-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RgTBuzzt++vuHB+kfNU27+23k3iaDJ5GCkzM4nm89gXHpdSVTgjS23ssT3t2gKYW 0nxPoQKc+Fj/1XuBIzJSfw== 0001169232-02-002971.txt : 20021118 0001169232-02-002971.hdr.sgml : 20021118 20021114175151 ACCESSION NUMBER: 0001169232-02-002971 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WIRE ONE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000746210 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 770312442 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25940 FILM NUMBER: 02826765 BUSINESS ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 BUSINESS PHONE: 8054828277 MAIL ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 FORMER COMPANY: FORMER CONFORMED NAME: VIEWTECH INC DATE OF NAME CHANGE: 19950418 FORMER COMPANY: FORMER CONFORMED NAME: VIEW TECH INC DATE OF NAME CHANGE: 19950418 10-Q 1 d52378_10-q.txt FORM 10-Q 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 September 30, 2002. 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 |_| The number of shares outstanding of the registrant's Common Stock as of November 9, 2002 was 28,971,551. WIRE ONE TECHNOLOGIES, INC Index PART I--FINANCIAL INFORMATION Item 1. Consolidated Financial Statements * Consolidated Balance Sheets September 30, 2002 and December 31, 2001 ................................. 1 Consolidated Statements of Operations For the Nine Months and Three Months Ended September 30, 2002 and 2001 .. 2 Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2002 and 2001 .................... 3 Notes to Consolidated Financial Statements .................................. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................ 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk .................. 14 Item 4. Controls and Procedures ..................................................... 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................................... 15 Item 2. Changes in Securities and Use of Proceeds ................................... 15 Item 3. Defaults Upon Senior Securities ............................................. 15 Item 4. Submission of Matters to a Vote of Security Holders ......................... 15 Item 5. Other Information ........................................................... 15 Item 6. Exhibits and Reports on Form 8-K ............................................ 15 Signatures .......................................................................... 16
* The Balance Sheet at December 31, 2001 has been taken from the audited financial statements at that date. All other financial statements are unaudited. Wire One Technologies, Inc. Consolidated Balance Sheets
September 30, 2002 December 31, 2001 ------------------ ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents .................................. $ 4,829,495 $ 1,689,451 Accounts receivable-net .................................... 26,326,638 35,471,482 Inventory .................................................. 11,791,287 10,218,796 Other current assets ....................................... 9,814,449 3,824,276 ------------- ------------- Total current assets ............................. 52,761,869 51,204,005 Furniture, equipment and leasehold improvements-net ............ 12,392,466 10,857,547 Goodwill-net ................................................... 42,558,509 42,163,844 Other assets ................................................... 731,588 274,089 ------------- ------------- Total assets ..................................... $ 108,444,432 $ 104,499,485 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank loan payable .......................................... $ -- $ 10,628,082 Accounts payable ........................................... 11,886,723 12,297,914 Accrued expenses ........................................... 2,281,417 3,218,890 Deferred revenue ........................................... 6,791,246 7,898,277 Other current liabilities .................................. -- 1,465,049 Current portion of capital lease obligations ............... 31,650 56,912 ------------- ------------- Total current liabilities ........................ 20,991,036 35,565,124 Bank loan payable .............................................. 8,940,691 -- Capital lease obligations, less current portion ................ 6,565 25,696 ------------- ------------- Total liabilities ................................ 29,938,292 35,590,820 ------------- ------------- Commitments Stockholders' Equity: Preferred stock, $.0001 par value; 5,000,000 shares authorized, none outstanding .. -- -- Common Stock, $.0001 par value; 100,000,000 authorized; 28,971,551 and 25,292,189 shares outstanding, respectively ................................... 2,895 2,529 Treasury stock ............................................. (239,742) (239,742) Additional paid-in capital ................................. 125,748,727 104,889,988 Accumulated deficit ........................................ (47,005,740) (35,744,110) ------------- ------------- Total stockholders' equity ....................... 78,506,140 68,908,665 ------------- ------------- Total liabilities and stockholders' equity ....... $ 108,444,432 $ 104,499,485 ============= =============
See accompanying notes to consolidated financial statements. 1 Wire One Technologies, Inc. Consolidated Statements of Operations (Unaudited)
Nine Months Ended Sept. 30, Three Months Ended Sept. 30, ------------------------------ ------------------------------ 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Revenues Video Solutions ................................ $ 72,620,758 $ 57,471,787 $ 21,962,851 $ 21,650,787 Video Network .................................. 3,883,471 2,483,798 1,525,494 664,194 ------------ ------------ ------------ ------------ 76,504,229 59,955,585 23,488,345 22,314,981 ------------ ------------ ------------ ------------ Cost of revenues Video Solutions ................................ 53,658,725 39,265,069 16,884,770 15,352,068 Video Network .................................. 3,616,072 2,008,506 1,440,224 618,507 ------------ ------------ ------------ ------------ 57,274,797 41,273,575 18,324,994 15,970,575 ------------ ------------ ------------ ------------ Gross margin Video Solutions ................................ 18,962,033 18,206,718 5,078,081 6,298,719 Video Network .................................. 267,399 475,292 85,270 45,687 ------------ ------------ ------------ ------------ 19,229,432 18,682,010 5,163,351 6,344,406 ------------ ------------ ------------ ------------ Operating expenses Selling ........................................ 23,467,390 17,422,226 7,538,055 6,109,456 General and administrative ..................... 5,691,746 4,818,610 1,847,963 1,658,918 Restructuring .................................. 960,000 -- -- -- Amortization of goodwill ....................... -- 2,000,564 -- 729,841 ------------ ------------ ------------ ------------ Total operating expenses ........................... 30,119,136 24,241,400 9,386,018 8,498,215 ------------ ------------ ------------ ------------ Loss from continuing operations .................... (10,889,704) (5,559,390) (4,222,667) (2,153,809) ------------ ------------ ------------ ------------ Other (income) expense Amortization of deferred financing costs ....... 106,456 62,735 46,762 40,974 Interest income ................................ (68,045) (56,817) (9,913) (16,765) Interest expense ............................... 182,176 445,950 76,389 128,084 ------------ ------------ ------------ ------------ Total other expenses, net .......................... 220,587 451,868 113,238 152,293 ------------ ------------ ------------ ------------ Income tax provision ............................... -- 200,000 -- 200,000 ------------ ------------ ------------ ------------ Net loss from continuing operations ................ (11,110,291) (6,211,258) (4,335,905) (2,506,102) Loss from discontinued operations .................. (151,339) (247,907) (50,000) (142,421) ------------ ------------ ------------ ------------ Net loss ........................................... (11,261,630) (6,459,165) (4,385,905) (2,648,523) Deemed dividends on series A convertible preferred stock ................................... -- 4,433,904 -- -- ------------ ------------ ------------ ------------ Net loss attributable to common stockholders ....... $(11,261,630) $(10,893,069) $ (4,385,905) $ (2,648,523) ============ ============ ============ ============ Net loss from continuing operations per share (basic and diluted)............................. $ (0.39) $ (0.32) $ (0.15) $ (0.11) ============ ============ ============ ============ Loss from discontinued operations per share (basic and diluted)............................. $ 0.00 $ (0.01) $ 0.00 $ 0.00 ============ ============ ============ ============ Deemed dividends per share (basic and diluted)...... $ 0.00 $ (0.23) $ 0.00 $ 0.00 ============ ============ ============ ============ Net loss per share (basic and diluted).............. $ (0.39) $ (0.56) $ (0.15) $ (0.11) ============ ============ ============ ============ Weighted average number of common shares (basic and diluted)............................. 28,731,560 19,570,351 28,942,177 23,146,204 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 2 Wire One Technologies, Inc. Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, ------------------------------- 2002 2001 ------------------------------- Cash F1ows From Operating Activities: Net loss ...................................................................... $(11,261,630) $ (6,459,165) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ............................................... 3,917,624 4,718,478 Non cash compensation ....................................................... 230,409 326,589 Deferred income taxes ....................................................... -- 200,000 Discontinued operations ..................................................... 151,339 247,907 Increase (decrease) in cash attributable to changes in assets and liabilities: Accounts receivable ..................................................... 9,144,844 (5,512,323) Inventory ............................................................... (2,774,005) (2,461,051) Other current assets .................................................... (6,359,056) (926,651) Other assets ............................................................ (563,955) (81,663) Discontinued operations ................................................. -- 1,100,210 Accounts payable ........................................................ (1,134,620) (72,793) Accrued expenses ........................................................ (937,473) (865,473) Deferred revenue ........................................................ (1,107,031) 162,842 Other current liabilities ............................................... (1,465,049) (900,756) ------------ ------------ Net cash used in operating activities ............................... (12,158,603) (10,523,849) ------------ ------------ Cash Flows From Investing Activities Purchases of furniture, equipment and leasehold improvements .................. (3,598,265) (5,393,589) Costs related to acquisition of business including cash acquired .............. -- 66,468 ------------ ------------ Net cash used by investing activities ............................... (3,598,265) (5,327,121) ------------ ------------ Cash Flows From Financing Activities Proceeds from common stock offering ........................................... 20,257,962 10,069,328 Issuance of common stock for cash assets of GeoVideo .......................... -- 2,500,000 Exercise of warrants and options, net ......................................... 370,735 738,872 Proceeds from bank loans ...................................................... 47,072,644 62,199,731 Payments on bank loans ........................................................ (48,760,035) (55,770,350) Payments on capital lease obligations ......................................... (44,394) (87,845) ------------ ------------ Net cash provided by financing activities ........................... 18,896,912 19,649,736 ------------ ------------ Increase in Cash and Cash Equivalents ............................................. 3,140,044 3,798,766 Cash and Cash Equivalents at Beginning of Period .................................. 1,689,451 1,870,573 ------------ ------------ Cash and Cash Equivalents at End of Period ........................................ $ 4,829,495 $ 5,669,339 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest ...................................................................... $ 182,176 $ 445,950 ============ ============ Taxes ......................................................................... $ -- $ 13,387 ============ ============
Non cash financing and investing activities: During the nine months ended September 30, 2001, the Company recorded non-cash deemed dividends on Series A mandatorily redeemable convertible preferred stock of $4,433,904. On June 4, 2001, the Company acquired the non-cash assets of GeoVideo Networks, Inc. for non-cash consideration of $2,500,000. During the nine months ended September 30, 2001, the Company issued 3,017,143 shares of $0.0001 par value common stock in exchange for 2,115 shares of Series A mandatorily redeemable, convertible preferred stock. Based on the average conversion price of $4.91 per share, the total value attributable to the common stock was $14,805,000. See accompanying notes to consolidated financial statements. 3 WIRE ONE TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2002 Note 1 -- The Business and Merger with View Tech, Inc. Wire One Technologies, Inc. ("Wire One" or the "Company") was formed by the merger of All Communications Corporation ("ACC") and View Tech, Inc. ("VTI") on May 18, 2000, with the former directors and senior management of ACC succeeding to the management of Wire One. In connection with the merger, each former shareholder of ACC received 1.65 shares of Wire One common stock for each share of ACC common stock held by such former shareholder. The transaction has been accounted for as a "reverse acquisition" using the purchase method of accounting. The reverse acquisition method resulted in ACC being recognized as the acquirer of VTI for accounting and financial reporting purposes. As a result, ACC's historical results have been carried forward and VTI's operations have been included in the financial statements commencing on the merger date. Further, on the date of the merger, the assets and liabilities of VTI were recorded at their fair values, with the excess purchase consideration allocated to goodwill. Wire One is engaged in the business of selling, installing and servicing video communications systems, as well as an Internet-protocol-based network devoted to video communications, to commercial and institutional customers located principally within the United States. The Company is headquartered in Hillside, New Jersey. 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 nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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, 2001 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. The Company does not segregate or manage its operations by business segment. Note 3 -- Effect of Recently Issued Accounting Standards In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations ("FAS 141"), and No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS 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. FAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. FAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of FAS 142, that the Company reclassifies, if necessary, the carrying amounts of intangible assets and goodwill based on the criteria in FAS 141. FAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, FAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful 4 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 FAS 142. FAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. FAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of FAS 142. With respect to the Company's business combinations that were effected prior to June 30, 2001, using the purchase method of accounting, the net carrying amount of the resulting goodwill as of September 30, 2002 was $36,775,028. No amortization expense was recorded in the nine-month period ended September 30, 2002. Acquisitions occurring subsequent to July 1, 2001 have been accounted for using the purchase method of accounting. The Company is in the process of obtaining appraisals of the assets acquired for the purpose of allocating the purchase price to all tangible and intangible assets acquired. We have determined that our business consists of two reporting units for purposes of assessing existing goodwill for impairment. An impairment charge will be recognized for the amount, if any, which the carrying amount of goodwill exceeds its implied fair value. We have completed Step 1 of FAS 142 and deemed a potential impairment exists. We are in the process of quantifying the impairment (Step 2 of FAS 142) and expect to complete the process in the fourth quarter of 2002. We currently do not have any reasonable estimate of the amount of impairment, which could range from $0 to the entire goodwill being carried at $42,588,509. The effect on 2001 reported net loss attributable to common stockholders and net loss per share excluding goodwill amortization is as follows:
Nine Months Ended Sept. 30, Three Months Ended Sept. 30, 2002 2001 2002 2001 -------------- -------------- -------------- -------------- Reported net loss attributable to common stockholders ............... $ (11,261,630) $ (10,893,069) $ (4,385,905) $ (2,648,523) Goodwill amortization ............... -- 2,000,564 -- 729,841 -------------- -------------- -------------- -------------- Adjusted net loss attributable to common stockholders ............... $ (11,261,630) $ (8,892,505) $ (4,385,905) $ (1,918,682) ============== ============== ============== ============== Reported net loss per share ......... $ (0.39) $ (0.56) $ (0.15) $ (0.11) Goodwill amortization ............... -- 0.11 -- 0.03 -------------- -------------- -------------- -------------- Adjusted net loss per share ......... $ (0.39) $ (0.45) $ (0.15) $ (0.08) ============== ============== ============== ==============
In August 2001, The FASB issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144"). The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("FAS 121"). FAS 144 supercedes FAS 121, but it retains FAS 121's fundamental provisions. It also amends Account Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. FAS 144 retains the requirement of FAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of FAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. FAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The Company has early adopted the provisions of FAS 144 as of December 31, 2001 to recognize discontinued business operations in its financial statements. In July 2002, the FASB issued FASB Statement No. 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 provisions of FASB No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company anticipates the adoption of this statement will not have a material effect on its consolidated financial position or results of operations. 5 Note 4 -- 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. In determining basic loss per share for the periods presented, the effects of deemed dividends related to the Company's series A mandatorily redeemable convertible preferred stock is added to the net loss. 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 preferred stock using the if-converted method.
Nine Months Ended Three Months Ended September 30, September 30, ------------------------- ------------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Weighted average shares outstanding ........... 28,731,560 19,570,351 28,942,177 23,146,204 Effect of dilutive options and warrants ....... -- -- -- -- ---------- ---------- ---------- ---------- Weighted average shares outstanding including dilutive effect of securities ... 28,731,560 19,570,351 28,942,177 23,146,204 ========== ========== ========== ==========
Weighted average options and warrants to purchase 10,818,595 and 11,241,703 shares of common stock were outstanding during the nine months and three months ended September 30, 2002. Weighted average options and warrants to purchase 9,266,960 and 10,219,135 shares of common stock were outstanding during the nine months and three months ended September 30, 2001. 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 antidilutive. Note 5 -- Bank Loan Payable In May 2002, the Company entered into a $25,000,000 working capital credit facility with an asset-based lender. 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 $2,000,000. Borrowings bear interest at the lender's base rate plus 1 1/2% per annum. At September 30, 2002, the interest rate on the facility was 5.50%. The credit facility contains certain financial and operational covenants. For the nine month period ended September 30, 2002, the Company was in violation of the covenant requiring the Company to meet a certain earnings before interest, taxes, depreciation and amortization ("EBITDA") target. During October 2002, the credit agreement was amended to cure this covenant violation. During November 2002, the credit agreement was further amended to adjust EBITDA targets, the interest rate and fees on the facility and the inventory cap and other provisions relating to loan availability. At September 30, 2002, $8,940,691 was outstanding under this facility and the loan has been classified as long-term in the accompanying balance sheet because the facility matures in more than one year. Note 6 -- Restructuring Charge During the three month period ended June 30, 2002, the Company recorded a restructuring charge of $960,000. The significant components of the restructuring charge are as follows: Employee termination costs $500,000 Facility exit costs 460,000 -------- $960,000 ======== 6 The employee termination costs relate to 84 employees and officers of the Company terminated following the implementation of a cost savings plan. The facility exit costs relate to the closing or downsizing of 19 sales offices. The following table summarizes the activity against the restructuring charge: Restructuring charge $960,000 Cash paid (452,009) -------- Balance at September 30, 2002 $507,991 ======== 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 communications solutions that encompass the entire video communications value chain. We are a leading integrator for major video communications equipment manufacturers, including the number one market share leader, Polycom, Inc. ("Polycom"), which accounts for over 50% of the installed videoconferencing endpoints in the United States. In December 2000, we introduced our Glowpoint network service, providing our customers with two-way video communications with high quality of service. With the introduction of Glowpoint, we now offer our customers a single point of contact for all their video communications requirements. Furthermore, we believe Glowpoint is the first dedicated network to provide two-way video communications by utilizing a dedicated Internet protocol ("IP") backbone and broadband access. The Company markets and sells its video communications products and services to the commercial, federal and state government, medical and educational markets through a direct sales force of account executives and telemarketers and through resellers. These efforts are supported by sales engineers, a marketing department, a call center and a professional services and engineering group. The Company has sold its products and services to over 3,000 customers who collectively have approximately 20,000 videoconferencing endpoints. The Company was formed on May 18, 2000 by the merger of ACC and VTI. VTI (renamed Wire One Technologies, Inc. upon the merger) was the surviving legal entity in the merger. However, for financial reporting purposes, the merger has been accounted for as a "reverse acquisition" using the purchase method of accounting. Under the purchase method of accounting, ACC's historical results have been carried forward and VTI's operations have been included in the financial statements commencing on the merger date. Accordingly, all 2000 results through the merger date are those of ACC only. Further, on the date of the merger, the assets and liabilities of VTI were recorded at their fair values, with the excess purchase consideration allocated to goodwill. We sell both products and services. Product revenue consists of revenue from the sale of video communications equipment and is recognized at the time of shipment, provided no significant obligations remain, collectibility is probable and returns are estimable. Service revenue is derived from services 7 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, technical training and user training. The majority of the services are rendered at or prior to installation, and all revenue is recognized when services are rendered. Revenue related to extended service contracts is deferred and recognized over the life of the extended service period. Revenues related to providing network services (either H.323 Bridging or Glowpoint IP Network) are recognized on a monthly basis for services rendered and detailed on a monthly bill. In July 2000, we acquired the net assets of 2CONFER, LLC ("2CONFER"), a Chicago-based provider of videoconferencing, audio and data solutions. The total consideration was $800,000, consisting of $500,000 in cash and the remainder in our common stock valued at the time of acquisition at $300,000. On the date of the acquisition, the assets and liabilities of 2CONFER were recorded at their fair values, with the excess purchase consideration allocated to goodwill. In October 2000, we acquired the assets and certain liabilities of the Johns Brook Company ("JBC") videoconferencing division, a New Jersey-based provider of videoconferencing solutions. The total consideration was $635,000, consisting of $481,000 in cash and the remainder in our common stock valued at the time of acquisition at $154,000. On the date of the acquisition, the assets and certain liabilities of the JBC videoconferencing division were recorded at their fair values, with the excess purchase consideration allocated to goodwill. In June 2001, we acquired the assets of GeoVideo Networks, Inc. ("GeoVideo"), a New York-based developer of video communications software. Chief among the assets, in addition to GeoVideo's cash on hand of $2,500,000, was GeoVideo's browser, a software tool based upon proprietary Bell Labs technology that allows up to six simultaneous, real-time, bi-directional high-bandwidth IP video sessions to be conducted over a standard desktop PC. In exchange for the acquired assets, we issued 815,661 shares of our common stock, together with warrants to purchase 501,733 additional shares of our common stock at $5.50 per share and 520,123 shares at $7.50 per share. On the date of acquisition the assets of GeoVideo were recorded at their fair values, with the excess purchase consideration allocated to goodwill. In July 2001, we acquired the assets and certain liabilities of Advanced Acoustical Concepts, Inc. ("AAC"), an Ohio-based designer of audiovisual conferencing systems. The total consideration was $794,000, which was paid in the form of our common stock valued at the time of acquisition. On the date of acquisition, the assets and certain liabilities were recorded at their fair values, with the excess purchase consideration allocated to goodwill. A final appraisal of certain assets included in the acquisition has not been completed. Pending the results of the appraisal, the allocation among the various components of the purchase price may change; however, any such reallocation will not materially affect our overall financial position or results of operations. In October 2001, we completed the sale of our voice communications business unit to Fairfield, N.J.-based Phonextra, Inc. for approximately $2,017,000, half 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 self-amortizing over one year. The sale of our voice communications unit was aimed at enabling us to sharpen our focus on video solutions and on Glowpoint. As a consequence, this unit has been classified as a discontinued operation in the accompanying financial statements. In November 2001, we acquired certain assets and liabilities of the video conferencing division of Axxis, Inc. ("Axxis"), a Kentucky-based designer of audiovisual conferencing systems. The total consideration was $2,051,000, which was paid in the form of our common stock valued at the time of acquisition. On the date of acquisition, the acquired assets and liabilities were recorded at their fair values, with the excess purchase consideration allocated to goodwill. A final appraisal of certain assets included in the acquisition has not been completed. Pending the results of the appraisal, the allocation among the various components of the purchase price may change; however, any such reallocation will not materially affect our overall financial position or results of operations. 8 Wire One Technologies, Inc. Results of Operations (Unaudited)
Nine Months Three Months Ended Sept. 30, Ended Sept. 30, ------------------- ------------------- 2002 2001 2002 2001 ------ ------ ------ ------ Revenues Video Solutions 94.9% 95.9% 93.5% 97.0% Video Network 5.1% 4.1% 6.5% 3.0% ------ ------ ------ ------ 100.0% 100.0% 100.0% 100.0% ------ ------ ------ ------ Cost of revenues Video Solutions 73.9% 68.3% 76.9% 70.9% Video Network 93.1% 80.9% 94.4% 93.1% ------ ------ ------ ------ 74.9% 68.8% 78.0% 71.6% ------ ------ ------ ------ Gross margin Video Solutions 26.1% 31.7% 23.1% 29.1% Video Network 6.9% 19.1% 5.6% 6.9% ------ ------ ------ ------ 25.1% 31.2% 22.0% 28.4% ------ ------ ------ ------ Operating expenses Selling 30.7% 29.1% 32.1% 27.4% General and administrative 7.4% 8.1% 7.9% 7.4% Restructuring 1.2% 0.0% 0.0% 0.0% Amortization of goodwill 0.0% 3.3% 0.0% 3.3% ------ ------ ------ ------ Total operating expenses 39.3% 40.5% 40.0% 38.1% ------ ------ ------ ------ Loss from continuing operations (14.2)% (9.3)% (18.0)% (9.7)% ------ ------ ------ ------ Other (income) expense Amortization of deferred financing costs 0.2% 0.1% 0.2% 0.2% Interest income (0.1)% (0.1)% 0.0% (0.1)% Interest expense 0.2% 0.8% 0.3% 0.6% ------ ------ ------ ------ Total other expenses, net 0.3% 0.8% 0.5% 0.7% ------ ------ ------ ------ Income tax provision 0.0% 0.3% 0.0% 0.9% ------ ------ ------ ------ Net loss from continuing operations (14.5)% (10.4)% (18.5)% (11.3)% Loss from discontinued operations (0.2)% (0.4)% (0.2)% (0.6)% ------ ------ ------ ------ Net loss (14.7)% (10.8)% (18.7)% (11.9)% Deemed dividends on series A convertible preferred stock 0.0% 7.4% 0.0% 0.0% ------ ------ ------ ------ Net loss attributable to common stockholders (14.7)% (18.2)% (18.7)% (11.9)% ====== ====== ====== ======
9 Nine Months Ended September, 2002 ("2002 period") Compared to Nine Months Ended September 30, 2001 ("2001 period") and Three Months Ended September 30, 2002 (" September 2002 quarter") Compared to Three Months Ended September 30, 2001 ("September 2001 quarter"). NET REVENUES. The Company reported net revenues of $76.5 million for the 2002 period, an increase of $16.5 million, or 27.6%, over the $60.0 million in net revenues reported for the 2001 period. Net revenues of $23.5 million for the September 2002 quarter represent an increase of $1.2 million, or 5.3%, over the $22.3 million reported for the September 2001 quarter. Although the operations of acquired companies have now been fully integrated into the Company, management estimates that approximately $4.5 million of the $16.5 million increase in revenues for the 2002 period over the 2001 period related to the core businesses in existence before contributions from AAC and Axxis and $12.0 million in revenues from AAC and Axxis accounted for the remainder of the growth. The $1.2 million increase in revenues for the September 2002 quarter over the September 2001 quarter resulted from a $2.6 million increase in revenues from AAC and Axxis and a $1.4 million decrease in revenues from core businesses in existence before contributions from AAC and Axxis. Video solutions -- Sales of video communications products and services were $72.6 million in the 2002 period, an increase of $15.1 million, or 26.4%, over the $57.5 million in the 2001 period. Net revenues of $22.0 million for the September 2002 quarter represent an increase of $0.3 million, or 1.4%, over the $21.7 million reported for the September 2001 quarter. Management estimates that approximately $3.1 million of the $15.1 million increase in revenues for the 2002 period over the 2001 period related to the core businesses in existence before contributions from AAC and Axxis and $12.0 million in revenues from AAC and Axxis accounted for the remainder of the growth. The growth experienced in the 2002 period resulted from sales to both new and existing customers in the commercial, government, medical and educational markets in each of the major geographic regions in the United States in which the Company operates, with particular strength experienced in the government sector. The $.3 million increase in revenues for the September 2002 quarter over the September 2001 quarter resulted from a $2.6 million increase in revenues from AAC and Axxis and a $2.3 million decrease in revenues from core businesses in existence before contributions from AAC and Axxis. Video network -- Sales of video network services were $3.9 million in the 2002 period, an increase of $1.4 million, or 56.4%, over the $2.5 million in the 2001 period. Net revenues of $1.5 million for the September 2002 quarter represent an increase of $0.8 million, or 129.7%, over the $0.7 million reported for the September 2001 quarter. Management estimates that the $1.4 million net increase in revenues for the 2002 period over the 2001 period related to approximately $1.7 million of revenues resulting from the introduction of the Glowpoint network offset by a $0.3 million decrease in revenues from VTI's H.320 bridging service. GROSS MARGINS. Gross margins were $19.2 million in the 2002 period, an increase of $0.5 million over the $18.7 million in the 2001 period. Gross margins decreased in the 2002 period to 25.1% of net revenues, as compared to 31.2% of net revenues in the 2001 period. Gross margins were $5.2 million in the September 2002 quarter, a decrease of $1.1 million from the $6.3 million in the September 2001 quarter. Gross margins decreased in the September 2002 quarter to 22.0% of net revenues, as compared to 28.4% of net revenues in the September 2001 quarter. In the 2002 period and the September 2002 quarter, the Company experienced a continuation of a trend that has been experienced in recent quarters, namely, heightened competitive pressure in the video solutions business resulting from the relatively weak economy and downward pricing pressure instigated by heavy competition for orders. SELLING. Selling expenses, which include sales salaries, commissions, overhead, and marketing costs, were $23.4 million in the 2002 period, an increase of $6.0 million from the $17.4 million reported for the 2002 period. Selling expenses increased in the 2002 period to 30.7% of net revenues, as compared to 29.1% of net revenues in the 2001 period. The year-to-date increase in expenses as a percentage of revenue primarily resulted from a $1.0 million increase in Glowpoint-related expenses and a $2.4 million increase in expenses resulting from the AAC and Axxis acquisitions. Selling expenses were $7.5 million, or 32.1% of net revenues, in the September 2002 quarter, an increase of $1.4 million over the $6.1 million, or 27.4% of net revenues, in the September 2001 quarter. The increase in expenses as a percentage of revenue for the quarter primarily resulted from a $0.3 million increase in Glowpoint-related expenses and a $0.6 million increase in expenses resulting from the AAC and Axxis acquisitions. 10 GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $0.9 million in the 2002 period to $5.7 million as compared to $4.8 million for the 2001 period. General and administrative expenses as a percentage of net revenues for the 2002 period declined to 7.4% in the 2002 period from 8.1% in the 2001 period. General and administrative expenses increased $0.2 million to $1.9 million, or 7.9% of net revenues, in the September 2002 quarter from $1.7 million, or 7.4% of net revenues, for the September 2001 quarter. In the 2002 period, management continued to leverage the general and administrative infrastructure costs of its executive, finance, legal and human resource groups over a greater revenue base. RESTRUCTURING. A restructuring charge of $960,000 was recorded in the 2002 period. Approximately half of the charge related to the costs of vacating certain sales offices with the other half related to severance and other personnel costs. AMORTIZATION OF GOODWILL. Amortization expense was zero in the 2002 period as the Company implemented the provisions of Financial Accounting Standards Board Statement No. 142, Goodwill and Other Intangible Assets ("FAS 142"). Amortization expense was $2.0 million in the 2001 period and $0.7 million for the September 2001 quarter. OTHER (INCOME) EXPENSES. Other expenses decreased $231,000 to $221,000 in the 2002 period from $452,000 in the 2001 period. The principal component of this category, interest expense, decreased approximately $264,000 to $182,000 in the 2002 period from $446,000 in the 2001 period. The decline in interest expense resulted from paying down the outstanding balance under our prior bank line of credit from the proceeds of our $20.3 million common stock offering early in the 2002 period. For the September 2002 quarter, other expenses decreased $39,000 to $113,000 from $152,000 in the September 2001 quarter, principally as a result of the decline in interest expense. DISCONTINUED OPERATIONS. As a result of some post-closing adjustments related to the sale of its voice communications business, the Company incurred a $151,000 loss from discontinued operations in the 2002 period. The Company incurred a loss from discontinued operations in the 2001 period of approximately $248,000. The loss from discontinued operations in the 2001 period resulted from lower revenues to cover the fixed costs of the voice communications unit and higher costs of revenues as competitive pressures reduced gross margins. NET LOSS. The Company reported a net loss attributable to common stockholders for the 2002 period of $(11.3) million, or $(.39) per diluted share, as compared to a net loss attributable to common stockholders of $(10.9) million, or $(.56) per diluted share, for the 2001 period. The $(11.3) million net loss for the 2002 period results primarily from depreciation and amortization charges totaling $3.9 million and $2.9 million of costs related to the Glowpoint network service offering. EBITDA from continuing operations for the 2002 period was $(5.8) million. The $(10.9) million net loss for the 2001 period results primarily from depreciation and amortization charges totaling $4.7 million, $4.4 million in deemed dividends on series A preferred stock, and $1.9 million of costs related to the Glowpoint network service offering. EBITDA from continuing operations for the 2001 period was $(0.6) million. Liquidity and Capital Resources At September 30, 2002, the Company had working capital of $31.8 million compared to $15.6 million at December 31, 2001, an increase of approximately 103.2%. The Company had $4.8 million in cash and cash equivalents at September 30, 2002 compared to $1.7 million at December 31, 2001. The $16.2 million increase in working capital resulted primarily from the January 2002 common stock offering of $20.3 million, the reclassification of $8.9 million of bank debt from current to long-term and the $11.3 million net loss for the 2002 period. Net cash used in operating activities for the 2002 period was $(12.2) million as compared to net cash used in operations of $(10.5) million during the 2001 period. Increases in other current assets of $6.4 11 million and inventory of $2.8 million and a cash loss from operations of $7.1 million were the primary uses of operating cash in the 2002 period, offset somewhat by a $9.1 million reduction in accounts receivable. Investing activities for the 2002 period included purchases of $3.6 million of network equipment and computer equipment and software, primarily for the Glowpoint network. Financing activities in the 2002 period included the issuance of common stock in a public offering under a shelf registration yielding net proceeds of $20.3 million and a net paydown of $1.7 million under the Company's revolving credit line. In May 2002, the Company entered into a $25 million working capital credit facility with an asset based lender. 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. At September 30, 2002, $8.9 million was outstanding under this facility and the loan has been classified as non-current in the accompanying balance sheet because the facility matures in more than one year. The credit facility contains certain financial and operational covenants. For the 2002 period, the Company was in violation of the covenant requiring the Company to meet a specified earnings before interest, taxes, depreciation and amortization ("EBITDA") target. During October 2002, the credit agreement was amended to cure this covenant violation. During November 2002, the credit agreement was further amended to adjust EBITDA targets, the interest rate and fees on the facility and the inventory cap and other provisions relating to loan availability. Management believes, based on current circumstances, that the Company has adequate capital resources to support its expected operating levels for 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 We sell both products and services. Product revenue consists of revenue from the sale of video communications equipment and is recognized at the time of shipment, provided no significant obligations remain, collectibility is probable and returns are estimable. 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, technical training and user training. The majority of the services are rendered at or prior to installation, and all revenue is recognized when services are rendered. Revenue related to extended service contracts is deferred and recognized over the life of the extended service period. Long-lived assets We evaluate impairment losses on long-lived assets used in operations, primarily fixed assets and goodwill, when events and circumstances indicate that the carrying value of the assets and goodwill might not be recoverable. 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 these undiscounted cash flows, the related assets will be written down to fair value. There were no impairment losses recorded in any of the periods presented. 12 Recent pronouncements of the Financial Accounting Standards Board In June 1998 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("FAS 133"). "Accounting for Derivative Instruments and Hedging Activities", which became effective for the Company during the first quarter of 2001. FAS 133 requires the recognition of all derivatives as either assets or liabilities in our balance sheet and measurement of those instruments at fair value. To date, we have not entered into any derivative or hedging activities, and, as such, the adoption of FAS 133, as amended, has not had a material effect on its consolidated financial statements. In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations ("FAS 141"), and No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS 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. FAS 141 also requires that we recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. FAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of FAS 142, that we reclassify, if necessary, the carrying amounts of intangible assets and goodwill based on the criteria in FAS 141. FAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, FAS 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 FAS 142. FAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. FAS 142 requires us to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of FAS 142. With respect to the Company's business combinations that were effected prior to June 30, 2001, using the purchase method of accounting, the net carrying amount of the resulting goodwill as of September 30, 2002 was $36,775,028. No amortization expense was recorded in the nine-month period ended September 30, 2002. Acquisitions occurring subsequent to July 1, 2001 have been accounted for using the purchase method of accounting. The Company is in the process of obtaining appraisals of the assets acquired for the purpose of allocating the purchase price to all tangible and intangible assets acquired. We have determined that our business consists of two reporting units for purposes of assessing existing goodwill for impairment. An impairment charge will be recognized for the amount, if any, which the carrying amount of goodwill exceeds its implied fair value. We have completed Step 1 of FAS 142 and deemed a potential impairment exists. We are in the process of quantifying the impairment (Step 2 of FAS 142) and expect to complete the process in the fourth quarter of 2002. We currently do not have any reasonable estimate of the amount of impairment which could range from $0 to the entire goodwill being carried at $42,588,509. The effect on 2001 reported net loss attributable to common stockholders and net loss per share excluding goodwill amortization is as follows: 13
Nine Months Ended September 30, Three Months Ended September 30, 2002 2001 2002 2001 Reported net loss attributable to common stockholders $ (11,261,630) $ (10,893,069) $ (4,385,905) $ (2,648,523) Goodwill amortization -- 2,000,564 -- 729,841 -------------- -------------- -------------- -------------- Adjusted net loss attributable to common stockholders $ (11,261,630) $ (8,982,505) $ (4,385,905) $ (1,918,682) ============== ============== ============== ============== Reported net loss per share $ (0.39) $ (0.56) $ (0.15) $ (0.11) Goodwill amortization -- 0.10 -- 0.03 -------------- -------------- -------------- -------------- Adjusted net loss per share $ (0.39) $ (0.46) $ (0.15) $ (0.08) ============== ============== ============== ==============
In August 2001, the FASB issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144"). The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("FAS 121"). FAS 144 supercedes FAS 121, but it retains FAS 121's fundamental provisions. It also amends Account Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. FAS 144 retains the requirement of FAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of FAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. FAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The Company has early adopted the provisions of FAS 144 as of December 31, 2001 to recognize discontinued business operations in its financial statements. In July 2002, the FASB issued FASB Statement No. 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 provisions of FASB No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company anticipates the adoption of this statement will not have a material effect on its consolidated financial position or results of operations. Inflation Management does not believe inflation had a material adverse effect on the financial statements for the periods presented. 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 and 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 $25 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 Based on the Company's most recent evaluation, which was completed within 90 days of the filing of this Form 10-Q, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiences and material weaknesses. 14 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 10 Material Agreements 10.1 Waiver and Amendment Agreement No. 2 10.2 Warrant to Purchase Common Stock 10.3 Amendment Agreement No. 3 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): In an interview in early October 2002 to Wainhouse Research and published on October 23, 2002, in the Wainhouse Research Bulletin, Leo Flotron, Wire One's President and Chief Operating Officer, stated that as of the date of the interview, Wire One had "north of 800" endpoints on its Glowpoint network. 15 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: November 14, 2002 By: /s/ Richard Reiss -------------------------------------- Richard Reiss, Chief Executive Officer Date: November 14, 2002 By: /s/ Christopher Zigmont -------------------------------------- Christopher Zigmont, Chief Financial Officer (principal financial and accounting officer) 16 WIRE ONE TECHNOLOGIES, INC. CERTIFICATION 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: November 14, 2002 By: /s/ Richard Reiss ----------------------------------- Richard Reiss Chief Executive Officer WIRE ONE TECHNOLOGIES, INC. CERTIFICATION 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: November 14, 2002 By: /s/ Christopher A. Zigmont -------------------------------------- Christopher A. Zigmont Executive Vice President and Chief Financial Officer EX-10.1 3 d52378_ex10-1.txt AMENDMENT AGREEMENT NO. 2 Exhibit 10.1 WAIVER AND AMENDMENT AGREEMENT NO. 2 WAIVER AND AMENDMENT AGREEMENT NO. 2 (this "Agreement") dated as of October 31, 2002 to the CREDIT AGREEMENT, dated as of May 31, 2002, as amended (as the same may be further amended, restated, modified or supplemented from time to time, the "Credit Agreement"), among WIRE ONE TECHNOLOGIES, INC. (the "Borrower"), the lenders named therein (the "Lenders") and JPMORGAN CHASE BANK, as administrative agent for the Lenders (the "Administrative Agent"). All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. WHEREAS, the Borrower has requested that the Required Lenders waive certain provisions of the Credit Agreement and agree to amend certain provisions of the Credit Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. WAIVER TO THE CREDIT AGREEMENT 1.1 The Required Lenders hereby waive the minimum EBITDA set forth in Section 6.12 of the Credit Agreement solely for the three fiscal quarters ended September 30, 2002, provided that the minimum EBITDA for such three fiscal quarter period is not less than ($6,000,000). SECTION 2. AMENDMENT TO THE CREDIT AGREEMENT 2.1 The definition of "Availability Block" in Section 1.01 of the Credit Agreement is hereby amended in its entirety to read as follows: "Availability Block" means (i) prior to November 29, 2002, $4,000,000, (ii) on or after November 29, 2002, $5,500,000, or (iii) if at any time (A) the Leverage Ratio is less than or equal to 4.00:1.00 for two consecutive fiscal quarters (and based on projections satisfactory to the Lenders, the Leverage Ratio will be less than or equal to 4.00:1.00 for the subsequent consecutive four fiscal quarters) and (B) the Fixed Charge Coverage Ratio is equal to or greater than 1.25:1.00 for two consecutive fiscal quarters (and based on projections satisfactory to the Lenders, the Fixed Charge Coverage Ratio will be equal to or greater than 1.25:1.00 for the subsequent consecutive four fiscal quarters), $2,500,000. SECTION 3. CONFIRMATION OF FINANCING DOCUMENTS 3.1 The Borrower, by its execution and delivery of this Agreement, irrevocably and unconditionally ratifies and confirms in favor of the Administrative Agent that the Financing Documents shall continue in full force and effect in accordance with their terms. SECTION 4. CONDITIONS PRECEDENT This Agreement shall become effective upon the execution and delivery of counterparts hereof by the Borrower, the Administrative Agent and the Lenders and the fulfillment of the following conditions: 4.1 All legal matters in connection with this Agreement shall be satisfactory to the Administrative Agent, the Lenders and their respective counsel in their sole discretion. 4.2 Kaye Scholer LLP, counsel to the Administrative Agent, shall have received payment in full for all legal fees charged, and all costs and expenses incurred, by such counsel through the date hereof and all legal fees charged, and all costs and expenses incurred, by such counsel in connection with the transactions contemplated under this Agreement and the other Loan Documents and instruments in connection herewith and therewith. 4.3 The Administrative Agent shall have received such other approvals, opinions or documents as the Administrative Agent may reasonably request. SECTION 5. CONDITIONS SUBSEQUENT 5.1 On or before November 14, 2002, the Administrative Agent shall have received a warrant reasonably satisfactory to the Administrative Agent for the purchase of 100,000 shares of common stock of the Borrower at an exercise price per share equal to the market value of the common stock of the Borrower as of the close of business on the date of delivery of such warrant. 5.2 In connection with the warrant referred to above, the Administrative Agent shall have received a written opinion of counsel for the Borrower, covering such matters as reasonably requested by the Administrative Agent and its counsel with respect to such warrant and otherwise in form and substance reasonably satisfactory to the Administrative Agent and its counsel. 2 SECTION 6. MISCELLANEOUS 6.1 The Borrower reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement, after giving effect to the transactions contemplated herein, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date (unless expressly related to an earlier date). The Borrower represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Administrative Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of the Borrower), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Agreement; (c) This Agreement has been duly executed and delivered on behalf of the Borrower by a duly authorized officer, and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Agreement will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of the Borrower. 6.2 Except as herein expressly amended, the Credit Agreement is ratified and confirmed in all respects and shall remain in full force and effect in accordance with its terms. 6.3 All references to the Credit Agreement in the Credit Agreement and the other Financing Documents and the other documents and instruments delivered pursuant to or in connection therewith shall mean the Credit Agreement as amended hereby and as may in the future be amended, restated, supplemented or modified from time to time. 6.4 This Agreement constitutes a Financing Document under the Credit Agreement. 6.5 This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 6.6 Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 6.7 THIS AGREEMENT, IN ACCORDANCE WITH SECTION 5-1401 OF 3 THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. 6.8 The parties hereto shall, at any time and from time to time following the execution of this Agreement, execute and deliver all such further instruments and take all such further actions as may be reasonably necessary or appropriate in order to carry out the provisions of this Agreement. [Remainder Intentionally Left Blank] 4 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WIRE ONE TECHNOLOGIES, INC., as Borrower By: /s/ Jonathan Birkhahn ---------------------------- Name: Jonathan Birkhahn Title: EVP Business Affairs and General Counsel JPMORGAN CHASE BANK, as Administrative Agent and Lender By: ____________________________ Name: Title: IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WIRE ONE TECHNOLOGIES, INC., as Borrower By: ____________________________ Name: Title: JPMORGAN CHASE BANK, as Administrative Agent and Lender By: /s/ John T. Zeller ---------------------------- Name: John T. Zeller Title: Vice President EX-10.2 4 d52378_ex10-2.txt FORM OF WARRANT Exhibit 10.2 WIRE ONE TECHNOLOGIES, INC. WARRANT TO PURCHASE COMMON STOCK Warrant No.: JPM - 001 Number of Shares: 100,000 Date of Issuance: November 13, 2002 Wire One Technologies, Inc., a Delaware corporation (the "Company"), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, JPMORGAN CHASE BANK, as administrative agent for the lenders under that certain Credit Agreement, dated as of May 31, 2002, as amended to date, among the Company, said lenders and said agent, the registered holder hereof or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time or times on or after the date hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined herein) one hundred thousand (100,000) fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (the shares so purchased, the "Warrant Shares") at the Warrant Exercise Price provided in Section l(a) below. Section 1. (a) Definitions. The following words and terms as used in this Warrant shall have the following meanings: (i) "Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed. (ii) "Closing Sale Price" means, for any security as of any date, the last closing trade price for such security at 4:00 p.m. Eastern Standard Time on the Nasdaq National Market, or, if the Nasdaq National Market is not the principal securities exchange or trading market for such security, the last closing trade price of such security at 4:00 p.m. Eastern Standard Time on the principal securities exchange or trading market where such security is listed or traded, or if the foregoing do not apply, the last closing trade price of such security in the over-the-counter market on the electronic bulletin board for such security at 4:00 p.m. Eastern Standard Time, or, if no last closing trade price is reported for such security, the average of the closing bid and ask prices of such security, or, if no closing ask or bid prices are reported for such security, the average of the bid and ask prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as determined in good faith by the Board of Directors of the Company. (All such determinations to be appropriately adjusted for any stock dividend, stock split or other similar transaction during such period). (iii) "Common Stock" means (i) the Company's common stock, par value $0.0001 per share, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock. (iv) "Expiration Date" means the date five (5) years from the date of this Warrant or, if such date falls on a Saturday, Sunday or other day on which banks are required or authorized to be closed in the City of New York or the State of New York or on which trading does not take place on the principal exchange or automated quotation system on which the Common Stock is traded (a "Holiday"), the next date that is not a Holiday. (v) "Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. (vi) "Securities Act" means the Securities Act of 1933, as amended. (vii) "Warrant" means this Warrant and all Warrants issued in exchange, transfer or replacement thereof. (viii) "Warrant Exercise Price" shall be equal to, with respect to any Warrant Share, $1.99, subject to adjustment as hereinafter provided. (ix) "Warrant Period" means the period beginning on the date hereof and ending on and including the Expiration Date. (b) Other Definitional Provisions. (i) Except as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company's successors and (B) to any applicable law defined or referred to herein, shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time. (ii) When used in this Warrant, the words "herein," "hereof" and "hereunder," and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified. (iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. 2 Section 2. Exercise of Warrant. (a) Subject to the terms and conditions hereof, this Warrant may be exercised by the holder hereof then registered on the books of the Company, in whole or in part, at any time on any Business Day on or after the opening of business on the date hereof and prior to 11:59 P.M. Eastern Time on the Expiration Date by (i) delivery of a written notice, in the form of the exercise notice attached as Exhibit A hereto (the "Exercise Notice"), of such holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the applicable Warrant Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (plus any applicable issue or transfer taxes) (the "Aggregate Exercise Price") in cash or wire transfer of immediately available funds, unless the holder elects to make a "Cashless Exercise" under certain conditions in accordance with section 2(d) of this Agreement, and (iii) the surrender to a common carrier for overnight delivery to the Company as soon as practicable following such date, this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction); provided, that if such Warrant Shares are to be issued in any name other than that of the registered holder of this Warrant, such issuance shall be deemed a transfer and the provisions of Section 7 shall be applicable. In the event of any exercise of the rights represented by this Warrant in compliance with this Section 2(a), the Company shall on the third Business Day following the date of receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) (the "Exercise Delivery Documents"), credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder's or its designee's balance account with The Depository Trust Company; provided, however, if the holder who submitted the Exercise Notice requested physical delivery of any or all of the Warrant Shares, then the Company shall, on or before the third Business Day following receipt of the Exercise Delivery Documents, issue and surrender to a common carrier for overnight delivery to the address specified in the Exercise Notice, a certificate, registered in the name of the holder, for the number of shares of Common Stock to which the holder shall be entitled pursuant to such request. Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in clause (ii) above or notification to the Company of a Cashless Exercise referred to in Section 2(d), the holder of this Warrant shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares, with respect to which this Warrant has been exercised, irrespective of the date of delivery of this Warrant as required by clause (iii) above or the certificates evidencing such Warrant Shares. (b) Unless the rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, as soon as practicable and in no event later than five (5) Business Days after any exercise and at its own expense, issue a new Warrant identical in all respects to this Warrant exercised except it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant exercised, less the number of Warrant Shares with respect to which such Warrant is exercised. (c) No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock issued upon exercise of this Warrant shall be rounded up or down to the nearest whole number. 3 (d) Notwithstanding anything contained herein to the contrary, the holder of this Warrant may elect to exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, receive upon such exercise the "Net Number" of shares of Common Stock (a "Cashless Exercise") which shall be determined according to the following formula: Net Number = (A x B) - (A x C) --------------- B For purposes of the foregoing formula: A=the total number of Warrant Shares with respect to which this Warrant is then being exercised. B=the Closing Sale Price of the Common Stock on the date immediately preceding the date of the exercise notice. C=the Warrant Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise. Section 3. Covenants as to Common Stock. The Company hereby covenants and agrees as follows: (a) This Warrant is, and any Warrants issued in substitution for or replacement of this Warrant will upon issuance be, duly authorized and validly issued. (b) All Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant have been duly and validly authorized and when issued and delivered upon exercise of this Warrant will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof. (c) During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved the number of shares of Common Stock needed to provide for the exercise of the rights then represented by this Warrant. (d) The shares of Common Stock issuable upon exercise of this Warrant shall be listed upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. 4 (e) The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant consistent with the tenor and purpose of this Warrant. (f) This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. Section 4. Taxes. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Common Stock or other securities or property in a name other than that of the registered holders of this Warrant to be converted and such holder shall pay such amount, if any, to cover any applicable transfer or similar tax. Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise specifically provided herein, no holder, as such, of this Warrant shall be entitled by virtue of this Warrant to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the holder of this Warrant of the Warrant Shares which he or she is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on such holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Section 6. Securities Laws. (a) Shares may not be issued to the Holder upon exercise of this Warrant if, at the time of exercise, a registration statement with respect to such shares is not effective under the Securities Act or if such shares are not qualified or exempt from qualification in the state wherein the holder of this Warrant resides. (b) If at any time prior to the Expiration Date the Company proposes to file a registration statement under the Securities Act with respect to an underwritten offering of Common Stock (except on Form S-4 or Form S-8 or any successor forms thereto), for its own account, then the Company shall give written notice of such proposed filing to the holder of this Warrant or of the Warrant Shares at least 15 days in advance of the anticipated filing date (the "Piggyback Notice"). The Piggyback Notice shall offer such holders the opportunity to register such amount of Warrant Shares as each such holder may request (a "Piggyback Registration"); 5 subject in all events to the agreement of the underwriter or underwriters of the offering contemplated by such registration statement that such Warrant Shares can be included in such registration statement without adversely affecting such offering. Any reduction in the number of securities to be so offered shall be (i) first, pro-rata among all security holders who are exercising "piggyback" registration rights, based on the number of registrable securities originally proposed to be sold by each of them, and (ii) second, pro-rata among all security holders who are exercising "demand" registration rights pursuant to a registration rights agreement with the Company, based on the number of registrable securities originally proposed to be sold by each of them. Section 7. Ownership and Transfer. (a) The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee. The Company may treat the person in whose name any Warrant is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary. (b) This Warrant and the rights granted hereunder shall be assignable by the holder hereof without the consent of the Company. Section 8. Adjustment of Warrant Exercise Price and Number of Shares. The Warrant Exercise Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted from time to time as follows: (a) Adjustment of Warrant Exercise Price upon Sale or Issuance of Securities. If the Company shall (A) sell or issue shares of its Common Stock, (B) issue rights, options or warrants to subscribe for or purchase shares of Common Stock or (C) issue or sell other rights for shares of Common Stock or securities convertible or exchangeable into shares of Common Stock (such securities and the Common Stock collectively, the "Securities"), at a Price Per Share (as defined below) less than the Warrant Exercise Price in effect on the date that the Company fixes the offering price of such Securities, then in each such case the Warrant Exercise Price in effect immediately prior to the issuance of such Securities shall be adjusted so that it shall equal the Price Per Share for such Securities. The adjustment provided for in this Section 8(a) shall become effective immediately after such issuance and shall be made successively whenever any such Securities are issued; provided that no further adjustments in the Warrant Exercise Price shall be made upon the subsequent exercise, conversion or exchange, as applicable, of such Securities pursuant to the original terms of such Securities. In determining the "Price Per Share" under this Section 8(a), there shall be taken into account any consideration received by the Company for such Securities and any consideration required to be paid upon the exercise, conversion or exchange, as applicable, of such Securities. The value of all such consideration (if other than cash) shall be determined by the Company's Board of Directors, whose determination shall be conclusive if made in good faith. If all of such Securities are not so issued or expire or terminate without having been exercised, converted or exchanged, the Warrant Exercise Price then in effect shall be appropriately readjusted to the Warrant Exercise Price that would then be in effect had the adjustments made upon the issuance of such Securities not been made. 6 Notwithstanding the foregoing, the provisions of this Section 8(a) shall not apply to the issuance of Common Stock to directors, officers or employees of, or consultants to, the Company or its subsidiaries upon the exercise of options pursuant to a stock grant, option plan, purchase plan or other employee stock incentive program or other arrangement approved by the Board of Directors of the Company. (b) Adjustment of Warrant Exercise Price upon Subdivision or Combination of Common Stock. If the Company at any time after the date of issuance of this Warrant subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Warrant Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Warrant will be proportionately increased. If the Company at any time after the date of issuance of this Warrant combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Warrant Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of shares of Common Stock obtainable upon exercise of this Warrant will be proportionately decreased. Any adjustment under this Section 8(b) shall become effective at the close of business on the date the subdivision or combination becomes effective. (c) Reclassification or Merger. In case of any reclassification or other change of securities of the class issuable upon exercise of this Warrant (other than a change solely in par value or from par value to no par value or vice versa or as a result of a subdivision or combination of Shares or other securities subject to this Warrant), the Company shall duly execute and deliver to the holder of this Warrant a new Warrant as nearly equivalent as possible to this Warrant; and in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing entity shall (i) duly execute and deliver to the holder a new Warrant as nearly equivalent as possible to this Warrant or (ii) make appropriate written provisions, without the issuance of a new Warrant, so that the holder shall have the right to receive upon exercise of this Warrant, at a total exercise price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock or other securities theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, merger or sale by a holder of the number of shares of Common Stock or other securities then unexercised and purchasable under this Warrant. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 8. The provisions of this Section 8(c) shall similarly apply to successive recapitalizations, reclassifications, reorganizations, changes, mergers and sales. (d) Minimum Adjustment of Warrant Exercise Price. No adjustment of the Warrant Exercise Price shall be made under this Section 8 in an amount of less than 1% of the Warrant Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next 7 subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Warrant Exercise Price. No adjustments shall be made pursuant to this Section 8 which would result in an increase in the Warrant Exercise Price. (e) Notices. (i) Immediately upon any adjustment of a Warrant Exercise Price, the Company will give written notice thereof to the holder of this Warrant, setting forth in reasonable detail, and certifying, the calculation of such adjustment. (ii) The Company will give written notice to the holder of this Warrant at least ten (10) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change (as defined below), dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets to another Person or other transaction in each case which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an "Organic Change." (iii) The Company will also give written notice to the holder of this Warrant at least ten (10) days prior to the date on which any Organic Change, dissolution or liquidation will take place, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Section 9. Redemption. (a) Mandatory Redemption of Warrants. The holder of this Warrant may, at any time and from time to time on or within sixty (60) days after the closing of any transaction or series of transactions during any six month period in which the Company shall have issued equity or debt securities having aggregate gross proceeds to the Company of at least $5,000,000 or more after the date of this Warrant, demand a determination of the Redemption Price (a "Determination Notice") for purposes of this Section 9(b). Within 5 days after the receipt of any Determination Notice from the holder, the Company shall give to the holder notice of the Redemption Price, including a reasonably detailed description of the method of calculation thereof, determined as of the day preceding such notice of the Redemption Price. At any time within 30 days after receipt of notice of the Redemption Price the holder may demand redemption of this Warrant, in whole or in part, at the Redemption Price by notice to the Company, which Redemption Price shall be payable on the third Business Day after receipt of notice of such demand (any such date, the "Redemption Due Date") in immediately available funds to the holder upon surrender of this Warrant to the Company. Thereupon, the right to purchase shares of Common Stock theretofore represented by this Warrant as to which the holder has demanded (and the Company may effect) redemption shall terminate, and this Warrant shall 8 represent the right of the holder to receive the full Redemption Price from the Company in accordance with this Section. (b) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date or Redemption Due Date, as applicable. On and after the Redemption Date or Redemption Due Date, as applicable, holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the redemption price. (c) From and after the Redemption Date specified, the Company shall, at the place specified in the notice of redemption, upon presentation and surrender to the Company by or on behalf of the registered holder thereof of one or more warrant certificates evidencing Warrants to be redeemed (or an affidavit of loss for such Warrant, which shall include provisions indemnifying the Company with respect to such loss, and otherwise in a form reasonably acceptable to the Company), deliver or cause to be delivered to or upon the written order of such holder a sum in cash equal to the redemption price of each such Warrant. From and after the Redemption Date and upon the deposit or setting aside by the Company of a sum sufficient to redeem all the Warrants called for redemption, such Warrants shall expire and become void and all rights hereunder and under the warrant certificates, except the right to receive payment of the redemption price, shall cease. Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt of an indemnification undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Section 11. Notice. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: Wire One Technologies, Inc. 225 Long Avenue Hillside, New Jersey 07205 Telephone: (973) 282-2000 Facsimile: (973) 923-3352 Attention: General Counsel With a copy to: Morrison & Foerster LLP 1290 Avenue of the Americas 9 New York, NY 10104 Telephone: (212) 468-8000 Facsimile: (212) 468-7999 Attention: Michael J.W. Rennock If to the holder, at the address of such holder or its transferee as shall appear on the records maintained by the Company. Each party shall provide five days' prior written notice to the other party of any change in address or facsimile number. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. Section 12. Date. This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Section 7 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant. Section 13. Amendment and Waiver. The provisions of this Warrant may, except as otherwise provided herein, be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of Warrants representing a majority of the shares of Common Stock obtainable upon exercise of this Warrant then outstanding; provided that no such action may increase the Warrant Exercise Price of the Warrants or decrease the number of shares or class of stock obtainable upon exercise of any Warrant without the written consent of the holder of such Warrant. Section 14. Descriptive Headings; Governing Law. The descriptive headings of the several Sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York, or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. WIRE ONE TECHNOLOGIES, INC. By: /s/ Jonathan Birkhahn --------------------------------- Name: Jonathan Birkhahn Title: Executive VP Business Affairs and General Counsel 10 EXHIBIT A TO WARRANT EXERCISE NOTICE TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT WIRE ONE TECHNOLOGIES, INC. The undersigned holder hereby exercises the right to purchase _____________________ (_______) of the shares of Common Stock ("Warrant Shares") of Wire One Technologies, Inc., a Delaware corporation (the "Company"), evidenced by the attached Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant. 1. Form of Warrant Exercise Price. The Holder intends that payment of the Warrant Exercise Price shall be made as: _____________ a "Cash Exercise" with respect to _____________ Warrant Shares; and/or _____________ a "Cashless Exercise" with respect to _____________ Warrant Shares (to the extent permitted by the terms of the Warrant). 2. Payment of Warrant Exercise Price. The holder shall pay the sum of $________ to the Company in accordance with the terms of the Warrant. 3. Delivery of Warrant Shares. The Company shall deliver to the holder _________ Warrant Shares in accordance with the terms of the Warrant. Date: ___________ _, ____ - ------------------------------------ Name of Registered Holder By: ---------------------------------------------- Name: Title: EXHIBIT B TO WARRANT FORM OF WARRANT POWER FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to ___________, with an address at _____________________________________, Federal Identification No. _____________, a warrant to purchase ____________ shares of the Common Stock of Wire One Technologies, Inc., a Delaware corporation, represented by warrant certificate no. _________, standing in the name of the undersigned on the books of said corporation. The undersigned does hereby irrevocably constitute and appoint ___________, attorney to transfer the warrants of said corporation, with full power of substitution in the premises. Dated: ______, _____ [HOLDER] By: ----------------------------------- Its: ----------------------------------- EX-10.3 5 d52378_ex10-3.txt AMENDMENT NO. 3 Exhibit 10.3 AMENDMENT AGREEMENT NO. 3 AMENDMENT AGREEMENT NO. 3 (this "Agreement") dated as of November 13, 2002 to the CREDIT AGREEMENT, dated as of May 31, 2002, as amended (as the same may be further amended, restated, modified or supplemented from time to time, the "Credit Agreement"), among WIRE ONE TECHNOLOGIES, INC. (the "Borrower"), the lenders named therein (the "Lenders") and JPMORGAN CHASE BANK, as administrative agent for the Lenders (the "Administrative Agent"). All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. WHEREAS, the Borrower has requested that the Required Lenders agree to amend certain provisions of the Credit Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 The definition of "Applicable Rate" in Section 1.01 of the Credit Agreement are hereby amended as follows: (a) Effective as of December 1, 2002, clause (i) is amended in its entirety to read as follows: "(i) if such day occurs on or after the Effective Date and prior to the delivery of the first financial statements referred to in clause (ii) below, (x) with respect to Loans that are Eurodollar Loans, 3.75% and (y) with respect to Loans that are ABR Loans, 1.50%; and" (b) Clause (ii) is amended by deleting the date "December 31, 2002" set forth in the third line thereof and substituting, in lieu thereof, the date "December 31, 2003". 1.2 The definition of "Availability Block" in Section 1.01 of the Credit Agreement is hereby amended in its entirety to read as follows: "Availability Block" means (i) prior to January 3, 2003, $4,000,000, (ii) on or after January 3, 2003, but prior to January 31, 2003, $4,250,000, (iii) on or after January 31, 2003, $4,500,000, or (iv) if at any time (A) the Leverage Ratio is less than or equal to 4.00:1.00 for two consecutive fiscal quarters (and based on projections satisfactory to the Lenders, the Leverage Ratio will be less than or equal to 4.00:1.00 for the subsequent consecutive four fiscal quarters) and (B) the Fixed Charge Coverage Ratio is equal to or greater than 1.25:1.00 for two consecutive fiscal quarters (and based on projections satisfactory to the Lenders, the Fixed Charge Coverage Ratio will be equal to or greater than 1.25:1.00 for the subsequent consecutive four fiscal quarters), $2,500,000. 1.3 Section 2.01 of the Credit Agreement is hereby amended by deleting the reference to "$3,000,000" in the tenth line thereof and substituting, in lieu thereof, "$2,000,000". 1.4 Section 2.10(a) of the Credit Agreement is hereby amended by deleting the term "a commitment fee of 3/8 of 1%" in line two thereof and substituting, in lieu thereof, the term "a commitment fee of 1/2 of 1%". 1.5 Section 6.12 of the Credit Agreement is hereby amended by deleting, in its entirety, the chart appearing in such section and substituting, in lieu thereof, the following: Period Amount ------ ------ Three fiscal quarters ending ($6,000,000) September 30, 2002 Four fiscal quarters ending ($7,050,000) December 31, 2002 Four fiscal quarters ending ($6,300,000) March 31, 2003 Four fiscal quarters ending ($4,250,000) June 30, 2003 Four fiscal quarters ending ($1,100,000) September 30, 2003 Four fiscal quarters ending $400,000 December 31, 2003 Four fiscal quarters ending $1,000,000 March 31, 2004 Four fiscal quarters ending $2,250,000 June 30, 2004 Four fiscal quarters ending $3,500,000 September 30, 2004 2 Period Amount ------ ------ Four fiscal quarters ending $5,000,000 December 31, 2004 and each four fiscal quarters thereafter SECTION 2. CONFIRMATION OF FINANCING DOCUMENTS 2.1 The Borrower, by its execution and delivery of this Agreement, irrevocably and unconditionally ratifies and confirms in favor of the Administrative Agent that the Financing Documents shall continue in full force and effect in accordance with their terms. SECTION 3. CONDITIONS PRECEDENT This Agreement shall become effective upon the execution and delivery of counterparts hereof by the Borrower, the Administrative Agent and the Lenders and the fulfillment of the following conditions: 3.1 All legal matters in connection with this Agreement shall be satisfactory to the Administrative Agent, the Lenders and their respective counsel in their sole discretion. 3.2 Kaye Scholer LLP, counsel to the Administrative Agent, shall have received payment in full for all legal fees charged, and all costs and expenses incurred, by such counsel through the date hereof and all legal fees charged, and all costs and expenses incurred, by such counsel in connection with the transactions contemplated under this Agreement and the other Loan Documents and instruments in connection herewith and therewith. 3.3 The Administrative Agent shall have received such other approvals, opinions or documents as the Administrative Agent may reasonably request. SECTION 4. MISCELLANEOUS 4.1 The Borrower reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement, after giving effect to the transactions contemplated herein, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date (unless expressly related to an earlier date). The Borrower represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Administrative Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the transactions 3 contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of the Borrower), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Agreement; (c) This Agreement has been duly executed and delivered on behalf of the Borrower by a duly authorized officer, and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Agreement will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of the Borrower. 4.2 Except as herein expressly amended, the Credit Agreement is ratified and confirmed in all respects and shall remain in full force and effect in accordance with its terms. 4.3 All references to the Credit Agreement in the Credit Agreement and the other Financing Documents and the other documents and instruments delivered pursuant to or in connection therewith shall mean the Credit Agreement as amended hereby and as may in the future be amended, restated, supplemented or modified from time to time. 4.4 This Agreement shall constitute a Financing Document under the Credit Agreement. 4.5 This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 4.6 Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 4.7 THIS AGREEMENT, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE 4 LAWS OF ANY OTHER JURISDICTION. 4.8 The parties hereto shall, at any time and from time to time following the execution of this Agreement, execute and deliver all such further instruments and take all such further actions as may be reasonably necessary or appropriate in order to carry out the provisions of this Agreement. [Remainder Intentionally Left Blank] 5 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WIRE ONE TECHNOLOGIES, INC., as Borrower By: /s/ Jonathan Birkhahn ---------------------------------------------- Name: Jonathan Birkhahn Title: EVP Business Affairs and General Counsel JPMORGAN CHASE BANK, as Administrative Agent and Lender By: /s/ John T. Zeller ---------------------------------------------- Name: John T. Zeller Title: Vice President EX-99.1 6 d52378_ex99-1.txt CEO CERTIFICATION Exhibit 99.1 WIRE ONE TECHNOLOGIES, INC CERTIFICATION In connection with the periodic report of Wire One Technologies, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002, as filed with the Securities and Exchange Commission (the "Report"), I, Richard Reiss, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission. Date: November 14, 2002 By: /s/ Richard Reiss ------------------------ Richard Reiss Chief Executive Officer EX-99.2 7 d52378_ex99-2.txt CFO CERTIFICATION Exhibit 99.2 WIRE ONE TECHNOLOGIES, INC. CERTIFICATION In connection with the periodic report of Wire One Technologies, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002, as filed with the Securities and Exchange Commission (the "Report"), I, Christopher Zigmont, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission. Date: November 14, 2002 By: /s/ Christopher A. Zigmont ---------------------------- Christopher A. Zigmont Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----