SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-Q**




x
            Quarterly
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934
                for the quarterly period ended March 31,
                2006.




or




o
            Transition
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934




**Commission
      file number: 0-25940**




**GLOWPOINT,
      INC.**


(Exact
      Name of registrant as Specified in its Charter)




**Delaware**
              (State
                or other Jurisdiction of
              Incorporation
                or Organization)
            **77-0312442**
              (I.R.S.
                Employer Number)





**225
      Long Avenue, Hillside, New Jersey 07205**


(Address
      of Principal Executive Offices)




**312-235-3888**


(Issuer’s
      Telephone Number, Including Area Code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yes
o No
x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
      accelerated filer o  Accelerated
      filer o   Non-accelerated
      filer x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.)




Yes
o No
x




The
      number of shares outstanding of the registrant’s Common Stock as of May 14, 2006
      was 46,289,673.







**GLOWPOINT,
      INC**




**Index**


PART
                  I - FINANCIAL INFORMATIONItem
                  1. Condensed Consolidated Financial StatementsCondensed
                  Consolidated Balance Sheets at March 31, 2006 (unaudited) and December
                  31,
                  2005*
              1Unaudited
                  Condensed Consolidated Statements of Operations for the Three Months
                  ended
                  March 31, 2006 and 2005
              2Unaudited
                  Condensed Consolidated Statements of Cash Flows for the three months
                  Ended
                  March 31, 2006 and 2005
              3Notes
                  to Condensed Consolidated Financial Statements
              4Item
                  2. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operations
              13Item
                  3. Quantitative and Qualitative Disclosures about Market
                  Risk
              18Item
                  4. Controls and Procedures
              18PART
                  II - OTHER INFORMATIONItem
                  1. Legal Proceedings
              19Item
                  1A. Risk Factors
              19Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              19Item
                  3. Defaults upon Senior Securities
              19Item
                  4. Submission of Matters to a Vote of Security Holders
              19Item
                  5. Other Information
              19Item
                  6. Exhibits
              19Signatures
              20Certifications
              21




*  The
      Condensed Consolidated Balance Sheet at December 31, 2005 has been derived
      from
      the audited consolidated financial statements filed as an exhibit to our Report
      on Form 8-K on February 27, 2007.




i




**GLOWPOINT,
        INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **(In
        thousands, except par value)**
 
 
 March
                  31, 2006
              
              December
                  31, 2005(Unaudited)**ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              870
              
              $
              2,023Accounts
                  receivable, net of allowance for doubtful accounts of $149 and
                  $145;
                  respectively
              
              
              2,028
              
              
              2,171Receivable
                  for proceeds of 10% Notes
              
              
              5,197
              
              
              —Prepaid
                  expenses and other current assets
              
              
              425
              
              
              510Total
                  current assets
              
              
              8,520
              
              
              4,704Property
                  and equipment, net
              
              
              3,712
              
              
              4,117Other
                  assets
              
              
              933
              
              
              216Total
                  assets
              
              $
              13,165
              
              $
              9,037**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIT**Current
                  liabilities:Accounts
                  payable
              
              $
              2,408
              
              $
              1,586Accrued
                  expenses
              
              
              3,417
              
              
              1,961Accrued
                  sales taxes and regulatory fees
              
              
              3,385
              
              
              3,063Current
                  portion of derivative financial instruments
              
              
              4,030
              
              
              1,246Deferred
                  revenue
              
              
              316
              
              
              374Total
                  current liabilities
              
              
              13,556
              
              
              8,230Long
                  term liabilities:Derivative
                  financial instruments, less current portion
              
              
              1,811
              
              
              32410%
                  Convertible notes, net of discount of $3,424
              
              
              2,241
              
              
              —Total
                  long term liabilities
              
              
              4,052
              
              
              324Total
                  liabilities
              
              
              17,608
              
              
              8,554Preferred
                  stock, $.0001 par value; 5,000 shares authorized and redeemable;
                  0.120
                  Series B shares issued and outstanding, (stated value of $2,888;
                  liquidation value of $3,474 and $3,388, respectively)
              
              
              2,888
              
              
              2,888Stockholders’
                  deficit:Common
                  stock, $.0001 par value; 100,000 shares authorized; 46,086 and
                  46,086
                  shares issued and issuable; 46,046 and 46,046 shares outstanding,
                  respectively
              
              
              5
              
              
              5Additional
                  paid-in capital
              
              
              160,769
              
              
              160,219Accumulated
                  deficit
              
              
              (167,865
              )
              
              (161,833
              )Deferred
                  compensation
              
              
              —
              
              
              (556
              )(7,091
              )
              
              (2,165
              )Less:
                  Treasury stock, 40 shares at cost
              
              
              (240
              )
              
              (240
              )Total
                  stockholders’ deficit
              
              
              (7,331
              )
              
              (2,405
              )Total
                  liabilities and stockholders’ deficit
              
              $
              13,165
              
              $
              9,037
 See
        accompanying notes to condensed consolidated financial
        statements.
  1
  **GLOWPOINT,
        INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(In
        thousands, except per share data)**
 
 **(Unaudited)**
  Three
                  Months Ended March 31,2006
              
              2005Revenue
              
              $
              4,721
              
              $
              4,202Cost
                  of revenue
              
              
              3,486
              
              
              3,686Gross
                  margin
              
              
              1,235
              
              
              516Operating
                  expenses:Research
                  and development
              
              
              271
              
              
              313Sales
                  and marketing
              
              
              729
              
              
              923General
                  and administrative
              
              
              4,653
              
              
              3,214Total
                  operating expense
              
              
              5,653
              
              
              4,450Loss
                  from operations
              
              
              (4,418
              )
              
              (3,934
              )Other
                  expense (income):Interest
                  expense
              
              
              1,638
              
              
              —Interest
                  income
              
              
              (4
              )
              
              (3
              )(Decrease)
                  increase in fair value of derivative financial instruments
              
              
              (23
              )
              
              42Gain
                  on settlement with Gores
              
              
              —
              
              
              (379
              )Total
                  other expense (income), net
              
              
              1,611
              
              
              (340
              )Net
                  loss
              
              
              (6,029
              )
              
              (3,594
              )Preferred
                  stock dividends
              
              
              (85
              )
              
              (89
              )Preferred
                  stock deemed dividends
              
              
              —
              
              
              (1,282
              )Net
                  loss attributable to common stockholders
              
              $
              (6,114
              )
              $
              (4,965
              )Net
                  loss attributable to common stockholders per share:Basic
                  and diluted
              
              $
              (0.13
              )
              $
              (0.13
              )Weighted
                  average number of common shares:Basic
                  and diluted
              
              
              46,046
              
              
              39,100
 See
        accompanying notes to condensed consolidated financial
        statements.
  2
  **GLOWPOINT,
        INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(In
        thousands)**
  **(Unaudited)**
 Three
                  Months Ended March 31,2006
              
              2005Cash
                  flows from Operating Activities:Net
                  loss
              
              $
              (6,029
              )
              $
              (3,594
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              526
              
              
              570Other
                  expense recognized for the (decrease) increase in the estimated
                  fair value
                  of the derivative financial instruments
              
              
              (23
              )
              
              43Beneficial
                  conversion feature for 10% Notes
              
              
              1,586
              
              
              —Gain
                  on settlement with Gores
              
              
              —
              
              
              (379
              )Stock-based
                  compensation
              
              
              297
              
              
              189Increase
                  (decrease) in cash attributable to changes in assets and
                  liabilities:Accounts
                  receivable
              
              
              143
              
              
              (163
              )Prepaid
                  expenses and other current assets
              
              
              85
              
              
              99Other
                  assets
              
              
              6
              
              
              (3
              )Accounts
                  payable
              
              
              822
              
              
              (26
              )Accrued
                  expenses, sales taxes and regulatory fees
              
              
              1,613
              
              
              21Deferred
                  revenue
              
              
              (58
              )
              
              210Net
                  cash used in operating activities
              
              
              (1,032
              )
              
              (3,033
              )Cash
                  flows from Investing Activities:Proceeds
                  from discontinued operations, including escrowed cash
              
              
              —
              
              
              3,087Purchases
                  of property, equipment and leasehold improvements
              
              
              (121
              )
              
              (295
              )Net
                  cash (used in) provided by investing activities
              
              
              (121
              )
              
              2,792Cash
                  flows from Financing Activities:Proceeds
                  from issuance of common stock and warrants
              
              
              —
              
              
              9,389Proceeds
                  from exercise of warrants and options, net
              
              
              —
              
              
              73Payments
                  on capital lease obligations
              
              
              —
              
              
              (35
              )Net
                  cash provided by financing activities
              
              
              —
              
              
              9,427(Decrease)
                  increase in cash and cash equivalents
              
              
              (1,153
              )
              
              9,186Cash
                  and cash equivalents at beginning of period
              
              
              2,023
              
              
              4,497Cash
                  and cash equivalents at end of period
              
              $
              870
              
              $
              13,683Supplement
                  disclosures of cash flow information:Cash
                  paid during the period forInterest
              
              $
              —
              
              $
              53Non-cash
                  investing and financing activities:Preferred
                  stock dividends
              
              $
              85
              
              $
              89Deferred
                  financing costs for 10% Notes incurred by issuance of placement
                  agent
                  warrants
              
              
              279
              
              
              —Proceeds
                  from March 2006 financing not yet received
              
              
              5,179
              
              
              —Preferred
                  stock deemed dividends
              
              
              —
              
              
              1,282Conversion
                  of Series B convertible preferred stock to common stock
              
              
              —
              
              
              2,000Equity
                  issued as consideration for accrued preferred stock
                  dividends
              
              
              —
              
              
              183
 See
        accompanying notes to condensed consolidated financial statements.
   3
  **GLOWPOINT,
        INC.** **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS** **March
        31, 2006**
  **(Unaudited)**
  **Note
        1** **-
        Basis of Presentation**
  **The
        Business**
  Glowpoint,
        Inc. ("Glowpoint" or "we" or "us"), a Delaware corporation, is a premiere
        broadcast-quality, IP (Internet Protocol)-based managed video services provider.
        We offer a vast array of managed video services, including video application
        services, managed network services, IP and ISDN videoconferencing services,
        multi-point conferencing (bridging), technology hosting and management, and
        professional services. We provide these services to a wide variety of companies,
        from large enterprises and governmental entities to small and medium-sized
        businesses. Glowpoint is exclusively focused on high quality two-way video
        communications and has been supporting millions of video calls since its
        launch
        in 2000. We have bundled some of our managed services to offer video
        communication solutions for broadcast/media content acquisition and for video
        call center applications. Recently, with the advent of HD (High Definition)
        Telepresence solutions, we have combined various components of our features
        and
        services into a comprehensive “white glove” service offering that can support
        any of the telepresence solutions on the market today.
  **Liquidity
        and Going Concern**
  Our
        condensed consolidated financial statements have been prepared assuming we
        will
        continue as a going concern. We have incurred recurring operating losses
        and
        negative operating cash flows since our inception including a net loss
        attributable to common stockholders of $6,114,000 for the three months ended
        March 31, 2006. At March 31, 2006, we had a working capital deficit of
        $5,036,000. We had $870,000 in cash and cash equivalents at March 31, 2006.
        We
        had net cash used in operations of $1,032,000 for the three months ended
        March
        31, 2006. Additionally, the 10% Senior Secured Convertible Notes (see Note
        5)
        mature in September 2007. These factors raise substantial doubt as to our
        ability to continue as a going concern. In March 2006 we implemented a corporate
        restructuring plan designed to reduce certain operating, sales and marketing
        and
        general and administrative costs (see Note 8). We raised capital in March
        2006,
        but continue to sustain losses and negative operating cash flows. Assuming
        we
        realize all of the savings from our restructured operating activities, assuming
        we are able to negotiate favorable terms with the authorities regarding our
        sales and use taxes and regulatory fees and assuming we are able to renegotiate
        or refinance the 10% Senior Secured Convertible Notes , we believe that our
        available capital as of March 31, 2006 will enable us to continue as a going
        concern through March 31, 2007. There are no assurances, however that we
        will be
        able to raise additional capital as needed, or upon acceptable terms nor
        any
        assurances that we will be able renegotiate the terms and maturity date of
        the
        10% Notes. If we are unable to renegotiate the maturity of the 10% Notes
        or
        issue new securities on favorable terms to repay them, it would have a material
        adverse effect on the Company. The accompanying financial statements do not
        include any adjustments that might result from this uncertainty.
  **Summary
        of Significant Accounting Policies**
  **Quarterly
        Financial Information and Results of Operations**
  The
        financial statements as of March 31, 2006 and for the three months ended
        March
        31, 2006 and 2005, are unaudited and, in the opinion of management, include
        all
        adjustments (consisting only of normal recurring adjustments) necessary to
        present fairly the financial position as of March 31, 2006, and the results
        of
        operations and cash flows for the three months ended March 31, 2006 and 2005.
        The results for the three months ended March 31, 2006 are not necessarily
        indicative of the results to be expected for the entire year. While management
        of the Company believes that the disclosures presented are adequate to make
        the
        information not misleading, these consolidated financial statements should
        be
        read in conjunction with the consolidated financial statements and the footnotes
        thereto for the fiscal year ended December 31, 2005 as filed with the Securities
        and Exchange Commission as an exhibit to Form 8-K on February 27, 2007.
  4
 See
“Note
        2 - Basis of Presentation and Summary of Significant Accounting Policies” in the
        consolidated financial statements for the fiscal year ended December 31,
        2005 as
        filed with the Securities and Exchange Commission as an exhibit to Form 8-K
        on
        February 27, 2007 for a discussion of the estimates and judgments necessary
        in
        the Company’s accounting for sales taxes and regulatory fees, concentration of
        credit risk, lives of property and equipment, income taxes and fair value
        of
        financial instruments. There have been no changes to our critical accounting
        policies in the three months ended March 31, 2006. Critical accounting policies
        and the significant estimates made in accordance with them are regularly
        discussed with our Audit Committee.
  **Principles
        of Consolidation**
  The
        condensed consolidated financial statements include the accounts of Glowpoint
        and our wholly owned subsidiaries, GP Communications LLC, AllComm Products
        Corporation and VTC Resources, Inc. All material inter-company balances and
        transactions have been eliminated in consolidation.
  **Reclassifications**
  Certain
          amounts from 2005 have been reclassified to conform to the 2006
          presentation.
 **Use
        of Estimates**
  Preparation
        of the condensed consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosure of contingent assets and liabilities
        at
        the date of the condensed consolidated financial statements and the reported
        amounts of revenues and expenses during the reporting period. Actual amounts
        could differ from the estimates made. We continually evaluate estimates used
        in
        the preparation of the consolidated financial statements for reasonableness.
        Appropriate adjustments, if any, to the estimates used are made prospectively
        based upon such periodic evaluation. The significant areas of estimation
        include
        determining the allowance for doubtful accounts, deferred tax valuation
        allowance, sales and use tax obligations, regulatory fees and related penalties
        and interest, the estimated life of customer relationships, the estimated
        lives
        of property and equipment and the fair value of derivative financial
        instruments.
  **Revenue
        Recognition**
  We
        recognize subscription revenue when the related services have been performed.
        Revenues billed in advance are deferred until the revenue has been earned.
        Other
        service revenue, including amounts related to surcharges charged by our
        carriers, related to the Glowpoint managed network service and the multi-point
        video and audio bridging services are recognized as service is provided.
        As the
        non-refundable, upfront activation fees charged to the subscribers do not
        meet
        the criteria as a separate unit of accounting, they are deferred and recognized
        over the twenty-four month period estimated life of the customer relationship.
        Revenues derived from other sources are recognized when services are provided
        or
        events occur.
  **Long-Lived
        Assets**
  We
        evaluate impairment losses on long-lived assets used in operations, primarily
        fixed assets, when events and circumstances indicate that the carrying value
        of
        the assets might not be recoverable in accordance with Statement of Financial
        Accounting Standards (“SFAS”) No. 144 *“Accounting
        for the Impairment or Disposal of Long-Lived Assets”* .
        For
        purposes of evaluating the recoverability of long-lived assets, the undiscounted
        cash flows estimated to be generated by those assets are compared to the
        carrying amounts of those assets. If and when the carrying values of the
        assets
        exceed their fair values, the related assets will be written down to fair
        value.
        In the 2006 period, no impairment losses were indicated or
        recorded.
  **Derivative
        Financial Instruments**
  The
        Company’s objectives in using debt related derivative financial instruments are
        to obtain the lowest cash cost source of funds within a targeted range of
        variable to fixed-rate debt obligations. Derivatives are recognized in the
        consolidated balance sheets at fair value based on the criteria specified
        in
        SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”.
        The estimated fair value of the derivative liabilities is calculated using
        the
        Black-Scholes formula where applicable and such estimates are revalued at
        each
        balance sheet date with changes in value recorded as other income or
        expense.
  5
 **Related
        Party Transactions**
  The
        Company receives consulting and tax services from an accounting firm in which
        one of our directors is a partner. Management believes that such transactions
        are at arm’s-length and for terms that would have been obtained from
        unaffiliated third parties. For the three months ended March 31, 2006 and
        2005,
        we incurred fees for these services of $0 and $10,000,
        respectively.
  **Recent
        Accounting Pronouncements**
  In
        February 2006, the FASB issued SFAS No. 155, *"Accounting
        for Certain Hybrid Financial Instruments"* .
        SFAS
        No. 155 amends SFAS No. 133 and SFAS No. 140, and addresses issues raised
        in
        SFAS No. 133 Implementation Issue No. D1, *"Application
        of Statement 133 to Beneficial Interests in Securitized Financial
        Assets”.* SFAS No.
        155 is effective for all financial instruments acquired or issued after the
        beginning of an entity's first fiscal year that begins after September 15,
        2006.
        The Company does not believe it will be materially affected by the adoption
        of
        SFAS No. 155.
  In
        June
        2006, the FASB issued FASB Interpretation Number (“FIN”) 48, *"Accounting
        for Uncertainty in Income Taxes—An interpretation of FASB Statement No.
        109"* ,
        regarding accounting for, and disclosure of, uncertain tax positions. FIN
        No. 48
        clarifies the accounting for uncertainty in income taxes recognized in an
        enterprise's financial statements in accordance with FASB Statement No. 109, *"Accounting
        for Income Taxes."* FIN 48
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. FIN No. 48 also provides guidance on derecognition,
        classification, interest and penalties, accounting in interim periods,
        disclosure, and transition. FIN No. 48 is effective for fiscal years beginning
        after December 15, 2006. The Company does not believe its results of operations
        and financial position will be materially affected by the adoption of FIN
        No.
        48.
  In
        September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
        Accounting Bulletin (“SAB”) No. 108, *"Considering
        the Effects on Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements"* .
        SAB No.
        108 requires registrants to quantify errors using both the income statement
        method (i.e. iron curtain method) and the rollover method and requires
        adjustment if either method indicates a material error. If a correction in
        the
        current year relating to prior year errors is material to the current year,
        then
        the prior year financial information needs to be corrected. A correction
        to the
        prior year results that are not material to those years would not require
        a
        "restatement process" where prior financials would be amended. SAB No. 108
        is
        effective for fiscal years ending after November 15, 2006. We have adopted
        SAB
        No. 108 and it did not have a material effect on our financial position,
        results
        of operations or cash flows.
  In
        September 2006, the FASB issued SFAS No. 157, *"Fair
        Value Measurements"* ,
        to
        define fair value, establish a framework for measuring fair value in accordance
        with generally accepted accounting principles, and expand disclosures about
        fair
        value measurements. SFAS No. 157 will be effective for fiscal years beginning
        after November 15, 2007, the beginning of the Company's 2008 fiscal year.
        The
        Company is assessing the impact the adoption of SFAS No. 157 will have on
        the
        Company's financial position and results of operations.
  **Note
        2 - Stock-Based Compensation**
  We
        periodically grant stock options to employees and directors in accordance
        with
        the provisions of our stock option plans, with the exercise price of the
        stock
        options being set at the closing market price of the common stock on the
        date of
        grant. Effective January 1, 2006, the Company adopted Statement of Financial
        Standards No. 123R, *Share-Based
        Payment* (“SFAS
        No. 123R”) which requires that compensation cost relating to share-based payment
        transactions be recognized as an expense in the financial statements and
        that
        measurement of that cost be based on the estimated fair value of the equity
        or
        liability instrument issued. Under SFAS No. 123R, the pro forma disclosures
        previously permitted under SFAS No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        No. 123”) are no longer an alternative to financial statement recognition. SFAS
        No. 123R also requires that forfeitures be estimated and recorded over the
        vesting period of the instrument.
  Prior
        to
        January 1, 2006, as permitted by SFAS No. 123, the Company accounted for
        share-based payments to employees using the intrinsic value method under
        the
        recognition and measurement principles of Accounting Principles Board Opinion
        No. 25, *Accounting
        for Stock Issued to Employees* (“APB
        25”), and related interpretations. Under this method, compensation cost is
        measured as the amount by which the market price of the underlying stock
        exceeds
        the exercise price of the stock option at the date at which both the number
        of
        options granted and the exercise price are known. As previously permitted
        by
        SFAS No. 123, the Company had elected to apply the intrinsic-value-based
        method
        of accounting under APB No. 25 described above, and adopted only the disclosure
        requirements of SFAS No. 123 which were similar in most respects to SFAS
        No.
        123R, with the exception of option forfeitures, which, under SFAS No. 123,
        had
        been accounted for as they occurred.
  6
 The
        Company has adopted SFAS No. 123R using the modified prospective method which
        requires that share-based expense recognized includes: (a) earned share-based
        expense for all awards granted prior to, but not yet vested, as of the adoption
        date and (b) earned share-based expense for all awards granted subsequent
        to the
        adoption date. Since the modified prospective application method is being
        used,
        there is no cumulative effect adjustment upon the adoption of SFAS No. 123R,
        and
        the Company’s December 31, 2005 financial statements do not reflect any restated
        amounts. No modifications were made to outstanding options prior to the adoption
        of SFAS No. 123R, and the Company did not change the quantity, type or payment
        arrangements of any share-based payments programs.
  The
        Company uses the same valuation methodologies and assumptions in estimating
        the
        fair value of options under both SFAS No. 123R and the pro forma disclosures
        under SFAS No. 123.
  Stock
        options or warrants issued in return for services rendered by non-employees
        are
        accounted for using the fair value based method. The following table illustrates
        the effect on net loss attributable to common shareholders and net loss per
        share for the three months ended March 31, 2005 if the fair value based method
        using the Black-Scholes model at the grant date had been applied to all awards:
        (in thousands except per share data):
  ThreeMonthsNet
                  loss attributable to common stockholders, as reported
              
              $
              (4,965
              )Add:
                  stock-based employee compensation expense included in reported
                  net
                  loss.
              
              
              155Deduct:
                  total stock-based employee compensation expense determined under
                  the fair
                  value based method
              
              
              (439
              )Pro
                  forma net loss attributable to common stockholders
              
              $
              (
                  5,249
              )Net
                  loss attributable to common stockholders per share:Basic
                  and diluted - as reported herein
              
              $
              (0.13
              )Basic
                  and diluted - pro forma
              
              $
              (0.13
              )
 
 The
        pro
        forma effect of applying SFAS No. 123R may not be representative of the effect
        on reported net income in future years because options vest over several
        years
        and varying amounts are generally made each year.
  The
        weighted average fair value of each option granted is estimated on the date
        of
        grant using the Black-Scholes option pricing model with the following
        assumptions during the three months ended March 31, 2006 and 2005:
  Three
                  Months Ended March 31,2006
              
              2005Risk
                  free interest rate
              
              
              4.3%
              
              
              4.3%Expected
                  option lives
              
              
              5
                  Years
              
              
              5
                  YearsExpected
                  volatility
              
              
              96.1%
              
              
              101.1%Estimated
                  forfeiture rate
              
              
              30%
              
              
              20%Expected
                  dividend yields
              
              
              None
              
              
              NoneWeighted
                  average grant date fair value of options
              
              
              $0.45
              
              
              $1.57
  Expected
        volatility was calculated using the historical volatility of the appropriate
        industry sector index. The expected term of the options is estimated based
        on
        the Company’s historical exercise rate and forfeiture rates are estimated based
        on employment termination experience. The risk free interest rate is based
        on
        U.S. Treasury yields for securities in effect at the time of grants with
        terms
        approximating the term of the grants. The assumptions used in the Black-Scholes
        option valuation model are highly subjective, and can materially affect the
        resulting valuation.
  7
 A
        summary
        of options granted, exercised, expired and forfeited under our plans and
        options
        outstanding as of and for the three months ended March 31, 2006 with respect
        to
        all outstanding options is as follows (options in thousands):
  Outstanding
              
              ExercisableNumber
                  of Options
              
              Weighted
                Average
                Exercise
                Price
              
              Number
                  of Options
              
              Weighted
                Average
                Exercise
                PriceOptions
                  outstanding, January 1, 2006
              
              
              4,996
              
              $
              2.51
              
              
              3,613
              
              $
              2.92Granted
              
              
              77
              
              
              0.60Exercised
              
              
              —
              
              
              —Expired
              
              
              (1
              )
              
              3.86Forfeited
              
              
              (282
              )
              
              1.34Options
                  outstanding, March 31, 2006
              
              
              4,790
              
              $
              2.54
              
              
              4,071
              
              $
              2.76
  At
        March
        31, 2006, there was $565,000 of total unrecognized compensation costs related
        to
        non-vested options granted prior to January 1, 2006 that are expected to
        be
        recognized over a weighted-average period of 1.13 years. The Company has
        recorded $297,000 related to its stock-based compensation in general and
        administrative expenses for the three months ended March 31, 2006. There
        was no
        income tax benefit recognized for stock-based compensation for the three
        months
        ended March 31, 2006. No compensation costs were capitalized as part of the
        cost
        of an asset.
  **Note
        3 - Loss Per Share**
  Basic
        loss per share is calculated by dividing net loss attributable to common
        stockholders by the weighted average number of shares of common stock
        outstanding during the period. Diluted loss per share for the three months
        ended
        March 31, 2006 and 2005 is the same as basic loss per share. Potential shares
        of
        common stock associated with 20,777,000 and 14,780,000 outstanding options
        and
        warrants, 1,699,000 and 1,301,000 shares issuable upon the conversion of
        our
        Series B convertible preferred stock and 11,330,000 and 0 shares issuable
        upon
        conversion of the March 2006 10% Senior Secured Convertible Notes as of March
        31, 2006 and 2005, respectively, have been excluded from the calculation
        of
        diluted loss per share because the effects would be anti-dilutive.
  **Note
        4** **- Stockholders’ Deficit**
  In
        January 2004, in exchange for the cancellation and termination of convertible
        debentures with an aggregate face value of $4,888,000 and forfeiture of any
        and
        all rights of collection, claim or demand under the debentures, we agreed
        to
        give the holders of the debentures: (i) an aggregate of 203.667 shares of
        series
        B convertible preferred stock; (ii) an aggregate of 250,000 shares of restricted
        common stock; and (iii) a reduction of the exercise price of the warrants
        issued
        pursuant to the original purchase agreement from $3.25 to $2.75. The investors
        have anti-dilution rights. As a result of subsequent financings, the conversion
        price of the Series B convertible preferred stock and the exercise price
        of the
        warrants have been adjusted to $1.70 and $1.88, respectively, as of March
        31,
        2006. We recognized deemed dividends of $115,000 in the three months ended
        March
        31, 2005.
  In
        February 2004, we raised net proceeds of $12,480,000 in a private placement
        of
        6,100,000 shares of our common stock at $2.25 per share. The registration
        rights
        agreement for the February 2004 financing provides for liquidated damages
        of 3%
        of the aggregate purchase price for the first month and 1.5% for each subsequent
        month if we failed to register the common stock and the shares of common
        stock
        underlying the warrants or maintain the effectiveness of such registration.
        We
        account for the registration rights agreement as a separate freestanding
        instrument and account for the liquidated damages provision as a derivative
        liability subject to SFAS No. 133. The estimated fair value of the derivative
        liability is based on estimates of the probability and costs expected to
        be
        incurred and such estimates are revalued at each balance sheet date with
        changes
        in value recorded as other income or expense. Approximately $1,164,000 of
        the
        proceeds of the financing was attributed to the estimated fair value of the
        derivative liability. We estimated the fair value of the derivative liability
        to
        be $1,547,000 and $1,570,000 as of March 31, 2006 and December 31, 2005.
        We
        recognized other income of $23,000 for the three months ended March 31, 2006
        and
        an expense of $42,000 for the three months ended March 31, 2005 based on
        changes
        in the estimated fair value.
  8
 In
        March
        2005, we raised net proceeds of $9,376,000 in a private placement of 6,766,667
        shares of our common stock at $1.50 per share. Investors in the private
        placement were also issued warrants to purchase 2,706,667 shares of common
        stock
        at an exercise price of $2.40 per share. As a result of the March 2006
        financing, the exercise price of the warrants have been adjusted to $1.82
        as of
        March 31, 2006. The warrants expire five years after the closing date. The
        warrants are subject to certain anti-dilution protection.
  In
        March
        2005, 83.333 shares of our outstanding Series B convertible preferred stock
        and
        accrued dividends of $183,000 were exchanged for 1,333,328 shares of our
        common
        stock and warrants to purchase 533,331 shares of our common stock with an
        excess
        aggregate fair value of $1,167,000. We recognized deemed dividends of $1,167,000
        during the 2005 period in connection with the warrants and a reduced conversion
        price, which were offered as an inducement to convert.
  **Note
        5 - 10% Senior Secured Convertible Notes**
  **10%
        Senior Secured Convertible Notes and 10% Note Discount**
  In
        March
        2006, we issued our 10% Senior Secured Convertible Notes (“10% Notes”) in a
        private placement to private investors. Activity for the 10% Notes and 10%
        Notes
        Discount during the year ended, and as of March 31, 2006, was as follows
        (in
        thousands):
  TotalPrincipal
                  of 10% Notes:March
                  2006 financing
              
              
              
              
              $
              5,665Discount:Derivative
                  financial instrument - Series A Warrants
              
              
              (2,708
              )Reduction
                  of exercise price and extension of expiration dates of
                  warrants
              
              
              (716
              )(3,424
              )Accretion
                  of discount
              
              
              —(3,424
              )10%
                  Notes, net of discount
              
              
              
              
              $
              2,241
  In
        the
        March 2006 transactions, we issued $5,665,000 of our 10% Notes, Series A
        warrants to purchase 5,665,000 shares of common stock at an exercise price
        of
        $0.65 per share and Series B warrants to purchase 5,565,000 shares of common
        stock at an exercise price of $0.01 per share. The proceeds of $5,197,000,
        net
        of financing costs deducted at closing, were received in April and are shown
        as
        a current asset on the balance sheet. Both warrants are subject to certain
        anti-dilution protection. The Series B warrants only become exercisable after
        we
        make available to the public our financial statements for the fourth quarter
        of
        2006 if we fail to achieve positive operating income, excluding restructuring
        and non-cash charges as identified on Schedule A of the Series B warrants,
        as
        amended. In addition, the Series B warrants will be cancelled if we consummate
        a
        strategic transaction or repay the 10% Notes prior to the date we make our
        consolidated financial statements for the fourth quarter of 2006 available
        to
        the public. We also agreed to reduce the exercise price of 3,625,000 previously
        issued warrants held by the investors in this offering to $0.65 from a weighted
        average price of $3.38, and to extend the expiration date of any such warrants
        to no earlier than three years after the offering date. The new weighted
        average
        expiration date of the warrants will be 3.5 years from a previous weighted
        average expiration date of 2.9 years. In addition, we issued to Burnham Hill
        Partners placement agent warrants to purchase 618,000 shares of our common
        stock
        at an exercise price of $0.55 per share. The warrants are subject to certain
        anti-dilution protection. The $5,123,000 net proceeds of the March 2006
        financings are being used to support our corporate restructuring program
        and for
        working capital.
  9
 The
        10%
        Notes bear interest at 10% per annum and are convertible into common stock
        at a
        conversion rate of $0.50 per share. The Notes mature on September 30, 2007.
        We
        have the option to pay the accrued interest for the 10% Notes in cash or
        additional 10% Notes. The Series A and Series B warrants are exercisable
        for a
        period of 5 years.
  We
        accounted for the reduction of the exercise price of 3,625,000 previously
        issued
        warrants held by the investors in this offering to $0.65 from a weighted
        average
        price of $3.38, and the extension of the expiration date of any such warrants
        to
        no earlier than three years after the offering date at fair value as a debt
        discount with an offsetting credit to paid in capital. A portion of the finance
        costs of the 10% Notes in March 2006 will be allocated to this transaction
        and
        charged to paid in capital. The estimated fair value of this modification
        is
        based on the excess of the fair value of these warrants at the date of the
        financings over the fair value of these warrants under their original terms.
        In
        the March 2006 financings $716,000 of the proceeds was attributed to the
        estimated fair value of the modification of price and term of these warrants.
        The $716,000 fair value of this modification will be treated as a discount
        of
        the Note and expensed, using the imputed interest method, over the 18 month
        period to the Note’s maturity date.
  **Financing
        Costs**
  The
        financing costs, which were included in the other assets in the accompanying
        balance sheets, and accumulated amortization as of March 31, 2006, are as
        follows (in thousands):
  March
                  2006Cash
                  financing costs:Placement
                  agent fees - Burnham Hill Partners
              
              $
              440Other
                  financing costs
              
              
              105545Non-cash
                  financing costs:Placement
                  agent warrants - Burnham Hill Partners
              
              
              279Financing
                  costs charged to additional paid in capital
              
              
              (101
              )Total
                  financing costs
              
              $
              723
  The
        financing costs are being amortized over the 18 month period through September
        30, 2007, the maturity date of the 10% Notes.
  Our
        financing costs related to the March 2006 financings were comprised of cash
        and
        non-cash charges. Our cash financing costs related to the issuance of the
        10%
        Notes in March 2006 were $545,000, a portion of which represents
        placement fees of $440,000 to Burnham Hill Partners,
        our placement agent. Our non-cash financing costs were based on the fair
        value of various components of the transactions. These included the
        convertibility of the 10% Notes (beneficial conversion feature), the issuance
        of
        the Series A warrants, modifications to previously issued warrants held by
        investors in the financing and the issuance to the placement agent of warrants.
        A portion of the finance costs of the 10% Notes in March 2006, $101,000,
        was
        allocated to the $716,000 fair value of the modification of warrant exercise
        prices and extension of expirations dates for 3,625,000 previously issued
        warrants held by the investors in this offering.
  The
        issuance to Burnham Hill Partners of placement agent warrants to purchase
        618,000 shares of our common stock at an exercise price of $0.55 per share
        was
        valued at $279,000 for the March 2006 financings. As a result of the issuance
        of
        the placement agent warrants we recognized Additional Paid in Capital of
        $279,000.
   10
  **Accounting
        for Conversion Feature and Series A Warrant Derivative
        Liabilities**
  Activity
        for derivative liabilities during the quarter ended March 31, 2006 and December
        31, 2005, was as follows (in thousands):
  Dec.
                  31, 2005
              
              Additions
              
              Decrease
                  in Fair Value
              
              Mar.
                  31, 2006Derivative
                  financial instrument - February 2004 capital raise
              
              $
              1,570
              
              $
              —
              
              $
              (23
              )
              $
              1,547Derivative
                  financial instrument - Beneficial conversion feature - 10%
                  notes
              
              
              —
              
              
              1,586
              
              
              —
              
              
              1,586Derivative
                  financial instrument - Series A Warrants
              
              
              —
              
              
              2,708
              
              
              —
              
              
              2,7081,570
              
              $
              4,294
              
              $
              (23
              )
              
              5,841Current
                  portion
              
              
              (1,246
              )
              
              
              
              
              
              
              
              (1,811
              )$
              324
              
              
              
              
              
              
              
              $
              4,030
  We
        accounted for the convertibility of the 10% Notes into common stock at a
        conversion rate of $0.50 per share as a derivative liability subject to SFAS
        No.
        133. Management determined that the events or actions necessary to deliver
        registered shares are not controlled by the Company and that the holders have
        the
        right to demand that the Company pay the holders in cash, calculated as defined
        in the Senior
        Secured Convertible Promissory Note , under
        certain circumstances. Accordingly the Company accounted for the beneficial
        conversion feature as a derivative liability. The estimated fair value of
        the
        derivative liability is based on the prepayment amount that would be owed
        to a
        10% Notes holder if payment is required. The prepayment amount is the greater
        of
        125% of the value of the 10% Notes and accrued interest or the value if the
        10%
        Notes and accrued interest are converted at $0.50 per share and then multiplied
        by the then current stock price. Since the 10% Notes are convertible at the
        issuance date an expense related to the derivative liability is recognized
        on
        that date. In the March 2006 financings $1,586,000 of the proceeds was
        attributed to the estimated fair value of the derivative liability and an
        expense of $1,586,000 was recognized.
  We
        accounted for the issuance of the Series A warrants to purchase 5,665,000
        shares
        of common stock at an exercise price of $0.65 per share as a derivative
        liability subject to SFAS No. 133. Management determined that the events
        or
        actions necessary to deliver registered shares are not controlled by the
        Company
        and that the holders have
        the
        right to demand that the Company pay the holders in cash, calculated as defined
        in the Series A warrant, under
        certain circumstances. Accordingly the Company accounted for the Series A
        warrants as a derivative liability. The estimated fair value of the derivative
        liability is calculated using the Black-Scholes formula and such estimates
        are
        revalued at each balance sheet date with changes in value recorded as other
        income or expense. In the March 2006 financings $2,708,000 of the proceeds
        was
        attributed to the estimated fair value of the derivative liability. The
        $2,708,000 expense for the derivative liability will be treated as a discount
        on
        the 10% Notes and expensed, using the imputed interest method, over the 18
        month
        period to the 10% Notes’ maturity date.
  If
        the
        Series B warrants were issued we would account for their issuance as a
        derivative liability subject to SFAS No. 133 on that date based on the fair
        value at the date of consummation of financings (see Note 9).
  **Note
        6 - Interest Expense**
  The
        components of interest expense for the three months ended March 31, 2006
        and
        2005 are presented below (in thousands):
  2006
              
              2005Beneficial
                  conversion feature for 10% Notes
              
              $
              1,586
              
              $
              —Interest
                  expense for sales and use taxes and regulatory fees
              
              
              52
              
              
              —$
              1,638
              
              $
              —
  11
 **Note
        7 - Sale of VS Business**
  In
        September 2003, we completed the sale of all of the assets of our VS business
        to
        Gores pursuant to the terms of the asset purchase agreement dated as of June
        10,
        2003. The total consideration payable to us under the agreement was up to
        $24,000,000, consisting of $21,000,000 in cash, of which $19,000,000 was
        payable
        as of closing ($335,000 was placed in an escrow account) and $2,000,000 was
        held
        back by Gores to cover potential purchase price adjustments, an unsecured
        $1,000,000 promissory note maturing on December 31, 2004 (bearing interest
        at 5%
        per annum) and up to $2,000,000 in earn-out payments based on performance
        of the
        assets over the two years following the closing. As partial consideration
        for
        the purchase of assets, Gores also assumed certain liabilities related to
        the VS
        business, including (1) all liabilities to be paid or performed after the
        closing date that arose from or out of the performance or non-performance
        by
        Gores after the closing date of any contracts included in the assets or entered
        into after June 10, 2003 and (2) our accounts payable, customer deposits,
        deferred revenue and accrued liabilities related to the VS
        business.
  Pursuant
        to the agreement, Gores agreed that, for a period of three years commencing
        on
        the closing date, it would not, directly or indirectly, acquire or own any
        equity interest in certain of our competitors identified in the agreement.
        The
        agreement further provided that Gores could acquire an identified competitor
        upon payment to us of a one-time fee of $5,000,000. In November 2004, Gores
        acquired V-SPAN, Inc., which was one of the identified competitors.
  Following
        the closing of the sale to Gores, we were unable to reach agreement with
        Gores
        on the amount, if any, of the adjustment to be made to the purchase price,
        which
        was based on the net assets, as defined, of the VS business sold to Gores
        as of
        June 30, 2003. Consequently, we entered into arbitration with Gores in July
        2004, with PriceWaterhouseCoopers as the arbitrator. In January 2005, the
        arbitrator concluded that the net assets of the VS business sold to Gores
        should
        be reduced by $4,340,000.
  In
        March
        2005, we entered into a settlement agreement with Gores, resolving the
        outstanding disputes between the companies relating to the sale of the VS
        business, various payables between the companies and Gores’ acquisition of
        V-SPAN. Pursuant to the agreement, Gores paid us $2,750,000 and released
        the
        $335,000, including interest thereon that was escrowed at the closing of
        the
        asset sale. We dismissed our lawsuit against Gores relating to the V-SPAN
        acquisition. We will not receive any payments under the earn-out provision
        in
        the agreement.
  The
        ultimate settlement of amounts due to/from Gores that arose subsequent to
        the
        transaction closing date and unrelated to the sale transaction, including
        $100,000 of revenues that we recognized during the three months ended March
        31,
        2004 have been excluded from the sale transaction, and a gain from the
        settlement of these items of $379,000 has been recognized during quarter
        ended
        March 31, 2005, when the settlement was reached with Gores.
  The
        arbitrator’s adjustment of $4,340,000 related to the correction of specific
        financial reporting errors. Accordingly, the accompanying consolidated financial
        statements reflect these items prior to 2004 and the gain or loss on the
        transaction has been accounted for upon the closing in 2003. Pursuant to
        the
        settlement agreement with Gores in 2005, each party was released from amounts
        due to the other beyond the payment by Gores of $2,750,000 and the release
        of
        the escrowed cash to us. Accordingly, we recognized the gain on settlement
        in
        the quarter ended March 31, 2005.
  **Note
        8 - March 2006 Restructuring**
  In
        March
        2006, we implemented a corporate restructuring plan designed to reduce certain
        operating, sales and marketing and general and administrative costs. The
        costs
        of this restructuring, approximately $1,200,000, consisting of severance
        payments, acceleration of vesting of stock options and benefit reimbursements,
        were recorded in the first quarter of 2006 and will be paid through April
        2007.
        As part of the restructuring initiative, we implemented management changes,
        including the departure of twenty-one employees and the promotion of Michael
        Brandofino to Chief Operating Officer. David Trachtenberg, President and
        Chief
        Executive Officer since October 2003, and Gerard Dorsey, Executive Vice
        President and Chief Financial Officer since December 2004 had left Glowpoint.
        In
        connection with their separation, Messrs. Trachtenberg and Dorsey were paid
        severance based upon their employment agreements of approximately $500,000
        and
        $155,000, respectively, over the following year and receive other benefits
        (e.g., accelerated vesting of restricted stock or options) valued at
        approximately $180,000 and $7,000, respectively. The amount paid to them
        is a
        portion of the $1,200,000 of restructuring costs recorded in the first quarter
        of 2006. In April 2006, Mr. Brandofino was appointed President and Chief
        Executive Officer and a member of the Board of Directors, Edwin Heinen was
        appointed Chief Financial Officer, and Joseph Laezza was appointed Chief
        Operating Officer. The following is a summary of our March 2006 restructuring
        activity as of March 31, 2006 (in thousands):
  12
 Accrual
                  as of December 31, 2005
              
              $
              0Provision
                  for severance
              
              
              1,200Less:
                  amounts paid
              
              
              (104
              )Accrual
                  as of March 31, 2006
              
              $
              1,096
  **Note
        9 - Subsequent Event**
  Management
        has determined that the Series B warrants are not exercisable because we
        achieved positive operating income, excluding the restructuring and non-cash
        charges as identified on Schedule A of the Series B warrants, as amended.
  **Item
        2. Management’s Discussion and Analysis of Financial Condition and Results of
        Operations.**
  *Certain
        statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.” These forward-looking statements include, but are
        not limited to, statements about the plans, objectives, expectations and
        intentions of Glowpoint, Inc.* *(“Glowpoint”
        or “we” or “us”)* *.,
        a
        Delaware corporation and other statements contained in this Report that are
        not
        historical facts. Forward-looking statements in this Report or hereafter
        included in other publicly available documents filed with the Securities
        and
        Exchange Commission, or the Commission, reports to our stockholders and other
        publicly available statements issued or released by us involve known and
        unknown
        risks, uncertainties and other factors which could cause our actual results,
        performance (financial or operating) or achievements to differ from the future
        results, performance (financial or operating) or achievements expressed or
        implied by such forward-looking statements. Such future results are based
        upon
        management's best estimates based upon current conditions and the most recent
        results of operations. When used in this Report, the words “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar
        expressions are generally intended to identify forward-looking statements,
        because these forward-looking statements involve risks and uncertainties.
        There
        are important factors that could cause actual results to differ materially
        from
        those expressed or implied by these forward-looking statements, including
        our
        plans, objectives, expectations and intentions and other factors that are
        discussed*  *under
        the section entitled “Risk Factors,” in item 7of our* *consolidated financial statements and the footnotes thereto for the fiscal
        year
        ended December 31, 2005 as filed with the Securities and Exchange Commission
        as
        an exhibit to Form 8-K on February 27, 2007.* ** **
  *The
        following discussion and analysis should be read in conjunction with the
        consolidated financial statements and related notes included elsewhere in
        this
        Report.*
  **Overview**
  Glowpoint,
        Inc. ("Glowpoint" or "we" or "us"), a Delaware corporation, is a premiere
        broadcast-quality, IP (Internet Protocol)-based managed video services provider.
        We offer a vast array of managed video services, including video application
        services, managed network services, IP and ISDN videoconferencing services,
        multi-point conferencing (bridging), technology hosting and management, and
        professional services. We provide these services to a wide variety of companies,
        from large enterprises and governmental entities to small and medium-sized
        businesses. Glowpoint is exclusively focused on high quality two-way video
        communications and has been supporting millions of video calls since its
        launch
        in 2000. We have bundled some of our managed services to offer video
        communication solutions for broadcast/media content acquisition and for video
        call center applications. Recently, with the advent of HD (High Definition)
        Telepresence solutions, we have combined various components of our features
        and
        services into a comprehensive “white glove” service offering that can support
        any of the telepresence solutions on the market today.  Prior to
        2004, Glowpoint, then known as Wire One Technologies, Inc., sold substantially
        all of the assets of its video solutions (VS) business to an affiliate of
        Gores
        Technology Group (Gores). See Note 7 to the condensed consolidated financial
        statements for further information.
  13
 On
        March
        7, 2005, we announced a settlement agreement with Gores, resolving the
        outstanding disputes relating to the sale of the assets of our VS business
        to
        Gores in September 2003. The agreement also covered Gores' acquisition of
        V-SPAN
        Inc. in November 2004. Pursuant to the terms of the settlement agreement,
        Gores
        paid us $2,750,000 and released to us the $335,000 that was escrowed at the
        closing of the asset sale. Also as part of the settlement, we dismissed our
        lawsuit against Gores relating to the V-SPAN acquisition.
  On
        March
        14, 2005, we entered into a common stock purchase agreement with several
        unrelated institutional investors in connection with the offering of (i)
        an
        aggregate of 6,766,667 shares of our common stock and (ii) warrants to purchase
        up to an aggregate of 2,706,667 shares of our common stock. We received proceeds
        from this offering of approximately $10,150,000, less our expenses relating
        to
        the offering, which were approximately $760,500, a portion of which represents
        investment advisory fees totaling $710,500 to Burnham Hill Partners, our
        financial advisor. The warrants are exercisable for a five-year period term
        and
        have an exercise price of $2.40 per share. As a result of subsequent financings,
        the conversion price of these warrants has been adjusted to $1.82 as of March
        31, 2006. The warrants may be exercised by cash payment of the exercise price
        or
        by "cashless exercise."
  In
        March
        and April 2006, we issued senior secured convertible notes and warrants in
        a
        private placement offering to private investors. In the March and April 2006
        transactions, we issued $5,665,000 and $515,000, respectively, with a total
        aggregate principal amount of $6,180,000 of our 10% Senior Secured Convertible
        Notes (“10% Notes”), Series A warrants to purchase 6,180,000 shares of common
        stock at an exercise price of $0.65 per share and Series B warrants to purchase
        6,180,000 shares of common stock at an exercise price of $0.01 per share.
        Both
        warrants are subject to certain anti-dilution protection. The Series B warrants
        only become exercisable after we make available to the public our financial
        statements for the fourth quarter of 2006 if we fail to achieve positive
        operating income, excluding restructuring and non-cash charges, in the fourth
        quarter of 2006. In addition, the Series B warrants will be cancelled if
        we
        consummate a strategic transaction or repay the 10% Notes prior to the date
        we
        make our consolidated financial statements for the fourth quarter of 2006
        available to the public. We also agreed to reduce the exercise price of
        3,625,000 previously issued warrants held by the investors in this offering
        to
        $0.65 from a weighted average price of $3.38, and to extend the expiration
        date
        of any such warrants to no earlier than three years after the offering date.
        The
        new weighted average expiration date of the warrants will be 3.5 years from
        a
        previous weighted average expiration date of 2.9 years. In addition, we issued
        to Burnham Hill Partners placement agent warrants to purchase 618,000 shares
        of
        our common stock at an exercise price of $0.55 per share. The warrants are
        subject to certain anti-dilution protection. The $5,123,000 and $462,000
        net
        proceeds of the March and April 2006, respectively, financings are being
        used to
        support our corporate restructuring program and for working capital.
  The
        10%
        Notes which bear interest at 10% per annum mature on September 30, 2007 and
        are
        convertible into common stock at a conversion rate of $0.50 per share. We
        have
        the option to pay the accrued interest for the 10% Notes in cash or additional
        10% Notes.
  Management
        has determined that the Series B warrants are not exercisable because we
        achieved positive operating income, excluding the restructuring and non-cash
        charges as identified on Schedule A of the Series B warrants, as
        amended.
  **Critical
        Accounting Policies**
  There
        have been no changes to our critical accounting policies in the three months
        ended March 31, 2006. Critical accounting policies and the significant estimates
        made in accordance with them are regularly discussed with our Audit Committee.
        Those policies are discussed under “Critical Accounting Policies” in our
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” included in Item 7 of our consolidated financial statements and the
        footnotes thereto for the fiscal year ended December 31, 2005 as filed with
        the
        Securities and Exchange Commission as an exhibit to Form 8-K on February
        27,
        2007.
   14
  **Results
        of Operations**
  The
        following table sets forth for the three months and three months ended March
        31,
        2006 and 2005, information derived from our condensed consolidated financial
        statements as expressed as a percentage of revenues:
  (Unaudited)
 Three
                  Months Ended
                March
                  31,2006
              
              2005Revenue
              
              
              100.0
              %
              
              100.0
              %Cost
                  of revenue
              
              
              73.8
              
              
              87.7Gross
                  margin
              
              
              26.2
              
              
              12.3Operating
                  expenses:Research
                  and development
              
              
              5.7
              
              
              7.4Sales
                  and marketing
              
              
              15.4
              
              
              22.0General
                  and administrative
              
              
              98.6
              
              
              76.5Total
                  operating expenses
              
              
              119.7
              
              
              105.9Loss
                  from operations
              
              
              (93.5
              )
              
              (93.6
              )Other
                  expense (income):Interest
                  expense
              
              
              34.6
              
              
              ──Interest
                  income
              
              
              ──
              
              
              ──(Decrease)
                  increase in fair value of derivative financial instruments
              
              
              (0.5
              )
              
              0.9Gain
                  on settlement with Gores
              
              
              ──
              
              
              (9.0
              )Total
                  other expense (income), net
              
              
              34.1
              
              
              (8.1
              )Net
                  loss
              
              
              (127.6
              )
              
              (85.5
              )Preferred
                  stock dividends
              
              
              (1.8
              )
              
              (2.1
              )Preferred
                  stock deemed dividends
              
              
              ──
              
              
              (30.5
              )Net
                  loss attributable to common stockholders
              
              
              (129.4
              )%
              
              (118.1
              )%
  **Three
        Months Ended March 31, 2006 (the “2006 quarter”) Compared to Three Months Ended
        March 31, 2005 (the “2005 quarter”).**
  **Revenue** -
        Revenue increased $519,000, or 12.4%, in the 2006 quarter to $4,721,000 from
        $4,202,000 in the 2005 quarter. Subscription and related revenue increased
        $545,000, or 20.7%, in the 2006 quarter to $3,176,000 from $2,631,000 in
        the
        2005 quarter. The increased subscription and related revenue is caused by
        an 8%
        increase in installed subscription circuits and an increase in the subscription
        revenue per circuit. The increased subscription revenue per circuit is a
        result
        of the Company evaluating circuit profitability and upon circuit renewal
        either
        increasing the monthly subscription charges or canceling unprofitable circuits.
        Non-subscription revenue consisting of bridging, events and other one-time
        fees
        decreased $26,000 in the 2006 quarter to $1,545,000 from $1,571,000 in the
        2005
        quarter.
  **Cost
        of revenue** - Cost
        of revenues for the 2006 quarter decreased $200,000, or 5.4%, to $3,486,000
        from
        $3,686,000 in the 2005 quarter. The decline in costs as a percentage of revenue
        in the 2006 quarter is the result of the start of an on-going activity involving
        the renegotiation of rates and the migration of service to lower cost providers
        where possible. Savings were also generated in connection with our Points
        of
        Presences (“POP”). A POP is where our customers gain access to the Glowpoint
        network. We eliminated three of our twelve POPs and excess capacity in several
        other POPs.
  **Gross
        margin** - Gross
        margin for the 2006 quarter increased by $719,000, or 139.3%, to $1,235,000
        from
        $516,000 in the 2005 quarter. The savings discussed in Cost of Revenue section
        caused our gross margin to increase to 26.2% in the 2006 quarter from 12.3%
        in
        the 2005 quarter. The rate of increase in our gross margin percentage is
        not
        indicative of results expected to be achieved in subsequent
        quarters.
  **Research
        and development** -
        Research and development costs, which include the costs of the personnel
        in this
        group, the equipment they use and their use of the network for development
        projects, decreased by $42,000, or 13.4%, in the 2006 quarter to $271,000
        from
        $313,000 in the 2005 quarter. The cost savings achieved were a direct result
        of
        the measures taken in the early part of 2006 which included staff reductions
        and
        reduced use of external contractors. As a percentage of revenue, it was 5.7%
        for
        the 2006 quarter, 7.4% for the 2005 quarter.
  15
 **Sales
        and marketing** - Sales
        and marketing expenses, which include sales salaries, commissions, overhead
        and
        marketing costs, were reduced by $194,000, or 21.0%, in the 2006 quarter
        to
        $729,000 from $923,000 in the 2005 quarter. Reduced staff levels and marketing
        programs as a result of the corporate restructuring that took place in March
        2006 account for the lower costs. Sales and marketing expense, as a percentage
        of revenue, was 15.4% for the 2006 quarter and 22.0% for the 2005 quarter.
  **General
        and administrative** -
        General and administrative expenses increased by $1,439,000, or 44.8%, in
        the
        2006 quarter to $4,655,000 from $3,214,000 in the 2005 period. The accrual
        for
        the March 2006 restructuring program in the amount of $1,200,000, designed
        to
        reduce certain operating, sales and marketing and general and administrative
        costs, was the significant factor. As part of the restructuring initiative,
        we
        implemented management changes, including the departure of twenty-one employees.
        In addition professional fees increased by $362,000 related to the restatement
        of prior period financial statements and salaries, benefits and training
        costs
        also increased by $151,000. These increases were partially offset by reductions
        in consulting expenses of $141,000, network and communication costs of $95,000,
        travel and entertainment of $17,000 and bad debts of $60,000. General and
        administrative expenses as a percentage of revenue were 98.6% in the 2006
        quarter and 76.5% in the 2005 quarter.
  **Other
        expense (income)** - Other
        expense of $1,611,000 principally reflects interest expense of $1,638,000
        which
        is comprised of $1,586,000 for the expensing of the beneficial conversion
        feature related to the 10% Notes and interest related to sales and use taxes
        and
        regulatory fees of $52,000 reduced by a $23,000 decrease in the fair value
        of
        derivative financial instruments related to the February 2004 capital raise
        and
        interest income of $4,000. Other income of $340,000 in the 2005 quarter
        principally reflects a $379,000 gain on the settlement of an amount owed
        to
        Gores reduced by a $42,000 increase in the fair value of derivative financial
        instruments related to the February 2004 capital raise.
  **Income
        taxes -** As
        a
        result of our losses we recorded no provision for incomes taxes in the three
        months ended March 31, 2006 and 2005. Any deferred
        tax asset that would be related to our losses has been fully reserved under
        a
        valuation allowance, reflecting the uncertainties as to realization evidenced
        by
        the Company’s historical results and restrictions on the usage of the net
        operating loss carryforwards.
  **Net
        loss** -
        Net
        loss increased by $2,435,000, or 67.8%, to $6,029,000 in the 2006 quarter
        from
        $3,594,000 in the 2005 quarter.
  **Preferred
        stock dividends** -
        We
        recognized preferred stock dividends of $85,000 for the 2006 quarter and
        $89,000
        for the 2005 quarter.
  **Preferred
        stock deemed dividends** -
        In the
        2006 quarter there were no preferred stock deemed dividends. We recognized
        preferred stock deemed dividends of $1,167,000 for the 2005 quarter in
        connection with warrants and a reduced conversion price, which were offered
        as
        an inducement to convert our Series B convertible preferred stock. In addition,
        we recognized preferred stock deemed dividends of $115,000 in the 2005 quarter
        in connection with an anti-dilution adjustment to the conversion price of
        our
        Series B convertible preferred stock resulting from our March 2005 financing.
  **Net
        loss attributable to common stockholders** - Net
        loss attributable to common stockholders increased by $1,149,000, or 23.1%
        in
        the 2006 quarter to $6,114,000, or $0.13 per basic and diluted share from
        $4,965,000, or $0.13 per basic and diluted share, in the 2005 quarter.
  **Liquidity
        and Capital Resources**
  Our
        condensed consolidated financial statements have been prepared assuming we
        will
        continue as a going concern. We have incurred recurring operating losses
        and
        negative operating cash flows since our inception including a net loss
        attributable to common stockholders of $6,114,000 for the three months ended
        March 31, 2006. At March 31, 2006, we had a working capital deficit of
        $5,036,000. We had $870,000 in cash and cash equivalents at March 31, 2006.
        We
        had net cash used in operations of $1,032,000 for the three months ended
        March
        31, 2006. Additionally, the 10% Notes mature in September 2007. These factors
        raise substantial doubt as to our ability to continue as a going concern.
        In
        March 2006 we implemented a corporate restructuring plan designed to reduce
        certain operating, sales and marketing and general and administrative costs
        (see
        Note 8). We raised capital in March 2006, but continue to sustain losses
        and
        negative operating cash flows. Assuming we realize all of the savings from
        our
        restructured operating activities, assuming we are able to negotiate favorable
        terms with the authorities regarding our sales and use taxes and regulatory
        fees
        and assuming we are able to renegotiate or refinance the 10% Notes (see Note
        5),
        we believe that our available capital as of March 31, 2006 will enable us
        to
        continue as a going concern through March 31, 2007. There are no assurances,
        however, that we will be able to raise additional capital as needed, or upon
        acceptable terms nor any assurances that we will be able renegotiate the
        terms
        and maturity date of the 10% Notes If we are unable to renegotiate the maturity
        of the 10% Notes or issue new securities on favorable terms to repay them,
        it
        would have a material adverse effect on the Company.. The accompanying financial
        statements do not include any adjustments that might result from this
        uncertainty.
  16
 In
        March
        and April 2006, we issued senior secured convertible notes and warrants in
        a
        private placement offering to private investors. In the March and April 2006
        transactions, we issued $5,665,000 and $515,000, respectively, with a total
        aggregate principal amount of $6,180,000 of our 10% Senior Secured Convertible
        Notes (“10% Notes”), Series A warrants to purchase 6,180,000 shares of common
        stock at an exercise price of $0.65 per share and Series B warrants to purchase
        6,180,000 shares of common stock at an exercise price of $0.01 per share.
        Both
        warrants are subject to certain anti-dilution protection. The Series B warrants
        only become exercisable after we make available to the public our financial
        statements for the fourth quarter of 2006 if we fail to achieve positive
        operating income, determined in accordance with generally accepted accounting
        principles, excluding restructuring and non-cash charges, in the fourth quarter
        of 2006. In addition, the Series B warrants will be cancelled if we consummate
        a
        strategic transaction or repay the 10% Notes prior to the date we make our
        consolidated financial statements for the fourth quarter of 2006 available
        to
        the public. Management has determined that the Series B warrants are not
        exercisable because we achieved positive operating income, excluding the
        restructuring and non-cash charges as identified on Schedule A of the Series
        B
        warrants, as amended. We also agreed to reduce the exercise price of 3,625,000
        previously issued warrants held by the investors in this offering to $0.65
        from
        a weighted average price of $3.38, and to extend the expiration date of any
        such
        warrants to no earlier than three years after the offering date. The new
        weighted average expiration date of the warrants will be 3.5 years from a
        previous weighted average expiration date of 2.9 years. In addition, we issued
        to Burnham Hill Partners placement agent warrants to purchase 618,000 shares
        of
        our common stock at an exercise price of $0.55 per share. The warrants are
        subject to certain anti-dilution protection. The $5,123,000 and $462,000
        net
        proceeds of the March and April 2006, respectively, financings are being
        used to
        support our corporate restructuring program and for working capital.
  The
        10%
        Notes which bear interest at 10% per annum mature on September 30, 2007 and
        are
        convertible into common stock at a conversion rate of $0.50 per share. We
        have
        the option to pay the accrued interest for the 10% Notes in cash or additional
        10% Notes.
  Management
        has determined that the Series B warrants are not exercisable because we
        achieved positive operating income, excluding the restructuring and non-cash
        charges as identified on Schedule A of the Series B warrants, as
        amended.
  Net
        cash
        used in operating activities was $1,032,000 for the 2006 quarter. For the
        2006
        quarter, the primary components of the net cash usage were the net loss of
        $6,029,000 which was increased by a decrease of $58,000 in deferred revenue
        and
        $23,000 for a decrease in the fair value of derivative financial instruments.
        This usage was partially offset by an increase of $2,435,000 in accounts
        payable
        and accrued expenses , sales taxes and regulatory fees, expensing of $1,586,000
        related to the beneficial conversion on the 10% Notes, depreciation and
        amortization of $526,000, stock-based compensation of $297,000 and decreases
        of
        $143,000 in accounts receivable and $85,000 in prepaid expenses and other
        current assets.
  During
        the quarter ended March 31, 2006, there were no material changes in our
        contractual obligations.
  Cash
        used
        in investing activities in the 2006 quarter for the purchase of property,
        equipment and leasehold improvements was $121,000. The Glowpoint network
        is
        currently built out to handle the anticipated level of subscriptions through
        2006. We do not anticipate current expansion for the network and therefore
        currently have no commitments to make significant capital expenditures in
        2006.
  Cash
        provided by financing activities for the 2006 quarter was $0 because the
        proceeds related to the 10% Notes were not received until April 2006.
  17
 **Commitments
        and Contingencies**
  During
        the three months ended March 31, 2006, there were no other items except as
        shown
        below that significantly impacted our commitments and contingencies as discussed
        in our consolidated
        financial statements and the footnotes thereto for the fiscal year ended
        December 31, 2005 as filed with the Securities and Exchange Commission as
        an
        exhibit to Form 8-K on February 27, 2007. The following table summarizes
        our
        contractual cash obligations and commercial commitments at March 31, 2006,
        and
        the effect such obligations are expected to have on liquidity and cash flow
        in
        future periods (in thousands).
  Contractual
                  Obligations:
              
              Total
              
              Less
                  Than 1 Year
              
              1-3
                  Years
              
              3-5
                  Years
              
              More
                  than 5 YearsLong
                  term debt - 10% Notes
              
              $
              5,665
              
              $
              ─
              
              $
              5,665
              
              $
              ─
              
              $
              ─Derivative
                  liabilities
              
              
              5,841
              
              
              4,030
              
              
              1,811
              
              
              ─
              
              
              ─Operating
                  lease obligations
              
              
              570
              
              
              357
              
              
              210
              
              
              3
              
              
              ─Commercial
                  commitments
              
              
              11,279
              
              
              5,200
              
              
              5,399
              
              
              680
              
              
              ─Total
              
              $
              23,355
              
              $
              9,587
              
              $
              13,085
              
              $
              683
              
              $
              ─
  **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;
        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 have certain derivative
        financial instruments related to the 10% Notes and the February 2004 capital
        raise. As the financial instruments are revalued each period these will cause
        fluctuations in our results from operations and if the 10% Notes are not
        converted and we are unable to register our common stock, ultimately cash
        flow
        from their settlement.
  There
        are
        no other material qualitative or quantitative market risks particular to
        us.
  **Item
        4. Controls and Procedures**
  During
        a
        portion of the 2005 periods covered by this report we lacked adequate internal
        controls. A material weakness in internal controls is a significant deficiency,
        or a combination of significant deficiencies, that results in more than a
        remote
        likelihood that a material misstatement of the annual or interim financial
        statements will be not be prevented or detected. We believe that a material
        weakness in our internal controls arose as the result of aggregating several
        significant deficiencies, including: inadequate review and approval of journal
        entries in the financial statement preparation process and a lack of supporting
        documentation and assumptions used therein, an insufficient number of technical
        accounting and public company reporting personnel in the finance department,
        an
        externally maintained warrant registry, the absence of a formal monthly closing
        process and subsequent formal reporting of monthly financial statements and
        account variance analysis. Additionally, our finance office was located in
        New
        Hampshire and our headquarters was located in New Jersey.
  Our
        current management team has instituted improved internal accounting controls,
        including the institution of a formal monthly closing process, including
        account
        analysis, oversight of all closing processes, formal monthly review of the
        financial statements and the implementation of monthly written reports to
        the
        Board of Directors and an internally maintained warrant registry. We are
        continuing to evaluate and improve our internal control procedures, where
        applicable.
  Another
        material weakness is that the Company does not release timely financial
        information to the general public. The restatements of prior periods delayed
        the
        filing of current periods and Management is in the process of hiring additional
        staff to assist in completing the prior financial statements to allow the
        Company to focus on, and issue, current financial statements.
  18
 **PART
        II - OTHER INFORMATION**
  **Item
        1.**  **Legal
        Proceedings**
 
 We
        are
        not currently defending any suit or claim.
  **Item
        1A. Risk Factors**
  The
        risk
        factors set forth in Item 1A of our 2006 Form 10-K, which is being filed
        simultaneously with this form 10-Q, are incorporated herein by
        reference.
  **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
  There
        have been no sales of securities in the past three years that have not been
        previously reported in a Quarterly Report on Form 10-Q or in a Current Report
        on
        Form 8-K.


**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**




31.1
            Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer31.2
            Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
            Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
            Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




19




**(i)**  **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.




GLOWPOINT,
                INC.
              RegistrantDate:
                June 6, 2007
            By:
            /s/
              Michael BrandofinoMichael
                Brandofino, Chief Executive Officer
                (principal
                  executive officer)


Date:
                June 6, 2007
            By:
            /s/
              Edwin F. HeinenEdwin
                F. Heinen, Chief Financial Officer
                (principal
                  financial and accounting
                  officer)




20