x
|
Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
for the quarterly period ended September 30,
2005.
|
o |
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 Number)
|
PART
I - FINANCIAL INFORMATION
|
||
Item
1. Restated Condensed Consolidated Financial Statements
|
||
Condensed
Consolidated Balance Sheets at September 30, 2005 (unaudited
restated) and
December
31, 2004*
|
1
|
|
Unaudited
Restated Condensed Consolidated Statements of Operations For the
Nine
Months
and
Three Months ended September 30, 2005 and 2004
|
2
|
|
Unaudited
Restated Condensed Consolidated Statements of Cash Flows for the
Nine
Months Ended
|
||
September
30, 2005 and 2004
|
3
|
|
Notes
to Restated Condensed Consolidated Financial Statements
|
5
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
11
|
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
19
|
|
Item
4. Controls and Procedures
|
20
|
|
PART
II - OTHER INFORMATION
|
||
Item
1. Legal Proceedings
|
20
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
20
|
|
Item
3. Defaults Upon Senior Securities
|
20
|
|
|
||
Item
4. Submission of Matters to a Vote of Security Holders
|
20
|
|
|
||
Item
5. Other Information
|
20
|
|
Item
6. Exhibits
|
20
|
|
Signatures
|
21
|
|
Certifications
|
22
|
*
|
The
Condensed Consolidated Balance Sheet at December 31, 2004 has been
derived
from the audited restated consolidated financial statements filed
as an
exhibit to our Report on Form 8-K on January 18,
2007.
|
September
30, 2005
|
December
31, 2004*
|
||||||
(Unaudited)
(Restated - Note 3) |
|||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
6,221
|
$
|
4,497
|
|||
Escrowed
cash
|
—
|
337
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of $152 and $305;
respectively
|
2,329
|
1,872
|
|||||
Receivable
from Gores Technology Group
|
—
|
2,371
|
|||||
Prepaid
expenses and other current assets
|
923
|
554
|
|||||
Total
current assets
|
9,473
|
9,631
|
|||||
Property
and equipment, net
|
4,588
|
5,103
|
|||||
Other
assets
|
217
|
258
|
|||||
Total
assets
|
$
|
14,278
|
$
|
14,992
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
3,732
|
$
|
2,984
|
|||
Accrued
expenses
|
4,353
|
3,822
|
|||||
Current
portion of derivative financial instrument
|
1,026
|
367
|
|||||
Deferred
revenue
|
449
|
265
|
|||||
Capital
lease obligations
|
—
|
35
|
|||||
Total
current liabilities
|
9,560
|
7,473
|
|||||
Derivative
financial instrument, less current portion
|
387
|
932
|
|||||
Total
liabilities
|
9,947
|
8,405
|
|||||
Preferred
stock, $.0001 par value; 5,000 shares authorized and redeemable;
0.120 and
0.204 Series B shares issued and outstanding, (stated value of $2,888
and
$4,888; liquidation value of $3,279 and $5,257),
respectively
|
2,888
|
4,888
|
|||||
Stockholders’
Equity:
|
|||||||
Common
stock, $.0001 par value; 100,000 shares authorized; 46,086 and 37,935
shares issued and issuable; 45,966 and 37,815 shares outstanding,
respectively
|
5
|
4
|
|||||
Deferred
compensation
|
(711
|
)
|
(1,176
|
)
|
|||
Additional
paid-in capital
|
160,328
|
148,510
|
|||||
Accumulated
deficit
|
(157,939
|
)
|
(145,399
|
)
|
|||
1,683
|
1,939
|
||||||
Less:
Treasury stock, 40 shares at cost
|
(240
|
)
|
(240
|
)
|
|||
Total
stockholders’ equity
|
1,443
|
1,699
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
14,278
|
$
|
14,992
|
·
|
Derived
from the audited restated consolidated financial statements filed
as an
exhibit to our Report on Form 8-K on January 18,
2007.
|
|
Nine
Months Ended
September
30,
|
Three
Months Ended
September
30,
|
|||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Revenue
|
$
|
13,157
|
$
|
11,748
|
$
|
4,558
|
$
|
4,383
|
|||||
Cost
of revenue
|
11,367
|
11,851
|
3,675
|
4,240
|
|||||||||
Gross
margin (loss)
|
1,790
|
(103
|
)
|
883
|
143
|
||||||||
Operating
expenses:
|
|||||||||||||
Research
and development
|
896
|
794
|
320
|
313
|
|||||||||
Sales
and marketing
|
3,159
|
2,190
|
1,011
|
931
|
|||||||||
General
and administrative
|
10,616
|
8,694
|
3,946
|
3,118
|
|||||||||
Total
operating expense
|
14,671
|
11,678
|
5,277
|
4,362
|
|||||||||
Loss
from operations before other (income) expense
|
(12,881
|
)
|
(11,781
|
)
|
(4,394
|
)
|
(4,219
|
)
|
|||||
Other
(income) expense:
|
|||||||||||||
Amortization
of deferred financing costs
|
—
|
448
|
—
|
—
|
|||||||||
Interest
(income) expense, net
|
(76
|
)
|
(5
|
)
|
(43
|
)
|
(26
|
)
|
|||||
Increase
in fair value of derivative financial instrument
|
114
|
88
|
33
|
45
|
|||||||||
Amortization
of discount on subordinated debentures
|
—
|
2,650
|
—
|
—
|
|||||||||
Other
non-operating business
|
—
|
(132
|
)
|
—
|
(132
|
)
|
|||||||
Loss
on exchange of debt
|
—
|
743
|
—
|
—
|
|||||||||
Gain
on settlement with Gores
|
(379
|
)
|
—
|
—
|
—
|
||||||||
Total
other (income) expense, net
|
(341
|
)
|
3,792
|
(10
|
)
|
(113
|
)
|
||||||
Net
loss
|
(12,540
|
)
|
(15,573
|
)
|
(4,384
|
)
|
(4,106
|
)
|
|||||
Preferred
stock dividends
|
(205
|
)
|
(
270
|
)
|
(58
|
)
|
(99
|
)
|
|||||
Preferred
stock deemed dividends
|
(1,282
|
)
|
—
|
—
|
—
|
||||||||
Net
loss attributable to common stockholders
|
$
|
(14,027
|
)
|
$
|
(15,843
|
)
|
$
|
(4,442
|
)
|
$
|
(4,205
|
)
|
|
Net
loss attributable to common stockholders per share:
|
|||||||||||||
Basic
and diluted
|
$
|
(0.32
|
)
|
$
|
(0.44
|
)
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
|
Weighted
average number of common shares:
|
|||||||||||||
Basic
and diluted
|
43,693
|
35,865
|
45,966
|
37,841
|
Nine
Months Ended
September
30,
|
|||||||
2005
|
2004
|
||||||
Cash
flows from Operating Activities:
|
|||||||
Net
loss
|
$
|
(12,540
|
)
|
$
|
(15,573
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
1,727
|
1,669
|
|||||
Amortization
of deferred financing costs
|
—
|
448
|
|||||
Amortization
of discount on subordinated debentures
|
—
|
2,650
|
|||||
Loss
on exchange of debt
|
—
|
743
|
|||||
Other
expense recognized for the increase in the estimated fair value of
the
derivative financial instrument
|
114
|
88
|
|||||
Common
stock issued for interest on convertible debentures
|
—
|
45
|
|||||
Gain
on settlement with Gores
|
(379
|
)
|
—
|
||||
Equity-based
compensation
|
775
|
586
|
|||||
Other
|
—
|
(78
|
)
|
||||
Increase
(decrease) in cash attributable to changes in assets and liabilities,
net
of effects of acquisition:
|
|||||||
Escrowed
cash
|
337
|
(2
|
)
|
||||
Accounts
receivable
|
(457
|
)
|
188
|
||||
Receivable
from Gores Technology Group
|
—
|
(400
|
)
|
||||
Prepaid
expenses and other current assets
|
(369
|
)
|
350
|
||||
Other
assets
|
41
|
(220
|
)
|
||||
Accounts
payable
|
748
|
(449
|
)
|
||||
Accrued
expenses
|
577
|
905
|
|||||
Deferred
revenue
|
184
|
17
|
|||||
Net
cash used in operating activities
|
(9,242
|
)
|
(9,033
|
)
|
|||
Cash
flows from Investing Activities:
|
|||||||
Settlement
from discontinued operations (Note 6)
|
2,750
|
—
|
|||||
Purchases
of property, equipment and leasehold improvements
|
(1,212
|
)
|
(852
|
)
|
|||
Net
cash provided by (used in) investing activities
|
1,538
|
(852
|
)
|
||||
Cash
flows from Financing Activities:
|
|||||||
Proceeds
from issuance of common stock and warrants
|
9,389
|
11,399
|
|||||
Offering
costs
|
—
|
(34
|
)
|
||||
Proceeds
attributed to derivative financial instrument
|
—
|
1,164
|
|||||
Proceeds
from exercise of warrants and options, net
|
74
|
562
|
|||||
Payments
on capital lease obligations
|
(35
|
)
|
(97
|
)
|
|||
Net
cash provided by financing activities
|
9,428
|
12,994
|
|||||
Increase
in cash and cash equivalents
|
1,724
|
3,109
|
|||||
Cash
and cash equivalents at beginning of period
|
4,497
|
4,105
|
|||||
Cash
and cash equivalents at end of period
|
$
|
6,221
|
$
|
7,214
|
|||
Supplement
disclosures of cash flow information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
2
|
$
|
62
|
Nine
Months Ended
September
30,
|
|||||||
2005
|
2004
|
||||||
Non-cash
investing and financing activities:
|
|||||||
Deferred
compensation and additional paid-in capital recorded for the issuance
of
restricted common stock
|
$
|
—
|
$
|
511
|
|||
Issuance
of Series B convertible preferred stock in exchange for convertible
debentures
|
—
|
4,888
|
|||||
Conversion
of Series B convertible preferred stock to common stock
|
2,000
|
—
|
|||||
Preferred
stock deemed dividends
|
1,282
|
—
|
|||||
Preferred
stock dividends
|
205
|
270
|
|||||
Equity
issued as consideration for accrued preferred stock
dividends
|
183
|
—
|
Nine
Months
Ended
September
30,
2004
|
||||
Revenue
|
$
|
12,738
|
||
Gross
margin
|
410
|
|||
Net
loss
|
(15,268
|
)
|
||
Net
loss attributable to common stockholders
|
(15,538
|
)
|
||
Net
loss attributable to common stockholders per share
|
$
|
(0.43
|
)
|
Previously
Reported
|
As
Restated
|
||||||
September
30, 2005
(unaudited)
|
|||||||
Balance
sheets:
|
|||||||
Accrued
expenses
|
$
|
2,353
|
$
|
4,353
|
|||
Total
current liabilities
|
7,560
|
9,560
|
|||||
Total
liabilities
|
7,947
|
9,947
|
|||||
Additional
paid-in capital
|
160,133
|
160,328
|
|||||
Accumulated
deficit
|
(155,744
|
)
|
(157,939
|
)
|
|||
Total
stockholders’ equity
|
$
|
3,443
|
$
|
1,443
|
Previously
Reported
|
As
Restated
|
Previously
Reported
|
As
Restated
|
Previously
Reported
|
As
Restated
|
Previously
Reported
|
As
Restated
|
||||||||||||||||||
Nine
months ended
|
Nine
months ended
|
Three
months ended
|
Three
months ended
|
||||||||||||||||||||||
September
30, 2005
|
September
30, 2004
|
September
30, 2005
|
September
30, 2004
|
||||||||||||||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||||||||||||||
Statements
of Operations:
|
|||||||||||||||||||||||||
General
and administrative
|
$
|
9,822
|
$
|
10,616
|
$
|
8,112
|
$
|
8,694
|
$
|
3,721
|
$
|
3,946
|
$
|
2,870
|
$
|
3,118
|
|||||||||
Total
operating expenses
|
13,877
|
14,671
|
11,096
|
11,678
|
5,052
|
5,277
|
4,114
|
4,362
|
|||||||||||||||||
Loss
from operations before other (income) expense
|
(12,087
|
)
|
(12,881
|
)
|
(11,199
|
)
|
(11,781
|
)
|
(4,169
|
)
|
(4,394
|
)
|
(3,971
|
)
|
(4,219
|
)
|
|||||||||
Net
loss
|
(11,746
|
)
|
(12,540
|
)
|
(14,991
|
)
|
(15,573
|
)
|
(4,159
|
)
|
(4,384
|
)
|
(3,858
|
)
|
(4,106
|
)
|
|||||||||
Net
loss attributable to common stockholders
|
(13,233
|
)
|
(14,027
|
)
|
(15,261
|
)
|
(15,843
|
)
|
(4,217
|
)
|
(4,442
|
)
|
(3,957
|
)
|
(4,205
|
)
|
|||||||||
Net
loss per share - basic and diluted
|
$
|
(0.30
|
)
|
$
|
(0.32
|
)
|
$
|
(0.43
|
)
|
$
|
(0.44
|
)
|
$
|
(0.09
|
)
|
$
|
(0.10
|
)
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
Nine
Months Ended
September
30,
|
Three
Months Ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
loss attributable to common stockholders, as
reported
herein
|
$
|
(14,027
|
)
|
$
|
(15,843
|
)
|
$
|
(4,442
|
)
|
$
|
(4,205
|
)
|
|
Add:
stock-based compensation expense included in reported
loss.
|
509
|
550
|
198
|
172
|
|||||||||
Deduct:
total stock-based employee
compensation
expense determined under the
fair
value based method for all awards
|
(1,351
|
)
|
(1,490
|
)
|
(504
|
)
|
(710
|
)
|
|||||
Pro
forma net loss attributable to common
stockholders
|
$
|
(14,869
|
)
|
$
|
(
16,783
|
)
|
$
|
(4,748
|
)
|
$
|
(
4,743
|
)
|
|
Net
loss attributable to common stockholders per
share:
|
|||||||||||||
Basic
and diluted - as reported herein
|
$
|
(0.32
|
)
|
$
|
(0.44
|
)
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
|
Basic
and diluted - pro forma
|
$
|
(0.34
|
)
|
$
|
(0.47
|
)
|
$
|
(0.10
|
)
|
$
|
(0.13
|
)
|
Nine
Months Ended
September
30,
|
Three
Months Ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Risk
free interest rate
|
4.07
|
3.51
|
4.19
|
3.57
|
|||||||||
Expected
lives
|
5
Years
|
5
Years
|
5
Years
|
5
Years
|
|||||||||
Expected
volatility
|
108.51
|
%
|
113.60
|
%
|
107.94
|
%
|
113.66
|
%
|
(Unaudited)
|
|||||||||||||
Nine
Months Ended
September
30,
|
Three
Months Ended
September
30 ,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Revenue
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
Cost
of revenue
|
86.4
|
100.9
|
80.6
|
96.7
|
|||||||||
Gross
margin (loss)
|
13.6
|
(0.9
|
)
|
19.4
|
3.3
|
||||||||
Operating
expenses:
|
|||||||||||||
Research
and development
|
6.8
|
6.8
|
7.0
|
7.1
|
|||||||||
Sales
and marketing
|
24.0
|
18.6
|
22.2
|
21.2
|
|||||||||
General
and administrative
|
80.7
|
74.1
|
86.6
|
71.1
|
|||||||||
Total
operating expenses
|
111.5
|
99.5
|
115.8
|
99.4
|
|||||||||
Loss
from operations before other (income)
expense
|
(97.9
|
)
|
(100.4
|
)
|
(96.4
|
)
|
(96.1
|
)
|
|||||
Other
(income) expense:
|
|||||||||||||
Amortization
of deferred financing costs
|
0.0
|
3.8
|
0.0
|
──
|
|||||||||
Interest
(income) expense, net
|
(0.6
|
)
|
(0.1
|
)
|
(1.0
|
)
|
(0.6
|
)
|
|||||
Increase
in derivative financial instrument
|
0.9
|
0.7
|
0.7
|
1.0
|
|||||||||
Amortization
of discount on
subordinated
debentures
|
0.0
|
22.6
|
0.0
|
──
|
|||||||||
Other
non-operating business
|
──
|
(1.1
|
)
|
──
|
(3.0
|
)
|
|||||||
Loss
on exchange of debt
|
0.0
|
6.3
|
0.0
|
──
|
|||||||||
Gain
on settlement with Gores
|
(2.9
|
)
|
──
|
──
|
──
|
||||||||
Total
other (income) expenses, net
|
(2.6
|
)
|
32.2
|
(0.3
|
)
|
(2.6
|
)
|
||||||
Net
loss
|
(95.3
|
)
|
(132.6
|
)
|
(96.1
|
)
|
(93.5
|
)
|
|||||
Preferred
stock dividends
|
(1.6
|
)
|
(2.3
|
)
|
(1.3
|
)
|
(2.3
|
)
|
|||||
Preferred
stock deemed dividends
|
(9.7
|
)
|
──
|
──
|
──
|
||||||||
Net
loss attributable to common
stockholders
|
(106.6
|
)%
|
(134.9
|
)%
|
(97.4
|
)%
|
(95.8
|
)%
|
Nine
Months Ended
September
30,
|
Three
Months Ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||
Net
loss attributable to common stockholders
|
$
|
(14,027
|
)
|
$
|
(15,843
|
)
|
$
|
(4,442
|
)
|
$
|
(4,205
|
)
|
|
Depreciation
and amortization
|
1,727
|
1,669
|
580
|
567
|
|||||||||
Amortization
of deferred financing costs
|
—
|
448
|
—
|
—
|
|||||||||
Amortization
of discount on subordinated debentures
|
—
|
2,650
|
—
|
—
|
|||||||||
Loss
on exchange of debt
|
—
|
743
|
—
|
—
|
|||||||||
Gain
from discontinued operations
|
(379
|
)
|
—
|
—
|
—
|
||||||||
Preferred
stock dividends and deemed dividends
|
1,487
|
270
|
58
|
99
|
|||||||||
Interest
income, net
|
(76
|
)
|
(5
|
)
|
(43
|
)
|
(26
|
)
|
|||||
EBITDA
from continuing operations
|
$
|
(11,268
|
)
|
$
|
(10,068
|
)
|
$
|
(3,847
|
)
|
$
|
(3,565
|
)
|
·
|
During
2003, we completed the sale of our VS business to Gores. As part
of the
sale, we transferred four data communication servers which contained
various documents and audit support workpapers associated with the
books
and records of the VS business for all periods prior to the sale.
We did
not retain backups of the information on those servers and we just
recently received data downloads from such servers. Gores was only
able to
locate three of the four servers
transferred.
|
·
|
We
may not be able to quantify inventory in periods prior to 2004. Effective
with the sale to Gores, we no longer owned any inventory and BDO
Seidman
was the only auditor who observed the physical inventory counts that
affect those periods. To date, we have not been able to verify such
inventory amounts, which will be necessary in order to complete a
restatement of our consolidated financial statements for the years
ended
December 31, 2002 and 2003. We will take all available actions to
gain
access to the BDO Seidman
workpapers.
|
GLOWPOINT,
INC.
Registrant
|
||
|
||
Date:
January 31, 2007
|
By: |
/s/
Michael Brandofino
|
Michael
Brandofino, Chief Executive Officer
(principal
executive officer)
|
||
|
||
Date:
January 31, 2007
|
By: |
/s/
Edwin F. Heinen
|
Edwin
F. Heinen, Chief Financial Officer
(principal
financial and accounting officer)
|