SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-Q/A**




x
            Quarterly
              report under Section 13 or 15(d) of the Securities Exchange Act of
              1934
              for the quarterly period ended June 30,
              2005.




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)




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




Yes
o No
x




Check
      whether the registrant is an accelerated filer as defined in Rule 12b-2 of
      the
      Exchange Act of 1934.




Yes
o No
x




The
      number of shares outstanding of the registrant’s Common Stock as of August 12,
      2005 was 46,046,340.







**GLOWPOINT,
      INC**




**Index**




PART I -FINANCIAL
                INFORMATIONItem 1.
              Restated Condensed Consolidated Financial
                StatementsCondensed
                  Consolidated Balance Sheets at June 30, 2005 (unaudited
                  restated) and December 31, 2004*
              1Unaudited
                  Restated Condensed Consolidated
                  Statements of Operations for the Six Months and Three Months
                Ended
                  June 30, 2005 and
                  2004
              2Unaudited
                  Restated Condensed Consolidated Statements of Cash Flows
                  for the Six Months
                EndedJune
                  30, 2005 and
                  2004
              3Notes
                  to Restated Condensed Consolidated Financial
                  Statements
              5Item 2.
              Management’s Discussion and Analysis of
                Financial Condition and Results of Operations
              11Item 3.
              Quantitative and Qualitative Disclosures
                about Market Risk
              19Item 4.
              Controls and Procedures
              20PART II -
              OTHER INFORMATIONItem 1.
              Legal Proceedings
              20Item 2.
              Unregistered Sales of Equity Securities
                and
                Use of Proceeds
              20Item 3.
              Defaults
                Upon Senior Securities
              20Item 4.
              Submission of Matters to a Vote of
                Security
                Holders
              20Item 5.
              Other Information
              20Item 6.
              Exhibits
              20Signatures
              
              21Certifications
              
              22


*
            The
                Condensed Consolidated Balance Sheet at December 31, 2004 has been
                derived
                from the audited restated consolidated financial statements filed
                as an
                exhibit to our Report on Form 8-K on January 18,
                2007.




i


**Glowpoint,
      Inc.**


**Condensed Consolidated Balance
      Sheets**


**(In
      thousands, except par value)**




June
                30, 2005
            
            December
                31, 2004*(Unaudited)
              (Restated
                - Note 3)**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            9,041
            
            $
            4,497Escrowed
                cash
            
            
            —
            
            
            337Accounts
                receivable, net of allowance for doubtful accounts of $341 and $305;
                respectively
            
            
            2,171
            
            
            1,872Receivable
                from Gores Technology Group
            
            
            —
            
            
            2,371Prepaid
                expenses and other current assets
            
            
            848
            
            
            554Total
                current assets
            
            
            12,060
            
            
            9,631Property
                and equipment , net
            
            
            4,967
            
            
            5,103Other
                assets
            
            
            256
            
            
            258Total
                assets
            
            $
            17,283
            
            $
            14,992**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            2,590
            
            $
            2,984Accrued
                expenses
            
            
            4,303
            
            
            3,822Current
                portion of derivative financial instrument
            
            
            806
            
            
            367Deferred
                revenue
            
            
            508
            
            
            265Capital
                lease obligations
            
            
            —
            
            
            35Total
                current liabilities
            
            
            8,207
            
            
            7,473Derivative
                financial instrument, less current portion
            
            
            573
            
            
            932Total
                liabilities
            
            
            8,780
            
            
            8,405Preferred
                stock, $.0001 par value; 5,000 shares authorized and redeemable,
                0.120334
                and 0.203667 Series B shares outstanding (stated value of $2,888
                and
                $4,888;liquidation value of $3,353 and $5,257),
                respectively
            
            
            2,888
            
            
            4,888Stockholders’
                Equity:Common
                stock, $.0001 par value; 100,000 shares authorized; 46,086 and 37,935
                shares issued and issuable; 45,966 and 37,815 shares outstanding,
                respectively
            
            
            5
            
            
            4Deferred
                compensation
            
            
            (865
            )
            
            (1,176
            )Additional
                paid-in capital
            
            
            160,270
            
            
            148,510Accumulated
                deficit
            
            
            (153,555
            )
            
            (145,399
            )5,855
            
            
            1,939Less:
                Treasury stock, 40 shares at cost
            
            
            (240
            )
            
            (240
            )Total
                stockholders’ equity
            
            
            5,615
            
            
            1,699Total
                liabilities and stockholders’ equity
            
            $
            17,283
            
            $
            14,992





*  Derived
      from the audited restated consolidated financial statements filed as an exhibit
      to our Report on Form 8-K on January 18, 2007.





See
      accompanying notes to condensed consolidated financial statements.




1




**Glowpoint,
      Inc.**


**Condensed
      Consolidated Statements of Operations**


**(In
      thousands, except per share data)**





**(Restated
      - Note 3)**


**(Unaudited)**




Six
                Months Ended June 30,
            
            Three
                Months Ended June 30,2005
            
            2004
            
            2005
            
            2004Revenue
            
            $
            8,599
            
            $
            7,365
            
            $
            4,397
            
            $
            4,179Cost
                of revenue
            
            
            7,692
            
            
            7,611
            
            
            4,006
            
            
            4,072Gross
                margin (loss)
            
            
            907
            
            
            (246
            )
            
            391
            
            
            107Operating
                expenses:Research
                and development
            
            
            576
            
            
            481
            
            
            263
            
            
            240Sales
                and marketing
            
            
            2,148
            
            
            1,259
            
            
            1,225
            
            
            703General
                and administrative
            
            
            6,670
            
            
            5,576
            
            
            3,456
            
            
            2,967Total
                operating expenses
            
            
            9,394
            
            
            7,316
            
            
            4,944
            
            
            3,910Loss
                from operations before other (income) expense
            
            
            (8,487
            )
            
            (7,562
            )
            
            (4,553
            )
            
            (3,803
            )Other
                (income) expense:Amortization
                of deferred financing costs
            
            
            —
            
            
            448
            
            
            —
            
            
            —Interest
                (income) expense, net
            
            
            (33
            )
            
            21
            
            
            (29
            )
            
            (19
            )Increase
                in fair value of derivative financial instrument
            
            
            81
            
            
            43
            
            
            38
            
            
            30Amortization
                of discount on subordinated debentures
            
            
            —
            
            
            2,650
            
            
            —
            
            
            —Loss
                on exchange of debt
            
            
            —
            
            
            743
            
            
            —
            
            
            —Gain
                on settlement with Gores
            
            
            (379
            )
            
            —
            
            
            —
            
            
            —Total
                other (income) expense, net
            
            
            (331
            )
            
            3,905
            
            
            9
            
            
            11Net
                loss
            
            
            (8,156
            )
            
            (11,467
            )
            
            (4,562
            )
            
            (3,814
            )Preferred
                stock dividends
            
            
            (147
            )
            
            (171
            )
            
            (58
            )
            
            (97
            )Preferred
                stock deemed dividends
            
            
            (1,282
            )
            
            —
            
            
            —
            
            
            —Net
                loss attributable to common stockholders
            
            $
            (9,585
            )
            $
            (11,638
            )
            $
            (4,620
            )
            $
            (3,911
            )Net
                loss attributable to common stockholders per share:Basic
                and diluted
            
            $
            (0.23
            )
            $
            (0.33
            )
            $
            (0.10
            )
            $
            (0.10
            )Weighted
                average number of common shares:Basic
                and diluted
            
            
            42,532
            
            
            34,860
            
            
            45,966
            
            
            37,332





See
      accompanying notes to condensed consolidated financial statements.




2




**Glowpoint,
      Inc.**


**Condensed
      Consolidated Sta** **tements
      of Cash Flows**


**(In
      thousands)**




**(Restated
      - Note 3)**


**(Unaudited)**




Six
                Months Ended June 30,2005
            
            2004Cash
                flows from Operating Activities:Net
                loss
            
            $
            (8,156
            )
            $
            (11,467
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            1,147
            
            
            1,102Amortization
                of deferred financing costs
            
            
            —
            
            
            448Amortization
                of discount on subordinated debentures
            
            
            —
            
            
            2,650Loss
                on exchange of debt
            
            
            —
            
            
            743Other
                expense recognized for the increase in the estimated fair value of
                the
                derivative financial instrument
            
            
            81
            
            
            43Common
                stock issued for interest on convertible debentures
            
            
            —
            
            
            45Gain
                on settlement with Gores
            
            
            (379
            )
            
            —Equity-based
                compensation
            
            
            573
            
            
            378Other
            
            
            —
            
            
            38Increase
                (decrease) in cash attributable to changes in assets and liabilities,
                net
                of effects of acquisition:Escrowed
                cash
            
            
            337
            
            
            (1
            )Accounts
                receivable
            
            
            (299
            )
            
            75Receivable
                from Gores Technology Group
            
            
            —
            
            
            (392
            )Prepaid
                expenses and other current assets
            
            
            (294
            )
            
            (119
            )Other
                assets
            
            
            2
            
            
            (215
            )Accounts
                payable
            
            
            (394
            )
            
            (806
            )Accrued
                expenses
            
            
            516
            
            
            1,257Deferred
                revenue
            
            
            243
            
            
            19Net
                cash used in operating activities
            
            
            (6,623
            )
            
            (6,202
            )Cash
                flows from Investing Activities:Settlement
                from discontinued operations (Note 6)
            
            
            2,750
            
            
            —Purchases
                of property, equipment and leasehold improvements
            
            
            (1,011
            )
            
            (568
            )Net
                cash provided by (used in) investing activities
            
            
            1,739
            
            
            (568
            )Cash
                flows from Financing Activities:Proceeds
                from issuance of common stock and warrants
            
            
            9,389
            
            
            11,399Offering
                costs
            
            
            —
            
            
            (27
            )Proceeds
                attributed to derivative financial instrument
            
            
            —
            
            
            1,164Proceeds
                from exercise of warrants and options, net
            
            
            74
            
            
            559Payments
                on capital lease obligations
            
            
            (35
            )
            
            (64
            )Net
                cash provided by financing activities
            
            
            9,428
            
            
            13,031Increase
                in cash and cash equivalents
            
            
            4,544
            
            
            6,261Cash
                and cash equivalents at beginning of period
            
            
            4,497
            
            
            4,105Cash
                and cash equivalents at end of period
            
            $
            9,041
            
            $
            10,366Supplement
                disclosures of cash flow information:Cash
                paid during the period for:Interest
            
            $
            1
            
            $
            15





3





Six
                Months Ended June 30,2005
            
            2004Non-cash
                investing and financing activities:Deferred
                compensation and additional paid-in capital recorded for the issuance
                of
                restricted common stock
            
            $
            —
            
            $
            511Issuance
                of Series B convertible preferred stock in exchange for convertible
                debentures
            
            
            —
            
            
            4,888Conversion
                of Series B convertible preferred stock to common stock
            
            
            2,000
            
            
            —Preferred
                stock deemed dividends
            
            
            1,282
            
            
            —Preferred
                stock dividends
            
            
            147
            
            
            171Equity
                issued as consideration for accrued preferred stock
                dividends
            
            
            183
            
            
            —







See
      accompanying notes to condensed consolidated financial statements.




4









**GLOWPOINT,
      INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2005**




**Note
      1 — The Business**




Glowpoint,
      Inc. ("Glowpoint" or "we" or "us"), a Delaware corporation, provides
      comprehensive video communications services. 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 6). Our services include IP-based and ISDN-based
      videoconferencing services, which are provided principally on a subscription
      basis, and managed bridging conferencing services for multi-point video and
      audio communications among three or more participants. We also provide IP-based
      broadcasting and event services.




On
      April
      20, 2004, we entered into an agreement with Tandberg, Inc., a wholly owned
      subsidiary of Tandberg ASA (OSLO: TAA.OL), a global provider of visual
      communications solutions. As part of the agreement, we acquired for $1.00
      certain assets and the customer base of Tandberg owned Network Systems LLC.
      Network Systems customers, primarily ISDN-based video users, obtained immediate
      access to our video bridging and webcasting services. As part of the agreement,
      Tandberg's corporate use of IP video communications and other telecommunications
      services, formerly purchased through Network Systems, is being provided
      exclusively by us under a multi-year agreement. In addition, we assumed current
      contractual commitments with AT&T, MCI and Sprint from Network Systems,
      which were subsequently consolidated into new agreements with these carriers.
      For accounting purposes, such commitments did not result in any additional
      asset
      or liability recognition. The transaction was accounted for following purchase
      accounting under Statement of Financial Accounting Standards ("SFAS") No. 141, *"Business
      Combinations"* .
      The
      fair value of tangible assets acquired and liabilities assumed were nominal.
      Accordingly, we did not record any value of intangible assets acquired. Results
      of operations of the acquired business were included in the accompanying
      financial statements from April 20, 2004, the date of acquisition. The following
      restated (see Note 3) pro forma information for the three months and six months
      ended June 30, 2004 gives effect to the acquisition as if it had occurred on
      January 1, 2004 (in thousands, except per share amounts):




Six
                Months Ended June 30, 2004
            
            Three
                Months Ended June 30, 2004Revenue
            
            $
            8,355
            
            $
            4,290Gross
                margin
            
            
            267
            
            
            188Net
                loss
            
            
            (11,162
            )
            
            (3,756
            )Net
                loss attributable to common stockholders
            
            
            (11,333
            )
            
            (3,853
            )Net
                loss attributable to common stockholders per share
            
            $
            (0.33
            )
            $
            (0.10
            )




**Note
      2 — Basis of Presentation**




Our
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and pursuant to the rules and regulations
      of
      the Securities and Exchange Commission. Accordingly, they do not include all
      of
      the information and footnotes required by accounting principles generally
      accepted in the United States of America for complete financial statements.
      In
      the opinion of management, all adjustments (consisting of normal recurring
      accruals and the restatement adjustments-see Note 3) considered necessary for
      a
      fair presentation have been included. Operating results for the three months
      and
      six months ended June 30, 2005 and 2004 are not necessarily indicative of the
      results that may be expected for the year ending December 31, 2005. For further
      information, refer to the restated consolidated financial statements and
      footnotes thereto for the fiscal year ended December 31, 2004 as filed with
      the
      Securities and Exchange Commission as an exhibit to Form 8-K on January 18,
      2007.




The
      restated condensed consolidated financial statements include the accounts of
      Glowpoint and our wholly owned subsidiaries, AllComm Products Corporation
      ("APC") and VTC Resources, Inc. ("VTC"). All material inter-company balances
      and
      transactions have been eliminated in consolidation.




5




Our
      consolidated financial statements have been prepared assuming we will continue
      as a going concern. We incurred a net loss of $8.2 million and $4.6 million
      for
      the six months and three months ended June 30, 2005, respectively and $11.5
      million and $3.8 million for the six months and three months ended June 30,
      2004, respectively. We had negative cash flows from operations of $6.6 million
      and $6.2 million for the six months ended June 30, 2005 and 2004, respectively.
      At June 30, 2005, we had cash and cash equivalents of $9.0 million, working
      capital of $3.9 million and an accumulated deficit of $153.6 million. We raised
      net proceeds of $9.4 million in March 2005, but continue to sustain losses
      and
      negative cash flows from operations. In March 2006, we commenced a restructuring
      of our business (see Note 10). In April 2006, we issued senior secured
      convertible notes and warrants and raised net proceeds of $5.6 million. We
      believe that our available working capital at June 30, 2005, together with
      our
      operating activities will enable us to continue as a going concern through
      June
      30, 2006.




**Note
      3 — Restatement**




The
      accompanying unaudited condensed consolidated financial statements restate
      the
      unaudited condensed consolidated financial statements included in Form 10-Q,
      which was previously filed on April 20, 2006. These restatements relate to
      additional accruals for (i) estimated sales and use taxes, regulatory fees
      and
      related penalties and interest and (ii) a tax obligation of a predecessor of
      Glowpoint and (iii) recognition of compensation expense related to the issuance
      of 100,000 warrants to a financial advisor in May 2005 and for the extension
      in
      the expiration date of 130,500 warrants. The restated unaudited condensed
      consolidated balance sheet as of December 31, 2004 has been derived from the
      audited restated financial statements filed as an exhibit to our Report on
      Form
      8-K on January 18, 2007. The restated condensed consolidated financial
      statements for the six and three months ended June 30, 2004 are consistent
      with
      the restated unaudited condensed consolidated financial information included
      in
      the audited restated financial statements filed as an exhibit to Form 8-K on
      January 18, 2007. The restatements had the following effect as of June 30,
      2005
      and for the six months ended June 30, 2005 (the 2005 period) and 2004 (the
      2004
      period) and for the three months ended June 30, 2005 (the 2005 quarter) and
      2004
      (the 2004 quarter):




**Accrued
      expenses** -
      Accrued expenses at June 30, 2005 were increased by $1,775,000 to reflect
      revised liability for the sales and use taxes, regulatory fees and related
      penalties and interest liability.




**Additional
      paid-in capital** -
      Additional paid-in capital as of June 30, 2005 has been increased by $195,000,
      related to the issuance of 100,000 warrants to a financial advisor and recorded
      as compensation and for the extension of the expiration date of 130,500
      warrants.




**Accumulated
      deficit** -
      Accumulated deficit as of June 30, 2005 has been increased by $1,970,000,
      including an increase of $1,401,000 as of January 1, 2005 and an increase in
      our
      net loss for the 2005 period of $374,000 related to sales and use taxes,
      regulatory fees and the related penalties and interest and $195,000 for
      compensation expense related to the warrants.




**General
      and administrative** -
      General and administrative expenses were increased by $569,000 and $334,000,
      respectively, in the 2005 and 2004 periods. The increase is comprised of sales
      and use taxes, regulatory fees and related penalties and interest of $374,000
      and $334,000, respectively, for the 2005 and 2004 periods and $195,000 in the
      2005 period and 2005 quarter for compensation expense related to warrants.
      General and administrative expenses were increased by $383,000 and $207,000,
      respectively, in the 2005 and 2004 quarters. The increase is comprised of sales
      and use taxes, regulatory fees and related penalties and interest of $187,000
      and $207,000, respectively, for the 2005 and 2004 quarters and $195,000 in
      the
      2005 quarter for compensation expense related to warrants.




6




The
      following tables summarize the account balances that have been restated (in
      thousands, except per share amounts):




Previously
                Reported
            
            As
                RestatedBalance
                sheets*:*
            
            June
                30, 2005
              (unaudited)Accrued
                expenses
            
            $
            2,528
            
            $
            4,303Total
                current liabilities
            
            
            6,432
            
            
            8,207Total
                liabilities
            
            
            7,005
            
            
            8,780Additional
                paid-in capital
            
            
            160,075
            
            
            160,270Accumulated
                deficit
            
            
            (151,585
            )
            
            (153,555
            )Total
                stockholders’ equity
            
            $
            7,390
            
            $
            5,615







Previously
                Reported
            
            As
              Restated
            
            Previously
                Reported
            
            As
              Restated
            
            Previously
                Reported
            
            As
              Restated
            
            Previously
                Reported
            
            As
              RestatedSix
                months ended
            
            Six
                months ended
            
            Three
                months ended
            
            Three
                months endedStatements
                of Operations*:*
            
            June
                30, 2005
            
            June
                30, 2004
            
            June
                30, 2005
            
            June
                30, 2004(unaudited)
            
            (unaudited)
            
            (unaudited)
            
            (unaudited)General
                and administrative
            
            $
            6,101
            
            $
            6,670
            
            $
            5,242
            
            $
            5,576
            
            $
            3,073
            
            $
            3,456
            
            $
            2,760
            
            $
            2,967Total
                operating expenses
            
            
            8,825
            
            
            9,394
            
            
            6,982
            
            
            7,316
            
            
            4,561
            
            
            4,944
            
            
            3,703
            
            
            3,910Loss
                from operations before other (income) expense
            
            
            (7,918
            )
            
            (8,487
            )
            
            (7,228
            )
            
            (7,562
            )
            
            (4,170
            )
            
            (4,553
            )
            
            (3,596
            )
            
            (3,803
            )Net
                loss
            
            
            (7,587
            )
            
            (8,156
            )
            
            (11,133
            )
            
            (11,467
            )
            
            (4,179
            )
            
            (4,562
            )
            
            (3,607
            )
            
            (3,814
            )Net
                loss attributable to common stockholders
            
            
            (9,016
            )
            
            (9,585
            )
            
            (11,304
            )
            
            (11,638
            )
            
            (4,237
            )
            
            (4,620
            )
            
            (3,704
            )
            
            (3,911
            )Net
                loss per share - basic and diluted
            
            $
            (0.21
            )
            $
            (0.23
            )
            $
            (0.32
            )
            $
            (0.33
            )
            $
            (0.09
            )
            $
            (0.10
            )
            $
            (0.10
            )
            $
            (0.10
            )




See
      Note
      4 with respect to the restatement of our proforma stock-based employee
      compensation for the six and three months ended June 30, 2005.




**Note
      4 —** **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. We account for our employee stock-based compensation plans under
      Accounting Principles Board ("APB") Opinion No. 25, *"Accounting
      for Stock Issued to Employees"* ,
      and,
      accordingly, account for employee stock-based compensation utilizing the
      intrinsic value method. Statement of Financial Standards ("SFAS") No. 123, *"Accounting
      for Stock-Based Compensation"* ,
      establishes a fair value based method of accounting for stock-based compensation
      plans. We have adopted the disclosure only alternative under SFAS No. 123,
      and
      SFAS No. 148 *"Accounting
      for Stock Based Compensation - Transition and Disclosure"* which
      requires disclosure of the pro forma effects on our net loss attributable to
      common stockholders and the related per share amounts as if SFAS No. 123 had
      been adopted as well as certain other information.




The
      fair
      value of stock options or warrants issued in return for services rendered by
      non-employees is accounted for using the fair value based method. The following
      table illustrates the effect on net loss attributable to common stockholders
      and
      net loss per share for the three months and six months ended June 30, 2005
      and
      2004 if the fair value based method had been applied to all awards.




7




Six
                Months Ended June 30,
            
            Three
                Months Ended June 30,2005
            
            2004
            
            2005
            
            2004Net
                loss attributable to common stockholders, as reported
                herein
            
            $
            (9,585
            )
            $
            (11,638
            )
            $
            (4,620
            )
            $
            (3,911
            )Add:
                stock-based compensation expense included in reported
                loss.
            
            
            311
            
            
            378
            
            
            156
            
            
            197Deduct:
                total stock-based employee compensation expense determined under
                the fair
                value based method for all awards
            
            
            (847
            )
            
            (780
            )
            
            (408
            )
            
            (390
            )Pro
                forma net loss attributable to common stockholders
            
            $
            (10,121
            )
            $
            (12,040
            )
            $
            (4,872
            )
            $
            (4,104
            )Net
                loss attributable to common stockholders per share:Basic
                and diluted - as reported herein
            
            $
            (0.23
            )
            $
            (0.33
            )
            $
            (0.10
            )
            $
            (0.10
            )Basic
                and diluted - pro forma
            
            $
            (0.24
            )
            $
            (0.35
            )
            $
            (0.11
            )
            $
            (0.11
            )


During
      the third quarter of 2004 we modified certain options to their life upon future
      separation of employment, which occurred during the second quarter of 2005.
      We
      have restated the above table to reflect the pro forma expense for the fair
      value of the modification in the third quarter of 2004 which was not included
      in
      the amounts previously disclosed. The unaudited condensed consolidated financial
      statements included in our June 30, 2005 Form 10-Q filed on April 20, 2006
      had
      reflected this pro forma expense in the second quarter of 2005 and disclosed
      stock-based employee compensation expense determined under the fair value based
      method of $1,071,000 and $630,000 for the six and three month periods ended
      June
      30, 2005, respectively.




The
      weighted average grant date fair value of options granted during the three
      months and six months ended June 30, 2005 was $1.13 and $1.39, respectively.
      The
      weighted average grant date fair value of options granted during the three
      months and six months ended June 30, 2004 was $1.49 and $1.62, respectively.
      The
      weighted average grant date fair value of 190,000 shares of restricted common
      stock granted during the six months ended June 30, 2004 was $2.01. The fair
      value of our stock-based option awards to employees was estimated assuming
      no
      expected dividends and the following weighted average assumptions:









Six
                Months Ended June 30,
            
            Three
                Months Ended June 30,2005
            
            2004
            
            2005
            
            2004Risk
                free interest rate
            
            
            3.86
            
            
            2.98
            
            
            3.83
            
            
            3.94Expected
                lives
            
            
            5
                Years
            
            
            5
                Years
            
            
            5
                Years
            
            
            5
                YearsExpected
                volatility
            
            
            109.52
            %
            
            113.13
            %
            
            108.57
            %
            
            112.83
            %


**Note
      5 — Loss Per Share**




Basic
      loss per share is calculated by dividing net loss attributable to common
      stockholders by the weighted average number of shares of common stock
      outstanding during the period. Diluted loss per share for the three months
      and
      six months ended June 30, 2005 and 2004 is the same as basic loss per share.
      Potential shares of common stock associated with 14,428,000 and 11,206,000
      outstanding and issuable options and warrants and 1,301,000 and 2,080,000 shares
      issuable upon the conversion of our Series B convertible preferred stock as
      of
      June 30, 2005 and 2004, respectively, have been excluded from the diluted
      calculations because the effects would be antidilutive.




**Note
      6 — 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
      million, consisting of $21 million in cash, of which $19 million was payable
      as
      of closing ($335,000 was placed in an escrow account) and $2 million was held
      back by Gores to cover potential purchase price
      adjustments, an unsecured $1 million promissory note maturing on December 31,
      2004 and bearing interest at 5% per annum and up to $2 million 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.




8




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 million. 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 $4.3 million.




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 $2.75 million 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
      $116,000 and $216,000 of revenues that we recognized during the three months
      and
      six months ended June 30, 2004, respectively, have been excluded from the sale
      transaction, and a gain from the settlement of these items of $379,000 has
      been
      recognized during the six months ended June 30, 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 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.




**Note
      7 — Bank Loan Payable**




In
      February 2004, we terminated a working capital credit facility with JPMorgan
      Chase. As a result of the termination of this facility, we wrote off $85,000
      of
      unamortized deferred financing costs to expense in the six months ended June
      30,
      2004.




**Note
      8 — Stockholder’s Equity**




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. As a result
      of
      this exchange, the unamortized discount on subordinated debentures and deferred
      financing costs were written off to expense, resulting in amortization of
      discount of $2,650,000 and amortization of deferred financing costs of $363,000
      for the six months ended June 30, 2004. Additionally, we recognized a $743,000
      loss on the exchange. The investors have anti-dilution rights. As a result
      of
      the February 2004 and March 2005 financings, the conversion price of the Series
      B convertible preferred stock and the exercise price of the warrants have been
      adjusted to $2.22 and
      $2.47, respectively and we recognized deemed dividends of $115,000 in the six
      months ended June 30, 2005. The corresponding amount in the 2004 period was
      nominal.




9




In
      February 2004, we raised net proceeds of $12.5 million in a private placement
      of
      6,100,000 shares of our common stock at $2.25 per share. We also issued warrants
      to the investors in the private placement to purchase 1,830,000 shares of our
      common stock at an exercise price of $2.75 per share. The warrants expire five
      and a half years after the closing date. The warrants are subject to certain
      anti-dilution protection and as a result of the March 2005 financing, the
      exercise price was reduced to $2.56 (the incremental fair value was nominal).
      We
      also issued to our placement agent five and a half year warrants to purchase
      427,000 shares of common stock at an exercise price of $2.71 per share with
      an
      estimated fair value of $895,000.




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 $1,379,000 as of June 30, 2005 and $1,298,000
      as
      of December 31, 2004. We recognized other expense of $30,000 and $43,000
      respectively, for the three months and six months ended June 30, 2004 and
      $38,000 and $81,000 for the three months and six months ended June 30,
      2005.




In
      March
      2005, we raised net proceeds of $9.4 million 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. 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
      aggregate fair value of $1,350,000. 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
      9 — Other Matters**




In
      April
      2005, we amended our operating lease for our Hillside, New Jersey office to
      extend the term of the lease through April 2007. At such time, we also increased
      the square feet under lease. Payments under the amended lease aggregate
      $145,000, $218,000 and $73,000 for the years ending December 31, 2005, 2006
      and
      2007, respectively, excluding operating costs.




**Note
      10 — Subsequent Events**




In
      March
      2006, we implemented a corporate restructuring plan designed to reduce certain
      operating, sales and marketing and general and administrative costs. As part
      of
      the strategic initiative, we implemented management changes, including the
      promotion of Michael Brandofino to Chief Operating Officer with principal
      responsibility for the implementation and management of the restructuring plan.
      We also announced that Gerard Dorsey, executive vice president and chief
      financial officer since December 2004, will be leaving Glowpoint in April 2006.
      In April 2006, Mr. Brandofino was appointed President and Chief Executive
      Officer and a member of the Board of Directors. Ed Heinen has been named to
      the
      Chief Financial Officer position. David Trachtenberg, Glowpoint's previous
      President and CEO will act as a consultant through April 2006.




In
      March
      and April 2006, we issued senior secured convertible notes and warrants in
      a
      private placement to private investors. In the transaction, we issued $6.18
      million aggregate principal amount of our 10% Senior Secured Convertible 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. The warrants are subject
      to certain anti-dilution protection. The Series B Warrants only become
      exercisable 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 Notes prior to the date we make our financial
      statements for the fourth quarter of 2006 available to the public. We also
      agreed to change the exercise price of all previously issued warrants held
      by
      the investors in this offering to $0.65, and to extend the term of any such
      warrants that would expire earlier than three years after the offering date.
      The
      $5.6 million net proceeds of the offering will be used to support our corporate
      restructuring program and for working capital.




10




The
      Notes
      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. The Series A and
      Series B warrants are exercisable for a period of 5 years.




We
      are
      evaluating the accounting treatment of this transaction, including consideration
      of applicable accounting standards for derivative instruments. We are also
      evaluating the effect on the conversion price of our Series B convertible
      preferred stock and the exercise price of outstanding warrants that are subject
      to anti-dilution adjustments occasioned by this transaction. Reductions to
      the
      conversion price and exercise prices may result in deemed dividend
      treatment.




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





The
      following discussion should be read in conjunction with our condensed
      consolidated financial statements for the three months and six months ended
      June
      30, 2005 and 2004 and the notes thereto included elsewhere herein. The
      discussion of results, causes and trends should not be construed to imply any
      conclusion that such results or trends will necessarily continue in the future.




The
      statements contained herein, other than historical information, are or may
      be
      deemed to be forward-looking statements within the meaning of Section 27A of
      the
      Securities Act of 1933, as amended, and Section 21E of the Securities and
      Exchange Act of 1934, as amended, and involve factors, risks and uncertainties
      that may cause our actual results in future periods to differ materially from
      such statements. These factors, risks and uncertainties, include market
      acceptance and availability of new video communications services; the
      non-exclusive and terminable at-will nature of sales agent agreements; rapid
      technological change affecting demand for our services; competition from other
      video communication service providers; and the availability of sufficient
      financial resources to enable us to expand our operations.




**Overview**




Glowpoint,
      Inc. ("Glowpoint" or "we" or "us"), a Delaware corporation, provides
      comprehensive video communications services over its carrier-grade IP based
      subscriber network enabling users to connect across the United States, as well
      as to business centers around the world. 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 4 to the condensed consolidated financial statements for further
      information.




On
      April
      20, 2004, we entered into an agreement with Tandberg, Inc., a wholly owned
      subsidiary of Tandberg ASA (OSLO:TAA.OL), a global provider of visual
      communications solutions. As part of the agreement, we acquired for $1.00
      certain assets and the customer base of Tandberg-owned Network Systems LLC
      (successor to the NuVision Companies). Network Systems customers, primarily
      ISDN-based video users, obtained immediate access to our video bridging and
      webcasting services. As part of the agreement, Tandberg's corporate use of
      IP
      video communications and other telecommunications services, formerly purchased
      through Network Systems, is being provided exclusively by us under a multi-year
      agreement. In addition, we assumed contractual commitments with AT&T, MCI
      and Sprint from Network Systems, which were subsequently consolidated into
      new
      agreements with these carriers. Tandberg named the Glowpoint Certified Program
      as a recognized external testing partner for its hardware and software
      products.




In
      the
      six months ended June 30, 2005, we entered into a strategic alliance with Sony
      Electronics, Inc. to create and launch a complete, Sony customized, user
      friendly video communication solution focused on broadening the use of IP-based
      video in and out of traditional office environments. The Sony service, powered
      by Glowpoint, is designed to bring together Sony's state-of-the-art line of
      video conferencing systems with our patent-pending advanced IP-based video
      applications and network services. The two companies are also developing joint
      initiatives to support the growing use of IP-based video for more diverse and
      innovative applications, including the broadcasting
      production segment where Sony is a recognized leader in providing customers
      with
      advanced audio and video equipment and systems. Through a "private label"
      arrangement, the two companies plan on delivering a customized Sony experience
      that will allow subscribers to see and talk to anyone, anywhere around the
      world
      regardless of network technology and device. Additionally, as part of the
      alliance and to support development of the new service, Sony will install the
      Glowpoint powered solution into a number of its office locations in the U.
      S.




11




On
      March
      7, 2005, we announced a settlement agreement with Gores Technology Group,
      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 $2.75 million 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 $10.15 million, 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. The warrants may be exercised
      by
      cash payment of the exercise price or by "cashless exercise."




**Restatement**




Glowpoint
      has reviewed its accruals relating to sales and use taxes, regulatory fees
      and
      related penalties and interest. This analysis caused Glowpoint to revise certain
      assumptions and determinations and, on September 20, 2006, Glowpoint’s Board of
      Directors concluded that the restatement of previously issued financial
      statements was appropriate. We have also reflected an adjustment to recognize
      compensation expense related to the issuance of 100,000 warrants to a financial
      advisor in May 2005 and the modification of the expiration date for 130,500
      warrants.




Additionally,
      on October 26, 2006, Glowpoint announced a potential tax owed by All
      Communications Corp. (“AllComm”), a predecessor of Glowpoint, to New York State
      Department of Taxation and Finance (the “AllComm Tax Liability”).  Our
      representatives then met with New York State officials and presented the
      supporting documentation in an attempt to have this matter resolved on the
      merits of the case. On or about December 12, 2006, we and New York State agreed
      on the amount of $269,000 owed to settle the AllComm Tax Liability.




Accordingly,
      we have restated our unaudited condensed consolidated balance sheet as of June
      30, 2005 and the unaudited condensed consolidated statements of operations
      for
      the six and three months ended June 30, 2005 and 2004 and cash flows for the
      six
      months ended June 30, 2005 and 2004, which were previously filed on Form 10-Q
      on
      April 20, 2006. The restated condensed consolidated balance sheet as of December
      31, 2004 has been derived from the audited restated financial statements filed
      as an exhibit to our Report on Form 8-K on January 18, 2007. The restated
      condensed consolidated financial statements for the six and three months ended
      June 30, 2004 are consistent with the restated unaudited condensed consolidated
      financial information included in the audited restated financial statements
      filed as an exhibit to Form 8-K on January 18, 2007. We have described the
      specific impact of the restatement as of June 30, 2005 and for the six months
      ended June 30, 2005 (the 2005 period) and 2004 (the 2004 period) and for the
      three months ended June 30, 2005 (the 2005 quarter) and 2004 (the 2004 quarter)
      in the discussion below.




12




**Results
      of Operations.**




The
      following table sets forth for the six months and three months ended June 30,
      2005 and 2004, information derived from restated condensed consolidated
      financial statements as expressed as a percentage of revenues:




(Unaudited)Six
                Months Ended June 30,
            
            Three
                Months Ended June 30 ,2005
            
            2004
            
            2005
            
            2004Revenues
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenues
            
            
            89.5
            
            
            103.3
            
            
            91.1
            
            
            97.4Gross
                margin (loss)
            
            
            10.5
            
            
            (3.3
            )
            
            8.9
            
            
            2.6Operating
                expenses:Research
                and development
            
            
            6.7
            
            
            6.5
            
            
            6.0
            
            
            5.7Sales
                and marketing
            
            
            25.0
            
            
            17.1
            
            
            27.9
            
            
            16.9General
                and administrative
            
            
            77.6
            
            
            75.7
            
            
            78.6
            
            
            71.0Total
                operating expenses
            
            
            109.3
            
            
            99.3
            
            
            112.5
            
            
            93.6Loss
                from operations before other (income) expense
            
            
            (98.8
            )
            
            (102.6
            )
            
            (103.6
            )
            
            (91.0
            )Other
                (income) expense:Amortization
                of deferred financing costs
            
            
            0.0
            
            
            6.1
            
            
            0.0
            
            
            ──Interest
                (income) expense, net
            
            
            (0.4
            )
            
            0.3
            
            
            (0.7
            )
            
            (0.4
            )Increase
                in derivative financial instrument
            
            
            0.9
            
            
            0.6
            
            
            0.9
            
            
            0.7Amortization
                of discount on subordinated debentures
            
            
            0.0
            
            
            36.0
            
            
            0.0
            
            
            ──Loss
                on exchange of debt
            
            
            0.0
            
            
            10.1
            
            
            0.0
            
            
            ──Gain
                on settlement with Gores
            
            
            (4.4
            )
            
            ──
            
            
            ──
            
            
            ──Total
                other (income) expenses, net
            
            
            (3.9
            )
            
            53.1
            
            
            0.2
            
            
            0.3Net
                loss
            
            
            (94.9
            )
            
            (155.7
            )
            
            (103.8
            )
            
            (91.3
            )Preferred
                stock dividends
            
            
            (1.7
            )
            
            (2.3
            )
            
            (1.3
            )
            
            (2.3
            )Preferred
                stock deemed dividends
            
            
            (14.9
            )
            
            ──
            
            
            ──
            
            
            ──Net
                loss attributable to common stockholders
            
            
            (111.5
            )%
            
            (158.0
            )%
            
            (105.1
            )%
            
            (93.6
            )%


**Six
      Months Ended June 30, 2005 ( the “2005 period”) Compared to Six Months Ended
      June 30, 2004 ( the “2004 period”) and the Three Months Ended June 30, 2005 (
      the “2005 quarter”) Compared to Three Months Ended June 30, 2004 ( the “ 2004
      quarter”).**




**Revenue** -
      Revenue increased $1.2 million, or 16%, in the 2005 period to $8.6 million
      from
      $7.4 million in the 2004 period. Subscription and related revenue (which
      includes contractual revenue related to the Network Services customer base)
      increased $0.33 million, or 7%, in the 2005 period to $5.4 million from $5.0
      million in the 2004 period. Contractual revenue related to the Network Services
      customer base (formerly known as NuVision) was $0.17 million in the 2005 period
      and $0.09 in the 2004 period. We received revenue from this customer base
      beginning in the 2004 quarter because we acquired it from Tandberg USA in April
      2004. Non-subscription revenue consisting of bridging, events and other one-time
      fees increased $0.9 million, or 39% in the 2005 period to $3.2 million from
      $2.3
      million in the 2004 period. The growth in non-subscription revenue was the
      result an increase of $0.85 million in revenue from the Network Services
      customer base in the 2005 period. Revenues for the 2005 quarter increased $0.2
      million, or 5% to $4.4 million from $4.2 million in the 2004 quarter.
      Subscription and related revenue (which includes contractual revenue related
      to
      the Network Services customer base) increased $.1 million, or 5% in the 2005
      quarter to $2.7 million from $2.6 million in the 2004 quarter. Non-subscription
      revenue consisting of bridging events and other one-time fees increased $0.1
      million, or 6% in the 2005 quarter to $1.7 million from $1.6 million in the
      2004
      quarter.




**Cost
      of revenue** -
      Cost of
      revenue for the 2005 period increased $0.1 million, or 1%, to $7.7 million
      from
      $7.6 million in the 2004 period. The decline in costs as a percentage of revenue
      in the 2005 period is the result of the renegotiation
      of rates and the migration of service to lower cost providers where possible.
      This caused the gross margin to increase to 10.5% in the 2005 period from a
      negative 3.3% in the 2004 period. Cost of revenues decreased $0.1 million or
      2%
      in the 2005 quarter to $4.0 million from $4.1 million in the 2004 quarter.
      This
      caused the gross margin to increase to 8.9% in the 2005 quarter from 2.6% in
      the
      2004 quarter. The rate of increase in our gross margin percentage is not
      indicative of results expected to be achieved in subsequent
      periods.




13




**Research
      and development** -
      Research and development costs, which include he costs of the personnel in
      this
      group, the equipment they use and their use of the network for development
      projects, increased by $0.14 million in the 2005 period to $0.6 million from
      $0.5 million in the 2004 period. The increase was a result of increased usage
      of
      outside contractors to meet the demand for application development in
      conjunction with new product development for us and certain of our partners.
      Research and development expense as a percentage of revenue was 6.7% for the
      2005 period, 6.5% for the 2004 period, 6.0% for the 2005 quarter and 5.7% for
      the 2004 quarter.




**Sales
      and marketing** - Sales
      and marketing expenses, which include sales salaries, commissions, overhead
      and
      marketing costs, increased $0.9 million in the 2005 period to $2.1 million,
      from
      $1.3 million in the 2004 period. The primary causes of the increase in costs
      for
      the 2005 period were a $0.5 million increase in salaries, benefits and travel
      costs resulting from the addition of a direct sales force of 11 employees and
      an
      increase of $0.3 million in marketing expense associated with a sales lead
      generation program and other initiatives Sales and marketing expenses increased
      $0.5 million to $1.2 million for the 2005 quarter from $0.7 million for the
      2004
      quarter. Sales and marketing expense, as a percentage of revenue, was 25.0%
      for
      the 2005 period, 17.1% for the 2004 period, 27.9% for the 2005 quarter and
      16.9%
      for the 2004 quarter.




**General
      and administrative** -
      General and administrative expenses, as restated, increased $1.1 million in
      the
      2005 period to $6.7 million from $5.6 million in the 2004 period. The primary
      components of the increase were $0.5 million in salaries and benefits related
      to
      executive management and increased staffing levels and $0.2 million for
      increased equipment rentals. General and administrative expenses increased
      $0.5
      million to $3.5 million for the 2005 quarter from $3.0 million for the 2004
      quarter. Salaries and benefits related to executive management and increased
      staffing levels increased $0.2 million in the 2005 quarter. General and
      administrative expenses include (i) estimated sales and use taxes, regulatory
      fees and related penalties and interest and (ii) a tax obligation of a
      predecessor of Glowpoint which totaled $0.5 million for both the 2005 period
      and
      2004 period and $0.3 million for both the 2005 quarter and 2004 quarter. Sales
      taxes and regulatory fees are supposed to be, or are routinely, collected from
      customers and remitted to the applicable authorities in certain circumstances.
      We have not been collecting and remitting such taxes and regulatory fees and
      as
      a result our general and administrative expenses include costs for such matters
      that would otherwise not have been incurred. General and administrative expenses
      as a percentage of revenue were 77.6% in the 2005 period, 75.7% in the 2004
      period, 78.6% in the 2005 quarter and 71.0% in the 2004 quarter.




**Restatement
      Impact - General and administrative** -
      General and administrative expenses were increased by $569,000 and $334,000,
      respectively, in the 2005 and 2004 periods. The increase is comprised of sales
      and use taxes, regulatory fees and related penalties and interest of $374,000
      and $334,000, respectively, for the 2005 and 2004 periods and $195,000 in the
      2005 period for compensation expense related to warrants. General and
      administrative expenses were increased by $383,000 and $207,000, respectively,
      in the 2005 and 2004 quarters. The increase is comprised of sales and use taxes,
      regulatory fees and related penalties and interest of $187,000 and $207,000,
      respectively, for the 2005 and 2004 quarters and $195,000 in the 2005 quarter
      for compensation expense related to warrants.




**Other
      (income) expense** -
      Other
      income of $0.3 million for the 2005 period principally reflects a gain on the
      settlement of an amount owed to Gores. Other expense of $3.9 million for the
      2004 period principally reflects amortization of discount on convertible
      debentures and related deferred financing costs and a loss on exchange of the
      debentures for Series B convertible preferred stock, common stock and a
      modification to warrants. Other expense for the 2005 quarter and 2004 quarter
      reflects net interest expense.




**Preferred
      stock deemed dividends** - We
      recognized deemed dividends of $1,167,000 for the 2005 period 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
      deemed dividends of $115,000 in the 2005 period in connection with an
      anti-dilution adjustment to the conversion price of our Series B convertible
      preferred stock resulting from our March 2005 financing. There were no deemed
      dividends previously reported.




14




**Net
      loss** -
      Net
      loss attributable to common stockholders, as restated, decreased to $9.6
      million, or $0.23 per basic and diluted share, in the 2005 period from $11.6
      million, or $0.33 per basic and diluted share, in the 2004 period. Net loss
      attributable to common stockholders, as restated, increased to $4.6 million,
      or
      $0.10 per basic and diluted share in the 2005 quarter from $3.9 million in
      the
      2004 quarter, or $0.10 per basic and diluted share, in the 2004
      quarter.




**Earnings
      before interest, taxes, depreciation and amortization
      (EBITDA)** is not a
      standard financial measurement under accounting principles generally accepted
      in
      the United States of America (GAAP). EBITDA should not be considered as an
      alternative to net loss or cash flow from operating activities as a measure
      of
      liquidity or as an indicator of operating performance or any measure of
      performance derived in accordance with GAAP. EBITDA is provided below to more
      clearly present the financial results that management uses to internally
      evaluate its business. We believe that this non-GAAP financial measure allows
      investors and management to evaluate and compare our operating results from
      continuing operations from period to period in a meaningful and consistent
      manner. The following table provides a reconciliation of the net loss
      attributable to common stockholders to EBITDA from continuing
      operations.




Six
                Months Ended June 30,
            
            Three
                Months Ended June 30,2005
            
            2004
            
            2005
            
            2004Net
                loss attributable to common stockholders
            
            $
            (9,585
            )
            $
            (11,638
            )
            $
            (4,620
            )
            $
            (3,911
            )Depreciation
                and amortization
            
            
            1,147
            
            
            1,102
            
            
            577
            
            
            559Amortization
                of deferred financing costs
            
            
            —
            
            
            448
            
            
            —
            
            
            —Amortization
                of discount on subordinated debentures
            
            
            —
            
            
            2,650
            
            
            —
            
            
            —Loss
                on exchange of debt
            
            
            —
            
            
            743
            
            
            —
            
            
            —Gain
                from discontinued operations
            
            
            (379
            )
            
            —
            
            
            —
            
            
            —Equity-based
                compensation
            
            
            573
            
            
            378
            
            
            381
            
            
            195Preferred
                stock dividends and deemed dividends
            
            
            1,429
            
            
            171
            
            
            58
            
            
            97Interest
                (income) expense net
            
            
            (33
            )
            
            21
            
            
            (29
            )
            
            (19
            )EBITDA
                from continuing operations
            
            $
            (6,848
            )
            $
            (6,125
            )
            $
            (3,633
            )
            $
            (3,079
            )


**Liquidity
      and Capital Resources**




At
      June
      30, 2005, we had working capital of $3.9 million compared to $2.2 million at
      December 31, 2004, an increase of approximately $1.7 million or 77%. We had
      $9.0
      million in cash and cash equivalents at June 30, 2005 compared to $4.5 million
      at December 31, 2004. The $1.7 million increase in working capital resulted
      primarily from the net proceeds from the March 2005 private placement of common
      stock of $9.4 million offset by the $6.6 million usage of cash in operations
      in
      the 2005 period and the purchase of $1.0 million of property, equipment and
      leasehold improvements.




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.




In
      February 2004, we raised net proceeds of $12.5 million in a private placement
      of
      6,100,000 shares of our common stock at $2.25 per share. We also issued warrants
      to purchase 1,830,000 shares of our common stock at an exercise price of $2.75
      per share. The warrants expire on August 17, 2009. The warrants are subject
      to
      certain anti-dilution protection. In addition, we issued to our placement agent
      five and a half year warrants to purchase 427,000 shares of common stock at
      an
      exercise price of $2.71 per share.




In
      February 2004, we terminated a $7.5 million revolving credit facility with
      JPMorgan Chase.




15




In
      March
      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 $10.15 million, 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. The warrants are subject to certain
      anti-dilution protection. 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 to private investors. In the transaction, we issued $6.18
      million aggregate principal amount of our 10% Senior Secured Convertible 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. The warrants are subject
      to certain anti-dilution protection. The Series B Warrants only become
      exercisable if we fail to achieve positive operating income, determined in
      accordance with GAAP, 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 Notes prior to the date
      we
      make our financial statements for the fourth quarter of 2006 available to the
      public. We also agreed to change the exercise price of all previously issued
      warrants held by the investors in this offering to $0.65, and to extend the
      term
      of any such warrants that would expire earlier to three years after the offering
      date. The $5.6 million net proceeds of the offering will be used to support
      our
      corporate restructuring program and for working capital.




The
      Notes
      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. The Series A and
      Series B warrants are exercisable for a period of 5 years.




Net
      cash
      used in operating activities was $6.6 million for the 2005 period and $6.2
      million for the 2004 period. For the 2005 period, the primary components of
      the
      net cash usage were the net loss of $8.2 million which was increased by a
      non-cash gain on the settlement with Gores of $0.4 million, a $0.3 million
      increase in accounts receivable and a $0.3 million increase in prepaid expenses
      and other current assets and reduced by depreciation and amortization of $1.1
      million, $0.6 million of equity-based compensation and the receipt of $0.3
      million in previously escrowed cash in conjunction with the Gores settlement
      agreement. For the 2004 period, the primary components of the net cash usage
      were the net loss of $11.5 million and an increase in the amount due from Gores
      of $0.4 million, reduced by depreciation and amortization of $1.1 million,
      amortization of deferred financing costs of $0.4 million, amortization of
      discount on subordinated debentures of $2.7 million, loss on exchange of debt
      of
      $0.7 million, an increase in accounts payable and accrued expenses of $0.5
      million and equity-based compensation of $0.4 million.




During
      the quarter ended June 30, 2005, there were no material changes in our
      contractual obligations.




Cash
      provided by investing activities for the 2005 period amounted to $1.7 million
      which consisted of $2.75 collected in the settlement with Gores partially offset
      by $1.0 million for the purchase of property, equipment and leasehold
      improvements. For the 2004 period, cash used by investing activities was $0.6
      million for the purchase of property, equipment and leasehold improvements.
      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 significant commitments to make capital
      expenditures in 2006.




Cash
      provided by financing activities for the 2005 and 2004 periods was $9.4 million
      and $13.1 million, respectively. Financing activities for the 2005 and 2004
      periods included receipt of the $9.4 million and $11.4 million of net proceeds
      from the private placements of common stock and warrants. The 2004 period
      includes $1.2 million of proceeds attributable to a derivative financial
      instrument.




We
      believe that our available capital as of June 30, 2005, together with our
      operating activities, will enable us to continue as a going concern through
      June
      30, 2006.




**Other
      Matters**




On
      June
      2, 2005, we dismissed our independent accounting firm, BDO Seidman LLP, for
      geographic reasons, and retained the independent accounting firm of Eisner
      LLP.
      In the course of its initial assessment of our December
      31, 2004 balance sheet, Eisner raised certain issues relating to property and
      equipment. Our internal accounting team looked into the matter and subsequently
      concluded, on a preliminary basis, that the costs associated with certain
      purchases of videoconferencing equipment for resale and certain other operating
      costs that represented cost of revenue had erroneously been capitalized as
      property and equipment.




16




These
      preliminary conclusions were discussed at a meeting of our board of directors
      on
      July 21, 2005. At that meeting, our Audit Committee determined to undertake
      an
      independent investigation of the matter. Following that meeting, our internal
      accounting team conducted a further review of the audited financial statements
      for 2002 through 2004 and held several discussions with our former CFO. Based
      on
      these discussions, on August 2, 2005, we concluded that our financial statements
      for fiscal years 2002 through 2004 (and the related quarters) and the quarter
      ended March 31, 2005 needed to be restated and should no longer be relied
      upon.




We
      requested that BDO Seidman audit our restated consolidated financial statements
      for fiscal years 2002 through 2004 and review our condensed consolidated
      financial statements for the applicable inclusive interim periods and the
      quarter ended March 31, 2005, which BDO Seidman declined. We have twice restated
      our consolidated financial statements as of December 31, 2004 and for the year
      then ended, including disclosure of the effect of the restatements on our
      unaudited condensed consolidated financial information for the interim periods
      within 2004, which have been filed as exhibits to our Reports on Form 8-K filed
      with the Securities and Exchange Commission on January 18, 2007, and previously
      on March 17, 2006. We have restated our unaudited condensed consolidated
      financial statements as of March 31, 2005 and for the three months ended March
      31, 2005 and 2004, which have
      been filed on Form 10-Q/A with the Commission on January 31, 2007 and previously
      on March 22, 2006. We also restated
      our unaudited condensed consolidated financial statements for the six and three
      months ended June 30, 2004, which were filed on our June 30, 2005 Form 10-Q
      on
      April 20, 2006. We are restating o ur
      unaudited condensed consolidated financial statements as of June 30, 2005 and
      for the six and three months ended June 30, 2005 and 2004, which are
      included elsewhere in this Report on Form 10-Q/A.




Our
      internal accounting team is working diligently to complete our fiscal 2005
      results. Restating financial statements for fiscal years 2002 and 2003 will
      require significant additional time and resources, primarily because of the
      following reasons:




·
            During
                2003, we completed the sale of our VS business to Gores. As part
                of the
                sale, we transferred four data communication servers which contained
                various documents and audit support workpapers associated with the
                books
                and records of the VS business for all periods prior to the sale.
                We did
                not retain backups of the information on those servers and we just
                recently received data downloads from such servers. Gores was only
                able to
                locate three of the four servers
                transferred.




·
            We
                may not be able to quantify inventory in periods prior to 2004. Effective
                with the sale to Gores, we no longer owned any inventory and BDO
                Seidman
                was the only auditor who observed the physical inventory counts that
                affect those periods. To date, we have not been able to verify such
                inventory amounts, which will be necessary in order to complete a
                restatement of our consolidated financial statements for the years
                ended
                December 31, 2002 and 2003. We will take all available actions to
                gain
                access to the BDO Seidman
                workpapers.




At
      this
      time, we cannot determine whether the resolution of the above items will enable
      us to restate fiscal years 2002 and 2003 in a reasonable amount of time or
      at
      all.




**Audit
      Committee Investigation** .
      The
      Audit Committee commenced its independent investigation following the July
      21,
      2005 board meeting. The Audit Committee hired independent counsel, the law
      firm
      of Kronish Lieb Weiner & Hellman LLP, to conduct the investigation. Kronish
      Lieb retained a forensic audit firm, Alix Partners LLP, to assist in the
      investigation. The investigation was concluded in late September 2005 and found
      that expenses associated with services provided to and equipment purchased
      by
      customers during 2001 through 2003 were improperly capitalized as additions
      to
      our fixed assets, and that such practices affected our 2001 through 2004
      financial statements. The Audit Committee investigation also found that, during
      the same period, some of the amounts associated with practices described in
      the
      preceding sentence were written off in subsequent accounting journal entries
      that were themselves improper, and that similarly improper additions to our
      fixed assets continued even after such write-offs had occurred. Our prior CFO,
      who participated in these practices and under whose supervision they occurred,
      left Glowpoint in April 2005 after the planned relocation of the finance
      department from New
      Hampshire to our headquarters in New Jersey. In addition to issues affecting
      fixed assets, the investigation found that during the relevant period, we lacked
      adequate internal accounting controls. Finally, the investigation identified
      certain areas that warrant further review, including past revenue recognition
      practices when we were a reseller of videoconferencing equipment, costs
      allocated to the accounting associated with the Gores transaction and internal
      reallocation of communication costs.




17




As
      noted
      above, the Audit Committee investigation found that during the relevant periods
      being restated, 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, 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.




The
      Audit
      Committee investigation further found that our current management has instituted
      improved internal accounting controls, including the hiring of our current
      CFO
      based in New Jersey and the subsequent relocation and restaffing of the finance
      organization to our headquarters in April 2005. Our restaffing included a
      corporate Controller who has over twenty years experience in public company
      reporting, has earned his CPA and will become our acting CFO in April 2006.
      We
      also instituted 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. We are continuing to evaluate and improve our internal control
      procedures, where applicable.




**SEC
      Inquiry** .
      On
      August 2, 2005, we contacted the Securities and Exchange Commission to notify
      it
      of our determination to restate our financial statements. On August 3, 2005,
      the
      SEC notified us that it was conducting an informal inquiry into our reported
      accounting issues. The SEC has met with our outside counsel as well as counsel
      to the Audit Committee. The SEC also sent us a document production request
      on
      October 27, 2005, and we responded to the request on November 14, 2005. The
      SEC
      has also recently contacted our former CFO and BDO Seidman LLP, our former
      independent accounting firm.




**Delisting** .
      On
      August 16, 2005, we received a letter from the Nasdaq National Market indicating
      that our common stock would be delisted from Nasdaq because of our failure
      to
      timely file our Form 10-Q for the quarter ended June 30, 2005. We requested
      and
      were granted a hearing to seek a conditional listing exception. The hearing
      occurred on September 15, 2005. On October 3, 2005, the Nasdaq Listing
      Qualifications Panel notified us that our common stock would be delisted from
      the Nasdaq National Market effective with the open of business on October 5,
      2005. Our common stock now trades over the counter in the pink sheets under
      the
      symbol "GLOW.PK".




**Critical
      Accounting Policies**




We
      prepare our financial statements in accordance with accounting principles
      generally accepted in the United States of America. Preparing financial
      statements in accordance with generally accepted accounting principles requires
      us to make estimates and assumptions that affect the reported amounts of assets
      and liabilities and disclose contingent assets and liabilities as of the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. The following paragraphs include a discussion
      of
      some critical areas where estimates are required. The significant areas of
      estimation includes determining the allowance for doubtful accounts, accrued
      sales tax, the estimated lives of property and equipment and the fair value
      of
      the derivative financial instrument.




**Revenue
      Recognition**




We
      recognize service revenue, including amounts related to surcharges charged
      by
      our carriers, related to the Glowpoint network subscriber service and the
      multi-point video and audio bridging services 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 life of the customer contracts. Revenues derived from other sources
      are
      recognized when services are provided or events occur.




18




**Allowance
      for Doubtful Accounts**




We
      record
      an allowance for doubtful accounts based on specifically identified amounts
      that
      we believe to be uncollectible. We also record additional allowances based
      on
      certain percentages of our aged receivables, which are determined based on
      historical experience and our assessment of the general financial conditions
      affecting our customer base. If our actual collections experience changes,
      revisions to our allowance may be required. After all attempts to collect a
      receivable have failed, we write off the receivable against the
      allowance.




**Long-Lived
      Assets**




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 2005 period, no impairment losses were recorded.




**Goodwill
      and Other Intangible Assets**




We
      follow
      SFAS No. 142, *"Goodwill
      and Other Intangible Assets"* in
      accounting for goodwill and other intangible assets. SFAS No. 142 requires,
      among other things, that companies no longer amortize goodwill, but instead
      test
      goodwill for impairment at least annually. In addition, SFAS 142 requires that
      we identify reporting units for the purposes of assessing potential future
      impairments of goodwill, reassess the useful lives of other existing recognized
      intangible assets, and cease amortization of intangible assets with indefinite
      useful lives. An intangible asset with an indefinite useful life should be
      tested for impairment in accordance with the guidance in SFAS No.
      142.




**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.




There
      are
      no other material qualitative or quantitative market risks particular to
      us.




**Item
      4. Controls and Procedures**





During
      the 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,
      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. We are continuing to evaluate and improve our internal
      control procedures, where applicable.




19




**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings**





We
      are
      defending several suits in the ordinary course of business that are not material
      to our business, financial condition or results of operations.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




None.




**Item
      3. Defaults upon Senior Securities**




None.




**Item
      4. Submission of Matters to a Vote of Security Holders**




None.




**Item
      5. Other Information**




None.




**Item
      6. Exhibits**




None.




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**(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:
                January 31, 2007
            By:/s/
                Michael BrandofinoMichael
                Brandofino, Chief Executive Officer
              (principal
                executive officer)Date:
                January 31, 2007
            By:/s/
                Edwin F. HeinenEdwin
                F. Heinen, Chief Financial Officer
              (principal
                financial and accounting officer)




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