EXHIBIT 99.2
Text of April 20, 2006 conference call.
CORPORATE PARTICIPANTS
ED HEINEN
GlowPoint, Inc. - CFO
MICHAEL BRANDOFINO
GlowPoint, Inc. - CEO
JOE LAEZZA
GlowPoint, Inc. - COO
CONFERENCE CALL PARTICIPANTS
ELLIOT GOLD
TeleSpan Publishing Corporation - President
ALAN KELLY
Florist Advisory
JOSEPH PUTARUSO
BILL FOREMAN
RICHARD PEARL
Bear Stearns - Analyst
PRESENTATION
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OPERATOR
Good afternoon everyone. Welcome to the GlowPoint April Restructuring Update
Conference Call. Before we begin, I want to remind listeners that this call is
being webcast live over the Internet and that a webcast replay will also be
available on the Company's website, www.glowpoint.com, following the call.
This call is being hosted by the Company's CEO, Michael Brandofino, and there
will be a brief question-and-answer period following the Company's prepared
remarks.
I would now like to introduce GlowPoint's CFO, Ed Heinen, who will review the
Safe Harbor information with you now. Please proceed.
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ED HEINEN - GLOWPOINT, INC. - CFO
Thank you very much.
The statements contained herein, other than historical information, are or may
be deemed to be forward-looking statements and involve factors, risks, and
uncertainties that may cause actual results in future periods to differ
materially from such statements. These factors, risks, and uncertainties include
market acceptance and availability of new video communication services; the
nonexclusive and terminable-at-will nature of sales agents agreements; rapid
technological change affecting demand for our services; competition from other
video communication service providers; and the availability of sufficient
financial resources to enable us to expand our operations; as well as other
risks detailed from time to time in our filings with the Securities and Exchange
Commission.
Today's call and webcast may include non-GAAP financial measures within the
meaning of SEC Regulation G.
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the prior written consent of Thomson Financial.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Thanks Ed. Hello everybody. Thank you for joining us today. I'm Mike
Brandofino, formerly the Chief Technology Officer for GlowPoint. As GlowPoint's
new CEO, I have been tasked by our Board of Directors with implementing a
restructuring plan designed to get expenses in line with our revenues, with the
ultimate goal of becoming cash flow positive in 2006.
Also here today are two key people who have been driving the restructuring plan
with me, Joe Laezza and Ed Heinen. Joe is our new Chief Operating Officer. He
was formerly VP of Operations.
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JOE LAEZZA - GLOWPOINT, INC. - COO
Hello everyone.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
And Ed was formerly VP and Controller and is now our Chief Financial Officer.
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ED HEINEN - GLOWPOINT, INC. - CFO
Hi.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
The purpose of this call is to explain in some detail our restructuring plan
and provide an update on what we've accomplished so far. I will also attempt to
provide answers to some questions I have received regarding the restructuring
plan, as well as some other topics that require updates.
As the Moderator stated, we will have a question-and-answer period of about 20
minutes following my remarks, and I will follow that with a brief summary.
The approach to our restructuring initiatives and new 2006 business plan involve
three basic components-- reducing costs, with a focus on main components of
salary and related expenses, cost of goods, and SG&A; protect the revenue base
by retaining our customers; and, of course, growing revenue. This may sound very
simple, but it's amazing how difficult it is to attain without a focused plan.
In building the plan, we took a very conservative approach. From a modeling
perspective we assumed, at a minimum, we would strive to maintain the monthly
revenue we generated as of January '06, and cut enough expense to match that
revenue rate. This is not to say that we don't anticipate or want growth. We
just don't want to count on sales growth alone to get us to cash flow positive.
We need to deal with what we know, which is that GlowPoint has a stable,
recurring revenue flow that is predictable. So our plan is designed around
cutting costs out of the business so we'll be in line with this revenue stream.
We anticipate cutting approximately $10 million in costs from the business.
However, a primary goal is to make sure we don't do anything that adversely
affects the GlowPoint experience and our ability to provide great customer
service. This is what makes our customers so loyal to GlowPoint. Therefore, any
changes that we have planned or that have already been executed are focused on
maintaining our ability to deliver high-quality services to our customers.
So when we addressed salary and related expenses in our recent staff reductions,
we carefully planned to minimize the impact on customer interaction they
experienced. Roughly 75% of the positions we eliminated were non-customer
facing. We targeted areas such as marketing, HR, finance, applications
development, and R&D. The only customer-facing positions eliminated were some
non-producing salespeople and some help desk engineers.
Growing revenue and expanding our customer base are important goals, and, as a
result, we continue to maintain a sales team. We have combined the remaining
marketing resources with the sales team to create a single group focused on
direct sales with about 14 people in the group.
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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Nothing was spared scrutiny and that included upper management. Given the
realities of our revenue to expense ratio, we felt it prudent to have a flatter
organization, allowing us to eliminate some higher-end salaries and related
expenses. To that end, through mutual consent and in support of the
restructuring efforts, David Trachtenberg, former CEO; Rod Dorsey, former CFO;
Stu Gold, former VP of Marketing; and Rochelle Wilson, former Director of HR are
no longer part of the GlowPoint team. In all, we have realized approximately 40%
cost reductions for salary and related expenses, which equates to approximately
$3.4 million on an annualized basis.
In addressing cost of goods, which is basically any expense, variable or fixed,
that is required to provide services to our customers, we look at four main
components -- the network, which is comprised of the backbone, aggregation
circuits, ISDN connectivity, and co-location fees; the local loop, which are the
last-mile circuits we use to connect customers to the GlowPoint network; the
infrastructure, which includes equipment, network management tools, and video
applications; and our bridging operation, which is in Ventura, California, and
provides managed bridging services.
From a network perspective, we have seen significant progress in 2006 due to
initiatives that began in the last quarter of 2005. These initiatives involve
the consolidation and rightsizing of our network to reduce the associated
expenses. We started to see efforts yield results, as the costs associated with
our network have already begun to decline. We have a number of new projects
underway that will yield additional savings in the coming months.
Once all projects are completed, we anticipate cost reductions on an annualized
basis of over $3 million. This generally begs the question, "So why haven't you
done this before?"
The answer is twofold. First, in 2003, we developed a plan to support very
aggressive growth. This plan required building out the organization and
allocating expenses for marketing, sales, and product development. At the time,
we felt it prudent to keep the network intact to support the anticipated growth,
but the aggressive growth didn't happen. So we have been forced to adjust our
thinking and to reflect the current conditions.
Second, we originally designed the network to support four times the amount of
customers and locations we have today. We now have significant intelligence on
usage patterns and the requirements of our current customer base. This allowed
us to redesign and right-size portions of our network to save a significant
amount of money without risking performance. In reality, many of the network
rightsizing projects did begin in 2005, but the resulting expense reductions are
only being seen now.
Logically, the next question is "When do we see savings?" The short answer is we
are already seeing significant savings. However, I want to set expectations and
explain the timing on some of the cost-saving initiatives. When we talk about
reengineering the backbone or replacing expensive last-mile circuits with more
cost-effective solutions, we are talking about complicated projects. In some
cases, there will also be a short-term double expense or buy-out associated with
canceling circuits. So before implementing any cost-reductions project, we weigh
all the short-term costs against long-term benefits, as well as the overall
impact on performance.
It can take weeks or months to plan and implement one of these cost-saving
projects. As a result, there is often a lag of two or three months after the
cancellation of the circuits before we realize the associated reduction in
costs. So while we anticipate approximately $2.2 million in savings in 2006,
there will be some one-time restructuring charges associated with these efforts
in the first two quarters of 2006, and the majority of the savings won't be
recognized until later in the year.
As we looked at our SG&A expense, which has traditionally been too high for a
company our size, we identified all the major components and worked on ways to
eliminate them or at least significantly reduce them. A large expense component
in recent quarters has been our corporate legal fees and accounting fees
associated with the restatement. As soon as we get back to filing current
quarters, these extra expenses will be eliminated.
We are a public company, and while there are unavoidable legal and accounting
expenses associated with being a public company, we believe we can significantly
reduce these expenses by more efficiently managing our outside resources during
2006. And, as previously stated, we already addressed some of the large salaries
and related expenses that were part of SG&A, and we have scrutinized every
aspect of our administrative costs and have implemented strict expense
management guidelines and detailed budgets across the organization. The cost
reduction from our efforts on SG&A are estimated at approximately $3.6 million
on an annualized basis.
I am pleased to say that we have already seen positive improvement and have made
significant progress in our expense reduction efforts and feel confident we will
meet or exceed our overall goals eliminating $10 million of annualized expense.
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the prior written consent of Thomson Financial.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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I mentioned at the beginning of the call that our plan is based on the revenue
run rate we started 2006 with. That does not mean that we don't expect to grow
the business in 2006. It simply provides a baseline for us to guide priorities
and focus our energies. Protecting our revenue base is of paramount importance
to us. The good news is that GlowPoint has always maintained a low churn rate
thanks to our loyal base of customers. Therefore, part of our plan calls for
taking proactive steps to communicate with customers to insure minimal churns
while anticipating their changes.
We have three dedicated resources focused on customer relations, but it is the
responsibility of everyone in the Company to keep customers happy, and we are
taking active steps to retain our revenue base. Some of these activities include
a campaign focused on contract renewals and extensions; the introduction of
GlowPoint Connect, this is a less expensive service allowing clients to use
their own network bandwidth but continue to utilize GlowPoint's features and
services; and having executive account reviews with key customers to see how we
are doing and what, if anything, we need to address from an executive level.
We have consistently seen approximately 25% of our new revenue come from our
existing customers, and we will continue to nurture our customer base to derive
as much revenue as possible from each account by offering diverse solutions to
meet their needs.
In a recent press release regarding the upcoming NFL draft, I tried to make a
clear point that maintaining existing customers and having them come back to us
year after year is of vital importance to our business. While some naysayers
think it is old news, I think the fact that ESPN and NFL continue to use us are
key indicators that 1) even with the cost-saving measures, we can still support
the high quality required and we have shown we also continue to grow the
broadcast sector, 2) we have successfully shielded our customers from any
changes occurring within the business and they are confident in GlowPoint as a
vendor, 3) we continue to drive net new revenue, even though we've had to deal
with being de-listed from the NASDAQ National Market, and continue to work for
our financial restatement, and 4) the strategic relations we formed in early
2005 are paying off.
It stands to reason that growing and maintaining revenue requires a sales team.
The common misconception after restructuring an [outfit] was that we eliminated
our sales force. This was incorrect. Some salespeople who were not [making]
planned were let go, but, as I mentioned earlier, we do maintain a sales
organization of 14 people, including a couple of sales engineers.
Our sales efforts are broken into four areas -- direct sales, account
management, strategic relationships and channels, and broadcast. We combined the
direct sales force with the remaining marketing resource into a direct sales
team of eight people. They are focused on directly driving net new business
across various enterprise customers, as well as assisting our reseller channel.
We created an inside team called Account Management, made up of three
individuals who focus on managing and [forming] existing accounts. We also have
two dedicated resources focused on strategic relationships and channels. They
work on business development and the management of the reseller channel. The
reseller channel currently represents about 25% of all new sales, and we have
one person dedicated to the broadcast vertical who is supported by our
engineering team.
In addition to the sales organization, the executive team is going to be
required to drive net new revenue opportunities as well. Our philosophy is that
everyone in this Company is a salesperson, and I'm pleased to say that these
efforts have not only led to us retaining our existing revenue base, but in the
first quarter of this year we have seen revenue growth over the revenue we
reported for the first quarter of 2005.
In the past, we have described our business as primarily being contracted
revenue and non-contractual revenue. Clearly, contracted revenue is still the
most desirable form of revenue, as it is predictable and dependable. However, I
believe in the past we have too narrowly focused our efforts on billable
subscribable locations, or BSLs, as the main component of contracted revenue. In
addition, we did not exploit our unique capabilities and capacity by trying to
expand revenue in the non-contractual category, made up primarily of bridging
revenue, events like the draft, and the new Vision usage-based revenue.
BSLs represent only one of the ways in which GlowPoint can drive profitable
revenue. While it is the bulk of our existing revenue stream today, there are
other areas in our market to drive revenue that offer shorter sales cycles and
attractive gross margin. In fact, the gross margin of these other services are
often better than traditional BSLs, with the added advantage that they don't
require additional resources for support. This is because the services leverage
the existing organization's [unique] network architecture.
So, in addition to traditional growth in revenue attributed to BSLs in 2006, we
will focus on and expect growth in some new areas. GlowPoint has a talent pool
of expertise unparalleled in the video space. We will leverage this by offering
hosted services on a contracted basis. This essentially means we will host other
companies' technology and services on our network and provide video-specific
help desk support and engineering services. So, in addition to driving
highly-profitable net new contracted revenue, we will essentially be turning
cost centers into revenue contributors.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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Another area of our Company that has been overlooked as a potential revenue
growth opportunity is our bridging services. With very little sales focus or
effort, our bridging operations managed to consistently generate profitable
revenue. We now have a focused effort on selling bridging services and have
adjusted the compensation plan to reward our salespeople and our channels for
bringing on new bridging customers. In addition to trying to drive net new event
revenue, or non-contracted revenue, we have been and will continue to see growth
in contracted revenue associated with our bridging services. We have been able
to get loyal customers to sign minimum commitment contracts and expect this
trend to continue.
Starting that new bridging business helps us in a number of ways. We currently
have the infrastructure and equipment that can support and double the current
revenue without an increase in staff or resources. The scalability is there with
little or no additional capital operational cost. Cost of acquisition is low.
Since we have been able to convince new customers to at least try our services
with as little as one phone call, we can turn a cold call into a billing
customer in one day and have done so on several occasions. And, most
importantly, it helps us overcome one of the biggest challenges facing our
salespeople, which is a long sales cycle, due in part by the fact that customers
don't know how much they're spending on video.
Once we have a customer using our bridging services, we have a clear
understanding of the usage patterns and can better tailor our solutions to
convert them to the GlowPoint IP Subscription business or other GlowPoint
services. Once again, our early efforts are paying off as we saw a nice increase
in bridging-related revenues for the month of March and expect this trend to
continue.
The third area of focus for new revenue growth is IVE. We will not be putting
any effort towards a free video service in 2006, however, we still believe we
can leverage the investment in IVE and generate new revenue by promoting a
business version of IVE. To date, we have about 225 full-paying IVE customers
and another 100 or so trials going on of the business version of IVE. We only
need about 400 paying IVE customers to cover the investment we made in creating
IVE, so with a little effort we can quickly get to the point where IVE pays for
itself and starts contributing to the bottom line.
In addition to selling the business version of IVE to individual customers, we
are actively pursuing partners who can leverage the IVE technology with
GlowPoint hosting the service for them. We believe there are affinity groups or
communities of interest where this solution could be very appealing and could be
customized for them. The opportunity to charge for customizing IVE is another
example of how we can turn our engineering team from a cost center to a revenue
contributor.
GlowPoint has all of the attributes of a successful company-- a proven
technology, loyal customers, and a stable revenue base, but we've never been
able to grow sales fast enough to support the cost structure we had in place. I
believe with the restructuring initiative and our new business plan we can
eliminate the excess costs and get our expenses in line with our revenue while
we fix the sales engine and drive new revenue opportunities.
Before I wrap up, I would like to touch on several other topics that have come
up during recent conversations with investors. I am well aware that we have been
perceived as [cold] and difficult to communicate with by the investment and
shareholder community. I am committed to doing my best to change this perception
and to be as transparent as possible within legal limitations.
There are two ways you can get in touch with the management team at GlowPoint.
The best way to get questions answered quickly is to email your questions to
InvestorRelations@glowpoint.com. We will try to respond within the same day of
receiving your email. In addition, I have been allocating time every Friday to
speak with investors who schedule time in advance. I allocate 20-minute time
slots to listen to your comments, your concerns, and questions and will provide
whatever information I can, legally.
The second item is to reiterate our desire to bring our financials up to date
and meet SEC compliance requirements. We filed our 10-Q for the second quarter
of '05 earlier this afternoon and expect to file a 10-Q for the third quarter of
'05 by mid May. The process is painstakingly slow but cannot be rushed. In the
financial reporting process we have to do certain things in a linear fashion. We
cannot complete our third quarter financials until we finish the second quarter
financials, and because we have no control over this process, we cannot provide
an exact date for our third quarter or '05 year-end financials. It has to be
right so that you, our investors, have accurate financial information. I can
assure you that I have already begun interjecting myself in the process to
insure it is moving as fast as it can, and the minute we are done with the
quarterly or annual report, we will file with the SEC and make it public.
I also know that some shareholders are frustrated because we recently completed
another capital [raise]. The bottom line is that we have very few options given
our cash position, the fact that we have been de-listed from the NASDAQ National
Market, and we currently only have one year of audited financials, but I believe
our ability to get prior investors to reinvest in GlowPoint reflects confidence
in the plan and the current management team.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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Finally, many of you have asked about the status of our engagement with
Rothschild. We are still engaged in exploring strategic alternatives for
GlowPoint and there have been interested parties, but the process had been
stalled because of the high expense in cash burns we have been reporting. And we
have been cautious. We do not want a fire sale. We hope the steps we are taking
will have the simultaneous benefit of making GlowPoint a viable standalone
business and drive up the overall valuation of the Company. Clearly, a GlowPoint
that is no longer burning cash becomes much more attractive to the market and
can justify higher valuations than when we originally engaged with Rothschild.
Hopefully, I have addressed many of the questions you had at the start of this
call and will now open it up for a question-and-answer session.
QUESTION AND ANSWER
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OPERATOR
[OPERATOR INSTRUCTIONS]. We have a question on the line from Elliot Gold of
TeleSpan Publishing Corporation. Please proceed.
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ELLIOT GOLD - TELESPAN PUBLISHING CORPORATION - PRESIDENT
Thank you. Michael, you gave the numbers for IVE, and I think I keyed them in
right, but I want to make sure I've got them right. You said there were 350
trials?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
There are about 225 paying customers, and this is IVE business.
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ELLIOT GOLD - TELESPAN PUBLISHING CORPORATION - PRESIDENT
Right.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
And about 100 trials of the business version right now. We have thousands and
thousands that have subscribed for the free version, but we're no longer
focusing on that.
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ELLIOT GOLD - TELESPAN PUBLISHING CORPORATION - PRESIDENT
Okay. So 225 paying for the business, 100 trials, you need 400 to be
profitable?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
400 to cover the expense of the investment.
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ELLIOT GOLD - TELESPAN PUBLISHING CORPORATION - PRESIDENT
I'm sorry, to cover expenses. All right. Okay. Any other areas where--? You
mentioned the bridging. I don't know if you are willing to break that out or not
when you talk about that revenue or is that something not to be disclosed?
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
At the current time we can't disclose specifics, but as we get our other queues
out and get current we'll be able to give you more information.
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ELLIOT GOLD - TELESPAN PUBLISHING CORPORATION - PRESIDENT
Okay. Thank you very much. I'll get back in the queue.
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OPERATOR
And we'll take our next question from [Alan Kelly] of [Florist Advisory].
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ALAN KELLY - FLORIST ADVISORY
Yes, Michael, how are you doing?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Hi. Who is this again?
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ALAN KELLY - FLORIST ADVISORY
Good guidance and good communications for the Company going forward. We
appreciate that. I wanted to know, you didn't mention the Sony deal or the Sony
relationship or how you're doing with the Polycom relationship, if there is any
kind of business that way since it is more third party and it doesn't require
large salaries to do that.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Sure. The Sony relationship is going well. We have renewed our contract for the
coming year, although the focus is going to be primarily on broadcasting since
that's where we've been most successful. The whole IVE solution really crossed
over into their consumer space and, quite frankly, made them a little nervous
about being in the service space. So we really restructured the agreement and
are focusing on where we've been successful and have been driving revenue, quite
frankly, which is in the broadcast space.
We do have good relationships with the other manufacturers, although really the
deals there happen at the street level. So what we've done is really try to
align our salespeople with salespeople from Polycom and TANDBERG and try to work
on individual deals. It is unlikely that you'll get -- or that we'll get some
kind of overall overarching statement from Polycom saying they're reselling
GlowPoint or TANDBERG, but we do have a very good relationship with them and
we've worked on a number of deals together and will continue to do so.
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ALAN KELLY - FLORIST ADVISORY
Would Wire One fit into any of those relationships or is that just a totally
separate issue?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Wire One?
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ALAN KELLY - FLORIST ADVISORY
Yeah.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Wire One, unfortunately, decided to buy a competitor of ours called V-Span on
the bridging side and no longer resells GlowPoint.
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ALAN KELLY - FLORIST ADVISORY
Okay. So it's null and void. Now are you running a dual role with the CEO role
and the technology role or how is that going to look going forward?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
We are all wearing multiple hats.
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ALAN KELLY - FLORIST ADVISORY
Okay.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
In a small [and sphere] company, we will be doing multiple tasks. And, yes, I
still will be driving the strategic vision of the Company.
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ALAN KELLY - FLORIST ADVISORY
Okay. We would like to have a [involved] conference call with you. How do we
proceed on that?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
The best thing would be to call my assistant, [Christopher Welsh], (973)
391-2002.
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ALAN KELLY - FLORIST ADVISORY
973?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
391-2002.
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ALAN KELLY - FLORIST ADVISORY
Great. Thanks. We appreciate it.
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OPERATOR
And we'll take our next question from [Joseph Putaruso]. Please proceed.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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JOSEPH PUTARUSO
Mike, how are you? Good call and we appreciate, like the last caller said, your
candid approach and, hopefully, it will help us in the future. One thing I'm
concerned about, when there's-- when you have a tumor and there's cancer, you
need to cut out all the cancer. A lot of the Board was left intact. We still
have Rich Reiss there collecting a salary, and I don't know what he's
contributing to the mix here.
What, going forward, is going to be done about moving us along, getting rid of
some of the other salaries and some of the Board members to establish
credibility with the investment community? You have your whole investment
community of brokers and broker-dealers that are no longer allowed to buy the
stock here because of the credibility issue, and I think this pertains to that.
What is your answer to that?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
What I will say is I won't comment on any individual Board member. I will say
that the current Board has done a really good job of navigating us through the
restatement process and the internal audit or investigation of what -- of the
finances, and we are always looking for the opportunity to bring new Board
members in that could help us in the current situation that we're in. We are now
moving into what I would consider a different mode of our existence. Once we
have the financials restated, we will look for opportunities to bring new people
into the Board, and that's all I can say at this point.
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JOSEPH PUTARUSO
One other question is we keep going back to the same source of financing and
that creates an overhang on the marketplace, which it seems to be doing at this
point in time. I know eventually as you drive the Company forward that will work
itself out, but what plans do we have going forward to get away from this type
of financing that has been a drain on the Company, quite frankly?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Okay. The first thing is the way to get away from that is cash flow positive.
So that's my ultimate goal is to not have to go back to the market to cash. But
I will tell you, our backs were against the wall and we went back to existing
investors who have done raises before, who understand the Company. We had one
year of audited financials and we were able to accomplish this raise. So it's a
difficult thing to do, our backs were against the wall. I understand your
concerns and the answer is to become cash flow positive so we don't ever have to
do that again.
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JOSEPH PUTARUSO
Okay. Thank you, Mike. Good job.
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OPERATOR
And we'll take our next question from [Bill Foreman] of GlowPoint.
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BILL FOREMAN
I don't know why they said GlowPoint, but I thought he was talking about the
company I was calling in for. Anyway, I just had a quick follow-up. I know you
said you can't address the individual Board members, but with regard to Rich
Reiss and the salaries taking, it just seems a little-- I guess this is more of
a comment, but it seems a little excessive given the size of the Company
relative to other public companies. And, like, I have one other investment
that's 20 times the size of GlowPoint on an annual and quarterly revenue basis,
and they have a founder who is the Chairman of the Board and he takes no salary
whatsoever. He gets his bump from the stock, and he's retired just like Rich
Reiss.
And so, I'd just-- I guess I'd like to make a comment that I hope that at some
point you guys will look at the salary that you're paying Rich, because it just
seems excessive when someone takes a look at the [box] he's in. Maybe he's worth
it. I just don't know what he's doing for the Company.
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Understood, and all I can say is that as I mentioned in my talk, nothing has
eluded scrutiny, and we will continue to uncover things and resolve expenses
that just don't need to be there any more, but, right now, Rich was very helpful
during the raise process and continues to be the Chairman of the Board, and that
was the preexisting agreement that the Board approved.
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BILL FOREMAN
I understand that. I just-- next year I hope that they'll consider the fact
that relative to other companies this size it's kind of excessive, but I
understand that he's on for another year. There's nothing we can do about it.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
As I said, the Board has been willing to look at themselves and we looked at
the upper management, so nothing is sacred. We will do what it takes to get this
Company to profitability.
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BILL FOREMAN
Great. And thanks again for having this call. It's great to hear from you guys
after a year, and I'm looking forward to the future. So, good job.
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OPERATOR
And we'll take our next question from [Richard Pearl], Bear Stearns.
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RICHARD PEARL - BEAR STEARNS - ANALYST
Hey, Mike. Good presentation. Mike, Joe covered most of my questions that I was
going to ask, but one concern that I have here, and it's kind of the past few
days and it has been kind of consistent, see the shares trade fairly heavy.
They're trading 150,000 - 200,000 shares a day and we can't cut through overhead
supply. And apparently the hedge funds and [Burnhill] partners and their
ping-pong game here makes it very difficult to figure out when this overhead
supply is going to cut loose.
I mean today and yesterday and the day before suddenly we started trading fairly
heavy. Now it's extremely frustrating to look at time and sales, which are
consistent similar blocks, trying to cut through [48], and any sellers that try
to sell get $0.44. Anybody that cuts into a buy hits the upper side. Now,
obviously, this is not the first time we've been through this frustration. The
last time was February 17 and a couple of times before that.
My question is how much volume do we have to work through before the
institutions cut loose their exits, if in fact that's what they're doing? My
other question is why can't these hedge funds, which have it both ways, why
can't they be restricted from turning or creating this overhead supply? Why
can't they be given some kind of restrictive action like you've got to keep the
shares for a certain time period or until the shares get up to a certain level?
I mean how are investors supposed to take seriously the trades of their stock? I
kind of guesstimate that we've got 10 million shares to work through to get
through--
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Rich?
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RICHARD PEARL - BEAR STEARNS - ANALYST
Yeah?
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FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
I don't want to cut you off, but I'm sure you understand that as CEO of this
Company I have no control over the people trading the stock. The only control I
have is to deliver on this plan and turn this Company into a profitable company
and then the stock will take care of itself. I appreciate your concern. I will
investigate with my CFO and see if there is anything that we need to be aware
of, but realize I have no control over the stock trading in this Company and the
only control I have over the price of the stock is by delivering on the
performance and turning this Company around, which will ultimately increase the
valuations.
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RICHARD PEARL - BEAR STEARNS - ANALYST
But, still, I repeat the question. What's creating the overhead?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
I don't know the answer to that Richard.
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RICHARD PEARL - BEAR STEARNS - ANALYST
Now it could be the hedge funds, couldn't it? Definitely.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
I don't know the answer to it Richard. I wish I did.
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RICHARD PEARL - BEAR STEARNS - ANALYST
Can you find out and elaborate on it?
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Ed and I will investigate and if we find something that needs to be disclosed,
we will disclose it.
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RICHARD PEARL - BEAR STEARNS - ANALYST
All right. Thanks, Mike.
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OPERATOR
And there seem to be no questions at this time.
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MICHAEL BRANDOFINO - GLOWPOINT, INC. - CEO
Okay then. All right. Well, I would like to reiterate that GlowPoint has all of
the attributes of a successful company -- proven technology, loyal customers,
and a stable revenue base. I am confident that the restructuring plan we have
put in place will achieve the stated goal of becoming cash flow positive in 2006
and am pleased with the progress we have seen in all categories in the first
quarter.
I would like to thank you for attending the call and to continue to support
GlowPoint. Goodbye.
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the prior written consent of Thomson Financial.
NY:1026190.2
FINAL TRANSCRIPT
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APR. 20. 2006/4:30PM ET, GLOW.PK - GLOWPOINT, INC. RESTRUCTURING PROGRESS UPDATE
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OPERATOR
LADIES AND GENTLEMEN, THANK YOU FOR JOINING US ON THE CALL.
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the prior written consent of Thomson Financial.
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