Certain statements in this Quarterly Report on Form 10-Q, (the "Report"), are "forward-looking statements." These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Glowpoint, Inc. ("Glowpoint" or "we" or "us")., a Delaware corporation and other statements contained in this Report that are not historical facts. Forward-looking statements in this Report or hereafter included in other publicly available documents filed with the Securities and Exchange Commission, or the Commission, reports to our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. When used in this Report, the words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are generally intended to identify forward-looking statements, because these forward-looking statements involve risks and uncertainties. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors that are discussed under the section entitled "Risk Factors," in item 7 of our consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2008 as filed with the Commission as an exhibit to Form 10-K on March 31, 2009.

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Report.

Overview

Glowpoint, Inc. ("Glowpoint" or "we" or "us" or the "Company"), a Delaware corporation, is a leading provider of advanced video communications solutions. Our suite of advanced and robust telepresence and video communications solutions enable organizations to communicate with each other over disparate networks and technology platforms - empowering business, governmental agencies and educational institutions to sharply boost the impact and productivity of their internal and external communications while at the same time reducing their on-going operating costs. We support thousands of video communications systems in over 35 countries with our 24/7 managed video services, powering FortuneŽ 500 companies, major broadcasters, as well as global carriers and video equipment manufacturers and their customers around the world. The Company operates in one segment and therefore segment information is not presented.

We view our services as analogous to cellular service providers in the cellular telephone industry. Regardless of the cellular phone purchased, users must select a cellular service provider to make it work. Users make that service decision based on the features, reliability and price offered by the service provider. In our industry, regardless of the video conferencing or telepresence equipment purchased, or the network connecting it, Glowpoint provides the managed services to make it work. In doing so, we offer a vast array of video communications solutions, including video application services, video operations services (VNOC) for telepresence, managed network services, IP and ISDN videoconferencing services, multi-point conferencing (bridging), technology hosting and management, and professional services. We provide these services to a wide variety of companies, from large enterprises and governmental entities to small and medium-sized businesses. Glowpoint is primarily focused on high quality two-way video communications. With the advent of HD (High Definition) and telepresence solutions, we combined various components of our features and services, and developed new ones, to create a comprehensive service offering for enterprises and their end users that can support any of the telepresence products on the market today. Glowpoint also wholesales these services and provides private-labeled branding for manufacturers, carriers, and integrators seeking to offer this service as a value-add to their offerings for their customer bases.

Glowpoint's video communications solutions are hardware and network agnostic, supporting all recognized video standards across any high-quality network. As a result, we have become the global video interconnection point, linking together "islands of video" across third party private networks (e.g., provided by AT&T, SBC, Qwest and others), protocols (e.g., H320, H323, IP, SIP, and VoIP), and devices (e.g., telepresence, desktop, laptop, and mobile phone). Glowpoint's services provide users with a consistent experience - regardless of how they are connecting or where they are connecting from.

Glowpoint's video communications solutions involve two major components, the Glowpoint managed video applications services and the Glowpoint managed network services. Glowpoint has focused its sales and marketing efforts on the managed video application services, which are network agnostic and may be leveraged by customers on any QoS (Quality of Service) network that supports two-way video transport. Glowpoint's services for telepresence are in increased demand because they address the need for a single point of contact to provide monitoring, scheduling, support, and management of telepresence rooms and the associated equipment. Additionally, companies look to Glowpoint as a resource to provide secure business-to-business (B2B) support when using the video systems to communicate beyond their internal enterprise use. Our Telepresence inter-Exchange Network (TEN) is a suite of services and applications designed to overcome the challenges of using video outside of a company's private network, such as interconnectivity and interoperability, and we believe will be a critical component for enhanced B2B video communications. Our managed video application services are sold as a monthly subscription service and may also include Glowpoint managed network services as an option.

Critical Accounting Policies

There have been no changes to our critical accounting policies in the nine months ended September 30, 2009. Critical accounting policies and the significant estimates made in accordance with them are regularly discussed with our Audit Committee. Those policies are discussed under "Critical Accounting Policies" in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of our consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2008 as filed with the Commission as an exhibit to Form 10-K on March 31, 2009.

Results of Operations

The following table sets forth for the nine and three months ended September 30,
2009 and 2008; information derived from our condensed consolidated financial
statements as expressed as a percentage of revenue:

                                                  (Unaudited)                    (Unaudited)
                                               Nine Months Ended             Three Months Ended
                                                 September 30,                  September 30,
                                              2009           2008            2009           2008
Revenue                                         100.0 %        100.0 %         100.0 %        100.0 %
Cost of revenue                                  51.0           58.0            50.8           59.8
    Gross margin                                 49.0           42.0            49.2           40.2

Operating expenses:
Sales and marketing                              13.3           14.6            12.1           13.4
General and administrative                       39.7           35.4            35.0           37.4
Total operating expenses                         53.0           50.0            47.1           50.8
(Loss) income from operations                    (4.0 )         (8.0 )           2.1          (10.6 )
Interest and other expense (income):
Interest expense, including 0.0%, 0.6%,
0.0% and 0.7% respectively, for Insider
Purchasers                                        1.3           18.4             0.9           21.3
Loss on extinguishment of debt                    1.3              -               -              -
Interest income                                     -           (0.1 )             -              -
Increase (decrease) in fair value of
derivative financial instruments                  9.3           (0.8 )          17.7           (3.5 )
Amortization of deferred financing
costs, including 0.2% and 0.2%
respectively, for Insider Purchasers                -            2.0               -            2.1
Total interest and other expense, net            11.9           19.5            18.6           19.9
Net loss                                        (15.9 )        (27.5 )         (16.5 )        (30.5 )
Gain (loss) on redemption of preferred
stock                                            (0.3 )            -            29.6              -
Net loss attributable to common
stockholders                                    (16.2 )%       (27.5 )%         13.1 %        (30.5 )%

Nine Months Ended September 30, 2009 (the "2009 period") Compared to Nine Months Ended September 30, 2008 (the "2008 period").

Revenue - Revenue increased $1,371,000, or 7.4%, in the 2009 period to $19,928,000 from $18,557,000 in the 2008 period. We have separated our revenue into Core Revenue and Non-core Revenue.

                                                       Nine Months Ended September 30,
                                                                         Increase
                                             2009          2008         (Decrease)        % Change
Revenue
Core revenue:
Subscription and related revenue (Note
A)                                         $  14,803     $  12,923     $       1,880           14.6 %
Non-subscription revenue
Bridging (Note B)                              3,366         2,948               418           14.2 %
Special events and professional services         689           528               161           30.5 %
                                              18,858        16,399             2,459           15.0 %
Non-core revenue:
Integration services for a broadcast
customer (Note C)                                 63           350              (287 )        (82.0 %)
ISDN resale revenue (Note D)                   1,007         1,808              (801 )        (44.3 %)
                                               1,070         2,158            (1,088 )        (50.4 %)
Total revenue                              $  19,928     $  18,557     $       1,371            7.4 %

Note A - The increased subscription and related revenue is caused by increases in installed subscription circuits and VNOC support services.

Note B - The increased bridging services revenue was a result of utilization of these services by VNOC support customers and a concerted effort by the Company to grow revenue from bridging services.

Note C - Glowpoint was asked to facilitate the procurement and integration of equipment required by a customer as part of the implementation of their subscription agreements.

Note D - We continue to consider alternatives with respect to our ISDN resale business, including whether to sell, transfer or discontinue this line of business. Currently, we resell ISDN and other services to Tandberg, from whom we acquired our ISDN resale business in April 2004. While we resell ISDN services to many customers, in the nine months ended September 30, 2009, 38.0% of our resold ISDN revenues, or $383,000, were from Tandberg, which was 1.9% of our total gross revenues. A year earlier, for the nine months ended September 30, 2008, 42.9% of our resold ISDN revenues, or $776,000 of our resold ISDN revenues were from Tandberg, which was 4.2% of our total gross revenues during that period. Tandberg continues the process of transitioning its business from Glowpoint and intends to cease buying these services from Glowpoint, which we expect to occur in the coming months. Because this revenue is our lowest margin revenue, however, we have seen, and expect to continue to see, our overall gross margin percentage to increase once we lose this gross revenue.

Cost of revenue - Cost of revenue for the 2009 period decreased $600,000, or 5.6%, to $10,157,000 from $10,757,000 in the 2008 period. The components of cost of revenues and their percentage of revenues for the nine months ended September 30, 2009 and 2008 are summarized as follows (in thousands):

                                           % of                              % of             Increase
                          2009         2009 Revenues        2008         2008 Revenues       (Decrease)        % Change
Telecommunication
carrier charges         $   6,994                35.1 %   $   7,442                40.1 %   $        (448 )         (6.0 %)
Sales taxes and
regulatory fees             1,340                 6.7 %       1,349                 7.3 %              (9 )         (0.7 %)
Salaries and benefits         940                 4.7 %         708                 3.8 %             232           32.8 %
Depreciation                  573                 2.9 %         709                 3.8 %            (136 )        (19.2 %)
General overhead
costs                         265                 1.4 %         241                 1.3 %              24           10.0 %
Integration costs              45                 0.2 %         308                 1.7 %            (263 )        (85.4 %)
                        $  10,157                51.0 %   $  10,757                58.0 %   $        (600 )         (5.6 %)

Gross margin - Gross margin for the 2009 period increased by $1,971,000, or 25.3%, to $9,771,000 from $7,800,000 in the 2008 period. The gross margin improvement is primarily related to the increases in higher margin VNOC revenues and reductions in our low margin ISDN resale revenues. Our cost of revenues were positively affected by reductions in telecommunication carrier charges, depreciation and integration charges. These improvements were partially offset by an increase in salaries and benefits. Our gross margin increased to 49.0% in the 2009 period from 42.0% in the 2008 period. The rate of increase in our gross margin percentage is not indicative of results expected to be achieved in subsequent periods.

Sales and marketing - Sales and marketing expenses, which include sales salaries, commissions, overhead and marketing costs, decreased by $61,000, or 2.2%, in the 2009 period to $2,656,000 from $2,717,000 in the 2008 period. The primary components of the decrease were reductions of $100,000 for advertising expenses, $87,000 for travel and entertainment expenses and $35,000 for other sales expenses, partially offset by a $161,000 increase in salaries, benefits and agent commissions. Sales and marketing expense, as a percentage of revenue, was 13.3% for the 2009 period and 14.6% for the 2008 period.

General and administrative - General and administrative expenses increased by $1,333,000, or 20.3% in the 2009 period to $7,898,000 from $6,565,000 in the 2008 period. The primary components of this increase were $1,279,000 in salaries, benefits and contract employee costs incurred in connection with staffing and growth costs driven by new contracts. Further were costs associated with expansion of our 24/7 VNOC Support Services staffing and $317,000 of onetime costs accrued in connection with the resignation of Mr. Brandofino and two members of the Board of Directors and $106,000 for bad debts. These increases were partially reduced by a decrease of $128,000 for sales taxes and regulatory fee accruals, $98,000 for consulting fees, $79,000 for travel and entertainment and $58,000 for professional fees. General and administrative expenses as a percentage of revenue were 39.7% in the 2009 period and 35.4% in the 2008 period.

Loss from operations - Loss from operations decreased by $699,000, or 47.2%, to $783,000 in the 2009 period from $1,482,000 in the 2008 period. This decreased loss from operations was primarily attributable to the increased gross margin partially offset by increased general and administrative expenses which included onetime charges relating to separation costs and costs associated with expansion of our 24/7 VNOC Support Services explained further above.

Other expense (income) - Other expense in the 2009 period of $2,375,000 principally reflects $1,848,000 for an increase in the fair value of derivative financial instruments, $254,000 for the loss on the extinguishment of the remaining Senior Secured Notes and interest expense of $273,000.

Other expense in the 2008 period of $3,621,000 principally reflects interest expense of $3,425,000 which is comprised of $2,158,000 for the accretion of the discount related to the Senior Secured Notes, $1,048,000 of accrued interest expense related to the Senior Secured Notes, $128,000 of interest related to sales and use taxes and regulatory fees and $91,000 of other interest and a $153,000 net decrease in fair value of derivative financial instruments. Amortization of deferred financing costs incurred in connection with the Senior Secured Notes was $368,000. Those expenses are partially offset by $19,000 of interest income.

Income taxes - As a result of our losses we recorded no provision for incomes taxes in the nine months ended September 30, 2009 and 2008. Any deferred tax asset that would be related to our losses has been fully reserved under a valuation allowance, reflecting the uncertainties as to realization evidenced by the Company's historical results and restrictions on the usage of the net operating loss carry forwards.

Net loss - Net loss decreased by $1,945,000, or 38.1%, to $3,158,000 in the 2009 period from $5,103,000 in the 2008 period. This decreased net loss was primarily attributable to a $3,152,000 decrease in interest expense and the $1,971,000 increase in the gross margin partially offset by the $1,333,000 increase in general and administrative expenses and $2,001,000 increase in the fair value for derivative financial instruments.

Loss on redemption of preferred stock - Our loss of $64,000 in the redemption of Preferred Stock is comprised of the Preferred Stock Exchange in March 2009 in which we recognized a loss for the $1,999,000 excess of Series A-1 Preferred Stock Fair Value over the Series A Preferred Stock Carrying Amount in the 2009 period and in the Preferred Stock Exchange in August 2009 we recognized a gain for the $1,935,000 excess of Series A-1 Preferred Stock Carrying Amount over the Series A-2 Preferred Stock Fair Value in the 2009 period.

Net loss attributable to common stockholders - Net loss attributable to common stockholders decreased by $1,881,000, or 36.9% in the 2009 period to $3,222,000, or $0.07 per basic and diluted share, from a net loss attributable to common stockholders of $5,103,000, or $0.11 per basic and diluted share, in the 2008 period.

Three Months Ended September 30, 2009 (the "2009 quarter") Compared to Three Months Ended September 30, 2008 (the "2008 quarter").

Revenue - Revenue increased $475,000, or 7.8%, in the 2009 quarter to $6,541,000 from $6,066,000 in the 2008 quarter. We have separated our revenue into Core Revenue and Non-core Revenue.

                                                       Three Months Ended September 30,
                                                                          Increase
                                              2009          2008         (Decrease)        % Change
Revenue
Core revenue:
Subscription and related revenue (Note
A)                                         $    5,033     $   4,332     $         701           16.2 %
Non-subscription revenue
Bridging (Note B)                               1,023           891               132           14.8 %
Special events and professional services          199           186                13            7.0 %
                                                6,255         5,409               846           15.7 %
Non-core revenue:
Integration services for a broadcast
customer (Note C)                                   -           101              (101 )       (100.0 %)
ISDN resale revenue (Note D)                      286           556              (270 )        (48.6 %)
                                                  286           657              (371 )        (56.5 %)
Total revenue                              $    6,541     $   6,066     $         475            7.8 %

Note A - The increased subscription and related revenue is caused by increases in installed subscription circuits and VNOC support services.

Note B - The increased bridging services revenue was a result of utilization of these services by VNOC support customers and a concerted effort by the Company to grow revenue from bridging services.

Note C - In 2008 Glowpoint was asked to facilitate the procurement and integration of equipment required by a customer as part of the implementation of their subscription agreements.

Note D - We continue to consider alternatives with respect to our ISDN resale business, including whether to sell, transfer or discontinue this line of business. Currently, we resell ISDN and other services to Tandberg, from whom we acquired our ISDN resale business in April 2004. While we resell ISDN services to many customers, in the three months ended September 30, 2009 40.9% of our resold ISDN revenues, or $117,000, were from Tandberg, which was 1.8% of our total gross revenues. A year earlier, for the three months ended September 30, 2008, 46.8% of our resold ISDN revenues, or $260,000 of our resold ISDN revenues were from Tandberg, which was 4.3% of our total gross revenues during that period. Tandberg continues the process of transitioning its business from Glowpoint and intends to cease buying these services from Glowpoint, which we expect to occur in the coming months. Because this revenue is our lowest margin revenue, however, we have seen, and expect to continue to see, our overall gross margin percentage to increase once we lose this gross revenue.

Cost of revenue - Cost of revenue for the 2009 quarter decreased $309,000, or 8.5%, to $3,321,000 from $3,630,000 in the 2008 quarter. The components of cost of revenues and their percentage of revenues for the three months ended September 30, 2009 and 2008 are summarized as follows (in thousands):

                                           % of                              % of             Increase
                          2009         2009 Revenues        2008         2008 Revenues       (Decrease)        % Change
Telecommunication
carrier charges         $   2,311                34.1 %   $   2,550                42.0 %   $        (239 )         (9.4 %)
Sales taxes and
regulatory fees               441                 6.6 %         456                 7.5 %             (15 )         (3.3 %)
Salaries and benefits         307                 4.4 %         244                 4.0 %              63           25.8 %
Depreciation                  176                 2.8 %         228                 3.8 %             (52 )        (22.8 %)
General overhead
costs                          86                 1.4 %          93                 1.5 %              (7 )         (7.5 %)
Integration costs               -                   -            59                 1.0 %             (59 )       (100.0 %)
                        $   3,321                49.3 %   $   3,630                59.8 %   $        (309 )         (8.5 %)

Gross margin - Gross margin for the 2009 quarter increased by $784,000, or 32.2%, to $3,220,000 from $2,436,000 in the 2008 quarter. The gross margin improvement is primarily related to the increases in higher margin VNOC revenues, reductions in our low margin ISDN resale revenues. Our cost of revenues were positively affected by reductions in telecommunication carrier charges, depreciation and integration charges. These improvements were partially offset by an increase in salaries and benefits. Our gross margin increased to 49.2% in the 2009 quarter from 40.2% in the 2008 quarter. The rate of increase in our gross margin percentage is not indicative of results expected to be achieved in subsequent quarters.

Sales and marketing - Sales and marketing expenses, which include sales salaries, commissions, overhead and marketing costs, decreased by $20,000, or 2.5%, in the 2009 quarter to $791,000 from $811,000 in the 2008 quarter. The primary components of the decrease were reductions of $12,000 for advertising expenses and $32,000 for travel and entertainment expenses, partially offset by a $26,000 increase in salaries, benefits and agent commissions. Sales and marketing expense, as a percentage of revenue, was 12.1% for the 2009 quarter and 13.4% for the 2008 quarter.

General and administrative - General and administrative expenses increased by $22,000, or 1.0% in the 2009 quarter to $2,291,000 from $2,269,000 in the 2008 period. The primary components of this increase were $261,000 in salaries, benefits and contract employee costs incurred in connection staffing and growth costs driven by new contracts. Further were costs associated with expansion of our 24/7 VNOC Support Services staffing. These increases were partially reduced by a decrease of $136,000 in sales taxes and regulatory fee accruals and $74,000 in professional fees and $32,000 for consulting expense. General and administrative expenses as a percentage of revenue were 35.0% in the 2009 quarter and 37.4% in the 2008 quarter.

Income from operations - Income from operations increased by $782,000, or 121.4%, to income from operations of $138,000 in the 2009 quarter from a loss from operations of $644,000 in the 2008 quarter. This increased income from operations was primarily attributable to the $784,000 increase in the gross margin to 49.2% from 41.8% with no increase in sales, marketing and general and administrative expense.

Other expense (income) - Other expense in the 2009 quarter of $1,217,000 principally reflects $1,157,000 for an increase in the fair value of derivative . . .