x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2013. |
¨ | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 77-0312442 (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company x |
PART I - FINANCIAL INFORMATION | ||
Item 1. Financial Statements | ||
Condensed Consolidated Balance Sheets at June 30, 2013 (unaudited) and December 31, 2012 | ||
Unaudited Condensed Consolidated Statements of Operations for the six and three months ended June 30, 2013 and 2012 | ||
Unaudited Condensed Consolidated Statement of Stockholders' Equity for the six months ended June 30, 2013 | ||
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 | ||
Notes to unaudited Condensed Consolidated Financial Statements | ||
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. Qualitative and Quantitative Disclosures About Market Risk | ||
Item 4. Controls and Procedures | ||
PART II - OTHER INFORMATION | ||
Item 1. Legal Proceedings | ||
Item 1A. Risk Factors | ||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 3. Defaults upon Senior Securities | ||
Item 4. Mine Safety Disclosures | ||
Item 5. Other Information | ||
Item 6. Exhibits | ||
Signatures |
June 30, 2013 | December 31, 2012 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 2,804 | $ | 2,218 | |||
Accounts receivable, net (including related party amounts of $24 and $32, respectively) | 3,189 | 4,047 | |||||
Prepaid expenses and other current assets | 745 | 897 | |||||
Total current assets | 6,738 | 7,162 | |||||
Property and equipment, net | 3,159 | 4,256 | |||||
Goodwill | 9,695 | 9,900 | |||||
Intangibles, net | 6,627 | 7,256 | |||||
Other assets | 605 | 742 | |||||
Total assets | $ | 26,824 | $ | 29,316 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 1,317 | $ | 1,397 | |||
Current portion of capital lease | 259 | 240 | |||||
Accounts payable (including related party amounts of $24 and $13, respectively) | 2,048 | 2,384 | |||||
Accrued expenses (including related party amounts of $6 and $15, respectively) | 1,435 | 1,672 | |||||
Accrued dividends | 210 | — | |||||
Accrued sales taxes and regulatory fees | 499 | 398 | |||||
Customer deposits | 195 | 205 | |||||
Deferred revenue | 124 | 155 | |||||
Total current liabilities | 6,087 | 6,451 | |||||
Long term liabilities: | |||||||
Capital lease, net of current portion | 129 | 231 | |||||
Long term debt, net of current portion | 9,113 | 9,631 | |||||
Total long term liabilities | 9,242 | 9,862 | |||||
Total liabilities | 15,329 | 16,313 | |||||
Commitments and contingencies (see Note 10) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, Series B-1, non-convertible; $.0001 par value; $100,000 stated value; 100 shares authorized and 100 shares issued and outstanding at June 30, 2013 and December 31, 2012, liquidation preference of $10,000 | $ | 10,000 | $ | 10,000 | |||
Preferred stock, Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized and 53 shares issued and outstanding at June 30, 2013 and December 31, 2012, liquidation preference of $396 | 167 | 167 | |||||
Common stock, $.0001 par value;150,000,000 shares authorized; 28,792,000 and 28,886,000 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 3 | 3 | |||||
Additional paid-in capital | 167,108 | 166,481 | |||||
Accumulated deficit | (165,783 | ) | (163,648 | ) | |||
Total stockholders’ equity | 11,495 | 13,003 | |||||
Total liabilities and stockholders’ equity | $ | 26,824 | $ | 29,316 |
Six Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue (including related party amounts of $70 and $125, respectively and $33 and $59, respectively) | $ | 17,240 | $ | 13,546 | $ | 8,736 | $ | 6,800 | |||||||
Operating expenses: | |||||||||||||||
Network and infrastructure | 4,108 | 4,221 | 2,106 | 2,145 | |||||||||||
Global managed services | 6,143 | 3,461 | 2,953 | 1,765 | |||||||||||
Sales and marketing (including related party amounts of $12 and $0, respectively and $6 and $0, respectively) | 2,066 | 1,864 | 997 | 878 | |||||||||||
General and administrative (including related party amounts of $147 and $147, respectively and $74 and $74, respectively) | 4,798 | 2,652 | 1,711 | 1,302 | |||||||||||
Depreciation and amortization | 1,458 | 865 | 700 | 425 | |||||||||||
Total operating expenses | 18,573 | 13,063 | 8,467 | 6,515 | |||||||||||
Income (loss) from operations | (1,333 | ) | 483 | 269 | 285 | ||||||||||
Interest and other expense: | |||||||||||||||
Interest expense, net | 612 | 29 | 320 | 18 | |||||||||||
Amortization of deferred financing costs | 121 | 29 | 60 | 14 | |||||||||||
Amortization of debt discount | 69 | — | 39 | — | |||||||||||
Total interest and other expense, net | 802 | 58 | 419 | 32 | |||||||||||
Income (loss) before provision for income taxes | (2,135 | ) | 425 | (150 | ) | 253 | |||||||||
Provision for income taxes | — | 5 | — | 5 | |||||||||||
Net income (loss) | (2,135 | ) | 420 | (150 | ) | 248 | |||||||||
Preferred stock dividends | 210 | — | 105 | — | |||||||||||
Net income (loss) attributable to common stockholders | $ | (2,345 | ) | $ | 420 | $ | (255 | ) | $ | 248 | |||||
Net income (loss) attributable to common stockholders per share: | |||||||||||||||
Basic net income (loss) per share | $ | (0.08 | ) | $ | 0.02 | $ | (0.01 | ) | $ | 0.01 | |||||
Diluted net income (loss) per share | $ | (0.08 | ) | $ | 0.02 | $ | (0.01 | ) | $ | 0.01 | |||||
Weighted average number of common shares: | |||||||||||||||
Basic | 27,786 | 24,440 | 27,868 | 24,525 | |||||||||||
Diluted | 27,786 | 25,742 | 27,868 | 25,874 |
Series B-1 Preferred Stock | Series A-2 Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid In Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||
Balance at December 31, 2012 | 100 | $ | 10,000 | 53 | $ | 167 | 28,886 | $ | 3 | $ | 166,481 | $ | (163,648 | ) | $ | 13,003 | ||||||||||||||||
Net loss | — | — | — | — | — | — | — | (2,135 | ) | (2,135 | ) | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 690 | — | 690 | |||||||||||||||||||||||
Issuance of restricted stock | — | — | — | — | 364 | — | — | — | — | |||||||||||||||||||||||
Stock issued in connection with debt amendment | — | — | — | — | 100 | — | 147 | — | 147 | |||||||||||||||||||||||
Forfeiture of restricted stock | — | — | — | — | (572 | ) | — | — | — | — | ||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | — | (210 | ) | — | (210 | ) | |||||||||||||||||||||
Exercise of options | — | — | — | — | 14 | — | — | — | — | |||||||||||||||||||||||
Balance at June 30, 2013 | 100 | $ | 10,000 | 53 | $ | 167 | 28,792 | $ | 3 | $ | 167,108 | $ | (165,783 | ) | $ | 11,495 |
Six Months Ended June 30, | |||||||
2013 | 2012 | ||||||
Cash flows from Operating Activities: | |||||||
Net income (loss) | $ | (2,135 | ) | $ | 420 | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 1,458 | 865 | |||||
Bad debt expense | 119 | 52 | |||||
Amortization of deferred financing costs | 121 | 29 | |||||
Amortization of debt discount | 69 | — | |||||
Loss on impairment/disposal of equipment | 539 | 10 | |||||
Stock-based compensation | 690 | 219 | |||||
Increase (decrease) attributable to changes in assets and liabilities: | |||||||
Accounts receivable | 739 | (573 | ) | ||||
Prepaid expenses and other current assets | 153 | (52 | ) | ||||
Other assets | 15 | (38 | ) | ||||
Accounts payable | (336 | ) | (13 | ) | |||
Accrued expenses, sales taxes and regulatory fees | (38 | ) | (539 | ) | |||
Customer deposits | (9 | ) | 28 | ||||
Deferred revenue | (31 | ) | (61 | ) | |||
Net cash provided by operating activities - continuing operations | 1,354 | 347 | |||||
Net cash used in operating activities - discontinued operations | — | (50 | ) | ||||
Net cash provided by operating activities | 1,354 | 297 | |||||
Cash flows from Investing Activities: | |||||||
Proceeds from sale of equipment | 2 | 11 | |||||
Purchases of property and equipment | (235 | ) | (353 | ) | |||
Net cash used in investing activities | (233 | ) | (342 | ) | |||
Cash flows from Financing Activities: | |||||||
Proceeds from exercise of stock options | — | 7 | |||||
Principal payments for capital lease | (122 | ) | (91 | ) | |||
Payments related to debt issuance | (133 | ) | — | ||||
Net payments on revolving loan facility | (280 | ) | — | ||||
Net cash used in financing activities | (535 | ) | (84 | ) | |||
Increase (decrease) in cash and cash equivalents | 586 | (129 | ) | ||||
Cash at beginning of period | 2,218 | 1,818 | |||||
Cash at end of period | $ | 2,804 | $ | 1,689 | |||
Supplement disclosures of cash flow information: | |||||||
Cash paid during the period for interest | $ | 586 | $ | 29 | |||
Non-cash investing and financing activities: | |||||||
Preferred stock dividends | $ | 210 | $ | — | |||
Reduction of debt in connection with severance obligations related to acquisition of Affinity | $ | 240 | $ | — | |||
Stock issued in connection with debt amendment recorded as debt discount | $ | 147 | $ | — | |||
Acquisition of network equipment under capital lease | $ | 38 | $ | 120 | |||
Preferred stock conversion and warrant exchange | $ | — | $ | 130 |
Six Months Ended June 30, 2012 | Three Months Ended June 30, 2012 | ||||||
Revenue | $ | 19,019 | $ | 9,577 | |||
Net income (loss) | 1,885 | (51 | ) | ||||
Earnings per share: | |||||||
Basic | $ | 0.07 | $ | — | |||
Diluted | $ | 0.07 | $ | — | |||
Weighted average number of common shares: | |||||||
Basic | 27,481 | 27,566 | |||||
Diluted | 28,783 | 28,915 |
Goodwill, December 31, 2012 | $ | 9,900 | |
Settlements | (11 | ) | |
Reduction of Note (see Note 4) | (240 | ) | |
Working capital adjustment | 46 | ||
Goodwill, June 30, 2013 | $ | 9,695 |
June 30, 2013 | December 31, 2012 | |||||
Comerica Revolver | $ | 500 | $ | 780 | ||
Comerica Term Loan | 2,000 | 2,000 | ||||
Escalate Term Loan (A) | 5,842 | 5,920 | ||||
Stockholder Representative Note | 2,088 | 2,328 | ||||
10,430 | 11,028 | |||||
Less current maturities | (1,317 | ) | (1,397 | ) | ||
$ | 9,113 | $ | 9,631 |
Year Ended December 31, | |||
Six months of 2013 | $ | 167 | |
2014 | 4,129 | ||
2015 | 3,000 | ||
2016 | 2,167 | ||
2017 | 1,625 | ||
Total payments | 11,088 | ||
Less debt discount, net of amortization | (658 | ) | |
Total debt on balance sheet as of June 30, 2013 | $ | 10,430 |
Six Months Ended June 30, | Three Months Ended June 30, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Risk free interest rate | 0.8% | 0.9% | 1.1% | 0.7% | |||
Expected option lives | 5 years | 5 years | 5 years | 5 years | |||
Expected volatility | 103.2% | 111.2% | 101.3% | 109.7% | |||
Estimated forfeiture rate | 10% | 10% | 10% | 10% | |||
Expected dividend yields | — | — | — | — | |||
Weighted average grant date fair value of options | $1.39 | $2.37 | $0.67 | $1.66 |
Outstanding | Exercisable | |||||||||||
Number of Options Shares Underlying | Weighted Average Exercise Price | Number of Options Shares Underlying | Weighted Average Exercise Price | |||||||||
Options outstanding, January 1, 2013 | 1,857 | $ | 3.02 | 605 | $ | 2.93 | ||||||
Granted | 1,075 | 1.84 | ||||||||||
Exercised * | (70 | ) | 1.61 | |||||||||
Expired | — | — | ||||||||||
Forfeited and canceled | (770 | ) | 3.11 | |||||||||
Options outstanding, June 30, 2013 | 2,092 | $ | 2.43 | 524 | $ | 3.16 |
Six Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Global managed services | $ | — | $ | 6 | $ | — | $ | 3 | |||||||
Sales and marketing | — | 4 | — | 3 | |||||||||||
General and administrative | 357 | 80 | 147 | 62 | |||||||||||
$ | 357 | $ | 90 | $ | 147 | $ | 68 |
Restricted Shares | Weighted Average Grant Price | |||||
Unvested restricted shares outstanding, December 31, 2012 | 1,294 | $ | 2.43 | |||
Granted | 364 | 1.30 | ||||
Vested | (367 | ) | 1.43 | |||
Forfeited | (572 | ) | 2.69 | |||
Unvested restricted shares outstanding, June 30, 2013 | 719 | $ | 2.16 |
Six Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Global managed services | $ | 11 | $ | 16 | $ | 3 | $ | 10 | |||||||
Sales and marketing | 26 | 30 | 11 | 16 | |||||||||||
General and administrative | 296 | 83 | (79 | ) | 46 | ||||||||||
$ | 333 | $ | 129 | $ | (65 | ) | $ | 72 |
Year Ending December 31, | ||
Six months of 2013 | 304 | |
2014 | 370 | |
2015 | 349 | |
2016 | 359 | |
2017 | 305 | |
2018 | 223 | |
1,910 |
Year Ended December 31, | Total | Interest | Principal | ||||||||
Six months of 2013 | 137 | 9 | 128 | ||||||||
2014 | 225 | 8 | 217 | ||||||||
2015 | 43 | 1 | 42 | ||||||||
2016 | 1 | — | 1 | ||||||||
$ | 406 | $ | 18 | $ | 388 |
June 30, 2013 | December 31, 2012 | ||||||
Accrued compensation | $ | 561 | $ | 508 | |||
Accrued severance | 495 | 607 | |||||
Accrued communication costs | 244 | 244 | |||||
Accrued professional fees | 32 | 208 | |||||
Other accrued expenses | 103 | 105 | |||||
$ | 1,435 | $ | 1,672 |
Six Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||||||
2013 Period | 2012 Period | Pro-forma 2012 Period | 2013 Quarter | 2012 Quarter | Pro-forma 2012 Quarter | ||||||||||||||||||
Revenue | |||||||||||||||||||||||
Managed services | $ | 10,134 | $ | 6,501 | $ | 11,391 | $ | 4,998 | $ | 3,204 | $ | 5,638 | |||||||||||
Network services | 6,089 | 6,170 | 6,544 | 3,021 | 3,030 | 3,213 | |||||||||||||||||
Professional and other services | 1,017 | 875 | 1,084 | 717 | 566 | 726 | |||||||||||||||||
Total revenue | $ | 17,240 | $ | 13,546 | $ | 19,019 | $ | 8,736 | $ | 6,800 | $ | 9,577 |
• | Revenue for managed services, which represents video collaboration services, increased $3,633,000 to $10,134,000 in the 2013 Period, from $6,501,000 in the 2012 Period. This increase is attributable to revenue contribution of $4,011,000 from Affinity in the 2013 Period, partially offset by a decrease of $378,000 primarily related to a decline in usage based video collaboration services. |
• | Revenue for managed services increased $1,794,000 to $4,998,000 in the 2013 Quarter, from $3,204,000 in the 2012 Quarter. This increase is attributable to revenue contribution of $1,981,000 from Affinity in the 2013 Quarter, partially offset by a $187,000 decrease primarily related to a decline in usage based video collaboration services. |
• | Revenue for managed services decreased $1,257,000 to $10,134,000 in the 2013 Period, from $11,391,000 in the Pro-forma 2012 Period. This decrease is attributable to: (i) a decrease of $879,000 in managed services revenue from Affinity, primarily relating to a decline in the use of video meeting suites, and (ii) a decrease of $378,000 primarily related to a decline in usage based video collaboration services. |
• | Revenue for managed services decreased $640,000 to $4,998,000 in the 2013 Quarter, from $5,638,000 in the Pro-forma 2012 Quarter. This decrease is attributable to: (i) a decrease of $453,000 in managed services revenue from Affinity, primarily relating to a decline in the use of video meeting suites, and (ii) a decrease of $187,000 primarily related to a decline in usage based video collaboration services. |
• | Revenue for network services, decreased $81,000 to $6,089,000 in the 2013 Period from $6,170,000 in the 2012 Period. Revenue for network services decreased $9,000 to $3,021,000 in the 2013 Quarter, from $3,030,000 in the 2012 Quarter. Revenue for Network Services for the Pro-forma 2012 Period and for the Pro-forma 2012 Quarter was $6,544,000 and $3,213,000, respectively. The decreases for all periods shown are primarily attributable to customer disconnects. |
• | Revenue for professional and other services, which represent non-recurring services and equipment sales, increased $142,000 to $1,017,000 in the 2013 Period from $875,000 in the 2012 Period. Revenue for professional and other services increased $151,000 to $717,000 in the 2013 Quarter, from $566,000 in the 2012 Quarter. Revenue for professional and other services for the Pro-forma 2012 Period and for the Pro-forma 2012 Quarter was $1,084,000 and $726,000, respectively, and approximated the amounts for the comparable 2013 periods. |
Six Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss) | $ | (2,135 | ) | $ | 420 | $ | (150 | ) | $ | 248 | |||||
Provision for income taxes | — | 5 | — | 5 | |||||||||||
Depreciation and amortization | 1,458 | 865 | 700 | 425 | |||||||||||
Interest and other expense, net | 802 | 58 | 419 | 32 | |||||||||||
EBITDA | 125 | 1,348 | 969 | 710 | |||||||||||
Stock-based compensation | 690 | 219 | 83 | 140 | |||||||||||
Severance | 407 | — | 8 | — | |||||||||||
Acquisition costs | 238 | — | (1 | ) | — | ||||||||||
Asset impairment | 539 | — | 104 | — | |||||||||||
Adjusted EBITDA | $ | 1,999 | $ | 1,567 | $ | 1,163 | $ | 850 |
Exhibit Number | Description | |
10.1 | First Amendment to Loan and Security Agreement, dated as of March 28, 2013, by and between Glowpoint, Inc. and Comerica Bank. | |
10.2 | Affirmation of Subordination and Intercreditor Agreement, dated as of March 28, 2013, by and between Escalate Capital Partners SBIC, L.P. and Comerica Bank. | |
31.1* | Rule 13a—14(a)/15d—14(a) Certification of the Chief Executive Officer. | |
31.2* | Rule 13a—14(a)/15d—14(a) Certification of the Chief Financial Officer. | |
32.1* | Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer. | |
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase | |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase |
GLOWPOINT, INC. | ||
Date: August 8, 2013 | By: | /s/ Peter Holst |
Peter Holst | ||
Chief Executive Officer | ||
(principal executive officer) |
Date: August 8, 2013 | By: | /s/ David Clark |
David Clark | ||
Chief Financial Officer | ||
(principal financial and accounting officer) |
1. | I have reviewed this annual report on Form 10-Q of Glowpoint, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this annual report on Form 10-Q of Glowpoint, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | The accompanying Annual Report on Form 10-K of the Company for the quarter ended March 31, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Commitments and Contingencies
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Operating Leases We lease several facilities under operating leases expiring through 2018. During May 2013, we entered into a new lease for office space in Colorado through 2018 with a lease commencement date of July 9, 2013. Certain leases require us to pay increases in real estate taxes, operating costs and repairs over certain base year amounts. Lease payments for the six and three months ended June 30, 2013 were $384,000 and $193,000, respectively. Lease payments for the six and three months ended June 30, 2012 were $264,000 and $136,000, respectively. Future minimum rental commitments under all non-cancelable operating leases as of June 30, 2013, are as follows (in thousands):
Capital Lease Obligation In 2013, the Company entered into a non-cancelable lease agreement for $38,000 with an interest rate of 8.8%. In 2012, the Company entered into three non-cancelable lease agreements for $90,000, $30,000 and $48,000 with interest rates of 9%, 3% and 0%, respectively. In 2011, the Company entered into two non-cancelable lease agreements for $512,000 and $40,000 with interest rates of 6% and 0%, respectively. These leases are accounted for as capital leases. Depreciation expense on the equipment under the capital leases for the six and three months ended June 30, 2013 was $79,000 and $40,000, respectively. Depreciation expense on the equipment under the capital leases for the six and three months ended June 30, 2012 was $59,000 and $30,000, respectively. Future minimum commitments under all non-cancelable capital leases as of June 30, 2013, are as follows (in thousands):
The current portion of the capital lease obligation is $259,000 and the long-term portion is $129,000 at June 30, 2013. Commercial Commitments We have entered into a number of agreements with telecommunications companies to purchase communications services. Some of the agreements require a minimum amount of services to be purchased over the life of the agreement, or during a specified period of time. Glowpoint believes that it will meet its commercial commitments. In certain instances where Glowpoint did not meet the minimum commitments, no penalties for minimum commitments have been assessed and the Company has entered into new agreements. It has been our experience that the prices and terms of successor agreements are similar to those offered by other carriers. Glowpoint does not believe that any loss contingency related to a potential shortfall should be recorded in the condensed consolidated financial statements because it is not probable, from the information available and from prior experience, that Glowpoint has incurred a liability. Letters of Credit The Company has an outstanding irrevocable standby letter of credit with Comerica Bank for $57,000 to serve as our security deposit for the sublease of our corporate headquarters in New Jersey. In July 2013, the Company issued an irrevocable standby letter of credit for $185,000 through Comerica Bank to serve as our security deposit for our office lease in Colorado. |
Affinity Acquisition
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Affinity Acquisition | Affinity Acquisition On October 1, 2012, the Company completed the acquisition of privately held Affinity VideoNet, Inc. ("Affinity"), a provider of public videoconferencing rooms and managed videoconferencing services to professional service organizations globally. The Company acquired 100% of the stock of Affinity, accounted for as a business combination, and paid an aggregate purchase price of $15,901,000. The purchase price consisted of (i) approximately $8.0 million in cash (obtained through debt financing as discussed below in Note 4), (ii) a $2.33 million promissory note payable to the Affinity shareholders, subject to adjustment, and (iii) 2,650,000 shares of the Company's common stock valued at approximately $5,512,000 based on the closing price of the Company's stock on October 1, 2012, subject to adjustment. The accompanying condensed consolidated financial statements for the six and three months ended June 30, 2012 do not include any revenues or expenses related to the Affinity business since the closing date of the acquisition was October 1, 2012. The Company's unaudited pro-forma results for the six and three months ended June 30, 2012 are summarized in the following table, assuming the acquisition had occurred on January 1, 2012 (in thousands):
These unaudited pro-forma results were prepared for comparative purposes only, and do not purport to be indicative of the results of operations which would have actually resulted had the acquisition occurred on January 1, 2012, nor to be indicative of future results of operations. Below is a summary of goodwill activity for the six months ended June 30, 2013 (in thousands):
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Debt Debt (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments [Table Text Block] | Long-term debt consists of the following (in thousands):
(A) Total proceeds less debt discount as discussed below |
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Schedule of Maturities of Long-term Debt [Table Text Block] | The following table summarizes the future minimum payments that the Company expects to make for long-term debt (in thousands):
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Major Customers
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6 Months Ended |
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Jun. 30, 2013
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Risks and Uncertainties [Abstract] | |
Major Customers | Major Customers Major customers are those customers or wholesale partners that account for more than 10% of revenues. For the six and three months ended June 30, 2013, approximately 21% and 21% of revenues, respectively, were derived from two major wholesale partners and the accounts receivable from these major partners represented approximately 32% of total accounts receivable as of June 30, 2013. For the six and three months ended June 30, 2012, approximately 37% and 36% of revenues, respectively, were derived from three major wholesale partners. The loss of any one of these partners would have a material adverse affect on the Company’s operations. |
Commitments and Contingencies Tables Capital Lease (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |
Six months of 2013, Total | $ 137 |
Six months of 2013, Interest | 9 |
Six months of 2013, Principal | 128 |
2013,Total | 225 |
2013,Interest | 8 |
2013,Principal | 217 |
2015, Total | 43 |
2015, Interest | 1 |
2015, Principal | 42 |
2016, Total | 1 |
2016, Interest | 0 |
2016, Principal | 1 |
Capital Lease Total | 406 |
Capital Lease Interest Total | 18 |
Capital Lease Principal Total | $ 388 |
Stock Options Table FV of Options (Details) (Stock Options [Member], USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Stock Options [Member]
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 1.10% | 0.70% | 0.80% | 0.90% |
Expected option lives | 5 years | 5 years | 5 years | 5 years |
Expected volatility | 101.30% | 109.70% | 103.20% | 111.20% |
Estimated forfeiture rate | 10.00% | 10.00% | 10.00% | 10.00% |
Expected dividend yields | 0.00% | 0.00% | 0.00% | 0.00% |
Weighted average grant date fair value of options | $ 0.67 | $ 1.66 | $ 1.39 | $ 2.37 |
Commitments and Contingencies (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum rental commitments under all non-cancelable operating leases as of June 30, 2013, are as follows (in thousands):
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Schedule of Future Minimum Lease Payments for Capital Leases | Future minimum commitments under all non-cancelable capital leases as of June 30, 2013, are as follows (in thousands):
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Restricted Stock (Tables) (Restricted Stock [Member])
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Jun. 30, 2013
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Restricted Stock [Member]
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of restricted stock granted, vested, forfeited and unvested outstanding | A summary of restricted stock granted, vested, forfeited and unvested outstanding as of, and changes made during, the six months ended June 30, 2013, is presented below (shares in thousands):
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Schedule of share-based compensation, Restricted stock, Allocation of recognized period costs | Restricted stock compensation expense is allocated as follows for the six and three months ended June 30, 2013 and 2012 (in thousands):
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Debt Schedule of Debt Instruments (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Debt Instrument [Line Items] | ||||||
Long-term Debt | $ 10,430 | $ 11,028 | ||||
Long-term Debt, Current Maturities | (1,317) | (1,397) | ||||
Long-term debt, excluding current maturities | 9,113 | 9,631 | ||||
Comerica Revolver [Member] | Revolving Credit Facility [Member] | Comerica Bank [Member]
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Debt Instrument [Line Items] | ||||||
Loans payable | 500 | 780 | ||||
Comerica Term Loan [Member] | Term Loan [Member] | Comerica Bank [Member]
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Debt Instrument [Line Items] | ||||||
Loans payable | 2,000 | 2,000 | ||||
Escalate Term Loan [Member] | Term Loan [Member] | Escalate Capital Partners SBIC I, L.P. [Member]
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Debt Instrument [Line Items] | ||||||
Loans payable | 5,842 | [1] | 5,920 | [1] | ||
Promissory Note with Stockholder Representative [Member] | Promissory Note [Member]
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Debt Instrument [Line Items] | ||||||
Notes Payable | $ 2,088 | $ 2,328 | ||||
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Stock Options Table Expense Allocation (Details) (Stock Options [Member], USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Stock option compensation expense | $ 147 | $ 68 | $ 357 | $ 90 |
Global managed services [Member]
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Stock option compensation expense | 0 | 3 | 0 | 6 |
Selling and marketing [Member]
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Stock option compensation expense | 0 | 3 | 0 | 4 |
General and administrative [Member]
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Stock option compensation expense | $ 147 | $ 62 | $ 357 | $ 80 |
Major Customers Narrative (Details)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Accounts Receivable [Member]
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Concentration Risk [Line Items] | ||||
Concentration risk percentage | 32.00% | |||
Sales Revenue, Services, Net [Member]
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Concentration Risk [Line Items] | ||||
Number of major wholesale partners | 2 | 3 | ||
Customer Concentration Risk [Member] | Sales Revenue, Services, Net [Member]
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Concentration Risk [Line Items] | ||||
Concentration risk percentage | 21.00% | 36.00% | 21.00% | 37.00% |
Affinity Acquisition (Details) (Affinity [Member], USD $)
Share data in Thousands, unless otherwise specified |
0 Months Ended |
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Oct. 02, 2012
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Affinity [Member]
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Business Acquisition [Line Items] | |
Business acquisition, percent of voting interest acquired | 100.00% |
Business acquisition, purchase price | $ 15,901,000 |
Cash paid for Affinity merger | 8,000,000 |
Note paid for Affinity merger | 2,330,000 |
Number of shares for Affinity merger (in shares) | 2,650 |
Value of common stock issued in Affinity merger | $ 5,512,000 |
Stock Options (Tables) (Stock Options [Member])
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Jun. 30, 2013
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Stock Options [Member]
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average grant date fair value of options | The weighted average fair value of each option granted is estimated on the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions during the six and three months ended June 30, 2013 and 2012:
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Summary of options granted, exercised, expired and forfeited | A summary of options granted, exercised, expired and forfeited under our plans and options outstanding as of, and changes made during, the six months ended June 30, 2013 (shares in thousands):
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Stock option compensation expense is allocated | Stock option compensation expense is allocated as follows for the six and three months ended June 30, 2013 and 2012 (in thousands):
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Basis of Presentation and Liquidity
|
6 Months Ended |
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Jun. 30, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Liquidity | Basis of Presentation and Liquidity The Business Glowpoint, Inc. (“Glowpoint” or “we” or “us” or the “Company”) is a provider of cloud-based video collaboration services, network services, and business-class support services. We provide our customers with a tailored mix of these services to fit each customer's needs. More than 1,000 different organizations in 96 countries use Glowpoint services to collaborate with colleagues, business partners and customers more effectively. Our video collaboration services include: i) Glowpoint NowTM, a reservationless videoconferencing service that allows users to collaborate via video on-demand from virtually any device, including web browsers; ii) managed videoconferencing, a high-touch, concierge-based managed service whereby Glowpoint sets up and manages customer videoconferences; and iii) video meeting suites, which allow our customers to conduct meetings and events in over 4,000 video conference rooms across 1,300 cities without investing in video devices or infrastructure. Glowpoint fully manages the videoconferences held in these suites. Our network services provide our customers with the flexibility to select specialized solutions or converge multi-service applications on a single network infrastructure to increase bandwidth efficiency and dynamic allocation. All of our network services are offered through our cloud based platform in an effort to make it easier to manage and share real-time information, spread job responsibilities and external resources while enabling stronger continuity of service and better planning for predictable peaks and valleys of the enterprise. We also offer professional services, including video communication services for broadcast/media content acquisition and remote analyst contribution for live-to-air or live-to-tape production that enable studios to broadcast or stream their media with solutions for mobile, video, and live events. Broadcasters rely on our platform and service delivery to deliver breaking news information. The Company was formed as a Delaware corporation in May 2000. The Company operates in one segment and therefore segment information is not presented. Liquidity As of June 30, 2013, we had $2,804,000 of cash and positive working capital of $651,000. Our cash balance as of June 30, 2013 includes restricted cash of $457,000 (as discussed in Note 14). For the six months ended June 30, 2013, we generated a net loss of $2,135,000 and net cash provided by operating activities of $1,354,000. We generated cash from operations even though we incurred a net loss due to certain non-cash expenses and changes in working capital. As of June 30, 2013, the current portion of long-term debt on the Company's condensed consolidated balance sheet was $1,317,000, which includes $500,000 of outstanding borrowings under our revolving line of credit with Comerica Bank (the "Comerica Revolver"), maturing on April 1, 2014, and $817,000 of scheduled principal payments under our other debt agreements, summarized in Note 4 below. As of June 30, 2013, interest payments under the Company's debt agreements over the next twelve months are expected to approximate $1,091,000. As of June 30, 2013, the Company had unused borrowing availability of $1,000,000 under the Comerica Revolver. Pursuant to the terms of our Series A-2 Preferred Stock and Series B-1 Preferred Stock, the Company began accruing dividends as of January 1, 2013 of approximately $105,000 per quarter, however, the Company is not obligated to begin paying such dividends in cash until the Company's cash balance exceeds approximately $4,176,000. Based on our current projection of revenue and expenses, the Company believes that it has, and will have, sufficient resources and cash flow to service its debt obligations and fund its operations for at least the next twelve months following the filing of this Quarterly Report on Form 10-Q. We have historically been able to raise capital in private placements as needed to fund operations and provide growth capital. There can be no assurances, however, that we will be able to raise additional capital as may be needed or upon acceptable terms, or that current economic conditions will not negatively impact us. If the current economic conditions negatively impact us and we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. Quarterly Financial Information and Results of Operations The condensed consolidated financial statements as of June 30, 2013 and for the six and three months ended June 30, 2013 and 2012 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2013, and the results of operations for the six and three months ended June 30, 2013 and 2012, the statement of stockholders' equity for the six months ended June 30, 2013 and the statement of cash flows for the six months ended June 30, 2013 and 2012. The results for the six and three months ended June 30, 2013 are not necessarily indicative of the results to be expected for the entire year. The condensed balance sheet as of December 31, 2012 was derived from audited financial statements for the year ended December 31, 2012. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with audited condensed consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2012 as filed with the Securities and Exchange Commission with our Form 10-K/A on April 4, 2013 (the "Audited 2012 Financial Statements"). |
Debt
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Long-term debt consists of the following (in thousands):
(A) Total proceeds less debt discount as discussed below On October 1, 2012, the Company entered into a Loan and Security Agreement (the "Comerica Loan Agreement") with Comerica Bank, providing the Company with a $2,000,000 term loan (the "Comerica Term Loan") and the Comerica Revolver, pursuant to which the Company could borrow, for working capital needs, an amount up to the lesser of (i) 80% of eligible accounts receivable and (ii) $3,000,000 (collectively, the "Comerica Loans"). The Comerica Loan Agreement is secured by substantially all of the assets of the Company and secured guarantees executed by GP Communications, LLC and Affinity. The Comerica Loan Agreement contains certain restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Comerica Loans are subject to certain financial covenants, including without limitation, financial covenants that require the Company to maintain a total funded debt to Adjusted EBITDA ratio, to maintain a senior funded debt to Adjusted EBITDA ratio and to maintain a fixed charge coverage ratio. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" under Item 2 of this Quarterly Report on Form 10-Q contains a description of Adjusted EBITDA. The Comerica Loan Agreement also provides for events of default, with corresponding grace periods, including failure to pay principal or interest when due, failure to pay other obligations within ten days after becoming due, failure to comply with covenants, breaches of representations and warranties, default under certain other indebtedness, certain insolvency events affecting the Company, the occurrence of certain material judgments or if any guaranty of the Company's obligations ceases to be in full force and effect. On March 28, 2013, the Company and Comerica mutually agreed to amend the Comerica Loan Agreement (the "Amendment"). The Amendment established revised definitions and ratios relating to the three financial covenants discussed above to reflect the Company's projections of EBITDA and liquidity. The Amendment also provided that the Company maintain a minimum cash balance of $400,000 in our accounts at Comerica Bank and limit extraordinary expenses in connection with acquisitions. As of June 30, 2013, the Company was in compliance with all required covenants under the Comerica Loan Agreement. The Comerica Revolver bears interest on outstanding borrowings at a rate equal to the Prime Rate (as defined in the Comerica Loan Agreement, or 3.25% as of June 30, 2013) plus 2.00%. The Amendment reduced funds available to the Company under the Comerica Revolver so that advances under the Comerica Revolver cannot exceed the lesser of (i) $3,000,000 and (ii) 80% of eligible accounts receivable, less in each case any amount outstanding under the Comerica Term Loan up to $1,500,000. As of June 30, 2013, we had outstanding borrowings under the Comerica Revolver of $500,000 and we had unused borrowing availability of approximately $1,000,000. The Comerica Revolver matures on April 1, 2014. The Comerica Term Loan bears interest at a rate equal to the Prime Rate (3.25% as of June 30, 2013) plus 3.00%. As of June 30, 2013, the outstanding balance under the Comerica Term Loan was $2,000,000. The outstanding balance of the Comerica Term Loan on October 1, 2013 shall be payable in 24 equal monthly installments of principal, plus all accrued interest, beginning on November 1, 2013. The Comerica Term Loan matures on November 1, 2015. On October 1, 2012, in connection with the Affinity acquisition, 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 $6,500,000 term loan (the “Escalate Term Loan”) for a term of 60 months. 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. The outstanding balance of the Escalate Term Loan shall be payable in 36 equal monthly installments of principal, plus all accrued interest, beginning on October 31, 2014. The Escalate Term Loan is secured by substantially all of the assets of the Company and secured guarantees executed by GP Communications and Affinity, and is subordinated to the Comerica Loans. The Escalate Loan Agreement contains certain restrictive covenants, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Escalate Loan Agreement also provides for events of default, with corresponding grace periods, including failure to pay principal when due, failure to pay interest within three business days after becoming due, failure to pay other obligations within ten days after becoming due, failure to comply with covenants, breaches of representations and warranties, default under certain other indebtedness, certain insolvency events affecting the Company and its subsidiaries or the occurrence of certain material judgments. The Escalate Loan Agreement also provides for certain management rights for Escalate, including (i) the ability for Escalate to consult with and advise management of the Company on significant business issues, including management’s proposed annual operating plans and (ii) the ability for Escalate to examine the books and records of the Company and inspect the Company’s facilities during normal business hours with reasonable notice. In connection with the Escalate Term Loan, the Company issued to Escalate 295,000 shares of Common Stock (the “Escalate Shares”) at a purchase price of $0.01 per share on October 1, 2012. Escalate received standard piggyback and demand registration rights with respect to the Escalate Shares. The shares were valued at $611,000 using the October 1, 2012, stock price of $2.08 less the purchase price were reflected as a debt discount to the Escalate Term Loan. The Comerica Amendment discussed above required the consent of Escalate. In consideration of Escalate's consent to the Amendment, the Company issued 100,000 shares of its common stock to Escalate. The shares were valued at $147,000 using the March 28, 2013 stock price of $1.47 and were reflected as a debt discount to the Escalate Term Loan. The total debt discount was $658,000 as of June 30, 2013 and is being amortized using the straight line method over the term of the loan through the maturity date. As of June 30, 2013, the Company was in compliance with all required covenants. On October 1, 2012, in connection with the Affinity acquisition, the Company issued a promissory note (the “Note”), in favor of the prior stockholders of Affinity (the "Stockholder Representative"), in original principal amount of $2.33 million, due and payable on December 31, 2014. The principal amount of the Note accrues interest at a rate of 8.0% per annum, and such interest shall be payable in arrears in quarterly payments commencing on April 1, 2013. Beginning on April 1, 2013 and on the first day of each month thereafter, if the Company has achieved a minimum EBITDA (as defined in the Comerica Loan Agreement), the Company shall make a principal payment in the amount of $50,000. The Company shall make additional payments on the principal amount on each of June 30, 2013, December 31, 2013, June 30, 2014 and December 31, 2014 in amount equal to 40% of the Company’s trailing six month EBITDA less $3.0 million, provided that the June 30, 2013 principal payment shall only be made if the Company is in compliance with the Fixed Charge Ratio (as defined in the Note). During the six months ended June 30, 2013, the Note was reduced by $240,000 in accordance with the terms of the Note in connection with severance obligations the Company incurred related to the acquisition of Affinity resulting in an equal and offsetting reduction in Goodwill. Approximately $206,000 of these severance obligations remain payable and are recorded in Accrued Expenses in the accompanying condensed consolidated balance sheet as of June 30, 2013. The following table summarizes the future minimum payments that the Company expects to make for long-term debt (in thousands):
Unamortized financing costs related to the Comerica Loans and Escalate Term Loans of $530,000 and $651,000 are included in Other Assets in the accompanying condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012, respectively. The financing costs are being amortized using the effective interest method over the term of each loan through each maturity date. During the six and three months ended June 30, 2013 there was $121,000 and $60,000 respectively, of amortization of financing costs, and $69,000 and $39,000 respectively, of amortization of debt discount. During the six and three months ended June 30, 2012 there was $29,000 and $14,000 respectively, of amortization of financing costs, and $0 and $0 respectively, of amortization of debt discount. |
Summary of Significant Accounting Policies
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6 Months Ended |
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Jun. 30, 2013
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Accounting Policies [Abstract] | |
Liquidity, Basis of Presentation and Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of Glowpoint and our 100%-owned subsidiaries, Affinity VideoNet Inc., a Delaware corporation, and GP Communications, LLC, whose business function is to provide interstate telecommunications services for regulatory purposes. All material inter-company balances and transactions have been eliminated in consolidation. Use of Estimates Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates made. We continually evaluate estimates used in the preparation of the consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the allowance for doubtful accounts, deferred tax valuation allowance, accrued sales taxes, the estimated life of customer relationships, the estimated lives and recoverability of property and equipment, and the valuation of intangible assets. See "Summary of Significant Accounting Policies" in the Company's Audited 2012 Financial Statements for a discussion on the estimates and judgments necessary in the Company's accounting for the allowance for doubtful accounts, financial instruments, concentration of credit risk, property and equipment, income taxes, stock-based compensation, and accrued sales taxes and regulatory fees. Accounting Standards Updates There have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2013, as compared to the recent accounting pronouncements described in the Company's Audited 2012 Financial Statements, that are of material significance, or have potential material significance to the Company. Revenue Recognition Revenue billed in advance for video collaboration services is deferred until the revenue has been earned, which is when the related services have been performed. Other service revenue, including amounts passed through based on surcharges from our telecom carriers, related to the network services and collaboration services are recognized as service is provided. As the non-refundable, upfront installation and activation fees charged to the subscribers do not meet the criteria as a separate unit of accounting, they are deferred and recognized over the 12 to 24 month estimated life of the customer relationship. Revenue related to professional services is recognized at the time the services are performed. Revenues derived from other sources are recognized when services are provided or events occur. Goodwill Goodwill is not amortized but is subject to periodic testing for impairment. The test for impairment will be conducted annually or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company determined that no events occurred or circumstances changed during the six months ended June 30, 2013 that would indicate that the fair value of goodwill may be below its carrying amount. However, if market conditions deteriorate, or if the Company is unable to execute on its strategies, it may be necessary to record impairment charges in the future. Allowance for Doubtful Accounts We record an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible. We also record additional allowances based on our aged receivables, which are determined based on historical experience and an assessment of the general financial conditions affecting our customer base. If our actual collections experience changes, revisions to our allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. We do not obtain collateral from our customers to secure accounts receivable. The allowance for doubtful accounts was $179,000 and $151,000 at June 30, 2013 and December 31, 2012, respectively. Taxes Billed to Customers and Remitted to Taxing Authorities We recognize taxes billed to customers in revenues and taxes remitted to taxing authorities in our operating expenses, network and infrastructure. For the six and three months ended June 30, 2013, we included taxes of $668,000 and $339,000, respectively, in revenues, and we included taxes of $635,000 and $323,000, respectively, in network and infrastructure expenses. For the six and three months ended June 30, 2012, we included taxes of $796,000 and $393,000, respectively, in revenues, and we included taxes of $764,000 and $372,000, respectively, in network and infrastructure expenses. Impairment of Long-Lived Assets and Intangible Assets We evaluate impairment losses on long-lived assets used in operations, primarily fixed assets and purchased intangible assets subject to amortization, when events and circumstances indicate that the carrying value of the assets might not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the undiscounted cash flows estimated to be generated by those assets are compared to the carrying amounts of those assets. If and when the carrying values of the assets exceed their fair values, then the related assets will be written down to fair value. In the six and three months ended June 30, 2013, there was an impairment loss of $474,000 and $39,000, respectively, recorded for network equipment no longer being utilized in the Company's business. In the six months ended June 30, 2012, no impairment losses were recorded. Capitalized Software Costs The Company capitalizes certain costs incurred in connection with developing or obtaining internal-use software. All software development costs have been appropriately accounted for as required by ASC Topic 350.40 “Intangible – Goodwill and Other – Internal-Use Software.” Capitalized software costs are included in “Property and Equipment” on our condensed consolidated balance sheets and are amortized over three to four years. Software costs that do not meet capitalization criteria are expensed as incurred. For the six and three months ended June 30, 2013, we capitalized internal use software costs of $79,000 and $27,000, respectively, and we amortized $259,000 and $121,000, respectively, of these costs. For the six and three months ended June 30, 2012 we capitalized internal use software costs of $161,000 and $77,000, respectively, and we amortized $279,000 and $139,000, respectively, of these costs. An impairment loss of $65,000 and $65,000, was recorded during the six and three months ended June 30, 2013, respectively. During the six and three months ended June 30, 2012, no impairment losses were recorded. |
Accrued Expenses Accrued Expenses (Tables)
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Jun. 30, 2013
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses | Accrued expenses consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):
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Affinity Acquisition Affinity Acquisition (Pro Forma) (Details) (Affinity [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended |
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Jun. 30, 2012
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Jun. 30, 2012
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Affinity [Member]
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Unaudited Pro Forma Information | ||
Revenue | $ 9,577 | $ 19,019 |
Net income (loss) | $ (51) | $ 1,885 |
Basic (in dollars per share) | $ 0.00 | $ 0.07 |
Diluted (in dollars per share) | $ 0.00 | $ 0.07 |
Basic (in shares) | 27,566 | 27,481 |
Diluted (in shares) | 28,915 | 28,783 |