----

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| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2010. |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

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

| Delaware(State or Other Jurisdiction ofIncorporation or Organization) | 77-0312442(I.R.S. EmployerIdentification No.) |
|-----------------------------------------------------------------------|-----------------------------------------------|

| Large accelerated filer |  o | Accelerated filer          |  o |
|-------------------------|---------|---------------------------------|---------|
| Non-accelerated filer   |  o | Smaller reporting company  |  x |

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Index

|                                                                                                                                                                                                                                   | Page   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                   |   |
| PART I – FINANCIAL INFORMATION                                                                                                                                                                                                   | 1      |
|                                                                                                                                                                                                                                   |   |
| Item 1. Financial Statements                                                                                                                                                                                                           | 1      |
|                                                                                                                                                                                                                                   |   |
| Condensed Consolidated Balance Sheets at June 30, 2010 (unaudited) and December 31, 2009*                                                                                                                                              | 1      |
|                                                                                                                                                                                                                                   |   |
| Unaudited Condensed Consolidated Statements of Operations for the six and three months ended June 30, 2010 and 2009                                                                                                                    | 2      |
|                                                                                                                                                                                                                                   |   |
| Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2010                                                                                                                        | 3      |
|                                                                                                                                                                                                                                   |   |
| Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009                                                                                                                              | 4      |
|                                                                                                                                                                                                                                   |   |
| Notes to unaudited Condensed Consolidated Financial Statements                                                                                                                                                                         | 5      |
|                                                                                                                                                                                                                                   |   |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                    | 18     |
|                                                                                                                                                                                                                                   |   |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                     | 30     |
|                                                                                                                                                                                                                                   |   |
| Item 4. Controls and Procedures                                                                                                                                                                                                        | 30     |
|                                                                                                                                                                                                                                   |   |
| PART II – OTHER INFORMATION                                                                                                                                                                                                      | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 1. Legal Proceedings                                                                                                                                                                                                              | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 1A. Risk Factors                                                                                                                                                                                                                  | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                                                    | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 3. Defaults Upon Senior Securities                                                                                                                                                                                                | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 4. [Removed and Reserved]                                                                                                                                                                                                         | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 5. Other Information                                                                                                                                                                                                              | 31     |
|                                                                                                                                                                                                                                   |   |
| Item 6. Exhibits                                                                                                                                                                                                                       | 31     |
|                                                                                                                                                                                                                                   |   |
| Signatures                                                                                                                                                                                                                             | 32     |
| Certifications                                                                                                                                                                                                                         |   |
|                                                                                                                                                                                                                                   |   |
| *  The Condensed Consolidated Balance Sheet at December 31, 2009 has been derived from the audited consolidated financial statements filed as an exhibit to our Annual Report on Form 10-K that was filed on March 31, 2010. |

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Table of Contents

CONSOLIDATED 

|                                                                                                                                                                                                                                                                                                                                                                |   | June 30,2010 |     |   | December 31,2009 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------|------------------|--------|
| ASSETS                                                                                                                                                                                                                                                                                                                                                              |   | (Unaudited)  |     |   |             |   |
| Current assets:                                                                                                                                                                                                                                                                                                                                                     |   |         |     |   |             |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                           |   | $            | 1,877    |   |             | $      | 587 |   |
| Accounts receivable, net of allowance for doubtful accounts of $269 and $262, respectively                                                                                                                                                                                                                                                                          |   |         | 3,639    |   |             |   | 3,323 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                                           |   |         | 546      |   |             |   | 291 |   |
| Total current assets                                                                                                                                                                                                                                                                                                                                                |   |         | 6,062    |   |             |   | 4,201 |   |
| Property and equipment, net                                                                                                                                                                                                                                                                                                                                         |   |         | 2,766    |   |             |   | 2,682 |   |
| Other assets                                                                                                                                                                                                                                                                                                                                                        |   |         | 112      |   |             |   | 31 |   |
| Total assets                                                                                                                                                                                                                                                                                                                                                        |   | $            | 8,940    |   |             | $      | 6,914 |   |
|                                                                                                                                                                                                                                                                                                                                                                |   |         |     |   |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                          |   |         |     |   |             |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                                                                                                |   |         |     |   |             |   |   |   |
| Accounts payable                                                                                                                                                                                                                                                                                                                                                    |   | $            | 2,858    |   |             | $      | 3,232 |   |
| Accrued expenses                                                                                                                                                                                                                                                                                                                                                    |   |         | 1,298    |   |             |   | 879 |   |
| Revolving loan facility                                                                                                                                                                                                                                                                                                                                             |   |         | 750      |   |             |   | — |   |
| Accrued sales taxes and regulatory fees                                                                                                                                                                                                                                                                                                                             |   |         | 703      |   |             |   | 888 |   |
| Customer deposits                                                                                                                                                                                                                                                                                                                                                   |   |         | 260      |   |             |   | 308 |   |
| Deferred revenue                                                                                                                                                                                                                                                                                                                                                    |   |         | 220      |   |             |   | 259 |   |
| Total current liabilities                                                                                                                                                                                                                                                                                                                                           |   |         | 6,089    |   |             |   | 5,566 |   |
| Long term liabilities:                                                                                                                                                                                                                                                                                                                                              |   |         |     |   |             |   |   |   |
| Accrued sales taxes and regulatory fees, less current portion                                                                                                                                                                                                                                                                                                       |   |         | 65       |   |             |   | 195 |   |
| Total long term liabilities                                                                                                                                                                                                                                                                                                                                         |   |         | 65       |   |             |   | 195 |   |
| Total liabilities                                                                                                                                                                                                                                                                                                                                                   |   |         | 6,154    |   |             |   | 5,761 |   |
|                                                                                                                                                                                                                                                                                                                                                                |   |         |     |   |             |   |   |   |
| Commitments and contingencies                                                                                                                                                                                                                                                                                                                                       |   |         |     |   |             |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                |   |         |     |   |             |   |   |   |
| Stockholders’ equity:                                                                                                                                                                                                                                                                                                                                         |   |         |     |   |             |   |   |   |
| Preferred stock Series B, non-convertible; $.0001 par value; $100,000 stated value; 100 shares authorized and 80 and 0 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively,  liquidation value of $8,000                                                                                                         |   |         | 8,000    |   |             |   | — |   |
| Preferred stock Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized and 1,630 and 4,509 shares issued and outstanding at June 30, 2010 and December 31, 2009 recorded at fair value, respectively (liquidation value of $12,226 and $33,815, respectively) (see Note 9 for information related to Insider Purchasers) |   |         | 5,161    |   |             |   | 14,275 |   |
| Common stock, $.0001 par value;150,000,000 shares authorized; 81,733,401 and 66,531,087 shares issued at June 30, 2010 and December 31, 2009, respectively; 81,733,401 and 64,966,196 shares outstanding, at June 30, 2010 and December 31, 2009, respectively                                                                                  |   |         | 8        |   |             |   | 7 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                                                                                          |   |         | 153,397  |   |             |   | 150,659 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                                                                                                 |   |         | (163,780 | )      |             |   | (162,405 | ) |
|                                                                                                                                                                                                                                                                                                                                                                |   |         | 2,786    |   |             |   | 2,536 |   |
| Less: Treasury stock, 0 and 1,564,891 shares at cost                                                                                                                                                                                                                                                                                                                |   |         | —  |   |             |   | (1,383 | ) |
| Total stockholders’ equity                                                                                                                                                                                                                                                                                                                                    |   |         | 2,786    |   |             |   | 1,153 |   |
| Total liabilities and stockholders’ equity                                                                                                                                                                                                                                                                                                                    |   | $            | 8,940    |   |             | $      | 6,914 |   |
|                                                                                                                                                                                                                                                                                                                                                                |   |         |     |   |             |   |   |   |

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Table of Contents

STATEMENTS 

|                                                                                                                                                          |   | Six Months EndedJune 30, |    |   | Three Months EndedJune 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|--------|----------------------------|--------|
|                                                                                                                                                          |   | 2010                     |    |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                          |   |                     |    |   |                       |   |   |   |   |   |   |   |
| Revenue                                                                                                                                                       |   | $                        | 13,985  |   |                       | $      | 13,387 |   |   | $ | 7,264 |   |   | $ | 6,945 |   |
|                                                                                                                                                          |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                                                                                           |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Network and Infrastructure                                                                                                                                    |   |                     | 6,114   |   |                       |   | 5,963 |   |   |   | 3,171 |   |   |   | 2,999 |   |
| Global managed services                                                                                                                                       |   |                     | 4,154   |   |                       |   | 3,748 |   |   |   | 2,102 |   |   |   | 1,880 |   |
| Sales and marketing                                                                                                                                           |   |                     | 2,101   |   |                       |   | 1,702 |   |   |   | 1,209 |   |   |   | 922 |   |
| General and administrative                                                                                                                                    |   |                     | 2,393   |   |                       |   | 2,536 |   |   |   | 1,250 |   |   |   | 928 |   |
| Depreciation and amortization                                                                                                                                 |   |                     | 542     |   |                       |   | 537 |   |   |   | 276 |   |   |   | 266 |   |
| Sales taxes and regulatory fees                                                                                                                               |   |                     | — |   |                       |   | (178 | ) |   |   | — |   |   |   | (88 | ) |
| Total operating expenses                                                                                                                                      |   |                     | 15,304  |   |                       |   | 14,308 |   |   |   | 8,008 |   |   |   | 6,907 |   |
| (Loss) income from operations                                                                                                                                 |   |                     | (1,319  | )      |                       |   | (921 | ) |   |   | (744 | ) |   |   | 38 |   |
|                                                                                                                                                          |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest and other expense:                                                                                                                                   |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                                                                              |   |                     | 54      |   |                       |   | 213 |   |   |   | 18 |   |   |   | 66 |   |
| Loss on extinguishment of debt                                                                                                                                |   |                     | — |   |                       |   | 254 |   |   |   | — |   |   |   | — |   |
| Increase (decrease) in fair value of derivative financial instruments’ liability, including $0, $20, $0 and $(11), respectively, for Insider Purchasers |   |                     | — |   |                       |   | 691 |   |   |   | — |   |   |   | (434 | ) |
| Amortization of financing costs                                                                                                                               |   |                     | 2       |   |                       |   | — |   |   |   | 2 |   |   |   | — |   |
| Total interest and other expense                                                                                                                              |   |                     | 56      |   |                       |   | 1,158 |   |   |   | 20 |   |   |   | (368 | ) |
| Net (loss) income                                                                                                                                             |   |                     | (1,375  | )      |                       |   | (2,079 | ) |   |   | (764 | ) |   |   | 406 |   |
| Loss on redemption of preferred stock                                                                                                                         |   |                     | (778    | )      |                       |   | (1,999 | ) |   |   | — |   |   |   | — |   |
| Net (loss) income attributable to common stockholders                                                                                                         |   | $                        | (2,153  | )      |                       | $      | (4,078 | ) |   | $ | (764 | ) |   | $ | 406 |   |
|                                                                                                                                                          |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income attributable to common stockholders per share:                                                                                              |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                         |   | $                        | (0.03   | )      |                       | $      | (0.09 | ) |   | $ | (0.01 | ) |   | $ | 0.01 |   |
| Diluted                                                                                                                                                       |   | $                        | (0.03   | )      |                       | $      | (0.09 | ) |   | $ | (0.01 | ) |   | $ | 0.00 |   |
|                                                                                                                                                          |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares:                                                                                                                     |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                         |   |                     | 71,941  |   |                       |   | 45,959 |   |   |   | 79,472 |   |   |   | 46,212 |   |
| Diluted                                                                                                                                                       |   |                     | 71,941  |   |                       |   | 45,959 |   |   |   | 79,472 |   |   |   | 92,717 |   |
|                                                                                                                                                          |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |

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Table of Contents

OF 

|                                                                 |   | Series B        |    |   | Series A-2      |   |    |         |   |   | Additional |   |   |        |    |   |           |   |
|----------------------------------------------------------------------|--------|-----------------|---------|--------|-----------------|--------|---------|--------------|--------|--------|------------|--------|--------|-------------|---------|--------|----------------|--------|
|                                                                 |   | Preferred Stock |    |   | Preferred Stock |   |    | Common Stock |   |   | Paid In    |   |   | Accumulated |    |   | Treasury Stock |   |   |   |   |
|                                                                 |   | Shares          |    |   | Amount          |   |    | Shares       |   |   | Amount     |   |   | Shares      |    |   | Amount         |   |   | Capital |   |   | Deficit |   |   | Shares |   |   | Amount |   |   | Total |   |
| Balance at January 1, 2010                                           |   |            | — |   |            | $      | — |         |   |   | 5          |   |   | $           | 14,275  |   |           |   | 66,531 |   |   | $ | 7 |   |   | $ | 150,659 |   |   | $ | (162,405 | ) |   |   | 1,565 |   |   | $ | (1,383 | ) |   | $ | 1,153 |   |
| Net loss                                                             |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | — |   |   |   | — |   |   |   | — |   |   |   | (1,375 | ) |   |   | — |   |   |   | — |   |   |   | (1,375 | ) |
| Stock-based compensation  - stock options                  |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | — |   |   |   | — |   |   |   | 126 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 126 |   |
| Stock-based compensation  - restricted stock               |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | 1,229 |   |   |   | — |   |   |   | 105 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 105 |   |
| 2010 Preferred Stock  Exchange                             |   |            | 50      |   |            |   | 5,000   |         |   |   | (1         | )      |   |        | (4,222  | )      |           |   | — |   |   |   | — |   |   |   | (778 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Warrants issued in connection  with 2010 Private Placement |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | — |   |   |   | — |   |   |   | 443 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 443 |   |
| Conversion of Preferred Stock                                        |   |            | — |   |            |   | — |         |   |   | (2         | )      |   |        | (4,892  | )      |           |   | 15,452 |   |   |   | 1 |   |   |   | 4,891 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Cashless exercise of warrants                                        |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | 66 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Exercise of stock options                                            |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | 20 |   |   |   | — |   |   |   | 7 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 7 |   |
| Sale of Series B Preferred Stock                                     |   |            | 30      |   |            |   | 3,000   |         |   |   | —    |   |   |        | — |   |           |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 3,000 |   |
| Cancellation of treasury stock                                       |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | (1,565 | ) |   |   | — |   |   |   | (1,383 | ) |   |   | — |   |   |   | (1,565 | ) |   |   | 1,383 |   |   |   | — |   |
| Costs related to 2010 Private Placement and Preferred Stock exchange |   |            | — |   |            |   | — |         |   |   | —    |   |   |        | — |   |           |   | — |   |   |   | — |   |   |   | (673 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (673 | ) |
| Balance at June 30, 2010                                             |   |            | 80      |   |            | $      | 8,000   |         |   |   | 2          |   |   | $           | 5,161   |   |           |   | 81,733 |   |   | $ | 8 |   |   | $ | 153,397 |   |   | $ | (163,780 | ) |   |   | — |   |   | $ | — |   |   | $ | 2,786 |   |

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Table of Contents

CASH 

|                                                                                                          |   | Six Months Ended June 30, |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------|
|                                                                                                          |   | 2010                      |   |   | 2009 |
| Cash flows from Operating Activities:                                                                         |   |                      |   |   |   |
| Net loss                                                                                                      |   | $                         | (1,375 | ) |   | $ | (2,079 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:                                   |   |                      |   |   |   |   |   |   |
| Depreciation and amortization                                                                                 |   |                      | 542 |   |   |   | 537 |   |
| Amortization of deferred financing costs                                                                      |   |                      | 2 |   |   |   | — |   |
| Other expense recognized for the increase in the estimated fair value of the derivative financial instruments |   |                      | — |   |   |   | 691 |   |
| Bad debt expense                                                                                              |   |                      | 184 |   |   |   | 122 |   |
| Accretion of discount on Senior Secured Notes                                                                 |   |                      | — |   |   |   | 23 |   |
| Loss on disposal of equipment                                                                                 |   |                      | (19 | ) |   |   | 10 |   |
| Loss on extinguishment of debt                                                                                |   |                      | — |   |   |   | 254 |   |
| Stock-based compensation                                                                                      |   |                      | 231 |   |   |   | 322 |   |
| Increase (decrease) attributable to changes in assets and liabilities:                                        |   |                      |   |   |   |   |   |   |
| Accounts receivable                                                                                           |   |                      | (500 | ) |   |   | (509 | ) |
| Prepaid expenses and other current assets                                                                     |   |                      | (255 | ) |   |   | (120 | ) |
| Other assets                                                                                                  |   |                      | (83 | ) |   |   | 2 |   |
| Accounts payable                                                                                              |   |                      | (374 | ) |   |   | 442 |   |
| Customer deposits                                                                                             |   |                      | (48 | ) |   |   | (80 | ) |
| Accrued expenses, sales taxes and regulatory fees                                                             |   |                      | 104 |   |   |   | 39 |   |
| Deferred revenue                                                                                              |   |                      | (39 | ) |   |   | (61 | ) |
| Net cash used in operating activities                                                                         |   |                      | (1,630 | ) |   |   | (407 | ) |
|                                                                                                          |   |                      |   |   |   |   |   |   |
| Cash flows from Investing Activities:                                                                         |   |                      |   |   |   |   |   |   |
| Purchases of property and equipment                                                                           |   |                      | (607 | ) |   |   | (647 | ) |
| Net cash used in investing activities                                                                         |   |                      | (607 | ) |   |   | (647 | ) |
|                                                                                                          |   |                      |   |   |   |   |   |   |
| Cash flows from Financing Activities:                                                                         |   |                      |   |   |   |   |   |   |
| Proceeds from preferred stock offering                                                                        |   |                      | 3,000 |   |   |   | 1,800 |   |
| Proceeds from revolving loan facility, net                                                                    |   |                      | 750 |   |   |   | — |   |
| Proceeds from exercise of stock options                                                                       |   |                      | 7 |   |   |   | — |   |
| Principal payments for capital lease                                                                          |   |                      | — |   |   |   | (77 | ) |
| Purchase of Senior Secured Notes                                                                              |   |                      | — |   |   |   | (750 | ) |
| Costs related to private placement                                                                            |   |                      | (230 | ) |   |   | (221 | ) |
| Net cash provided by financing activities                                                                     |   |                      | 3,527 |   |   |   | 752 |   |
|                                                                                                          |   |                      |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                              |   |                      | 1,290 |   |   |   | (302 | ) |
| Cash and cash equivalents at beginning of period                                                              |   |                      | 587 |   |   |   | 1,227 |   |
| Cash and cash equivalents at end of period                                                                    |   | $                         | 1,877 |   |   | $ | 925 |   |
|                                                                                                          |   |                      |   |   |   |   |   |   |
| Supplement disclosures of cash flow information:                                                              |   |                      |   |   |   |   |   |   |
| Cash paid during the period for                                                                               |   |                      |   |   |   |   |   |   |
|     Interest                                                                              |   | $                         | 54 |   |   | $ | 43 |   |
|                                                                                                          |   |                      |   |   |   |   |   |   |
| Non-cash investing and financing activities:                                                                  |   |                      |   |   |   |   |   |   |
| Costs related to private placement incurred by issuance of placement agent warrants                           |   | $                         |  443 |   |   | $ | 133 |   |
| Exchange of Senior Secured Notes for Series A-1 Preferred Stock                                               |   |                      |  — |   |   |   |    1,076 |   |
| Additional Senior Secured Notes issued as payment for interest                                                |   |                      |  — |   |   |   | 55 |   |
|                                                                                                          |   |                      |   |   |   |   |   |   |
| See accompanying notes to condensed consolidated financial statements.                                        |   |

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FINANCIAL 

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Table of Contents

|                |   | Six Months EndedJune 30, |    |   | Three Months EndedJune 30, |   |
|---------------------|--------|--------------------------|---------|--------|----------------------------|--------|
|                |   | 2010                     |    |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Consulting Services |   | $                        | — |   |                       | $      | 26 |   |   | $ | — |   |   | $ | 17 |   |
|                |   |                     |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Video Services      |   | $                        | 159     |   |                       | $      | 158 |   |   | $ | 77 |   |   | $ | 83 |   |

|                                         |   | Six Months EndedJune 30, |   |   | Three Months EndedJune 30, |   |
|----------------------------------------------|--------|--------------------------|--------|--------|----------------------------|--------|
|                                         |   | 2010                     |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Taxes included in revenues                   |   | $                        | 1,055  |   |                       | $      | 929 |   |   | $ | 550 |   |   | $ | 478 |   |
|                                         |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Taxes included in network and infrastructure |   | $                        | 961    |   |                       | $      | 899 |   |   | $ | 482 |   |   | $ | 461 |   |
|                                         |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |

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|                                    |   | Six Months EndedJune 30, |   |   | Three Months EndedJune 30, |   |
|-----------------------------------------|--------|--------------------------|--------|--------|----------------------------|--------|
|                                    |   | 2010                     |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Capitalized internal use software costs |   | $                        | 111    |   |                       | $      | 167 |   |   | $ | 19 |   |   | $ | 92 |   |
|                                    |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Amortization expense                    |   | $                        | 113    |   |                       | $      | 63 |   |   | $ | 63 |   |   | $ | 31 |   |
|                                    |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |

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|                                 |   | 2010 Preferred Stock Sale |    |   | 2010Preferred-BStock Exchange |   |    | 2010Preferred-Common Stock Exchange |   |   | Placement AgentWarrant Fee |   |   | Total  |    |
|--------------------------------------|--------|--------------------------------|---------|--------|-------------------------------|--------|---------|-------------------------------------|--------|--------|----------------------------|--------|--------|--------|---------|
| Consideration received by Company:   |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |
| Cash:                                |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |   |    |
| Gross proceeds                       |   | $                              | 3,000   |   |                          | $      | — |                                |   | $      | —                    |   |   | $      | — |   |   | $ | 3,000 |   |
| Series A-2 Preferred Stock received: |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |
| Shares                               |   |                           | — |   |                          |   | 1,334   |                                |   |   | 1,545                      |   |   |   | — |   |   |   | 2,879 |   |
| Book value                           |   | $                              | — |   |                          | $      | 4,222   |                                |   | $      | 4,892                      |   |   | $      | — |   |   | $ | 9,114 |   |
|                                 |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |   |    |   |   |   |   |   |
| Consideration provided to holders:   |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |
| Warrants issued:                     |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |
| Shares                               |   |                           | — |   |                          |   | — |                                |   |   | —                    |   |   |   | 1,181   |   |   |   | 1,181 |   |
| Book value                           |   | $                              | — |   |                          | $      | — |                                |   | $      | —                    |   |   | $      | 443     |   |   | $ | 443 |   |
| Series B Preferred Stock issued:     |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |
| Shares                               |   |                           | 30      |   |                          |   | 50      |                                |   |   | —                    |   |   |   | — |   |   |   | 80 |   |
| Book value                           |   | $                              | 3,000   |   |                          | $      | 5,000   |                                |   | $      | —                    |   |   | $      | — |   |   | $ | 8,000 |   |
| Common Stock issued:                 |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |
| Shares                               |   |                           | — |   |                          |   | — |                                |   |   | 15,452                     |   |   |   | — |   |   |   | 15,452 |   |
| Book value                           |   | $                              | — |   |                          | $      | — |                                |   | $      | 1                          |   |   | $      | — |   |   | $ | 1 |   |
| Paid in Capital                      |   | $                              | — |   |                          | $      | — |                                |   | $      | 4,891                      |   |   | $      | — |   |   | $ | 4,891 |   |
|                                 |   |                           |    |   |                          |   |    |                                |   |   |                       |   |   |   |    |   |   |   |   |   |

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|                            |   |   |   |
|---------------------------------|--------|--------|--------|
| Risk free interest rate         |   |   | 2.6    | % |
| Expected warrant lives in years |   |   | 5.0    |   |
| Expected volatility             |   |   | 113.6  | % |
| Estimated forfeiture rate       |   | None   |   |
| Expected dividend yields        |   | None   |   |
| Fair value per share            |   | $      | 0.38   |   |
| Common stock price              |   | $      | 0.48   |   |
|                            |   |   |   |   |

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|                              |   | Total Costs |   |
|-----------------------------------|--------|-------------|--------|
| Cash financing costs:             |   |        |   |
| Placement agent fee               |   | $           | 210    |   |
| Legal and other professional fees |   |        | 20     |   |
|                              |   |        | 230    |   |
| Non-cash financing costs:         |   |        |   |   |
| Financial advisory warrants       |   |        | 443    |   |
|                              |   | $           | 673    |   |

|                                              |   | Six Months EndedJune 30, |   |   | Three Months EndedJune 30, |   |
|---------------------------------------------------|--------|--------------------------|--------|--------|----------------------------|--------|
|                                              |   | 2010                     |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Options granted                                   |   |                     | 1,068  |   |                       |   | 586 |   |   |   | 924 |   |   |   | 28 |   |
| Risk free interest rate                           |   |                     | 2.6    | %      |                       |   | 1.7 | % |   |   | 2.6 | % |   |   | 2.3 | % |
| Expected option lives                             |   | 5 Years                  |   |   | 5 Years                    |   |   | 5 Years |   |   | 5 Years |   |
| Expected volatility                               |   |                     | 113.9  | %      |                       |   | 112.0 | % |   |   | 114.0 | % |   |   | 113.6 | % |
| Estimated forfeiture rate                         |   |                     | 10     | %      |                       |   | 10 | % |   |   | 10 | % |   |   | 10 | % |
| Expected dividend yields                          |   | None                     |   |   | None                       |   |   | None |   |   | None |   |
| Weighted average grant date fair value of options |   | $                        | 0.51   |   |                       | $      | 0.27 |   |   | $ | 0.50 |   |   | $ | 0.32 |   |
|                                              |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |

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|                                 |   | Outstanding       |   |   | Exercisable                    |   |
|--------------------------------------|--------|-------------------|--------|--------|--------------------------------|--------|
|                                 |   | Number of Options |   |   | Weighted AverageExercise Price |   |   | Number of Options |   |   | Weighted AverageExercise Price |   |
| Options outstanding, January 1, 2010 |   |              | 4,706  |   |                           | $      | 0.84 |   |   |   | 2,910 |   |   | $ | 1.08 |   |
| Granted                              |   |              | 1,068  |   |                           |   | 0.63 |   |   |   |   |   |   |   |   |   |
| Exercised                            |   |              | (20    | )      |                           |   | 0.38 |   |   |   |   |   |   |   |   |   |
| Expired                              |   |              | (16    | )      |                           |   | 5.50 |   |   |   |   |   |   |   |   |   |
| Forfeited                            |   |              | (324   | )      |                           |   | 0.96 |   |   |   |   |   |   |   |   |   |
| Options outstanding, June 30, 2010   |   |              | 5,414  |   |                           | $      | 0.78 |   |   |   | 3,012 |   |   | $ | 0.99 |   |
|                                 |   |              |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |

|                       |   | Six Months EndedJune 30, |   |   | Three Months EndedJune 30, |   |
|----------------------------|--------|--------------------------|--------|--------|----------------------------|--------|
|                       |   | 2010                     |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Global managed services    |   | $                        | 66     |   |                       | $      | 8 |   |   | $ | 33 |   |   | $ | 4 |   |
| Sales and marketing        |   |                     | 21     |   |                       |   | 24 |   |   |   | 11 |   |   |   | 11 |   |
| General and administrative |   |                     | 39     |   |                       |   | 123 |   |   |   | 20 |   |   |   | 64 |   |
|                       |   | $                        | 126    |   |                       | $      | 155 |   |   | $ | 64 |   |   | $ | 79 |   |
|                       |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |

|                                                    |   | Restricted Shares |   |   | Weighted AverageGrant Price |   |
|---------------------------------------------------------|--------|-------------------|--------|--------|----------------------------------|--------|
| Unvested restricted shares outstanding, January 1, 2010 |   |              | 1,162  |   |                             | $      | 0.38 |   |
| Granted                                                 |   |              | 1,439  |   |                             |   | 0.63 |   |
| Vested                                                  |   |              | (219   | )      |                             |   | 0.53 |   |
| Forfeited                                               |   |              | (210   | )      |                             |   | 0.66 |   |
| Unvested restricted shares outstanding, June 30, 2010   |   |              | 2,172  |   |                             | $      | 0.50 |   |
|                                                    |   |              |   |   |                             |   |   |   |

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|                            |   | Six Months EndedJune 30, |   |   | Three Months EndedJune 30, |   |
|---------------------------------|--------|--------------------------|--------|--------|----------------------------|--------|
|                            |   | 2010                     |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Restricted stock shares granted |   |                     | 1,439  |   |                       |   | 1,225 |   |   |   | 1,327 |   |   |   | 75 |   |
|                            |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Global managed services         |   | $                        | 11     |   |                       | $      | 11 |   |   | $ | 5 |   |   | $ | 5 |   |
| Sales and marketing             |   |                     | 2      |   |                       |   | 6 |   |   |   | 1 |   |   |   | 3 |   |
| General and administrative      |   |                     | 92     |   |                       |   | 150 |   |   |   | 50 |   |   |   | 62 |   |
|                            |   | $                        | 105    |   |                       | $      | 167 |   |   | $ | 56 |   |   | $ | 70 |   |
|                            |   |                     |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |

|                                  |   | Warrants |   |   | Weighted AverageExercise Price |   |
|---------------------------------------|--------|----------|--------|--------|-------------------------------------|--------|
| Warrants outstanding, January 1, 2010 |   |     | 3,464  |   |                                | $      | 0.97 |   |
| Granted                               |   |     | 1,181  |   |                                |   | 0.63 |   |
| Exercised                             |   |     | (157   | )      |                                |   | 0.40 |   |
| Forfeited                             |   |     | (1,640 | )      |                                |   | 1.61 |   |
| Warrants outstanding, June 30, 2010   |   |     | 2,848  |   |                                | $      | 0.50 |   |
|                                  |   |     |   |   |                                |   |   |   |

| Exercise Prices |   |   | Number Outstanding |   | Expiration Date |
|-----------------|--------|--------|--------------------|--------|-----------------|
| $               | 0.40   |   |               |   | 1,667           |   | 11/25/2013 |
|            | 0.63   |   |               |   | 1,181           |   | 3/29/2015 |
|            |   |   |               |   | 2,848           |   |   |
|            |   |   |               |   |            |   |   |

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|                             |   | June 30, |   |
|----------------------------------|--------|----------|--------|
|                             |   | 2010     |   |   | 2009 |   |
| Series A-2 Preferred Stock  |   |     | 16,302 |   |   |   | — |   |
| Warrants                    |   |     | 2,848  |   |   |   | 44,262 |   |
| Options                          |   |     | 5,414  |   |   |   | 5,399 |   |
| Unvested restricted stock        |   |     | 2,172  |   |   |   | 1,272 |   |
|                             |   |     | 26,736 |   |   |   | 50,933 |   |
|                             |   |     |   |   |   |   |   |   |

| Preferred Stock Class |   | Shares Authorized |   |   | Shares Issued and Outstanding |   |
|-----------------------|--------|-------------------|--------|--------|-------------------------------|--------|
| Series B              |   |              | 100    |   |                          |   | 80 |   |
| Series A-2            |   |              | 7,500  |   |                          |   | 1,630 |   |
| Series D              |   |              | 4,000  |   |                          |   | — |   |
|                  |   |              |   |   |                          |   |   |   |

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|                        |   | December 31,2009 |    |   | 2010 Preferred Stock Sale |   |    | 2010 Preferred-B Stock Exchange (1) |   |   | 2010 Preferred-Common Stock Exchange |   |   | June 30, 2010 |    |
|-----------------------------|--------|------------------|---------|--------|---------------------------|--------|---------|-------------------------------------|--------|--------|--------------------------------------|--------|--------|---------------|---------|
| Shares of Preferred Stock:  |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |
| Series B Preferred Stock:   |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |
| Investors                   |   |             | — |   |                      |   | 30      |                                |   |   | 50                                   |   |   |          | — |   |   |   | 80 |   |
|                        |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Series A-2 Preferred Stock: |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Investors                   |   |             | 4,394   |   |                      |   | — |                                |   |   | (1,334                               | )      |   |          | (1,545  | ) |   |   | 1,515 |   |
| Insider Purchasers          |   |             | 115     |   |                      |   | — |                                |   |   | —                              |   |   |          | — |   |   |   | 115 |   |
|                        |   |             | 4,509   |   |                      |   | — |                                |   |   | (1,334                               | )      |   |          | (1,545  | ) |   |   | 1,630 |   |
|                        |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Book Value:                 |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Series B Preferred Stock:   |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Investors                   |   | $                | — |   |                      | $      | 3,000   |                                |   | $      | 5,000                                |   |   | $             | — |   |   | $ | 8,000 |   |
|                        |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Series A-2 Preferred Stock: |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Investors                   |   | $                | 13,911  |   |                      | $      | — |                                |   | $      | (4,222                               | )      |   | $             | (4,892  | ) |   | $ | 4,797 |   |
| Insider Purchasers          |   |             | 364     |   |                      |   | — |                                |   |   | —                              |   |   |          | — |   |   |   | 364 |   |
|                        |   | $                | 14,275  |   |                      | $      | — |                                |   | $      | (4,222                               | )      |   | $             | (4,892  | ) |   | $ | 5,161 |   |
| Total book value            |   | $                | 14,275  |   |                      | $      | 3,000   |                                |   | $      | (4,222                               | )      |   | $             | (4,892  | ) |   | $ | 13,161 |   |
|                        |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Liquidation Value:          |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Series B Preferred Stock:   |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Investors                   |   | $                | — |   |                      | $      | 3,000   |                                |   | $      | 5,000                                |   |   | $             | — |   |   | $ | 8,000 |   |
|                        |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Series A-2 Preferred Stock: |   |             |    |   |                      |   |    |                                |   |   |                                 |   |   |          |    |   |   |   |   |   |
| Investors                   |   | $                | 32,952  |   |                      | $      | — |                                |   | $      | (10,000                              | )      |   | $             | (11,589 | ) |   | $ | 11,363 |   |
| Insider Purchasers          |   |             | 863     |   |                      |   | — |                                |   |   | —                              |   |   |          | — |   |   |   | 863 |   |
|                        |   | $                | 33,815  |   |                      | $      | — |                                |   | $      | (10,000                              | )      |   | $             | (11,589 | ) |   | $ | 12,226 |   |
| Total liquidation value     |   | $                | 33,815  |   |                      | $      | 3,000   |                                |   | $      | (5,000                               | )      |   | $             | (11,589 | ) |   | $ | 20,226 |   |

| (1) | In the 2010 Private Placement, 1,334 shares of the Series A-2 Preferred Stock were exchanged for 50 shares of Series B Preferred Stock.  The resulting $778,000 loss on the redemption of the Series A-2 Preferred Stock was charged to Additional Paid in Capital. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Management’s Discussion 

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|                                                                                                                                               |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Revenue                                                                                                                                            |   |   | 100.0   | %      |   |   | 100.0   | %      |   |   | 100.0 | % |
| Operating expenses:                                                                                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Network and infrastructure                                                                                                                         |   |   | 43.7    |   |   |   | 44.5    |   |   |   | 51.3 |   |
| Global managed services                                                                                                                            |   |   | 29.7    |   |   |   | 28.0    |   |   |   | 20.6 |   |
| Sales and marketing                                                                                                                                |   |   | 15.0    |   |   |   | 12.7    |   |   |   | 13.9 |   |
| General and administrative                                                                                                                         |   |   | 17.1    |   |   |   | 19.0    |   |   |   | 17.3 |   |
| Depreciation and amortization                                                                                                                      |   |   | 3.9     |   |   |   | 4.0     |   |   |   | 5.2 |   |
| Sales taxes and regulatory fees                                                                                                                    |   |   | — |   |   |   | (1.3    | )      |   |   | (1.6 | ) |
| Total operating expenses                                                                                                                           |   |   | 109.4   |   |   |   | 106.9   |   |   |   | 106.7 |   |
| Loss from operations                                                                                                                               |   |   | (8.5    | )      |   |   | (6.9    | )      |   |   | (6.7 | ) |
| Interest and other expense:                                                                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest expense, net, including 0.0%, 0.0%  and 0.7%, respectively, for Insider Purchasers                                              |   |   | 0.4     |   |   |   | 1.6     |   |   |   | 17.0 |   |
| Interest income                                                                                                                                    |   |   | — |   |   |   | — |   |   |   | (0.1 | ) |
| Amortization of deferred financing costs, including 0.0%, 0.0% and 0.2%, respectively, for Insider Purchasers                                      |   |   | — |   |   |   | — |   |   |   | 1.9 |   |
| Loss on extinguishment of debt                                                                                                                     |   |   | — |   |   |   | 1.9     |   |   |   | — |   |
| Increase in fair value of derivative financial instruments’ liability, including 0.0% , 0.1%, and 0.0%, respectively, for Insider Purchasers |   |   | — |   |   |   | 5.2     |   |   |   | 0.5 |   |
| Total interest and other expense, net                                                                                                              |   |   | 0.4     |   |   |   | 8.7     |   |   |   | 19.3 |   |
| Net loss                                                                                                                                           |   |   | (9.8    | )      |   |   | (15.6   | )      |   |   | (26.0 | ) |
| Loss on redemption of preferred stock                                                                                                              |   |   | (5.6    | )      |   |   | (14.9   | )      |   |   | — |   |
| Net loss attributable to common stockholders                                                                                                       |   |   | (15.4   | )%     |   |   | (30.5   | )%     |   |   | (26.0 | )% |
|                                                                                                                                               |   |   |    |   |   |   |    |   |   |   |   |   |

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|                               |   | Six Months Ended June 30,(in thousands) |   |
|------------------------------------|--------|-----------------------------------------|--------|
| Revenue                            |   | 2010                                    |   |   | 2009 |   |   | Increase (Decrease) |   |   | % Change |   |
| Core:                              |   |                                    |   |   |   |   |   |   |   |   |   |   |
|    Subscription     |   | $                                       | 10,476 |   |   | $ | 9,770 |   |   | $ | 706 |   |   |   | 7.2 | % |
|    Non-subscription |   |                                    | 3,120  |   |   |   | 2,833 |   |   |   | 287 |   |   |   | 10.1 |   |
|                               |   |                                    | 13,596 |   |   |   | 12,603 |   |   |   | 993 |   |   |   | 7.9 |   |
| Non-core                           |   |                                    | 389    |   |   |   | 784 |   |   |   | (395 | ) |   |   | (50.4 | ) |
| Total Revenue                      |   | $                                       | 13,985 |   |   | $ | 13,387 |   |   | $ | 598 |   |   |   | 4.5 | % |
|                               |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|                               |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|------------------------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Telecommunication carrier charges  |   | $      | 5,153  |   |               |   | 36.8   | %      |   | $      | 5,064              |   |   |                   | 37.8   | %      |                     | $      | 89 |   |   |   | 1.8 | % |
| Cost for taxes billed to customers |   |   | 961    |   |               |   | 6.9    |   |   |   | 899                |   |   |                   | 6.7    |   |                     |   | 62 |   |   |   | 6.9 |   |
| Total for the period               |   | $      | 6,114  |   |               |   | 43.7   | %      |   | $      | 5,963              |   |   |                   | 44.5   | %      |                     | $      | 151 |   |   |   | 2.5 | % |
|                               |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

|                    |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|-------------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Salaries and benefits   |   | $      | 3,310  |   |               |   | 23.7   | %      |   | $      | 2,964              |   |   |                   | 22.1   | %      |                     | $      | 346 |   |   |   | 11.7 | % |
| Repairs and maintenance |   |   | 218    |   |               |   | 1.6    |   |   |   | 210                |   |   |                   | 1.6    |   |                     |   | 8 |   |   |   | 3.8 |   |
| Communication costs     |   |   | 197    |   |               |   | 1.4    |   |   |   | 234                |   |   |                   | 1.7    |   |                     |   | (37 | ) |   |   | (15.8 | ) |
| Rent and occupancy      |   |   | 196    |   |               |   | 1.4    |   |   |   | 194                |   |   |                   | 1.4    |   |                     |   | 2 |   |   |   | 1.0 |   |
| Other expenses          |   |   | 233    |   |               |   | 1.6    |   |   |   | 103                |   |   |                   | 1.2    |   |                     |   | 87 |   |   |   | 59.6 |   |
| Total for the period    |   | $      | 4,154  |   |               |   | 29.7   | %      |   | $      | 3,748              |   |   |                   | 28.0   | %      |                     | $      | 406 |   |   |   | 10.8 | % |
|                    |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

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|                      |   | 2010   |   |   | % of 2010 Revenues |   |    | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|---------------------------|--------|--------|--------|--------|--------------------|--------|---------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Salaries and benefits     |   | $      | 1,239  |   |               |   | 8.9     | %      |   | $      | 965                |   |   |                   | 7.2    | %      |                     | $      | 274 |   |   |   | 28.4 | % |
| Bonuses and commissions   |   |   | 322    |   |               |   | 2.3     |   |   |   | 315                |   |   |                   | 2.4    |   |                     |   | 7 |   |   |   | 2.2 |   |
| Advertising and marketing |   |   | 207    |   |               |   | 1.5     |   |   |   | 132                |   |   |                   | 1.0    |   |                     |   | 75 |   |   |   | 56.8 |   |
| Agent commissions         |   |   | 148    |   |               |   | 1.1     |   |   |   | 168                |   |   |                   | 1.3    |   |                     |   | (20 | ) |   |   | (11.9 | ) |
| Travel and entertainment  |   |   | 91     |   |               |   | 0.7     |   |   |   | 65                 |   |   |                   | 0.5    |   |                     |   | 26 |   |   |   | 40.0 |   |
| Consultants               |   |   | 70     |   |               |   | 0.5     |   |   |   | 18                 |   |   |                   | 0.1    |   |                     |   | 52 |   |   |   | 288.9 |   |
| Other expenses            |   |   | 24     |   |               |   | — |   |   |   | 39                 |   |   |                   | 0.2    |   |                     |   | (15 | ) |   |   | (38.5 | ) |
| Total for the period      |   | $      | 2,101  |   |               |   | 15.0    | %      |   | $      | 1,702              |   |   |                   | 12.7   | %      |                     | $      | 399 |   |   |   | 23.4 | % |
|                      |   |   |   |   |               |   |    |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

|                  |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|-----------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Salaries and benefits |   | $      | 1,302  |   |               |   | 9.3    | %      |   | $      | 1,288              |   |   |                   | 9.6    | %      |                     | $      | 14 |   |   |   | 1.1 | % |
| Professional fees     |   |   | 254    |   |               |   | 1.8    |   |   |   | 293                |   |   |                   | 2.2    |   |                     |   | (39 | ) |   |   | (13.3 | ) |
| Bad debts             |   |   | 184    |   |               |   | 1.3    |   |   |   | 122                |   |   |                   | 0.9    |   |                     |   | 62 |   |   |   | 50.8 |   |
| Severance costs       |   |   | 125    |   |               |   | 0.9    |   |   |   | 317                |   |   |                   | 2.4    |   |                     |   | (192 | ) |   |   | (60.6 | ) |
| Consultants           |   |   | 95     |   |               |   | 0.7    |   |   |   | 33                 |   |   |                   | 0.2    |   |                     |   | 62 |   |   |   | 187.9 |   |
| Insurance             |   |   | 74     |   |               |   | 0.5    |   |   |   | 74                 |   |   |                   | 0.6    |   |                     |   | — |   |   |   | — |   |
| Other expenses        |   |   | 359    |   |               |   | 2.6    |   |   |   | 409                |   |   |                   | 3.0    |   |                     |   | (50 | ) |   |   | (12.2 | ) |
| Total for the period  |   | $      | 2,393  |   |               |   | 17.1   | %      |   | $      | 2,536              |   |   |                   | 18.9   | %      |                     | $      | (143 | ) |   |   | (5.6 | %) |
|                  |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

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|                                                                                                                                               |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Revenue                                                                                                                                            |   |   | 100.0   | %      |   |   | 100.0   | %      |   |   | 100.0 | % |
| Operating expenses:                                                                                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Network and infrastructure                                                                                                                         |   |   | 43.7    |   |   |   | 43.2    |   |   |   | 52.3 |   |
| Global managed services                                                                                                                            |   |   | 28.9    |   |   |   | 27.1    |   |   |   | 21.0 |   |
| Sales and marketing                                                                                                                                |   |   | 16.6    |   |   |   | 13.3    |   |   |   | 14.6 |   |
| General and administrative                                                                                                                         |   |   | 17.2    |   |   |   | 13.4    |   |   |   | 16.1 |   |
| Depreciation and amortization                                                                                                                      |   |   | 3.8     |   |   |   | 3.8     |   |   |   | 4.9 |   |
| Sales taxes and regulatory fees                                                                                                                    |   |   | — |   |   |   | (1.3    | )      |   |   | (1.6 | ) |
| Total operating expenses                                                                                                                           |   |   | 110.2   |   |   |   | 99.5    |   |   |   | 107.3 |   |
| Loss from operations                                                                                                                               |   |   | (10.2   | )      |   |   | 0.5     |   |   |   | (7.3 | ) |
| Interest and other expense:                                                                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest expense, net, including 0.0%, 0.0%  and 0.7%, respectively, for Insider Purchasers                                              |   |   | 0.3     |   |   |   | 0.9     |   |   |   | 17.2 |   |
| Interest income                                                                                                                                    |   |   | — |   |   |   | — |   |   |   | (0.1 | ) |
| Amortization of deferred financing costs, including 0.0%, 0.0% and 0.2%, respectively, for Insider Purchasers                                      |   |   | — |   |   |   | — |   |   |   | 1.9 |   |
| Increase in fair value of derivative financial instruments’ liability, including 0.0% , 0.1%, and 0.0%, respectively, for Insider Purchasers |   |   | — |   |   |   | (6.2    | )      |   |   | (21.5 | ) |
| Total interest and other expense, net                                                                                                              |   |   | 0.3     |   |   |   | (5.3    | )      |   |   | (2.5 | ) |
| Net loss attributable to common stockholders                                                                                                       |   |   | (10.5   | )%     |   |   | 5.8     | %      |   |   | (4.8 | )% |
|                                                                                                                                               |   |   |    |   |   |   |    |   |   |   |   |   |

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|                               |   | Three Months Ended June 30,(in thousands) |   |
|------------------------------------|--------|-------------------------------------------|--------|
| Revenue                            |   | 2010                                      |   |   | 2009 |   |   | Increase (Decrease) |   |   | % Change |   |
| Core:                              |   |                                      |   |   |   |   |   |   |   |   |   |   |
|    Subscription     |   | $                                         | 5,281  |   |   | $ | 4,942 |   |   | $ | 339 |   |   |   | 6.9 | % |
|    Non-subscription |   |                                      | 1,797  |   |   |   | 1,644 |   |   |   | 153 |   |   |   | 9.3 |   |
|                               |   |                                      | 7,078  |   |   |   | 6,586 |   |   |   | 492 |   |   |   | 7.5 |   |
| Non-core                           |   |                                      | 186    |   |   |   | 359 |   |   |   | (173 | ) |   |   | (48.2 | ) |
| Total Revenue                      |   | $                                         | 7,264  |   |   | $ | 6,945 |   |   | $ | 319 |   |   |   | 4.6 | % |
|                               |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                               |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|------------------------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Telecommunication carrier charges  |   | $      | 2,689  |   |               |   | 37.0   | %      |   | $      | 2,538              |   |   |                   | 36.5   | %      |                     | $      | 151 |   |   |   | 5.9 | % |
| Cost for taxes billed to customers |   |   | 482    |   |               |   | 6.7    |   |   |   | 461                |   |   |                   | 6.7    |   |                     |   | 21 |   |   |   | 4.6 |   |
| Total for the quarter              |   | $      | 3,171  |   |               |   | 43.7   | %      |   | $      | 2,999              |   |   |                   | 43.2   | %      |                     | $      | 172 |   |   |   | 5.7 | % |
|                               |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

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|                    |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|-------------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Salaries and benefits   |   | $      | 1,673  |   |               |   | 23.0   | %      |   | $      | 1,487              |   |   |                   | 21.4   | %      |                     | $      | 186 |   |   |   | 12.5 | % |
| Repairs and maintenance |   |   | 113    |   |               |   | 1.6    |   |   |   | 112                |   |   |                   | 1.6    |   |                     |   | 1 |   |   |   | 0.9 |   |
| Communication costs     |   |   | 102    |   |               |   | 1.4    |   |   |   | 116                |   |   |                   | 1.7    |   |                     |   | (14 | ) |   |   | (12.1 | ) |
| Rent and occupancy      |   |   | 98     |   |               |   | 1.3    |   |   |   | 96                 |   |   |                   | 1.4    |   |                     |   | 2 |   |   |   | 2.1 |   |
| Other expenses          |   |   | 116    |   |               |   | 1.6    |   |   |   | 69                 |   |   |                   | 1.0    |   |                     |   | 47 |   |   |   | 68.1 |   |
| Total for the quarter   |   | $      | 2,102  |   |               |   | 28.9   | %      |   | $      | 1,880              |   |   |                   | 27.1   | %      |                     | $      | 222 |   |   |   | 11.8 | % |
|                    |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

|                      |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|---------------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Salaries and benefits     |   | $      | 689    |   |               |   | 9.5    | %      |   | $      | 489                |   |   |                   | 7.0    | %      |                     | $      | 200 |   |   |   | 40.9 | % |
| Advertising and marketing |   |   | 166    |   |               |   | 2.3    |   |   |   | 117                |   |   |                   | 1.7    |   |                     |   | 49 |   |   |   | 41.9 |   |
| Bonuses and commissions   |   |   | 161    |   |               |   | 2.2    |   |   |   | 179                |   |   |                   | 2.6    |   |                     |   | (18 | ) |   |   | (10.1 | ) |
| Agent commissions         |   |   | 72     |   |               |   | 1.0    |   |   |   | 80                 |   |   |                   | 1.2    |   |                     |   | (8 | ) |   |   | (10.0 | ) |
| Consultants               |   |   | 59     |   |               |   | 0.8    |   |   |   | 9                  |   |   |                   | 0.1    |   |                     |   | 50 |   |   |   | 555.6 |   |
| Other expenses            |   |   | 62     |   |               |   | 0.8    |   |   |   | 48                 |   |   |                   | 0.7    |   |                     |   | 14 |   |   |   | 29.2 |   |
| Total for the quarter     |   | $      | 1,209  |   |               |   | 16.6   | %      |   | $      | 922                |   |   |                   | 13.3   | %      |                     | $      | 287 |   |   |   | 31.1 | % |
|                      |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

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|                  |   | 2010   |   |   | % of 2010 Revenues |   |   | 2009   |   |   | % of 2009 Revenues |   |   | Change from Prior Year |   |   | % Change from Prior Year |   |
|-----------------------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
| Salaries and benefits |   | $      | 651    |   |               |   | 9.0    | %      |   | $      | 580                |   |   |                   | 8.4    | %      |                     | $      | 71 |   |   |   | 12.2 | % |
| Severance costs       |   |   | 125    |   |               |   | 1.7    |   |   |   | (75                | )      |   |                   | (1.1   | )      |                     |   | 200 |   |   |   | (266.7 | ) |
| Bad debts             |   |   | 102    |   |               |   | 1.4    |   |   |   | 91                 |   |   |                   | 1.3    |   |                     |   | 11 |   |   |   | 12.1 |   |
| Professional fees     |   |   | 98     |   |               |   | 1.3    |   |   |   | 81                 |   |   |                   | 1.2    |   |                     |   | 17 |   |   |   | 21.0 |   |
| Consultants           |   |   | 51     |   |               |   | 0.7    |   |   |   | 5                  |   |   |                   | 0.1    |   |                     |   | 46 |   |   |   | 920.0 |   |
| Other expenses        |   |   | 223    |   |               |   | 3.1    |   |   |   | 246                |   |   |                   | 3.5    |   |                     |   | (23 | ) |   |   | (9.3 | ) |
| Total for the quarter |   | $      | 1,250  |   |               |   | 17.2   | %      |   | $      | 928                |   |   |                   | 13.4   | %      |                     | $      | 322 |   |   |   | 34.7 | % |
|                  |   |   |   |   |               |   |   |   |   |   |               |   |   |                   |   |   |                     |   |   |   |   |   |   |   |

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|                       |   | December 31,2009 |    |   | 2010 Private Placement – Exchange of Series A-2 Preferred Stock |   |    | 2010 Private Placement -Series B Preferred Stock Exchange |   |   | Expiration of Warrants |   |   | Other Transactions (1) |    |   | June 30, 2010 |   |
|----------------------------|--------|------------------|---------|--------|-----------------------------------------------------------------------|--------|---------|-----------------------------------------------------------|--------|--------|------------------------|--------|--------|------------------------|---------|--------|---------------|--------|
| Common Shares Outstanding  |   |             | 64,966  |   |                                                                  |   | 15,452  |                                                      |   |   | —                |   |   |                   | — |   |          |   | 1,315 |   |   |   | 81,733 |   |
| Series B Preferred Stock   |   |             | — |   |                                                                  |   | — |                                                      |   |   | —                |   |   |                   | — |   |          |   | — |   |   |   | — |   |
| Options                    |   |             | 4,706   |   |                                                                  |   | — |                                                      |   |   | —                |   |   |                   | — |   |          |   | 708 |   |   |   | 5,414 |   |
| Warrants                   |   |             | 3,464   |   |                                                                  |   | — |                                                      |   |   | —                |   |   |                   | (1,640  | )      |          |   | 1,024 |   |   |   | 2,848 |   |
| Series A-2 Preferred Stock |   |             | 45,087  |   |                                                                  |   | (15,452 | )                                                         |   |   | (13,333                | )      |   |                   | — |   |          |   | — |   |   |   | 16,302 |   |
| Total                      |   |             | 118,223 |   |                                                                  |   | — |                                                      |   |   | (13,333                | )      |   |                   | (1,640  | )      |          |   | 3,047 |   |   |   | 106,297 |   |

| (1) | Includes issuances of restricted stock and options to employees and consultants, forfeitures and 1,181,000 warrants issued in the 2010 Private Placement reduced by 157,000 warrants exercised. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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INFORMATION

Legal 

1A

and 

Securities

Reserved

Information

Exhibits

| 31.1   | Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer                                                                                                                                                                                             |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2   | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                                                                                                                           |
| 32.1   | Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

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SIGNATURE

|                             | GLOWPOINT, INC.                                                                                                                                                                                                                                                                    |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                                                                                                                                                                                                                                                                                    |
| Date:  August 11, 2010 | By:  /s/ Joseph Laezza                                           |
|                             | Joseph Laezza, Chief Executive Officer(principal executive officer)                                                                                                                                                                                                                     |
|                             |                                                                                                                                                                                                                                                                                    |
| Date:  August 11, 2010 | By:  /s/ Edwin F. Heinen                                                        |
|                             | Edwin F. Heinen, Chief Financial Officer(principal financial and accounting officer)                                                                                                                                                                                                    |