---

---

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

|          
|----------
|          
|FORM
 10-Q

|           |                                                                                          
|---------- | -----------------------------------------------------------------------------------------
|(Mark One)
|x          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934 
|           | For the quarterly period ended September 30, 2007                                        
|          
|or        
|          
|o          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934
|           | For the transition period from
 ______________________ to ______________________         

Commission file number: 0-27168

---

|                                                       
|-------------------------------------------------------
|VIEWPOINT
 CORPORATION                                 
|(Exact
 name of registrant as specified in its charter)

|                                                                 |                                     
|---------------------------------------------------------------- | ------------------------------------
|Delaware                                                         | 95-4102687                          
|(State
 or other jurisdiction of
 incorporation or organization) | (I.R.S. Employer Identification No.)

498 Seventh Avenue, Suite 1810, New York, NY 10018(Address of principal executive offices
and zip code)

(212) 201-0800(Registrant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 shorter period that the registrant was required to file
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 o | Accelerated
 Filer x | Non-accelerated Filer o

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

As of November 2, 2007,
99,051,000 shares of $0.001 par value common stock were outstanding.

---

---



TABLE OF CONTENTS

|        |  |                                                                                                               |  |     
|------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                               |  | Page
|        |  |                                                                                                               |  |     
|        |  | PART I - FINANCIAL INFORMATION                                                                                |  |     
|Item 1. |  | Financial Statements                                                                                          |  | 3   
|        |  | Consolidated Balance
 Sheets  September 30, 2007 and December 31, 2006 (unaudited)                           |  | 3   
|        |  | Consolidated Statements of
 Operations  Three and nine months ended September 30, 2007 and 2006
 (unaudited) |  | 4   
|        |  | Consolidated Statements of
 Cash Flows  Nine months ended September 30, 2007 and 2006 (unaudited)            |  | 5   
|        |  | Notes to Consolidated
 Financial Statements (unaudited)                                                       |  | 7   
|Item 2. |  | Managements Discussion
 and Analysis of Financial Condition and Results of Operations                        |  | 15  
|Item 3. |  | Quantitative and
 Qualitative Disclosures About Market Risk                                                   |  | 28  
|Item 4. |  | Controls and Procedures                                                                                       |  | 28  
|        |  | PART II  OTHER INFORMATION                                                                                   |  |     
|Item 6. |  | Exhibits                                                                                                      |  | 29  
|        |  | Signatures                                                                                                    |  | 29  

---



PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

VIEWPOINT CORPORATIONCONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)

|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------- | -------- | ------------------- | - | -------- | -
|                                                                                                                                                                                                                   |  | September
 30,
 2007 |          | December
 31,
 2006 |  
|                                                                                                                                                                                                                   |  |                      |          |                     |  
|ASSETS                                                                                                                                                                                                             |  |                      |          |                     |   |          |  
|Current assets:                                                                                                                                                                                                    |  |                      |          |                     |   |          |  
|Cash and cash equivalents                                                                                                                                                                                          |  | $                    | 1,531    |                     | $ | 4,154    |  
|Marketable securities                                                                                                                                                                                              |  |                      | 1,725    |                     |   | 113      |  
|Accounts receivable, net of reserve of $291 and $230,
respectively                                                                                                                                                 |  |                      | 4,345    |                     |   | 3,037    |  
|Prepaid expenses and other current assets                                                                                                                                                                          |  |                      | 679      |                     |   | 543      |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Total current assets                                                                                                                                                                                               |  |                      | 8,280    |                     |   | 7,847    |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Restricted cash                                                                                                                                                                                                    |  |                      | 591      |                     |   | 190      |  
|Property and equipment, net                                                                                                                                                                                        |  |                      | 802      |                     |   | 1,023    |  
|Goodwill                                                                                                                                                                                                           |  |                      | 15,103   |                     |   | 14,882   |  
|Intangible assets, net                                                                                                                                                                                             |  |                      | 3,779    |                     |   | 3,689    |  
|Other assets                                                                                                                                                                                                       |  |                      | 60       |                     |   | 56       |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Total assets                                                                                                                                                                                                       |  | $                    | 28,615   |                     | $ | 27,687   |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|LIABILITIES
 AND STOCKHOLDERS EQUITY                                                                                                                                                                              |  |                      |          |                     |   |          |  
|Current liabilities:                                                                                                                                                                                               |  |                      |          |                     |   |          |  
|Accounts payable                                                                                                                                                                                                   |  | $                    | 2,527    |                     | $ | 1,660    |  
|Accrued expenses                                                                                                                                                                                                   |  |                      | 426      |                     |   | 401      |  
|Deferred revenues                                                                                                                                                                                                  |  |                      | 177      |                     |   | 70       |  
|Current portion of notes payable                                                                                                                                                                                   |  |                      | 488      |                     |   | 389      |  
|Accrued incentive compensation                                                                                                                                                                                     |  |                      | 545      |                     |   | 545      |  
|Current liabilities related to discontinued operations                                                                                                                                                             |  |                      | 231      |                     |   | 231      |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Total current liabilities                                                                                                                                                                                          |  |                      | 4,394    |                     |   | 3,296    |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Deferred rent                                                                                                                                                                                                      |  |                      | 160      |                     |   | 232      |  
|Warrants to purchase common
 stock                                                                                                                                                                                 |  |                      | 1,877    |                     |   | 467      |  
|Subordinated notes                                                                                                                                                                                                 |  |                      | 2,529    |                     |   | 2,456    |  
|Unicast notes                                                                                                                                                                                                      |  |                      | 1,420    |                     |   | 1,541    |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Total liabilities                                                                                                                                                                                                  |  |                      | 10,380   |                     |   | 7,992    |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Commitments and
 Contingencies (notes 5 and 7)                                                                                                                                                                     |  |                      |          |                     |   |          |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Stockholders equity:                                                                                                                                                                                              |  |                      |          |                     |   |          |  
|Preferred stock, $.001 par value; 5,000 shares authorized - no shares
 issued and outstanding on September 30, 2007 and December 31, 2006                                                                          |  |                      |         |                     |   |         |  
|Common stock, $.001 par value; 150,000 shares authorized - 82,783
 shares issued and 82,623 shares outstanding at September 30, 2007, and 67,830
 shares issued and 67,670 shares outstanding at December 31, 2006 |  |                      | 83       |                     |   | 68       |  
|Paid-in capital                                                                                                                                                                                                    |  |                      | 312,157  |                     |   | 306,214  |  
|Treasury stock at cost; 160 at September 30, 2007 and December 31,
 2006                                                                                                                                           |  |                      | (1,015   | )                   |   | (1,015   | )
|Accumulated other comprehensive loss                                                                                                                                                                               |  |                      | 4        |                     |   | 14       |  
|Accumulated deficit                                                                                                                                                                                                |  |                      | (292,994 | )                   |   | (285,586 | )
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Total stockholders equity                                                                                                                                                                                         |  |                      | 18,235   |                     |   | 19,695   |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  
|Total liabilities and stockholders equity                                                                                                                                                                         |  | $                    | 28,615   |                     | $ | 27,687   |  
|                                                                                                                                                                                                                   |  |                      |          |                     |   |          |  

The accompanying notes are an integral part
of these consolidated financial statements.

3

---



VIEWPOINT CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|----------------------------------------------------------------- |  | ---------------------------------- | ------ | --------------------------------- | - | ------- | - | ---- | ------ | - | - | ------- | -
|                                                                  |  | Three
 Months Ended
 September 30, |        | Nine
 Months Ended
 September 30, |  
|                                                                  |  |                                    |        |                                   |  
|                                                                  |  | 2007                               |        | 2006                              |   | 2007    |   | 2006 |       
|                                                                  |  |                                    |        |                                   |   |         |   |      |       
|Revenues:                                                         |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Advertising systems                                               |  | $                                  | 2,004  |                                   | $ | 961     |   | $    | 4,540  |   | $ | 5,569   |  
|Search                                                            |  |                                    | 1,533  |                                   |   | 1,460   |   |      | 4,744  |   |   | 4,822   |  
|Services                                                          |  |                                    | 954    |                                   |   | 786     |   |      | 2,353  |   |   | 2,430   |  
|Licenses                                                          |  |                                    | 19     |                                   |   | 4       |   |      | 30     |   |   | 82      |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Total revenues                                                    |  |                                    | 4,510  |                                   |   | 3,211   |   |      | 11,667 |   |   | 12,903  |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Cost of revenues:                                                 |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Advertising systems                                               |  |                                    | 1,350  |                                   |   | 399     |   |      | 2,715  |   |   | 3,638   |  
|Search                                                            |  |                                    | 29     |                                   |   | 39      |   |      | 100    |   |   | 113     |  
|Services                                                          |  |                                    | 747    |                                   |   | 455     |   |      | 1,737  |   |   | 1,766   |  
|Licenses                                                          |  |                                    | 3      |                                   |   |        |   |      | 3      |   |   | 8       |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Total cost of revenues                                            |  |                                    | 2,129  |                                   |   | 893     |   |      | 4,555  |   |   | 5,525   |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Gross profit                                                      |  |                                    | 2,381  |                                   |   | 2,318   |   |      | 7,112  |   |   | 7,378   |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Operating expenses:                                               |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Sales and marketing                                               |  |                                    | 1,118  |                                   |   | 1,454   |   |      | 3,635  |   |   | 4,481   |  
|Research and development                                          |  |                                    | 892    |                                   |   | 982     |   |      | 2,506  |   |   | 3,138   |  
|General and administrative                                        |  |                                    | 2,301  |                                   |   | 2,102   |   |      | 6,886  |   |   | 6,687   |  
|Depreciation                                                      |  |                                    | 147    |                                   |   | 113     |   |      | 375    |   |   | 337     |  
|Amortization of intangible assets                                 |  |                                    | 282    |                                   |   | 222     |   |      | 640    |   |   | 443     |  
|Restructuring charges                                             |  |                                    |       |                                   |   |        |   |      |       |   |   | 92      |  
|Impairment of goodwill                                            |  |                                    |       |                                   |   | 10,655  |   |      |        |   |   | 10,655  |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Total operating expenses                                          |  |                                    | 4,740  |                                   |   | 15,528  |   |      | 14,042 |   |   | 25,833  |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Loss from operations                                              |  |                                    | (2,359 | )                                 |   | (13,210 | ) |      | (6,930 | ) |   | (18,455 | )
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Other income (expense),
 net:                                     |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Interest and other income; net                                    |  |                                    | 68     |                                   |   | 95      |   |      | 180    |   |   | 264     |  
|Interest expense                                                  |  |                                    | (202   | )                                 |   | (213    | ) |      | (606   | ) |   | (709    | )
|Changes in fair values of warrants to purchase common stock       |  |                                    | 2,254  |                                   |   | 1,021   |   |      | (7     | ) |   | (151    | )
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Total other income
 (expense)                                     |  |                                    | 2,120  |                                   |   | 903     |   |      | (433   | ) |   | (596    | )
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Loss before provision for
 income taxes                           |  |                                    | (239   | )                                 |   | (12,307 | ) |      | (7,363 | ) |   | (19,051 | )
|Provision for income taxes                                        |  |                                    | 17     |                                   |   | 30      |   |      | 45     |   |   | 56      |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Net loss                                                          |  | $                                  | (256   | )                                 | $ | (12,337 | ) | $    | (7,408 | ) | $ | (19,107 | )
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Basic and diluted net loss
 per common share:                     |  | $                                  | (0.00  | )                                 | $ | (0.18   | ) | $    | (0.10  | ) | $ | (0.29   | )
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  
|Weighted average number of shares outstanding  basic and
diluted |  |                                    | 82,619 |                                   |   | 67,361  |   |      | 75,677 |   |   | 66,253  |  
|                                                                  |  |                                    |        |                                   |   |         |   |      |        |   |   |         |  

The accompanying notes are an integral part
of these consolidated financial statements.

4

---



VIEWPOINT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands) 
(Unaudited)

|                                                                             |  |                                   |        |      |   |         |  
|---------------------------------------------------------------------------- |  | --------------------------------- | ------ | ---- | - | ------- | -
|                                                                             |  | Nine
 Months Ended
 September 30, |       
|                                                                             |  |                                   |       
|                                                                             |  | 2007                              |        | 2006 |  
|                                                                             |  |                                   |        |      |  
|Cash flows from operating
 activities:                                       |  |                                   |        |      |   |         |  
|Net loss                                                                     |  | $                                 | (7,408 | )    | $ | (19,107 | )
|Adjustments to reconcile
 net loss to net cash used in operating activities: |  |                                   |        |      |   |         |  
|Stock-based compensation charges                                             |  |                                   | 1,333  |      |   | 1,616   |  
|Depreciation and amortization                                                |  |                                   | 1,174  |      |   | 942     |  
|Impairment of goodwill and intangibles                                       |  |                                   |       |      |   | 10,655  |  
|Provision for bad debt                                                       |  |                                   | 81     |      |   | 27      |  
|Changes in fair values of warrants to purchase
common stock                  |  |                                   | 7      |      |   | 151     |  
|Amortization of debt discount and issuance
costs                             |  |                                   | 421    |      |   | 533     |  
|Changes in operating assets and liabilities, net of
acquisition:             |  |                                   |        |      |   |         |  
|Accounts receivable                                                          |  |                                   | (1,265 | )    |   | 1,764   |  
|Prepaid expenses                                                             |  |                                   | (143   | )    |   | 6       |  
|Accounts payable                                                             |  |                                   | 668    |      |   | (693    | )
|Accrued expenses                                                             |  |                                   | (43    | )    |   | (99     | )
|Deferred revenues                                                            |  |                                   | 107    |      |   | (58     | )
|Other                                                                        |  |                                   |       |      |   | 34      |  
|                                                                             |  |                                   |        |      |   |         |  
|Net cash used in operating activities                                        |  |                                   | (5,068 | )    |   | (4,229  | )
|                                                                             |  |                                   |        |      |   |         |  
|Cash flows from investing
 activities:                                       |  |                                   |        |      |   |         |  
|Proceeds from sales and maturities of marketable
securities                  |  |                                   | 1,170  |      |   | 7,943   |  
|Purchases of marketable securities                                           |  |                                   | (2,792 | )    |   | (9,645  | )
|Net increase in restricted cash                                              |  |                                   | (401   | )    |   | (6      | )
|Purchases of property and equipment                                          |  |                                   | (207   | )    |   | (226    | )
|Acquisition of Makos, net of cash acquired                                   |  |                                   | (384   | )    |   |        |  
|Purchases of patents and trademarks                                          |  |                                   | (64    | )    |   | (77     | )
|                                                                             |  |                                   |        |      |   |         |  
|Net cash used in investing activities                                        |  |                                   | (2,678 | )    |   | (2,011  | )
|                                                                             |  |                                   |        |      |   |         |  
|Cash flows from financing
 activities:                                       |  |                                   |        |      |   |         |  
|Payment of Makos debt                                                        |  |                                   | (142   | )    |   |         |  
|Repayment of Subordinated Notes                                              |  |                                   | (165   | )    |   | (450    | )
|Repayment of Unicast Debt                                                    |  |                                   | (291   | )    |   | (227    | )
|Proceeds from issuance of common stock and
warrants                          |  |                                   | 4,974  |      |   |        |  
|Proceeds from exercise of stock options                                      |  |                                   | 747    |      |   | 2,407   |  
|                                                                             |  |                                   |        |      |   |         |  
|Net cash provided by financing activities                                    |  |                                   | 5,123  |      |   | 1,730   |  
|                                                                             |  |                                   |        |      |   |         |  
|                                                                             |  |                                   |        |      |   |         |  
|Net decrease in cash and
 cash equivalents                                   |  |                                   | (2,623 | )    |   | (4,510  | )
|Cash and cash equivalents
 at beginning of period                            |  |                                   | 4,154  |      |   | 6,437   |  
|                                                                             |  |                                   |        |      |   |         |  
|Cash and cash equivalents
 at end of period                                  |  | $                                 | 1,531  |      | $ | 1,927   |  
|                                                                             |  |                                   |        |      |   |         |  

The
accompanying notes are an integral part of these consolidated financial
statements.

5

---



VIEWPOINT CORPORATION 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands) 
(Unaudited)

|                                                                        |  |                                   |      |      |  |     | 
|----------------------------------------------------------------------- |  | --------------------------------- | ---- | ---- |  | --- | 
|                                                                        |  | Nine
 Months Ended
 September 30, |     
|                                                                        |  |                                   |     
|                                                                        |  | 2007                              |      | 2006 | 
|                                                                        |  |                                   |      |      | 
|                                                                       
|Supplemental disclosure of
 cash flow activities:                       |  |                                   |      |      |  |     | 
|Cash paid during the period for income
taxes                            |  |                                   | 45   |      |  | 56  | 
|Cash paid during the period for interest                                |  |                                   | 183  |      |  | 178 | 
|Net Assets acquired in Makos acquisitions:                              |  |                                   |      |      |  |     | 
|Accounts receivable, net                                                |  |                                   | 170  |      |  |    | 
|Other assets                                                            |  |                                   | 10   |      |  |    | 
|Fixed assets                                                            |  |                                   | 22   |      |  |    | 
|Goodwill and Intangible Assets                                          |  |                                   | 971  |      |  |    | 
|Accounts payable and accrued expenses                                   |  |                                   | (200 | )    |  |    | 
|Makos - note payable                                                    |  |                                   | (99  | )    |  |    | 
|Deferred revenue                                                        |  |                                   | (47  | )    |  |     | 
|Supplemental disclosure of non-cash investing and
financing activities: |  |                                   |      |      |  |     | 
|Non-cash cost of Makos acquisition                                      |  |                                   |      |      |  |     | 
|Common stock                                                            |  |                                   | (1   | )    |  |    | 
|Paid-in capital                                                         |  |                                   | (306 | )    |  |    | 
|                                                                        |  |                                   |      |      |  |     | 
|Unrealized losses on marketable securities                              |  |                                   | (10  | )    |  | 6   | 
|Purchase of property and equipment accrued and not
yet paid             |  |                                   |     |      |  | 117 | 

The accompanying notes are an
integral part of these consolidated financial statements.

6

---



VIEWPOINT CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America, consistent in all material respects with those applied in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006. The
interim financial information is unaudited, but reflects all adjustments which
are, in the opinion of management, necessary for a fair statement of the
financial position and operating results of Viewpoint Corporation (Viewpoint
or the Company) for the interim periods.

These
unaudited consolidated financial statements have been prepared in accordance
with the instructions to Rule 10-01 of Regulation S-X and, therefore, do not
include all of the information and footnotes normally provided in annual
financial statements. As a result, these unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with managements discussion and
analysis of financial condition and results of operations, contained in Viewpoints
Annual Report on Form 10-K for the year ended December 31, 2006. The results of
operations for the three and nine month periods ended September 30, 2007, are
not necessarily indicative of the results to be expected for the year ending
December 31, 2007 or other future periods.

The
year-end consolidated balance sheet data was derived from audited financial
statements but does not include all disclosures required by accounting
principles generally accepted in the United States of America.

Liquidity

The
Company had cash, cash equivalents and marketable securities of $3.3 million at
September 30, 2007. During the nine months ended September 30, 2007, net cash
used in operations amounted to $5.1 million. As of September 30, 2007, the Company
had an accumulated deficit of $293.0 million. The Company has incurred negative
cash flows and net losses since inception. There can be no assurance that
Viewpoint will achieve or sustain positive cash flows from operations or
profitability.

On
October 18, 2007 the Company entered into a Securities Purchase Agreement with
certain accredited investors pursuant to which it issued 15.7 million shares
    of its common stock in a private placement to such accredited investors at
    a purchase price of $0.70 per share (resulting in aggregate gross proceeds
    of $11 million). The investors in the transaction also received warrants
    to purchase an additional 4.7 million shares of common stock at an exercise
    price of $0.84 per share (subject to certain adjustments). Such warrants
    are not exercisable for six months following issuance and have an aggregate
    term of five and one-half years. $5 million of the proceeds of the private
    placement were used by the Company to acquire Springbox, an Austin, Texas
    based interactive advertising agency and the balance of the private placement
    proceeds, after expenses (approximately $5.3 million) is available for expansion
    of UK operations, developing business partnerships, construction costs for
    facilities, and other general corporate purposes. The acquisition of Springbox
    closed on October 31, 2007.

As
of the last quarterly filing, management estimated that the Company did not
have adequate liquidity to fund operations beyond one year and that there was
substantial doubt about the Companys ability to continue as a going concern.
As the result of the October 2007 private placement, the Company now estimates
that there is sufficient liquidity to fund estimated losses beyond September 30
2008; however should the Company experience unforeseen increases in
expenditures or should estimated revenues not materialize, it could significantly
impair the ability of the Company to fund future operations which would require
management to scale back operations, raise additional debt or equity capital or
discontinue operations before September 30, 2008. The Company may seek
additional funds when necessary through public or private equity financing or
from other sources to fund operations and pursue growth, although there are no
assurances that the Company can obtain such financing with reasonable terms.
Any financing the Company obtains may contain covenants that restrict the
Companys freedom to operate the business or may have rights, preferences or
privileges senior to the Companys common stock and may dilute the Companys
current shareholders ownership interest in Viewpoint.

The
Nasdaq Stock Market (Nasdaq) notified Viewpoint Corporation (the Company)
on November 27, 2006 that the Companys common stock could be delisted from
Nasdaq for failure to maintain a minimum bid price of $1.00 and that the
Company had until May 29, 2007 to regain compliance with the listing standards
of The Nasdaq Global Market. On May 24, 2007, the Company received written
notification from Nasdaq that the Staff had approved the Companys application
to transfer the listing of the Companys common stock from The Nasdaq Global
Market to The Nasdaq Capital Market. The Companys securities commenced trading
on The Nasdaq Capital Market effective May 29, 2007. On June 6, 2007, the
Company received notification from Nasdaq that the Company has regained
compliance with Nasdaqs continued listing requirements under Marketplace Rule
4310(c)(4). The notification provided that the closing bid price of the Companys
common stock has been at $1.00 per share or greater for at least 10 consecutive
business days and, accordingly, Nasdaq advised the Company that this matter is
now closed.

7

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On
September 17, 2007 the Company received a second written notification from the
NASDAQ Listing Qualifications Department notifying management that, for the
last 30 consecutive business days, the bid price of the Companys common stock
has closed below the minimum $1.00 per share requirement for continued
inclusion under NASDAQ Marketplace Rule 4310(c)(4). The Company, in accordance
with NASDAQ Marketplace Rule 4310(c)(8)(D), has been provided 180 calendar
days, or until March 17, 2008, to regain compliance. To regain compliance, the
bid price of the Companys common stock must close at $1.00 per share or more
for a minimum of ten consecutive business days at any time before March 17,
2008.

If
the Company does not regain compliance with the NASDAQ Marketplace Rule
4310(c)(4) by March 17, 2008, the Staff will determine whether the Company
meets The Nasdaq Capital Market initial listing criteria as set forth in
Marketplace Rule 4310(c), except for the bid price requirement. If the Company
meets the initial listing criteria, the Staff will notify the Company that it
has been granted an additional 180 calendar day compliance period. If the
Company is not eligible for an additional compliance period, the Staff will
provide written notification that the Companys securities will be delisted. At
that time, the Company may appeal NASDAQs determination to delist its
securities to a Listing Qualifications Panel.

The
Company has certain debt covenants with the Clark Estates that require the
Companys common stock remain listed on a national stock exchange, as defined.
If the Companys common stock is delisted, the face value of the note, $3.4
million, becomes due immediately. In March 2007, the Clark Estates waived the
requirement that the Companys common stock remain listed on a national stock
exchange, until December 31, 2008. See footnote 5 for further details.

Use of Estimates

The
preparation of financial statements in conformity with generally accepted
accounting principles 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 financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The most significant
estimates impact the following accounts: revenue, receivables, liabilities,
warrants, goodwill, the useful lives of intangible and fixed assets and
employee stock compensation.

Net Loss Per Common Share

Basic
net loss per common share is computed using the weighted average number of
shares of common stock outstanding, and diluted net loss per common share is
computed using the weighted average number of shares of common stock and common
equivalent shares outstanding. Because they do not have a dilutive effect,
approximately 14.0 million and 12.3 million of common share equivalents for the
three and nine months ended September 30, 2007, respectively, and approximately
11.6 million and 12.8 million for the three and nine months ended September 30,
2006, respectively, were excluded from the calculation of diluted loss per
common share.

Recent Accounting Pronouncements

In
June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), which
clarifies the accounting for uncertainty in income taxes recognized in a
companys financial statements. The interpretation prescribes a recognition
threshold and measurement attribute criteria for the financial statement
recognition and measurement of an uncertain tax position taken or expected to
be taken in a tax return. The interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company adopted the provisions of FIN
48 on January 1, 2007. Since the Company does not have any uncertain tax
positions, the implementation of FIN 48 did not have a material impact on its
consolidated financial statements. At January 1, 2007 and September 30, 2007
there were no accrued liabilities for tax-related interest and penalties, which
the Company recognizes as interest expense and general and administrative
expense, respectively, as incurred. Since the Company has incurred net losses for
tax purposes since inception, all tax years remain open to examination by major
taxing jurisdictions, which are the federal government and states of New York
and California.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (FAS
157). FAS 157 establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The changes to current practice
resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. We will be required to adopt the
provisions of FAS 157 beginning with our first quarter ending March 31, 2008.
We do not believe that the adoption of the provisions of FAS 157 will
materially impact our consolidated financial statements.

In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  Including an Amendment of FASB Statement No.
115

8

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

which is
effective for fiscal years beginning after November 15, 2007. This statement
permits an entity to choose to measure many financial instruments and certain
other items at fair value at specified election dates. Subsequent unrealized
gains and losses on items for which the fair value option has been elected will
be reported in earnings. We are currently evaluating the potential impact of
this statement.

2. Acquisition of Makos Advertising, L.P.

On
March 12, 2007, the Company entered into a Purchase Agreement to acquire all of
the outstanding partnership interests of Makos Advertising, L.P. (Makos). On
April 30, 2007, the Company completed the acquisition. In exchange for all of
the outstanding partnership interests of Makos, the Company issued an aggregate
of 0.7 million shares of Company common stock to the partners of Makos and paid
$0.6 million in cash.

The
Company also paid off outstanding debt in the form of a line of credit owed by
Makos in the amount of approximately $0.1 million and also assumed outstanding
debt relating to another line of credit in the amount of approximately $0.1
million (Makos note).

As
of September 30, 2007, the Company is accumulating needed information in order
to calculate the fair value of acquired assets and assumed liabilities and
accordingly the purchase price allocation has not been finalized. The
preliminary purchase price allocation appears below and is subject to change,
which could be material.

Goodwill
was determined based upon the excess of the fair value of common stock issued,
cash paid and liabilities assumed less identifiable assets acquired. Goodwill
recorded is subject to adjustment based upon the final amount of working
capital acquired. Consideration paid for the acquisition amounted to $0.9
million comprised of cash consideration of $0.6 million plus the issuance of
0.7 million shares of common stock valued at $0.3 million. The following table,
which is based on preliminary estimates and subject to change, summarizes
amounts recorded in connection with the Makos acquisition,

|                           |  |                |       | 
|-------------------------- |  | -------------- | ----- | 
|                           |  | (in thousands) |      
|Current
 assets            |  | $              | 348   | 
|Property and
 equipment    |  |                | 22    | 
|Intangible
 assets         |  |                | 750   | 
|Goodwill                   |  |                | 221   | 
|Other assets               |  |                | 10    | 
|                           |  |                |       | 
|                          
|Total assets
 acquired     |  |                | 1,351 | 
|                           |  |                |       | 
|Less:
 liabilities assumed |  |                | 488   | 
|                           |  |                |       | 
|                          
|Total
 purchase price      |  | $              | 863   | 
|                           |  |                |       | 

The
intangible assets acquired will be amortized over periods ranging from one to
three years.

Unaudited
pro forma results of operations for the three and nine months ended September
30, 2007 and 2006, assuming the Makos acquisition had occurred at the beginning
of the respective years, have been intentionally omitted as the effects on the
Companys operating results for the corresponding periods was immaterial.

3. Private Placements of Common Stock and
Warrants

May 2007 Private Placement of Common Stock and
Warrants:

The
Company entered into a Securities Purchase Agreement with certain accredited
investors, dated as of May 4, 2007, under which the Company issued 13.3 million
shares of the Companys common stock in a private placement to such accredited
investors at a purchase price of $0.40 per share (resulting in aggregate gross
proceeds of $5.3 million). The investors in the transaction also received
warrants to purchase an additional 3.3 million shares of common stock at an
exercise price of $0.45 per share (subject to certain adjustments). Such
warrants are not exercisable for six months following issuance and have an
aggregate term of three and one-half years. For financial reporting purposes,
the terms and provisions of the warrants require that the Company record the
fair value of the warrants as a liability at the time of issuance in accordance
with SFAS No. 133 Accounting for Derivative Instruments and Hedging
Activities, and EITF Issue No. 00-19 Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock.
Initial fair value assigned to the warrants at issuance was $1.4 million. At
each balance sheet date subsequent to issuance, the carrying amount of warrants
are adjusted to the current fair value using the Black-Scholes Method and any
changes of the warrants are included within operating results. On May 7, 2007
the Company announced the closing of the transaction and the receipt of $5.3
million.

9

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On
May 7, 2007, in connection with the investment by DG FastChannel, Inc. of $4.3
million of the $5.3 million raised in the private placement referenced above,
the Company announced that it had entered into a strategic partnership with DG
FastChannel, Inc., the leading provider of digital media services to the
advertising and broadcast industries. DG FastChannel will integrate its media
services platform with the Companys Unicast advertising solutions technology
to launch its latest advertising industry innovation by deploying a
next-generation platform for managing and delivering both traditional and
interactive advertising. Revenues generated from the strategic partnership will
be related party revenue. For the three and nine months ended September 30,
2007, revenues generated from this agreement were immaterial.

October 2007 Private Placement of Common Stock and
Warrants:

On
October 18, 2007, the Company sold common stock and warrants to purchase common
stock in a private placement to accredited investors. See Note 9.

4. Goodwill and Intangible Assets

As
required by SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is
subject to impairment tests annually, or earlier if indicators of potential
impairment exist, using a fair-value-based approach. All other intangible
assets are amortized over their estimated useful lives and are assessed for
impairment under SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.

Goodwill
impairment has been assessed on a reporting unit basis based on the net asset
value of each segment, including goodwill, and the estimated fair market value
of each reporting unit. Fair market value of a reporting unit is estimated
based on a comparison of that segments revenue or gross profit performance to
the performance of similar companies, as well as discounted cash flows, using a
discount rate of 16%.

A
summary of changes in the Companys goodwill by reporting unit and intangible
assets during each three-month period from December 31, 2006 through September
30, 2007 by aggregated segment are as follows (in thousands):

|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  
|--------------------------------- |  | ---------- | ------ | ---------------------- |  | -------- |  | ----- | ----- | ---------------- |  | ------ |  |  | ----- | -
|                                  |  | Goodwill   |        |                        |  |         
|                                  |  |            |        |                        |  |         
|                                  |  | Technology |        | Advertising
 
 Systems |  | Services |  | Total |       | IntangibleAssets | 
|                                  |  |            |        |                        |  |          |  |       |       |                  | 
|Balance as of December 31,
 2006  |  |            | 10,206 |                        |  | 2,039    |  |       | 2,637 |                  |  | 14,882 |  |  | 3,689 |  
|Additions during period           |  |            |       |                        |  |         |  |       |      |                  |  |       |  |  | 1     |  
|Amortization                      |  |            |       |                        |  |         |  |       |      |                  |  |       |  |  | (156  | )
|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  
|Balance as of March 31,
 2007     |  |            | 10,206 |                        |  | 2,039    |  |       | 2,637 |                  |  | 14,882 |  |  | 3,534 |  
|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  
|Additions during period           |  |            |       |                        |  |         |  |       | 221   |                  |  | 221    |  |  | 810   |  
|Amortization                      |  |            |       |                        |  |         |  |       |      |                  |  |       |  |  | (258  | )
|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  
|Balance as of June 30, 2007       |  |            | 10,206 |                        |  | 2,039    |  |       | 2,858 |                  |  | 15,103 |  |  | 4,086 |  
|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  
|Additions during period           |  |            |       |                        |  |         |  |       |      |                  |  |       |  |  | 3     |  
|Amortization                      |  |            |       |                        |  |         |  |       |      |                  |  |       |  |  | (310  | )
|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  
|Balance as of September 30,
 2007 |  |            | 10,206 |                        |  | 2,039    |  |       | 2,858 |                  |  | 15,103 |  |  | 3,779 |  
|                                  |  |            |        |                        |  |          |  |       |       |                  |  |        |  |  |       |  

As
of September 30, 2007 and December 31, 2006, the Companys intangible assets
and related accumulated amortization consisted of the following (in thousands):

10

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

|                                        |  |                    |       |                           |   |        |   |       |       |                            |   |       |  |   |        |   |   |       | 
|--------------------------------------- |  | ------------------ | ----- | ------------------------- | - | ------ | - | ----- | ----- | -------------------------- | - | ----- |  | - | ------ | - | - | ----- | 
|                                        |  | September 30, 2007 |       | December 31, 2006         |  
|                                        |  |                    |       |                           |  
|                                        |  | Gross              |       | Accumulated
 Amortization |   | Net    |   | Gross |       | Accumulated 
 Amortization |   | Net   | 
|                                        |  |                    |       |                           |  
|Website Partner Relationships - Unicast |  | $                  | 3,772 |                           | $ | (1,058 | ) | $     | 2,714 |                            | $ | 3,772 |  | $ | (778   | ) | $ | 2,994 | 
|Acquired Technology - Unicast           |  |                    | 410   |                           |   | (382   | ) |       | 28    |                            |   | 410   |  |   | (299   | ) |   | 111   | 
|Patents and Trademarks - Unicast        |  |                    | 326   |                           |   | (188   | ) |       | 138   |                            |   | 326   |  |   | (141   | ) |   | 185   | 
|Fotomat Trademark                       |  |                    | 134   |                           |   | (41    | ) |       | 93    |                            |   | 134   |  |   | (8     | ) |   | 126   | 
|Patents and Other Trademarks            |  |                    | 502   |                           |   | (189   | ) |       | 313   |                            |   | 438   |  |   | (165   | ) |   | 273   | 
|Customer relationships - Makos          |  |                    | 200   |                           |   | (42    | ) |       | 158   |                            |   |       |  |   |        |   |   |       | 
|Tradenames & URLs - Makos              |  |                    | 50    |                           |   | (7     | ) |       | 43    |                            |   |       |  |   |        |   |   |       | 
|Non-complete agreements - Makos         |  |                    | 500   |                           |   | (208   | ) |       | 292   |                            |   |      |  |   |       |   |   |      | 
|                                        |  |                    |       |                           |   |        |   |       |       |                            |   |       |  |   |        |   |   |       | 
|Total Intangible Assets                 |  | $                  | 5,894 |                           | $ | (2,115 | ) | $     | 3,779 |                            | $ | 5,080 |  | $ | (1,391 | ) | $ | 3,689 | 
|                                        |  |                    |       |                           |   |        |   |       |       |                            |   |       |  |   |        |   |   |       | 

Amortization
of intangible assets is estimated to be $0.8 million a year for the next five
years.

5. Long-Term Debt

Subordinated
Notes

In
March 2007, the Company and Clark Estates, a subordinated note holder, who
holds ownership interest in the Companys stock of approximately 8.1% as of
November 2, 2007 (pursuant to a Form 13-G filed on May 9, 2007), amended the
4.95% subordinated note in the principal amount of $3.1 million to extend the
maturity date from March 31, 2008 to September 30, 2009. In addition, Clark
Estates waived the requirement that the Companys common stock remain listed on
a national stock exchange, as defined, until December 31, 2008, in exchange for
the payment by Viewpoint of $0.2 million to the holder of the subordinated
note, and the addition of $0.3 million to the principle amount of the note,
payable at maturity, but not subject to interest.

Following
the guidance in EITF 02-4 Determining Whether a Debtors Modification or
Exchange of Debt Instruments is within the Scope of FASB Statement No 15, the
Company accounted for the March 2007 amendment to the subordinated note, which
was issued in March 2003, as a troubled debt transaction in accordance with
Statement of Financial Accounting Standards No. 15 Accounting by Debtors and
Creditors for Troubled Debt Restructurings. Pursuant to SFAS 15 and EITF 02-4,
if the Company is deemed to be experiencing financial difficulty and the
Companys effective borrowing rate in the restructuring is decreased, the
Holder is deemed to have granted a concession. Since at that time the Company
announced there was substantial risk to continue as a going concern, the
Company was deemed to be experiencing financial difficulties. The Companys
effective borrowing rate is determined by the carrying value of the debt and
the timing and amount of future cash payments. The Company determined that the
effective borrowing rate was lowered. Accordingly, the Company accounted for
the amendment as a troubled debt restructuring, and therefore, no change was
made to the carrying value of the debt. In addition the interest expense over
the remaining life of the note will be determined by an effective borrowing
rate of 21%.

Makos
Note

As
part of the aquisition of Makos Advertising, L.P., which was completed on April
30, 2007, the company assumed a line of credit debt of $0.1 million with a
commercial bank. The line of credit bears interest at the prime rate plus one
and one-half percent annually and expires in June 2008.

The
Companys total carrying value of long-term debt at September 30, 2007 and
December 31, 2006 is as follows (amounts in thousands):

|                                        |  |               |       |             |   |       | 
|--------------------------------------- |  | ------------- | ----- | ----------- | - | ----- | 
|                                        |  | September
 30 |       | December 31 |  
|                                        |  |               |       |             |  
|                                        |  |               | 2007  |             |   | 2006  | 
|                                        |  |               |       |             |  
|                                        |  |               |       |             |  
|Subordinated
 notes                     |  | $             | 2,529 |             | $ | 2,456 | 
|Unicast
 notes                          |  |               | 1,809 |             |   | 1,930 | 
|Makos note                              |  |               | 99    |             |   |      | 
|                                        |  |               |       |             |   |       | 
|Total debt                              |  |               | 4,437 |             |   | 4,386 | 
|Less current
 portion                   |  |               | 488   |             |   | 389   | 
|                                        |  |               |       |             |   |       | 
|Long-term
 debt, net of current portion |  | $             | 3,949 |             | $ | 3,997 | 
|                                        |  |               |       |             |   |       | 

11

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The
reconciliation of the carrying value to the face value of each note as of
September 30, 2007, is as follows (amounts in thousands):

|                   |  |                     |       |              |   |             |  |       |    |  |   |       | 
|------------------ |  | ------------------- | ----- | ------------ | - | ----------- |  | ----- | -- |  | - | ----- | 
|                   |  | Subordinated
 Notes |       | UnicastNotes |   | Makos
 Note |  | Total |   
|                   |  |                     |       |              |   |             |  |       |   
|                   |  |                     |       |              |   |             |  |       |   
|Book value of debt |  | $                   | 2,529 |              | $ | 1,809       |  | $     | 99 |  | $ | 4,437 | 
|Discount on debt   |  |                     | 821   |              |   | 325         |  |       |   |  |   | 1,146 | 
|                   |  |                     |       |              |   |             |  |       |    |  |   |       | 
|Face value of debt |  | $                   | 3,350 |              | $ | 2,134       |  | $     | 99 |  | $ | 5,583 | 
|                   |  |                     |       |              |   |             |  |       |    |  |   |       | 

The
maturity schedule for the Companys debt subsequent to September 30, 2007 is as
follows (amounts in thousands):

|                                       |   |       | 
|-------------------------------------- | - | ----- | 
|Maturity                               |  
|                                       |  
|                                      
|Three months
 ending December 31, 2007 | $ | 26    | 
|2008                                   |   | 449   | 
|2009                                   |   | 3,700 | 
|2010                                   |   | 350   | 
|2011                                   |   | 1,058 | 
|                                       |   |       | 
|                                       | $ | 5,583 | 
|                                       |   |       | 

6. Stock-based Compensation

The
assumptions used to value option grants for the nine months ended September 30,
2007 and September 30, 2006 are as follows:

|                                         |  |                                  |           |      |  |           |  
|---------------------------------------- |  | -------------------------------- | --------- | ---- |  | --------- | -
|                                         |  | Nine Months
 Ended September 30, |          
|                                         |  |                                  |          
|                                         |  | 2007                             |           | 2006 | 
|                                         |  |                                  |           |      | 
|Risk-free
 interest rate                 |  |                                  | 4.51-5.00 | %    |  | 4.72-5.07 | %
|Dividend
 yield                          |  |                                  |          |      |  |          |  
|Volatility
 factor                       |  |                                  | 1.36-1.39 |      |  | 1.34-1.35 |  
|Weighted
 average expected life in years |  |                                  | 3.9-.4.1  |      |  | 4.52-4.58 |  

As
of September 30, 2007, there was $3.1 million of unrecognized compensation cost
related to non-vested stock-based payments granted to Viewpoint employees.
Subject to forfeitures, the unrecognized compensation cost at September 30,
2007 will be completely expensed as shown in the following table,

|                                 |  |                        |       | 
|-------------------------------- |  | ---------------------- | ----- | 
|Period                           |  | Amount
 (in thousands) |      
|                                 |  |                        |      
|                                 |  |                        |       | 
|Three months ended Dec. 31, 2007 |  | $                      | 434   | 
|2008                             |  |                        | 1,558 | 
|2009                             |  |                        | 999   | 
|2010                             |  |                        | 97    | 
|                                 |  |                        |       | 
|                                 |  | $                      | 3,088 | 
|                                 |  |                        |       | 

7.
Commitments & Contingencies

Legal Proceedings

The
Company is from time to time engaged in certain legal actions arising in the
ordinary course of business. Although it is impossible to predict the
outcome of any legal proceeding and there can be no assurances, the
Company believes it has adequate legal defenses in legal actions in which it is
the defendant and believes that the ultimate outcome of such actions will not
have a material adverse effect on the Companys consolidated financial
position, results of operations, or cash flows.

8. Segment Information and Enterprise-Wide
Disclosures

The
Company operates in three separate segments: technology, advertising systems
and services. The following tables present selected operating results and
financial position information by segment,

12

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|-------------------------------- |  | ---------------------------------- | ----- | --------------------------------- | - | ----- | - | ---- | ------ | - | - | ------ | -
|                                 |  | Three Months Ended 
 September 30, |       | Nine Months Ended 
 September 30, |  
|                                 |  |                                    |       |                                   |  
|                                 |  | 2007                               |       | 2006                              |   | 2007  |   | 2006 |       
|                                 |  |                                    |       |                                   |   |       |   |      |       
|                                 |  | (in thousands)                     |      
|Revenues:                        |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Advertising systems              |  |                                    | 2,004 |                                   |   | 961   |   |      | 4,540  |   |   | 5,569  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Technology:                      |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Licenses                         |  |                                    | 19    |                                   |   | 4     |   |      | 30     |   |   | 82     |  
|Search                           |  |                                    | 1,533 |                                   |   | 1,460 |   |      | 4,744  |   |   | 4,822  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total Technology Revenue         |  |                                    | 1,552 |                                   |   | 1,464 |   |      | 4,774  |   |   | 4,904  |  
|Services                         |  |                                    | 954   |                                   |   | 786   |   |      | 2,353  |   |   | 2,430  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total revenues                   |  |                                    | 4,510 |                                   |   | 3,211 |   |      | 11,667 |   |   | 12,903 |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Cost of Revenues:                |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Advertising systems              |  |                                    | 1,350 |                                   |   | 399   |   |      | 2,715  |   |   | 3,638  |  
|Technology:                      |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Licenses                         |  |                                    | 3     |                                   |   |      |   |      | 3      |   |   | 8      |  
|Search                           |  |                                    | 29    |                                   |   | 39    |   |      | 100    |   |   | 113    |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total Technology Cost of Revenue |  |                                    | 32    |                                   |   | 39    |   |      | 103    |   |   | 121    |  
|Services                         |  |                                    | 747   |                                   |   | 455   |   |      | 1,737  |   |   | 1,766  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total cost of revenues           |  |                                    | 2,129 |                                   |   | 893   |   |      | 4,555  |   |   | 5,525  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Gross profit                     |  |                                    | 2,381 |                                   |   | 2,318 |   |      | 7,112  |   |   | 7,378  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Advertising systems              |  |                                    | 654   |                                   |   | 562   |   |      | 1,825  |   |   | 1,931  |  
|Technology:                      |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Licenses                         |  |                                    | 16    |                                   |   | 4     |   |      | 27     |   |   | 74     |  
|Search                           |  |                                    | 1,504 |                                   |   | 1,421 |   |      | 4,644  |   |   | 4,709  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total Technology Gross Profit    |  |                                    | 1,520 |                                   |   | 1,425 |   |      | 4,671  |   |   | 4,783  |  
|Services                         |  |                                    | 207   |                                   |   | 331   |   |      | 616    |   |   | 664    |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total gross profit               |  | $                                  | 2,381 |                                   | $ | 2,318 |   | $    | 7,112  |   | $ | 7,378  |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Gross profit margin              |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Advertising systems              |  |                                    | 33    | %                                 |   | 58    | % |      | 40     | % |   | 35     | %
|Technology:                      |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Licenses                         |  |                                    | 84    |                                   |   | 100   |   |      | 90     |   |   | 90     |  
|Search advertising               |  |                                    | 98    |                                   |   | 97    |   |      | 98     |   |   | 98     |  
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  
|Total Technology Gross Profit    |  |                                    | 98    |                                   |   | 97    |   |      | 98     |   |   | 98     |  
|Services                         |  |                                    | 22    |                                   |   | 42    |   |      | 26     |   |   | 27     |  
|Total gross profit margin        |  |                                    | 53    | %                                 |   | 72    | % |      | 61     | % |   | 57     | %
|                                 |  |                                    |       |                                   |   |       |   |      |        |   |   |        |  

|                    |  |                      |        |                     |   |        | 
|------------------- |  | -------------------- | ------ | ------------------- | - | ------ | 
|                    |  |                      |       
|                    |  | September 
 30, 2007 |        | December 
 31, 2006 |  
|                    |  |                      |       
|                    |  | (In thousands)       |       
|                    |  |                      |        |                     |   |        | 
|Total assets:       |  |                      |        |                     |   |        | 
|Technology          |  | $                    | 12,679 |                     | $ | 12,512 | 
|Advertising Systems |  |                      | 7,786  |                     |   | 3,925  | 
|Services            |  |                      | 4,303  |                     |   | 6,793  | 
|Corporate (*)       |  |                      | 3,847  |                     |   | 4,457  | 
|                    |  |                      |        |                     |   |        | 
|Total assets:       |  |                      | 28,615 |                     |   | 27,687 | 
|                    |  |                      |        |                     |   |        | 

* Corporate
assets consists solely of cash, cash equivalents, marketable securities and
restricted cash as the Company does not allocate such amounts to the individual
reporting units.

13

---



VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

9. Subsequent Events

Purchase of
Springbox

On
October 18, 2007, the Company entered into a Purchase Agreement to acquire all
of the outstanding partnership interests of Springbox, Ltd. (Springbox), an
interactive marketing firm located in Austin, TX, with digital web marketing
and creative solutions. The agreement contains customary representations,
warranties and covenants of the sellers and the Company. The transaction closed
on October 31, 2007.

Under
the terms of the agreement, the Company paid at closing approximately $5.0
million in cash and issued 714,286 shares of its common stock. The amount of
cash payable by the Company is subject to adjustment based on the net book
value of Springbox as of the closing date of the transaction and (ii) the
subsequent receipt by the Company of accounts receivable outstanding on the
closing date of the transaction. In addition, the sellers of Springbox are entitled
to an EBITDA based earnout. The Company has the option to pay cash or shares of
its common stock in order to satisfy any obligation pursuant to the earnout.

October 2007 Private Placement of Common Stock and
Warrants

In
addition, the Company entered into a Securities Purchase Agreement with certain
accredited investors, dated as of October 18, 2007, pursuant to which the
Company issued 15.7 million shares of its common stock in a private placement
to such accredited investors at a purchase price of $0.70 per share (resulting
in aggregate gross proceeds of $11 million). The investors in the transaction
also received warrants to purchase an additional 4.7 million shares of common
stock at an exercise price of $0.84 per share (subject to certain adjustments).
Such warrants are not exercisable for six months following issuance and have an
aggregate term of five and one-half years. Of the gross proceeds of $11 million
received from investors, approximately $5.0 million was used to purchase Springbox.

14

---



Item 2. Managements Discussion and Analysis
of Financial Conditions and Results of Operations

The
following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.

In
addition to historical information, this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from the results implied by the
forward looking statements. Factors that might cause or contribute to such
differences include, but are not limited to, those discussed in the section
entitled Factors That May Affect Future Results of Operations. You should
carefully review the risks described in other documents we file from time to
time with the Securities and Exchange Commission, including any future reports
to be filed in 2007 and our Annual Report on Form 10-K and amendments for 2006.
When used in this report, the words will, expects, anticipates,
intends, plans, believes, seeks, targets, estimates, and
similar
expressions are generally intended to identify forward-looking statements. You
should not place undue reliance on these forward-looking statements, which
speak only as of the date of this Quarterly Report on Form 10-Q. We undertake
no obligation to publicly release any revisions to the forward looking
statements or reflect events or circumstances after the date of this document.

Overview

Overview.The Company had cash, cash equivalents and marketable
securities of $3.3 million at September 30, 2007. During the nine months ended
September 30, 2007, net cash used in operations amounted to $5.1 million. As of
September 30, 2007, the Company had an accumulated deficit of $293.0 million.
The Company has incurred negative cash flows and net losses since inception.
There can be no assurance that Viewpoint will achieve or sustain positive cash
flows from operations or profitability.

On
October 18, 2007 the Company entered into a Securities Purchase Agreement with
certain accredited investors pursuant to which it issued 15.7 million shares of
its common stock in a private placement to such accredited investors at a
purchase price of $0.70 per share (resulting in aggregate gross proceeds of $11
million). The investors in the transaction also received warrants to purchase
an additional 4.7 million shares of common stock at an exercise price of $0.84
per share (subject to certain adjustments). Such warrants are not exercisable
for six months following issuance and have an aggregate term of five and
one-half years. $5 million of the proceeds of the private placement were used
by the Company to acquire Springbox, an Austin, Texas based interactive
advertising agency and the balance of the private placement proceeds, after
expenses (approximately $5.3 million) is available for expansion of UK operations, developing business partnerships, construction costs for facilities, and other general corporate purposes. The acquisition of Springbox closed on October 31, 2007.

As
of the last quarterly filing, management estimated that the Company did not
have adequate liquidity to fund operations beyond one year and that there was
substantial doubt about the Companys ability to continue as a going concern.
As the result of the October 2007 private placement, the Company now estimates
that there is sufficient liquidity to fund estimated losses beyond September 30
2008; however should the Company experience unforeseen increases in
expenditures or should estimated revenues not materialize, it could
significantly impair the ability of the Company to fund future operations which
would require management to scale back operations, raise additional debt or
equity capital or discontinue operations before September 30, 2008. The Company
may seek additional funds when necessary through public or private equity
financing or from other sources to fund operations and pursue growth, although
there are no assurances that the Company can obtain such financing with
reasonable terms. Any financing the Company obtains may contain covenants that
restrict the Companys freedom to operate the business or may have rights,
preferences or privileges senior to the Companys common stock and may dilute
the Companys current shareholders ownership interest in Viewpoint.

Viewpoint
Corporation (Viewpoint or the Company) is an internet marketing technology
company that focuses on using its technical capabilities to help marketers
effectively promote their products online. Viewpoint provides a full suite of
digital products, services and consulting for internet marketers. Viewpoint
employs its visualization technology to drive powerful customer-facing
marketing tools that enable marketers to showcase complex products in a simple
way, and allows for user interaction. Since 2003 we have extended the
historical imaging capabilities of our proprietary graphics technology to
develop a search business that provides internet consumers a flexible graphical
searching experience and an advertising delivery system that specializes in
deploying video and rich media advertising. The company supplements its
revenues in these product segments by using its in-house services team to build
sophisticated content that is used by customers in each product segment.
Finally, the Company previously licensed its Viewpoint Media Player platform to
internet publishers enabling them to deploy graphical sophisticated content at
their websites; however in June 2005, the Company began to enable free use of
its Viewpoint Media Player platform to facilitate growth in its search and
advertising systems segments.

Viewpoint
offers an online advertising campaign management and deployment product known
as the Unicast Advertising Platform or UAP. UAP permits publishers,
advertisers, and their agencies to manage the process of deploying online
advertising campaigns. This process includes creating the advertising assets,
selecting the sites on which the advertisements will be deployed, setting the
metrics (ad rotation, the frequency with which an ad may be deployed, and
others) associated with the campaign, ad deployment, and tracking of campaign
results. UAP enables users to manage advertising campaigns across many sites.

In
March 2004, Viewpoint entered the internet search business by launching a
toolbar search product which the Company calls the Viewpoint Toolbar. The
Viewpoint Toolbar attaches to the Internet Explorer browser, enabling web
surfers to conduct

15

---



internet
searches without leaving the web page they are viewing. When a user enters a
term or phrase in the search field of the Viewpoint Toolbar, search results
appear not only as text links listed on a search results page but also as
thumbnail icons of the web pages themselves in a tray that descends from the
Viewpoint Toolbar. Additionally, if a user visits certain internet search engine
sites the Viewpoint Toolbar will simultaneously receive a users search request
and provide the user comparative thumbnail search results in the Viewpoint
Toolbar search results tray.

The
Company executed a search advertising agreement with Yahoo! in 2004, which was
amended in 2006 and in 2007. The agreement provides that Yahoo! is the
exclusive provider of search results for the Viewpoint Toolbar through March
2008. Yahoo! pays a variable fee per month for access to the Companys
distribution and exclusive rights to display search results through the
Viewpoint Toolbar. Revenue generated is a function of the number of Viewpoint
Toolbars performing searches, the number of searches that are sponsored by
advertisers, the number of advertisements that are clicked on by Viewpoint
Toolbar searchers, the rate advertisers pay for those advertisements, and the
percentage retained by Yahoo! for providing the results. In October 2005, we
launched version 3.5 of the Viewpoint Toolbar which includes the capability to
manage digital photograph files on the users computer and provides the ability
to share the photographs at a website or purchase printed copies of the
photographs. We had licensed the trademark and internet url Fotomat.com for our
exclusive use in connection with the internet website for photograph and
printing services and computer software for organization, editing, managing,
sharing, and processing images and related data through the end of December
2006, with the ability to renew such license. In November 2006, Viewpoint
purchased the trademark and URL to Fotomat outright. The Fotomat Toolbar
provides enhanced photograph editing capabilities and an efficient method of
creating albums of photographs, which we believe will enhance the utility of the
toolbars for users, while simultaneously allowing users to use the Toolbar to
search the internet.

Prior
to launching our Search product we principally leveraged our distributed base
of Viewpoint Media Players (VMP) by licensing access to use the Viewpoint
Platform for display of content on a website. Viewpoint initiated internet
activities with the release of a beta version of the VMP in 1999.
Simultaneously, Viewpoint released a suite of content authoring tools
specifically designed to enable customers who published digital content on
their websites to create material that can be read or played back by the
VMP. With the VMP residing on the web consumers computer and interpreting
instructions delivered by our customers web sites, web sites can transmit
relatively small files that can yield rich media on the end users computer.
In this way, website owners can deploy digital content representing
three-dimensional views of their products, include pre-set animations, and
provide high-resolution two-dimensional views, video, audio, text, and other
media types. For example, we have licensing customers who are auto
manufacturers that deploy from their websites 3D representations of their
vehicles which viewers can interact with by opening doors, zooming in on
features, configuring accessories, or swapping colors. Our licensees helped
facilitate the growth of our distributed base of VMPs that we used to launch
our Search Toolbar business.

We
provide fee-based professional services for creating content and implementing
visualization systems. Clients include both content-related licensees and
advertisers who use UAP as well as internal services provided to our marketing
team. Our professional services group uses the Viewpoint platform, as well as a
spectrum of tools and other technologies to create enhanced rich media
solutions for a clients particular purpose, whether over the web, intranet
systems or offline media and applications. We provide the support our clients
need to implement the rich media content, to fully utilize the enhanced
software, or to maximize the branding potential of the advertising opportunity.
With the addition of Makos Advertising, a full service creative agency, in
April 2007 the Company began offering broadcast and video advertising content,
branding and graphic design. Clients supported during 2007 include America
Online, Toyota Motor Services, General Electric and Honda.

Viewpoint
has a limited operating history upon which an evaluation of the Company and its
prospects can be based. Viewpoint has had significant quarterly and annual
operating losses since its inception, and, as of September 30, 2007, had an
accumulated deficit of $ 293.0 million. Viewpoints prospects must be
considered in light of the risks and difficulties frequently encountered by
early stage technology companies. There can be no assurance that Viewpoint will
achieve or sustain profitability.

16

---



RESULTS OF
OPERATIONS

The following
table sets forth for the three and nine months ended September 30, 2007 and
2006, the Companys consolidated statements of operations expressed as a
percentage of total revenues for the periods indicated:

| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | --------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | --- | --------------------------------- |  | ---- | -- | ---- | --- | -- |  | ---- | --
| |                                                                                                           |  | Three Months Ended
  September 30, |     | Nine Months Ended
  September 30, | 
| |                                                                                                           |  |                                    |     |                                   | 
| |                                                                                                           |  | 2007                               |     | 2006                              |  | 2007 |    | 2006 |    
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |    
| | Statements of Operations Data                                                                             |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Revenues:                                                                                                 |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Advertising Systems                                                                                       |  |                                    | 44  | %                                 |  | 30   | %  |      | 39  | %  |  | 43   | % 
| | Search                                                                                                    |  |                                    | 34  |                                   |  | 46   |    |      | 41  |    |  | 37   |   
| | Services                                                                                                  |  |                                    | 21  |                                   |  | 24   |    |      | 20  |    |  | 19   |   
| | Licenses                                                                                                  |  |                                    | 1   |                                   |  |     |    |      |    |    |  | 1    |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Total revenues                                                                                            |  |                                    | 100 |                                   |  | 100  |    |      | 100 |    |  | 100  |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Cost of revenues:                                                                                         |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Advertising Systems                                                                                       |  |                                    | 30  |                                   |  | 13   |    |      | 23  |    |  | 28   |   
| | Search                                                                                                    |  |                                    | 1   |                                   |  | 1    |    |      | 1   |    |  | 1    |   
| | Services                                                                                                  |  |                                    | 17  |                                   |  | 14   |    |      | 15  |    |  | 14   |   
| | Licenses                                                                                                  |  |                                    |    |                                   |  |     |    |      |    |    |  |     |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Total cost of revenues                                                                                    |  |                                    | 48  |                                   |  | 28   |    |      | 39  |    |  | 43   |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Gross profit                                                                                              |  |                                    | 52  |                                   |  | 72   |    |      | 61  |    |  | 57   |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Operating expenses:                                                                                       |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Sales and marketing                                                                                       |  |                                    | 25  |                                   |  | 45   |    |      | 31  |    |  | 34   |   
| | Research and development                                                                                  |  |                                    | 20  |                                   |  | 31   |    |      | 21  |    |  | 24   |   
| | General and administrative                                                                                |  |                                    | 51  |                                   |  | 65   |    |      | 59  |    |  | 52   |   
| | Depreciation                                                                                              |  |                                    | 3   |                                   |  | 4    |    |      | 3   |    |  | 3    |   
| | Amortization of intangible assets                                                                         |  |                                    | 6   |                                   |  | 7    |    |      | 5   |    |  | 3    |   
| | Restructuring charges                                                                                     |  |                                    |    |                                   |  |     |    |      |    |    |  | 1    |   
| | Impairment of goodwill and other intangible
  assets                                                      |  |                                    |    |                                   |  | 332  |    |      |    |    |  | 83   |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Total operating expenses                                                                                  |  |                                    | 105 |                                   |  | 484  |    |      | 119 |    |  | 200  |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Gain/Loss from operations                                                                                 |  |                                    | (53 | )                                 |  | (412 | )  |      | (58 | )  |  | (143 | ) 
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Other income (expense):                                                                                   |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Interest and other income, net                                                                            |  |                                    | 2   |                                   |  | 3    |    |      | 2   |    |  | 2    |   
| | Interest expense                                                                                          |  |                                    | (4  | )                                 |  | (7   | )  |      | (5  | )  |  | (5   | ) 
| | Changes in fair values of warrants to
  purchase common stock and conversion feature of convertible notes |  |                                    | 50  |                                   |  | 32   |    |      |    |    |  | (1   | ) 
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Total Other income (expense)                                                                              |  |                                    | 48  |                                   |  | 28   |    |      | (3  | )  |  | (4   | ) 
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
|
| | Loss before provision for income taxes                                                                    |  |                                    | (5  | )                                 |  | (384 | )  |      | (61 | )  |  | (147 | ) 
| | Provision for income taxes                                                                                |  |                                    |    |                                   |  | 1    |    |      |    |    |  |     |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   
| | Net loss                                                                                                  |  |                                    | (5  | )%                                |  | (385 | )% |      | (61 | )% |  | (147 | )%
| |                                                                                                           |  |                                    |     |                                   |  |      |    |      |     |    |  |      |   

17

---



Critical Accounting Policies and Estimates

Viewpoints
discussion and analysis of its financial condition and results of operations
are based upon its consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. The Company bases its estimates on
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances though actual results may differ from
these estimates under different assumptions or conditions. For a complete
description of the Companys critical accounting policies and estimates refer
to the Companys 2006 Form 10-K and amendments.

Financial Performance Summary

Viewpoint
reported total revenue of $4.5 million for the third quarter of 2007 compared
to $3.2 million for the third quarter of 2006. The increase was primarily
driven by strong performance from the marketer direct sales area in both Ad
Systems and Services. Gross profit increased by $0.1 million to $2.4 million
for the third quarter of 2007 compared to $2.3 million in the third quarter of
2006. Operating loss for the third quarter of 2007 was $2.4 million compared to
$13.2 million in the third quarter of 2006. Net loss for the third quarter 2007
was $0.3 million, or a loss of $0.00 per share, compared to a net loss of $
12.3 million, or a loss of $0.18 per share, in the third quarter of 2006.

Viewpoint
reported total revenue of $11.7 million for the nine months ended September 30,
2007, compared to $12.9 million for the nine months ended September 30, 2006.
This variance was driven primarily by softer Ad Systems media services revenue
in the first half of 2007. Gross profit decreased to $7.1 million for the nine
months ended September 30, 2007 compared to $7.4 million for the prior period.
Operating loss for the nine months ended September 30, 2007, was $6.9 million
compared to $18.5 million in the nine months ended September 30, 2006. Net loss
for the nine months ended September 30, 2007, was $7.4 million, or a loss of
$0.10 per share, compared to a net loss of $19.1 million, or a loss of $0.29
per share, in the nine months ended September 30, 2006.

Viewpoints
cash, cash equivalents, and marketable securities as of September 30, 2007 were
$3.3 million. This can be compared to cash, cash equivalents, and marketable
securities of $4.3 million at December 31, 2006. The decrease in cash, cash
equivalents, and marketable securities is primarily due to increased accounts
receivable, driven by a sharp increase in Ad Systems media revenue, as well as
cash used to fund our loss from operations, offset by proceeds from the sale of
common stock and warrants.

Revenues

| |                     |  |                                |        |      |   |        |  |  |     |   
| | ------------------- |  | ------------------------------ | ------ | ---- | - | ------ |  |  | --- | --
| |                     |  | Months
  Ended
  September 30, |        | %    |  
| |                     |  |                                |        |      |  
| |                     |  | 2007                           |        | 2006 |   | Change | 
| |                     |  |                                |        |      |   |       
| |                     |  | (dollars
  in thousands)       |        |      |  
| | Three months ended: |  |                                |        |      |   |        |  |  |     |   
| | Advertising Systems |  | $                              | 2,004  |      |   | 961    |  |  | 109 |   
| | Search              |  |                                | 1,533  |      |   | 1,460  |  |  | 5   |   
| | Services            |  |                                | 954    |      |   | 786    |  |  | 21  |   
| | Licenses            |  |                                | 19     |      |   | 4      |  |  | 375 |   
| |                     |  |                                |        |      |   |        |  |  |     |   
| | Total revenues      |  | $                              | 4,510  |      | $ | 3,211  |  |  | 40  | % 
| |                     |  |                                |        |      |   |        |  |  |     |   
| |                     |  |                                |        |      |   |        |  |  |     |   
| | Nine months ended:  |  |                                |        |      |   |        |  |  |     |   
| | Advertising Systems |  | $                              | 4,540  |      | $ | 5,569  |  |  | (18 | ) 
| | Search              |  |                                | 4,744  |      |   | 4,822  |  |  | (2  | )%
| | Services            |  |                                | 2,353  |      |   | 2,430  |  |  | (3  | ) 
| | Licenses            |  |                                | 30     |      |   | 82     |  |  | (63 | ) 
| |                     |  |                                |        |      |   |        |  |  |     |   
| | Total revenues      |  | $                              | 11,667 |      | $ | 12,903 |  |  | (10 | )%
| |                     |  |                                |        |      |   |        |  |  |     |   

Viewpoint
offers an online advertising campaign management and deployment product. In
July 2005, the Company deployed a new product, incorporating the Viewpoint
Creative Innovator product and Unicasts UCP ad delivery system into one
system. This system, known as the Unicast Ad Platform (UAP), permits
publishers, advertisers, and their agencies to manage the process of deploying
online advertising campaigns. The Company charges customers on a cost per
thousand (CPM) impression basis, and recognizes revenue when the impressions
are served, so long as all other revenue recognition criteria are satisfied.
The Company also provides another advertising services product whereby the
Company purchases media space from web-site publishers and resells that space
to advertisers. The Company is the primary obligor in the transaction, has latitude
in establishing the price charged to the customer, performs part of the service
(in delivering the ad), has discretion in publisher selection, is involved with
the determination of the media purchased, and assumes the risks of collection
and therefore recognizes the entire amount billed to the customer as revenue
and the cost of the media space as cost of sales.

18

---



Additionally
in March 2004 Viewpoint entered the internet search business by launching the
Viewpoint Toolbar on a test basis. In April 2004, the Company ended the test
phase and began delivering the Viewpoint Toolbar Version 1.0. Search revenue is
generated when a customer uses the Viewpoint Toolbar to search the internet and
clicks on a sponsored advertisement included in the search results. The
Viewpoint Toolbars search results are provided by Yahoo!, which collects a fee
from the advertiser and remits a percentage of the fee to Viewpoint. Revenue
generated is a function of the number of Viewpoint Toolbars performing searches,
the number of searches that are sponsored by advertisers, the number of
advertisements that are clicked on by Viewpoint Toolbar searchers, the rate
advertisers pay for those advertisements, and the percentage retained by Yahoo!
for providing the results.

Viewpoint
has a creative services group that builds content for customers. Viewpoint
charges customers fees for these services based on the estimated time and
materials to complete a creative project, including an acceptable profit
margin. Revenue is recognized on a proportional performance basis if all other
revenue recognition criteria are satisfied.

The
Company also generated revenues by selling licenses to the Viewpoint graphical
platform principally to internet content publishers. In June 2005, Viewpoint
announced that for all non-special-purpose licenses, it was discontinuing the
practice of charging customers a license fee for the use of the Viewpoint Media
Player and related technologies. The Viewpoint Media Player will no longer
require a broadcast key to display content, thereby giving all developers a
free license to the Viewpoint Distribution Network. However, Viewpoint will
still charge for certain licenses requiring customization. By providing the
standard license for free, the Company plans to extend the Viewpoint Media
Players reach into new channels of distribution beyond the estimated 120
million computers it currently resides within. Viewpoint believes that this
strategy supports the advertising businessby potentially making the player
more pervasiveas well as providing stronger distribution for the search
business.

The
Company recognized $2.0 million in advertising systems revenue during the three
months ended September 30, 2007 compared to $1.0 million for the same period in
2006. This revenue was generated by delivering advertising impressions to
websites in several different formats, including video. The increase in Ad
Systems revenue is attributable to growth in the business from customers who
receive end-to-end full service interactive campaign management, and revenue
reflects a combination of media, media management and ad delivery (marketer
direct customers). Business associated with these marketer direct customers
may have lower margins as the cost of media is included in these products.

The
Company recognized $4.5 million in advertising systems revenue during the nine
months ended September 30, 2007 compared to $5.6 million for the same period in
2006. The decline in advertising systems revenue for the nine month period
ended September 30, 2007, is primarily attributable to a weaker media revenue
in the first half of 2007.

Search
revenues are generated when users of the Viewpoint Toolbar click on provided
search results that are provided by advertisers. These advertisers then pay a
fee to Yahoo!, which remits a percentage of the fee to Viewpoint. The Company
had installed 8.7 million Viewpoint Toolbars through December 2004, 21.4
million through December 2005, 26.6 million through December 2006 and 29.7
million through September 2007. Internet users can uninstall the Viewpoint
Toolbar, and through December 2004, 3.3 million users who had accepted the
installation of the Toolbar had later uninstalled it during 2004. The total of uninstalled
toolbars had increased to 9.9 million by December 2005, 13.5 million by
December 2006, and 15.6 million by September 2007. Search revenues were $1.5
million and $4.7 million for the three and nine month period ended September
30, 2007, respectively, compared to $1.5 million and $4.8 million for the three
and nine months ended September 30, 2006, respectively. The Company is
continuing to evaluate methods of enhancing the toolbar users experience on
the web through new features (including 3-D widget applications). If the
Company is unable to identify new enhancements to toolbar users, the Company
expects to see a decrease in revenue in this segment.

Services
revenues amounted to $1.0 million and $2.4 million for the three and nine
months ended September 30, 2007, respectively, as compared to $0.8 million and
$2.4 million for the same periods in 2006, respectively. The Company continued
to see a decline in customers use of traditional site-side content
development. The Company is addressing this decline by developing the segment
to support marketer direct customers as part of Viewpoints portfolio of
full-service advertising capabilities. In this capacity, the Company expects
see a higher volume of smaller deals that drive additional revenue to the Ad
Systems segment. Further growing those capabilities, the Company acquired Makos
Advertising in April 2007 and is incorporating that business into its services
segment. The Company will support the Makos Advertising business with the
services segment in the future.

The
Company essentially eliminated the sale of all but special-purposes licenses in
June 2005 and believes that revenues in this segment will be insignificant in
2007.

19

---



Cost of revenues

| |                                            |  |                        |       |      |   |        |   |  |     |   
| | ------------------------------------------ |  | ---------------------- | ----- | ---- | - | ------ | - |  | --- | --
| |                                            |  | September 30,          |       | %    |  
| |                                            |  |                        |       |      |   |       
| |                                            |  | 2007                   |       | 2006 |   | Change |  
| |                                            |  |                        |       |      |   |        |   | 
| |                                            |  | (dollars in thousands) |       |      |   |       
| | Three months ended:                        |  |                        |       |      |   |        |   |  |     |   
| | Advertising Systems                        |  | $                      | 1,350 |      | $ | 399    |   |  | 238 | % 
| | Percentage of Advertising Systems Revenues |  |                        | 67    | %    |   | 42     | % |  |     |   
| | Nine months ended:                         |  |                        |       |      |   |        |   |  |     |   
| | Advertising Systems                        |  | $                      | 2,715 |      | $ | 3,638  |   |  | (25 | )%
| | Percentage of Advertising Systems Revenues |  |                        | 60    | %    |   | 65     | % |  |     |   
| |                                            |  |                        |       |      |   |        |   |  |     |   
| | Three months ended:                        |  |                        |       |      |   |        |   |  |     |   
| | Search                                     |  | $                      | 29    |      | $ | 39     |   |  | (26 | )%
| | Percentage of Search Revenues              |  |                        | 2     | %    |   | 3      | % |  |     |   
| | Nine months ended:                         |  |                        |       |      |   |        |   |  |     |   
| | Search                                     |  | $                      | 100   |      | $ | 113    |   |  | (12 | )%
| | Percentage of Search Revenues              |  |                        | 2     | %    |   | 2      | % |  |     |   
| |                                            |  |                        |       |      |   |        |   |  |     |   
| | Three months ended:                        |  |                        |       |      |   |        |   |  |     |   
| | Services                                   |  | $                      | 747   |      | $ | 455    |   |  | 64  | % 
| | Percentage of Services Revenues            |  |                        | 78    | %    |   | 58     | % |  |     |   
| | Nine months ended:                         |  |                        |       |      |   |        |   |  |     |   
| | Services                                   |  | $                      | 1,737 |      | $ | 1,766  |   |  | (2  | )%
| | Percentage of Services Revenues            |  |                        | 74    | %    |   | 73     | % |  |     |   
| |                                            |  |                        |       |      |   |        |   |  |     |   
| | Three months ended:                        |  |                        |       |      |   |        |   |  |     |   
| | Licenses                                   |  | $                      | 3     |      | $ |       |   |  | N/A | % 
| | Percentage of Licenses Revenues            |  |                        | 16    | %    |   |       | % |  |     |   
| | Nine months ended:                         |  |                        |       |      |   |        |   |  |     |   
| | Licenses                                   |  | $                      | 3     |      | $ | 8      |   |  | (63 | )%
| | Percentage of Licenses Revenues            |  |                        | 10    | %    |   | 10     | % |  |     |   

Cost
of revenues for advertising systems was $1.4 million and $2.7 million for the
three and nine month periods, respectively, ended September 30, 2007 compared
to $0.4 million and $3.6 million for the same period last year. These costs
consist of the web-hosting and employee costs associated with serving
advertising content, costs for media space at websites when we package the
media space with delivery, and costs of developing certain advertisements in
contracts that include a combined price for developing creative material and
delivering that material. The three month variance reflects the increase in
costs associated with serving marketer direct customers, specifically the media
fees associated with that business. Advertising systems costs as a percentage
of the associated revenue increased to 67% in the three months ended September
30, 2007 from 42% in the same period in the prior year due to an increase in marketer direct business.
The decrease over the nine month period is attributable to weaker marketer
direct business during the first half of 2007.

The
Company incurs cost of revenues related to Search revenue for the hosting
services associated with providing search results. Bandwidth costs utilized in
providing results has been minimal, and the Company believes that these costs
will stay consistent.

Cost
of revenues for services consists primarily of salaries, consulting fees and
overhead for those who provide fee-based content creation and engineering
professional services. Cost of revenues for services was $0.7 million and $1.7
million for the three and nine month periods ended September 30, 2007,
respectively, compared to $0.5 million and $1.8 million for the same periods
last year. The increased costs during the three month period reflect the
expenses associated with adding Makos resources into the Services segment.

20

---



Sales and marketing

| |                              |  |                        |       |      |   |          |   |  |     |   
| | ---------------------------- |  | ---------------------- | ----- | ---- | - | -------- | - |  | --- | --
| |                              |  | September 30,          |       |      |   |         
| |                              |  | 2007                   |       | 2006 |   | % Change |  
| |                              |  |                        |       |      |  
| |                              |  | (dollars in thousands) |       |      |   |         
| | Three months ended:          |  | $                      | 1,118 |      | $ | 1,454    |   |  | (23 | )%
| | Sales and Marketing          |  |                        | 25    | %    |   | 45       | % |  |     |   
| | Percentage of total revenues |  |                        |       |      |   |          |   |  |     |   
| | Nine months ended:           |  | $                      | 3,635 |      | $ | 4,481    |   |  | (19 | )%
| | Sales and Marketing          |  |                        | 31    | %    |   | 35       | % |  |     |   
| | Percentage of total revenues |  |                        |       |      |   |          |   |  |     |   

Sales
and marketing expenses include salaries and benefits, sales commissions,
non-cash stock-based compensation charges, consulting fees, and travel and
entertainment expenses for our sales and marketing personnel. Sales and
marketing expenses also include the cost of programs aimed at increasing
revenue, such as advertising, trade shows, and public relations.

Sales
and marketing expenses of $1.1 million for the three month period ended
September 30, 2007 decreased by $0.3 million compared to the same period last
year. The decrease was principally due to the discontinuance of licensing fees
paid in association with use of the Fotomat brand.

Sales
and marketing expenses of $ 3.6 million for the nine months ended September 30,
2007 decreased by $0.8 million compared to the same period last year. The
decrease was principally due to the discontinuance of licensing fees paid in
association with use of the Fotomat brand.

Research and
development

| |                              |  |                        |       |      |   |          |   |  |     |   
| | ---------------------------- |  | ---------------------- | ----- | ---- | - | -------- | - |  | --- | --
| |                              |  | September 30,          |       |      |   |         
| |                              |  | 2007                   |       | 2006 |   | % Change |  
| |                              |  |                        |       |      |  
| |                              |  | (dollars in thousands) |       |      |   |         
| | Three months ended:          |  |                        |       |      |   |          |   |  |     |   
| | Research and development     |  | $                      | 892   |      | $ | 982      |   |  | (9  | )%
| | Percentage of total revenues |  |                        | 20    | %    |   | 31       | % |  |     |   
| | Nine months ended:           |  |                        |       |      |   |          |   |  |     |   
| | Research and development     |  | $                      | 2,506 |      | $ | 3,138    |   |  | (20 | )%
| | Percentage of total revenues |  |                        | 21    | %    |   | 24       | % |  |     |   

Research
and development expenses consist primarily of salaries and benefits for
software developers, and contracted development related to the Companys
product development efforts. The Company expenses as incurred research and
development costs necessary to establish the technological feasibility of its
internally developed software products and technologies. To date, the
establishment of technological feasibility of the Companys products and
general release has substantially coincided. As a result, the Company has not
capitalized any software development costs since costs qualifying for such
capitalization have not been significant. Additionally, the Company capitalizes
costs of software, consulting services, hardware and payroll-related costs
incurred to purchase or develop internal-use software during the application
development stage. The Company expenses costs incurred during preliminary
project assessment.

The
Companys research and development efforts are primarily directed at creating
new technology in an effort to improve the overall quality of Viewpoints
products: the Viewpoint Media Player and Enliven, its proprietary software
tools for creating digital content; advertising systems products; and the
Viewpoint Toolbar.

Research
and development expenses of $0.9 million for the three months ended September
30, 2007 decreased by $0.1 million from compared to the same period last year.
The decrease is primarily attributable to a reduction in the number of research
and development employees.

Research
and development expenses of $2.5 million for the nine months ended September
30, 2007 decreased by $0.6 million from compared to the same period last year.
The decrease is primarily attributable to a reduction in the number of research
and development employees.

21

---



General and
administrative

| |                              |  |                        |       |      |   |          |   |  |   |  
| | ---------------------------- |  | ---------------------- | ----- | ---- | - | -------- | - |  | - | -
| |                              |  | September 30,          |       |      |   |         
| |                              |  | 2007                   |       | 2006 |   | % Change |  
| |                              |  |                        |       |      |  
| |                              |  | (dollars in thousands) |       |      |   |         
| | Three months ended:          |  |                        |       |      |   |          |   |  |   |  
| | General and Administrative   |  | $                      | 2,301 |      | $ | 2,102    |   |  | 9 | %
| | Percentage of total revenues |  |                        | 51    | %    |   | 65       | % |  |   |  
| | Nine months ended:           |  |                        |       |      |   |          |   |  |   |  
| | General and Administsrative  |  | $                      | 6,886 |      | $ | 6,687    |   |  | 3 | %
| | Percentage of total revenues |  |                        | 59    | %    |   | 52       | % |  |   |  

General
and administrative expenses primarily consist of corporate overhead of the
Company, which includes salaries and benefits related to finance, human
resources, MIS, legal, and executive personnel along with other administrative
costs such as facilities costs, legal, accounting and investor relations fees,
and insurance expense.

General
and administrative expenses of $2.3 million for the three months ended September
30, 2007 increased by $0.2 million compared to the same period last year. The
increase is primarily attributable to an increase in the use of consultants and
an increase in bad debt expense.

General
and administrative expenses of $6.9 million for the nine months ended September
30, 2007 increased by $0.2 million compared to the same period last year
primarily due an increase in the use of consultants.

Depreciation expense

| |                              |  |                        |     |      |   |     |          |  |    |  
| | ---------------------------- |  | ---------------------- | --- | ---- | - | --- | -------- |  | -- | -
| |                              |  | September 30,          |     |      |   |    
| |                              |  | 2007                   |     | 2006 |   |     | % Change | 
| |                              |  |                        |     |      |   |    
| |                              |  | (dollars in thousands) |     |      |   |    
| | Three months ended:          |  |                        |     |      |   |     |          |  |    |  
| | Depreciation                 |  | $                      | 147 |      | $ | 113 |          |  | 30 | %
| | Percentage of total revenues |  |                        | 3   | %    |   | 4   | %        |  |    |  
| | Nine months ended:           |  |                        |     |      |   |     |          |  |    |  
| | Depreciation                 |  | $                      | 375 |      | $ | 337 |          |  | 11 | %
| | Percentage of total revenues |  |                        | 3   | %    |   | 3   | %        |  |    |  

Depreciation
expense for the three and nine months ended September 30, 2007 increased by
approximately $35 thousand over the same periods in the prior year because the
useful life of leasehold improvements at the Companys present New York, NY,
offices was shortened when the Company decided to move these operations to a
new location within the same city.

Amortization of
intangible assets

| |                                   |  |                        |     |      |   |     |          |  |    |  
| | --------------------------------- |  | ---------------------- | --- | ---- | - | --- | -------- |  | -- | -
| |                                   |  | September 30,          |     |      |   |    
| |                                   |  | 2007                   |     | 2006 |   |     | % Change | 
| |                                   |  |                        |     |      |   |    
| |                                   |  | (dollars in thousands) |     |      |   |    
| | Three months ended:               |  |                        |     |      |   |     |          |  |    |  
| | Amortization of intangible assets |  | $                      | 282 |      | $ | 222 |          |  | 27 | %
| | Percentage of total revenues      |  |                        | 6   | %    |   | 7   | %        |  |    |  
| | Nine months ended:                |  |                        |     |      |   |     |          |  |    |  
| | Amortization of intangible assets |  | $                      | 640 |      | $ | 443 |          |  | 44 | %
| | Percentage of total revenues      |  |                        | 5   | %    |   | 3   | %        |  |    |  

Amortization
of intangible assets relates to the amortization of patents, trademarks and
other intangible assets acquired in the Unicast acquisition and to the
amortization of customer relationships, tradenames and URLs and non-compete agreements
acquired in the Makos acquisition. The increases in amortization expense for
the three and nine month periods ended September 30, 2007 compared to the same
periods in the prior year are attributable to the acquisition of Makos
Advertising in April 2007.

22

---



Restructuring charges

| |                              |  |                        |   |      |   |          |   |  |      |   
| | ---------------------------- |  | ---------------------- | - | ---- | - | -------- | - |  | ---- | --
| |                              |  | September 30,          |   |      |   |         
| |                              |  | 2007                   |   | 2006 |   | % Change |  
| |                              |  |                        |   |      |  
| |                              |  | (dollars in thousands) |   |      |   |         
| | Three months ended:          |  |                        |   |      |   |          |   |  |      |   
| | Restructuring charges        |  | $                      |  |      | $ |         |   |  | N/A  | % 
| | Percentage of total revenues |  |                        |  | %    |   |         | % |  |      |   
| | Nine months ended:           |  |                        |   |      |   |          |   |  |      |   
| | Restructuring charges        |  | $                      |  |      | $ | 92       |   |  | (100 | )%
| | Percentage of total revenues |  |                        |  | %    |   | 1        | % |  |      |   

The
Company implemented a restructuring plan in March 2006 designed to streamline
the services business. Under this plan the Company eliminated 10 positions in
the services group and relocated the management of the group from its New York
office to its existing Los Angeles office. This restructuring plan was
completed by March 31, 2006 and the severance was paid in the second quarter of
2006. No restructuring costs have been incurred in the current period.

Interest and other
income, net

| |                                |  |                        |     |      |   |          |   |  |     |   
| | ------------------------------ |  | ---------------------- | --- | ---- | - | -------- | - |  | --- | --
| |                                |  | September 30,          |     |      |   |         
| |                                |  | 2007                   |     | 2006 |   | % Change |  
| |                                |  |                        |     |      |  
| |                                |  | (dollars in thousands) |     |      |  
| | Three months ended:            |  |                        |     |      |   |          |   |  |     |   
| | Interest and other income, net |  | $                      | 68  |      | $ | 95       |   |  | (28 | )%
| | Percentage of total revenues   |  |                        | 2   | %    |   | 3        | % |  |     |   
| | Nine months ended:             |  |                        |     |      |   |          |   |  |     |   
| | Interest and other income, net |  | $                      | 180 |      | $ | 264      |   |  | (32 | )%
| | Percentage of total revenues   |  |                        | 2   | %    |   | 2        | % |  |     |   

Interest
and other income, net, primarily consists of interest and investment income on
cash, cash equivalents and marketable securities. As a result, interest and
other income, net, fluctuates with changes in the Companys cash, cash
equivalents and marketable securities balances and market interest rates.

Interest expense

| |                              |                        |               |      |    |          |      |    |  |     |   
| | ---------------------------- | ---------------------- | ------------- | ---- | -- | -------- | ---- | -- |  | --- | --
| |                              |                        | September 30, |      |    |          |     
| |                              | 2007                   |               | 2006 |    | % Change |     
| |                              |                        |               |      |   
| |                              | (dollars in thousands) |               |      |    |         
| | Three months ended:          |                        |               |      |    |          |      |    |  |     |   
| | Interest expense             |                        | $             | (202 | )  | $        | (213 | )  |  | (5  | )%
| | Percentage of total revenues |                        |               | (4   | )% |          | (7   | )% |  |     |   
| | Nine months ended:           |                        |               |      |    |          |      |    |  |     |   
| | Interest expense             |                        | $             | (606 | )  | $        | (709 | )  |  | (15 | )%
| | Percentage of total revenues |                        |               | (5   | )% |          | (5   | )% |  |     |   

Interest
expense consists of interest paid and accrued, and amortization of debt
discount and debt issue costs on the Companys outstanding subordinated notes
and the debt assumed based upon the Unicast acquisition on January 3, 2005. The
decrease is primarily the result of a lowering of the effective borrowing rate
on the subordinated notes and a principal payment of $0.2 million resulting
from a restructuring that occurred in March 2007. The notes were executed and
funded during the first quarter of 2003. During March and June 2004, all of the
convertible notes were converted into shares of the Companys common stock.

23

---



Changes in fair value of warrants to purchase common stock

| |                                                                                                         |  |                        |       |      |   |          |    |  |     |   
| | ------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ---- | - | -------- | -- |  | --- | --
| |                                                                                                         |  | September 30,          |       |      |   |         
| |                                                                                                         |  | 2007                   |       | 2006 |   | % Change |   
| |                                                                                                         |  |                        |       |      |  
| |                                                                                                         |  | (dollars in thousands) |       |      |   |         
| | Three months ended:                                                                                     |  |                        |       |      |   |          |    |  |     |   
| | Changes in fair value of warrants to
 purchase common stock and conversion options of convertible notes |  | $                      | 2,254 |      | $ | 1,021    |    |  | 121 | % 
| | Percentage of total revenues                                                                            |  |                        | 50    | %    |   | 32       | %  |  |     |   
| | Nine months ended:                                                                                      |  |                        |       |      |   |          |    |  |     |   
| | Changes in fair value of warrants to
 purchase common stock and conversion options of convertible notes |  | $                      | (7    | )    | $ | (151     | )  |  | (95 | )%
| | Percentage of total revenues                                                                            |  |                        | (0    | )%   |   | (1       | )% |  |     |   

Based
on the provisions of SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities, and EITF Issue No. 00-19 Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Companys Own
Stock, the Company records gains and losses based upon changes in the
Companys common stock value and the number of common stock equivalents that
the associated financial instruments may be settled in.

For
the three month periods ended September 30, 2007 and 2006, the Company recorded
a gain based on the change in the fair value of the warrants of $2.3 million
and $1.0 million, respectively, related to an decrease in the Companys stock
price. For the nine month periods ended September 30, 2007 and 2006, the
Company recorded expense of less than $0.1 million and $0.2 million,
respectively, based on the change in the fair values of the warrants related to
an increase in the Companys stock price. In addition, the Company issued 3.3
million warrants in the May 2007 private placement.

Provision for income
taxes

| |                              |  |                        |    |      |   |          |   |  |     |   
| | ---------------------------- |  | ---------------------- | -- | ---- | - | -------- | - |  | --- | --
| |                              |  | September 30,          |    |      |   |         
| |                              |  | 2007                   |    | 2006 |   | % Change |  
| |                              |  |                        |    |      |  
| |                              |  | (dollars in thousands) |    |      |   |         
| | Three months ended:          |  |                        |    |      |   |          |   |  |     |   
| | Provision for income taxes   |  | $                      | 17 |      | $ | 30       |   |  | (43 | )%
| | Percentage of total revenues |  |                        |   | %    |   | 1        | % |  |     |   
| | Nine months ended:           |  |                        |    |      |   |          |   |  |     |   
| | Provision for income taxes   |  | $                      | 45 |      | $ | 56       |   |  | (20 | )%
| | Percentage of total revenues |  |                        |   | %    |   |         | % |  |     |   

Provision
for income taxes consists primarily of certain minimum state income taxes as
well as foreign tax withholdings.

Factors That May
Affect Future Results of Operations

We believe
that in the future our results of operations could be affected by various
factors including the following. For a complete listing of risk factors you
should read the Companys Form 10K/A for the year ended December 31, 2006:

|  |                                                                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a
 history of losses and expect to incur losses in the future, which may cause
 our share price to decline.                                                                                                                                               
|  |                                                                                                                                                                                                                                                                   
| | We may have
 to obtain financing on less favorable terms, which could dilute current
 stockholders ownership interests in the company.                                                                                                                           
|  |                                                                                                                                                                                                                                                                   
| | Our stock
 may be de-listed from NASDAQ, which may adversely affect our ability to raise
 capital and stockholders ability to sell their shares.                                                                                                                 
|  |                                                                                                                                                                                                                                                                   
| | If our
 common stock were to be de-listed from NASDAQ after December 31, 2008 we
 would be in default of certain loan covenants which could require the
 accelerated payment of our $3.4 million subordinated loan that is scheduled
 to mature in September 2009.
|  |                                                                                                                                                                                                                                                                   
| | Our efforts
 to distribute our graphically enhanced toolbar may experience setbacks
 limiting or reducing our search revenue.                                                                                                                                     
|  |                                                                                                                                                                                                                                                                   
| | The success
 of our graphically enhanced search operations depends on users satisfaction
 with search results supplied by Yahoo!.                                                                                                                                 

24

---



|  |                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be
  unable to successfully replace our search results vendor when our
  distribution contract with Yahoo! Expires in March 2008.                                                                                                
|  |                                                                                                                                                                                                                                         
| | Our software
  products may be wrongly labeled as spyware or adware which might lead to its
  uninstallation causing a decrease in our revenues.                                                                                        
|  |                                                                                                                                                                                                                                         
| | Our business
  may not grow if the internet advertising market does not continue to develop
  or if we are unable to successfully implement our business model.                                                                         
|  |                                                                                                                                                                                                                                         
| | Our failure
  to successfully compete may hinder our growth.                                                                                                                                                                            
|  |                                                                                                                                                                                                                                         
| | Our revenues
  will be subject to seasonal fluctuations.                                                                                                                                                                                
|  |                                                                                                                                                                                                                                         
| | We may enter
  into business combinations and strategic alliances which could be difficult
  to integrate and may disrupt our business.                                                                                                 
|  |                                                                                                                                                                                                                                         
| | We may need
  to develop new products or other untested methods of increasing sales with
  our existing products or distribution network to generate sales and if we are
  unsuccessful the growth of our business may cease or decline.
|  |                                                                                                                                                                                                                                         
| | We will need
  to keep pace with rapid technological changes in the internet search and
  advertising industries.                                                                                                                       
|  |                                                                                                                                                                                                                                         
| | Our ad
  campaign management and deployment solution may not be successful and may
  cause business disruption.                                                                                                                         
|  |                                                                                                                                                                                                                                         
| | We might
  experience significant defects in our products.                                                                                                                                                                              
|  |                                                                                                                                                                                                                                         
| | Our
  technical systems are vulnerable to interruption and damage.                                                                                                                                                                      
|  |                                                                                                                                                                                                                                         
| | Our
  management team has only recently started working together.                                                                                                                                                                       
|  |                                                                                                                                                                                                                                         
| | Our stock is
  volatile, which could subject us to class action litigation.                                                                                                                                                             
|  |                                                                                                                                                                                                                                         
| | Our charter
  documents could make it more difficult for an unsolicited third party to
  acquire us.                                                                                                                                    
|  |                                                                                                                                                                                                                                         
| | The market
  for digital visualizations solutions is characterized by rapidly changing
  technology, and if we do not respond in a timely manner, our products and
  technologies may not succeed in the marketplace.                   
|  |                                                                                                                                                                                                                                         
| | We may be
  unable to protect our intellectual property rights.                                                                                                                                                                         
|  |                                                                                                                                                                                                                                         
| | We may be
  liable for infringing on the intellectual property rights or others.                                                                                                                                                        
|  |                                                                                                                                                                                                                                         
| | Regulatory
  and legal uncertainties could harm our business.                                                                                                                                                                           
|  |                                                                                                                                                                                                                                         
| | Changes in
  regulations or user concerns regarding privacy and protection of user data
  could adversely affect our business.                                                                                                          
|  |                                                                                                                                                                                                                                         
| | Internet
  security poses a risk to our business.                                                                                                                                                                                       

Recent Accounting Pronouncements

In
June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), which
clarifies the accounting for uncertainty in income taxes recognized in a
companys financial statements. The interpretation prescribes a recognition
threshold and measurement attribute criteria for the financial statement
recognition and measurement of an uncertain tax position taken or expected to
be taken in a tax return. The interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company adopted the provisions of FIN
48 on January 1, 2007. Since the Company does not have any uncertain tax
positions, the implementation of FIN 48 did not have a material impact on its
consolidated financial statements. At January 1, 2007 and September 30, 2007
there were no accrued liabilities for tax-related interest and penalties, which
the Company recognizes as interest expense and general and administrative
expense, respectively, as incurred. Since the Company has incurred net losses
for tax purposes since inception, all tax years remain open to examination by
major taxing jurisdictions, which are the federal government and states of New
York and California.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (FAS
157). FAS 157 establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The changes to current practice
resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. We will be required to adopt the
provisions of FAS 157 beginning with our first quarter ending March 31, 2008.
We do not believe that the adoption of the provisions of FAS 157 will
materially impact our consolidated financial statements.

25

---



In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  Including an Amendment of FASB Statement No.
115 which is effective for fiscal years beginning after November 15, 2007.
This statement permits an entity to choose to measure many financial
instruments and certain other items at fair value at specified election dates.
Subsequent unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings. We are currently evaluating the
potential impact of this statement.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and
Capital Resources

Cash,
cash equivalents, and marketable securities totaled $3.3 million at September
30, 2007, down from $4.3 million at December 31, 2006.

| |                                         |  |                                   |      |      |   |      |  
| | --------------------------------------- |  | --------------------------------- | ---- | ---- | - | ---- | -
| |                                         |  | Nine Months Ended
  September 30, |     
| |                                         |  | 2007                              |      | 2006 |  
| |                                         |  |                                   |     
| |                                         |  | (dollars in millions)             |     
|
| | Cash used in operating
  activities     |  | $                                 | (5.1 | )    | $ | (4.2 | )
| | Cash used in investing
  activities     |  |                                   | (2.7 | )    |   | (2.0 | )
| | Cash provided by financing
  activities |  |                                   | 5.1  |      |   | 1.7  |  

Operating activities

In
the nine months ended September 30, 2007, cash used in operating activities was
$5.1 million compared to $4.2 million in the nine months ended September 30,
2006. The use of cash in operating activities during the nine months ended
September 30, 2007 was attributable primarily to a net loss of $7.4 million and
an increase in accounts receivable of $1.3 million offset by stock-based
compensation expense of $1.3 million and depreciation and amortization of $1.2
million.

The
use of cash in operating activities during the nine months ended September 30,
2006 was attributable primarily to a net loss of $19.1 million offset by
impairment of goodwill and intangibles of $10.7 million, a decrease in accounts
receivable of $1.8 million and stock-based compensation charges of $1.6
million.

Investing activities

In
the nine months ended September 30, 2007, cash used in investing activities of
$2.7 million was primarily attributable to net purchases of marketable
securities of $1.6 million, an increase in restricted cash of $0.4 million in
connection with entering into a lease agreement for new office space in New
York, NY, and to cash used in the acquisition of Makos of $0.4 million net of
cash acquired.

In
the nine months ended September 30, 2006, cash used in investing activities of
$2.0 million was primarily attributable to net purchases of marketable
securities of $1.7 million and purchase of property and equipment of $0.2
million

Financing activities

In
the nine months ended September 30, 2007, net cash provided by financing
activities of $5.1 million was primarily attributable of the issuance of common
stock and warrants for net proceeds of $5.0 million.

In
the nine months ended September 30, 2006, net cash provided by financing
activities of $1.7 million was primarily attributable to the exercise of stock
options of $2.4 million which was offset by cash used for the repayment of debt
totaling $0.7 million.

As
of September 30, 2007, the Company had cash commitments totaling approximately
$12.5 million through 2017, related mainly to long-term notes and future
minimum lease payments for office space, and equipment.

26

---



|                                                |  |                          |        |                         |   |                         |  |                         |       |                         |   |            |  |   |       |  |   |       | 
|----------------------------------------------- |  | ------------------------ | ------ | ----------------------- | - | ----------------------- |  | ----------------------- | ----- | ----------------------- | - | ---------- |  | - | ----- |  | - | ----- | 
|                                                |  | Payments
  Due By Period |       
|                                                |  |                          |       
|                                                |  | (in
  thousands)         |       
|                                                |  | Total                    |        | 1-Oct-2007to31-Dec-2007 |   | 1-Jan-2008to31-Dec-2008 |  | 1-Jan-2009to31-Dec-2010 |       | 1-Jan-2011to31-Dec-2012 |   | Thereafter | 
|                                                |  |                          |        |                         |   |                         |  |                         |       |                         |   |            | 
|Long-Term Debt Obligations                      |  | $                        | 3,350  |                         | $ |                        |  | $                       |      |                         | $ | 3,350      |  | $ |      |  | $ |      | 
|Operating Lease Obligations                     |  |                          | 6,123  |                         |   | 277                     |  |                         | 894   |                         |   | 1,543      |  |   | 1,097 |  |   | 2,312 | 
|Short-Term Debt Obligations                     |  |                          | 99     |                         |   |                        |  |                         | 99    |                         |   |           |  |   |      |  |   |      | 
|Interest Payments on Long-Term Debt Obligations |  |                          | 485    |                         |   | 54                      |  |                         | 204   |                         |   | 160        |  |   | 67    |  |   |      | 
|Unicast Debt Obligations                        |  |                          | 2,134  |                         |   | 26                      |  |                         | 350   |                         |   | 700        |  |   | 1,058 |  |   |      | 
|Purchase Obligations                            |  |                          | 298    |                         |   | 298                     |  |                         |      |                         |   |           |  |   |      |  |   |      | 
|                                                |  |                          |        |                         |   |                         |  |                         |       |                         |   |            |  |   |       |  |   |       | 
|Total                                           |  | $                        | 12,489 |                         | $ | 655                     |  | $                       | 1,547 |                         | $ | 5,753      |  | $ | 2,222 |  | $ | 2,312 | 
|                                                |  |                          |        |                         |   |                         |  |                         |       |                         |   |            |  |   |       |  |   |       | 

Long-Term Debt

In
March 2007, the Company and a holder of the subordinated debt amended the 4.95%
subordinated note in the principal amount of $3.1 million (referred to herein
as the Holder) to extend the maturity date from March 31, 2008 to September
30, 2009 in exchange for the payment by Viewpoint of $0.2 million to the holder
of the subordinated note, and adding $0.3 million to the principle of the note.
In addition, the amendment waived the requirement that the Companys common
stock remain listed on a national stock exchange until December 31, 2008. Also
see Note 5 to the accompanying financial statements.

Other Transactions

On
March 12, 2007, the Company entered into a Purchase Agreement to acquire all of
the outstanding partnership interests of Makos Advertising, L.P. On April 30,
2007, the Company completed the acquisition. In exchange for the all of the
outstanding partnership interests of Makos Advertising, L.P., the Company
issued an aggregate of 0.7 million shares of Company common stock to the
partners of Makos Advertising, L.P. and paid $0.6 million in cash.

The
Company also paid off outstanding debt in the form of a line of credit owed by
Makos Advertising, L.P. in the amount of approximately $0.1 million and assumed
outstanding debt relating to another line of credit in the amount of approximately
$0.1 million.

The
Company entered into a Securities Purchase Agreement with certain accredited
investors, dated as of May 4, 2007, under which the Company issued 13.3 million
shares of the its common stock in a private placement to such accredited
investors at a purchase price of $0.40 per share (resulting in aggregate gross
proceeds of $5.3 million ). The investors in the transaction also received
warrants to purchase an additional 3.3 million shares of common stock at an
exercise price of $0.45 per share (subject to certain adjustments). Such
warrants are not exercisable for six months following issuance and have an
aggregate term of three and one-half years. On May 7, 2007 the Company
announced the closing of the transaction and the receipt of $5.3 million.

On
October 18, 2007, Viewpoint Corporation (Viewpoint) entered into a Purchase
Agreement to acquire all of the outstanding partnership interests of Springbox,
Ltd. (Springbox), interactive marketing firm located in Austin, TX, with
digital web marketing and creative solutions. The agreement contains customary
representations, warranties and covenants of the sellers and Viewpoint. The
transaction closed on November 1, 2007.

Under
the terms of the agreement, Viewpoint paid, at the closing, approximately $5.0
million in cash and issued 714,286 shares of its common stock. The amount of
cash payable by Viewpoint was subject to adjustment based on the net book value
of Springbox as of the closing date of the transaction and (ii) the subsequent
receipt by Viewpoint of accounts receivable outstanding on the closing date of
the transaction. In addition, the sellers of Springbox are entitled to an
EBITDA based earnout. Viewpoint has the option to pay cash or shares of its
common stock in order to satisfy any obligation pursuant to the earnout.

In
addition, Viewpoint entered into a Securities Purchase Agreement with certain
accredited investors, dated as of October 18, 2007, pursuant to which Viewpoint
issued 15,714,286 shares of Viewpoint common stock in a private placement to
such accredited investors at a purchase price of $0.70 per share (resulting in
aggregate gross proceeds of $11,000,000). The investors in the transaction also
received warrants to purchase an additional 4,714,286 shares of common stock
    at an exercise price of $0.84 per share (subject to certain adjustments).
    The Company also paid a placement fee of approximately $0.7 million and issued
warrants to purchase 314,286 shares of its common stock (on the same terms as
those issued to investors) to Merriman, Curhan Ford & Co., as placement
agent. Such warrants are not exercisable for six months following issuance and
have an aggregate term of five and one-half years. Of the gross proceeds of $11 million
 received from investors, approximately $5.0 million was used to purchase Springbox.

27

---



The
securities offered and sold in the private placement have not been registered
under the Securities Act of 1933, as amended, and were sold in reliance upon
the exemption from securities registration afforded by Regulation D. Each
investor represented to Viewpoint that it is an Accredited Investor, as
defined in Rule 501 of Regulation D under the Securities Act. In connection
with the private placement, Viewpoint entered into a Registration Rights
Agreement with the investors pursuant to which Viewpoint is required to file a
registration statement with the SEC covering the shares within 45 days of the
closing of the private placement.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

The
Company is subject to concentration of credit risk and interest rate risk
related to cash, cash equivalents and marketable securities. Credit risk is
managed by limiting the amount of securities placed with any one issuer,
investing in high-quality marketable securities and securities of the U.S.
government and limiting the average maturity of the overall portfolio. The
majority of the Companys portfolio, which is classified as available-for-sale,
is comprised of fixed income securities that are subject to the risk of market
interest rate fluctuations, and all of the Companys securities are subject to
risks associated with the ability of the issuers to perform their obligations
under the instruments. The Company may suffer losses in principal if forced to
sell securities, which have declined in market value due to changes in interest
rates.

Item 4. Disclosure Controls and Procedures

Based
on our managements evaluation, with the participation of our chief executive
officer and our chief financial officer, as of September 30, 2007, our chief
executive officer and chief financial officer have concluded that our
disclosure controls and procedures (as defined in rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended, (the Exchange Act)) were
effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the SEC and is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding disclosure.

There
have been no changes in our internal control over financial reporting
identified in the evaluation that occurred during the third quarter of our
fiscal year 2007 that have materially affected, or are reasonably likely to
affect, our internal control over financial reporting.

28

---



PART II - OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits

|                 |  |                                                                                              
|---------------- |  | ---------------------------------------------------------------------------------------------
|Exhibit
  Number |  | Exhibit Title                                                                                
|                 |  |                                                                                              
|31.1             |  | Certification
  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                   
|                 |  |                                                                                              
|31.2             |  | Certification
  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                   
|                 |  |                                                                                              
|32.1             |  | Certification
  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
|                 |  | Sarbanes-Oxley
  Act of 2002.                                                                

SIGNATURES

Pursuant to
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.

|                          |  |                         |                                        
|------------------------- |  | ----------------------- | ---------------------------------------
|                          |  | VIEWPOINT
  CORPORATION
|                          |  |                         |                                        
|Dated:
  November 9, 2007 |  | By:                     | /s/ PATRICK
  VOGT                     
|                          |  |                        
|                          |  |                         | Patrick Vogt                           
|                          |  |                         | President
  and Chief Executive Officer
|                          |  |                         |                                        
|Dated:
  November 9, 2007 |  | By:                     | /s/
  CHRISTOPHER C. DUIGNAN           
|                          |  |                        
|                          |  |                         | Christopher
  C. Duignan               
|                          |  |                         | Chief
  Financial Officer              

29

---