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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2003.
or
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission file number: 0-25940
WIRE ONE TECHNOLOGIES, INC.
(Exact Name of registrant as Specified in its Charter)
Delaware 77-0312442
(State or other Jurisdiction of (I.R.S. Employer Number)
Incorporation or Organization)
225 Long Avenue, Hillside, New Jersey 07205
(Address of Principal Executive Offices)
973-282-2000
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 |X| No |_|
Check whether the registrant is an accelerated filer as defined in Rule
12b-2 of the Exchange Act of 1934.
Yes |_| No |X|
The number of shares outstanding of the registrant's Common Stock as of
May 6, 2003 was 29,141,190.
WIRE ONE TECHNOLOGIES, INC
Index
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
March 31, 2003 and December 31, 2002........................... 1
Consolidated Statements of Operations
For the Three Months Ended March 31, 2003 and 2002............. 2
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2003 and 2002............. 3
Notes to Consolidated Financial Statements......................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk......... 16
Item 4. Controls and Procedures............................................ 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 16
Item 2. Changes in Securities and Use of Proceeds.......................... 16
Item 3. Defaults Upon Senior Securities.................................... 16
Item 4. Submission of Matters to a Vote of Security Holders................ 16
Item 5. Other Information.................................................. 16
Item 6. Exhibits and Reports on Form 8-K................................... 16
Signatures................................................................. 17
Certifications............................................................. 18
Wire One Technologies, Inc.
Consolidated Balance Sheets
(Unaudited)
March 31, 2003 December 31, 2002
-------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents ........................................... $ 656,707 $ 2,762,215
Accounts receivable-net ............................................. 22,873,348 25,441,557
Inventory-net ....................................................... 7,009,204 8,122,996
Net assets of discontinued operations ............................... 3,113,964 5,291,327
Other current assets ................................................ 3,236,339 2,392,216
------------- -------------
Total current assets ...................................... 36,889,562 44,010,311
Furniture, equipment and leasehold improvements-net ....................... 14,380,595 14,196,679
Goodwill .................................................................. 2,547,862 2,547,862
Other assets .............................................................. 715,547 746,812
------------- -------------
Total assets .............................................. $ 54,533,566 $ 61,501,664
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 8,146,168 $ 9,049,961
Accrued expenses .................................................... 1,657,631 2,122,813
Deferred revenue .................................................... 7,884,035 7,871,268
Current portion of capital lease obligations ........................ 125,991 25,874
------------- -------------
Total current liabilities ................................. 17,813,825 19,069,916
------------- -------------
Non-current liabilities:
Bank loan payable ................................................... 3,521,578 5,845,516
Capital lease obligations, less current portion ..................... 53,901 --
------------- -------------
Total non-current liabilities ............................ 3,575,479 5,845,516
------------- -------------
Total liabilities ................................... 21,389,304 24,915,432
------------- -------------
Commitments and contingencies
Subordinated debentures ................................................... 4,888,000 4,888,000
Discount on subordinated debentures ....................................... (4,353,375) (4,888,000)
------------- -------------
Subordinated debentures, net ........................................ 534,625 --
------------- -------------
Stockholders' Equity:
Preferred stock, $.0001 par value;
5,000,000 shares authorized, none issued ................ -- --
Common Stock, $.0001 par value; 100,000,000 authorized;
29,125,368 and 28,931,660 shares issued, respectively .... 2,913 2,893
Treasury stock, 39,891 shares at cost ............................... (239,742) (239,742)
Additional paid-in capital .......................................... 131,805,026 131,132,374
Accumulated deficit ................................................. (98,958,560) (94,309,293)
------------- -------------
Total stockholders' equity ................................ 32,609,637 36,586,232
------------- -------------
Total liabilities and stockholders' equity ................ $ 54,533,566 $ 61,501,664
============= =============
See accompanying notes to consolidated financial statements.
1
Wire One Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31,
----------------------------
2003 2002
------------ ------------
Revenues
Video Solutions
Equipment .......................................... $ 14,528,405 $ 14,438,325
Service ............................................ 3,747,432 3,654,439
Video Network ........................................... 2,226,858 1,099,421
------------ ------------
20,502,695 19,192,185
------------ ------------
Cost of revenues
Video Solutions
Equipment .......................................... 11,582,078 10,316,066
Service ............................................ 2,030,549 1,774,477
Video Network ........................................... 2,294,287 969,541
------------ ------------
15,906,914 13,060,084
------------ ------------
Gross margin
Video Solutions
Equipment .......................................... 2,946,327 4,122,259
Service ............................................ 1,716,883 1,879,962
Video Network ........................................... (67,429) 129,880
------------ ------------
4,595,781 6,132,101
------------ ------------
Operating expenses
Selling ................................................. 5,850,942 6,446,554
General and administrative .............................. 1,653,089 1,803,637
------------ ------------
Total operating expenses ..................................... 7,504,031 8,250,191
------------ ------------
Loss from continuing operations .............................. (2,908,250) (2,118,090)
------------ ------------
Other (income) expense
Amortization of deferred financing costs ................ 45,509 13,757
Interest income ......................................... (5,189) (19,330)
Interest expense ........................................ 373,050 26,239
Amortization of discount on subordinated debentures ..... 534,625 --
------------ ------------
Total other expenses, net .................................... 947,995 20,666
------------ ------------
Net loss from continuing operations .......................... (3,856,245) (2,138,756)
Loss from discontinued AV operations ......................... (793,022) (419,752)
------------ ------------
Net loss attributable to common stockholders ................. $ (4,649,267) $ (2,558,508)
============ ============
Net loss from continuing operations per share:
Basic and diluted ....................................... $ (0.13) $ (0.08)
============ ============
Loss from discontinued AV operations per share:
Basic and diluted ....................................... $ (0.03) $ (0.01)
============ ============
Net loss attributable to common stockholders per share:
Basic and diluted ....................................... $ (0.16) $ (0.09)
============ ============
Weighted average number of common shares:
Basic and diluted ....................................... 29,029,894 28,232,809
============ ============
See accompanying notes to consolidated financial statements.
2
Wire One Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
----------------------------
2003 2002
------------ ------------
Cash flows from Operating Activities
Net loss .................................................................... $ (4,649,267) $ (2,558,508)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization ............................................. 1,756,285 1,195,110
Amortization of deferred financing costs .................................. 45,509 13,757
Amortization of discount on subordinated debentures ....................... 534,625 --
Non-cash compensation ..................................................... 243,543 105,704
Increase (decrease) in cash attributable to changes in assets and
liabilities, net of effects of acquisitions:
Accounts receivable .............................................. 2,568,209 4,150,623
Inventory ........................................................ 496,260 (599,178)
Net assets of discontinued AV operations ......................... 2,177,363 --
Other current assets ............................................. (995,185) (2,578,580)
Other assets ..................................................... (8,471) (140,739)
Accounts payable ................................................. (903,793) (2,876,584)
Accrued expenses ................................................. (465,182) (1,339,915)
Deferred revenue ................................................. 12,767 (1,029,798)
Other current liabilities ........................................ -- (1,465,049)
------------ ------------
Net cash provided by (used in) operating activities .......... 812,663 (7,123,157)
------------ ------------
Cash flows from Investing Activities
Purchases of furniture, equipment and leasehold improvements ......... (515,275) (1,295,128)
Costs related to acquisition of business including cash acquired ..... -- (2,253)
------------ ------------
Net cash used by investing activities ........................ (515,275) (1,297,381)
------------ ------------
Cash flows from Financing Activities
Proceeds from common stock offering ....................................... -- 20,257,962
Costs of issuance of subordinated debentures .............................. (36,316) --
Exercise of warrants and options, net ..................................... 41,214 355,344
Proceeds from bank loans .................................................. 25,788,354 3,018,910
Payments on bank loans .................................................... (28,112,292) (13,646,992)
Deferred financing costs .................................................. (5,774) --
Payments on capital lease obligations ..................................... (78,082) (17,669)
------------ ------------
Net cash provided by (used in) financing activities .......... (2,402,896) 9,967,555
------------ ------------
Increase (decrease) in cash and cash equivalents ............................... (2,105,508) 1,547,017
Cash and cash equivalents at beginning of period ............................... 2,762,215 1,689,451
------------ ------------
Cash and cash equivalents at end of period ..................................... $ 656,707 $ 3,236,468
============ ============
Supplement disclosures of cash flow information:
Cash paid during the period for:
Interest .................................................................. $ 72,873 $ 26,239
============ ============
Taxes ..................................................................... $ -- $ --
============ ============
Non-cash financing and investing activities:
Equipment with costs totaling $232,100 was acquired under capital lease
arrangements during the three months ended March 31, 2003.
See accompanying notes to consolidated financial statements.
3
WIRE ONE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
Note 1 -- The Business
Wire One Technologies, Inc. is a single source provider of video products and
services that assists customers located principally in the United States with
systems design and engineering, procurement, installation, operation and
maintenance of their video communications systems. The Company offers its
customers video communications products from leading manufacturers such as
Polycom (which distributes products under the Polycom, PictureTel and Accord
brands, among others), Tandberg, RADVision, Cisco Systems and Sony and provides
a comprehensive suite of video and data services including engineering,
installation, customized training, on-site technical assistance and maintenance.
The Company also operates its Glowpoint network subscriber service, which
provides its customers with two-way video communications with high quality of
service utilizing an Internet network and broadband access dedicated solely to
transporting video using the H.323 Internet Protocol standard. Finally, the
Company sells multi-point video and audio bridging services through its
Multiview Network Services program. The Company employs state-of-the-art
conferencing servers that provide seamless connectivity for all switched digital
networks. The Company, headquartered in Hillside, New Jersey, operates a
distribution facility in Miamisburg, Ohio and maintains 24 sales offices and
demonstration facilities across the United States. The Company manages its
operations in two business segments, video solutions which includes the sale of
video and data communications products and design, engineering, installation,
training and maintenance services and video network which includes the Glowpoint
network subscriber and Multiview network service programs.
Note 2 -- Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2003 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report for the
fiscal year ended December 31, 2002 as filed with the Securities and Exchange
Commission.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, AllComm Products Corporation ("APC"), VTC
Resources, Inc. ("VTC") and Wire One Travel Services, Inc. ("WOTS"). All
material intercompany balances and transactions have been eliminated in
consolidation.
4
Note 3 -- Effect of Recently Issued Accounting Standards
On January 1, 2003, the Company adopted FASB Statement 146, Accounting for the
Costs Associated with Exit or Disposal activities. This statement requires
companies to recognize costs associated with exit or disposal activities only
when liabilities for those costs are incurred rather than at the date of a
commitment to an exit or disposal plan. FASB No. 146 also requires companies to
initially measure liabilities for exit and disposal activities at their fair
values. FASB No. 146 replaces Emerging Issues Task Force (EITF) Issues No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring) and
EITF No. 88-10, Costs Associated with Lease Modification or Termination. The
adoption of this statement did not have a material effect on the Company's
consolidated financial position or results of operations.
In November 2002, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Revenue
arrangements with multiple deliverables include arrangements which provide for
the deliver or performance of multiple products, services and/or rights to use
assets where performance many occur at different points in time or over
different periods of time. The Company generally enters into arrangements for
multiple deliverables that occur at different points in time when it is
contracted to provide installation services. EITF Issue No. 00-21 is effective
for the Company beginning January 1, 2004. The Company has not completed the
evaluation of the impact of EITF Issue No. 00-21.
Note 4 -- Stock-Based Compensation
At March 31, 2003, the Company accounts for its stock-based compensation plans
using the intrinsic value method in accordance with the provisions of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and comply with the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based compensation,
and SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure.
The following table illustrates, in accordance with the provisions of SFAS No.
148, Accounting for Stock-Based compensation - Transition and Disclosure, the
effect on net loss and loss per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
to stock-based employee compensation.
Three Months Ended
March 31,
---------------------------
2003 2002
----------- -----------
Net loss as reported ............................................. $(4,649,267) $(2,558,508)
Add: stock-based compensation expense included in reported loss,
net of tax .................................................. 56,333 105,704
Deduct: total stock-based employee compensation expense determined
under the fair value based method for all awards, net of tax (1,189,095) (1,281,812)
----------- -----------
Pro forma net loss ............................................... $(5,782,029) $(3,734,616)
=========== ===========
Loss per share:
Basic and diluted - as reported .................................. $ (0.16) $ (0.09)
Basic and diluted - pro forma .................................... $ (0.20) $ (0.13)
5
The fair value of the Company's stock-based option awards to employees was
estimated assuming no expected dividends and the following weighted-average
assumptions:
March 31,
-----------------------
2003 2002
--------- ---------
Risk free interest rate .......................................... 3.77% 4.28%
Expected lives ................................................... 5 Years 4 years
Expected volatility .............................................. 146.32% 91.56%
Note 5 -- Loss Per Share
Basic loss per share is calculated by dividing net loss attributable to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted loss per share is calculated by dividing net loss
attributable to common stockholders by the weighted average number of common
shares outstanding plus the weighted-average number of net shares that would be
issued upon exercise of stock options and warrants using the treasury stock
method and the deemed conversion of subordinated debentures using the
if-converted method.
Three Months Ended
March 31,
-------------------------
2003 2002
---------- ----------
Weighted average shares outstanding .............. 29,029,894 28,232,809
Effect of dilutive options and warrants .......... -- --
---------- ----------
Weighted average shares outstanding
including dilutive effect of securities ....... 29,029,894 28,232,809
========== ==========
Weighted average options and warrants to purchase 12,282,257 shares of common
stock and subordinated debentures convertible into 2,036,677 common shares were
outstanding during the three months ended March 31, 2003. Weighted average
options and warrants to purchase 10,650,907 shares of common stock were
outstanding during the three months ended March 31, 2002. These options and
warrants were not included in the computation of diluted EPS because the Company
reported a net operating loss for these periods and their effect would have been
anti-dilutive.
Note 6 -- Discontinued Operations
In March 2003, the Company completed the sale of certain assets and liabilities
of its Audio-Visual ("AV") component to Columbia, Maryland-based Signal
Perfection Limited ("SPL") for approximately $807,000, $250,000 of which was
paid in cash at the close of the transaction and the balance of which was paid
in the form of a promissory note payable in five equal consecutive monthly
payments commencing on April 15, 2003. The sale of the AV component was aimed at
enabling the Company to focus more of its resources to the development and
marketing of its subscriber-based IP network, Glowpoint, and to its video
solutions business. As a consequence, this unit, previously a component of the
Video Solutions segment, has been classified as a discontinued operation in the
accompanying financial statements, with its net assets summarized in a single
line item on the consolidated balance sheets and its results from operations
summarized in a single line item on the consolidated statements of operations.
Net assets of discontinued AV operations consist of the following:
March 31, 2003 December 31, 2002
-------------- -----------------
Inventory $ 210,000 $ 300,000
Earnings in excess of billings 2,903,964 4,991,327
----------- -----------
Total $ 3,113,964 $ 5,291,327
=========== ===========
The assets actually sold by the Company totaled approximately $684,000 and
$807,000 at March 31, 2003 and December 31, 2002, respectively, and consisted
primarily of inventory and earnings in excess of billings.
Revenues and pretax loss from discontinued AV operations are as follows:
Quarters Ended March 31,
------------------------
2003 2002
----------- -----------
Revenues $ 2,241,925 $ 5,811,950
Pretax loss $ (793,022) $ (419,752)
6
Note 7 -- Bank Loan Payable
In May 2002, the Company entered into a $25,000,000 working capital credit
facility with JPMorgan Chase Bank. Under terms of the three-year agreement for
this facility, loan availability is based on (1) 80% of eligible accounts
receivable and (2) the lesser of 50% against eligible finished goods inventory
or 80% against the net eligible amount of the net orderly liquidation value by
category of finished goods inventory as determined by an outside appraisal firm,
subject to an inventory cap of $2 million. Borrowings bear interest at the
lender's base rate plus 1 1/2% per annum. The credit facility contains certain
financial and operational covenants. In March 2003, the Company concluded an
amendment to the credit facility to cure non-compliance with the EBITDA
financial covenant arising from the 2002 fourth quarter results. Some additional
highlights of the amendment include: (1) a reduction in the commitment amount of
the line of credit from $25 million to $15 million; (2) revised EBITDA covenant
levels for the remainder of the term of the agreement; and (3) maintenance of
the interest rate, loan fees and provisions of the borrowing formula at the same
levels as previously negotiated. For the period from January 1, 2003 through
March 31, 2003, the Company was in compliance with the covenants of its credit
agreement. At March 31, 2003, $3.5 million was outstanding under the facility
and the interest rate was 5.75%. The loan has been classified as non-current in
the accompanying consolidated balance sheet because the facility matures on May
31, 2005.
Note 8 -- Business Segments
The Company follows SFAS No. 131 Disclosures about Segments of a Business
Enterprise and Related Information, which establishes standards for reporting
information about operating segments. Operating segments are defined as
components of a company about which separate financial information is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and to assess financial performance.
Prior to 2002, the Company was engaged in one business, providing customers with
a single source for video products and services. During fiscal 2002, the
Company's direct investment in the Glowpoint Network has increased and the
financial results of the Video Network segment became more material to the
Company so that the Company determined that it was in two reportable segments
for fiscal 2002 and, accordingly reported two operating segments, Video
Solutions and Video Network.
Video Solutions Segment
The Video Solutions segment sells and markets a full range of video, audio and
data products and systems from Polycom, Tandberg, VCON Telecommunications, Ltd.
("VCON"), Sony Electronics, Inc., Gentner Communications, Inc. and Extron
Electronics, Inc. principally in the United States. The Company also distributes
data products from companies such as Adtran, Lucent, Initia and RADVision to
provide its customers with remote access into LANs, permitting them to acquire
bandwidth on demand and to digitally transmit data. The Company configures
single- or multi-vendor video and data conferencing platforms for its clients
and integrates systems and components into a complete solution designed to suit
each customer's particular communications requirements. After designing a
customer's video communications solution, it delivers, installs and tests the
communications equipment. When the system is functional, the Company provides
training to all levels of its customers' organizations, including executives,
managers, management information systems and data-processing administrators and
technical staff. Training includes instruction in system operation, as well as
the planning and administration of meetings. By means of thorough training, the
Company helps to ensure that its customers understand the functionality of their
systems and are able to apply the technology effectively. The Company's OneCare
service covers a customer's entire video communications system deployment for a
fixed fee. OneCare encompasses installation and maintenance services that
provide comprehensive customer support after the sale and help ensure that
customers experience reliable, effortless video communications. The Company's
installation service places minimal demands on a customer's time and resources.
The Company's maintenance service provides technical support representatives and
engineers, a help desk offering 24x7 responsiveness, nationwide on-site
diagnostic repair and replacement service, nationwide network trouble
coordination and a video test facility.
7
Video Network Segment
The Video Network segment is composed of the following two components: 1)
Glowpoint network services and 2) Multiview Network Services. The Glowpoint
network provides customers with a high-quality platform for video communications
over IP and related applications. The Glowpoint service offers subscribers
substantially reduced transmission costs and superior video communications
quality, remote management of all videoconferencing endpoints utilizing simple
network management protocol ("SNMP"), gateway services to ISDN-based video
communications equipment, video streaming and store-and-forward applications
from our network operations center ("NOC"). The Company also sells multi-point
video and audio bridging services through its Multiview Network Services
program. The Company employs state-of-the-art conferencing servers that provide
seamless connectivity for all switched digital networks at an affordable rate.
The following table provides financial information by segment which is used by
the chief operating decision maker in assessing segment performance. The Company
allocated direct costs to each business segment based on management's analysis
of each segment's resource needs.
Thee Months Ended March 31, 2003 VSB VNB Total
- ---------------------------------------- ------------- ------------- -------------
Revenues ............................... $ 18,275,837 $ 2,226,858 $ 20,502,695
Segment loss ........................... $ (1,193,878) $ (2,662,367) $ (3,856,245)
Depreciation and amortization .......... $ 1,023,399 $ 1,313,020 $ 2,336,419
Interest expense, net .................. $ -- $ 367,861 $ 367,861
Total assets ........................... $ 39,650,419 $ 14,883,147 $ 54,533,566
Expenditures for long-lived assets ..... $ 200,534 $ 546,841 $ 747,375
Thee Months Ended March 31, 2002 VSB VNB Total
- ---------------------------------------- ------------- ------------- -------------
Revenues ............................... $ 18,092,764 $ 1,099,421 $ 19,192,185
Segment loss ........................... $ (520,682) $ (1,618,074) $ (2,138,756)
Depreciation and amortization .......... $ 748,130 $ 460,737 $ 1,208,867
Interest expense, net .................. $ -- $ 6,909 $ 6,909
Total assets ........................... $ 99,203,931 $ 6,098,959 $ 105,302,890
Expenditures for long-lived assets ..... $ 316,532 $ 978,596 $ 1,295,128
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto. The discussion of
results, causes and trends should not be construed to imply any conclusion that
such results or trends will necessarily continue in the future.
The statements contained herein, other than historical information, are or may
be deemed to be forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended, and involve factors, risks and uncertainties
that may cause the Company's actual results in future periods to differ
materially from such statements. These factors, risks and uncertainties, include
the relatively short operating history of the Company; market acceptance and
availability of new products and services; the terminable-at-will and
nonexclusive nature of reseller agreements with manufacturers; rapid
technological change affecting products and services sold by the Company; the
impact of competitive products, services, and pricing, as well as competition
from other resellers and service providers; possible delays in the shipment of
new products; and the availability of sufficient financial resources to enable
the Company to expand its operations.
Overview
Wire One is a leading single source provider of video products and services that
assists customers located principally in the Unites States with systems design
and engineering, procurement, installation, operation and maintenance of their
video communications systems. We offer our customers video communications
products from leading manufacturers such as Polycom (which distributes products
under the Polycom, PictureTel and Accord brands, among others), Tanberg,
RADVision, Cisco Systems and Sony and provide a comprehensive suite of video and
data services including engineering, installation, customized training, on-site
technical assistance and maintenance. We also operate our Glowpoint network
subscriber service, which provides our customers with two-way video
communications with high quality of service utilizing an Internet network and
broadband access dedicated solely to transporting video using the H.323 IP
standard. Lastly, we sell multi-point video and audio bridging services through
our Multiview Network Services program. We employ state-of-the-art conferencing
servers that provide seamless connectivity for all switched digital networks.
We market and sell products and services to the commercial, government, medical
and educational sectors through a direct sales force of account executives as
well as through resellers. Sales to resellers are made on terms with respect to
pricing, payment and returns that are consistent with those offered to end user
customers. No price protection or similar arrangement is offered, nor are the
obligations as to payment contingent on the resale of the equipment purchased by
the reseller. There are no special rights to return equipment granted to
resellers, nor are we obligated to repurchase reseller inventory. These efforts
are supported by sales engineers, a marketing department, and a professional
services and engineering group. We have sold our products and services to over
3,000 customers who collectively have approximately 22,000 videoconferencing
endpoints.
Product revenue consists of revenue from the sale of video communications
equipment and is recognized at the time of shipment, provided that the price is
fixed and determinable, no significant obligations remain, collectibility is
probable and returns are estimable. Revenue is recognized at the time of
shipment since the terms of shipment are FOB shipping point and legal title to
the equipment passes to the customer at this time. Post shipment obligations
such as installation and training are considered relatively insignificant given
the underlying nature of the equipment and of its installation.
Service revenue is derived from services rendered in connection with the sale of
new systems and the maintenance of previously installed systems. Services
rendered in connection with the sale of new systems consist of engineering
services related to systems integration, installation, technical training and
user training. Most of these services are rendered at or prior to installation
and all revenue is recognized only after the services have been rendered.
Revenue related to extended service contracts is deferred and recognized over
the life of the extended service period. Revenue related to the Glowpoint
network subscriber service and the multi-point video and audio bridging services
we offer are recognized through a monthly billing process after services have
been rendered.
9
In March 2003, we completed the sale of certain assets and liabilities of the
Audio-Visual ("AV") component to Columbia, Maryland-based Signal Perfection
Limited ("SPL") for approximately $807,000, $250,000 of which was paid in cash
at the close of the transaction and the balance of which was paid in the form of
a promissory note payable in five equal consecutive monthly payments commencing
on April 15, 2003. The sale of our AV component was aimed at enabling us to
focus more of our resources on the development and marketing of our Glowpoint
network, and to our video solutions business. As a consequence, this unit,
previously a component of the Video Solutions Segment, has been classified as a
discontinued operation in the accompanying financial statements, with its net
assets summarized in a single line item on our consolidated balance sheets and
its results from operation summarized in a single line item on our consolidated
statements of operations. See footnote 6 to the consolidated financial
statements for further information.
Wire One Technologies, Inc.
Results of Operations
(Unaudited)
Three Months Ended March 31,
---------------------------
2003 2002
----- -----
Revenues
Video Solutions
Equipment.............................................. 70.8% 75.3%
Service................................................ 18.3 19.0
Video Network............................................... 10.9 5.7
----- -----
100.0 100.0
----- -----
Cost of revenues
Video Solutions
Equipment.............................................. 79.7 71.4
Service................................................ 54.2 48.6
Video Network............................................... 103.0 88.2
----- -----
77.6 68.0
----- -----
Gross margin
Video Solutions
Equipment.............................................. 20.3 28.6
Service................................................ 45.8 51.4
Video Network............................................... (3.0) 11.8
----- -----
22.4 32.0
----- -----
Operating expenses
Selling................................................ 28.5 33.6
General and administrative............................. 8.1 9.4
----- -----
Total operating expenses......................................... 36.6 43.0
----- -----
Loss from continuing operations.................................. (14.2) (11.0)
----- -----
Other (income) expense
Amortization of deferred financing costs............... 0.2 0.1
Interest income........................................ 0.0 (0.1)
Interest expense....................................... 1.8 0.1
Amortization of discount on subordinated debentures.... 2.6 0.0
----- -----
Total other expenses, net........................................ 4.6 0.1
----- -----
Net loss from continuing operations.............................. (18.8) (11.1)
Loss from discontinued AV operations............................. (3.9) (2.2)
----- -----
Net loss attributable to common stockholders..................... (22.7)% (13.3)%
===== =====
10
Three Months Ended March 31, 2003 ("2003 period") Compared to Three Months Ended
March 31, 2002 ("2002 period").
NET REVENUES. We reported net revenues from continuing operations of $20.5
million for the 2003 period, an increase of $1.3 million, or 7%, over the $19.2
million in revenues reported for the 2002 period. This revenue growth was
achieved despite operating in a very challenging information technology and
telecom spending environment. Sales of video communications products amounted to
71% of total net revenues in the 2002 period, revenues related to video services
totaled 18% and video network revenues accounted for the remaining 11% of total
net revenues.
Video solutions -- Sales of video communications products were $14.5
million in the 2003 period, an increase of $.1 million, or 1%, over the $14.4
million in the 2002 period. We sold 985 videoconferencing endpoints in the 2003
period, a 7% decrease from the 1,062 videoconferencing endpoints sold in the
2002 period. The decline in endpoint sales was offset by increased sales of
video bridges and peripheral equipment. In the 2003 period, approximately 32% of
sales of video communications products were to new customers. We experienced
growth in the 2003 period in the following sectors: educational institutions,
$1.4 million, and governmental, $0.8 million; offset by declines in sales to
corporations, $1.9 million and medical institutions, $0.2 million. Revenues
related to video services were $3.7 million in the 2003 period, an increase of
$.1 million, or 3%, over the $3.6 million in the 2002 period. The revenue growth
experienced in the 2003 period resulted from a $0.1 million increase in on-site
technical support revenue as a result of providing more on-site technicians to
assist our customers in managing their video enterprises. Installation revenue
and service contract revenues were relatively unchanged from their prior year
levels.
Video network - Sales of video network services were $2.2 million in the
2003 period, an increase of $1.1 million, or 103%, over the $1.1 million in the
2002 period. $1.2 million in revenues growth related to Glowpoint network
services was offset by a $0.1 million decline in revenues from the H.320
bridging service. The growth in Glowpoint network services revenue was the
result of having on average 618 more video endpoints on the network in the 2003
period versus the 2002 period and those endpoints producing $654 per month in
revenue. The decline in H.320 bridging revenues is the result of: 1) year to
year bridging service utilization declines on the part of a number of existing
customers; and 2) several customers transferring from H.320 bridging to IP
bridging made possible by the Glowpoint network. These customers became
Glowpoint subscribers during the year and utilized the full range of Glowpoint
services, including IP bridging.
GROSS MARGINS. Gross margins were $4.6 million in the 2003 period, a
decrease of $1.5 million from the 2002 period. Gross margins decreased in the
2003 period to 22.4% of net revenues, as compared to 32.0% of net revenues in
the 2002 period. The primary cause of the overall decline in gross margins was
the decline in gross margins on sales of video communications products. Gross
margins on sales of video communications products declined from 28.6% in the
2002 period to 20.3% in the 2003 period. This decrease is attributable to
overall competitive pressures in the video solutions market resulting from the
relatively weak economy, decreased spending for information technology and
telecom and downward pricing pressure initiated by competitors. Most video
communications products that we sell suffered year-over-year gross margin
declines. Gross margins related to video service revenues decreased from 51.4%
in the 2002 period to 45.8% in the 2003 period. This decrease is attributable to
the utilization of supplier provided services rather than internal resources to
service certain types of equipment covered under maintenance contracts such as
video bridges due to the highly technical nature of the underlying equipment. We
expect the gross margins on sales of video communications products to continue
to be under pressure in the first half of the 2003 period as a difficult
economic environment persists, but anticipate improvement in the second half of
the 2003 period as economic uncertainties are clarified, competitor video
product inventory levels decline and new products from manufacturers are
introduced to the market.
11
Gross margins related to video network revenues declined from 11.8% in the
2002 period to (3.0)% in the 2003 period. The decline is the result of increased
fixed costs incurred in the 2003 period to build the network to handle the video
traffic of over 2,000 video endpoints. At the end of the 2003 period there were
960 video endpoints on the network. Gross margins related to video network
revenues should improve over the course of the 2003 period as we anticipate that
more video endpoints will be installed that will utilize the network and minimal
further fixed costs related to the operation of the network will be incurred.
SELLING. Selling expenses, which include sales salaries, commissions,
overhead, and marketing costs, at $5.9 million, or 28.5%, in the 2003 period,
were down $.6 million from the $6.5 million, or 33.6%, reported for the 2002
period. The decline was achieved as a direct result of the cost saving measures
taken in mid-2002 and in the 2003 period. Specifically, we reduced headcount;
closed or relocated sales offices; implemented a salary reduction program;
enhanced operating efficiencies by implementing new operating processes,
management information systems and technology; and negotiated more favorable
terms from numerous service providers and other vendors supplying us with goods
and services.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
$0.1 million in the 2003 period to $1.7 million as compared to $1.8 million for
the 2002 period. General and administrative expenses as a percentage of net
revenues for the 2003 period declined from 9.4% in the 2002 period to 8.1% in
the 2003 period. The primary reason for the decline was the headcount reductions
made as a part of the cost saving measures taken in mid-2002 and in the 2003
first quarter.
OTHER (INCOME) EXPENSES. Other expenses increased $927,000 to $948,000 in
the 2003 period from $21,000 in the 2002 period. The increase was primarily due
to the recognition of $535,000 in amortization of discount on the subordinated
debentures issued in December, 2002. The other major component of this category,
interest expense, increased $347,000 to $373,000 primarily due to higher
interest expense on our line of credit facility, $47,000; the Black-Scholes
value assigned to the 100,000 warrants granted to JPMorgan Chase Bank in the
quarter, $187,000; and interest accrued on the subordinated debentures,
$113,000.
DISCONTINUED OPERATIONS. In the 2003 period, we treated our audio-visual
integration component as a discontinued operation because: 1) the operations and
cash flows of this component have been eliminated from our ongoing operations as
a result of a disposal transaction; and 2) we do not have any significant
continuing involvement in the operation of the component after the disposal
transaction. We incurred a loss from discontinued AV operations in the 2003
period of $793,000 which was $373,000 higher than the $420,000 loss incurred in
the 2002 period.
NET LOSS. We reported a net loss attributable to common stockholders for
the 2003 period of $(4.6) million, or $(.16) per diluted share, as compared to a
net loss attributable to common stockholders of $(2.6) million, or $(.09) per
diluted share for the 2002 period. Earnings before interest, taxes, depreciation
and amortization ("EBITDA") from continuing operations is a measurement tool
management used to understand our results of operations. As EBITDA from
continuing operations does not include non-cash charges and the results of
discontinued operations it serves as a more accurate gauge of our current
results. In addition, our primary covenant with our asset-based lender is based
on EBITDA results. The following table provides a reconciliation of the net loss
attributable to common stockholders to EBITDA from continuing operations.
Three Months Ended March 31,
----------------------------
2003 2002
----------- -----------
Net loss attributable to common stockholders ............... $(4,649,267) $(2,558,508)
Depreciation and amortization .......................... 1,756,285 1,195,110
Amortization of deferred financing costs ............... 45,509 13,757
Amortization of discount on subordinated debentures .... 534,625 --
Loss from discontinued AV operations ................... 793,022 419,752
Non-cash compensation .................................. 243,543 105,704
Interest expense, net .................................. 180,651 6,909
----------- -----------
EBITDA from continuing operations .......................... $(1,095,632) $ (817,276)
=========== ===========
12
Liquidity and Capital Resources
At March 31, 2003, we had working capital of $19.0 million compared to
$24.9 million at December 31, 2002, a decrease of approximately 24%. We had $0.7
million in cash and cash equivalents at March 31, 2003 compared to $2.8 million
at December 31, 2002. The $5.9 million decrease in working capital resulted
primarily from the net pay down of $2.3 million of bank loans, the funding of
the $2.1 million cash loss from operations in the 2003 period and the purchase
of $0.7 million of furniture, equipment and leasehold improvements.
Net cash provided by operating activities for the 2003 period was $0.8
million as compared to net cash used in operations of $7.1 million during the
2002 period. The primary sources of operating cash in 2003 were the net decrease
in accounts receivable of $2.6 million, which resulted from improved collection
efforts and lower first quarter sales in the current year versus the prior year;
the net decrease in other current assets of $1.1 million, which resulted from
projects related to the discontinued AV operation being invoiced; and the net
reduction of inventory of $0.5 million. We used this cash to fund the $2.1
million cash loss from operations and $1.4 million in payments on outstanding
accounts payable and accrued expenses.
Investing activities for the 2003 period included purchases of $0.2
million for computer and demonstration equipment and leasehold improvements for
the video solutions segment and $0.5 million for computer, network and office
equipment related to the video network segment. The Glowpoint network is
currently built out to handle the anticipated level of subscriptions for 2003.
Although we anticipate current expansion of the Glowpoint network and our video
solutions segment, we have no significant commitments to make capital
expenditures for Glowpoint or the video solutions segment in 2003.
Financing activities in the 2003 period included net pay downs under our
revolving credit line totaling $2.3 million and payments on capital lease
obligations of $0.1 million.
We currently have a $15.0 million working capital credit facility with
JPMorgan Chase Bank. Borrowings under this facility bear interest at the
lender's base rate plus 1/2% per annum. At March 31, 2003, there was $3.5
million outstanding under this facility. The Company's credit facility contains
certain financial and operational covenants. To date in 2003, we were in
compliance with these covenants.
Management believes, based upon current circumstances, we have adequate
capital resources to support current operating levels for at least the next
twelve months.
Critical accounting policies
We prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America. Preparing financial
statements in accordance with generally accepted accounting principles requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclose contingent assets and liabilities as of the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The following paragraphs include a discussion of
some critical areas where estimates are required.
Revenue recognition
The Company sells products and services to the commercial, government, medical
and educational sectors through a direct sales force of account executives as
well as through resellers. Sales to resellers are made on terms with respect to
pricing, payment and returns that are consistent with those offered to end user
customers. No price protection or similar arrangement is offered, nor are the
obligations as to payment contingent on the resale of the equipment purchased by
the reseller. There are no special rights to return equipment granted to
resellers, nor are we obligated to repurchase reseller inventory.
13
Product revenue consists of revenue from the sale of video communications
equipment and is recognized at the time of shipment, provided that the price is
fixed and determinable, no significant obligations remain, collection is
probable and returns are estimable. Revenue is recognized at the time of
shipment because the terms of shipment are FOB shipping point and legal title to
the equipment passes to the customer at this time. Post-shipment obligations,
such as installation and training, are considered relatively insignificant given
the underlying nature of the equipment and of its installation.
Service revenue is derived from services rendered in connection with the sale of
new systems and the maintenance of previously installed systems. Services
rendered in connection with the sale of new systems consist of engineering
services related to system integration, installation, technical training and
user training. Most of these services are rendered at or prior to installation
and all revenue is recognized only after the services have been rendered.
Revenue related to extended service contracts is deferred and recognized over
the life of the extended service period. Revenue related to the Glowpoint
network subscriber service and the multi-point video and audio bridging services
offered by the Company are recognized through a monthly billing process after
services have been rendered.
Allowance for Doubtful Accounts
We record an allowance for doubtful accounts based on specifically identified
amounts that we believe to be uncollectible. We also record additional
allowances based on certain percentages of our aged receivables, which are
determined based on historical experience and our assessment of the general
financial conditions affecting our customer base. If our actual collections
experience changes, revisions to our allowance may be required. After all
attempts to collect a receivable have failed, we write off the receivable
against the allowance.
Long-lived assets
The Company evaluates impairment losses on long-lived assets used in operations,
primarily fixed assets, when events and circumstances indicate that the carrying
value of the assets might not be recoverable in accordance with FASB Statement
No. 144 "Accounting for the Impairment or Disposal of Long-lived Assets". For
purposes of evaluating the recoverability of long-lived assets, the undiscounted
cash flows estimated to be generated by those assets would be compared to the
carrying amounts of those assets. If and when the carrying values of the assets
exceed their fair values, the related assets will be written down to fair value.
Goodwill and other intangible assets
In June 2001, the FASB finalized FASB Statements No. 141, "Business
Combinations" (SFAS 141), and No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). SFAS 141 requires the use of the purchase method of accounting and
prohibits the use of the pooling-of-interest method of accounting for business
combinations initiated after June 30, 2001. SFAS 141 also required that we
recognize acquired intangible assets apart from goodwill if they meet certain
criteria. SFAS 141 applies to all business combinations initiated after June 30,
2001 and for purchase business combinations completed on or after July 1, 2001.
The FASB also requires, upon adoption of SFAS 142, that we classify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that we identify reporting units for the purposes of
assessing potential future impairments of goodwill, reassess the useful lives of
other existing recognized intangible assets, and cease amortization of
intangible assets with an indefinite useful life. An intangible asset with an
indefinite useful life should be tested for impairment in accordance with the
guidance in SFAS 142. SFAS 142 was adopted in 2002 and we will review goodwill
and other intangible assets on an annual basis going forward.
14
Any future business combinations will be accounted for under the purchase
method, which may result in the recognition of goodwill and other intangibles
assets, some of which may subsequently be charged to operations, either by
amortization or impairment charges.
Recent pronouncements of the Financial Accounting Standards Board
On January 1, 2003, we adopted FASB Statement 146, "Accounting for the Costs
Associated with Exit or Disposal Activities". This statement requires companies
to recognize costs associated with exit or disposal activities only when
liabilities for those costs are incurred rather than at the date of a commitment
to an exit or disposal plan. FASB No. 146 also requires companies to initially
measure liabilities for exit and disposal activities at their fair values. FASB
No. 146 replaces Emerging Issues Task Force (EITF) Issues No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring) and EITF No.
88-10, Costs Associated with Lease Modification or Termination. The adoption of
this statement did not have a material effect on our consolidated financial
position or results of operations.
In November 2002, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables". Revenue
arrangements with multiple deliverables include arrangements which provide for
the deliver or performance of multiple products, services and/or rights to use
assets where performance many occur at different points in time or over
different periods of time. The Company generally enters into arrangements for
multiple deliverables that occur at different points in time when it is
contracted to provide installation services. EITF Issue No. 00-21 is effective
for us beginning January 1, 2004. To date, we have not completed the evaluation
of the impact of this EITF.
Inflation
Management does not believe inflation had a material adverse effect on the
financial statements for the periods presented.
15
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We have exposure to interest rate risk related to our cash equivalents
portfolio. The primary objective of our investment policy is to preserve
principal while maximizing yields. Our cash equivalents portfolio is short-term
in nature, therefore changes in interest rates will not materially impact our
consolidated financial condition. However, such interest rate changes can cause
fluctuations in our results of operations and cash flows.
We maintain borrowings under a $15 million working capital credit facility
with an asset based lender that are not subject to material market risk exposure
except for such risks relating to fluctuations in market interest rates. The
carrying value of these borrowings approximates fair value since they bear
interest at a floating rate based on the "prime" rate. There are no other
material qualitative or quantitative market risks particular to the Company.
Item 4. Controls and Procedures
Within the 90 days prior to the date of this Form 10-Q, we carried out an
evaluation, under the supervision and with the participation of the Company's
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information relating to us (including our consolidated
subsidiaries) required to be included in our periodic SEC filings. There have
been no significant changes in our internal controls or in other factors, which
could significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is defending several suits or claims in the ordinary course of
business, none of which individually or in the aggregate is material to the
Company's business, financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 CEO Certification
99.2 CFO Certification
(b) Reports on Form 8-K
Current Report on Form 8-K (File No. 000-25940) related to the Company's
public disclosure of the following information in accordance with Rule 100
of Regulation FD of the Securities Act of 1933 (as amended): On May 1,
2003, Wire One Technologies, Inc. (the "Company") announced via press
release the Company's preliminary results for its first quarter ended
March 31, 2003.
16
Signatures
In accordance with 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.
WIRE ONE TECHNOLOGIES, INC.
Registrant
Date: May 15, 2003 By: /s/ Richard Reiss
--------------------------
Richard Reiss, Chief Executive Officer
Date: May 15, 2003 By: /s/ Christopher Zigmont
--------------------------
Christopher Zigmont, Chief Financial Officer
(principal financial and accounting officer)
17
CERTIFICATIONS
I, Richard Reiss, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wire One
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and 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 functions):
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 there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Richard Reiss
----------------------------
Chief Executive Officer
18
I, Christopher A. Zigmont, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wire One
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and 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 functions):
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 there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Christopher A. Zigmont
-------------------------------
Executive Vice President and
Chief Financial Officer
19