
1,181,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
As of March 31, 2006, there was $53,900 of total unrecognized compensation cost related to
non-vested share-based compensation arrangements related to stock options granted under the Plan.
That cost is expected to be recognized over a weighted-average period of 1.1 years.
(4) |
|
TOTAL COMPREHENSIVE INCOME (LOSS) |
Total comprehensive loss for the first quarter of 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
Net loss |
|
$ |
(57,477 |
) |
|
$ |
(85,286 |
) |
Accumulated other
comprehensive income (loss) |
|
|
(2,125 |
) |
|
|
1,537 |
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
$ |
(59,602 |
) |
|
$ |
(83,749 |
) |
|
|
|
|
|
|
|
(5) |
|
NET INCOME (LOSS) PER SHARE (EPS) |
|
|
|
SFAS 128 Earnings Per Share requires the Company to calculate net income (loss) per share
based on basic and diluted net income (loss) per share, as defined. Basic EPS excludes
dilution and is computed by dividing net income (loss) by the
weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into
common stock. The dilutive effect of outstanding options issued by the Company are reflected
in diluted EPS using the treasury stock method. Under the treasury stock method, options
will only have a dilutive effect when the average market price of common stock during the
period exceeds the exercise price of the options. |
10
Calculations of Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(57,477 |
) |
|
$ |
(85,286 |
) |
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
8,838,373 |
|
|
|
8,673,998 |
|
|
|
|
|
|
|
|
Net loss per common share |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(57,477 |
) |
|
$ |
(85,286 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
8,838,373 |
|
|
|
8,673,998 |
|
|
|
|
|
|
|
|
|
|
Additional dilutive effect of stock options and
warrants after application of treasury stock method |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average dilutive shares outstanding |
|
|
8,838,373 |
|
|
|
8,673,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share assuming full obligation |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
There were no dilutive effects of stock options in 2006 or 2005, as the effect would be
anti-dilutive due to the net losses incurred.
(6) |
|
INDEMNIFICATION OF CUSTOMERS |
|
|
|
Our agreements with customers generally require us to indemnify the customer against claims
that our software infringes third party patent, copyright, trademark or other proprietary
rights. Such indemnification obligations are generally limited in a variety of
industry-standard respects, including our right to replace an infringing product. As of
March 31, 2006 we had not experienced any material losses related to these indemnification
obligations and no material claims with respect thereto were outstanding. We do not expect
significant claims related to these indemnification obligations, and consequently, we have
not established any related reserves. |
(7) |
|
BENEFIT PLANS |
|
|
|
The Company sponsors an employee incentive savings plan under Section 401(k) for all eligible
employees. The Companys contributions to the plan are discretionary. There were no
contributions to the plan for the three months ended March 31, 2006 and 2005. |
11
|
|
The Company also sponsors an unfunded Supplemental Executive Retirement Program (SERP),
which is a non-qualified plan that provides certain key employees defined pension benefits.
Periodic pension expense for the three months ended March 31, 2006 and 2005 consists of the
following: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2006 |
|
|
2005 |
|
Current Service Cost |
|
$ |
69,503 |
|
|
$ |
114,248 |
|
Amortization of Prior Service Cost |
|
|
22,123 |
|
|
|
22,650 |
|
Interest Cost |
|
|
73,374 |
|
|
|
65,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Expense |
|
$ |
165,000 |
|
|
$ |
202,503 |
|
|
|
|
|
|
|
|
The Company paid pension obligations of $41,534 for both the three months ended March 31,
2006 and 2005.
The discount rate used in determining the actuarial present value of the projected benefit
obligation was 6% for the three months ended March 31, 2006 and 2005.
The Company maintains life insurance covering certain key employees under its Supplemental
Executive Retirement Program with the Company named as beneficiary. The Company intends to
use the death benefits of these policies, as well as loans against the accumulating cash
surrender value of the policies, to fund future pension obligations. The total death benefit
associated with these policies is $10.2 million, with an associated accumulated cash
surrender value of approximately $2,525,000 at March 31, 2006. The accumulated cash surrender
values of these policies at December 31, 2005 was approximately $2,502,000.
Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Managements Discussion and Analysis contains statements that are forward-looking. Such
statements are identified by the use of words like plans, expects, intends, believes,
will, anticipates, estimates and other words of similar meaning in conjunction with, among
other things, discussions of future operations, financial performance, the Companys strategy for
growth, product development, regulatory approvals, market position and expenditures.
Forward-looking statements are based on managements expectations as of the date of this report.
The Company cannot guarantee that any forward-looking statement will be accurate, although the
Company believes that it has been reasonable in its expectations and assumptions. Forward-looking
statements are subject to the risks identified in Issues and Risks and elsewhere in this report.
Readers are cautioned not to place undue reliance on forward-looking statements and are advised to
review the risks identified in Issues and Risks and elsewhere in this report. The Company has no
obligation to update forward-looking statements.
Overview
Sales for Veramarks first quarter ended March 31, 2006 were $2,444,000 which compared with sales
of $2,626,000 for the first quarter ended March 31, 2005. The net loss of $57,000, or $0.01 per
share, incurred for the quarter ended March 31, 2006 represents a slight improvement from the loss
of $85,000, also $0.01 per share, for the same quarter of 2005.
12
Significant progress was made in terms of filling key sales and marketing positions. During the
first quarter we added four new employees to our sales team, two of whom will be focused on channel
sales of telemanagement products, primarily eCAS, and two chartered with increasing direct sales of
VeraSMART. In addition, our marketing capabilities have been strengthened with the addition of a
Director of Business Development and Marketing, and a Director of International Business
Development. We will continue our efforts to recruit additional sales and marketing personnel
during the remainder of 2006.
Orders booked for the quarter ended March 31, 2006 were $2,643,000, an increase of 14% from orders
booked of $2,319,000 for the first quarter of 2005. We are pleased with that increase as the first
quarter has traditionally been the weakest quarter in terms of orders for the Company.
For the first quarter of 2006 we did experience a net cash and investment outflow of $76,000. The
decrease was primarily the result of a $60,000 increase in accounts receivable combined with an
$188,000 decrease in accounts payable and accrued compensation from December 31, 2005 balances.
Sales
For the quarter ended March 31, 2006 sales of VeraSMART, the Companys enterprise level product
increased 20% from sales achieved for the first quarter of 2005. New VeraSMART customers included
the Federal Emergency and Management Agency (FEMA), Hearst Corporation, KPMG Peat Marwick LLP, ING
Reliastar, and Comcast Cable Communications.
Sales revenues generated from existing maintenance contracts for Quantum, VeraSMARTs predecessor
product, declined 17% for the first quarter of 2006 from the prior year. This decrease was
anticipated as we continue to phase out support for the discontinued Quantum product line, and
encourage the transition of existing Quantum customers to the VeraSMART platform.
Sales of eCAS, our core telemangement product which is sold primarily on a direct basis to Avaya,
Inc. or through Avayas master distribution channels, declined 29% for the first quarter of 2006 as
compared with the first quarter of 2005. We feel that the decreased sales activity in this heavily
competitive market segment can be addressed by strengthening our sales and marketing resources from
the level that existed during the fourth quarter of 2005 and continuing into the earlier stages of
the first quarter of 2006. Subsequent to the end of the first quarter we announced the renewal of
our OEM Resellers Agreement with Avaya. Pursuant to the agreement Veramark and Avaya will continue
their long established relationship of providing Avaya customers with Veramarks eCAS call
accounting software under the Avaya brand name.
Sales derived from the Companys Outsourced Solution Group decreased 3% in the first quarter of
2006 from the same quarter of 2005, though increased 6% from the fourth quarter of 2005. The
comparison to last years first quarter is inclusive of the loss of a major client at the end of the
first quarter of 2005 as a result of a merger/consolidation. Major clients currently served by
Veramarks Outsourced Solutions Group include St.Paul /Travelers Insurance, Sony Corporation, Bank
of America/Fleet Bank, and a division of Lockheed Martin.
Cost of Sales
For the quarter ended March 31, 2006 gross margin (defined as sales minus cost of sales) was
$1,920,000, or 79% of sales. This compares with a gross margin of $2,186,000, or 83% of sales for
the quarter ended March 31, 2005. The reduction in gross margin results from a combination of the
lower sales volume in the first quarter
13
of 2006 as compared with the prior year, and an increase in amortization and direct overhead costs
charged to cost of sales for those respective periods.
Operating Expenses
Engineering and software development expenses, net of the capitalization of development costs,
decreased 49% from $302,000 for first quarter of 2005 to $153,000 for the first quarter of 2006.
The below table summarizes for the three months ended March 31, 2006 and 2005 gross engineering
costs, development costs capitalized, costs amortized, and the resulting impact on the Companys
Statements of Operations for those respective periods.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Gross expenditures for engineering and software development |
|
$ |
526,000 |
|
|
$ |
582,000 |
|
|
Less: Software development costs capitalized |
|
|
(373,000 |
) |
|
|
(280,000 |
) |
|
|
|
|
|
|
|
|
Net expenses for engineering and software development included in the
Companys statement of operations |
|
|
153,000 |
|
|
|
302,000 |
|
|
Plus: Software development costs amortized and charged to cost of sales |
|
|
249,000 |
|
|
|
201,000 |
|
|
|
|
|
|
|
|
|
Total Expense Recognized |
|
$ |
402,000 |
|
|
$ |
503,000 |
|
|
|
|
|
|
|
|
Engineering and software development efforts throughout the first quarter of 2006 continued to be
focused on further expansion of the VeraSMART product, and the continued strengthening of eCAS
functionality. In early March of this year we announced the general availability of Release 4.0 of
eCAS. This latest release of eCAS includes expanded reporting and graphics packages, improved
alerting, more robust data import functionality, and greater auditing capabilities. Development
also continues on the next release of VeraSMART which will be a fully integrated Assets/Inventory
module, currently scheduled for a fourth quarter 2006 release.
Selling, general and administrative expenses of $1,833,000 for the quarter ended March 31, 2006
decreased 7% or $138,000 from expenses of $1,971,000 for the quarter ended March 31, 2005. Expenses
for 2006 versus 2005 declined in all functional areas encompassing Marketing ($60,000), Sales
($26,000), Support and Service ($19,000) and Administration ($34,000). Significant expense
reductions were realized in legal and professional costs, trade show expenses incurred and facility
costs. It is expected that selling, general, and administrative costs will increase throughout the
balance of 2006 due to the additional staffing added during the first quarter of the year, and the
anticipated hiring of additional staff contemplated for the remainder of 2006.
Liquidity and Capital Resources
Veramarks total cash and investment position, consisting of cash in the bank and the value of
short term investments, was $1,436,000 at March 31, 2006 which compares with $1,512,000 at December
31, 2005 and $978,000 at March 31, 2005. The decrease in the cash and investment balance from
December 31, 2005 was
14
attributable to an increase of $60,000 in accounts receivable and a $188,000 reduction in accounts
payable and accrued compensation.
As noted above, accounts receivable increased $60,000 during the first quarter from $1,522,000 at
December 31, 2005 to $1,582,000 March 31, 2006. The increase in accounts receivable results from a
balance due from a single customer that is over 90 days past due. The company does not expect the
ultimate collection of this invoice to be problematic and payment is expected in May. Merely as a
precaution and acknowledgement of the higher accounts receivable balance we have increased our
reserve for bad debts from $32,000 at December 31, 2005 to $43,000 at March 31, 2006.
Inventories increased from $32,000 at December 31, 2005 to $57,000 at March 31, 2006 due to the
purchase of pollable storage devices utilized in the collection and storage of customer call
records required of larger customer installations with multi-site locations. It is not expected
that inventories will increase by a significant amount over the remainder of 2006.
Prepaid expenses and other current asset total $206,000 at December 31, 2006 increased from
$161,000 at December 31, 2005. The increase reflects first quarter premium payments associated with
the renewal of a series of business insurance policies, the economic benefit of which will extend
through December 31, 2006.
Capital equipment additions for the quarter ended March 31, 2006 totaled $53,000. Capital equipment
additions for the first quarter of 2005 totaled $25,000. During the quarter we disposed of $14,000
of outdated equipment, all of which had been fully depreciated.
Software development costs capitalized and carried on the Companys balance sheet at March 31, 2006
are $2,951,000 versus $2,827,000 at December 31, 2005. During the first quarter of 2006 we
capitalized $373,000 of software development costs and amortized $249,000 of previously capitalized
development costs. All of the development costs capitalized in the first quarter of 2006 relate to
additional functionality being applied to the VeraSMART product suite.
Pension assets of $2,525,000 at March 31, 2006 and $2,502,000 at December 31, 2005 consists of the
cash surrender values of company owned life insurance policies, the death benefit and accumulated
cash surrender values of which are designed to fund future pension obligations. These cash
surrender values are also available to fund current operations of the Company in the event that was
deemed appropriate. Management has no current plans, nor does it anticipate the need in the near
future to access these funds to meet operating requirements.
Current liabilities total $4,026,000 at March 31, 2006 as compared with $3,913,000 at December 31,
2005. While liabilities for accounts payable and accrued compensation were reduced by a combined
total of $188,000 during the first quarter, total current liabilities rose as a result of an
increase in deferred revenues of $294,000. Deferred revenues represent services for which we have
billed customers but for which we have not yet performed the contracted service, and therefore have
not recognized the associated revenue. These services typically include maintenance and support
contracts, training and installation. The vast majority of the currently deferred revenues will be
recognized as revenue over the next twelve months as those services are provided.
Stockholders Equity of $1,738,000 at March 31, 2006 compares with total stockholders equity of
$1,786,000 at December 31, 2005, primarily reflecting the net loss incurred for the quarter of
$57,000
15
It is managements opinion, that given our current cash and investment position, the access to cash
surrender values of company-owned insurance policies if necessary and the absence of debt, that the
Company has sufficient resources to fully fund operations and support product development schedules
for the next twelve month and beyond.
Accounting Pronouncements
|
1) |
|
In December 2003, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 104, Revenue Recognition, which updates the guidance in
SAB No. 101, integrates the related set of Frequently Asked Questions, and recognizes the
role of EITF 00-21. The adoption of SAB No. 104 did not have a material effect on the
Companys financial statements. |
|
|
2) |
|
In November 2002, the Emerging Issues Task Force reached a consensus on Issue No.
00-21, Revenue Arrangements with Multiple Deliverables. Issue 00-21 provides guidance on
how to account for arrangements that involve the delivery or performance of multiple
products, services and/or rights to use assets. The provisions of Issue 00-21 applied to
revenue arrangements entered into in periods beginning after June 15, 2003. The adoption
of Issue 00-21 did not have a material effect on the Companys financial position or
results of operations. |
|
|
3) |
|
In December 2004, the FASB issued SFAS 123(R), Share-Based Payment, which establishes
standards for transactions in which an entity exchanges its equity instruments for goods or
services. This standard requires an issuer to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date fair value
of the award and the recording of such expense in the consolidated financial statements.
This eliminates the exception to account for such awards using the intrinsic value method
previously allowable under Accounting Principles Board (APB) Opinion No. 25. Pro forma
disclosure of fair value recognition will no longer be an alternative. In addition, the
adoption of SFAS No. 123(R) will require additional accounting related to the income tax
effects and disclosure regarding the cash flow effects resulting from share-based payment
arrangements. |
|
|
|
|
SFAS 123(R) permits public companies to adopt its requirements using one of two methods: |
Modified prospective method: Compensation cost is recognized beginning with the
effective date of adoption (a) based on the requirements of SFAS No. 123(R) for all
share-based payments granted after the effective date of adoption and (b) based on the
requirements of SFAS 123 for all awards granted to employees prior to the effective
date of adoption that remain unvested on the date of adoption.
Modified retrospective method: Includes the requirements of the modified prospective
method described above, but also permits restatement using amounts previously
disclosed under the pro forma provisions of SFAS No. 123 either for (a) all periods
presented or (b) prior interim periods of the year of adoption. In March 2005, the SEC
released Staff Accounting Bulletin (SAB) 107, Share-Based Payment, which expresses
views of the SEC Staff about the application of SFAS No. 123(R). In April 2005, the
SEC issued a rule that SFAS No. 123(R) will be effective for annual reporting periods
beginning on or after June 15, 2005.
SFAS 123(R) was effective for our first quarter of fiscal 2006 and we utilized the modified
prospective method. We have selected the Black-Scholes option-pricing model as the most
appropriate fair-value
16
method for our awards and will recognize compensation cost on a straight-line basis over our
awards vesting periods. Although the adoption of SFAS No. 123(R) had no adverse impact on
our balance sheet or total cash flows, it is expected to negatively impact our net income and
earnings per share for 2006 by approximately $50,000. The actual effects of adopting SFAS
No. 123(R) will depend on numerous factors including the amounts of share-based payments
granted in the future, our stock price volatility, estimated forfeiture rates and employee
stock option exercise behavior.
|
4) |
|
In December 2004, FASB issued SFAS 153, Exchanges of Nonmonetary Assetsan amendment
to APB Opinion No. 29. This statement amends APB 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. Adoption of this statement is not
expected to have a material impact on our results of operations or financial condition. |
|
|
5) |
|
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections
a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154
changes the requirements for the accounting for and reporting of a change in accounting
principle. These requirements apply to all voluntary changes and changes required by an
accounting pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. SFAS 154 is effective for fiscal years beginning after
December 15, 2005. As such, the Company is required to adopt these provisions at the
beginning of the fiscal year ended December 31, 2006. Adoption of SFAS 154 is not expected
to have a significant impact on the Companys financial statements. |
Critical Accounting Policies
The preparation of financial statements requires management to make estimates and assumptions
that affect amounts reported therein. The most significant of these involving difficult or complex
judgments in 2005 include:
|
|
|
Revenue recognition |
|
|
|
|
Capitalization of software development costs |
|
|
|
|
Allowance for Doubtful Accounts |
|
|
|
|
Pension liability |
In each situation, management is required to make estimates about the effects of matters or
future events that are inherently uncertain.
The Companys revenue consists of revenues from the licensing of software to resellers and end
user customers; fees for services rendered to include installation, training, implementation, and
customer maintenance contracts; and the outsourcing or hosting of services.
The Company recognizes software license revenue under Statement of Position No 97-2 Software
Revenue Recognition as amended by Statement of Position No. 98-9, Software Revenue Recognition
With Respect to Certain Transactions, Emerging Issues Task Force 00-21, Revenue Arrangements with
Multiple Deliverables, and related interpretations.
Sales of licensed software sold directly to an end user customer are recognized as revenue
upon delivery and installation of the software at the customer site. Sales of licensed software to
a reseller are recognized as
17
revenue when delivery is made to the reseller. Regardless of the form of sale no revenue is
recognized without persuasive evidence of an arrangement existing. Persuasive evidence is
determined to be a signed purchase order received from the customer or an equivalent form for those
customers lacking a formalized purchase order system. In the case of VeraSMART sales, a software
license agreement signed by both parties is often required in addition to a purchase order or
equivalent. Additionally, revenue is only recognized when a selling price is fixed or determinable
and collectibility of the receivable is deemed to be probable.
Service revenues such as training, installation and implementation are recognized when the
service is complete and acknowledged by the customer, regardless as to whether the sale is on a
direct basis or through a reseller arrangement.
Fees charged to customers for post-contract Customer Support are recognized ratably over the
term of the contract. Costs related to maintenance obligations are expensed as incurred.
Sales which constitute a multiple-element arrangement are accounted for by determining if the
elements can be accounted for as separate accounting units, and if so, by applying values to those
units for which there is vendor specific objective evidence of their fair value. We use the
residual method to apply any remaining balance to the remaining elements of the arrangement. More
specifically, this methodology applies when there is embedded maintenance (post-contract customer
support) involved in the sale of a software license, or when the sale of a software license is made
in conjunction with installation services. In the latter case, the recognition of the software
license is deferred until installation is completed.
The Companys revenues generated through hosting solutions are recognized using the
proportional performance method. Revenues are recognized in the month services are rendered and
earned under service agreements with clients where service fees are fixed or determinable.
Contracts can be terminated with 90 days written notice. All services provided by us through the
date of cancellation are due and payable under the contract terms.
The Company believes its revenue recognition policies are appropriate, in all circumstances,
and that its policies are reflective of complexities arising from customer arrangements involving
such features as maintenance, warranty agreements, license agreements, and other normal course of
business arrangements.
The Company capitalizes software development costs when technological feasibility has been
established for the software in accordance with SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed. Such capitalized costs are amortized on a
product-by-product basis over their economic life or the ratio of current revenues to current and
anticipated revenues from such software, whichever provides the greater amortization. The Company
periodically reviews the carrying value of capitalized software development costs and impairments
are recognized in the results of operations when the expected future undiscounted operating cash
flow derived from the capitalized software is less than its carrying value. Should the Company
inaccurately determine when a product reaches technological feasibility or the economic life of a
product, results could differ materially from those reported. Veramark uses what it believes are
reasonable assumptions and where applicable, established valuation techniques in making its
estimates.
The Company maintains allowances for doubtful accounts for estimated losses resulting from the
potential inability of its customers to make required payments. Management specifically analyzes
accounts receivable, historical bad debts, credit concentrations and customer payment terms when
evaluating the adequacy of the allowance for doubtful accounts.
18
The Company sponsors an unfunded Supplemental Executive Retirement Program (SERP), which is a
nonqualified plan that provides certain key employees a defined pension benefit. In order to
properly record the net present value of future pension obligations a number of assumptions are
required to be made by Companys management. These assumptions include years of service, life
expectancies, and projected future salary increases for each participant. In addition, management
must make assumptions with regard to the proper long-term interest and liability discount rates to
be applied to these future obligations.
Should the Company need to alter any of these assumptions, there is the potential for
significant adjustments to future projected pension liabilities.
Issues and Risks
The following factors, among others discussed herein and in the Companys filings under the
Act, could cause actual results and future events to differ materially from those set forth
or contemplated in the forward-looking statements: economic, competitive, governmental and
technological factors, increased operating costs, failure to obtain necessary outside
financing, risks related to natural disasters and financial market fluctuations. Such
factors also include:
Intellectual Property Rights
Veramark regards its software as proprietary and attempts to protect it with a combination of
copyright, trademark and trade secret protections, employee and third-party non-disclosure
agreements and other methods of protection. Despite those precautions, it may be possible for
unauthorized third parties to copy certain portions of Veramarks products, reverse engineer
or obtain and use information that Veramark regards as proprietary. The laws of some foreign
countries do not protect Veramarks proprietary rights to the same extent as the laws of the
United States. Any misappropriation of Veramarks intellectual property could have a
material adverse effect on its business and results of operations. Furthermore, although
Veramark take steps to prevent unlawful infringement of others intellectual property, there
can be no assurance that third parties will not assert infringement claims against Veramark
in the future with respect to current or future products. Any such assertion could require
Veramark to enter into royalty arrangements or result in costly litigation.
New Products and Services
Veramark has made significant investments in research, development and marketing for new
products, services and technologies, including the VeraSMART® software offering and its
service bureau outsourced solutions. Significant revenue from new product and service
investments may not be achieved for a number of years, if at all. Moreover, if such
products or services are profitable, operating margins may not be as high as the
margins historically experienced by Veramark.
Declines in Demand for Software
If overall market if demand for software and computer devices generally, as well as call
accounting software or enterprise level products specifically, declines, or corporate
spending for such products declines, Veramarks revenue will be adversely affected.
Additionally, Veramarks revenues would be unfavorably impacted if customers reduce their
purchases of new software products or upgrades to existing products.
19
Product Development Schedule
The development of software products is a complex and time-consuming process. New products
and enhancements to existing products can require long development and testing periods.
Significant delays in new product releases or significant problems in creating new products,
particularly any delays in future releases of the VeraSMART® suite of products, could
adversely affect Veramark revenues.
Competition
Veramark experiences intensive competition across all markets for its products and services.
Some competing firms have greater name recognition and more financial, marketing and
technological resources than Veramark. These competitive pressures may result in decreased
sales volumes, price reductions, and/or increased operating costs, such as for marketing and
sales incentives, resulting in lower revenues, gross margins and operating income.
Marketing and Sales
Veramarks marketing and distribution strategy is founded on building mutually beneficial
relationships with companies that have established distribution networks. Some sell
privately labeled, customized products developed and manufactured by Veramark to their
specific specifications, while others resell Veramarks products. Any loss of the continued
availability of those relationships could have a material adverse effect on Veramarks
business and results of operations.
Item 3 Quantitative and Qualitative Disclosures About Market Risk
The Company has no long-term bank debt obligations. The Company has no foreign currency
exchange risk and has no foreign currency exchange contracts.
Item 4 Controls and Procedures
Based upon an evaluation as of the end of the period covered by this report, the Companys
Chief Executive Officer and Treasurer (Chief Accounting Officer) concluded that the Companys
disclosure controls and procedures are effective to provide reasonable assurance that information
required to be disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported, within the
time periods specified in the SECs rules and forms and (ii) accumulated and communicated to the
Companys management, including its principal executive and principal financial officers, or
persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. There have been no changes in the Companys internal controls over financial reporting,
that occurred during the period covered by this report, that have materially affected, or are
reasonably likely to materially affect the Companys internal controls over financial reporting.
The Companys disclosure controls and procedures and internal controls over financial
reporting provide reasonable, but not absolute, assurance that all deficiencies in design or
operation of those control systems, or all instances of errors or fraud, will be prevented or
detected. Those control systems are designed to provide reasonable assurance of achieving the goals
of those systems in light of the Companys resources and nature of the Companys business
operations. The Companys disclosure controls and procedures and internal control over financial
reporting remain subject to risks of human error and the risk that controls can be circumvented for
wrongful purposes by one or more individuals in management or non-management positions.
20
PART II OTHER INFORMATION
Item 5: Certification of Chief Executive Officer and Chief Accounting Officer
The Companys Chief Executive Officer and the Companys Chief Accounting Officer have
provided the certifications with respect to this Form 10-Q that are required by Sections
302 and 906 of the Sarbanes-Oxley Act of 2002. These certifications have been filed as
Exhibits 31.1 and 31.2 and Exhibits 32.1 and 32.2, respectively.
Item 6: Exhibits and Reports on Form 8-K
|
(a) |
|
Exhibits required by Item 601 of Regulation S-K |
(I) Registrants Condensed Financial Statements for the three months ended March 31,
2006 and 2005 are set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
(31.1) CEO Certification Pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2) Treasurer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1) CEO Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2) Treasurer Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
VERAMARK TECHNOLOGIES, INC.
REGISTRANT
Date: May 12, 2006
|
|
|
/s/ David G. Mazzella
David G. Mazzella
|
|
|
President and CEO |
|
|
|
|
|
Date: May 12, 2006 |
|
|
|
|
|
/s/ Ronald C. Lundy
Ronald C. Lundy
|
|
|
Treasurer (Chief Accounting Officer) |
|
|
22