x
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2011.
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o
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Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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77-0312442
(I.R.S. Employer Identification No.)
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31.1*
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Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer
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31.2*
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Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
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32.1*
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Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS**
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XBRL Instance Document
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101.SCH**
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XBRL Taxonomy Extension Schema
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101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase
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101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase
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101.LAB**
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XBRL Taxonomy Extension Label Linkbase
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101.PRE**
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XBRL Taxonomy Extension Presentation Linkbase
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GLOWPOINT, INC.
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Date: August 9, 2011
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By:/s/ Joseph Laezza
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Joseph Laezza, Chief Executive Officer
(principal executive officer)
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Date: August 9, 2011
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By:/s/ John R. McGovern
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John R. McGovern, Chief Financial Officer
(principal financial and accounting officer)
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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
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Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Current assets: | Â | Â |
Accounts receivable, net of allowance for doubtful accounts | $ 200 | $ 250 |
Stockholders' equity: | Â | Â |
Preferred Stock Par value B | $ 0.0001 | $ 0.0001 |
Preferred Stock Stated value B | 100,000 | 100,000 |
Preferred Stock Authorized B | 100 | 100 |
Preferred Stock issued B | 100 | 100 |
Preferred Stock outstanding B | 100 | 100 |
Liquidation value B | 10,000 | 10,000 |
Preferred Stock Par value A | $ 0.0001 | $ 0.0001 |
Preferred Stock Stated value A | 7,500 | 7,500 |
Preferred Stock Authorized A | 7,500 | 7,500 |
Preferred Stock issued A | 1,059 | 1,059 |
Preferred Stock outstanding A | 1,059 | 1,059 |
Liquidation value A | $ 7,945 | $ 7,945 |
Common Stock Par value | $ 0.0001 | $ 0.0001 |
Common Stock Authorized | 150,000,000 | 150,000,000 |
Common Stock issued | 22,285,462 | 21,353,604 |
Common Stock outstanding | 22,285,462 | 21,353,604 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
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Revenue | $ 6,954 | $ 7,082 | $ 13,935 | $ 13,597 |
Operating expenses: | Â | Â | Â | Â |
Network and Infrastructure | 2,471 | 3,041 | 4,883 | 5,876 |
Global managed services | 1,979 | 2,102 | 3,873 | 4,154 |
Sales and marketing | 902 | 1,209 | 1,824 | 2,101 |
General and administrative | 1,282 | 1,233 | 2,688 | 2,355 |
Depreciation and amortization | 297 | 276 | 573 | 542 |
Total operating expenses | 6,931 | 7,861 | 13,841 | 15,028 |
(Loss) income from operations | 23 | (779) | 94 | (1,431) |
Interest and other expense: | Â | Â | Â | Â |
Interest expense | 14 | 18 | 32 | 54 |
Amortization of financing costs | 16 | 2 | (31) | (2) |
Total interest and other expense | 30 | 20 | 63 | 56 |
Net (loss) income from continuing operations | 24 | 35 | 18 | 112 |
Income from discontinued operations | 24 | 35 | 18 | 112 |
Net income (loss) | 17 | (764) | 49 | (1,375) |
Redemption of preferred stock | (778) | |||
Net income (loss) attributable to common stockholders | $ 17 | $ (764) | $ 49 | $ (2,153) |
Continuing operations | $ 0.00 | $ (0.04) | $ 0.00 | $ (0.13) |
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.01 |
Basic net (loss) income per share | $ 0.00 | $ (0.04) | $ 0.00 | $ (0.12) |
Continuing operations | $ 0.00 | $ (0.04) | $ 0.00 | $ (0.13) |
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.01 |
Diluted net income (loss) per share | $ 0.00 | $ (0.04) | $ 0.00 | $ (0.12) |
Weighted average number of common shares: | Â | Â | Â | Â |
Basic | 20,753 | 19,868 | 20,714 | 17,985 |
Diluted | 24,594 | 19,868 | 24,594 | 17,985 |
Document and Entity Information (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 08, 2011
|
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Entity Registrant Name | GLOWPOINT, INC. | Â |
Entity Central Index Key | 0000746210 | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Amendment Flag | false | Â |
Current Fiscal Year End Date | --12-31 | Â |
Is Entity a Well-known Seasoned Issuer? | No | Â |
Is Entity a Voluntary Filer? | No | Â |
Is Entity's Reporting Status Current? | Yes | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Public Float | Â | $ 2,511 |
Entity Common Stock, Shares Outstanding | Â | 25,113,701 |
Document Fiscal Period Focus | Q2 | Â |
Document Fiscal Year Focus | 2011 | Â |
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Warrants
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Note 6 - Warrants | A summary of warrants granted, exercised, exchanged, forfeited and outstanding as of, and changes made during, the six months ended June 30, 2011, is presented below (in thousands):
All of our warrants are exercisable, with 417,000 having an exercise price of $1.60 and an expiration date of November 25, 2013 and 295,000 having an exercise price of $2.53 and an expiration date of March 29, 2015.
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Revolving Loan Facility
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6 Months Ended |
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Jun. 30, 2011
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Note 11 - Revolving Loan Facility | On June 16, 2010, the Company entered into a Loan and Security Agreement (the Revolving Loan Facility) with SVB pursuant to which the Company may borrow up to $5,000,000 for working capital purposes. The Revolving Loan Facility matures on June 15, 2012. The amounts that can be borrowed at any given time are equal to the lesser of $5,000,000 or 80% of the eligible accounts receivable, as defined. As of June 30, 2011, we had unused borrowing availability of $1,287,000. Outstanding principal amounts under the Revolving Loan Facility bear interest at a floating rate per annum equal to Prime Rate as announced by SVB plus two percent (2%), payable monthly in arrears, subject to a minimum interest rate of 6%. The Company is also obligated to pay minimum monthly interest of $3,750 regardless of the amount borrowed. The SVB Prime Rate was 4% as of June 30, 2011. The Revolving Loan Facility is secured by a first priority security interest in all the Companys assets, including, without limitation, its intellectual property. The Revolving Loan Facility contains a number of financial covenants, including without its limitation, covenants relating to minimum unrestricted cash balances and minimum monthly Adjusted EBITDA, as defined, in the Revolving Loan Facility. At June 30, 2011, we were in compliance with the covenants, as defined, set forth in the Revolving Loan Facility and there was $750,000 outstanding under the Revolving Loan Facility.
The Revolving Loan Facility financing costs, net of accumulated amortization, which are included in other assets in the accompanying consolidated balance sheets, were $59,000 as of June 30, 2011. The financing costs for the Revolving Loan Facility are being amortized over the 12 to 24 month period through the maturity date of the Revolving Loan Facility. During the quarter ended June 30, 2011 the amortization of financing costs was $16,000 and was included as Amortization of Deferred Financing Costs in the consolidated statement of operations in Interest and Other Expense.
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Summary of Significant Accounting Policies
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6 Months Ended |
---|---|
Jun. 30, 2011
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Note 2 - Summary of Significant Accounting Policies | Principles of Consolidation The condensed consolidated financial statements include the accounts of Glowpoint and our wholly-owned subsidiary, GP Communications, LLC. All material inter-company balances and transactions have been eliminated in consolidation. Reclassifications The accompanying condensed consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Prior year financial statements have been restated in conformity with generally accepted accounting principles to present the operations of the ISDN resale services as a discontinued operation. Certain other prior year amounts have been reclassified to conform to the current period presentation and the impact of the reverse stock split on January 14, 2011. Use of Estimates Preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates made. We continually evaluate estimates used in the preparation of the condensed 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 and the estimated lives and recoverability of property and equipment. See Summary of Significant Accounting Policies in the Companys Annual Report on Form 10-K for the year ended December 31, 2010 for a discussion on the estimates and judgments necessary in the Companys 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 three months ended June 30, 2011, as compared to the recent accounting pronouncements described in the Companys Annual Report on Form 10-K for the year ended December 31, 2010, that are of material significance, or have potential material significance to the Company. Revenue Recognition We recognize subscription revenue when the related services have been performed. Revenue billed in advance is deferred until the revenue has been earned. Other service revenue, including amounts passed through based on surcharges from our telecom carriers, related to the Glowpoint managed network service and the multi-point video and audio conferencing services are recognized as service is provided. As the non-refundable, upfront activation fees charged to the subscribers do not meet the criteria as a separate unit of accounting, they are deferred and recognized over the 12 to 24 month period estimated life of the customer relationship. Revenue related to integration services is recognized at the time the services are performed, and presented as required by ASC Topic 605 Revenue Recognition. Revenues derived from other sources are recognized when services are provided or events occur. 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 costs, network and infrastructure. For the six and three months ended June 30, 2011, we included taxes of $846,000 and $415,000, respectively, in revenues and we included taxes of $801,000 and $392,000, respectively, in network and infrastructure costs. For the six and three months ended June 30, 2010, we included taxes of $985,000 and $511,000, respectively, in revenues and we included taxes of $896,000 and $444,000, respectively, in network and infrastructure costs. Long-Lived Assets We evaluate impairment losses on long-lived assets used in operations, primarily fixed assets, when events and circumstances indicate that the carrying value of the assets might not be recoverable as required by ASC topic 360 Property, Plant and Equipment. 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, 2011 and 2010, 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 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, 2011, we capitalized internal use software costs of $197,000 and $72,000, respectively, and we amortized $127,000 and $66,000, respectively, of these costs. For the six and three months ended June 30, 2010, we capitalized internal use software costs of $111,000 and $19,000, respectively, and we amortized $113,000 and $63,000, respectively, of these costs. Income Taxes The Company has completed a preliminary study in accordance with Section 382 of the Internal Revenue Code (Section 382) and has determined that the ownership changes it has undergone will significantly impair the Companys ability to utilize its net operating carryforwards before their expiration. As a result of this study, approximately $89,250,000 of federal net operating loss carryforwards will expire without being able to be utilized. This would reduce the Companys deferred tax asset as well as the valuation allowance by approximately $89,250,000 with no effect on the consolidated balance sheet or statement of operations. The Company continues to maintain a full valuation allowance against its deferred tax assets. Due to the ownership changes, the Company may be subject to an annual limitation of approximately $3,400,000 through 2013 and approximately $1,200,000 from 2014 to 2028. |
Preferred Stock
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6 Months Ended |
---|---|
Jun. 30, 2011
|
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Note 8 - Preferred Stock | Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. As of June 30, 2011, there are: 100 shares of Series B Preferred Stock authorized, issued and outstanding; 7,500 shares of Series A-2 Preferred Stock authorized and 1,059 shares issued and outstanding; and 4,000 shares of Series D Preferred Stock authorized and no shares issued or outstanding.
Each share of Series B Preferred Stock has a stated value of $100,000 per share (the Series B Stated Value), and a liquidation preference equal to the Series B Stated Value plus all accrued and unpaid dividends (the Series B Liquidation Preference). The Series B Preferred Stock is not convertible into common stock. The Series B Preferred Stock is senior to all other classes of equity and, commencing on January 1, 2013, is entitled to cumulative dividends from January 1, 2013, at a rate of 4% per annum, payable quarterly, based on the Series B Stated Value. Commencing January 1, 2014, the cumulative dividend rate increases to 12% per annum, payable quarterly, based on the Series B Stated Value. The Company may, at its option at any time, redeem all or a portion of the outstanding shares of Series B Preferred Stock by paying the Series B Liquidation Preference.
Each share of Series A-2 Preferred Stock has a stated value of $7,500 per share (the A-2 Stated Value), a liquidation preference equal to the Series A-2 Stated Value, and is convertible at the holders election into common stock at a conversion price per share of $3.00. Therefore, each share of Series A-2 Preferred Stock is convertible into 2,500 shares of common stock. The Series A-2 Preferred Stock is subordinate to the Series B Preferred Stock but is senior to all other classes of equity, has weighted average anti-dilution protection and, commencing on January 1, 2013, is entitled to cumulative dividends at a rate of 5% per annum, payable quarterly, based on the Series A-2 Stated Value. Once dividend payments commence, all dividends are payable at the option of the holder in cash or through the issuance of a number of additional shares of Series A-2 Preferred Stock with an aggregate liquidation preference equal to the dividend amount payable on the applicable dividend payment date.
In accordance with ASC Topic 815, we evaluated whether our convertible preferred stock contains provisions that protect holders from declines in our stock price or otherwise could result in modification of the exercise price and/or shares to be issued under the respective preferred stock agreements based on a variable that is not an input to the fair value of a fixed-for-fixed option and require a derivative liability. The Company determined no derivative liability is required under ASC Topic 815 with respect to our convertible preferred stock. A contingent beneficial conversion amount is required to be calculated and recognized when and if the adjusted conversion price of the convertible preferred stock, currently $3.00, is adjusted to reflect a down round stock issuance that reduces the conversion price below the $1.16 fair value of the common stock on the issuance date of the convertible preferred stock.
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Related Party Transactions
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6 Months Ended |
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Jun. 30, 2011
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Note 13 - Related Party Transactions |
The Company provides cloud-managed video services (the Video Services) to a company in which one of our directors is an officer. Management believes that such transactions contain terms that would have been obtained from unaffiliated third parties.
Related party Video Services revenue for the six months ended June 30, 2011 and 2010 were $161,000 and $159,000, respectively, and for the three months ended June 30, 2011 and 2010 were $81,000 and $82,000, respectively. The accounts receivable for this company was $54,000 as of June 30, 2011.
Also, the Company receives financial advisory services from a firm where one of their principals is a shareholder of Glowpoint. Management believes that such transactions contain terms that would have been obtained from unaffiliated third parties.
Related party financial advisory fees for the six months ended June 30, 2011 and 2010 were $72,000 and $210,000, respectively, and for the three months ended June 30, 2011 and 2010 were $36,000 and $0, respectively. As of June 30, 2011, there was no accounts payable for this firm.
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Commitments and Contingencies
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 9 - Commitments and Contingencies | Operating Leases
We lease several facilities under operating leases expiring through 2014. 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 31, 2011 were $247,000 and $123,000, respectively. Lease payments for the six and three months ended June 31, 2010 were $193,000 and $96,000, respectively.
Capital Lease Obligation
We lease certain equipment under a non-cancelable lease agreement at a fixed interest rate of 6%. The lease is accounted for as capital lease. The equipment under the capital lease as of June 30, 2011 had a cost of $512,000. Future minimum commitments under all non-cancelable capital leases are as follows (in thousands):
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.
Letter of Credit
In November 2010, the Company entered into an irrevocable standby letter of credit (LOC) for $115,000 to secure our security deposit for the sublease of our corporate headquarters. The LOC was obtained from Silicon Valley Bank (SVB) and will be renewed yearly until January 2014, the expiration date of our sublease.
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Earnings or Loss Per Share
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Jun. 30, 2011
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Note 7 - Income or Loss Per Share | Earnings or loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common shares outstanding during the period. Diluted loss per share for the six and three months ended June 30, 2010 is the same as basic loss per share due to the net loss in each of the respective periods. For the six and three months ended June 30, 2011 diluted earnings per share includes 500,000 and 469,000, respectively, shares of common stock associated with outstanding options and warrants, and 2,648,000 and 2,648,000, respectively, shares issuable upon conversion of our convertible preferred stock calculated using the treasury stock method.
For the six months ended June 30, 2010, the following potential shares of common stock that could have been issuable have been excluded from the calculation of diluted loss per share because the effects, as a result of our net loss, would be anti-dilutive (in thousands):
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2010 Private Placements
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6 Months Ended |
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Jun. 30, 2011
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Note 3 - 2010 Private Placement Transactions | In March 2010, the Company entered into transactions to raise further growth capital (the 2010 Private Placement). As required by ASC topic 260 Earnings Per Share, we recognized a $778,000 Loss on Redemption of Preferred Stock in our condensed consolidated statements of operations, which is added to our net loss to arrive at the net loss attributable to common stockholders. |
Stock Options
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Jun. 30, 2011
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Note 4 - Stock Options |
We periodically grant stock options to employees and directors in accordance with the provisions of our stock option plans, with the exercise price of the stock options being set at the closing market price of the common stock on the date of grant. The intrinsic value of options outstanding and exercisable at June 30, 2011 and 2010 was $108,000 and $165,000, respectively. Options exercised during the six and three months ended June 30, 2011 were 124,000 and 64,000, respectively. Options exercised during the six and three months ended June 30, 2010 were 5,000 and 0, respectively.
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, 2011 and 2010 (options granted in thousands):
The Company calculates expected volatility for a stock-based grant based on historic daily stock price observations of its common stock during the period immediately preceding the grant that is equal in length to the expected term of the grant. The expected term of the options and forfeiture rates are estimated based on the Companys exercise and employment termination experience. The risk free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants with terms approximating the expected life of the grants. The assumptions used in the Black-Scholes option valuation model are highly subjective and can materially affect the resulting valuations.
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, 2011 (in thousands):
(1) 31 common shares were issued in cashless exercises of 124 options.
Stock option compensation expense is allocated as follows for the six and three months ended June 30, 2011 and 2010 (in thousands):
The remaining unrecognized stock-based compensation expense for options at June 30, 2011 was $348,000, of which $268,000, representing 130,000 options, will only be expensed upon a change in control and the remaining $80,000 will be amortized over a weighted average period of approximately 10 months.
There was no income tax benefit recognized for stock-based compensation for the six and three months ended June 30, 2011 and 2010. No compensation costs were capitalized as part of the cost of an asset.
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Discontinued Operations
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6 Months Ended |
---|---|
Jun. 30, 2011
|
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Note 12 - Discontinued Operations | Our ISDN resale services no longer fit into our overall strategic plan. In September 2010, we entered into an agreement with an independent telecommunications service provider to transfer these services and the related customers, and going forward the Company will receive a 15% monthly recurring referral fee for those revenues for as long as the customers maintain service. The only remaining assets of the ISDN resale services are the receivables for services provided prior to the transfer, and the Company will retain and collect these accounts. It is anticipated that the transfer will be completed in the third quarter of 2011, and the Company will have no continuing involvement with the ISDN product line.
The Company accordingly classified these ISDN related revenues and expenses as discontinued operations in accordance with ASC 205.20 Discontinued Operations. The accompanying condensed consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Prior year financial statements have been restated in conformity with generally accepted accounting principles to present the operations of the ISDN resale services as a discontinued operation.
Revenues from the ISDN resale services, reported as discontinued operations, for the six months ended June 30, 2011 and 2010 were $81,000 and $388,000, respectively, and for the three months ended June 30, 2011 and 2010 were $30,000 and $185,000, respectively. Net income from the ISDN resale services, reported as discontinued operations, for the six months ended June 30, 2011 and 2010 were $18,000 and $112,000, respectively, and for the three months ended June 30, 2011 and 2010 were $24,000 and $35,000, respectively. The assets and liabilities from the ISDN resale services, reported as net current (liabilities)/assets of discontinued operations, as of June 30, 2011 and 2010 were ($25,000) and $190,000, respectively. No income tax provision was required to be recognized by the Company against income from the ISDN resale services over the related periods.
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Restricted Stock
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Jun. 30, 2011
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Note 5 - Restricted Stock | A summary of restricted stock granted, vested, forfeited and unvested outstanding as of, and changes made during, the six and three months ended June 30, 2011, is presented below (in thousands):
Restricted stock shares granted and compensation expense is allocated as follows for the six and three months ended June 30, 2011 and 2010 (in thousands):
The remaining unrecognized stock-based compensation expense for restricted stock at June 30, 2011 was $1,305,000, of which $462,000, representing 183,000 shares, will only be expensed upon a change in control and the remaining $843,000 will be amortized over a weighted average period of 7.4 years.
There was no income tax benefit recognized for stock-based compensation for the six and three months ended June 30, 2011 and 2010, respectively. No compensation costs were capitalized as part of the cost of an asset.
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Subsequent Events
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6 Months Ended |
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Jun. 30, 2011
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Note 15 - Subsequent Events | Preferred Stock Conversion
In August 2011, certain holders of the Companys Series A-2 Preferred Stock elected to convert 965 shares of Series A-2 Preferred Stock into 2,413,000 shares of common stock of the Company (the A-2 Conversion) at the original conversion price. Each of the Series A-2 Preferred Stock shares was exchanged for 2,500 shares of common stock, which is consistent with the Series A-2 Preferred Stock Certificate of Designation. As a result of the A-2 Conversion, there remained 94 shares of Series A-2 Preferred Stock outstanding as of August 3, 2011.
In connection with the A-2 Conversion, the Company has elected to exchange the Companys outstanding Series B Preferred Stock for a new Series B-1 Preferred Stock, par value $0.0001 and stated value $100,000 per share. The Series B-1 Preferred Stock will rank senior to the Series A-2 Preferred Stock with respect to the distribution of assets on liquidation, dissolution or winding up and will be entitled to the payment of cash dividends.
Warrant Conversion
In August 2011, the company agreed with certain holders of the Companys outstanding warrants to exchange an aggregate 623,000 warrants into 335,000 shares of common stock of the Company (the Warrant Exchange). As a result of the Warrant Exchange, there remained 89,000 warrants outstanding as of August 3, 2011.
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Basis of Presentation
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6 Months Ended |
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Jun. 30, 2011
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Note 1 - Basis of Presentation | The Business Glowpoint, Inc. ("Glowpoint" or "we" or "us" or the Company), a Delaware corporation, is a provider of cloud managed video services. The Company pursues its recurring revenue business model by delivering service to more than 500 different enterprises in over 35 countries supporting thousands of video endpoints, telepresence rooms, and infrastructure. Glowpoints managed services solve the challenges associated with achieving consistent high-quality experiences and the total cost of ownership relating to technology and support costs. As one of the only pure play video service providers in the world, Glowpoint is uniquely positioned in a growing market and benefits from the network effect created by the proliferation of video communications. Glowpoint provides wholesale programs and private-labeled (branded) resale options for hardware manufacturers, network operators and system integrators seeking to offer video services as a value-added addition to their collaboration and communications offerings. Today, the Company maintains multiple strategic partnerships that are core to its global sales strategy. Glowpoints services, which are accessible from anywhere in the world, enable two-way interactive video communications through our Open Video cloud platform. Glowpoints Open Video service cloud is fully equipped with multi-tenant infrastructure, technology platforms, and applications, much of which is proprietary. Customers simply plug into Open Video to gain access to the services. In this regard, our services are analogous to the software and infrastructure as a service industry. Glowpoints core service offerings are designed to integrate video into enterprise unified communications environments enabling scalability, security and interoperability for large enterprises and small and medium sized businesses around the world. The four primary components of our managed services consist of help desk and concierge support, open business exchange platform, hosted bridging and remote monitoring. Open Video offers telepresence, video and unified collaboration users a way to meet and communicate across various hardware and software platforms and carrier networks in a secure, open fashion removing all barriers to video collaboration and communications. Glowpoint operates in one reporting segment. In September 2010, we determined that our Integrated Services Digital Network (ISDN) resale services no longer fit into our strategic plan. We entered into an agreement with an independent telecommunications service provider to transfer our customers receiving this service to them, and prospectively we now receive a 15% recurring referral fee for those revenues. The transfer will be completed in the third quarter of 2011 (see Note 12). Liquidity For the six months ended June 30, 2011, we had net income attributable to common stockholders of $49,000 and had a negative cash flow from operations of $223,000. At June 30, 2011, we had $1,258,000 of cash, negative working capital of $407,000 and an accumulated deficit of $165,019,000. We have historically been able to raise capital in private placements, most recently $3,000,000 in March 2010 and $1,000,000 in September 2010, as needed to fund operations and provide growth capital. In June 2011, the Company issued shares of common stock, in lieu of cash, as consideration for the purchase of assets pursuant to the terms of a purchase agreement (as discussed in Note 14). In June 2010, the Company entered into a Revolving Loan Facility (as discussed in Note 11) pursuant to which the Company may borrow up to $5,000,000 for working capital purposes and under which we had unused borrowing availability of approximately $1,287,000 as of June 30, 2011. The Revolving Loan Facility matures in June 2012. In addition to our financing activity, we also amended the terms of our Series A-2 and Series B Preferred Stock to eliminate any dividends until January 2013 and have reached settlements regarding a majority of the liability for which we had accrued sales and use taxes and regulatory fees. Based primarily on our efforts to manage costs, the 2010 Private Placements (as defined in Note 3), our new Revolving Loan Facility, the elimination of dividends until January 2013, along with our cash flow projection, the Company believes that it has, and will have, sufficient cash flow to fund its operations through at least August 31, 2012. There can be no assurances, however, that we will be able to raise additional capital as may be needed or upon acceptable terms, nor 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, 2011 and for the six and three months ended June 30, 2011 and 2010 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, 2011, and the results of operations for the six and three months ended June 30, 2011 and 2010, the statement of stockholders equity for the six months ended June 30, 2011 and the statement of cash flows for the six months ended June 30, 2011 and 2010. The results for the six and three months ended June 30, 2011 are not necessarily indicative of the results to be expected for the entire year. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2010 as filed with the Securities and Exchange Commission with our Form 10-K on March 16, 2011 (the Audited 2010 Financial Statements). |
Major Customers
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6 Months Ended |
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Jun. 30, 2011
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Note 10 - Major Customers | Major customers are those customers that account for more than 10% of revenues. For the six and three months ended June 30, 2011, 25.6% and 22.1% of revenues, respectively, were derived from two major customers and the accounts receivable from these major customers represented 21.3% of total accounts receivable as of June 30, 2011. For the six and three months ended June 30, 2010, 18.3% and 18.2% of revenues, respectively, were derived from one major customer and the accounts receivable from this major customer represented 17.3% of total accounts receivable as of June 30, 2010. The loss of these customers would have a material adverse affect on the Companys operations.
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Asset Purchase Agreement
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6 Months Ended |
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Jun. 30, 2011
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Note 14 - Asset Purchase Agreement | On June 30, 2011, the Company issued 769,000 shares of common stock as consideration for the purchase of assets pursuant to the terms of a purchase agreement. The assets acquired are equipment primarily used in the delivery and management of hosted video bridging and help desk and concierge services and are classified as property and equipment on the accompanying consolidated balance sheet. The total number of shares was based on consideration equal to $1,581,000 using the common stocks 30-day trailing volume-weighted average price for the period ended June 28, 2011 (the VWAP). This transaction did not meet the requirements of a business combination and therefore was accounted for as an asset purchase with the fair value of the assets purchased equal to the consideration given. The equipment will be depreciated on a straight line basis over five years.
Pursuant to the agreement, if at any time between the first anniversary of the closing date and the date that is 18 months following the closing date (the repurchase period) the closing price of the Companys common stock shall fall below the VWAP, then the seller has the right to demand that the Company repurchase from it, in a single transaction, not more than 50% of the shares delivered to such seller at closing at a price equal to the VWAP. This will result in a derivative liability and will be accounted for with changes in fair value during the repurchase period recorded in earnings. As of June 30, 2011, there was no derivative liability.
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