8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 1, 2012

Commission File Number:  00025940

	Glowpoint, Inc.
(Exact name of registrant as specified in its charter)
Delaware		770312442
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)
430 Mountain Avenue, Suite 301, Murray Hill, New Jersey 07974 (Address of principal executive offices)
973-855-3411 (Registrant’s telephone number) Not Applicable (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On October 1, 2012, Glowpoint, Inc. (the “Company”), and GPAV Merger Sub Inc., its wholly owned subsidiary, completed the acquisition of Affinity VideoNet, Inc. (“Affinity”), as more fully described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2012 (the “Original 8-K”). This Amendment No. 1 to the Original 8-K is being filed solely to include the financial statements and financial information required under Item 9.01, which were excluded from the original filing in reliance on paragraph (a)(4) of Item 9.01 of Form 8-K.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

The audited financial statements for Affinity as of December 31, 2011 and 2010 and for the years then ended, and the notes related thereto, are attached hereto as Exhibit 99.2 and are incorporated herein by reference. The unaudited financial statements of Affinity as of September 30, 2012 and 2011 and for each of the three and nine month periods then ended, and the notes related thereto, are attached hereto as Exhibit 99.3 and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed consolidated balance sheets as of September 30, 2012 of the Company and Affinity, and the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011 and the three and nine months ended September 30, 2012 of the Company and Affinity, and the notes related thereto, are attached hereto as Exhibit 99.4 and are incorporated herein by reference.

(d) The following exhibits are included with this report:

Exhibit
Number	Description
23.1±	Consent of Anton Collins Mitchell LLP, Independent Auditors
99.1*	Press Release, dated October 1, 2012
99.2±	Audited financial statements of Affinity VideoNet, Inc. as of December 31, 2011 and 2010 and for each of the years then ended, and the notes related thereto.
	Unaudited financial statements of Affinity VideoNet, Inc. as of September 30, 2012 and 2011 and for each of the three and nine month periods then ended, and the notes related thereto.
99.3±	Unaudited pro forma condensed consolidated balance sheets as of September 30, 2012 of Glowpoint, Inc. and Affinity VideoNet, Inc. and unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011 and the three and nine months ended September 30, 2012 of Glowpoint, Inc. and Affinity VideoNet, Inc., and the notes related thereto.

* Previously filed.

± Filed herewith.

SIGNATURE

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 hereunto duly authorized.

Dated: December 17, 2012	GLOWPOINT, INC. /s/ Tolga Sakman
	Tolga Sakman Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
23.1±	Consent of Anton Collins Mitchell LLP, Independent Auditors
99.1*	Press Release, dated October 1, 2012
99.2±	Audited financial statements of Affinity VideoNet, Inc. as of December 31, 2011 and 2010 and for each of the years then ended, and the notes related thereto.
	Unaudited financial statements of Affinity VideoNet, Inc. as of September 30, 2012 and 2011 and for each of the nine month periods then ended, and the notes related thereto.
99.3±	Unaudited pro forma condensed consolidated balance sheets as of September 30, 2012 of Glowpoint, Inc. and Affinity VideoNet, Inc. and unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011 and the nine months ended September 30, 2012 of Glowpoint, Inc. and Affinity VideoNet, Inc., and the notes related thereto.

* Previously filed.

± Filed herewith.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement of Glowpoint, Inc. on Form S-­8 (No. 333-150436) of our report dated May 25, 2012, on our audits of the financial statements of Affinity VideoNet, Inc. as of December 31, 2011 and 2010 and for each of the years then ended, which is included in this Form 8-K/A of Glowpoint, Inc. to be filed on or about December 17, 2012.

/s/ Anton Collins Mitchell LLP

Denver, Colorado

December 14, 2012

EX-99.2

Exhibit 99.2

AFFINITY VIDEONET, INC.

As of September 30, 2012 and for the Nine Months Ended

September 30, 2012 and 2011 (Unaudited)

As of and for the Years Ended

December 31, 2011 and 2010 (Audited)

Page 1

Exhibit 99.2

AFFINITY VIDEONET, INC.

Table of Contents

	Page
Financial Statements
Independent Auditors' Report	3
Balance Sheets	4
Statements of Income	5
Statement of Stockholders' Equity	6
Statements of Cash Flows	7
Notes to Financial Statements	8

Page 2

Exhibit 99.2

Independent Auditors' Report

Board of Directors

Affinity VideoNet, Inc.

Denver, Colorado

We have audited the balance sheets of Affinity VideoNet, Inc. (the “Company”) as of December 31, 2011 and 2010, and the related statements of income, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Affinity VideoNet, Inc. at December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Anton Collins Mitchell LLP

May 25, 2012

Denver, Colorado

Page 3

Exhibit 99.2

AFFINITY VIDEONET, INC.

BALANCE SHEETS

	September 30,		December 31,		December 31,
ASSETS	2012		2011		2010
	(Unaudited)
Current assets:
Cash and cash equivalents	$	993,961	$	495,496	$	1,156,417
Accounts receivable, net	1,145,447		1,177,284		703,982
Unbilled revenue	55,555		91,702		—
Income tax refund	83,284		—		—
Inventories, net	64,868		84,426		83,352
Prepaid expenses and other current assets	104,024		90,161		57,989
Lease receivable- current	26,477		—		—
Deferred income tax assets	34,995		30,591		49,980
Total current assets	2,508,611		1,969,660		2,051,720
Property and equipment, net	409,582		495,247		424,887
Goodwill	4,291,049		4,291,049		4,291,049
Intangible assets, net	1,660,986		1,791,837		1,966,304
Debt issuance costs, net	129,018		158,791		198,489
Lease receivable- non-current	55,552		—		—
Deposits	—		15,303		15,303
Total assets	$	9,054,798	$	8,721,887	$	8,947,752
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	971,564	$	982,046	$	1,011,391
Accrued liabilities	497,288		364,864		138,074
Income tax payable	—		145,884		—
Current maturities of long-term debt	—		—		50,000
Total current liabilities	1,468,852		1,492,794		1,199,465
Long-term debt, net of current maturities and unamortized discount	3,044,969		2,957,083		4,230,764
Warrant liabilities	583,713		431,251		266,570
Dividends payable	847,615		—		—
Stock option liability	236,475		—		—
Deferred income tax liabilities	454,799		471,367		398,607
Total liabilities	6,636,423		5,352,495		6,095,406
Commitments and contingencies
Stockholders' equity:
Series A Redeemable Convertible Preferred stock, $0.01 par value; authorized
1,700,000 shares; 1,620,766 issued and outstanding at September 30, 2012,
December 31, 2011 and 2010, respectively; liquidation value of $3,247,615 at
September 30, 2012, $3,081,983 at December 31, 2011 and $2,874,207 at
December 31, 2010.	16,207		16,207		16,207
Common stock, $0.01 par value; authorized 8,000,000 shares; 2,572,968
issued and outstanding at September 30, 2012, December 31, 2011 and 2010	25,730		25,730		25,730
Additional paid-in-capital	1,535,448		2,542,265		2,383,063
Retained earnings	840,990		785,190		427,346
Total stockholders' equity	2,418,375		3,369,392		2,852,346
Total liabilities and stockholders' equity	$	9,054,798	$	8,721,887	$	8,947,752

The accompanying notes are an integral part of these financial statements

Page 4

Exhibit 99.2

AFFINITY VIDEONET, INC.

STATEMENTS OF INCOME

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)			(Unaudited)
Revenues:
Gross sales	$	8,029,112		$	8,721,237		$	11,396,937		$	9,639,611
Discounts and allowances	(2,847		)	(1,887		)	(1,370		)	(10,170		)
Net sales	8,026,265			8,719,350			11,395,567			9,629,441
Operating expenses:
Cost of sales	3,917,909			4,315,562			5,711,627			4,690,862
Selling, general and administrative	3,256,369			3,069,758			3,984,048			3,155,528
Depreciation and amortization	259,875			235,105			321,369			279,530
Loss on extinguishment of debt	—			—			—			53,119
Total operating expenses	7,434,153			7,620,425			10,017,044			8,179,039
Operating income	592,112			1,098,925			1,378,523			1,450,402
Other income (expense):
Other income	80,304			77,857			104,020			1,886
Interest expense	(367,098		)	(460,468		)	(592,937		)	(832,484		)
Change in fair value of warrant liability	(152,462		)	(123,511		)	(164,681		)	(47,334		)
Loss on foreign currency transactions	(3,852		)	(6,338		)	(7,785		)	(2,288		)
Total other expense	(443,108		)	(512,460		)	(661,383		)	(880,220		)
Income before income taxes	149,004			586,465			717,140			570,182
Income taxes	93,204			287,695			359,296			253,710
Net income	$	55,800		$	298,770		$	357,844		$	316,472

The accompanying notes are an integral part of these financial statements

Page 5

Exhibit 99.2

AFFINITY VIDEONET, INC.

STATEMENT OF STOCKHOLDER'S EQUITY

									Additional
	Preferred Stock					Common Stock			Paid-in			Retained
	Shares		Amount			Shares	Amount		Capital			Earnings		Total
Balance at January 1, 2010	1,654,532		$	16,545		2,572,968	$	25,730	$	2,407,725		$	110,874	$	2,560,874
Redemption of preferred stock	(33,766	)	(338		)	—	—		(24,662		)	—		(25,000		)
Net income	—		—			—	—		—			316,472		316,472
Balance at December 31, 2010	1,620,766		$	16,207		2,572,968	$	25,730	$	2,383,063		$	427,346	$	2,852,346
Stock based compensation	—		—			—	—		159,202			—		159,202
Net income	—		—			—	—		—			357,844		357,844
Balance at December 31, 2011	1,620,766		$	16,207		2,572,968	$	25,730	$	2,542,265		$	785,190	$	3,369,392
Stock based compensation (Unaudited)	—		—			—	—		15,128			—		15,128
Reclassification of stock option to liability
(Unaudited)	—		—			—	—		(174,330		)	—		(174,330		)
Dividends declared (Unaudited)	—		—			—	—		(847,615		)	—		(847,615		)
Net income (Unaudited)	—		—			—	—		—			55,800		55,800
Balance at September 30, 2012 (Unaudited)	1,620,766		$	16,207		2,572,968	$	25,730	$	1,535,448		$	840,990	$	2,418,375

The accompanying notes are an integral part of these financial statements

Page 6

Exhibit 99.2

AFFINITY VIDEONET, INC.

STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	55,800		$	298,770		$	357,844		$	316,472
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization	259,875			235,105			321,369			279,530
Amortization of debt issuance costs	29,773			29,773			39,698			62,664
Loss on extinguishment of debt	—			—			—			53,119
Change in fair value of warrant liabilities	152,462			123,511			164,681			47,334
Amortization of debt discount	32,886			32,886			43,848			—
Deferred income tax expense (benefit)	(20,972		)	41,524			92,149			253,710
Provisions for losses on accounts receivable	13,948			7,200			14,800			6,000
Inventory reserve	6,652			952			941			—
Stock based compensation	15,128			119,401			159,202			—
Change in fair value of stock based liability	62,145			—			—			—
Loss on disposal of property and equipment	10,458			—			—			—
Changes in assets and liabilities:
Accounts receivable	17,889			(504,406		)	(488,102		)	45,726
Unbilled revenue	36,147			(124,194		)	(91,702		)	—
Income tax refund	(83,284		)	—			—			—
Inventories	12,906			(131,285		)	(2,015		)	(83,352		)
Prepaid expenses and other current assets	1,440			(35,972		)	(32,172		)	(12,352		)
Lease receivable	(82,029		)	—			—			—
Accounts payable	(10,482		)	304,015			(29,345		)	321,980
Income tax payable (receivable)	(145,884		)	184,908			145,884			—
Accrued liabilities	132,424			249,702			226,790			(7,100		)
Net cash provided by operating activities	497,282			831,890			923,870			1,283,731
Cash flows from investing activities
Purchase of property and equipment	(53,817		)	(208,429		)	(217,262		)	(134,664		)
Deposits	—			—			—			(3,210		)
Net cash used in investing activities	(53,817		)	(208,429		)	(217,262		)	(137,874		)
Cash flows from financing activities
Proceeds from issuance of long-term debt	—			—			—			4,500,000
Debt issuance costs	—			—			—			(198,489		)
Repayment of long-term debt	(645,000		)	(876,793		)	(1,867,529		)	(4,919,491		)
Advance (repayment) on revolving line of credit	700,000			—			(500,000		)	—
Redemption of preferred stock	—			—			—			(25,000		)
Net cash provided by (used in) financing activities	55,000			(876,793		)	(2,367,529		)	(642,980		)
Net increase (decrease) in cash and cash equivalents	498,465			(253,332		)	(1,660,921		)	502,877
Cash and cash equivalents, beginning of period	(504,504		)	1,156,417			1,156,417			653,540
Cash and cash equivalents, end of period	$	(6,039	)	$	903,085		$	(504,504	)	$	1,156,417
Supplemental disclosure of cash flow information:
Cash paid for interest	$	304,218		$	344,142		$	469,985		$	932,872
Cash paid for taxes	$	155,000		$	55,000		$	115,000		$	—
Dividends declared	$	847,615		$	—		$	—		$	—
Reclassification of previously recognized stock based compensation to a liability	$	174,330		$	—		$	—		$	—
Detachable stock warrants issued in connection with long-term debt	$	—		$	—		$	—		$	219,236

The accompanying notes are an integral part of these financial statements

Page 7

Exhibit 99.2

AFFINITY VIDEONET, INC.

Notes to Financial Statements

Information as of September 30, 2012 and for the Nine Months Ended

September 30, 2012 and 2011 is unaudited

Note 1 - Description of Business and Summary of Significant Accounting Policies

Nature of Operations

Affinity VideoNet, Inc. (the “Company”) was organized on May 31, 2008 as a C Corporation. The Company provides video conferencing services through a network of affiliate video conferencing facilities primarily in the United States. In addition, the Company sells video conferencing equipment and provides support for networks that host video conferences.

Interim Financial Statements

In the opinion of the Company's management, the accompanying unaudited financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its financial position as of September 30, 2012 and the results of its operations and its cash flows for the nine months ended September 30, 2012 and 2011. These interim financial statements are condensed and therefore do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”). The actual results for the nine months ended September 30, 2012 are not necessarily indicative of the results that can be expected for the year ended December 31, 2012.

Use of Estimates

The accompanying financial statements were prepared in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures 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 and such differences could be material.

Cash and Cash Equivalents

The Company considers temporary cash investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. All of the Company's non-interest bearing cash balances were fully insured at September 30, 2012 due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning in 2013, insurance coverage will revert to $250,000 per depositor at each financial institution, and the Company's non-interest bearing cash balances may again exceed federally insured limits. Interest-bearing amounts on deposit at September 30, 2012, December 31, 2011 and 2010 were not in excess of federally insured limits.

Page 8

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

Accounts Receivable and Credit Policies

At the time the accounts receivable are originated, the Company considers a reserve for doubtful accounts based on the creditworthiness of its customers. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover potential future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical performance that is tracked by the Company on an ongoing basis. The Company's allowance for doubtful accounts as of September 30, 2012, December 31, 2011 and 2010 was $29,990, $25,270 and $18,441, respectively. Management believes the allowance for doubtful accounts is adequate; however, actual credit losses may be higher or lower than the recorded allowance.

Lease Receivable

Revenue earned on leased equipment is recognized using an effective interest method over the life of the agreement. For the period ending September 30, 2012, the Company recognized $6,095 in rental income and $2,833 of interest income from leased equipment. At September 30, 2012, the outstanding lease receivable was $82,029, of which $26,477 is shown as a current asset. Leased equipment did not exist in previous periods.

Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or market (net realizable value) and consist of video conference equipment totaling $64,868, $84,426 and $83,352 at September 30, 2012, December 31, 2011 and 2010, respectively.

Property and Equipment, net

Property and equipment is stated at cost. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets, ranging from three to ten years.

Goodwill

Goodwill impairment tests are performed on an annual basis, at December 31, or when events or circumstances dictate. In these tests, the fair values of each reporting unit, or segment, is compared to the carrying amount of that reporting unit in order to determine if impairment is indicated. If so, the implied fair value of the reporting unit's goodwill is compared to its carrying amount and the impairment loss is measured by the excess of the carrying value over fair value. For the years ended December 31, 2011 and 2010, the Company determined that the fair value of goodwill exceeded the carrying amount and therefore, no impairment loss was recognized. As the Company's policy is to perform this analysis annually on December 31, no impairment tests have been performed as of September 30, 2012. Management is not aware of any circumstances that would result in an impairment as of September 30, 2012.

Page 9

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

Intangible Assets, net

Intangible assets were recorded at fair value at the time of acquisition. The affiliate facility network is amortized on a straight-line basis over 15 years and customer lists are amortized on an accelerated basis over 5 years based on the attrition rate of the existing relationships.

Debt Issuance Costs, net

Costs related to obtaining long-term debt are capitalized and amortized over the term of the related debt using the effective interest rate method for cost incurred on term loans and the straight line method for costs incurred on the line of credit. Amortization of $29,773 was charged to interest expense for each of the nine months ended September 30, 2012 and 2011. For the years ended December 31, 2011 and 2010, amortization of $39,698 and $62,664, respectively, was charged to interest expense. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and expensed.

As disclosed in Note 8, the Company's debt facilities were paid in full on October 1, 2012 and all unamortized debt issuance costs were expensed at that date.

Long-Lived Assets

The Company reviews its long-lived assets including identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company evaluates the recoverability of its long-lived assets based on estimated undiscounted future cash flows and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset. If impaired, the long-lived asset is written down to its estimated fair value. For the nine months ended September 30, 2012 and 2011 and for the years ended December 31, 2011 and 2010, the Company determined that the fair value of the Company's long-lived assets exceeded the carrying amount and no impairment loss was recorded.

Dividends

Dividends declared on stock that is accounted for as equity is reflected as a liability when declared.

Revenue Recognition

For video conferencing services, the Company recognizes revenue at the time that a video conference takes place. The Company typically has service agreements with each of its site affiliates regarding the responsibilities of each party including the billing, collection, charges and reimbursement of video conferencing fees and expenses.

Page 10

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

The Company also recognizes revenue related to the sale of inventory. Revenue is recognized when all of the following criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the fee for the arrangement is fixed or determinable; and (iv) collectability is reasonably assured.

The Company also sells inventory and managed services in a bundled arrangement. The Company follows the accounting guidance prescribed in ASC 605-25, Multiple-Element Arrangements, and has determined that the bundled managed services offering contains multiple deliverables that include:

1. Video equipment; and

2. Managed services, which includes bridging services, technical support, and equipment, network and software maintenance.

The guidance requires an entity to measure and allocate revenue to an arrangement using management's estimated selling price (“ESP”) of the deliverables if it does not have vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”) of selling prices. The Company sells equipment and managed services in separate stand-alone transactions; however, the Company cannot demonstrate that a substantial majority of the standalone sales are priced within a relatively narrow range. Additionally, the Company has determined that TPE available is not sufficient, relevant or reliable for establishing selling price; therefore, the Company measures and allocates revenues in its multiple deliverable arrangements based on ESP.

For the unit of account that represents the equipment, the Company has determined the element has value on a stand-alone basis as the customer could resell the delivered item as is, and has established an estimated selling price separately for the delivered element using prices at which the Company would transact if the deliverable were sold regularly on a standalone basis. In estimating the selling price, the Company has considered all reasonably available information, including market data and conditions as well as entity-specific factors. The Company recognizes revenue on the equipment using the same principles as when it sells inventory on a stand-alone basis.

For the unit of account that represents the managed services, the Company has established an estimated selling price considering profit margin for similar arrangements, effect of competitors on the Company's services, and other market constraints. The Company recognizes revenue in accordance with accounting provisions for service deliverables using the proportional performance model ratably over the life of the agreement.

Advanced Billings

Billings in advance of revenue recognition are deferred until earned, but have not been reflected in these financial statements. As of September 30, 2012, advance billings net of earnings was $26,567. Advance billings did not exist in previous periods.

Page 11

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense for the nine months ended September 30, 2012 and 2011 was $46,956 and $44,811, respectively. Advertising expense for the years ended December 31, 2011 and 2010 was $55,437 and $99,369, respectively.

Income Taxes

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using current enacted tax rates. The provision for income taxes includes the amount due for the current period and the change in deferred taxes between periods. The Company provides a valuation allowance against its deferred tax assets when it determines that it is more likely than not that the deferred tax assets may not be realized.

The Company follows FASB ASC 740, Income Taxes, to account for any uncertainty in income taxes with respect to the accounting for all tax positions taken (or expected to be taken) on any income tax return. This guidance applies to all open tax periods in all tax jurisdictions in which the Company is required to file an income tax return. Under GAAP, in order to recognize an uncertain tax benefit the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50 percent likely to be realized upon resolution of the benefit. The Company performs a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740. Based on its review, the Company did not recognize any uncertain tax positions in the financial statements for the nine months ended September 30, 2012 or for the years ended December 31, 2011 and 2010. The Company's tax returns for 2008 through 2011 are subject to examination by the Internal Revenue Service and state taxing authorities. Interest and penalties, if any, would be included in selling, general and administrative expenses.

Management makes judgments regarding the interpretation of tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions as well as by the Internal Revenue Service.

Stock-Based Compensation

The Company accounts for stock-based transactions using a fair-value-based method. Accordingly, compensation cost for stock is recognized on a straight-line basis over the requisite service (vesting) period for the entire award.

Page 12

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, lease receivable, accounts payable, warrant liabilities, and long-term debt. The carrying value of cash and cash equivalents, accounts receivable, lease receivable and accounts payable approximate their fair values due to their short maturities. Warrant liabilities are measured at fair value in the accompanying balance sheet. The carrying value of long-term debt approximates its fair value due to terms available to the Company for similar debt instruments.

The Company follows FASB ASC 820, Fair Value Measurements, for nonrecurring measurements of non-financial assets and non-financial liabilities. FASB ASC 820 establishes a common definition of fair value to be applied when GAAP requires the use of fair value, establishes a framework for measuring fair value, and expands disclosures about such fair value measurements. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on a measurement date.

Fair value is a market-based measure considered from the perspective of a market participant that holds the asset or owes the liability, rather than an entity-specific measure. Therefore, when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability on a measurement date. FASB ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities to which the Company has access at a measurement date.

Level 2: Observable inputs other than Level 1 quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs for which little or no market data exists, and for which the Company must develop its own assumptions regarding the assumptions that market participants would use in pricing the asset or liability, including assumptions regarding risk.

Page 13

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

Because of inherent uncertainties in the valuation of assets or liabilities for which there are no observable inputs, those estimated fair values may differ significantly from the values that may have been used had a readily observable market for the assets or liabilities existed.

The Company utilizes the best available information in measuring fair value.

The following table summarizes, by level within the fair value hierarchy, the warrant liabilities at September 30, 2012 (unaudited):

Description	Level 1		Level 2		Level 3		Total
Warrant liabilities	$	—	$	—	$	583,713	$	583,713

The following table summarizes, by level within the fair value hierarchy, the warrant liabilities at December 31, 2011:

Description	Level 1		Level 2		Level 3		Total
Warrant liabilities	$	—	$	—	$	431,251	$	431,251

The following table summarizes, by level within the fair value hierarchy, the warrant liabilities at December 31, 2010:

Description	Level 1		Level 2		Level 3		Total
Warrant liabilities	$	—	$	—	$	266,570	$	266,570

The following is a reconciliation of the beginning and ending balances of the warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2012 and years ended December 31, 2011 and 2010:

Description	Warrant Liabilities
Balance, January 1, 2010	$	—
Fair value of warrants issued in connection with debt financing	219,236
Change in fair value of warrant liabilities	47,334
Balance, December 31, 2010	266,570
Change in fair value of warrant liabilities	164,681
Balance, December 31, 2011	431,251
Change in fair value of warrant liabilities (unaudited)	152,462
Balance, September 30, 2012 (unaudited)	$	583,713

The amount of total expense recognized for the nine months ended September 30, 2012 and 2011 included in earnings attributable to the change in fair value relating to warrant liabilities was $152,462 and $123,511, respectively. The amount of total expense recognized for the years ended December 31, 2011 and 2010 included in earnings attributable to the change in fair value relating to warrant liabilities is $164,681 and $47,334, respectively.

Page 14

Exhibit 99.2

Note 1 - Description of Business and Summary of Significant Accounting Policies (Continued)

Management's estimate of the fair value of the warrant liabilities is based on enterprise valuation models using both the income and market approaches.

As disclosed in Note 8, the Company settled the warrant liability on October 1, 2012 in connection with the sale and merger agreement.

Concentrations of Credit Risk

The Company grants credit in the normal course of business to customers. The Company periodically performs credit analyses and monitors the financial condition of its customers to reduce credit risk.

During the nine months ended September 30, 2012, two customers accounted for 27% of total revenues, and for the same period in 2011, two customers accounted 30% of total revenues. At September 30, 2012, two customers accounted for 42% of total accounts receivable.

During the year ended December 31, 2011, two customers accounted for 27% of total revenues, and for the same period in 2010, two customers accounted for 29% of total revenues. At December 31, 2011 and 2010, two customers accounted for 53% and one customer accounted for 24% of total accounts receivable, respectively.

Historically, a large percentage of the Company's revenue has been the result of sales to customers in the human resource and recruiting industry.

Note 2 - Balance Sheet Disclosures

Property and equipment, net consisted of the following:

	September 30,		December 31,
	2012		2011		2010
	(unaudited)
Software	$	447,266	$	414,819	$	329,755
Office equipment	203,975		219,580		130,831
Computer equipment	104,777		93,463		50,946
Furniture	85,794		92,990		92,058
	841,812		820,852		603,590
Less accumulated depreciation	432,230		325,605		178,703
	$	409,582	$	495,247	$	424,887

Depreciation expense for the nine months ended September 30, 2012 and 2011 was $129,024 and $104,254, respectively. Depreciation expense for the years ended December 31, 2011 and 2010 was $146,902 and $105,063, respectively.

Page 15

Exhibit 99.2

Note 2 - Balance Sheet Disclosures (Continued)

Intangible assets consisted of the following:

	September 30,		December 31,
	2012		2011		2010
	(unaudited)
Affiliate facility network	$	2,317,011	$	2,317,011	$	2,317,011
Customer lists	100,000		100,000		100,000
	2,417,011		2,417,011		2,417,011
Less accumulated amortization	756,025		625,174		450,707
	$	1,660,986	$	1,791,837	$	1,966,304

Amortization expense for each of the nine months ended September 30, 2012 and 2011 was $130,851. Amortization expense for each of the years ended December 31, 2011 and 2010 was $174,467.

Future amortization expense of intangible assets is as follows:

December 31,
2012	$	174,467
2013	162,801
2014	154,467
2015	154,467
2016	154,467
Thereafter	991,168
	$	1,791,837

Note 3 - Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence. The Company expects future taxable income and, therefore, believes it will recognize future benefits related to its deferred tax assets. The Company's temporary differences result primarily from depreciation and amortization, nondeductible accruals, and goodwill and intangibles.

Page 16

Exhibit 99.2

Note 3 - Income Taxes (Continued)

Net deferred tax assets and liabilities in the accompanying balance sheets consisted of the following:

	September 30,			December 31,
	2012			2011			2010
	(unaudited)
Deferred tax assets:
Accrued liabilities	$	34,995		$	30,591		$	40,710
Warrant liabilities	145,939			84,806			18,934
Stock-based compensation	24,873			18,869			—
NOL carryover	—			—			9,270
	205,807			134,266			68,914
Deferred tax liabilities:
Property and equipment	(143,559		)	(174,239		)	(125,026		)
Goodwill and intangibles	(482,052		)	(400,803		)	(292,515		)
	(625,611		)	(575,042		)	(417,541		)
Net deferred tax liability	$	(419,804	)	$	(440,776	)	$	(348,627	)

Deferred taxes are presented in the accompanying balance sheet as follows:

	September 30,			December 31,
	2012			2011			2010
	(unaudited)
Current deferred tax assets	$	34,995		$	30,591		$	49,980
Long-term deferred tax liabilities	(454,799		)	(471,367		)	(398,607		)
Total net deferred tax liability	$	(419,804	)	$	(440,776	)	$	(348,627	)

Page 17

Exhibit 99.2

Note 3 - Income Taxes (Continued)

Components of the provision for income taxes reflected in the statements of income are as follows:

	Nine Months Ended September 30,					Years Ended December 31,
	2012			2011		2011		2010
	(unaudited)			(unaudited)
Current expense:
Federal	$	97,050		$	207,261	$	227,075	$	—
State	17,126			38,910		40,072		—
	114,176			246,171		267,147		—
Deferred (benefit) expense:
Federal	(17,826		)	35,295		78,327		215,653
State and local	(3,146		)	6,229		13,822		38,057
	(20,972		)	41,524		92,149		253,710
Total income tax expense	$	93,204		$	287,695	$	359,296	$	253,710

The Company's effective tax rate is different from the statutory tax rate primarily due to state taxes and permanent differences including meals and entertainment expenses and non-deductible stock based compensation.

Note 4 - Long-Term Debt

Long-term debt consisted of the following:

	September 30,		December 31,
	2012		2011		2010
	(unaudited)
Main Street Capital - Term Loan A	$	487,471	$	1,132,471	$	2,000,000
Main Street Capital - Term Loan B	2,000,000		2,000,000		2,000,000
Main Street Capital - Revolving Credit Facility	700,000		—		500,000
	3,187,471		3,132,471		4,500,000
Less current portion	—		—		50,000
Less unamortized discount	142,502		175,388		219,236
	$	3,044,969	$	2,957,083	$	4,230,764

Page 18

Exhibit 99.2

Note 4 - Long-Term Debt (Continued)

The Company's Loan and Security Agreement with Hercules Technology Group (“Hercules”), that had a maturity date of June 1, 2012, was collateralized by a security interest in all assets of the Company and was subject to certain restrictive covenants. As discussed below, this Note was refinanced on December 31, 2010. Term Loan A had an interest rate of 12% per annum and a deferred interest rate of 2.50% per annum. Term Loan A required monthly principal and interest payments totaling approximately $91,000 through maturity. Term Loan B had an interest rate of 18% per annum, payable monthly, and a deferred interest rate of 2% per annum. The Revolving Credit Facility had an interest rate of 13% per annum, payable monthly.

On December 31, 2010, the Company executed a new loan agreement with Main Street Capital (“MS Loan Agreement”) to refinance the Hercules debt. The MS Loan Agreement facility is comprised of the following: (i) Term Loan A ($2.0 million), (ii) Term Loan B ($2.0 million), (iii) Revolving Credit Facility ($1.0 million), and (iv) additional term loan availability totaling $4.0 million subject to certain restrictions as noted within the MS Loan Agreement. Under the terms of the MS Loan Agreement, the Company is required to pay 50% of its excess cash flow, as defined in the Loan Agreement, on a quarterly basis beginning March 31, 2011 through the earlier of the repayment of all long-term debt obligations or December 31, 2015. The Company may prepay the loan obligations in whole, or in part, without penalty. All payments will be allocated first to the Revolving Credit Facility, then to Term Loan A and then to Term Loan B. The interest rate on the Revolving Credit Facility is fixed at 9.00% per annum and Term Loan A and B is fixed at 13.00% per annum. All interest is payable monthly. Term Loan A also has a deferred interest rate of 1.00% per annum that the Company may pay currently without penalty. The Revolving Credit Facility has an unused commitment fee of 0.375% per annum, payable monthly. The loans are collateralized by a security interest in all assets of the Company and are subject to certain restrictive covenants. As of September 30, 2012, December 31, 2011 and 2010, the Company was in compliance with all financial covenants.

In accordance with the accounting guidance associated with the accounting for a modification or exchange of debt instruments, the Company performed an analysis to determine whether the refinancing would be recorded as an extinguishment of debt or a modification of debt. The Company determined that the refinancing qualified as a debt extinguishment. As a result, the Company recognized a loss on debt extinguishment related to unamortized debt issuance costs in the amount of $53,119 during the year ended December 31, 2010.

Maturities of long-term debt as of December 31, 2011 are as follows:

Year Ending December 31,
2012	$	—
2013	—
2014	—
2015	3,132,471
	$	3,132,471

Page 19

Exhibit 99.2

Note 4 - Long-Term Debt (Continued)

In connection with the closing of the sale and merger agreement (see Note 8) the Company's outstanding debt, including interest, was paid in full.

Warrants

On May 30, 2008, in accordance with the Hercules Loan and Security Agreement and on May 29, 2009, as part of the amended loan agreement, the Company granted 133,500 and 67,531 warrants, respectively, to purchase fully paid and non-assessable shares of Series A Preferred Stock at an exercise price of $1.48 per share. The warrants commenced on the date of grant and are exercisable for a period ending upon the later to occur of: (i) ten (10) years from the date of grant for the 133,500 warrants and seven (7) years from the date of grant for the 67,531 warrants or (ii) three (3) years after an initial public offering. The warrants allow for either cash or net share settlement at the sole discretion of the holder. On each date of grant, the Company determined the fair value of warrants to be de minimus.

On December 31, 2010, in accordance with the Main Street Loan Agreement, the Company granted 125,278 warrants to purchase fully paid and non-assessable shares of common stock at an exercise price of $0.01 per share. The warrants commenced on the date of grant and are exercisable for a period ending upon the later to occur of: (i) ten (10) years from the date of grant (ii) any merger or consolidation into an entity that is not the Company or a wholly-owned subsidiary of the Company (iii) any sale or disposition of all or substantially all of the assets of the Company (iv) any public offering of equity securities of the Company (v) any other transaction involving a “change of control” as defined in the MS Loan Agreement. The Company has an option to call the warrants, exercisable after the later of (i) the third anniversary of the original issue date, or (ii) the date that the Company has repaid the loans in full under the MS Loan Agreement, but no later than five and one-half (5 ½) years after the original issue date, to purchase the warrants for cash. The holder has an option to put the warrants to the Company, exercisable at any time from and after the five and one-half (5 ½) year anniversary of the original issue date, and the Company shall have the obligation to purchase the warrants from holder, for cash, to the extent exercised. The warrants allow for either cash or net share settlement at the sole discretion of the holder. On the date of grant, the Company determined the fair value of warrants to be $219,236 which was recorded as debt discount and is being amortized over the term of the MS Loan Agreement using the effective interest rate method.

The ability of a warrant holder to exercise a put option obligating the Company to purchase warrants from the holder or to exercise warrants for redeemable preferred shares requires the financial instruments to be classified as liabilities and measured at fair value at each reporting period. As a result, the Company measured the initial value of the warrants on the warrant issue date and will continue to remeasure the fair value at each reporting period until the warrants are either exercised or expire. At September 30, 2012, December 31, 2011 and 2010, the fair value of these financial instruments totaled $583,713, $431,251 and $266,570, respectively. Refer to Note 1 for a description of the valuation methods used to determine the fair value of these warrants at the valuation dates. The warrants may be transferred subject to the Company's stockholders agreement and federal and state securities laws. In connection with the closing of the sale and merger agreement (see Note 8) the Company's outstanding warrant liability was paid in full.

Page 20

Exhibit 99.2

Note 5 - Employee Benefit Plan

The Company maintains a Section 401(k) plan (the “Plan”). Eligible employees may make voluntary contributions to the Plan. In addition, the Company may, at its discretion, make matching contributions to the Plan. For the nine months ended September 30, 2012 and 2011 and for the years ended December 31, 2011 and 2010, the Company made no matching contributions.

Note 6 - Stockholders' Equity

Common Stock

As of September 30, 2012, December 31, 2011 and 2010, the Company had authorized 8,000,000 shares of common stock.

On June 30, 2011, the Company's stockholders approved an amendment to the Certificate of Incorporation to convert one million authorized shares of common stock to non-voting common stock. The holders of non-voting common stock shall have no voting rights. Other than with respect to voting rights, the holders of non-voting common stock shall have rights identical to the holders of voting stock. As of September 30, 2012 and December 31, 2011, there were no issued and outstanding non-voting shares of common stock.

Redeemable Convertible Preferred Stock

As of September 30, 2012, December 31, 2011 and 2010, the Company has authorized 1,700,000 shares of Series A Redeemable Convertible Preferred Stock (“Series A Preferred Stock”). At inception, the Company issued 1,654,532 shares for total net proceeds of $2,424,270. During 2010, the Company redeemed 33,766 shares. The total redemption cost including unpaid dividends was $25,000.

Dividend Rights

The holders of the Series A Preferred Stock accrue cumulative dividends on a monthly basis at the rate per share equal to 7.00% per annum and are entitled to receive any accumulated and unpaid dividends when and as declared by the Board of Directors.

On August 12, 2012, the Board of Directors declared that all unpaid dividends on the Series A Preferred Stock would be payable upon closing of the sale and merger agreement (see Note 8). As of September 30, 2012 the Company has accrued cumulative unpaid dividends of $847,615. This liability was paid on October 1, 2012.

Page 21

Exhibit 99.2

Note 6 - Stockholders' Equity (Continued)

Conversion Rights

Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, into such number of duly authorized, validly issued, fully paid and non-assessable shares of common stock as is determined by dividing the original Series A Preferred Stock issue price by the conversion price in effect on the date the certificate is surrendered for conversion. The initial Series A conversion price per share shall be the original Series A issue price, provided, however, that the Series A conversion price shall be subject to adjustment for certain dilutive events.

Each share of Series A Preferred Stock shall automatically be converted into shares of common stock at the conversion price in effect at the time, immediately upon the earlier of (i) a firm commitment underwritten public offering pursuant to a registration statement filed with the Securities and Exchange Commission and declared effective under the Securities Act of 1933, as amended, that results in net cash proceeds to the Company (after deducting applicable underwriting discounts and commissions) of not less than $40,000,000 and that has an offering price per share to the public of not less than two times the conversion price then in effect (as adjusted to reflect stock dividends, stock splits, combinations and the like subsequent to the Series A Preferred Stock issue date), or (ii) the affirmative vote or written consent of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock.

Anti-Dilution Protection

The Series A Preferred Stock conversion ratio is subject to adjustment, calculated in accordance with the amended and restated articles of incorporation, if the Company issues securities at a price per share that is less than the current conversion price of the Series A Preferred Stock. As a privately held entity, the common stock is not readily convertible to cash. Therefore, the fair value of this embedded conversion feature has not been reflected in the financial statements because the embedded conversion feature would not meet the criteria to be classified as a derivative if it were a freestanding instrument.

Liquidation Preference

In accordance with the articles of incorporation, upon any liquidation, dissolution, or winding up of the Company, the holders of the Series A Preferred Stock shall be entitled to either convert their shares of Series A Preferred Stock into shares of common stock or receive, prior to and in preference to any distribution of any of the Company's assets or surplus funds to the holders of any other classes and series of the Corporation's capital stock including, without limitation, an amount per share equal to the sum of (i) the original Series A issue price (as adjusted to reflect stock dividends, stock splits, combinations and the like), and (ii) all accrued but unpaid dividends on the Series A Preferred Stock (whether or not declared). If, upon the occurrence of a liquidation the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the full preferential amount each such holder is otherwise entitled to receive.

Page 22

Exhibit 99.2

Note 6 - Stockholders' Equity (Continued)

At September 30, 2012, December 31, 2011 and 2010, the liquidation preference of the Series A Preferred Stock was approximately $3,248,000, $3,082,000 and $2,874,000, respectively.

Redemption

Commencing on June 1, 2014, any holder of then outstanding shares of Series A Preferred Stock may require the Company to redeem the outstanding shares of Series A Preferred Stock held by such holder in three equal increments on the redemption date and the two next-succeeding anniversaries thereof for the sum of the original issue price plus all accrued but unpaid dividends.

Voting Rights

Each holder of outstanding shares of Series A Preferred Stock shall have the right to one vote for each share of common stock into which such holder's shares of Series A Preferred Stock could then be converted.

Redeemable Stock

FASB ASC 480, Distinguishing Liabilities from Equity, provides guidance on how an entity classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement requires that mandatorily redeemable stock that an entity may be required to redeem for cash at a fixed or determinable date, depending on whether the holders elect to convert or redeem, be classified as a liability and reported at the estimated fair value when the holders elect to redeem. The Company's redeemable preferred stock and common stock will be reclassified as a liability at the date the holders of the preferred stock and common stock notify the Company of their intent to redeem.

As discussed in Note 8, on October 1, 2012 the Company's Series A Preferred Stock was converted into common stock, and all common stock of the Company was acquired in connection with the sale and merger agreement.

Stock Options

During 2011, the Company adopted a Stock Option Plan (the “Plan”) that provides for the grant of either qualified or nonqualified stock options to purchase the Company's non-voting common stock to employees, officers, consultants and non-employee directors of the Company.

The Company is authorized to grant stock options to eligible persons for up to 492,050 shares of non-voting common stock. The number and terms of options granted under the Plan are determined by the Board of Directors when granted. These options are exercisable for a period determined by the Board of Directors not to exceed ten years following the date of grant.

Page 23

Exhibit 99.2

Note 6 - Stockholders' Equity (Continued)

A summary of the status of the Company's Plan as of December 31, 2011 is presented below:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2010	—	$	—
Granted	232,303	1.76
Exercised	—	—
Forfeited or expired	—	—
Outstanding at December 31, 2011	232,303	$	1.76	9.50	$	104,536
Options exercisable at December 31, 2011	175,427	$	1.76	9.50	$	78,942

Stock-based compensation for the nine months ended September 30, 2012 and 2011 was $77,273 and $119,401, respectively, and $159,202 for the year ended December 31, 2011.

On September 26, 2012 the Company entered into an agreement with all holders of outstanding stock options to fully vest and cancel existing shares. Prior to September 26, 2012, the Company recorded $15,128 of stock compensation expense. In exchange for this cancellation, the Company is obligated to pay an amount equal to $236,475 upon closing of the sale and merger agreement (see Note 8). In accordance with GAAP, the Company reclassified the previously recorded stock based compensation of $174,330 from equity and recorded the additional incremental compensation of $62,145. At September 30, 2012, the Company has recorded a stock option liability of $236,475.

No options were granted during the nine months ended September 30, 2012.

Note 7 - Operating Lease Commitments

The Company leased office space under a non-cancellable operating lease that expired on January 31, 2012. Since February 1, 2012, the Company has leased its office space on a month to month basis.

Rent expense under operating leases for the nine months ended September 30, 2012 and 2011 was $106,679 and $108,120, respectively. Rent expense under operating leases for the years ended December 31, 2011 and 2010 was $120,626 and $104,758, respectively.

Monthly rental payments under the Company's office lease agreements increase incrementally each year. In accordance with FASB ASC 840, Leases, the Company recognizes lease expense on a straight-line basis over the lease term. As of September 30, 2012, December 31, 2011 and 2010, the amount of lease expense recognized in excess of cash payments was $5,610, $6,486 and $5,886, respectively.

Page 24

Exhibit 99.2

Note 8 - Subsequent Events

Effective October 1, 2012, the Company completed a sale and merger transaction with Glowpoint, Inc., and GPAV Merger Sub Inc., its wholly owned subsidiary, in exchange for approximately $8.1 million in cash, a $2.3 million note, and approximately 2,650,000 shares of common stock in Glowpoint, Inc. for a total value of approximately $15.9 million. In connection with this transaction, all shares of Series A Preferred Stock were converted to common stock. Upon completion of the transaction the buyer acquired all the assets of the Company and assumed all remaining obligations of the Company not settled at the time of close.

On October 1, 2012 the following payments were made from the proceeds of the transaction (unaudited):

Closing fees	$	420,000
Legal costs	75,000
Payment of stock option liability	236,000
Bonus payment to CEO	135,000
Payment of warrant liabilities	584,000
Dividend payment	848,000
Payoff of long-term debt and accrued interest	3,224,000

In connection with the closing of the sale and merger agreement, the Company's CEO entered into an employment agreement with Glowpoint, Inc., and his previous employment agreement with the Company was amended and restated.

On November 30, 2012, the COO of the Company was terminated which generated a severance obligation whereas a settlement could be up to $300,000, based upon the terms of the employee's employment agreement.

In accordance with FASB ASC 855, Subsequent Events, the Company evaluated subsequent events through December 14, 2012, the date the financial statements were issued. Except for the matters previously disclosed, there were no material subsequent events that required recognition or additional disclosure in these financial statements.

Page 25

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On October 1, 2012, (the “Closing Date”) Glowpoint, Inc. (the “Company” or “Glowpoint”), and GPAV Merger Sub Inc., its wholly owned subsidiary, acquired Affinity VideoNet, Inc. (“AVN”), a provider of public videoconferencing rooms and managed videoconferencing services, for approximately $8,069,000 in cash, a $2,328,000 note, subject to working capital adjustments (as defined in the Merger Agreement), and 2,646,329 shares of common stock of the Company (“Common Stock”) with a fair value of $5,504,000, on the terms previously disclosed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 13, 2012. The Company had no prior material relationship with any of the parties to the transaction.

The following unaudited pro forma condensed combined financial statements have been developed by applying pro forma adjustments to the historical condensed consolidated financial statements of Glowpoint and AVN. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 and the nine months ended September 30, 2012 give effect to the acquisition of AVN (the “Acquisition”) and its related financing as if they had occurred on January 1, 2011. The unaudited pro forma condensed combined balance sheet as of September 30, 2012, gives effect to the Acquisition and its related financing as if they occurred on September 30, 2012. All pro forma adjustments and underlying assumptions are described more fully in the notes to the unaudited pro forma combined financial statements.

The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisition and related financing were completed on the dates indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon available information and certain assumptions that the management of Glowpoint believes to be reasonable. Since the Acquisition has only recently been completed, the estimates and assumptions regarding the Acquisition are preliminary. The final purchase price allocation will be based on a formal valuation analysis of the assets acquired and liabilities assumed at closing and may result in differences in the estimates used in these pro forma condensed combined financial statements, and those differences could be material. Furthermore, the ability of Glowpoint to integrate AVN and realize the received benefits of the acquisition remains subject to a number of risks and uncertainties.

The unaudited pro forma condensed combined financial statements do not include the effects of:

• non-recurring income statement impacts arising directly as a result of the Acquisition;

• any operating efficiencies or cost savings;

• other post-acquisition selling, general and administrative costs;

• savings as a result of planned restructuring actions to be taken; or

• acquisition and integration expenses;

You should read this information in conjunction with the:

• accompanying notes to the unaudited pro forma combined financial statements;

• audited historical consolidated financial statements of Glowpoint as of and for the year ended December 31, 2011, included in the Company's Form 10-K filed with the SEC on March 8, 2012;

• unaudited historical condensed consolidated financial statements of Glowpoint as of and for the nine months ended September 30, 2012, included in the Company's Form 10-Q filed with the SEC on November 8, 2012;

• audited historical financial statements of AVN as of and for the year ended December 31, 2011 and unaudited historical financial statements of AVN as of and for the nine months ended September 30, 2012, included as an exhibit to this Form 8-K.

Page 1

Exhibit 99.3

Glowpoint, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

September 30, 2012

(in thousands)

		Historical				Pro Forma			Pro Forma
		Glowpoint		AVN		Adjustments			Combined
ASSETS						(Note 4)
Current assets:
	Cash and cash equivalents	$	1,650	$	994	$	(2	)	$	2,642
	Accounts receivable, net	2,896		1,201		—			4,097
	Deferred income taxes	—		35		(35		)	—
	Other current assets	367		278		519			1,164
TOTAL CURRENT ASSETS		4,913		2,508		482			7,903
Property, plant and equipment, net		4,080		410		—			4,490
Customer relationships		—		13		5,657			5,670
Affiliate network		—		1,648		252			1,900
Trademarks		—		—		820			820
Goodwill		—		4,291		4,881			9,173
Other noncurrent assets		247		185		194			626
TOTAL ASSETS		$	9,240	$	9,055	$	12,286		$	30,581
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Revolving loan facilities	$	750	$	—	$	30		$	780
	Current portion of capital lease	221		—		—			221
	Accounts payable	1,361		972		227			2,559
	Accrued expenses	569		480		359			1,408
	Accrued sales taxes and regulatory fees	538		17		94			649
	Customer deposits	164		—		—			164
	Deferred revenue	153		—		—			153
TOTAL CURRENT LIABILITIES		3,756		1,469		710			5,935
Capital lease, noncurrent portion		261		—		—			261
Term loans		—		3,045		4,726			7,771
Seller note payable		—		—		2,328			2,328
Stock option liability		—		236		(236		)	—
Warrant liabilities		—		584		(584		)	—
Dividends Payable		—		848		(848		)	—
Deferred income taxes		—		455		(455		)	—
TOTAL NONCURRENT LIABILITIES		261		5,168		4,931			10,360
TOTAL STOCKHOLDERS’ EQUITY		5,223		2,418		6,645			14,287
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	9,240	$	9,055	$	12,286		$	30,581

See accompanying notes to unaudited pro forma condensed combined financial statements

Page 2

Exhibit 99.3

Glowpoint, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2011

(in thousands, except per share amounts)

	Historical					Pro Forma				Pro Forma
	Glowpoint		AVN			Adjustments				Combined
Revenue	$	27,806	$	11,396		$	—			$	39,202
Operating expenses:
Expenses	25,900		9,696			360			(a)	35,956
Depreciation and amortization	1,436		321			412			(b)	2,169
Total operating expenses	27,336		10,017			772				38,125
Income (loss) from operations	470		1,379			(772		)		1,077
Other expenses (income):
Interest expense, net	129		593			855			(c)	1,577
Other income	—		(104		)	—				(104		)
Change in fair value of warrant liabilities	—		165			(165		)	(d)	—
Loss on foreign currency transactions	—		8			—				8
Total other expenses, net	129		662			690				1,481
Income (loss) from continuing operations
before provision for income taxes	341		717			(1,462		)		(404		)
(Provision) benefit for income taxes	—		(359		)	3,100			(e)	2,741
Income (loss) from continuing operations	$	341	$	358		$	1,638			$	2,337
Income (loss) from continuing operations per share:
Basic income (loss) from continuing operations per share	$	0.02				$	0.07		(f)	$	0.09
Diluted income (loss) from continuing operations per share	$	0.02				$	0.07		(f)	$	0.09
Weighted average number of common shares:
Basic	22,286					3,041			(f)	25,327
Diluted	23,363					3,041			(f)	26,404

See accompanying notes to unaudited pro forma condensed combined financial statements

Page 3

Exhibit 99.3

Glowpoint, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

Nine Months Ended September 30, 2012

(in thousands, except per share amounts)

	Historical						Pro Forma				Pro Forma
	Glowpoint			AVN			Adjustments				Combined
Revenue	$	20,107		$	8,026		$	—			$	28,133
Operating expenses:
Expenses	18,897			7,174			—				26,071
Depreciation and amortization	1,301			260			309			(b)	1,870
Total operating expenses	20,198			7,434			309				27,941
Income (loss) from operations	(91		)	592			(309		)		192
Other expenses (income):
Interest expense, net	76			367			631			(c)	1,074
Other income	—			(80		)	—				(80		)
Change in fair value of warrant liabilities	—			152			(152		)	(d)	—
Loss on foreign currency transactions	—			4			—				4
Total other expenses, net	76			443			479				998
(Loss) income before provision for income taxes	(167		)	149			(788		)		(806		)
Provision for income taxes	5			93			—			(e)	98
Net (loss) income	$	(172	)	$	56		$	(788	)		$	(904	)
Net loss per share:
Basic	$	(0.01	)				$	(0.02	)	(f)	$	(0.03	)
Diluted	$	(0.01	)				$	(0.02	)	(f)	$	(0.03	)
Weighted average number of common shares:
Basic	24,441						3,041			(f)	27,482
Diluted	24,441						3,041			(f)	27,482

See accompanying notes to unaudited pro forma condensed combined financial statements

Page 4

Exhibit 99.3

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

As more fully discussed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 5, 2012, on October 1, 2012 (the “Closing Date”) Glowpoint, Inc. (the “Company” or “Glowpoint”), and GPAV Merger Sub Inc., its wholly owned subsidiary, acquired Affinity VideoNet, Inc. (“AVN”), a provider of public videoconferencing rooms and managed videoconferencing services, for approximately $8,069,000 in cash, a $2,328,000 note, subject to working capital adjustments (as defined in the Merger Agreement), and 2,646,329 shares of common stock of the Company (“Common Stock”) with a fair value of $5,504,000. The acquisition will be accounted for in accordance with FASB Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”), which requires an allocation of the purchase price of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The final purchase price allocation will be based on a formal valuation analysis of AVN's assets and liabilities as of the date the acquisition was consummated.

The unaudited pro forma condensed combined financial statements have been developed by applying pro forma adjustments to the historical condensed consolidated financial statements of Glowpoint and AVN. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2011 and nine months ended September 30, 2012 gives effect to the acquisition of AVN (the “Acquisition”) and its related financing as if they had occurred on January 1, 2011. The unaudited pro forma condensed combined balance sheet as of September 30, 2012, gives effect to the Acquisition and its related financing as if they occurred on September 30, 2012.

Page 5

Exhibit 99.3

NOTE 2: PRELIMINARY PURCHASE PRICE AND ALLOCATION OF THE ACQUISITION

Since the Acquisition has only recently been completed, the estimates and assumptions regarding the Acquisition are preliminary. The final purchase price allocation will be based on a formal valuation analysis of the assets acquired and liabilities assumed at closing and may result in differences in the estimates used in these pro forma condensed combined financial statements, and those differences could be material.

Pursuant to ASC 805, the purchase price of $15,901,000 was measured as the fair value of the consideration exchanged in the Acquisition as follows:

Cash paid	$	8,069,000.00
Note payable	2,328,000
Common stock of Glowpoint	5,504,000
Total	$	15,901,000

The value of the common stock was estimated at $2.08 per share, which was the closing price of Glowpoint's common stock as traded on the New York Stock Exchange on the Closing Date.

The purchase price was allocated to AVN's net tangible and intangible assets based on their estimated fair values as of the Closing Date, which for purposes of these unaudited pro forma condensed combined financial statements is assumed to be October 1, 2012. The pro forma allocation of the purchase price to the assets acquired, the liabilities assumed and goodwill recognized is as follows:

Cash and cash equivalents	$	994,000
Accounts receivable	1,201,000
Property, plant, and equipment	410,000
Customer relationships	5,670,000
Affiliate network	1,900,000
Trademarks	820,000
Accounts payable	(972,000		)
Accrued expenses	(780,000		)
Deferred income taxes	(3,100,000		)
Other assets and liabilities, net	222,000
Net assets acquired	6,365,000
Escrow held to the benefit of Glowpoint	363,000
Goodwill	9,173,000
Purchase price	$	15,901,000

In accordance with ASC 805, goodwill, if any, is recognized as the excess of the purchase price over the estimated fair value of net assets acquired. Based on the Company's preliminary estimates, the $15,901,000 purchase price exceeded the estimated fair value of the net assets acquired, resulting in goodwill of $9,173,000.

Due to the nature and limitations of these preliminary calculations differences between the estimated fair values used in these pro forma calculations and those estimated under a formal valuation are expected to be different and those differences could be material.

Page 6

Exhibit 99.3

NOTE 3: FINANCING

In connection with the Acquisition, on the Closing Date, the Company entered into the following financing agreements:

Loan and Security Agreement - Comerica Bank

The Company entered into a Loan and Security Agreement (“Comerica Loan Agreement”) with Comerica Bank, providing the Company with a $2.0 million term loan (the “Comerica Term Loan”) and a revolving line of credit (the “Comerica Revolver” and, together with the Comerica Term Loan, the “Comerica Loans”), pursuant to which the Company can borrow, for working capital needs, an amount up to the lesser of (i) 80% of eligible accounts receivable and (ii) $3.0 million. The Company requested and was provided with an advance of $780,000 from the Comerica Revolver on the Closing Date. The proceeds of the Comerica Term Loan and the Comerica Revolver were used to finance a portion of the Acquisition and refinance the $750,000 previously outstanding pursuant to the Loan and Security Agreement, between the Company and Silicon Valley Bank, dated June 16, 2010 (as modified, the “SVB Loan Agreement”). The SVB Loan Agreement was terminated in connection with the repayment of outstanding amounts thereunder, effective as of the Closing Date. The Comerica Term Loan bears interest at a rate equal to the Prime Rate (as defined in the Comerica Loan Agreement) plus 3.00%, and borrowings under the Comerica Revolver bears interest at a rate equal to the Prime Rate (as defined in the Comerica Loan Agreement) plus 2.00%. The Comerica Loans are secured by substantially all assets of the Company and secured by guarantees executed by GP Communications, LLC, a wholly-owned subsidiary of the Company (“GP Communications”) and AVN. The Comerica Loan Agreement contains certain restrictive covenants, financial covenants and events of default customary for facilities of this type (subject to negotiated exceptions and baskets) as defined. The Comerica Term Loan matures on November 1, 2015 and the Comerica Revolver matures on April 1, 2014.

Loan and Security Agreement - Escalate Capital Partners SBIC I, L.P.

The Company entered into a Loan and Security Agreement (the “Escalate Loan Agreement”) with Escalate Capital Partners SBIC I, L.P. (“Escalate”), providing the Company with a $6.5 million 60 month term loan (the “Escalate Term Loan”). The Escalate Term Loan bears interest at a fixed rate of 12.0% per annum, with interest-only payable monthly for the first 24 months after the Closing Date and, commencing after such interest-only period, monthly payments of the outstanding principal amount, plus accrued interest, for the remainder of the term. The proceeds of the Escalate Term Loan were used to finance a portion of the AVN acquisition. The Escalate Term Loan is secured by substantially all assets of the Company and secured by guarantees executed by GP Communications and AVN, and is subordinated to the Comerica Loans. The Escalate Loan Agreement contains certain restrictive covenants, financial covenants and events of default customary for facilities of this type (subject to negotiated exceptions and baskets) as defined. The Escalate Loan Agreement also provides for certain management rights for Escalate as defined. In connection with the Escalate Term Loan, the Company issued to Escalate on the Closing Date, 295,000 shares of Common Stock (the “Escalate Shares”) at a purchase price of $0.01 per share. Escalate received standard piggyback and demand registration rights with respect to the Escalate Shares.

Seller Promissory Note Payable

The Company issued a promissory note (the “Note”), in favor of the AVN Stockholder Representative, with an original principal amount of $2,328,000, due and payable on December 31, 2014. The principal amount of the note will accrue interest at a rate of 8.0% per annum, and such interest shall be payable in arrears quarterly commencing on April 1, 2013. The note also provides for accelerate principal payments beginning in April 2013 should the Company achieve a minimum EBITDA (as defined in the Note) and if the Company is in compliance with the Modified Fixed Charge Ratio (as defined in the Note).

Page 7

Exhibit 99.3

NOTE 4: PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed combined financial statements reflect the pro forma adjustments of the Acquisition and the related financing as described in Note 3. Pursuant to the acquisition method of accounting, the total purchase price, as measured in Note 2, has been preliminarily allocated to the assets acquired and liabilities assumed based on their respective estimated fair values. There were no payable or receivable balances between Glowpoint and AVN as of September 30, 2012. For the year ended December 31, 2011 and the nine months ended September 30, 2012 there were $4,000 and $2,000, respectively, of expenses and $5,000 and $0, respectively of revenue related to AVN.

A reasonable allocation of fees paid to attorneys that are involved with completing both the acquisition and the issuance of debt has been made to acquisition-related costs and debt issuance costs based on consultation with these professionals. Based on this allocation and information specific to each aspect of the acquisition, $727,000 of costs incurred before the Closing Date associated with investment banking, legal, refinancing of the SVB revolver, and other third-party costs in connection with the Acquisition have been expensed as acquisition-related costs and have been charged to retained earnings as of September 30, 2012. No adjustment has been made to the unaudited pro forma condensed consolidated income statements for these costs as they are non-recurring.

The unaudited pro forma condensed combined statement of operations does not include costs that may result from integration activities. Management of Glowpoint is in the process of making estimates of severance costs for employees, costs of vacating some facilities, or other costs associated with exiting activities of the acquired business that would affect the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 and the nine months ended September 30, 2012.

Except for the working capital adjustment associated with the seller's note, Glowpoint has not identified any Acquisition contingencies where the related asset, liability, or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated. Prior to the end of the purchase price allocation period, not to exceed one year from the acquisition date, if information becomes available that would indicate it is probable that such events have occurred and the amounts can be reasonably estimated, such items will be included in the purchase price allocation. The working capital adjustment associated with the seller's note is to be finalized no later than March 31, 2013 and is not expected to have a material impact on the accounting for the acquisition.

The pro forma condensed combined provision for income taxes does not necessarily reflect the amounts that would have resulted had Glowpoint and AVN filed consolidated income tax returns for the full years ended December 31, 2011 and 2012.

Page 8

Exhibit 99.3

ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet related to the Acquisition and associated financing as of October 1, 2012 are as follows (in thousands):

Increase/(Decrease) in:	Funding for Acquisition (1)		Financing Commitment Fees and Expenses (2)			Debt Issuance Costs (3)			Refinance SVB Revolver (4)			Acquisition- Related Costs (5)			Acquisition (6)			Adjustment to Fair Value (7)			Tax Benefit (8)		Net Adjustment
Cash and cash equivalents	$	9,280	$	(118	)	$	(345	)	$	(750	)	$	—		$	(8,069	)	$	—		$	—	$	(2	)
Deferred income tax - current asset																		(35		)			(35		)
Other current assets						185			(29		)				363								519
Property, plant and equipment																							—
Customer relationships																		5,657					5,657
Affiliate network																		252					252
Trademarks																		820					820
Goodwill																		4,881					4,881
Other noncurrent assets						323												(129		)			194
Revolving loan facilities	780								(750		)												30
Accounts payable												227											227
Accrued expenses						59									300								359
Accrued sales taxes and regulatory fees																		94					94
Term loans	8,500		(729		)										(3,045		)						4,726
Seller note payable															2,328								2,328
Stock option liability															(236		)						(236		)
Warrant liabilities															(584		)						(584		)
Dividends payable															(848		)						(848		)
Deferred income tax - noncurrent liability																		(3,555		)	3,100		(455		)
Equity			611			104			(29		)	(227		)	5,504			(2,418		)	3,100		6,645

(1) Funding for acquisition - In connection with the Acquisition, the Company entered into the financing agreements described in Note 3. The gross proceeds from these agreements were as follows:

Escalate Term Loan	$	6,500,000
Comerica Term Loan	2,000,000
Comerica Revolver	780,000
Gross proceeds	$	9,280,000

(2) Financing commitment fees and expenses - In connection with the financing, the Company paid $118,000 in commitment fees and expenses directly to the creditors. In addition to these payments, the Company has provided for the Escalate Shares (as described in Note 3) issued at their fair value net of the proceeds received. The fair value of the 295,000 Escalate Shares was measured as $2.08 per share less the purchase price of $0.01, or $611,000. The aggregate value of the fees paid and the Escalate Shares issued of $729,000 has been reflected as a reduction of the gross proceeds of the debt and will be accreted over the term of the related debt as interest expense.

Page 9

Exhibit 99.3

(3) Debt issuance costs - In connection with obtaining the financing described in Note 3, the Company incurred cash professional and legal fees due to third-parties of $404,000, of which $345,000 was paid at closing. In addition to these payments, the Company also compensated a consultant through the issuance of 50,000 shares of the Company's common stock, with an estimated value of $2.08 per share for no cash consideration, or $104,000. The aggregate value of the fees paid and the common shares issued of $508,000 have been reflected as capitalized debt costs and will be amortized over the term of the related debt as interest expense.

(4) Refinance of Silicon Valley Bank Revolver - As described in Note 3, a portion of the proceeds from the Comerica Revolver were used to pay $750,000 previously outstanding pursuant to the SVB Loan Agreement. As a result, the SVB Loan Agreement was terminated and the unamortized deferred loan costs of $29,000 associated with this credit facility was charged to interest expense on the Closing Date.

(5) Acquisition-related costs - In connection with the Acquisition, the Company and AVN incurred $1,058,000 of legal and other third party cash acquisition-related costs. As of September 30, 2012, the Company and AVN expensed $727,000 of these costs and paid $280,000. The Company also incurred $331,000 of acquisition-related costs including additional cash payments due of $227,000 and issuance of 50,000 shares of the Company's common stock, with an estimated value of $2.08 per share, or $104,000, to a consultant which was expensed upon completion of the acquisition.

(6) Acquisition - This pro forma adjustment also reflects the settlement of certain AVN liabilities, which were settled from the cash consideration at closing (as described in Note 2). These liabilities are as follows:

Long term debt	$	2,345,000
Revolving credit facility	700,000
Dividend payable	848,000
Accrued expenses	300,000
Warrant liabilities	584,000
Stock option liability	236,000
Escrow Agreement to the benefit of Glowpoint	363,000

Also, the Company and a representative of the prior stockholders of AVN (the “Stockholder Representative”) also entered into an Escrow Agreement on the Closing Date with a third-party escrow agent (the “Escrow Agreement”), whereby the Company made a deposit of $363,000, a portion of the purchase price, with the escrow agent for the purpose of securing the payment obligations of AVN, if any, with respect to certain retention bonus agreements entered into with its employees on or before the Closing Date. If any employee does not satisfy the conditions of receipt of the retention bonus, the Company and the Stockholder Representative will jointly direct that such funds on deposit be released to the Stockholder Representative on behalf of the prior stockholders of AVN.

In addition, an employment agreement was in place before the Closing Date which entitles an officer of AVN severance and a bonus upon termination of $300,000. Accordingly, a pro forma adjustment to accrued expenses has been provided to reflect the fair value of these liabilities as of the Closing Date.

(7) Adjustments to fair value - The assets acquired and liabilities assumed of AVN have been adjusted to their estimated fair values as of the acquisition date. Those adjustments are as follows:

Page 10

Exhibit 99.3

Intangible assets-The historical value of AVN's identifiable intangible assets (other than goodwill) was $1,661,000 and had an estimated fair value of $8,390,000 at the acquisition date. Accordingly, a pro forma adjustment of $6,729,000 has been provided. Identifiable intangible assets acquired included customer lists, trademarks, and established affiliate network. The estimated useful lives for the intangible assets are determined based on the expected benefit period of the AVN assets and historical experience with similar assets. The Company expects to amortize the estimated fair value of these assets based on the straight-line method.

The preliminary estimated fair values, related amortization periods, and the pro forma amortization expense for the year ended December 31, 2011 and the nine months ended September 30, 2012 are as follows:

	Estimated Value of Intangible Asset Acquired		Estimated Average Useful Lifes	Twelve Months Amortization Expense		Nine Months Amortization Expense
Customer relationships	$	5,670,000	15 years	$	378,000	$	283,500
Affiliate network	1,900,000		15 years	127,000		95,000
Trademark	820,000		10 years	82,000		61,500
	$	8,390,000		$	587,000	$	440,000

Goodwill-AVN's historical goodwill balance of $4,291,000 has been eliminated and $9,173,000 of goodwill as calculated in Note 2 has been provided for purposes of the combined pro forma financial statements, resulting in a net increase in goodwill of $4,881,000.

Loan origination fees- AVN's historical other asset account balance of $185,000 included $129,000 of deferred loan origination fees associated with its debt. As the debt has been extinguished, the fair value of these fees is $0 and a pro forma adjustment was provided to eliminate this asset from the pro forma combine balances.

Taxes - The AVN deferred tax asset and liabilities of $35,000 and $455,000, respectively, were eliminated.  A deferred tax liability is recorded of $3,100,000 relating to the intangible assets. In addition, a sales tax liability of $94,000 was recognized for AVN's acquisition-related expenses. 

AVN equity - AVN's historical equity balance of $2,418,000 was eliminated as a result of the Acquisition.

(8) Tax Benefit - A deferred tax benefit is recorded as a result of the change in the deferred tax valuation allowance resulting from the deferred tax liability recorded in purchase accounting.

Page 11

Exhibit 99.3

ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations related to the Acquisition and associated financing for the year ended December 31, 2011 and September 30, 2012 are as follows:

(a) Retention payments - The $360,000 pro forma adjustment for the year ended December 31, 2011 reflects the impact of amortization related to an employee retention fund, which was created to provide retention awards to employees of AVN over a six-month vesting period as described in item (6) above.

(b) Amortization of intangible assets-Pro forma adjustments of $412,000 and $309,000 has been provided for the incremental amortization of intangible assets for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, associated with the stepped-up value of these assets and the stated useful lives of the assets as of January 1, 2011, offset by historical amortization expense. Pro forma amortization is $587,000 and $440,000 and AVN historical amortization was $175,000 and $131,000, respectively.

(c) Interest expense - The pro forma interest expense adjustment for the year ended December 31, 2011 and the nine months ended September 30, 2012 of $855,000 and $631,000, respectively, reflects the difference in pro forma interest expense assuming the refinancing described in Note 3, took place on January 1, 2011. The pro forma interest expense and pro forma adjustments were determined as follows:

		Year Ended December 31, 2011		Nine Months Ended September 30, 2012
Pro Forma Interest Expense:
	Cash Interest on Comerica Term Loan (1)	$	127,000	$	79,000
	Amortization of Comerica Term Loan Discount (2)	7,000		5,000
	Amortization of Comerica Term Loan Debt Costs (3)	28,000		21,000
	Cash Interest on Comerica Revolver (4)	42,000		21,000
	Amortization of Comerica Revolver Debt Costs (5)	103,000		51,000
	Cash Interest on Escalate Term Loan (6)	789,000		591,000
	Amortization of Escalate Term Loan Discount (7)	142,000		106,000
	Amortization of Escalate Term Loan Debt Costs (8)	54,000		41,000
	Cash Interest on Seller's Note (9)	183,000		111,000
	Other Historical Interest Expense (10)	104,000		48,000
Pro Forma Interest Expense		1,579,000		1,074,000
Historical Combined Interest Expense		724,000		443,000
Pro Forma Interest ExpenseAdjustment		$	855,000	$	631,000

(1) Cash Interest on Comerica Term Loan - The Comerica Term Loan bears interest at a rate equal to the Prime Rate (as defined in the Comerica Loan Agreement) plus 3.00%. Pro forma cash interest expense of $127,000 and $79,000 for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, was determined by applying a margin of 3.0% per annum to the Prime Rate at October 1, 2012 of 3.25%.

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Exhibit 99.3

(2) Amortization of Comerica Term Loan discount - The pro forma non-cash interest expense of $7,000 and $5,000 reflects the accretion of the debt discount on the Comerica Term Loan for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, as if the refinancing had occurred on January 1, 2011. Fees paid to the creditors of $20,000 in connection with the modification were recorded as a discount to the face value of the debt. This discount is accreted over the term of the debt.

(3) Amortization of Comerica Term Loan Debt Costs - The pro forma non-cash interest expense of $28,000 and $21,000 reflects the amortization of debt issuance costs associated with the Comerica Term Loan for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, as if the refinancing had occurred on January 1, 2011. Debt issuance costs of $83,000 were incurred in connection with the issuance of the Comerica Term Loan and are amortized over the term of the debt.

(4) Cash Interest on Comerica Revolver - The Comerica Revolver bears interest at a rate equal to the Prime Rate (as defined in the Comerica Loan Agreement) plus 2.00%. Pro forma cash interest expense of $42,000 and $21,000 for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, was determined by applying a margin of 2.0% per annum to the Prime Rate at October 1, 2012 of 3.25%.

(5) Amortization of Comerica Revolver Debt Costs - The pro forma non-cash interest expense of $103,000 and $51,000 reflects the amortization of debt issuance costs associated with the Comerica Revolver for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, as if the refinancing had occurred on January 1, 2011. Debt issuance costs of $154,000 were incurred in connection with the issuance of the Comerica Revolver and are amortized over the term of the debt.

(6) Cash Interest on Escalate Term Loan - The Escalate Term Loan bears interest at a fixed rate of 12.0% per annum. Pro forma cash interest expense is $789,000 and $591,000 for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively.

(7) Amortization of Escalate Term Loan discount - The pro forma non-cash interest expense of $142,000 and $106,000 reflects the accretion of the debt discount on the Escalate Term Loan for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, as if the refinancing had occurred on January 1, 2011. Fees paid to the creditors, including the fair value of the Escalate Shares were $709,000 in connection with this loan was recorded as a discount to the face value of the debt. This discount is accreted over the term of the debt.

(8) Amortization of Escalate Term Loan Debt Costs - The pro forma non-cash interest expense of $54,000 and $41,000 reflects the amortization of debt issuance costs associated with the Comerica Term Loan for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, as if the refinancing had occurred on January 1, 2011. Debt issuance costs of $272,000 were incurred in connection with the issuance of the Escalate Term Loan and are amortized over the term of the debt.

(9) Cash Interest on Seller's Note - The Note bears interest at a fixed rate of 8.0% per annum. Pro forma cash interest expense is $183,000 and $111,000 for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively.

(10) Other Historical Interest Expense - Includes interest expense of $104,000 and $48,000 for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, associated with Glowpoint's capital lease obligations and other interest charges not impacted by the refinancing.

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Exhibit 99.3

(d) Change in fair value of warrant liabilities - AVN's warrant liability was settled from the consideration at closing and therefore a pro forma adjustment of $165,000 and $152,000 has been provided to eliminate the change in fair value of the warrant liability for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively.

(e) Income taxes - A pro forma adjustment of $3,100,000 has been provided for the tax benefit from amortization of intangible assets for the year ended December 31, 2011.

(f) Earnings or Loss Per Share is calculated by dividing income (loss) from continuing operations by the weighted average number of shares of common shares outstanding during the period.  Diluted earnings or loss per share reflects the potential dilution from the conversion or exercise into common stock of securities such as stock options and warrants. For the year ended December 31, 2011 and nine months ended September 30, 2012, aggregate pro forma adjustments to operations were $1,638,000 and $788,000, respectively. In connection with the acquisition, Glowpoint issued 3,041,329 shares of restricted stock which included 2,646,329 shares to the stockholders of AVN, 295,000 Escalate Shares, and 100,000 shares to a consultant that provided services in connection with the acquisition and obtaining the financing. Pro forma earnings per share has been determined as if the acquisition and the refinancing had occurred on January 1, 2011 by applying the effect of the pro forma adjustments to historical operating results and the historic basic and diluted shares outstanding of Glowpoint as follows (in thousands, except per share data):

	Year Ended December 31, 2011		Nine Months Ended September 30, 2012
Pro forma combined income (loss) from continuing operations
Historic Glowpoint income (loss) from continuing operations	$	341	$	(172	)
Historic AVN net income	358		56
Pro forma adjustments to loss from continuing operations	1,638		(788		)
Pro forma combined loss from continuing operations	$	2,337	$	(904	)
Basic income (loss) from continuing operations per share:
Historic basic income (loss) from continuing operations per share	$	0.02	$	(0.01	)
Pro forma effect on basic (loss) income from continuing operations per share	0.07		(0.02		)
Pro forma basic (loss) income from continuing operations per share	$	0.09	$	(0.03	)
Diluted income (loss) from continuing operations per share:
Historic diluted income (loss) from continuing operations per share	$	0.02	$	(0.01	)
Pro forma effect on diluted (loss) income from continuing operations per share	0.07		(0.02		)
Pro forma diluted (loss) income from continuing operations per share	$	0.09	$	(0.03	)
Weighted average number of common shares:
Historic basic shares	22,286		24,441
Pro forma shares issued	3,041		3,041
Pro forma basic shares	25,327		27,482
Historic diluted shares	23,363		24,441
Pro forma shares issued	3,041		3,041
Pro forma diluted shares	26,404		27,482

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