SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-Q**




x
            Quarterly
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934
                for the quarterly period ended June 30,
                2007.




or




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




**Commission
      file number: 0-25940**




**GLOWPOINT,
      INC.**


(Exact
      Name of registrant as Specified in its Charter)




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





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


(Address
      of Principal Executive Offices)




**312-235-3888**


(Issuer’s
      Telephone Number, Including Area Code)




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




Yes 
      x No
o




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




Large
      accelerated filer  ̈  Accelerated
      filer  ̈   Non-accelerated
      filer x




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




Yes
o No
x




The
      number of shares outstanding of the registrant’s Common Stock as of August 14,
      2007 was 47,509,673.







**GLOWPOINT,
      INC**




**Index**




PART
                I –
                FINANCIAL INFORMATIONItem
                1. Condensed Consolidated Financial StatementsCondensed
                Consolidated Balance Sheets at June 30, 2007 (unaudited) and December
                31,
                2006*
            1Unaudited
                Condensed Consolidated Statements of Operations for the Six and Three
                Months Ended June 30, 2007 and 2006
            2Unaudited
                Condensed Consolidated Statements of Stockholders’ Deficit for the Six
                Months Ended June 30, 2007
            3Unaudited
                Condensed Consolidated Statements of Cash Flows for the Six Months
                Ended
                June 30, 2007 and 2006
            4Notes
                to Condensed Consolidated Financial Statements
            5Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            13Item
                3. Quantitative and Qualitative Disclosures about Market
                Risk
            18Item
                4. Controls and Procedures
            19PART
                II – OTHER INFORMATIONItem
                1. Legal Proceedings
            19Item
                1A. Risk Factors
            19Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            19Item
                3. Defaults upon Senior Securities
            19Item
                4. Submission of Matters to a Vote of Security Holders
            19Item
                5. Other Information
            19Item
                6. Exhibits
            20Signatures
            21Certifications
            22




*
            The
                Condensed Consolidated Balance Sheet at December 31, 2006 has been
                derived
                from the audited consolidated financial statements filed as an exhibit
                to
                our Report on Form 10-K on June 6, 2007.




i




**GLOWPOINT,
      INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


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





June
                30, 2007
            
            December
                31,
              2006(Unaudited)**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            712
            
            $
            2,153Accounts
                receivable, net of allowance for doubtful accounts of $136 and $121;
                respectively
            
            
            2,712
            
            
            2,748Prepaid
                expenses and other current assets
            
            
            476
            
            
            327Total
                current assets
            
            
            3,900
            
            
            5,228Property
                and equipment, net
            
            
            2,530
            
            
            2,762Other
                assets
            
            
            318
            
            
            403Total
                assets
            
            $
            6,748
            
            $
            8,393**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**Current
                liabilities:Accounts
                payable
            
            $
            2,575
            
            $
            1,957Accrued
                expenses
            
            
            2,206
            
            
            1,906Customer
                deposits
            
            
            109
            
            
            102Accrued
                sales taxes and regulatory fees
            
            
            4,130
            
            
            4,216Derivative
                financial instruments
            
            
            5,401
            
            
            4,301Senior
                secured convertible notes, net of discount of $900 and $2,280,
                respectively
            
            
            6,067
            
            
            4,326Deferred
                revenue
            
            
            267
            
            
            288Total
                current liabilities
            
            
            20,755
            
            
            17,096Preferred
                stock, $.0001 par value; 5,000 shares authorized and redeemable;
                0.120
                Series B shares issued and outstanding, (stated value of $2,888;
                liquidation value of $3,907 and $3,735, respectively)
            
            
            2,888
            
            
            2,888Commitments
                and contingenciesStockholders’
                deficit:Common
                stock, $.0001 par value; 100,000 shares authorized; 47,550 and 46,390
                shares issued and issuable; 47,510 and 46,350 shares outstanding,
                respectively
            
            
            5
            
            
            5Additional
                paid-in capital
            
            
            161,645
            
            
            161,267Accumulated
                deficit
            
            
            (178,305
            )
            
            (172,623
            )(16,655
            )
            
            (11,351
            )Less:
                Treasury stock, 40 shares at cost
            
            
            (240
            )
            
            (240
            )Total
                stockholders’ deficit
            
            
            (16,895
            )
            
            (11,591
            )Total
                liabilities and stockholders’ deficit
            
            $
            6,748
            
            $
            8,393




See
      accompanying notes to condensed consolidated financial statements.




1




**GLOWPOINT,
      INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


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





**(Unaudited)**




Six
                Months Ended June 30,
            
            Three
                Months Ended June 30,2007
            
            2006
            
            2007
            
            2006Revenue
            
            $
            11,508
            
            $
            9,702
            
            $
            5,847
            
            $
            4,981Cost
                of revenue
            
            
            7,806
            
            
            6,836
            
            
            3,897
            
            
            3,350Gross
                margin
            
            
            3,702
            
            
            2,866
            
            
            1,950
            
            
            1,631Operating
                expenses:Research
                and development
            
            
            325
            
            
            474
            
            
            164
            
            
            203Sales
                and marketing
            
            
            1,477
            
            
            1,374
            
            
            831
            
            
            645General
                and administrative
            
            
            4,339
            
            
            7,458
            
            
            2,388
            
            
            2,805Total
                operating expense
            
            
            6,141
            
            
            9,306
            
            
            3,383
            
            
            3,653Loss
                from operations
            
            
            (2,439
            )
            
            (6,440
            )
            
            (1,433
            )
            
            (2,022
            )Other
                expense (income):Interest
                expense
            
            
            2,004
            
            
            2,415
            
            
            1,089
            
            
            777Interest
                income
            
            
            (28
            )
            
            (41
            )
            
            (13
            )
            
            (37
            )Increase
                in fair value of derivative financial instruments
            
            
            1,006
            
            
            579
            
            
            392
            
            
            602Amortization
                of deferred financing costs
            
            
            261
            
            
            129
            
            
            131
            
            
            129Total
                other expense, net
            
            
            3,243
            
            
            3,082
            
            
            1,599
            
            
            1,471Net
                loss
            
            
            (5,682
            )
            
            (9,522
            )
            
            (3,032
            )
            
            (3,493
            )Preferred
                stock dividends
            
            
            (172
            )
            
            (172
            )
            
            (87
            )
            
            (87
            )Net
                loss attributable to common stockholders
            
            $
            (5,854
            )
            $
            (9,694
            )
            $
            (3,119
            )
            $
            (3,580
            )Net
                loss attributable to common stockholders per share:Basic
                and diluted
            
            $
            (0.13
            )
            $
            (0.21
            )
            $
            (0.07
            )
            $
            (0.08
            )Weighted
                average number of common shares:Basic
                and diluted
            
            
            46,762
            
            
            46,127
            
            
            46,982
            
            
            46,207




See
      accompanying notes to condensed consolidated financial statements.





2




**GLOWPOINT,
      INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**Three
      Months Ended June 30, 2007**





**(In
      thousands)**





**(Unaudited)**





Common
                Stock
            
            Paid
                In
            
            Accumulated
            
            Treasury
                StockShares
            
            Amount
            
            Capital
            
            Deficit
            
            Shares
            
            Amount
            
            TotalBalance
                at January 1, 2007
            
            
            46,390
            
            $
            5
            
            $
            161,267
            
            $
            (172,623
            )
            
            40
            
            $
            (240
            )
            $
            (11,591
            )Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (5,682
            )
            
            —
            
            
            —
            
            
            (5,682
            )Comprehensive
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (5,682
            )Stock-based
                compensation - options
            
            
            —
            
            
            —
            
            
            274
            
            
            —
            
            
            —
            
            
            —
            
            
            274Stock-based
                compensation - restricted stock
            
            
            1,160
            
            
            —
            
            
            276
            
            
            —
            
            
            —
            
            
            —
            
            
            276Preferred
                stock dividends
            
            
            **—**
            
            
            **—**
            
            
            (172
            )
            
            **—**
            
            
            **—**
            
            
            **—**
            
            
            (172
            )Balance
                at June 30, 2007
            
            
            47,550
            
            $
            5
            
            $
            161,645
            
            $
            (178,305
            )
            
            40
            
            $
            (240
            )
            $
            (16,895
            )





See
      accompanying notes to consolidated financial statements.




3


**GLOWPOINT,
      INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(In
      thousands)**





**(Unaudited)**





Six Months Ended
              June
                30,2007
            
            2006Cash
                flows from Operating Activities:Net
                loss
            
            $
            (5,682
            )
            $
            (9,522
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            779
            
            
            1,013Expense
                recognized for the increase in the estimated fair value of the derivative
                financial instruments
            
            
            1,006
            
            
            579Amortization
                of deferred financing costs
            
            
            261
            
            
            129Accretion
                of discount on Convertible Notes
            
            
            1,380
            
            
            369Beneficial
                conversion feature for Convertible Notes
            
            
            94
            
            
            1,768Loss
                on disposal of equipment
            
            
            8
            
            
            30Stock-based
                compensation
            
            
            550
            
            
            530Increase
                (decrease) in cash attributable to changes in assets and
                liabilities:Accounts
                receivable
            
            
            36
            
            
            (145
            )Prepaid
                expenses and other current assets
            
            
            (149
            )
            
            23Other
                assets
            
            
            (176
            )
            
            205Accounts
                payable
            
            
            618
            
            
            692Customer
                deposits
            
            
            7
            
            
            —Accrued
                expenses, sales taxes and regulatory fees
            
            
            403
            
            
            1,104Deferred
                revenue
            
            
            (21
            )
            
            (74
            )Net
                cash used in operating activities
            
            
            (886
            )
            
            (3,299
            )Cash
                flows from Investing Activities:Proceeds
                from disposal of property and equipment
            
            
            —
            
            
            27Purchases
                of property and equipment
            
            
            (555
            )
            
            (478
            )Net
                cash used in investing activities
            
            
            (555
            )
            
            (451
            )Cash
                flows from Financing Activities:Proceeds
                from issuance of Convertible Notes, net of financing costs of
                $595
            
            
            —
            
            
            5,585Net
                cash provided by financing activities
            
            
            —
            
            
            5,585(Decrease)
                increase in cash and cash equivalents
            
            
            (1,441
            )
            
            1,835Cash
                and cash equivalents at beginning of period
            
            
            2,153
            
            
            2,023Cash
                and cash equivalents at end of period
            
            $
            712
            
            $
            3,858Supplemental
                disclosures of cash flow information:Cash
                paid during the period forInterest
            
            $
            2
            
            $
            —Non-cash
                investing and financing activities:Preferred
                stock dividends
            
            $
            172
            
            $
            172Additional
                Convertible Notes issued as payment for interest
            
            
            361
            
            
            103Deferred
                financing costs for Convertible Notes incurred by issuance of placement
                agent warrants
            
            
            —
            
            
            296





See
      accompanying notes to condensed consolidated financial statements.




4


**GLOWPOINT,
      INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2007**




**(Unaudited)**




**Note
      1** **-
      Basis of Presentation**




**The
      Business**




Glowpoint,
      Inc. ("Glowpoint" or "we" or "us"), a Delaware corporation, is a premiere
      broadcast-quality, IP (Internet Protocol)-based managed video services provider.
      We offer a vast array of managed video services, including video application
      services, managed network services, IP and ISDN videoconferencing services,
      multi-point conferencing (bridging), technology hosting and management, and
      professional services. We provide these services to a wide variety of companies,
      from large enterprises and governmental entities to small and medium-sized
      businesses. Glowpoint is exclusively focused on high quality two-way video
      communications and has been supporting millions of video calls since its launch
      in 2000. We have bundled some of our managed services to offer video
      communication solutions for broadcast/media content acquisition and for video
      call center applications. Recently, with the advent of HD (High Definition)
      Telepresence solutions, we have combined various components of our features
      and
      services into a comprehensive “white glove” service offering that can support
      any of the telepresence solutions on the market today.




**Liquidity
      and Going Concern**




Our
      condensed consolidated financial statements have been prepared assuming we
      will
      continue as a going concern. We have incurred recurring operating losses and
      negative operating cash flows since our inception including a net loss
      attributable to common stockholders of $5,854,000 for the six months ended
      June
      30, 2007. At June 30, 2007, we had a working capital deficit of $16,855,000.
      We
      had $712,000 in cash and cash equivalents at June 30, 2007 and cash used in
      operating activities of $886,000 for the six months ended June 30, 2007.
      Additionally, the Senior Secured Convertible Notes (the “Convertible Notes”)
      (see Note 5) mature in September 2007. These factors raise substantial doubt
      as
      to our ability to continue as a going concern. Assuming we are able to negotiate
      favorable terms with the authorities regarding our sales and use taxes and
      regulatory fees and assuming we are able to renegotiate or refinance the
      Convertible Notes, we believe that our available capital as of June 30, 2007
      will enable us to continue as a going concern through June 30, 2008. There
      are
      no assurances, however that we will be able to raise additional capital as
      needed, or upon acceptable terms nor any assurances that we will be able to
      renegotiate the terms and maturity date of the Convertible Notes. If we are
      unable to renegotiate the maturity of the Convertible Notes or issue new
      securities on favorable terms to repay them, it would have a material adverse
      effect on the Company. The accompanying financial statements do not include
      any
      adjustments that might result from this uncertainty.




**Summary
      of Significant Accounting Policies**




**Quarterly
      Financial Information and Results of Operations**




The
      financial statements as of June 30, 2007 and for the six and three months ended
      June 30, 2007 and 2006, are unaudited and, in the opinion of management, include
      all adjustments (consisting only of normal recurring adjustments) necessary
      to
      present fairly the financial position as of June 30, 2007, the results of
      operations for the six and three months ended June 30, 2007 and 2006 and cash
      flows for the six months ended June 30, 2007. The results for the six and three
      months ended June 30, 2007 are not necessarily indicative of the results to
      be
      expected for the entire year. While management of the Company believes that
      the
      disclosures presented are adequate to make the information not misleading,
      these
      consolidated financial statements should be read in conjunction with the
      consolidated financial statements and the footnotes thereto for the fiscal
      year
      ended December 31, 2006 as filed with the Securities and Exchange Commission
      as
      an exhibit to Form 10-K on June 6, 2007.




See
“Note
      2 - Basis of Presentation, Liquidity and Summary of Significant Accounting
      Policies” in the consolidated financial statements for the fiscal year ended
      December 31, 2006 as filed with the Securities and Exchange Commission as an
      exhibit to Form 10-K on June 6, 2007 for a discussion of the estimates and
      judgments necessary in the Company’s accounting for sales taxes and regulatory
      fees, concentration of credit risk, lives of property
      and equipment, income taxes and fair value of financial instruments. There
      have
      been no changes to our critical accounting policies in the six and three months
      ended June 30, 2007. Critical accounting policies and the significant estimates
      made in accordance with them are regularly discussed with our Audit
      Committee.




5




**Principles
      of Consolidation**




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




**Reclassifications**




Certain
      amounts from 2006 have been reclassified to conform to the 2007
      presentation.




**Use
      of Estimates**




Preparation
      of the condensed consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the condensed consolidated financial statements and the reported
      amounts of revenues and expenses during the reporting period. Actual amounts
      could differ from the estimates made. We continually evaluate estimates used
      in
      the preparation of the consolidated financial statements for reasonableness.
      Appropriate adjustments, if any, to the estimates used are made prospectively
      based upon such periodic evaluation. The significant areas of estimation include
      determining the allowance for doubtful accounts, deferred tax valuation
      allowance, sales and use tax obligations, regulatory fees and related penalties
      and interest, the estimated life of customer relationships, the estimated lives
      of property and equipment and the fair value of derivative financial
      instruments.




**Revenue
      Recognition**




We
      recognize subscription revenue when the related services have been performed.
      Revenue billed in advance is deferred until the revenue has been earned. Other
      service revenue, including amounts related to surcharges charged by our
      carriers, related to the Glowpoint managed network service and the multi-point
      video and audio bridging services are recognized as service is provided. As
      the
      non-refundable, upfront activation fees charged to the subscribers do not meet
      the criteria as a separate unit of accounting, they are deferred and recognized
      over the twenty-four month period estimated life of the customer relationship.
      Revenues derived from other sources are recognized when services are provided
      or
      events occur.




**Long-Lived
      Assets**




We
      evaluate impairment losses on long-lived assets used in operations, primarily
      fixed assets, when events and circumstances indicate that the carrying value
      of
      the assets might not be recoverable in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 144 *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* .
      For
      purposes of evaluating the recoverability of long-lived assets, the undiscounted
      cash flows estimated to be generated by those assets are compared to the
      carrying amounts of those assets. If and when the carrying values of the assets
      exceed their fair values, the related assets will be written down to fair value.
      In the 2007 and 2006 periods, no impairment losses were indicated or
      recorded.




**Derivative
      Financial Instruments**




The
      Company’s objectives in using debt related derivative financial instruments are
      to obtain the lowest cash cost source of funds within a targeted range of
      variable to fixed-rate debt obligations. Derivatives are recognized in the
      consolidated balance sheets at fair value based on the criteria specified in
      SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”.
      The estimated fair value of the derivative liabilities is calculated using
      the
      Black-Scholes method where applicable and such estimates are revalued at each
      balance sheet date with changes in value recorded as other income or expense
      in
      the statement of operations.




6


**Related
      Party Transactions**




The
      Company receives consulting and tax services from an accounting firm in which
      one of our directors is a partner. Management believes that such transactions
      are at arm’s-length and for terms that would have been obtained from
      unaffiliated third parties. For the six and three months ended June 30, 2007
      we
      incurred fees for these services of $51,000 and $48,000, respectively. For
      the
      six and three months ended June 30, 2006 we incurred fees for these services
      of
      $19,000 and $19,000, respectively.




**Software
      Development Costs**




The
      Company incurs costs for the development of its “Customer Connect” software that
      is to be sold, leased or licensed to third parties in the future. All software
      development costs have been appropriately accounted for in accordance with
      SFAS
      86 “ *Accounting
      for the Costs of Computer Software to be Sold, Leased or Otherwise
      Marketed”* .
      Software development costs are required to be capitalized when a product’s
      technological feasibility has been established by completion of a detailed
      program design or working model of the product and until a product is available
      for release to customers. The Company capitalized $126,000 and $53,000 of
      software development costs for the six and three months ended June 30, 2007,
      respectively and no costs in the 2006 periods. Software development costs will
      be amortized over two years starting upon the sale of the product.




**Uncertainty
      in Income Taxes**




In
      June
      2006, the FASB issued FASB Interpretation No. (“FIN”) 48 *“Accounting
      for Uncertainty in Income Taxes* ”
(“FIN
      48”). FIN 48 sets forth a recognition threshold and measurement attribute for
      financial statement recognition of positions taken or expected to be taken
      in
      income tax returns. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. The tax returns for the years ending December 31, 2003,
      2004
      and 2005 are currently open and the tax return for the year ended December
      31,
      2006 will be filed in September 2007. There are no unrecognized tax benefits
      as
      of June 30, 2007. The adoption of FIN 48 in the first quarter of 2007 had no
      material impact on the Company’s consolidated financial statements.




**Recent
      Accounting Pronouncements**




In
      February 2007, the FASB issued SFAS No. 159 *“The
      Fair Value Option for Financial Assets and Financial
      Liabilities”* .
      SFAS
      No. 159 permits entities to choose to measure many financial assets and
      financial liabilities at fair value. Unrealized gains and losses on items for
      which the fair value option has been elected are reported in earnings. SFAS
      No.
      159 is effective for fiscal years beginning after November 15, 2007. The
      Company is currently assessing the impact of SFAS No. 159 on its financial
      position and results of operations.




**Note
      2 - Stock-Based Compensation**




We
      periodically grant stock options to employees and directors in accordance with
      the provisions of our stock option plans, with the exercise price of the stock
      options being set at the closing market price of the common stock on the date
      of
      grant. Effective January 1, 2006, the Company adopted Statement of Financial
      Standards No. 123R, *Share-Based
      Payment* (“SFAS
      No. 123R”) which requires that compensation cost relating to share-based payment
      transactions be recognized as an expense in the financial statements and that
      measurement of that cost be based on the estimated fair value of the equity
      or
      liability instrument issued. Under SFAS No. 123R, the pro forma disclosures
      previously permitted under SFAS No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123”) are no longer an alternative to financial statement recognition. SFAS
      No. 123R also requires that forfeitures be estimated and recorded over the
      vesting period of the instrument.




The
      Company has adopted SFAS No. 123R using the modified prospective method which
      requires that share-based expense recognized includes: (a) earned share-based
      expense for all awards granted prior to, but not yet vested, as of the adoption
      date and (b) earned share-based expense for all awards granted subsequent to
      the
      adoption date. Since the modified prospective application method is being used,
      there was no cumulative effect adjustment upon the adoption of SFAS No. 123R,
      and the Company’s December 31, 2006 financial statements do not reflect any
      restated amounts. No modifications were made to outstanding options prior to
      the
      adoption of SFAS No. 123R, and the Company did not change the quantity, type
      or
      payment arrangements of any share-based payments programs.




7


The
      weighted average fair value of each option granted is estimated on the date
      of
      grant using the Black-Scholes option pricing model with the following
      assumptions during the six and three months ended June 30, 2007 and
      2006:




Six Months Ended June 30,
            
            Three Months Ended June 30,2007
            
            2006
            
            2007
            
            2006Risk
                free interest rate
            4.7%
            
            4.8%
            
            4.7%
            
            4.9%Expected
                option lives
            5
                Years
            
            5
                Years
            
            5
                Years
            
            5
                YearsExpected
                volatility
            99.8%
            
            95.4%
            
            99.8%
            
            95.3%Estimated
                forfeiture rate
            10%
            
            30%
            
            10%
            
            30%Expected
                dividend yields
            None
            
            None
            
            None
            
            NoneWeighted
                average grant date fair value of options
            $0.43
            
            $0.30
            
            $0.43
            
            $0.29




Expected
      volatility was calculated using the historical volatility of the Company. The
      expected term of the options is estimated based on the Company’s historical
      exercise and forfeiture rates. The forfeiture rates are estimated based on
      employment termination experience. The risk free interest rate is based on
      U.S.
      Treasury yields for securities in effect at the time of grants with terms
      equaling the expected option lives. The assumptions used in the Black-Scholes
      option valuation model are highly subjective, and can materially affect the
      resulting valuation.




A
      summary
      of options granted, exercised, expired and forfeited under our plans and options
      outstanding during the six months ended, and as of June 30, 2007, with respect
      to all outstanding options is as follows (options in thousands):




Outstanding
            
            ExercisableNumberofOptions
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                of Options
            
            Weighted
              Average
              Exercise
              PriceOptions
                outstanding, January 1, 2007
            
            
            5,100
            
            $
            2.26
            
            
            3,664
            
            $
            2.86Granted
            
            
            911
            
            
            0.57Exercised
            
            
            —
            
            
            —Expired
            
            
            (1,360
            )
            
            2.95Forfeited
            
            
            (685
            )
            
            2.88Options
                outstanding, June 30, 2007
            
            
            3,966
            
            $
            1.53
            
            
            2,262
            
            $
            2.15




At
      June
      30, 2007, there was $71,000 of total unrecognized compensation costs related
      to
      non-vested options granted prior to January 1, 2006 that are expected to be
      recognized over a weighted-average period of 0.85 years.




The
      Company has recorded $274,000 and $191,000 related to its stock option
      compensation in general and administrative expenses for the six and three months
      ended June 30, 2007, respectively. The Company has recorded $257,000 and
      $115,000 for the six and three months ended June 30, 2006, respectively. There
      was no income tax benefit recognized for stock-based compensation for the six
      and three months ended June 30, 2007 and 2006. No compensation costs were
      capitalized as part of the cost of an asset. The intrinsic value of stock
      options granted in the six months ended, and as of June 30, 2007 and 2006 was
      $78,000 and $0, respectively.




8


**Restricted
      Stock**




A
      summary
      of restricted stock granted, vested, forfeited and unvested restricted stock
      outstanding during the six months ended, and as of June 30, 2007, is presented
      below (restricted shares in thousands):




Restricted
              Shares
            
            Weighted
              Average
              Exercise
              PriceUnvested
                restricted shares outstanding, January 1, 2007
            
            
            317
            
            $
            0.71Granted
            
            
            1,160
            
            
            0.57Vested
            
            
            (484
            )
            
            0.69Forfeited
            
            
            —
            
            
            —Unvested
                restricted shares outstanding, June 30, 2007
            
            
            993
            
            $
            0.53




The
      Company has recorded $276,000 and $214,000 related to its restricted stock
      compensation in general and administrative expenses for the six and three months
      ended June 30, 2007, respectively. The Company has recorded $273,000 and
      $118,000 for the six and three months ended June 30, 2006, respectively. There
      was no income tax benefit recognized for stock-based compensation for the six
      and three months ended June 30, 2007 and 2006, respectively. No compensation
      costs were capitalized as part of the cost of an asset.




**Note
      3 - Loss Per Share**




Basic
      loss per share is calculated by dividing net loss attributable to common
      stockholders by the weighted average number of shares of common stock
      outstanding during the period. Diluted loss per share for the six and three
      months ended June 30, 2007 and 2006 is the same as basic loss per share.
      Potential shares of common stock associated with 18,295,000 and 20,943,000
      outstanding options and warrants, 1,729,000 and 1,729,000 shares issuable upon
      the conversion of our Series B convertible preferred stock and 13,935,000 and
      13,214,000 shares issuable upon conversion of the Convertible Notes as of June
      30, 2007 and 2006, respectively, have been excluded from the calculation of
      diluted loss per share because the effects would be anti-dilutive.




**Note
      4** **- Stockholders’ Deficit**




In
      February 2004, we raised net proceeds of $12,480,000 in a private placement
      of
      6,100,000 shares of our common stock at $2.25 per share. The registration rights
      agreement for the February 2004 financing provides for liquidated damages of
      3%
      of the aggregate purchase price for the first month and 1.5% for each subsequent
      month if we failed to register the common stock and the shares of common stock
      underlying the warrants or maintain the effectiveness of such registration.
      We
      account for the registration rights agreement as a separate freestanding
      instrument and account for the liquidated damages provision as a derivative
      liability subject to SFAS No. 133. The estimated fair value of the derivative
      liability is based on estimates of the probability and costs expected to be
      incurred and such estimates are revalued at each balance sheet date with changes
      in value recorded as other income or expense. Approximately $1,164,000 of the
      proceeds of the financing was attributed to the estimated fair value of the
      derivative liability. We estimated the fair value of the derivative liability
      to
      be $1,223,000 and $1,236,000 as of June 30, 2007 and December 31, 2006,
      respectively. We recognized other income of $13,000 and $0 for the six and
      three
      months ended June 30, 2007, respectively. **** We
      recognized other income of $26,000 and $3,000 for the six and three months
      ended
      June 30, 2006, respectively.




9


**Note
      5 - Senior Secured Convertible Notes**




**Senior
      Secured Convertible Notes and Convertible Note Discount**




In
      March
      and April 2006, we issued our Senior Secured Convertible Notes (“Convertible
      Notes”) in a private placement to private investors. Activity for the
      Convertible Notes and Convertible Notes discount during the six months ended,
      and as of June 30, 2007, was as follows (in thousands):




Dec.
                31, 2006
            
            Activity
            
            June
                30, 2007Principal
                of Convertible Notes:March
                2006 financing
            
            $
            5,665
            
            $
            —
            
            $
            5,665April
                2006 financing
            
            
            515
            
            
            —
            
            
            515Additional
                Convertible Notes
            
            
            426
            
            
            361
            
            
            7876,606
            
            
            361
            
            
            6,967Discount:Derivative
                financial instrument - Series A Warrants
            
            
            (2,873
            )
            
            —
            
            
            (2,873
            )Reduction
                of exercise price and extension of expiration dates of
                warrants
            
            
            (766
            )
            
            —
            
            
            (766
            )(3,639
            )
            
            —
            
            
            (3,639
            )Accretion
                of discount
            
            
            1,359
            
            
            1,380
            
            
            2,739(2,280
            )
            
            1,380
            
            
            (900
            )Convertible
                Notes, net of discount
            
            $
            4,326
            
            $
            1,741
            
            $
            6,067




In
      the
      March and April 2006 transactions, we issued $5,665,000 and $515,000,
      respectively, with a total aggregate principal amount of $6,180,000 of our
      Convertible Notes and Series A warrants to purchase 6,180,000 shares of common
      stock at an exercise price of $0.65 per share. The warrants are subject to
      certain anti-dilution protection. We also agreed to reduce the exercise price
      of
      3,625,000 previously issued warrants held by the investors in this offering
      to
      $0.65 from a weighted average price of $3.38, and to extend the expiration
      date
      of any such warrants to no earlier than three years after the offering date.
      The
      new weighted average expiration date of the warrants will be 3.5 years from
      a
      previous weighted average expiration date of 2.9 years. In addition, we issued
      to Burnham Hill Partners placement agent warrants to purchase 618,000 shares
      of
      our common stock at an exercise price of $0.55 per share. The warrants are
      subject to certain anti-dilution protection. The $5,585,000 net proceeds of
      the
      March and April 2006 financings are being used to support our corporate
      restructuring program and for working capital.




The
      Convertible Notes bear interest at 10% per annum, increasing to 12% in April
      2007 and mature on September 30, 2007. They are convertible into common stock
      at
      a conversion rate of $0.50 per share. We have the option to pay the accrued
      interest for the Convertible Notes in cash or additional Convertible Notes.
      The
      Series A warrants are exercisable for a period of 5 years.




We
      accounted for the reduction of the exercise price of 3,625,000 previously issued
      warrants held by the investors in this offering to $0.65 from a weighted average
      price of $3.38, and the extension of the expiration date of any such warrants
      to
      no earlier than three years after the offering date at fair value as a debt
      discount with an offsetting credit to paid in capital. A portion of the finance
      costs of the Convertible Notes in March and April 2006 will be allocated to
      this
      transaction and charged to paid in capital. The estimated fair value of this
      modification is based on the excess of the fair value of these warrants at
      the
      date of the financings over the fair value of these warrants at their original
      terms. In the March and April 2006 financings $766,000 of the proceeds was
      attributed to the estimated fair value of the modification of price and term
      of
      these warrants. The $766,000 fair value of this modification will be treated
      as
      a discount of the Convertible Notes and expensed, using the imputed interest
      method, over the 18 month period to the Convertible Note’s maturity
      date.




During
      the six and three months ended June 30, 2007 the accretion of discount was
      $1,380,000 and $752,000, respectively. During the six and three months ended
      June 30, 2006 the accretion of discount was $369,000.




10


**Financing
      Costs**




The
      financing costs, which were included in the other assets in the accompanying
      consolidated balance sheets, and accumulated amortization as of June 30, 2007,
      are as follows (in thousands):




June 30,
              2007Cash
                financing costs:Placement
                agent fees –
                Burnham
                Hill Partners
            
            $
            480Other
                financing costs
            
            
            115595Non-cash
                financing costs:Placement
                agent warrants –
                Burnham
                Hill Partners
            
            
            296Financing
                costs charged to additional paid in capital
            
            
            (110
            )Total
                financing costs
            
            
            781Accumulated
                amortization
            
            
            (650
            )$
            131




The
      financing costs are being amortized over the 18 month period through September
      30, 2007, the maturity date of the Convertible Notes. During the six and three
      months ended June 30, 2007 the amortization of financing costs was $261,000
      and
      $131,000, respectively. During the six and three months ended June 30, 2006
      the
      amortization of financing costs was $129,000.




**Accounting
      for Conversion Feature and Series A Warrant Derivative
      Liabilities**




Activity
      for derivative liabilities during the quarter ended June 30, 2007 and December
      31, 2006, was as follows (in thousands):




Dec. 31,
              2006
            
            Additions
            
            Increase
              (decrease)
              in
                Fair
              Value
            
            June
                30,
              2007Derivative
                financial instrument –
                February
                2004 capital raise
            
            $
            1,236
            
            $
            —
            
            $
            (13
            )
            $
            1,223Derivative
                financial instrument –
                Beneficial
                conversion feature –
                Convertible
                Notes
            
            
            1,666
            
            
            94
            
            
            —
            
            
            1,760Derivative
                financial instrument –
                Series A
                Warrants
            
            
            1,399
            
            
            —
            
            
            1,019
            
            
            2,418$
            4,301
            
            $
            94
            
            $
            1,006
            
            $
            5,401




We
      accounted for the convertibility of the Convertible Notes into common stock
      at a
      conversion rate of $0.50 per share as a derivative liability subject to SFAS
      No.
      133. Management determined that the events or actions necessary to deliver
      registered shares are not controlled by the Company and that the holders have
      the
      right to demand that the Company pay the holders in cash, calculated as defined
      in the Senior Secured Convertible Promissory Note , under
      certain circumstances. Accordingly, the Company accounted for the beneficial
      conversion feature as a derivative liability. The estimated fair value of the
      derivative liability is based on the prepayment amount that would be owed to
      a
      Convertible Notes holder if payment is required. The prepayment amount is the
      greater of 125% of the value of the Convertible Notes and accrued interest
      or
      the value if the Convertible Notes and accrued interest are converted at $0.50
      per share and then multiplied by the then current stock price. Since the
      Convertible Notes are convertible at the issuance date an expense related to
      the
      derivative liability is recognized on that date. We estimated the fair value
      of
      the derivative liability as of June 30, 2007 and December 31, 2006 to be
      $1,760,000 and $1,666,000, respectively. During the six and three months ended
      June 30, 2007 unpaid interest on the Convertible Notes was paid in additional
      Convertible Notes and the estimated fair value of the derivative liability
      and an expense of $94,000 and $53,000 was recognized, respectively. During
      the
      six and three months ended June 30, 2006 we recognized $1,715,000 and $129,000,
      respectively, for the estimated fair value of the derivative liability of the
      Convertible Notes when they were issued. In addition, unpaid interest on the
      Convertible Notes was paid in additional Convertible Notes and the estimated
      fair value of the derivative liability and an expense of $53,000 was recognized
      for the six and three months ended June 30, 2006.




11




We
      accounted for the issuance of the Series A warrants to purchase 6,180,000 shares
      of common stock at an exercise price of $0.65 per share as a derivative
      liability subject to SFAS No. 133. Management determined that the events or
      actions necessary to deliver registered shares are not controlled by the Company
      and that the holders have
      the
      right to demand that the Company pay the holders in cash, calculated as defined
      in the Series A warrant, under
      certain circumstances. Accordingly the Company accounted for the Series A
      warrants as a derivative liability. The estimated fair value of the derivative
      liability is calculated using the Black-Scholes method and such estimates are
      revalued at each balance sheet date with changes in value recorded as other
      income or expense. We estimated the fair value of the derivative liability
      as of
      June 30, 2007 and December 31, 2006 to be $2,418,000 and $1,399,000,
      respectively. During the six and three months ended June 30, 2007 we recognized
      an expense of $1,019,000 and $392,000, respectively for the increase in the
      derivative liability. During the six and three months ended June 30, 2006 we
      recognized an expense of $219,000 for the increase in the derivative
      liability.




**Note
      6 - Interest Expense**




The
      components of interest expense for the six and three months ended June 30,
      2007
      and 2006 are presented below (in thousands):




Six Months Ended June 30,
            
            Three Months Ended June 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Accretion
                of discount on Convertible Notes
            
            $
            1,380
            
            $
            369
            
            $
            752
            
            $
            369Interest
                on Convertible Notes
            
            
            374
            
            
            155
            
            
            207
            
            
            155Beneficial
                conversion feature –
                Convertible
                Notes
            
            
            94
            
            
            1,768
            
            
            53
            
            
            182Interest
                expense for sales and use taxes and regulatory fees
            
            
            154
            
            
            123
            
            
            76
            
            
            71Other
                interest expense
            
            
            2
            
            
            —
            
            
            1
            
            
            —$
            2,004
            
            $
            2,415
            
            $
            1,089
            
            $
            777




**Note
      7- March 2006 Restructuring**




In
      March
      2006, we implemented a corporate restructuring plan designed to reduce certain
      operating, sales and marketing and general and administrative costs. The costs
      of this restructuring, approximately $1,200,000, consisting of severance
      payments, acceleration of vesting of stock options and benefit reimbursements,
      were recorded in the first quarter of 2006 and were paid through April 2007.
      As
      part of the restructuring initiative, we implemented management changes,
      including the departure of twenty-one employees and the promotion of Michael
      Brandofino to Chief Operating Officer. David Trachtenberg, President and Chief
      Executive Officer since October 2003, and Gerard Dorsey, Executive Vice
      President and Chief Financial Officer since December 2004 had left Glowpoint.
      In
      connection with their separation, Messrs. Trachtenberg and Dorsey were paid
      severance based upon their employment agreements of approximately $500,000
      and
      $155,000, respectively, over the following year and receive other benefits
      (e.g., accelerated vesting of restricted stock or options) valued at
      approximately $180,000 and $7,000, respectively. The amount paid to them is
      a
      portion of the $1,200,000 of restructuring costs recorded in the first quarter
      of 2006. There is no outstanding liability at June 30, 2007.




**Note
      8 - Commitments and Contingencies**




We
      have
      entered into a number of agreements with telecommunications companies to
      purchase communications services. Some of the agreements require a minimum
      amount of services purchased over the life of the agreement, or during a
      specified period of time.




Glowpoint
      believes that it will meet its commercial commitments. In certain instances
      where Glowpoint did not meet the minimum commitments no such penalties for
      minimum commitments have been assessed and the Company has entered into new
      agreements. It has been our experience that the prices and terms of successor
      agreement
      are similar to those offered by other carriers. Glowpoint is in discussion
      with
      one carrier where the Company’s computation differs from that of the Carrier.
      Glowpoint believes that it will ultimately complete negotiations with the
      Carrier that will result in no penalty under the current arrangement. Glowpoint
      does not believe that any loss contingency related to a potential shortfall
      should be recorded in the financial statements because it is not probable,
      from
      the information available and from prior experience, that Glowpoint has incurred
      a liability.




12




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




*Certain
      statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.” These forward-looking statements include, but are
      not limited to, statements about the plans, objectives, expectations and
      intentions of Glowpoint, Inc.* *(“Glowpoint”
      or “we” or “us”)* *.,
      a
      Delaware corporation and other statements contained in this Report that are
      not
      historical facts. Forward-looking statements in this Report or hereafter
      included in other publicly available documents filed with the Securities and
      Exchange Commission, or the Commission, reports to our stockholders and other
      publicly available statements issued or released by us involve known and unknown
      risks, uncertainties and other factors which could cause our actual results,
      performance (financial or operating) or achievements to differ from the future
      results, performance (financial or operating) or achievements expressed or
      implied by such forward-looking statements. Such future results are based upon
      management's best estimates based upon current conditions and the most recent
      results of operations. When used in this Report, the words “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar
      expressions are generally intended to identify forward-looking statements,
      because these forward-looking statements involve risks and uncertainties. There
      are important factors that could cause actual results to differ materially
      from
      those expressed or implied by these forward-looking statements, including our
      plans, objectives, expectations and intentions and other factors that are
      discussed*  *under
      the section entitled “Risk Factors,” in item 7of our* *consolidated financial statements and the footnotes thereto for the fiscal
      year
      ended December 31, 2006 as filed with the Securities and Exchange Commission
      as
      an exhibit to Form 10-K on June 6, 2007.* **




*The
      following discussion and analysis should be read in conjunction with the
      consolidated financial statements and related notes included elsewhere in this
      Report.*




**Overview**




Glowpoint,
      Inc. ("Glowpoint" or "we" or "us"), a Delaware corporation, is a premiere
      broadcast-quality, IP (Internet Protocol)-based managed video services provider.
      We offer a vast array of managed video services, including video application
      services, managed network services, IP and ISDN videoconferencing services,
      multi-point conferencing (bridging), technology hosting and management, and
      professional services. We provide these services to a wide variety of companies,
      from large enterprises and governmental entities to small and medium-sized
      businesses. Glowpoint is exclusively focused on high quality two-way video
      communications and has been supporting millions of video calls since its launch
      in 2000. We have bundled some of our managed services to offer video
      communication solutions for broadcast/media content acquisition and for video
      call center applications. Recently, with the advent of HD (High Definition)
      Telepresence solutions, we have combined various components of our features
      and
      services into a comprehensive “white glove” service offering that can support
      any of the telepresence solutions on the market today.




**Critical
      Accounting Policies**




There
      have been no changes to our critical accounting policies in the three months
      ended June 30, 2007. Critical accounting policies and the significant estimates
      made in accordance with them are regularly discussed with our Audit Committee.
      Those policies are discussed under “Critical Accounting Policies” in our
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” included in Item 7 of our consolidated financial statements and the
      footnotes thereto for the fiscal year ended December 31, 2006 as filed with
      the
      Securities and Exchange Commission as an exhibit to Form 10-K on June 6, 2007.




13


**Results
      of Operations**




The
      following table sets forth for the six and three months ended June 30, 2007
      and
      2006; information derived from our condensed consolidated financial statements
      as expressed as a percentage of revenue:




(Unaudited)
              Six Months Ended
              June
                30,
            
            (Unaudited)
              Three Months Ended
              June
                30,2007
            
            2006
            
            2007
            
            2006Revenue
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenue
            
            
            67.8
            
            
            70.5
            
            
            66.6
            
            
            67.3Gross
                margin
            
            
            32.2
            
            
            29.5
            
            
            33.4
            
            
            32.7Operating
                expenses:Research
                and development
            
            
            2.8
            
            
            4.9
            
            
            2.8
            
            
            4.1Sales
                and marketing
            
            
            12.8
            
            
            14.2
            
            
            14.2
            
            
            12.9General
                and administrative
            
            
            37.7
            
            
            76.9
            
            
            40.8
            
            
            56.3Total
                operating expenses
            
            
            53.3
            
            
            96.0
            
            
            57.8
            
            
            73.3Loss
                from operations
            
            
            (21.1
            )
            
            (66.5
            )
            
            (24.4
            )
            
            (40.6
            )Other
                expense (income):Interest
                expense
            
            
            17.4
            
            
            24.8
            
            
            18.6
            
            
            15.5Interest
                income
            
            
            (0.2
            )
            
            (0.4
            )
            
            (0.2
            )
            
            (0.7
            )Increase
                in fair value of derivative financial instruments
            
            
            8.7
            
            
            6.0
            
            
            6.7
            
            
            12.1Amortization
                of deferred financing costs
            
            
            2.3
            
            
            1.3
            
            
            2.2
            
            
            2.6Total
                other expense, net
            
            
            28.2
            
            
            31.7
            
            
            27.3
            
            
            29.5Net
                loss
            
            
            (49.3
            )
            
            (98.2
            )
            
            (51.7
            )
            
            (70.1
            )Preferred
                stock dividends
            
            
            (1.5
            )
            
            (1.8
            )
            
            (1.5
            )
            
            (1.7
            )Net
                loss attributable to common stockholders
            
            
            (50.8
            )%
            
            (100.0
            )%
            
            (53.2
            )%
            
            (71.8
            )%




**Six
      Months Ended June 30, 2007 (the “2007 period”) Compared to Six Months Ended June
      30, 2006 (the “2006 period”).**




**Revenue** -
      Revenue increased $1,806,000, or 18.6%, in the 2007 period to $11,508,000 from
      $9,702,000 in the 2006 period. Subscription and related revenue increased
      $757,000, or 11.8%, in the 2007 period to $7,185,000 from $6,428,000 in the
      2006
      period.  The increased subscription and related revenue is caused by
      increases in installed subscription circuits and in revenue per
      circuit.   Non-subscription revenue consisting of bridging, services,
      special events
      and other one-time fees increased $1,049,000, or 32,0%, in the 2007 period
      to
      $4,323,000 from $3,274,000 in the 2006 period.  The primary causes were
      $672,000 of one-time integration services on equipment required by broadcast
      customers as part of the implementation of their two-year agreements. 
Glowpoint was asked to facilitate the procurement and integration of equipment
      on behalf of the broadcast customers and agreed to do so as a pass through
      service.  Therefore all equipment integrated into the solution was billed
      to the broadcast customers at cost plus a slight mark-up and the related costs
      are included in cost of revenue. In addition, bridging services increased
      $360,000, or 28.4%, in the 2007 period to $1,628,000 from $1,268,000 in the
      2006
      period.  This was a result of a concerted effort by the Company to grow
      revenue from bridging services and was facilitated by the hiring of a Product
      Manager who focused on the bridging business.




**Cost
      of revenue** - Cost
      of revenue for the 2007 period increased $970,000, or 14.2%, to $7,806,000
      from
      $6,836,000 in the 2006 period. The primary components of this increase were
      $907,000 of sales taxes and regulatory fees that until the fourth period of
      2006
      were not properly collected and remitted and, as a result we had accrued this
      liability in general and administrative expenses. Subsequently, these sales
      taxes and regulatory fees were being properly collected and remitted to the
      taxing authorities and that expense is now included in cost of revenues. Another
      increase was for $656,000 of one-time integration services on equipment required
      by broadcast customers, discussed in the revenue section. These increases were
      partially offset by $439,000 of savings from the continuing efforts to eliminate
      costs in our network and our on-going activity involving the renegotiation
      of
      rates and the migration of service to lower cost providers where possible and
      a
      $186,000 reduction in depreciation costs.




14




**Gross
      margin** - Gross
      margin for the 2007 period increased $836,000, or 29.2%, to $3,702,000 from
      $2,866,000 in the 2006 period. The savings discussed in Cost of Revenue section
      caused our gross margin to increase to 32.2% in the 2007 period from 29.5%
      in
      the 2006 period. Excluding the broadcast customers integration transactions
      our
      gross margin percentage is 34.0% in the 2007 period. The rate of increase in
      our
      gross margin percentage is not indicative of results expected to be achieved
      in
      subsequent periods.




**Research
      and development** -
      Research and development expenses, which include the costs of the personnel
      in
      this group, the equipment they use and their use of the network for development
      projects, decreased $149,000, or 31.4% in the 2007 period to $325,000 from
      $474,000 in the 2006 period. Salaries and benefits were reduced $37,000 as
      a
      result of the corporate restructuring that took place in March 2006. In
      addition, we capitalized $103,000 of software development costs related to
      our
“Customer Connect” software that is to be sold, leased or licensed to third
      parties in the future. Research and development expenses, as a percentage of
      revenue were 2.8% for the 2007 period and 4.9% for the 2006 period.




**Sales
      and marketing** - Sales
      and marketing expenses, which include sales salaries, commissions, overhead
      and
      marketing costs, increased $103,000, or 7.5%, in the 2007 period to $1,477,000
      from $1,374,000 in the 2006 period. The primary components of the increase
      were
      $104,000 for marketing and trade show expenses, $40,000 for contract employees
      and $25,000 for agent commissions. These increases were partially offset by
      reductions of $46,000 for salaries and benefits as a result of the corporate
      restructuring that took place in March 2006 and $13,000 of consultant fees.
      Sales and marketing expenses, as a percentage of revenue, were 12.8% for the
      2007 period and 14.2% for the 2006 period.




**General
      and administrative** -
      General and administrative expenses decreased $3,119,000, or 41.8%, in the
      2007
      period to $4,339,000 from $7,458,000 in the 2006 period. The primary components
      of this decrease were reductions of $1,200,000 for the accrual of the March
      2006
      restructuring program, $629,000 of accrued sales taxes and regulatory fees
      that
      are now included in cost of revenue, $572,000 of salaries and benefits as a
      result of the March 2006 restructuring program, $556,000 in professional fees
      related to the restatements of 2004 and 2005 financial statements, $141,000
      of
      equipment rental, maintenance and repairs, $35,000 of depreciation, $34,000
      of
      supplies and $22,000 of losses from disposals of equipment. These reductions
      were partially offset by increases of $49,000 in consulting expenses and $28,000
      in insurance. General and administrative expenses, as a percentage of revenue
      were 37.7% in the 2007 period and 76.9% in the 2006 period.




**Other
      expense (income)** - Other
      expense (income) increased $161,000, or 5.2%, in the 2007 period to $3,243,000
      from $3,082,000 in the 2006 period. The primary components of this growth were
      increases of $1,011,000 for the accretion of discount related to the Convertible
      Notes entered into in March and April 2006, $427,000 for changes in the fair
      value of derivative financial instruments related to the Series A warrants
      and
      the February 2004 financing, $219,000 of accrued interest expense related to
      the
      Convertible Notes, $132,000 of amortization of deferred financing costs incurred
      in connection with the Convertible Notes and $31,000 of accrued interest related
      to sales and use taxes and regulatory fees. Those increases were partially
      offset by a $1,675,000 reduction in the expensing of the beneficial conversion
      feature related to additional Convertible Notes.




**Income
      taxes -** As
      a
      result of our losses we recorded no provision for incomes taxes in the six
      months ended June 30, 2007 and 2006. Any deferred
      tax asset that would be related to our losses has been fully reserved under
      a
      valuation allowance, reflecting the uncertainties as to realization evidenced
      by
      the Company’s historical results and restrictions on the usage of the net
      operating loss carryforwards.




**Net
      loss** -
      Net
      loss decreased $3,840,000, or 40.3%, to $5,682,000 in the 2007 period from
      $9,522,000 in the 2006 period.




**Preferred
      stock dividends** -
      We
      recognized preferred stock dividends of $172,000 for the 2007 and 2006 periods.




**Net
      loss attributable to common stockholders** - Net
      loss attributable to common stockholders decreased $3,840,000, or 39.6%, in
      the
      2007 period to $5,854,000, or $0.13 per basic and diluted share from $9,694,000,
      or $0.21 per basic and diluted share, in the 2006 period.




**Three
      Months Ended June 30, 2007 (the “2007 quarter”) Compared to Three Months Ended
      June 30, 2006 (the “2006 quarter”).**




15




**Revenue** -
      Revenue increased $866,000, or 17.4%, in the 2007 quarter to $5,847,000 from
      $4,981,000 in the 2006 quarter. Subscription and related revenue increased
      $486,000, or 14.9%, in the 2007 quarter to $3,738,000 from $3,252,000 in the
      2006 quarter.  The increased subscription and related revenue is caused by
      increases in installed subscription circuits and in revenue per
      circuit.   Non-subscription revenue consisting of bridging, services,
      special events
      and other one-time fees increased $380,000, or 22.0%, in the 2007 quarter to
      $2,109,000 from $1,729,000 in the 2006 quarter.  The primary causes were
      $242,000 of one-time integration services on equipment required by a broadcast
      customer as part of the implementation of their two-year agreement. 
Glowpoint was asked to facilitate the procurement and integration of equipment
      on behalf of a broadcast customer and agreed to do so as a pass through service.
       Therefore all equipment integrated into the solution was billed to the
      broadcast customer at cost plus a slight mark-up and the related costs are
      included in cost of revenue. In addition, bridging services increased $180,000,
      or 29.5%, in the 2007 quarter to $791,000 from $611,000 in the 2006
      quarter.  This was a result of a concerted effort by the Company to grow
      revenue from bridging services and was facilitated by the hiring of a Product
      Manager who focused on the bridging business.




**Cost
      of revenue** - Cost
      of revenue for the 2007 quarter increased $547,000, or 16.3%, to $3,897,000
      from
      $3,350,000 in the 2006 quarter. The primary components of this increase were
      $471,000 of sales taxes and regulatory fees that until the fourth quarter of
      2006 were not properly collected and remitted and, as a result we had accrued
      this liability in general and administrative expenses. Subsequently, these
      sales
      taxes and regulatory fees were being properly collected and remitted to the
      taxing authorities and that expense is now included in cost of revenues. Another
      increase was for $226,000 of one-time integration services on equipment required
      by a broadcast customer, discussed in the revenue section. These increases
      were
      partially offset by $60,000 of savings from the continuing efforts to eliminate
      costs in our network and our on-going activity involving the renegotiation
      of
      rates and the migration of service to lower cost providers where possible and
      by
      an $111,000 reduction in depreciation costs.




**Gross
      margin** - Gross
      margin for the 2007 quarter increased $319,000, or 19.6%, to $1,950,000 from
      $1,631,000 in the 2006 quarter. The savings discussed in Cost of Revenue section
      caused our gross margin to increase to 33.4% in the 2007 quarter from 32.7%
      in
      the 2006 quarter. Excluding the broadcast customers integration transaction
      our
      gross margin percentage is 34.5% in the 2007 period. The rate of increase in
      our
      gross margin percentage is not indicative of results expected to be achieved
      in
      subsequent quarters.




**Research
      and development** -
      Research and development expenses decreased $39,000, or 19.2% in the 2007
      quarter to $164,000 from $203,000 in the 2006 quarter. This reduction is caused
      by the capitalization of $46,000 of software development costs related to our
      “Customer Connect” software that is to be sold, leased or licensed to third
      parties in the future. Research and development expenses, as a percentage of
      revenue, were 2.8% for the 2007 quarter and 4.1% for the 2006 quarter.




**Sales
      and marketing** - Sales
      and marketing expenses increased $186,000, or 28.8%, in the 2007 quarter to
      $831,000 from $645,000 in the 2006 quarter. The primary components of the
      increase were $102,000 for marketing and trade show expenses, $50,000 for
      consultants and $30,000 for salaries and benefits. Sales and marketing expenses,
      as a percentage of revenue, were 14.2% for the 2007 quarter and 12.9% for the
      2006 quarter.




**General
      and administrative** -
      General and administrative expenses decreased $417,000, or 14.9%, in the 2007
      quarter to $2,388,000 from $2,805,000 in the 2006 period. The primary components
      of this decrease were reductions of $316,000 of accrued sales taxes and
      regulatory fees that are now included in cost of revenue, $139,000 in
      professional fees related to the restatements of prior period financial
      statements, $83,000 of salaries and benefits as a result of the March 2006
      restructuring program, $22,000 of losses from disposals of equipment, $20,000
      of
      equipment rental, maintenance and repairs and $19,000 of depreciation. Those
      reductions were partially offset by increases of $172,000 in the amortization
      of
      deferred compensation related to option and restricted stock grants and $38,000
      for consulting expenses. General and administrative expenses, as a percentage
      of
      revenue were 40.8% for the 2007 quarter and 56.3% for the 2006
      quarter.




**Other
      expense (income)** - Other
      expense (income) increased $128,000, or 8.7%, in the 2007 quarter to $1,599,000
      from $1,471,000 in the 2006 quarter. The primary components of this growth
      were
      increases of $383,000 for the accretion of discount related to the Convertible
      Notes, $52,000 of accrued interest expense related to the Convertible Notes
      and
      a reduction of $24,000 of interest income. Those increases were partially offset
      by a $210,000 for changes in the fair value of derivative financial instruments
      related to the Series A warrants and the February
      2004 financing and a $129,000 reduction in the expensing of the beneficial
      conversion feature related to additional Convertible Notes.




16




**Income
      taxes -** As
      a
      result of our losses we recorded no provision for incomes taxes in the three
      months ended June 30, 2007 and 2006. Any deferred
      tax asset that would be related to our losses has been fully reserved under
      a
      valuation allowance, reflecting the uncertainties as to realization evidenced
      by
      the Company’s historical results and restrictions on the usage of the net
      operating loss carryforwards.




**Net
      loss** -
      Net
      loss decreased $461,000, or 13.2%, to $3,032,000 in the 2007 quarter from
      $3,493,000 in the 2006 quarter.




**Preferred
      stock dividends** -
      We
      recognized preferred stock dividends of $87,000 for the 2007 and 2006 quarters.




**Net
      loss attributable to common stockholders** - Net
      loss attributable to common stockholders decreased $461,000, or 12.9%, in the
      2007 quarter to $3,119,000, or $0.07 per basic and diluted share from
      $3,580,000, or $0.08 per basic and diluted share, in the 2006 quarter.




**Liquidity
      and Capital Resources**




Our
      condensed consolidated financial statements have been prepared assuming we
      will
      continue as a going concern. We have incurred recurring operating losses and
      negative operating cash flows since our inception including a net loss
      attributable to common stockholders of $5,854,000 for the six months ended
      June
      30, 2007. At June 30, 2007, we had a working capital deficit of $16,855,000.
      We
      had $712,000 in cash and cash equivalents at June 30, 2007 and cash used in
      operating activities of $886,000 for the six months ended June 30, 2007.
      Additionally, the Convertible Notes (see Note 5) mature in September 2007.
      These
      factors raise substantial doubt as to our ability to continue as a going
      concern. Assuming we are able to negotiate favorable terms with the authorities
      regarding our sales and use taxes and regulatory fees and assuming we are able
      to renegotiate or refinance the Convertible Notes, we believe that our available
      capital as of June 30, 2007 will enable us to continue as a going concern
      through June 30, 2008. There are no assurances, however that we will be able
      to
      raise additional capital as needed, or upon acceptable terms nor any assurances
      that we will be able to renegotiate the terms and maturity date of the
      Convertible Notes. If we are unable to renegotiate the maturity of the
      Convertible Notes or issue new securities on favorable terms to repay them,
      it
      would have a material adverse effect on the Company. The accompanying financial
      statements do not include any adjustments that might result from this
      uncertainty.




Net
      cash
      used by operating activities was $886,000 for the 2007 period. The primary
      components of the net cash used by operations were $5,682,000 for the net loss,
      $176,000 for an increase in other assets, $149,000 for an increase in prepaid
      expenses and other current assets and $21,000 for a decrease in deferred
      revenue. These were partially offset by $1,380,000 for the accretion of the
      discount on the Convertible Notes, $1,021,000 for an increase in accounts
      payable and accrued expenses, sales taxes and regulatory fees, $1,006,000 for
      the net increase in the fair value of derivative financial instruments, $779,000
      of depreciation and amortization, $550,000 of stock-based compensation, $261,000
      for the amortization of deferred financing costs, $94,000 for expensing the
      beneficial conversion on the additional Convertible Notes, $36,000 for a
      decrease in accounts receivable, $8,000 for a loss on disposal of equipment
      and
      $7,000 for a increase in customer deposits.




During
      the quarter ended June 30, 2007, there were no material changes in our
      contractual obligations.




Cash
      used
      in investing activities in the 2007 quarter for the purchase of property,
      equipment and leasehold improvements was $555,000. We have no commitments to
      make significant capital expenditures in 2007.




17


**Commitments
        and Contingencies**
  During
        the three months ended June 30, 2007, there were no other items except as
        shown
        below that significantly impacted our commitments and contingencies as discussed
        in our consolidated
        financial statements and the footnotes thereto for the fiscal year ended
        December 31, 2006 as filed with the Securities and Exchange Commission as
        an
        exhibit to Form 10-K on June 6, 2007. The following table summarizes our
        contractual cash obligations and commercial commitments at June 30, 2007,
        and
        the effect such obligations are expected to have on liquidity and cash flow
        in
        future periods (in thousands).
  Contractual
                  Obligations:
              
              Total
              
              Less Than
                1
                  Year
              
              1-3 Years
              
              3-5 Years
              
              More than
                  5 YearsConvertible
                  Notes
              
              $
              6,967
              
              $
              6,967
              
              $
              ─
              
              $
              ─
              
              $
              ─Derivative
                  liabilities
              
              
              5,401
              
              
              5,401
              
              
              ─
              
              
              ─
              
              
              ─Operating
                  lease obligations
              
              
              135
              
              
              129
              
              
              6
              
              
              ─
              
              
              ─Commercial
                  commitments
              
              
              4,951
              
              
              2,729
              
              
              2,222
              
              
              ─
              
              
              ─Total
              
              $
              17,454
              
              $
              15,226
              
              $
              2,228
              
              $
              ─
              
              $
              ─
  **Inflation**
  Management
        does not believe inflation had a material adverse effect on the financial
        statements for the periods presented.
  **Item
        3. Quantitative and Qualitative Disclosures about Market
        Risk**
  We
        have
        certain derivative financial instruments related to the Convertible Notes
        and
        the February 2004 capital raise. As the financial instruments are revalued
        each
        period these will cause fluctuations in our results from operations and if
        the
        Convertible Notes are not converted and we are unable to register our common
        stock, ultimately cash flows from their settlement. The following table shows
        the effect of certain common stock prices on the derivative financial
        instruments shown in the consolidated balance sheets and the increase in
        fair
        value of derivative financial instruments and net loss attributable to common
        stockholders shown in the consolidated statement of operations as of June
        30,
        2007.
  As Reported
                June
                  30,
                2007
              
              Common
                Stock Price
                  Reduction
              
              Common
                Stock Price
                IncreaseCommon
                  stock price
              
              $
              0.59
              
              $
              0.49
              
              $
              0.69Balance
                  Sheet:Derivative
                  financial instrument –
                  February
                  2004 capital raise
              
              $
              1,223
              
              $
              1,223
              
              $
              1,223Derivative
                  financial instrument – Beneficial conversion feature – Convertible
                  Notes
              
              
              1,760
              
              
              1,760
              
              
              2,674Derivative
                  financial instrument – Series A Warrants
              
              
              2,418
              
              
              1,910
              
              
              2,942Derivative
                  financial instruments
              
              $
              5,401
              
              $
              4,893
              
              $
              6,839Change
                  in fair value of derivative financial instruments
              
              $
              -
              
              $
              (508
              )
              $
              1,438Consolidated
                  Statement of Operations:Increase
                  in fair value of derivative financial instruments
              
              $
              1,006
              
              $
              498
              
              $
              2,444Net
                  loss attributable to common stockholders
              
              $
              (5,854
              )
              $
              (5,346
              )
              $
              (7,292
              )
  18
  The
        derivative financial instrument related to the February 2004 capital raise
        is
        not affected by changes in the Company’s common stock price but to the number of
        shares of common stock currently held by the original investors in the February
        2004 capital raise. Had 77,000 shares, 10% of shares currently held by the
        original investors, been sold as of June 30, 2007 then the fair value of
        the
        related derivative financial instrument would have been reduced by $51,000
        and
        we would have recognized that amount as income in the consolidated statement
        of
        operations.
  There
        are
        no other material qualitative or quantitative market risks particular to
        us.
  **Item
        4. Controls and Procedures**
  During
        the 2007 and 2006 periods covered by this report we lacked adequate internal
        controls. A material weakness in internal controls is a significant deficiency,
        or a combination of significant deficiencies, that results in more than a
        remote
        likelihood that a material misstatement of the annual or interim financial
        statements will be not be prevented or detected. We believe that a material
        weakness in our internal controls arose as the result of aggregating several
        significant deficiencies, including insufficient number of technical accounting
        and public company reporting personnel in the finance department and lack
        of an
        externally maintained warrant registry.
  Our
        current management team has instituted improved internal accounting controls,
        used outside resources with technical accounting and public company experience
        to assist the finance department while we attempt to hire employees with
        that
        type of experience and maintain the warrant registry internally. We are
        continuing to evaluate and improve our internal control procedures, where
        applicable.
  Another
        material weakness was that the Company did not release timely financial
        information to the general public. The restatements of prior periods delayed
        the
        filing of current periods and Management was in the process of hiring additional
        staff to assist in completing the prior financial statements to allow the
        Company to focus on, and issue, current financial statements. With the filing
        of
        this Quarterly Report the Company is now releasing timely financial
        information.
  There
        were no other changes in the internal controls during the 2007
        period.
  **PART
        II - OTHER INFORMATION**
  **Item
        1.**  **Legal
        Proceedings**
 
 We
        are
        not currently defending any suit or claim.
  **Item
        1A. Risk Factors**
  The
        risk
        factors set forth in Item 1A of our 2006 Form 10-K filed on June 6, 2007,
        are
        incorporated herein by reference.
  **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
  There
        have been no sales of securities in the past three years that have not been
        previously reported in a Quarterly Report on Form 10-Q or in a Current Report
        on
        Form 8-K.
  **Item
        3.**  **Defaults
        upon Senior Securities**
  None.
 
 **Item
        4.**  **Submission
        of Matters to a Vote of Security Holders**
  None.
 
 **Item
        5.**  **Other
        Information**
  None.
  19
  **Item
        6.** **Exhibits**
  31.1
              Rule
                  13a-14(a)/15d-14(a) Certificate of Chief Executive
                  Officer31.2
              Rule
                  13a-14(a)/15d-14(a) Certification of Chief Financial
                  Officer32.1
              Certificate
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200232.2
              Certificate
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002
  20
  **(i)**  **Signatures**
  In
        accordance with the requirements of the Securities Exchange Act of 1934,
        the
        registrant has duly caused this report to be signed on its behalf by the
        undersigned, thereunto duly authorized.
  GLOWPOINT,
                INC.RegistrantDate:
                  August 14, 2007
              By:
              /s/
                  Michael BrandofinoMichael
                  Brandofino, Chief Executive Officer
                (principal
                  executive officer)Date:
                  August 14, 2007
              By:
              /s/
                  Edwin F. HeinenEdwin
                  F. Heinen, Chief Financial Officer
                (principal
                  financial and accounting officer)
  21