UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 —————— FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to ________________________

Commission file number: 0-27168

VIEWPOINT CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

95-4102687

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

498 Seventh Avenue, Suite 1810, New York, NY 10018

(Address of principal executive offices and zip code)

(212) 201-0800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [ ]

Accelerated Filer [X]

Non-accelerated Filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]

As of May 9, 2007, 81,587,000 shares of $0.001 par value common stock were outstanding.

(Mark One)
TABLE OF CONTENTS
S	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			Page
	For the quarterly period ended June 30, 2005
		PART I - FINANCIAL INFORMATION
	or
Item 1.		Financial Statements	3
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		Consolidated Balance Sheets – March 31, 2007
	For the transition period from ____________ to ____________
		and December 31, 2006 (unaudited)	3
Commission file number: 0-27168
		Consolidated Statements of Operations – Three months
——————
		ended March 31, 2007 and 2006 (unaudited)	4
VIEWPOINT CORPORATION (Exact name of registrant as specified in its charter)
		Consolidated Statements of Cash Flows – Three months ended
		March 31, 2007 and 2006 (unaudited)	5
		Notes to Consolidated Financial Statements (unaudited)	6
Item 2.		Management’s Discussion and Analysis of Financial
		Condition and Results of Operations	13
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.		Controls and Procedures	26
		PART II – OTHER INFORMATION
Item 6.		Exhibits	28
		Signatures	29

Delaware		95-4102687
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

498 Seventh Avenue, Suite 1810, New York, NY 10018 (Address of principal executive offices and zip code) (212) 201-0800 (Registrant’s telephone number, including area code) —————— Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes S No £ As of August 4, 2005, 59,487,000 shares of $0.001 par value common stock were outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets – June 30, 2005 and December 31, 2004 (unaudited)	3
	Consolidated Statements of Operations – Three and six months ended June 30, 2005 and 2004 (unaudited)	4
	Consolidated Statements of Cash Flows – Six months ended June 30, 2005 and 2004 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II – OTHER INFORMATION
Item 6.	Exhibits	40
	Signatures	41

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

VIEWPOINT CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (Unaudited)

	June 30, 2005			December 31, 2004
		March 31, 2007				December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	31,~~529~~749		$	~~5,905~~$	4,154
Marketable securities		1,~~086~~034			~~2,757~~	113
Accounts receivable, net of reserve of $404 and $430, respectively		4,048			2,583
Accounts receivable, net of reserve of $223 and $230, respectively		2,520				3,037
Related party accounts receivable		26			26
Prepaid expenses and other current assets		547				543
Prepaid expenses and other current assets		541			421
Total current assets		5,850				7,847
Total current assets		9,230			11,692
Restricted cash		192				190
Restricted cash		220			320
Property and equipment, net		919				1,023
Property and equipment, net		1,445			1,485
Goodwill		14,882				14,882
Goodwill, net		33,409			31,276
Intangible assets, net		3,534				3,689
Intangible assets, net		4,393			230
Other assets		43				56
Other assets, net		180			270
Total assets	$	25,420			$	27,687
Total assets	$	48,877		$	45,273
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current liabilities:
Accounts payable	$	1,390			$	1,660
Accounts payable	$	2,104		$	1,218
Accrued expenses		387				401
Accrued expenses		1,311			244
Deferred revenues		61				70
Deferred revenues		393			431
Current portion of notes payable		389				389
Related party deferred revenues		2,144			4,607
Accrued incentive compensation		545				545
Current portion of notes payable		518			—
Current liabilities related to discontinued operations		231				231
Accrued incentive compensation		545			545
Total current liabilities		3,003				3,296
Current liabilities related to discontinued operations		231			231
Deferred rent		206				232
Total current liabilities		7,246			7,276
Warrants to purchase common stock		310				467
Deferred rent		373			365
Subordinated notes		2,368				2,456
Warrants to purchase common stock		456			1,286
Unicast notes		1,500				1,541
Subordinated notes		2,417			2,388
Total liabilities		7,387				7,992
Unicast notes		1,676			—
Commitments and Contingencies (note 5)
Total liabilities		12,168			11,315
Stockholders' equity:
Stockholders’ equity:
Preferred stock, $.001 par value; 5,000 shares authorized - no shares
Preferred stock, $.001 par value; 5,000 shares authorized - no shares issued and outstanding at June 30, 2005 and December 31, 2004		—			—
issued and outstanding at March 31, 2007 and December 31, 2006		-				-
Common stock, $.001 par value; 100,000 shares authorized - 58,295 shares issued and 58,135 shares outstanding at June 30, 2005, and 56,704 shares issued and 56,544 shares outstanding at December 31, 2004		58			57
Common stock, $.001 par value; 67,830
Paid-in capital		294,206			290,260
shares issued and 67,670 shares outstanding at March 31,
Deferred compensation		(4	)		(5	)
2007, and 67,830 shares issued and 67,670 shares outstanding
Treasury stock at cost; 160 at June 30, 2005 and December 31, 2004		(1,015	)		(1,015	)
at December 31, 2006		68				68
Accumulated other comprehensive loss		(66	)		(60	)
Paid-in capital		306,552				306,214
Accumulated deficit		(256,470	)		(255,279	)
Treasury stock at cost; 160 at March 31, 2007 and December 31, 2006		(1,015	)			(1,015	)
Total stockholders’ equity		36,709			33,958
Accumulated other comprehensive income		4				14
Total liabilities and stockholders’ equity	$	48,877		$	45,273
Accumulated deficit		(287,576	)			(285,586	)
Total stockholders' equity		18,033				19,695
Total liabilities and stockholders' equity	$	25,420			$	27,687

The accompanying notes are an integral part of these consolidated financial statements.

VIEWPOINT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
		Three Months Ended March 31,
	2005			2004			2005			2004
		2007				2006
Revenues:
Search	$	2,393		$	—		$	4,573		$	8
Advertising systems	$	1,110			$	1,595
Advertising systems		1,163			37			1,895			37
Search		1,485				1,789
Services		~~1,564~~719			~~1,066~~	553		~~2,807~~			~~2,589~~
Related party services		354			686			749			1,600
Licenses		6				46
Licenses		227			144			382			384
Total revenues		3,320				3,983
Related party licenses		872			872			1,745			1,779
Cost of Revenues:
Total revenues		6,573			2,805			12,151			6,397
Advertising systems		452				1,040
Cost of revenues:
Search		43				36
Search		49			—			95			—
Services		481				663
Advertising systems		847			6			1,365			6
Licenses		-				6
Services		1,026			792			1,836			1,543
Total cost of revenues		976				1,745
Licenses		1			3			3			4
Gross profit		2,344				2,238
Total cost of revenues		1,923			801			3,299			1,553
Operating expenses:
Gross profit		4,650			2,004			8,852			4,844
Sales and marketing		1,195				1,578
Operating expenses:
Research and development		810				1,088
Sales and marketing		1,228			945			2,503			1,996
General and administrative		2,078				2,359
Research and development		1,147			860			2,353			1,773
Depreciation		115				117
General and administrative		2,654			1,845			4,741			3,727
Amortization of intangible assets		128				110
Depreciation		220			205			453			424
Restructuring charges		-				92
Amortization of intangible assets		179			1			357			4
Total operating expenses		4,326				5,344
Restructuring charges (release)		—			—			—			(17	)
Loss from operations		(1,982	)			(3,106	)
Total operating expenses		5,428			3,856			10,407			7,907
Other income (expense):
Loss from operations		(778	)		(1,852	)		(1,555	)		(3,063	)
Interest and other income		51				79
Other income (expense), net:
Interest expense		(204	)			(287	)
Interest and other income; net		32			27			56			46
Change in fair value of warrants to purchase common stock		157				(628	)
Interest expense		(339	)		(236	)		(655	)		(486	)
Other income (expense):		4				(836	)
Changes in fair values of warrants to purchase common stock and conversion options of convertible notes		648			3,050			830			(3,553	)
Loss before provision for income taxes		(1,978	)			(3,942	)
Loss on conversion of debt		—			(212	)		—			(810	)
Provision for income taxes		12				7
Total other income (expense)		341			2,629			231			(4,803	)
Net loss	$	(1,990	)		$	(3,949	)
Income (loss) before provision for income taxes		(437	)		777			(1,324	)		(7,866	)
Basic and diluted net loss per common share:
Provision for income taxes		9			25			12			35
Net loss per common share	$	(0.03	)		$	(0.06	)
Net income (loss) from continuing operations		(446	)		752			(1,336	)		(7,901	)
Weighted average number of shares outstanding — basic and diluted		67,670				64,864
Adjustment to net income (loss) on disposal of discontinued operations, net of tax		—			20			145			39
Net income (loss)	$	(446	)	$	772		$	(1,191	)	$	(7,862	)
Basic and diluted net income (loss) per common share:
Net income (loss) per common share from continuing operations	$	(0.01	)	$	0.01		$	(0.02	)	$	(0.15	)
Net income (loss) per common share	$	(0.01	)	$	0.01		$	(0.02	)	$	(0.15	)
Weighted average number of shares outstanding — basic and diluted		58,014			52,651			57,835			51,433

The accompanying notes are an integral part of these consolidated financial statements.

VIEWPOINT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)

			Six Months Ended June 30,
		Three Months Ended March 31,
			2005			2004
			2007					2006
Cash flows from operating activities:	~~Cash flows from operating activities:~~
Net loss	~~Net loss~~	$	$(1,990	~~(1,191~~)	)	$	~~(7,862~~	)(3,949	)
	Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash used in
	Non-cash stock-based compensation charges			595			282
operating activities:
	Restructuring charges (release)			—			(17	)
Stock-based compensation charges			338					668
Depreciation and amortization	~~Depreciation and amortization~~		297	~~810~~			~~428~~	283
Provision for bad debt	~~Provision for bad debt~~		(7	62)			(4	)1
	Interest expense paid using common stock			—			18
Changes in fair values of warrants to purchase common stock			(157	)				628
	Changes in fair values of warrants to purchase common stock and and conversion feature of convertible debt			(830	)		3,553
Amortization of debt discount and issuance costs			146					236
	Amortization of debt discount and issuance costs			563			310
Changes in operating assets and liabilities
	Loss on conversion of debt			—			330
Accounts receivable			524					1,758
	Issuance of stock below market price on conversion of debt			—			480
Prepaid expenses			(4	)				(831	)
	Changes in operating assets and liabilities, net of
Accounts payable			(270	)				(491	)
	acquisitions:
Accrued expenses			(40	)				4
	Accounts receivable			527			(315	)
Deferred revenues			(9	)				(26	)
	Related party accounts receivable			—			860
Other			-					(1	)
	Prepaid expenses			(43	)		278
Net cash used in operating activities			(1,172	)				(1,720	)
	Accounts payable			(1,300	)		(262	)
Cash flows from investing activities:
	Accrued expenses			(410	)		(246	)
Proceeds from sales and maturities of marketable securities			-					3,645
	Deferred revenues			(38	)		(111	)
Purchases of marketable securities			(931	)				(4,790	)
	Related party deferred revenues			(2,463	)		(2,431	)
Increase in restricted cash			(2	)				(2	)
	Net cash used in operating activities			(3,718	)		(4,709	)
Purchases of property and equipment			(37	)				(53	)
	Cash flows from investing activities:
Purchases of patents and trademarks			(1	)				(16	)
	Proceeds from sales and maturities of marketable securities			6,980			3,450
Net cash used in investing activities			(971	)				(1,216	)
	Purchases of marketable securities			(5,307	)		(9,971	)
Cash flows from financing activities:
	Net decrease in restricted cash			100			69
Repayment of Subordinate Notes			(165	)				(450	)
	Purchases of property and equipment			(296	)		(166	)
Repayment of Unicast Debt			(97	)				(33	)
	Acquisition of Unicast, net of cash acquired			(512	)		—
Proceeds from exercise of stock options			-					761
	Purchases of patents and trademarks			(12	)		(38	)
Net cash (used in) provided by financing activities			(262	)				278
	Net cash provided by (used in) investing activities			953			(6,656	)
Net decrease in cash and cash equivalents			(2,405	)				(2,658	)
	Cash flows from financing activities:
Cash and cash equivalents at beginning of year			4,154					6,437
	Proceeds from issuance of common stock			—			3,675
Cash and cash equivalents at end of year		$	1,749			$		3,779
	Proceeds from exercise of stock options			386			222
Supplemental disclosure of cash flow activities:
	Net cash provided by financing activities			386			3,897
Cash paid during the period for income taxes		$	12			$		7
	Effect of exchange rates changes on cash			3			(3	)
Cash paid during the period for interest			21					53
	Net decrease in cash and cash equivalents			(2,376	)		(7,471	)
Unrealized (loss) on marketable securities			(10	)				(1	)
	Cash and cash equivalents at beginning of period			5,905			8,130
	Cash and cash equivalents at end of period		$	3,529		$	659

The accompanying notes are an integral part of these consolidated financial statements.

VIEWPOINT ~~CORPORATIONCONSOLIDATED~~CORPORATION ~~STATEMENTS~~ NOTES OFTO ~~CASH~~CONSOLIDATED ~~FLOWS(in~~FINANCIAL ~~thousands)~~STATEMENTS (Unaudited)

	Six Months Ended June 30,
	2005			2004
Supplemental disclosure of cash flow activities:
Cash paid during the year for income taxes	$	12		$	35
Cash paid during the year for interest		136			80
Supplemental disclosure of non-cash investing and financing activities:
Non-cash financing activities related to the Unicast acquistion
Supplemental disclosure of non-cash investing and financing activities:
Net assets acquired in Unicast acquisition
Accounts receivable, net	$	684		$	—
Prepaids		7			—
Other assets		22			—
Fixed assets		128			—
Intangible assets		4,508			—
Accounts payable		(1,485	)		—
Unicast Debt		(1,702	)		—
Non-cash cost of Unicast acquisition
Common stock		1			—
APIC		2,967			—
Issuance of common stock in repayment of convertible notes		—			2,700
Cancellation of common stock option awards		—			17
Deferred compensation recognized related to adjustment of an option grant		—			32
Closing costs for convertible notes and subordinated notes accrued and not yet paid					175
Unrealized gains (losses) on marketable securities		2			11

1. Summary of Significant Accounting Policies

~~The~~ Basis ~~accompanying notes are an integral part~~ of ~~these~~Presentation ~~consolidated financial statements.~~

6 The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The interim financial information is unaudited, but reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and operating results of Viewpoint Corporation (“Viewpoint” or the “Company”) for the interim periods.

1 These unaudited consolidated financial statements have been prepared in accordance with the instructions to Rule 10-01 of Regulation S-X and, therefore, do not include all of the information and footnotes normally provided in annual financial statements. ~~Summary~~As a result, these unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of ~~Significant~~financial ~~Accounting~~condition ~~Policies~~and results of operations, contained in Viewpoint’s Annual Report on Form 10-K for the year ended December 31, 2006. The results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007 or other future periods.

~~Basis~~ The 2006 consolidated financial statements have been reclassified to conform to the 2007 presentation regarding the allocation of ~~Presentation~~depreciation and amortization expense from operating expense to cost of revenues; this allocation commenced during the three months ended June 30, 2006. Depreciation and amortization expense of $0.1 million was recorded in cost of revenues for the three months ended March 31, 2006.

The ~~accompanying~~year-end ~~unaudited~~ consolidated ~~financial statements have been prepared in accordance with~~ ~~accounting~~balance ~~principles~~sheet ~~generally~~data ~~accepted~~was inderived ~~the~~from ~~United~~audited ~~States~~financial ofstatements ~~America,~~but ~~consistent~~does innot include all ~~material respects~~disclosures ~~with~~required ~~those~~by ~~applied~~accounting inprinciples ~~the~~generally ~~Company’s Annual Report on Form 10-K for the year ended December~~accepted ~~31, 2004. The interim financial information is unaudited, but reflects all adjustments which are,~~ in the ~~opinion~~United ofStates ~~management, necessary for a fair presentation~~ of ~~the financial position and operating results of Viewpoint Corporation (“Viewpoint” or the “Company”) for the interim periods~~America.

~~These unaudited consolidated financial statements have been prepared in accordance with the instructions~~ toLiquidity Rule 10-01 of Regulation S-X and, therefore, do not include all of the information and footnotes normally provided in annual financial statements. As a result, these unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in Viewpoint’s Annual Report on Form 10-K for the year ended December 31, 2004. The results of operations for the six months ended June 30, 2005 are not necessarily indicative of the results to be expected for the year ending December 31, 2005 or other future periods.

~~Certain~~ The ~~reclassifications~~accompanying consolidated financial statements of the Company have been ~~made~~prepared toon a going concern basis, which contemplates the ~~2004~~realization ~~consolidated~~of ~~financial~~assets ~~statements~~and tothe ~~conform~~satisfaction of liabilities in the normal course of business. The Company had cash, cash equivalents and marketable securities of $2.8 million at March 31, 2007. During the quarter ended March 31, 2007, net cash used in operations amounted to $1.2 million. As of March 31, 2007, the ~~2005~~Company ~~presentation~~had an accumulated deficit of $287.6 million. The Company has incurred negative cash flows and net losses since inception. Based on current operating levels combined with limited capital resources, financing operations during 2007 will require that the Company improve operating results through cost cutting measures, increases in revenues or both, and/or raise sufficient additional equity or debt capital. If the Company’s expected revenue targets are not achieved or the Company fails to raise sufficient equity or debt capital, management would implement cost reduction measures including work force reduction as well as reduction in overhead costs and capital expenditures.

~~Liquidity~~ There can be no assurance that the Company will achieve or sustain positive cash flows from operations or profitability. Without improving operating results through increasing revenues, reducing expenses and/or raising additional capital, future operations will need to be discontinued. All these factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company entered into ~~had~~a ~~cash~~Securities Purchase Agreement with certain accredited investors, ~~cash~~including DG ~~equivalents~~FastChannel, ~~and~~Inc., ~~marketable~~as ~~securities~~to which the Company also entered into a strategic partnership (see note 8), dated as of $May 4, 2007, under which Viewpoint issued 13.63 million shares of Viewpoint common stock in a private placement to such accredited investors at ~~June~~a ~~30,~~purchase ~~2005~~price of $0.40 ~~During~~ per ~~the~~share ~~six~~(resulting ~~months~~in ~~ended~~aggregate ~~June~~gross ~~30,~~proceeds ~~2005,~~of ~~net~~$5.3 ~~cash~~million). The ~~used~~investors in ~~operations~~the ~~amounted~~transaction also received warrants to $purchase an additional 3.73 million shares of common stock at an exercise price of $0.45 per share As(subject to certain adjustments). Such warrants are not exercisable for six months following issuance and have an aggregate term of ~~June~~three 30and one-half years. As discussed in note 8, ~~2005~~on May 7, ~~the~~2007 the Company ~~had~~announced anthe ~~accumulated~~closing ~~deficit~~of the transaction and the receipt of $~~256.~~5.3 million. ~~There~~While ~~can~~the beproceeds nofrom ~~assurance~~the private placement provide additional liquidity, the Company still believes that ~~Viewpoint~~near ~~will~~term ~~achieve~~operating orlevels ~~sustain~~require ~~positive~~that ~~cash~~the ~~flows~~Company ~~from~~improve ~~operations~~operating results through cost cutting measures, increases in revenues or ~~profitability~~both in order to mitigate the substantial doubt as to the Company’s ability to continue as a going concern.

~~The Company believes that its current cash, cash equivalents, and marketable securities balances and~~ ~~cash~~6 ~~provided by expected future operations are sufficient to meet its operating cash flow needs and anticipated capital expenditure requirements through the next twelve months.~~

~~The Company has contingency plans for 2005 if expected revenue targets are not achieved. These plans~~ ~~include~~VIEWPOINT ~~further~~CORPORATION ~~workforce reductions as well as reductions in overhead and capital expenditures.~~ ~~The~~NOTES ~~Company~~TO ~~may~~CONSOLIDATED ~~seek~~FINANCIAL ~~additional funds when necessary through public or private equity financing~~STATEMENTS ~~or from other sources to fund operations and pursue growth, although there are no assurances that the Company can obtain such financing with reasonable terms.~~(Unaudited)

As Of ~~discussed in~~ the ~~subsequent~~13.3 ~~events~~million ~~footnote,~~shares ~~on July 27, 2005, the Company~~ and ~~a holder of the Company’s subordinated debt entered into a Stock Purchase Agreement, under which the Company issued 1~~3.3 million ~~shares~~ ofwarrants ~~common~~issued ~~stock~~ in ~~a private placement to~~ the ~~holder~~agreement, atDG FastChannel, aInc. ~~purchase~~received ~~price of $1~~10.558 ~~per~~million ~~share (resulting~~shares inand ~~aggregate gross proceeds of $~~2.07 million). ~~The~~warrants ~~Company currently has no commitment for additional financing and may experience difficulty~~ in ~~obtaining additional financing on favorable~~ ~~terms,~~consideration iffor ~~at all~~$4.3 Any financing the Company obtains may contain covenants that restrict the Company’s freedom to operate the business or may have rights, preferences or privileges senior to the Company’s common stock and may dilute the Company’s current shareholders’ ownership interest in Viewpointmillion. If ~~the Company is unable to achieve profitable operations and/or raise additional capital, future operations will need to be scaled back further or discontinued.~~

~~At June~~ In ~~30,~~connection ~~2005~~with the ~~Company~~private ~~classified~~placement, ~~$2.4~~Viewpoint ~~million~~entered ofinto ~~short-term~~a ~~debt~~Registration asRights ~~long-term. This~~Agreement ~~amount~~with ~~represented~~ the ~~carrying~~investors ~~value~~pursuant ofto ~~the~~which ~~amended~~Viewpoint ~~note (see note 4 below). Settlement of this note~~ is ~~not~~required ~~expected~~ to ~~require~~file ~~the~~a ~~use~~registration ofstatement ~~working capital~~with in the ~~next~~SEC ~~twelve~~covering ~~months,~~the asshares ~~the~~within ~~Company~~45 ~~has~~days ~~both~~of the ~~intent~~closing ~~and~~of the ~~ability to~~private ~~refinance this debt on a long-term basis~~placement.

~~Revenue~~ On ~~Recognition~~November 27, 2006 the Company received notice from The NASDAQ Listing Qualifications Department that for the prior 30 consecutive business days, the bid price of the Company’s common stock closed below the minimum $1.00 per share requirement for continued listing under Marketplace Rule 4450(a)(5). The Company may regain compliance with Marketplace Rule 4450(a)(5) if at any time before May 29, 2007, the bid price of the Company’s common stock closes at $1.00 per share for a minimum of ten consecutive business days.

~~The~~ If the Company ~~recognizes~~does ~~revenue~~not inregain ~~accordance~~compliance ~~with~~by ~~Statement~~May of29, ~~Position~~2007, ~~(“SOP”)~~the ~~97-2,~~Company ~~“Software~~will be notified that its securities will be delisted. At that time the Company may appeal NASDAQ’s determination to ~~Revenue~~delist ~~Recognition,”~~its assecurities ~~amended~~to a Listing Qualifications Panel. Alternatively, ~~Emerging~~the ~~Issues~~Company ~~Task~~may ~~Force~~also ~~(“EITF”)~~apply Nofor listing on The NASDAQ Capital Market. ~~00-21~~If ~~“Revenue Arrangements~~its ~~with~~application ~~Multiple~~is ~~Deliverables~~approved,” ~~and~~the ~~Staff~~Company ~~Accounting~~will ~~Bulletin~~be ~~(“SAB”)~~afforded ~~No.~~the remainder of The NASDAQ Capital ~~101~~Market’s ~~“Revenue~~second ~~Recognition~~180 calendar day compliance period in ~~Financial~~order to regain compliance while on The NASDAQ Capital Market.

7 Use of Estimates

~~Statements”~~ The aspreparation ~~amended~~of byfinancial ~~SAB~~statements ~~No.~~in ~~104~~conformity ~~“Revenue~~with ~~Recognition.”~~generally ~~Per~~accepted ~~SOP~~accounting ~~97-2~~principles requires management to make estimates and ~~SAB~~assumptions ~~No.~~that affect the reported amounts of ~~101,~~assets asand ~~amended~~liabilities byand ~~SAB~~disclosure ~~No.~~of ~~104,~~contingent ~~the~~assets ~~Company~~and ~~recognizes~~liabilities ~~revenue~~at ~~when~~the date of the ~~following~~financial ~~criteria~~statements ~~are~~and ~~met: (a)~~the ~~persuasive~~reported ~~evidence~~amounts of anrevenues ~~arrangement~~and ~~exists,~~expenses ~~(b)~~during ~~delivery~~the ~~has~~reporting ~~occurred~~period. orActual ~~services~~results ~~have~~could ~~been~~differ from those estimates. The ~~rendered,~~most ~~(c)~~significant ~~the~~estimates ~~Company’s~~include ~~fee~~revenue, isreceivables, ~~fixed~~liabilities, orwarrants, ~~determinable~~goodwill, and ~~(d)~~the ~~collectibility~~useful islives ~~reasonably assured~~of intangible and fixed assets.

~~Viewpoint has generated revenues through four sources: (a) search advertising, (b) advertising systems~~ ~~revenue,~~Net ~~(c)~~Loss ~~software~~Per ~~licenses,~~Common ~~and~~Share (d) services. Search revenue is derived from a share of the fees charged by its search results provider Yahoo Corporation (“Yahoo!”) to advertisers who pay for sponsored links when a customer clicks on the paid link on the results provided by the Viewpoint Toolbar. Advertising systems revenue is generated by charging customers to host advertising campaigns based on a cost per thousand (“CPM”) impressions. License revenues are generated from licensing the rights to use products directly to customers and indirectly through Value Added Resellers (“VARs”). Service revenues are generated from fee-based professional services, customer support services (maintenance arrangements), and training services performed for customers that license the Company’s products.

~~Search~~ Basic ~~revenue~~net isloss ~~generated~~per ~~when~~common share ais ~~customer~~computed ~~uses~~using the ~~Viewpoint~~weighted ~~Toolbar~~average tonumber ~~search~~of ~~the~~shares ~~internet,~~of ~~and~~outstanding ~~clicks~~and ondiluted anet ~~sponsored~~loss ~~advertisement~~per ~~included~~common inshare ~~the~~is ~~search~~computed ~~results.~~using ~~The~~the ~~Viewpoint~~weighted ~~Toolbar’s~~average ~~search~~number ~~results~~of ~~are~~shares ~~provided~~of bycommon ~~Yahoo!,~~and ~~who~~common ~~collects~~equivalent ashares ~~fee~~outstanding. ~~from~~The ~~the advertiser and remits a percentage~~calculation of ~~the~~diluted ~~fee~~loss toper ~~Viewpoint.~~common ~~Revenue~~share ~~generated~~for isMarch a31, ~~function~~2007 ofand ~~the~~2006 ~~number~~excludes ~~of Viewpoint Toolbars performing~~approximately ~~searches,~~10.6 ~~the~~million ~~number~~and of13.5 ~~searches~~million ~~that are sponsored by advertisers, the number~~ of ~~advertisements that~~common ~~are~~share ~~clicked~~equivalents ~~on by Viewpoint Toolbar searchers~~respectively, ~~the rate advertisers pay for those advertisements,~~ ~~and~~because ~~the~~they ~~percentage~~do ~~retained~~not byhave ~~Yahoo!~~a ~~for~~dilutive ~~providing the results~~effect.

~~Viewpoint also offers an online advertising campaign management and deployment product. This advertising~~ ~~system~~Comprehensive ~~permits~~Income ~~publishers, advertisers, and their agencies to manage the process of deploying online advertising campaigns. The Company charges customer on a cost per thousand~~ (~~“CPM”~~Loss) impression basis, and recognizes revenue when the impressions are served, so long as all other revenue recognition criteria are satisfied. The Company also provides another advertising services product whereby the Company purchases media space from web-site publishers and re-sells that space to advertisers. The Company acts as a principal party in the transaction, assumes the title to the inventory purchased, and assumes the risks of collection and therefore recognizes the entire amount billed to the customer as revenue.

~~Fee-based professional services for customized software development are performed on a fixed-fee or~~ ~~time-and-materials~~ For ~~basis~~all ~~under~~periods separate service arrangements. Revenues for fixed-fee arrangements are recognized over the pattern of performance in accordance with the provisions of SAB No. 104. The pattern of performance for service arrangements is measured by the percentage of costs incurred and accrued to date for each contractpresented, ~~which primarily consist of direct labor costs, cost of outsourcing, and overhead, to~~ the ~~estimated~~difference ~~total~~between ~~cost~~net ~~for~~loss ~~each contract at completion. The percentage approximates the percentage of a customer’s contract that has been completed~~ and ~~would~~comprehensive benet ~~available~~loss ~~for~~was ~~the customer to use at that point in time. Use of this method is based on the availability of reasonably dependable estimates. If reasonably dependable estimates are~~ not available due to the complexity of the services to be performed, the Company defers recognition of any revenues for the project until the project is completed, delivered and accepted by the customer, provided all other revenue recognition criteria are met and no further significant obligations existmaterial. ~~Revenues from customer support services are recognized ratably over the term of the contract. Revenues from training services are recognized as services are performed.~~

~~License revenues from direct customers included sales of perpetual and term-based licenses for broadcasting~~ ~~digital~~Recent ~~content~~Accounting inPronouncements ~~the Viewpoint format. License revenues were recognized up-front provided no further significant obligations exist and the resulting receivable was deemed collectible by management.~~

~~Fees~~ In ~~from~~June ~~licenses~~2006, ~~sold~~the ~~together~~FASB ~~with~~issued ~~fee-based~~Interpretation ~~professional~~No. ~~services~~48, ~~were~~“Accounting ~~generally~~for ~~recognized~~Uncertainty ~~upon delivery~~in Income Taxes, an interpretation of ~~the~~FASB ~~software,~~Statement ~~provided~~No. ~~that~~109” ~~the~~(“FIN ~~payment~~48”), ofwhich clarifies the ~~license~~accounting ~~fees~~for ~~were~~uncertainty ~~not~~in ~~dependent~~income ~~upon~~taxes ~~the performance~~recognized ofin ~~the~~a ~~services,~~company’s ~~and~~financial ~~the~~statements. ~~services~~The ~~were~~interpretation ~~not~~prescribes ~~essential~~a torecognition ~~the~~threshold ~~functionality~~and ofmeasurement ~~the~~attribute ~~licensed software.~~criteria Iffor the ~~services~~financial ~~were~~statement ~~essential~~recognition toand ~~the~~measurement ~~functionality~~ of an ~~the~~uncertain ~~software,~~tax position taken or ~~payment~~expected ofto ~~the license~~be ~~fees~~taken ~~were~~in ~~dependent~~a ~~upon~~tax ~~the~~return. ~~performance~~The ofinterpretation ~~the~~also ~~services~~provides guidance on derecognition, ~~both~~classification, ~~the~~interest ~~software~~and ~~license~~penalties, accounting in interim periods, disclosure and ~~service~~transition. The Company ~~fees~~adopted ~~were~~the ~~recognized~~provisions inof ~~accordance~~FIN ~~with~~48 ~~SOP~~on ~~81-~~January 1, ~~“Accounting~~2007. ~~for~~Since ~~Performance~~the ofCompany ~~Construction-Type and~~does ~~Certain~~not ~~Production-Type~~have ~~Contracts.”~~any ~~The~~uncertain ~~percentage~~tax positions, the implementation of ~~completion~~FIN ~~method~~48 ~~was~~did ~~used~~not ~~for~~have ~~those arrangements~~a inmaterial ~~which~~impact ~~reasonably~~on ~~dependable~~its ~~estimates~~consolidated ~~were~~financial ~~available~~statements. IfAt ~~reasonably~~March ~~dependable~~31, ~~estimates~~ 2007 there were ~~not~~no accrued ~~available~~liabilities ~~due~~for totax-related ~~the~~interest ~~complexity~~and ofpenalties, which the ~~services~~Company torecognizes beas ~~performed,~~general and administrative expense as incurred. Since the Company ~~deferred~~has ~~recognition of~~incurred ~~any~~net ~~revenues~~losses for ~~the~~tax ~~project~~purposes ~~until~~since ~~the~~inception, ~~project~~all ~~was~~tax ~~completed,~~years ~~delivered~~remain ~~and~~open ~~accepted~~to examination by ~~the~~major ~~customer~~taxing jurisdictions, ~~provided~~ ~~all~~which ~~other~~are ~~revenue~~the ~~recognition~~federal ~~criteria~~government ~~were met~~ and nostates ~~further~~of ~~significant~~New ~~obligations~~York ~~exist~~and California.

8 7

~~For arrangements involving multiple elements, the Company defers revenue for the undelivered elements~~ ~~based~~VIEWPOINT onCORPORATION ~~their relative fair value and recognizes the difference between the total arrangement~~ ~~fee and~~NOTES ~~the~~TO ~~amount~~CONSOLIDATED ~~deferred~~FINANCIAL ~~for the undelivered elements as revenue. The determination of fair~~STATEMENTS value of each undelivered element in multiple element arrangements is based on the price charged when the same element is sold separately. For maintenance and technical support elements, the Company uses renewal rates to determine the price when sold separately. The Company accounts for multiple element arrangements which involve only fee-based professional services in accordance with EITF 00-21. For licenses sold that include updates over a period of time the Company recognizes the license revenue over the period in which updates are provided.(Unaudited)

~~Standard~~ In ~~terms~~September ~~for service arrangements~~2006, ~~which~~the ~~are~~FASB ~~typically~~issued ~~billed~~SFAS ~~and~~No. ~~collected on an installment basis~~157, ~~require~~“Fair ~~final~~Value ~~payment~~Measurements” ~~within~~(FAS 90157). ~~days~~FAS of157 ~~completion~~establishes ofa ~~the~~framework ~~services. Standard terms~~ for ~~license arrangements~~measuring ~~required~~fair ~~payment~~value ~~within~~and 90expands ~~days~~disclosures ofabout ~~the~~fair ~~contract date, which typically coincided with~~value ~~delivery~~measurements. ~~Probability~~The ofchanges ~~collection~~to iscurrent ~~based~~practice ~~upon~~resulting from the ~~assessment~~application of ~~the~~this ~~customer’s~~Statement ~~financial condition~~relate ~~through~~to the ~~review~~definition of ~~their~~fair ~~current financial statements and/or credit reports. For follow-on sales to existing customers~~value, ~~prior~~the ~~payment~~methods ~~history is also~~ used to ~~evaluate~~measure ~~probability~~fair ofvalue, ~~collection. The~~and ~~Company’s~~the ~~arrangements~~expanded ~~with~~disclosures ~~customers~~about dofair ~~not~~value ~~contain product return rights~~measurements. IfWe ~~the~~will ~~fee~~be ~~is not~~required ~~fixed~~to oradopt ~~determinable,~~the ~~revenue~~provisions isof ~~recognized~~FAS as157 ~~payments~~beginning ~~become~~with ~~due~~our orfirst asquarter ~~cash~~ending isMarch ~~received from the~~31, ~~customer~~2008. IfWe ado ~~nonstandard~~not ~~acceptance~~believe ~~period~~that isthe ~~required,~~adoption ~~revenues~~of ~~are recognized upon~~ the ~~earlier~~ provisions of ~~customer~~FAS ~~acceptance~~157 orwill ~~the~~materially ~~expiration~~impact ofour ~~the~~consolidated ~~acceptance~~financial ~~period~~statements.

~~Stock-Based~~ In ~~Compensation~~February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” which is effective for fiscal years beginning after November 15, 2007. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We are currently evaluating the potential impact of this statement.

~~The Company accounts for stock option grants in accordance with Accounting Principles Board (“APB”)~~ ~~Opinion No~~2. ~~25,~~Goodwill “Accounting for Stock Issued to Employees”, Financial Accounting Standards Board (“FASB”) issued Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25” (FIN 44), and ~~complies with~~Intangible ~~the~~Assets disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure.” Under APB Opinion No. 25, compensation expense is recognized over the vesting period based on the difference, if any, between the fair value of the Company’s stock at the date of grant and the exercise price. The Company accounts for stock issued to non-employees in accordance with SFAS No. 123 and Emerging Issues Task Force (“EITF”) Issue No. 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.”

~~Pro~~ ~~forma~~ As ~~information regarding net income and earnings per share is~~ required by SFAS No. ~~123~~142, ~~and has been determined as if~~ the Company ~~has~~discontinued ~~accounted~~amortizing ~~for its Stock Option Plans under~~ the ~~fair~~remaining ~~value~~balances ~~method~~ of ~~SFAS~~goodwill ~~No.~~as ~~123. The fair value~~ of ~~options~~January ~~issued~~1, ~~under~~2002. ~~the~~All ~~Plans~~remaining ~~was~~and ~~estimated~~future atacquired ~~the~~goodwill ~~date~~is ofsubject ~~grant~~to ~~using a~~impairment ~~Black-Scholes~~tests ~~option-pricing~~annually, ~~model.~~or ~~For~~earlier ~~purposes~~if indicators of ~~pro~~potential ~~forma~~impairment ~~disclosures~~exist, ~~the~~using ~~estimated~~a fair -value-based ofapproach. ~~the~~All ~~Company's~~other ~~options~~intangible isassets ~~amortized~~continue to ~~expense~~be amortized over ~~the~~their ~~options'~~estimated ~~vesting~~useful ~~period.~~lives ~~The~~and ~~Company's~~are ~~pro~~assessed ~~forma~~for ~~net~~impairment ~~loss~~under ~~and~~SFAS ~~net~~No. ~~loss~~144, “Accounting ~~per~~for ~~common share would approximate~~ the ~~following~~Impairment ~~(in~~or ~~thousands,~~Disposal ~~except~~of ~~per~~Long-Lived ~~share~~Assets.” ~~amounts):~~

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net income (loss), as reported	$	(446	)	$	772		$	(1,191	)	$	(7,862	)
Add: Non-cash stock-based employee compensation charges included in reported net loss, net of related tax effects		581			55			595			281
Deduct: Non-cash stock-based employee compensation charges determined under fair value based method for all awards, net of related tax effects		(945	)		(774	)		(1,926	)		(1,731	)
Pro forma net income (loss)	$	(810	)	$	53		$	(2,522	)	$	(9,312	)
Net income (loss) per share:
Basic and diluted as reported	$	(0.01	)	$	0.01		$	(0.02	)	$	(0.15	)
Basic and diluted pro forma	$	(0.01	)	$	0.00		$	(0.04	)	$	(0.18	)

Goodwill impairment has been assessed on a reporting unit basis based on the net asset value of each segment, including goodwill, and the estimated fair market value of each reporting unit. Fair market value of a reporting unit is estimated based on a comparison of that segment’s revenue or gross profit performance to the performance of similar companies, as well as discounted cash flows, using a discount rate of 16%.

~~The~~ A ~~effects~~summary of ~~applying~~changes ~~SFAS~~in ~~No.~~the ~~123,~~Company’s asgoodwill ~~amended~~ by ~~SFAS~~reporting ~~No.~~unit ~~148,~~and inintangible ~~this~~assets ~~pro~~during ~~forma~~the ~~disclosure~~quarter ~~are not~~ended ~~indicative~~March of31, ~~future~~2007 ~~amounts.~~by ~~The~~aggregated ~~Company~~segment ~~anticipates~~are ~~grants~~as offollows ~~additional awards~~ (in ~~future years.~~thousands):

		Goodwill
		Advertising Systems
	Technology	Advertising Systems	Services	Total	Intangible Assets
Balance as of December 31, 2006	10,206	2,039	2,637	14,882	3,689
Additions during period	-	-	-	-	1
Amortization	-	-	-	-	(156	)
Balance as of March 31, 2007	10,206	2,039	2,637	14,882	3,534

~~On April 14, 2003, the Company granted 2.3 million non-statutory stock options to acquire Company common~~ ~~stock,~~ The tochanges ~~certain~~in ~~executives of~~ the ~~Company~~carrying atamounts ~~an exercise price equal to the fair market value~~ of ~~the~~ ~~Company’s~~goodwill ~~common~~by ~~stock~~reporting ~~on the date of grant. Under the initial terms of the grant~~unit, ~~twenty-five percent of the options vest on the first anniversary of the date of grant~~ and ~~the~~intangible ~~remaining~~assets ~~options vest~~for at the ~~rate~~quarter ofended ~~1/36th~~March ~~per month thereafter. On July 1~~31, ~~2003~~2006, ~~the~~are ~~Company~~as ~~modified~~follows ~~the~~(in ~~terms~~thousands): ~~to accelerate the vesting of a grant to one executive. In addition the Company also extended the life of the options vested at the date of termination from three months to three years.~~

The executive’s employment terminated on June 30, 2005, at which time the Company recorded a charge of $0.6 million as the modification to the options was determined to be beneficial to the executive on the date of termination.

		Goodwill
		Advertising Systems
	Technology	Advertising Systems	Services	Total	Intangible Assets
Balance as of December 31, 2005	10,206	2,039	13,292	25,537	4,131
Additions during period	-	-	-	-	16
Amortization	-	-	-	-	(138	)
Balance as of March 31, 2006	10,206	2,039	13,292	25,537	4,009

In As ~~November 2003, the Company modified the terms~~ of ~~six~~March ~~stock~~31, ~~option~~2007 ~~grants to certain employees~~ and ~~officers~~ toDecember ~~reduce~~31, 2006, the ~~vesting period from four years to two years. The~~ Company’s ~~may~~intangible ~~record~~assets ~~a non-cash stock-based compensation charge based upon the difference between the closing price on the day of the modification~~ and ~~the~~related ~~closing~~accumulated ~~price~~amortization onconsisted ~~the date~~ of the ~~grant~~following for any of the 1.25 million options modified. The weighted average grant price for these options is $0.76. Such charge would be recorded if the executives are expected to derive a benefit from the acceleration. If any recipient ceases employment before the end of the initially-established vesting period of four years, then the modification to accelerate will be determined to be beneficial, resulting (in athousands): ~~non-cash compensation charge of less then $0.1 million.~~

~~Basic~~ 8 ~~and Diluted Net Loss Per Common Share~~

~~Basic~~ ~~net~~VIEWPOINT ~~loss~~CORPORATION ~~per common share is computed using the weighted average number of shares~~ ofNOTES ~~outstanding~~TO ~~and~~CONSOLIDATED ~~diluted~~FINANCIAL ~~net loss per common share is computed using the weighted~~STATEMENTS average number of shares of common and common equivalent shares outstanding. Common equivalent shares related to stock options totaling 7.0 million and 7.1 million for the three and six months ended June 30, 2005 and common equivalent shares related to stock options and warrants totaling 7.6 million for the six months ended June 30, 2004, are excluded from the computation of diluted net loss per common share because their effect was anti-dilutive.(Unaudited)

In March 2004, the Company sold 1.5 million shares of common stock, in a private placement to an institutional investor for $3.7 million or $2.45 per share. The institutional investor was one of the holders of the convertible notes. Prior to the closing of the March 2004 private placement the institutional investor converted $0.9 million of outstanding notes and received 0.9 million shares of Company common stock in the exchange.

	March 31, 2007							December 31, 2006
				Accumulated							Accumulated
		Gross		Amortization			Net		Gross		Amortization			Net

Website Partner Relationships - Unicast	$	3,772	$	(872	)	$	2,900	$	3,772	$	(778	)	$	2,994
Acquired Technology - Unicast		410		(326	)		84		410		(299	)		111
Patents and Trademarks - Unicast		326		(157	)		169		326		(141	)		185
Fotomat		134		(19	)		115		134		(8	)		126
Patents and Trademarks		439		(173	)		266		438		(165	)		273
Total Intangible Assets	$	5,081	$	(1,547	)	$	3,534	$	5,080	$	(1,391	)	$	3,689

In Amortization ~~June~~of ~~2004,~~intangible ~~the~~assets ~~Company~~is ~~exercised~~estimated ~~its right~~ to ~~convert~~be ~~the remaining outstanding convertible notes of~~ $10.87 million ~~and~~a ~~the~~year ~~related~~for ~~outstanding~~the ~~interest~~next ~~into~~five 1years.7 ~~million shares of Viewpoint common stock.~~

~~In December 2004, the Company sold 1.9 million shares of common stock in a private placement for $5.0~~ ~~million or $2~~3.65 ~~per~~Long-Term ~~share.~~Debt

~~Derivatives~~ Subordinated Notes

In ~~2002~~March ~~and 2003~~2007, the Company ~~issued convertible notes~~ and ~~warrants~~the ~~which~~Clarke ~~would~~Estates, ~~require~~a ~~Viewpoint~~subordinated ~~to issue~~note ~~registered~~holder, ~~shares~~who ofholds ~~common~~ownership ~~stock upon conversion of these securities. The Company accounts~~interest ~~for~~in the ~~fair values of these outstanding warrants to purchase common~~ Company’s stock ~~and conversion options~~ of ~~its~~approximately ~~convertible~~12%, ~~notes~~amended inthe ~~accordance with SFAS No~~4.95% ~~133~~subordinated ~~“Accounting~~note ~~for~~in ~~Derivative~~the ~~Instruments~~principal ~~and~~amount ~~Hedging~~of ~~Activities,”~~$3.1 ~~and~~million ~~EITF~~to ~~Issue~~extend ~~No.~~the ~~00-19~~maturity ~~“Accounting~~date ~~for~~from ~~Derivative~~March ~~Financial Instruments~~31, ~~Indexed~~2008 to, September ~~and Potentially Settled in~~30, a2009. ~~Company’s~~In ~~Own Stock~~addition,” ~~which requires~~ the ~~Company~~Clarke toEstates ~~bifurcate~~waived ~~and separately account for~~ the ~~conversion option and warrants as embedded~~requirement ~~derivatives~~that ~~contained in~~ the Company’s common ~~convertible~~stock ~~notes.~~remain ~~The~~listed ~~Company is required to carry these embedded derivatives~~ on ~~its~~a ~~balance~~national ~~sheet~~stock atexchange, ~~fair~~as ~~value~~defined, ~~and~~until ~~the unrealized changes in the value of~~December ~~these~~31, ~~embedded~~2008, ~~derivatives are reflected~~ in ~~net~~exchange ~~income~~for asthe ~~changes~~payment inby ~~fair~~Viewpoint ~~values~~ of ~~warrants to purchase common stock and conversion options of convertible notes~~$0.2 ~~Such~~million ~~changes in fair value are recorded as an adjustment~~ to ~~reconcile net loss to net cash used in operating activities in~~ the ~~consolidated~~ ~~statement~~holder of ~~cash~~the ~~flows.~~subordinated ~~In 2004~~note, ~~all~~and of the ~~outstanding~~addition ~~convertible notes were converted into shares~~ of ~~common stock~~$0.3 Atmillion ~~June~~to ~~30,~~the principle ~~2005,~~amount ~~warrants~~of tothe ~~purchase~~note ~~0.7~~payable ~~million~~at ~~shares~~maturity ofbut ~~common~~not ~~stock~~subject ~~remain~~to ~~outstanding~~interest.

10 Following the guidance in EITF 02-4 “Determining Whether a Debtor’s Modification or Exchange of Debt Instruments is within the Scope of FASB Statement No 15,” the Company accounted for the second amendment to the subordinated note, which was issued in March 2003, note as a troubled debt transaction in accordance with Statement of Financial Accounting Standards No. 15 “Accounting by Debtors and Creditors for Troubled Debt Restructurings.” Pursuant to SFAS 15 and EITF 02-4, if the Company is deemed to be experiencing financial difficulty and the Company’s effective borrowing rate in the restructuring is decreased, the Holder is deemed to have granted a concession. Since the Company announced there was substantial risk to continue as a going concern, the Company was deemed to be experiencing financial difficulties. The Company’s effective borrowing rate is determined by the carrying value of the debt and the timing and amount of future cash payments. The Company determined that the effective borrowing rate was lowered. Accordingly, the Company accounted for the amendment as a troubled debt restructuring, and therefore, no change was made to the carrying value of the debt. In addition the interest expense over the remaining life of the note will be determined by an effective borrowing rate of 21%.

~~Recent~~ The ~~Accounting~~Company’s ~~Pronouncements~~total carrying value of long-term debt at March 31, 2007 and December 31, 2006 is as follows (amounts in thousands):

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004) (“SFAS 123R”), “Share-Based Payment,” which requires companies to expense the fair value of employee stock options and other forms of stock-based compensation for interim periods that begin after June 15, 2005. This requirement represents a significant change because stock option awards have not been recognized as compensation expense in the Company’s historical consolidated financial statements under Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” SFAS 123R requires the cost of an award, based upon fair value on the date of grant, to be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The fair value of the award on the date of grant will be estimated using option pricing models. In April 2005, the Securities and Exchange Commission (the “SEC”) delayed the effective date of SFAS 123R for public companies until the first annual period, rather than the first interim period, that begins after June 15, 2005. The Company will adopt SFAS 123R on January 1, 2006 and recognize compensation expense prospectively for non-vested stock options outstanding at December 31, 2005 and for all future stock option grants. The effect of the adoption of SFAS No. 123(R) is expected to be comparable to the effect disclosed on a pro forma basis resulting from the application of the current fair-value recognition provisions of SFAS No. 123, as shown in Note 1.

	March 31		December 31
	2007		2006

Subordinated notes	$	2,368	$	2,456
Unicast notes		1,889		1,930
Total long-term debt		4,257		4,386
Less current portion		389		389
Long-term debt, net of current portion	$	3,868	$	3,997

In ~~March~~ The ~~2005,~~reconciliation the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”), which clarifies that the term “conditional asset retirement”, as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of ~~settlement are conditional on a future event that may or may not be within~~ the ~~control~~carrying ~~of the entity. FIN 47 requires that a liability be recognized for the fair~~ value ~~of a~~to ~~conditional asset retirement obligation when incurred, if~~ the ~~fair~~face value of ~~the~~ ~~liability~~each ~~can~~note beas ~~reasonably estimated. Uncertainty about the timing and method~~ of ~~settlement~~March of31, a2007, ~~conditional asset retirement obligation would be factored into the measurement of the liability when sufficient information exists. FIN 47~~ is ~~effective~~as nofollows ~~later~~(amounts ~~than~~in ~~the~~thousands): ~~end of fiscal years ending after December 15, 2005. Management believes that the future adoption of FIN 47 will not have a material impact on the Company’s consolidated financial statements.~~

~~In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - a replacement~~ of9 APB Opinion No. 20 and SFAS No. 3.” This statement provides guidance on the accounting for and reporting of accounting changes and error corrections. It requires, unless impracticable, retrospective application for reporting a change in accounting principle, unless the newly adopted accounting principle specifies otherwise, and reporting of a correction of an error. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of this statement is not expected to materially impact the Company’s consolidated financial statements.

2. VIEWPOINT ~~Unicast~~CORPORATION ~~Acquisition~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

On December 1, 2004, Viewpoint Corporation entered into an agreement to acquire all of the outstanding capital stock of Unicast Communications Corp. (“Unicast”). The transaction closed on January 3, 2005, and Viewpoint assumed ownership of Unicast as a wholly owned subsidiary at that date. The aggregate purchase price for the acquisition was $3.5 million.

	Subordinated Notes
	Subordinated Notes		Unicast Notes		Total

Book value of long-term debt	$	2,368	$	1,889	$	4,257
Discount on long-term debt		982		440		1,422
Face value of the long-term debt	$	3,350	$	2,329	$	5,679

~~Under~~ ~~the~~ The ~~terms~~maturity ofschedule for the ~~agreement,~~Company’s ~~Viewpoint~~debt ~~issued~~subsequent anto ~~aggregate~~March ~~of 1.1 million shares of Viewpoint common stock~~31, ~~with~~2007 ais ~~fair~~as ~~value~~follows of(amounts ~~$3.0 million to the selling stockholders of Unicast and paid $0.4 million~~ in ~~cash~~thousands): and acquisition costs of $0.1 million. Viewpoint also assumed negative networking capital from Unicast of $1.2 million. Based upon the working capital calculation during the period following the acquisition Viewpoint has no additional obligation to issue shares or pay cash to the seller.

Maturity

Nine months ending December 31, 2007	$	221
2008		350
2009		3,700
2010		350
2011		1,058
	$	5,679

11 4. Stock-based Compensation

~~amount outstanding under the promissory note. Viewpoint will become an additional obligor under the~~ ~~promissory~~ The ~~note~~assumptions ~~and~~used ~~Viewpoint’s assets will become additional collateral~~ to ~~secure~~value ~~the~~option ~~obligations if~~grants ~~certain~~for ~~contingencies occur, such as Viewpoint’s failure to operate~~ the ~~Unicast~~quarters ~~ad-serving business~~ended ~~through the Unicast subsidiary or the ad-serving business fails to achieve certain revenue targets. No payments under the secured promissory note are due until~~ March ~~2006.~~31, ~~All~~2007 ~~unpaid principal~~ and ~~interest is payable in 60 equal monthly installments from~~ March 31, 2006 ~~through~~are ~~March~~as ~~2011 amounting to $2.2 million~~ follows:

Viewpoint recorded all working capital assets and liabilities at their fair market value on the date of the acquisition. Liabilities assumed included an obligation to make certain payments on behalf of the selling stockholders in the maximum amount of $0.4 million, payable in equal bi-monthly installments over the one-year period following the closing.

	Three Months Ended March 31,
	2007		2006
Risk-free interest rate	4.58	%	4.72	%
Dividend yield	-		-
Volatility factor	1.39		1.35
Weighted average expected life in years	3.9		4.6

~~Viewpoint~~ As ~~assessed the values~~ of ~~assets~~March ~~other~~31, ~~than~~2007, ~~working~~there ~~capital assets purchased in the acquisition. Tangible equipment value~~ was ~~determined based on fair market value at the date of acquisition~~$3. ~~The remaining~~0 ~~useful~~million ~~life~~ of ~~this~~unrecognized ~~equipment~~compensation ~~was~~cost, ~~predominantly~~adjusted ~~determined~~for toestimated ~~be one year. Intangible values acquired included trademarks~~forfeitures, ~~acquired~~related ~~technology, website partner relationships and goodwill. Acquired technology was determined~~ to ~~have~~non-vested astock-based ~~life~~payments ofgranted ~~three years while the other intangible values were determined~~ to ~~have a life of 5-10 years~~Viewpoint employees. ~~Unicast had no in-process research and development.~~

~~Goodwill was determined based upon the residual value based upon fair value of the common stock issued,~~ the cash paid less the liabilities assumed less the identifiable asset values. Values assigned to goodwill and other acquired assets and liabilities are preliminary and are subject to adjustment based upon finalizing the fair values of acquired assets and liabilities. During the quarter ended June 30, 2005, the Company changed its initial estimate of the fair value of the acquired website relationships and certain liabilities the affect of which increased goodwill by less then $0.1 million from the amounts recorded at March 31, 2005. Consideration paid for the acquisition amounted to $3.5 ~~million, made up of cash consideration of $0~~.4 ~~million,~~Commitments ~~acquisition~~& ~~costs~~Contingencies of $0.1 million and the issuance of 1.1 million shares of common stock valued at $3.0 million. The following table which is based on preliminary estimates and subject to change, summarizes amounts recorded associated with the Unicast transaction, based upon the consideration paid.

	(in thousands)
Current assets	$	2,097
Property and equipment		128
Intangible assets		4,508
Goodwill		2,133
Total assets acquired		8,866
Less: liabilities assumed		(5,374	)
Total purchase price	$	3,492

Legal Proceedings

The ~~results~~Company ofis ~~operations~~engaged ofin ~~Unicast~~certain ~~are~~legal ~~included~~actions arising in the ordinary course of business. The Company’s ~~Consolidated~~believes ~~Statement~~it ofhas ~~Operations beginning~~adequate legal defenses in legal actions in which it is the ~~first~~defendant ~~quarter~~and believes that the ultimate outcome of ~~2005~~such actions will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

~~The~~ ~~following~~10 unaudited pro forma results of operations have been prepared assuming that the acquisition of Unicast occurred at the beginning of the respective period presented. Pro forma financial information for the three and six months ended June 30, 2005 has been intentionally omitted as the Company’s reported operating results for those periods include the operating results of Unicast for the beginning of the respective periods.

~~This pro forma financial information should not be considered indicative of the actual results that~~ ~~would~~VIEWPOINT ~~have~~CORPORATION ~~been achieved had the acquisition been completed on the date indicated and does not purport~~ toNOTES ~~indicate~~TO ~~results~~CONSOLIDATED ofFINANCIAL ~~operations as of any future date or any future period.~~STATEMENTS (Unaudited)

12 6. Segment Information and Enterprise-Wide Disclosures

	Three MonthsEnded June 30, 2004			Six MonthsEnded June 30,2004
Revenue	$	3,832		$	9,210
Net loss		(3	)		(9,108	)
Basic and diluted net loss per common share	$	(0.00	)	$	(0.18	)

The Company operates in three separate segments: technology, advertising systems and services. The following tables present selected operating results and asset financial information by segment,

3. Goodwill and Intangible Assets

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Revenues:
Advertising systems	$	1,110		$	1,595
Technology:
Licenses		6			46
Search		1,485			1,789
Total technology revenue:		1,491			1,835

Services		719			553

Total revenues		3,320			3,983
Cost of Revenues:
Advertising systems		452			1,040
Technology:
License		-			6
Search		43			36
Total technology cost of revenues		43			42
Services		481			663
Total cost of revenues		976			1,745
Gross profit	$	2,344		$	2,238

Advertising systems	$	658		$	555
Technology:
Licenses		6			40
Search		1,442			1,753
Total technology gross profit		1,448			1,793
Services		238			(110	)
Total gross profit	$	2,344		$	2,238

Gross profit margin
Advertising systems		59	%		35	%
Technology:
Licenses		100			87
Search		97			98
Total technology gross profit margin		97			98
Services		33			-20
Total gross profit		71	%		56	%


	March 31, 2007			December 31, 2006
	(In thousands)
Total assets:
Technology	$	11,776		$	12,512
Advertising Systems		7,110			3,925
Services		3,559			6,793
Corporate (*)		2,975			4,457
Total assets:	$	25,420		$	27,687

~~Goodwill~~ * isCorporate ~~subject~~assets toconsists ~~impairment~~solely ~~tests~~of ~~annually~~cash, atcash ~~January 1~~equivalents, ormarketable ~~earlier~~securities ifand ~~indicators~~restricted ofcash ~~potential impairment~~as ~~exist,~~the ~~using~~Company adoes ~~fair-value-based~~not ~~approach.~~allocate ~~All~~such ~~other~~amounts ~~intangible assets will continue~~ to be ~~amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, “Accounting for~~ the ~~Impairment~~individual orreporting ~~Disposal of Long-Lived Assets~~units.”

~~On January 3, 2005, Viewpoint entered into an agreement to acquire all of the outstanding capital stock~~ of11 ~~Unicast. See Note 2 for the determination method of the intangible assets.~~

~~The~~ VIEWPOINT ~~changes~~CORPORATION ~~in the carrying amounts of goodwill and intangible assets during the three and six months~~ ~~ended~~NOTES ~~June~~TO ~~30,~~CONSOLIDATED ~~2005,~~FINANCIAL ~~are as follows~~ STATEMENTS (~~in thousands~~Unaudited):

	Goodwill		Intangible Assets			Total
Balance as of December 31, 2004	$	31,276	$	230		$	31,506
Additions during period		—		9			9
Additions during period related to Unicast acquisition		2,101		5,170			7,271
Amortization		—		(1	)		(1	)
Amortization related to Unicast acquisition		—		(177	)		(177	)
Balance as of March 31, 2005	$	33,377	$	5,231		$	38,608
Additions during period		—		2			2
Fair value adjustments during the period related to Unicast acquisition		32		(662	)		(630	)
Amortization		—		(1	)		(1	)
Amortization related to Unicast acquisition		—		(177	)		(177	)
Balance as of June 30, 2005	$	33,409	$	4,393		$	37,802

8. Subsequent Events

~~The~~ Acquisition ~~changes in the carrying amounts~~ of ~~goodwill~~Makos ~~and intangible assets for the three and six months ended June 30~~Advertising, ~~2004,~~L.P. ~~are as follows (in thousands):~~

	Goodwill		Intangible Assets			Total
Balance as of December 31, 2003	$	31,276	$	186		$	31,462
Additions during period		—		38			38
Amortization		—		(3	)		(3	)
Balance as of March 31, 2004	$	31,276	$	221		$	31,497
Additions during period		—		—			—
Amortization		—		(1	)		(1	)
Balance as of June 30, 2004	$	31,276	$	220		$	31,496

On March 12, 2007, the Company entered into a Purchase Agreement to acquire all of the outstanding partnership interests of Makos Advertising, L.P. On April 30, 2007, the Company completed the Purchase Agreement. In exchange for the all of the outstanding partnership interests of Makos Advertising, L.P., the Company issued an aggregate of 0.7 million shares of Company common stock to the partners of Makos Advertising, L.P. and paid $0.6 million in cash.

As The number of ~~June~~shares issuable ~~30,~~and ~~2005~~the ~~and~~amount ~~December 31,~~of ~~2004,~~cash payable by the Company’s ~~intangible~~are ~~assets~~subject ~~and~~to ~~related~~adjustment based ~~accumulated~~on ~~amortization~~(i) ~~consisted~~the difference in the estimated net book value of Makos Advertising, L.P. based on the ~~following~~year-end ~~(in~~balance ~~thousands~~sheet as compared to the net book value as of the closing date of the transaction and (ii): subsequent receipt by the Company of accounts receivable outstanding on the closing date of the transaction.

13 The Company also paid off outstanding debt in the form of a line of credit owed by Makos Advertising, L.P. in the amount of approximately $0.1 million and also assumed outstanding debt relating to another line of credit in the amount of approximately $0.1 million.

	June 30, 2005										December 31, 2004
	Gross		Accumulated Amortization			Adjustment			Net		Gross		Accumulated Amortization			Net
Website Partner Relationships - Unicast	$	4,100	$	(205	)	$	(328	)	$	3,567	$	—	$	—		$	—
Acquired Technology - Unicast		630		(105	)		(220	)		305		—		—			—
Patents and Trademarks - Unicast		440		(44	)		(114	)		282		—		—			—
Patents and Trademarks		258		(19	)		—			239		247		(17	)	230
Total Intangible Assets	$	5,428	$	(373	)	$	(662	)	$	4,393	$	247	$	(17	)	$	230

Private Placement of Common Stock and Warrants

~~Amortization~~ The Company entered into a Securities Purchase Agreement with certain accredited investors, dated as of ~~intangible~~May ~~assets~~4, is2007, ~~estimated~~under which the Company issued 13.3 million shares of the Company common stock in a private placement to besuch accredited investors at a purchase price of $0.640 per share (resulting in aggregate gross proceeds of $5.3 million a). The ~~year~~investors ~~for~~in the ~~next~~transaction ~~five~~also received warrants to purchase an additional 3.3 million shares of common stock at an exercise price of $0.45 per share (subject to certain adjustments). Such warrants are not exercisable for six months following issuance and have an aggregate term of three and one-half years. On May 7, 2007 the Company announced the closing of the transaction and the receipt of $5.3 million.

4. In ~~Long~~connection ~~Term~~with ~~Debt~~the private placement, The Company entered into a Registration Rights Agreement with the investors pursuant to which The Company is required to file a registration statement with the SEC covering the shares within 45 days of the closing of the private placement.

~~Convertible~~ Strategic ~~Notes~~Partnership with DG FastChannel

On ~~December~~May 317, ~~2002~~2007, in connection with the ~~Company~~investment ~~completed~~by aDG ~~private~~FastChannel, ~~placement~~Inc. of ~~convertible~~$4.3 ~~notes~~million ~~and~~of ~~warrants~~the $5.3 million raised in the private placement ~~which~~referenced above, the Company announced that it ~~issued~~had toentered ~~three~~into ~~institutional~~a ~~investors~~strategic partnership with DG FastChannel, 4Inc.~~95%~~, ~~convertible~~the ~~notes~~leading ~~having~~provider anof ~~aggregate~~digital ~~principal amount~~media ofservices ~~$7.0~~to ~~million,~~the advertising and ~~warrants~~broadcast industries. toDG ~~purchase~~FastChannel ~~0.7~~will ~~million~~integrate ~~shares~~its ofmedia ~~Company~~services ~~common~~platform ~~stock.~~with ~~The warrants~~the ~~expire~~Company’s onUnicast ~~December~~advertising ~~31,~~solutions ~~2006,~~technology ~~and~~to ~~are~~launch ~~exercisable~~its atlatest aadvertising ~~price~~industry ofinnovation ~~$2.26~~by ~~per~~deploying ~~share.~~a Asnext-generation ofplatform ~~June 30,~~for ~~2005~~managing ~~0.7~~and delivering ~~million~~both ~~warrants~~traditional ~~were~~and ~~outstanding~~interactive advertising.

~~On March 25, 2003, the Company entered into Redemption, Amendment and Exchange Agreements with the~~ ~~three~~12 institutional investors with whom it had completed the private placement of convertible notes and warrants on December 31, 2002, extinguishing the original convertible notes. In conjunction with the extinguishment, the Company paid $3.3 million, issued new convertible notes in the principal amount of $2.7 million and issued $1.4 million shares of its common stock with a market value of $0.7 million.

~~Pursuant~~Item ~~to SFAS No~~2. ~~133,~~Management’s ~~the~~Discussion ~~Company~~and ~~bi-furcated~~Analysis ~~the fair value~~ of ~~the~~Financial ~~conversion~~Conditions ~~options from the new convertible notes since the conversion options were determined to not be clearly~~ and ~~closely related~~Results ~~to the debt host. In addition, since the effective registration~~ of the securities underlying the conversion options is an event outside of the control of the Company, pursuant to EITF Issue No. 00-19, the Company recorded the fair value of the conversion options as long-term liabilities, as it was assumed that the Company would be required to net-cash settle the underlying securities.Operations

The ~~Company~~following ~~recorded~~discussion ~~income~~should orbe ~~loss~~read ~~based on the decrease or increase, respectively,~~ in ~~the~~conjunction ~~fair~~with ~~values of~~ the ~~new~~consolidated ~~conversion~~financial ~~options~~statements and ~~original warrants in the Company’s consolidated statements of operations. The amortization of discount on the new convertible~~ notes ~~and debt issue costs were accounted for using the effective interest method~~thereto.

On In ~~March~~addition ~~17,~~to ~~2004~~historical information, ~~one~~this ofQuarterly ~~the~~Report ~~institutional~~on ~~investors~~Form ~~holding~~10-Q ~~the~~contains ~~convertible~~forward-looking ~~notes~~statements ~~converted~~that ~~$0.9 million~~involve ofrisks ~~outstanding~~and ~~notes~~uncertainties ~~for~~that ~~shares~~could ofcause actual results to differ materially from the ~~Company’s~~results ~~common~~implied ~~stock~~by the forward looking statements. InFactors ~~addition,~~that onmight ~~the~~cause ~~same day~~or ascontribute ~~the~~to ~~conversion~~such differences include, but are not limited to, those discussed in the ~~Company~~section ~~sold~~entitled ~~1.5~~“Factors ~~million~~That ~~shares~~May Affect Future Results of ~~common~~Operations.” ~~stock~~You should carefully review the risks described in aother ~~private~~documents ~~placement~~ we file from time to time with the ~~institutional~~Securities ~~investor~~and Exchange Commission, ~~for~~including ~~$3.7~~any ~~million~~future orreports ~~$2.45~~to ~~per~~be ~~share.~~filed ~~The~~in ~~Company~~2007 ~~recorded~~and aour ~~loss~~Annual Report on Form 10-K for ~~conversion~~2006. ofWhen ~~debt~~used in this report, the ~~amount~~words of“will,” ~~$0.6~~“expects,” ~~million~~“anticipates,” ~~which~~“intends,” ~~represented~~“plans,” ~~the~~“believes,” ~~write-off~~“seeks,” of“targets,” ~~unamortized~~“estimates,” and similar ~~loan~~expressions ~~discount~~are ~~and~~generally ~~debt~~intended ~~issuance~~to ~~costs~~identify offorward-looking $0statements.1 ~~million~~You ~~and~~should ~~the~~not ~~difference~~place ~~between~~undue ~~the~~reliance ~~proceeds~~on ~~received from~~these ~~the~~forward-looking ~~private~~statements, ~~placement~~which ~~and~~speak ~~the~~only ~~fair~~as ~~value~~ of the ~~common~~date ~~stock~~of ~~issued~~this ~~based~~Quarterly ~~upon~~Report ~~the~~on ~~closing~~Form ~~price~~10-Q. We undertake no obligation to ofpublicly ~~the~~release ~~Company’s~~any ~~stock~~revisions onto the ~~day~~forward oflooking statements or reflect events or circumstances after the ~~sale~~date of ~~$0.5~~this ~~million~~document.

~~On June 18, 2004, the Company completed the conversion of the remaining outstanding convertible notes~~ ofOverview ~~$1.8 million and the related outstanding interest into 1.7 million shares of Viewpoint common stock.~~

~~For~~ Overview. The accompanying consolidated financial statements of the ~~three~~Company ~~and~~have ~~six~~been ~~month~~prepared on ~~period~~a ~~ended~~going ~~June~~concern 30basis, ~~2005,~~which contemplates the ~~Company~~realization ~~recognized~~of aassets ~~gain~~and ~~from~~ the ~~change~~ satisfaction of liabilities in the ~~fair~~normal ~~value~~course of ~~the~~business. ~~outstanding~~The ~~warrants~~Company had ofcash, ~~$0.6~~cash ~~million~~equivalents and marketable securities of $02.8 million at March 31, ~~respectively~~2007. During the quarter ended March 31, ~~resulting from~~2007, anet ~~decrease~~cash used in ~~the~~operations ~~fair~~amounted ~~market~~to ~~value~~$1.2 million. As of March 31, 2007, the Company’s had ~~common~~an ~~stock~~accumulated deficit of $287.6 ~~For~~million. ~~the~~The ~~three~~Company has incurred negative cash flows and ~~six~~net losses since inception. Based on current operating ~~month~~ levels ~~period~~combined ~~ended~~with ~~June~~limited ~~30,~~capital ~~2004~~resources, financing operations during 2007 will require that the Company ~~recognized~~improve aoperating ~~gain~~results through cost cutting measures, increases in revenues or ~~loss~~both, ~~related~~and/or toraise sufficient additional equity or debt capital. If the ~~change~~Company’s inexpected revenue ~~valuation~~ targets ~~for~~are not achieved or the ~~converted~~Company ~~notes~~fails to raise sufficient equity or debt capital, management would implement cost reduction measures including work force reduction as well as reduction in overhead costs and ~~outstanding~~capital expenditures.

14 There can be no assurance that the Company will achieve or sustain positive cash flows from operations or profitability. Without improving operating results through increasing revenues, reducing expenses and/or raising additional capital, future operations will need to be discontinued. All these factors raise substantial doubt about the Company’s ability to continue as a going concern.

~~warrants~~ The Company entered into a Securities Purchase Agreement with certain accredited investors, including DG FastChannel, Inc., as to which the Company also entered into a strategic partnership (see note 8), dated as of $3May 4, 2007, under which Viewpoint issued 13.13 million ~~and~~shares of Viewpoint common stock in a private placement to such accredited investors at a purchase price of $0.40 per share (resulting in aggregate gross proceeds of $5.3 million).6 The investors in the transaction also received warrants to purchase an additional 3.3 million shares of common stock at an exercise price of $0.45 per share (subject to certain adjustments). Such warrants are not exercisable for six months following issuance and have an aggregate term of three and one-half years. As discussed in note 8, ~~respectively~~on May 7, ~~resulting~~2007 the Company announced the closing of the transaction and the receipt of $5.3 million. While the proceeds from the private placement provide additional liquidity the ~~charge~~Company instill believes that near term operating levels require that the ~~fair~~Company ~~market~~improve operating ~~value~~ results ofthrough cost cutting measures, increases in revenues or both in order to mitigate the substantial doubt as to the Company’s ~~common~~ability ~~stock~~to continue as a going concern.

~~Subordinated~~ Of ~~Notes~~the 13.3 million shares and 3.3 million warrants issued in the agreement, DG FastChannel, Inc. received 10.8 million shares and 2.7 million warrants in consideration for $4.3 million.

On In ~~March~~connection with ~~26,~~the ~~2003~~private placement, Viewpoint ~~Corporation~~ entered into a ~~Securities~~Registration ~~Purchase~~ Rights Agreement with ~~three~~the ~~accredited~~ investors, pursuant to which itViewpoint ~~received~~is ~~$3.5~~required ~~million~~to ~~in exchange for an aggregate of $3.5 million~~file ~~principal~~ a ~~amount~~registration ofstatement ~~4.95%~~with ~~subordinated~~the ~~notes~~SEC ~~and~~covering ~~3.6~~the ~~million~~ shares ofwithin ~~Viewpoint~~45 ~~common stock. The~~days ~~subordinated~~ of ~~notes are scheduled to mature on March 31, 2006. Interest on these notes is payable quarterly in arrears in cash. The Company has~~ the ~~right~~closing ~~at any time to redeem up to all~~ of the ~~outstanding notes~~private ~~at par plus accrued and unpaid interest~~placement.

~~The~~ Viewpoint ~~$3.5~~Corporation ~~million~~(“Viewpoint” ofor ~~proceeds~~the ~~was~~“Company”) ~~allocated~~is toan ~~subordinated~~internet ~~notes,~~marketing ~~common~~technology ~~stock,~~company ~~and~~that ~~additional~~focuses ~~paid in capital based~~ on ~~the~~using ~~market~~its ~~value~~technical ofcapabilities ~~the~~to ~~Company’s~~help ~~common stock on March 26, 2003. In accordance~~marketers ~~with~~effectively ~~the~~promote ~~provisions~~their ofproducts ~~APB Opinion No~~online. ~~21,~~Viewpoint ~~the~~provides ~~Company recorded~~ a ~~debt~~full ~~discount~~suite of ~~$2.0~~digital ~~million. Debt issuance costs~~products, ~~which~~services ~~amounted~~and toconsulting ~~$0.2~~for ~~million,~~internet ~~were recorded as other assets in the Company’s consolidated balance sheet~~marketers. ~~The~~Viewpoint ~~amortization~~employs ofits ~~the~~visualization ~~discount~~technology onto ~~the~~drive ~~subordinated~~powerful ~~notes~~customer-facing ~~and~~marketing ~~debt~~tools ~~issue~~that ~~costs~~enable ~~totaled~~marketers ~~$0.2~~to ~~million~~showcase ~~and~~complex ~~$0.1~~products ~~million~~in ~~for~~a ~~the~~simple ~~three month periods ended June 30~~way, ~~2005~~ and ~~2004, respectively,~~allows ~~and~~for ~~$0.4~~user ~~million and $0~~interaction.3 ~~million~~Since ~~for~~2003 ~~the~~we ~~six~~have ~~month~~extended ~~periods ended June 30, 2005 and 2004, respectively, were accounted for using~~ the ~~effective~~historical ~~interest method.~~

~~Amended~~ 13 ~~and Restated Notes~~

~~On July 27, 2005, the Company and a holder of the subordinated debt amended the 4.95% subordinated~~ ~~note~~imaging incapabilities ~~the principal amount~~ of ~~$3.1~~our ~~million~~proprietary tographics ~~extend~~technology ~~the maturity date from March 31, 2006~~ to ~~March 31,~~ ~~2008~~develop ina ~~exchange~~search ~~for~~business ~~the~~that ~~payment~~provides byinternet ~~Viewpoint~~consumers ofa ~~$0.1~~flexible ~~million~~graphical tosearching ~~the~~experience ~~holder of the subordinated note. In addition, the Company~~ and ~~the~~an ~~holder~~advertising ~~entered~~delivery ~~into~~system athat ~~Stock~~specializes ~~Purchase Agreement, dated as~~in ~~of July~~deploying ~~27,~~video ~~2005,~~and ~~under~~rich ~~which~~media ~~the Company issued 1~~advertising.3 ~~million~~The ~~shares~~company ofsupplements ~~Company~~its ~~common~~revenues ~~stock~~ in a ~~private placement~~these toproduct ~~the~~segments ~~holder~~by atusing aits ~~purchase~~in-house ~~price~~services ofteam ~~$1.55~~to ~~per~~build ~~share~~sophisticated ~~(resulting~~content inthat ~~aggregate gross~~is ~~proceeds of~~used ~~$2.0~~by ~~million).~~customers ~~The securities offered and sold~~ in ~~the~~each ~~private~~product ~~placement~~segment. ~~have not been registered under the Securities Act of 1933~~Finally, ~~as amended and were sold in reliance upon~~ the ~~exemption from securities~~Company ~~registration~~previously ~~afforded~~licensed byits ~~Regulation~~platform D.to Ininternet ~~connection~~publishers ~~with~~enabling ~~the~~them ~~private placement,~~to ~~the~~deploy ~~Company~~graphical ~~entered into~~sophisticated acontent ~~Registration~~at ~~Rights~~their ~~Agreement~~websites, ~~with~~however ~~the~~in ~~holder~~June ~~pursuant~~2005, ~~to which~~ the Company isbegan ~~required~~ to ~~file~~ aenable ~~registration~~free ~~statement~~use ~~with~~of ~~the~~its ~~SEC~~platform ~~covering~~to ~~the~~facilitate ~~shares within~~growth 45in ~~days~~its ofsearch ~~the closing of the~~and ~~private~~advertising ~~placement~~systems segments.

At ~~June~~ Viewpoint ~~30,~~offers ~~2005~~an ~~the~~online ~~Company~~advertising ~~classified~~campaign ~~$2.4~~management ~~million~~and ofdeployment ~~short-term~~product ~~debt~~known as ~~long-term~~the Unicast Advertising Platform or “UAP”. UAP permits publishers, advertisers, and their ~~This~~agencies ~~amount~~to ~~represented~~manage the ~~carrying~~process ~~value~~ of ~~the~~deploying ~~amended~~online ~~note~~advertising campaigns. ~~Settlement~~This ~~of this~~process ~~note~~includes iscreating ~~not~~the ~~expected~~advertising toassets, ~~require~~selecting the ~~use~~sites ofon ~~working~~which ~~capital~~the inadvertisements ~~the~~will ~~next twelve~~be ~~months~~deployed, assetting the ~~Company~~metrics ~~has~~(ad ~~both~~rotation, the ~~intent~~frequency with which an ad may be deployed, and others) associated with the ~~ability~~campaign, ad deployment, and tracking of campaign results. UAP enables users to ~~refinance this~~manage ~~debt~~advertising oncampaigns aacross ~~long-term~~many ~~basis~~sites.

~~Unicast~~ In ~~Notes~~March 2004, Viewpoint entered the internet search business by launching a toolbar search product which the Company calls the “Viewpoint Toolbar”. The Viewpoint Toolbar attaches to the Internet Explorer browser, enabling web surfers to conduct internet searches without leaving the web page they are viewing. When a user enters a term or phrase in the search field of the Viewpoint Toolbar, search results appear not only as text links listed on a search results page but also as thumbnail icons of the web pages themselves in a “tray” that descends from the Viewpoint Toolbar. Additionally, if a user visits certain internet search engine sites the Viewpoint Toolbar will simultaneously receive a user’s search request and provide the user comparative thumbnail search results in the Viewpoint Toolbar search results tray.

On ~~January~~ The 3,Company ~~2005~~executed a search advertising agreement with Yahoo! in 2004, aswhich ~~disclosed~~was amended in ~~Note~~2006. The 2,agreement ~~Viewpoint~~provides ~~purchased~~that ~~Unicast~~Yahoo! ~~and,~~is asthe exclusive provider of search results for the Viewpoint Toolbar through March 2008. Yahoo! pays a ~~result,~~variable ~~assumed~~fee ~~debt~~per month ~~which~~for ~~included~~access anto ~~unsecured~~the ~~note~~Company’s ~~with~~distribution aand ~~principal~~exclusive ~~amount~~rights to display ofsearch ~~$1.0~~results ~~million~~through ~~due~~the inViewpoint ~~December~~Toolbar. ~~2011~~Revenue ~~and~~generated is a ~~secured~~function of ~~note~~the ~~with~~number aof ~~principal~~Viewpoint ~~balance~~ Toolbars performing searches, the number of ~~$1.8~~searches that ~~million~~are ~~which~~sponsored ~~matures~~by inadvertisers, ~~March~~the ~~2011.~~number ~~This~~of ~~note~~advertisements isthat ~~collateralized~~are clicked on by Viewpoint Toolbar searchers, the rate advertisers pay for those advertisements, and the percentage retained by Yahoo! for providing the ~~assets~~results. ofIn ~~Unicast~~October 2005, we launched version 3.5 ~~The~~of ~~debt~~the ~~was~~Viewpoint ~~discounted~~Toolbar which includes the capability to ~~its~~manage ~~fair~~digital ~~value~~photograph ~~based~~files ~~upon~~on the user’s computer and provides the ~~prevailing~~ability ~~interest~~to ~~rates~~share the photographs at ~~the~~a ~~date~~website or purchase printed copies of the ~~acquisition,~~photographs. ~~the~~We ~~term~~had oflicensed the trademark and ~~debt,~~internet ~~the~~url ~~interest~~Fotomat.com ~~provisions~~for ofour exclusive use in connection with the ~~debt~~internet website for photograph and printing services and computer software for organization, editing, managing, sharing, and processing images and related data through the end ~~credit~~of ~~risk~~December ~~associated~~2006, with ~~repayment~~ the ability to renew such license. ~~Viewpoint~~In ~~will~~November ~~accrete~~2006, Viewpoint purchased the ~~notes~~trademark ~~based~~and ~~upon~~URL ~~the~~to ~~interest-~~Fotomat outright. The Fotomat Toolbar provides enhanced photograph editing capabilities and an efficient method of creating albums of photographs, which we believe will enhance the utility of ~~including~~the ~~interest~~toolbars ~~payment~~for ~~requirements~~users, ~~through~~while ~~maturity~~simultaneously allowing users to use the Toolbar to search the internet.

As Prior to launching our Search product we principally leveraged our distributed base of ~~January~~Viewpoint 3,Media ~~2005,~~Players (VMP) by licensing access to use the ~~date~~Viewpoint Platform for display of ~~acquisition,~~content on a website. Viewpoint initiated internet activities with the ~~fair~~release ~~value~~of a beta version of the ~~secured~~VMP ~~and unsecured~~in ~~notes~~1999. ~~amounted~~Simultaneously, Viewpoint released a suite of free content authoring tools specifically designed to $1enable customers who published digital content on their websites to create material that can be “read” or “played back” by the VMP.4 ~~million~~With the VMP residing on the web consumer’s computer and ~~$0.3~~interpreting ~~million~~instructions delivered by our customers’ web sites, ~~respectively.~~web ~~The~~sites can transmit ~~Company~~relatively ~~recorded~~small ~~interest~~files ~~expense~~that can yield “rich” media on ~~these~~the ~~notes~~end ofuser’s $0computer.1 ~~million~~In this way, ~~and~~website ~~$0.2~~owners ~~million during~~can ~~the~~deploy digital content representing three-dimensional views of their products, include pre-set animations, and ~~six~~provide high-resolution ~~months~~two-dimensional ~~ended~~views, ~~June~~video, 30audio, ~~2005~~text, and other media types. For example, we have licensing customers who are auto manufacturers that deploy from their websites 3D representations of their vehicles which ~~increased~~viewers ~~the~~can ~~aggregate~~interact ~~carrying~~with ~~value~~by of“opening” ~~these~~doors, ~~notes~~zooming toin $1on features, configuring accessories, or swapping colors.8 ~~million~~Our aslicensees helped facilitate the growth of ~~June~~our ~~30,~~distributed ~~2005~~base of VMP’s that we used to launch our Search Toolbar business.

5 We provide fee-based professional services for creating content and implementing visualization systems. ~~Related~~Clients ~~Party~~include ~~Transactions~~both content-related licensees and advertisers who use UAP as well as internal services provided to

~~During the three and six month periods ended June 30, 2005, the Company recorded revenues totaling~~ ~~$1.2~~14 million and $2.5 million respectively, primarily related to agreements with AOL that were entered into prior to December 31, 2003. Comparative revenues of $1.6 million and $3.4 million were recorded for the three and six month periods ended June 30, 2004 respectively. AOL had a representative on the Company’s Board of Directors

15 our marketing team. Our professional services group uses the Viewpoint platform, as well as a spectrum of tools and other technologies to create enhanced rich media solutions for a client’s particular purpose, whether over the web, intranet systems or offline media and applications. We provide the support our clients need to implement the rich media content, to fully utilize the enhanced software, or to maximize the branding potential of the advertising opportunity. Clients supported during 2007 include America Online, Toyota Motor Services, General Electric and Honda.

~~until~~ Viewpoint ~~December~~has ~~2003.~~a Aslimited ofoperating ~~June~~history ~~30,~~upon ~~2005,~~which ~~the~~an ~~Company~~evaluation ~~has~~of ~~less~~the ~~then~~Company ~~$0.1~~and ~~million~~its inprospects ~~related~~can ~~party~~be ~~accounts receivable,~~based. ~~and~~Viewpoint has ~~$2.1~~had ~~million~~significant inquarterly ~~deferred~~and ~~revenues~~annual ~~relating~~operating tolosses ~~transactions~~since ~~with~~its ~~AOL.~~inception, Atand, ~~June~~as of March 3031, ~~2004~~2007, ~~the~~had ~~Company~~an ~~had~~accumulated deficit of $0287.16 million. inViewpoint’s ~~accounts~~prospects ~~receivable~~must ~~and~~be ~~$7.2~~considered ~~million~~ in ~~deferred~~light ~~revenue relating~~of tothe ~~transactions~~risks ~~with~~and ~~both~~difficulties ~~AOL~~frequently ~~and~~encountered ~~Computer~~by ~~Associates,~~early ~~Inc.~~stage ~~(“CA”),~~technology ~~who~~companies. ~~had~~There ~~a representative~~can onbe ~~the~~no ~~Company’s~~assurance ~~Board~~that ofViewpoint will ~~Directors~~achieve ~~until~~or ~~September~~sustain ~~2004~~profitability.

~~In 2003, the Company entered into an amended license agreement with AOL which provides for payments~~ by15 AOL of $10.0 million which were all received during the fourth quarter of 2003. The agreement contains multiple elements consisting of a perpetual broadcast license, a perpetual source code license, quarterly updates to the source code through December 2005, and maintenance and consulting services. The Company will recognize $9.0 million of revenue from this agreement ratably as license and services revenue, through December 31, 2005, which represents the duration of the Company’s obligation for post-contract customer support of the source code element including quarterly upgrades and maintenance requirements. License revenues will represent 85% of this $9.0 million portion of the revenue arrangement. The Company recognized $0.9 million and $1.7 million in related party license revenue for the three and six months ended June 30, 2005, respectively, and $0.4 million and $0.7 million in related party service revenue for the three and six months ended June 30, 2005, respectively, relating to this agreement. The Company recognized $0.9 million and $1.8 million in related party license revenue for the three and six months ended June 30, 2004, respectively, and $0.2 million and $0.4 million in related party service revenue for the three and six months ended June 30, 2004, respectively, relating to this agreement.

6. RESULTS ~~Comprehensive~~OF ~~Income~~OPERATIONS ~~(Loss)~~

~~Total~~ The ~~comprehensive~~following ~~income~~table ~~(loss)~~sets forth for the three ~~and six~~ months ended ~~June~~March 3031, ~~2005~~2007 and ~~2004~~2006, ~~consisted~~ the Company’s consolidated statements of ~~the~~operations ~~following~~expressed ~~(in~~as ~~thousands)~~a percentage of total revenues for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended March 31,
	2005			2004			2005			2004
	2007					2006
Net income (loss)	$	(446	)	$	772		$	(1,191	)	$	(7,862	)
Statements of Operations Data
Foreign currency translation adjustment		3			—			3			(3	)
Revenues:
Unrealized loss on marketable securities		(1	)		(2	)		(9	)		(9	)
Advertising systems	33	%				40	%
Comprehensive net income (loss)	$	(444	)	$	770		$	(1,197	)	$	(7,874	)
Search	45					45
Services	22					14
Licenses	-					1
Total revenues	100					100
Cost of revenues:
Advertising systems	14					26
Search	1					1
Services	14					17
Licenses	-					-
Total cost of revenues	29					44
Gross profit	71					56
Operating expenses:
Sales and marketing	36					40
Research and development	24					27
General and administrative	63					59
Depreciation	4					3
Amortization of intangible assets	4					3
Restructuring charges	-					2
Total operating expenses	131					134
Loss from operations	(60	)				(78	)
Other income (expense):
Interest and other income, net	2					2
Interest expense	(6	)				(7	)
Change in fair value of warrants to purchase common stock	5					(16	)
Other income (expense)	1					(21	)
Loss before provision for income taxes	(59	)				(99	)
Provision for income taxes	-					-
Net loss	(59	)%				(99	)%

7. 16 ~~Segment Reporting~~

~~In 2003, sales and production employees became dedicated to its License or Service business and each~~ ~~business~~Critical ~~was~~Accounting ~~managed~~Policies ~~separately. In 2004, the Company added Search~~ and ~~Advertising~~Estimates systems as businesses that it managed separately. The Company manages and analyzes the business in four reportable segments, and discloses these segments in accordance with SFAS 131. Search revenue is generated when a customer uses the Viewpoint Toolbar to search the internet, and clicks on a sponsored advertisement included in the search results. The Viewpoint Toolbar’s search results are provided by Yahoo! who collects a fee from the advertiser and remits a percentage of the fee to Viewpoint. Advertising systems revenue, including Unicast, is generated by charging customers to host advertising campaigns based on a cost per thousand (“CPM”) impressions. The Service segment provides creative and support services to customers who generally have purchased or received licenses to use the Viewpoint software platform. Services are sold directly by the Company’s sales team. Services revenues are earned by the delivery of product created or provided by Company employees or third parties that the Company has contracted to perform services under the guidance of the Company. The License segment sells software licenses to use the Viewpoint software platform. Licenses are sold directly by the Company’s sales employees and indirectly through VARs, for which the Company pays a commission.

~~The~~ Viewpoint’s ~~accounting~~discussion ~~policies~~and analysis of ~~the~~its ~~segments~~financial condition and results of operations are ~~the~~based ~~same~~upon asits ~~those~~consolidated ~~described~~financial statements, which have been prepared in ~~the~~accordance ~~summary~~with ofaccounting ~~significant~~principles ~~accounting~~generally ~~policies~~accepted in the United States of America. The preparation of these financial statements requires the Company ~~does~~to ~~not~~make ~~currently~~estimates ~~evaluate~~and judgments that affect the ~~performance~~reported amounts of ~~its~~assets, ~~segments~~liabilities, ~~beyond~~revenues and expenses, and related ~~gross~~disclosure ~~profit~~of contingent assets and liabilities. The Company ~~does~~bases ~~not~~its ~~allocate~~estimates ~~research~~on ~~and~~historical ~~development,~~experience ~~sales~~ and ~~marketing~~on orvarious ~~general and~~other ~~administrative~~assumptions ~~costs,~~that ~~specifically,~~the Company believes to ~~any~~be ~~segment~~reasonable asunder itthe ~~does~~circumstances ~~not~~though ~~use~~actual ~~that~~results ~~information~~may todiffer ~~make~~from these ~~key~~estimates ~~operating~~under ~~decisions~~different ~~and~~assumptions ~~does~~or ~~not~~conditions. ~~believe~~For ~~that~~a ~~allocating~~complete ~~these~~description ~~expenses~~of isthe ~~necessary~~Company’s incritical ~~evaluating performance~~accounting policies and estimates refer to the Company’s 2006 Form 10-K and amendments.

16 Financial Performance Summary

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenues:
Search	$	2,393		$	—		$	4,573		$	8
Advertising systems		1,163			37			1,895			37
Services		1,564			1,066			2,807			2,589
Related party services		354			686			749			1,600
Licenses		227			144			382			384
Related party licenses		872			872			1,745			1,779
Total revenues		6,573			2,805			12,151			6,397
Cost of Revenues:
Search		49			—			95			—
Advertising systems		847			6			1,365			6
Services		1,026			792			1,836			1,543
Licenses		1			3			3			4
Total cost of revenues		1,923			801			3,299			1,553
Gross profit		4,650			2,004			8,852			4,844
Search advertising		2,344			—			4,478			8
Advertising systems		316			31			530			31
Services		892			960			1,720			2,646
Licenses		1,098			1,013			2,124			2,159
Total gross profit	$	4,650		$	2,004		$	8,852		$	4,844
Gross profit margin
Search advertising		98	%		—	%		98	%		100
Advertising systems		27			84			28			84
Services		47			55			48			63
Licenses		100			100			100			100
Total gross profit		71	%		71	%		73	%		76

Viewpoint reported total revenue of $3.3 million for the first quarter 2007 compared to $4.0 million for the first quarter 2006. The lower revenues were attributable to a decline in Ad Serving revenues of $0.5 million and a decline in Search revenues of $0.3 million offset by Services revenue increasing by $0.2 million. Gross profit increased $0.1 million despite the decline in revenue since cost of revenues decreased by $0.8 million compared to the first quarter of 2006 due to a decrease in media management revenue, which typically has lower margins. Operating loss for the first quarter of 2007 was $2.0 million compared to $3.1 million in the first quarter of 2006 due to overall lower operating expenses. Net loss for the first quarter 2007 was $2.0 million, or a loss of $0.03 per share, compared to a net loss of $3.9 million, or a loss of $0.06 per share, in the first quarter of 2006.

~~The~~ Viewpoint’s ~~Company~~cash, ~~analyzes~~cash ~~adjustments~~equivalents, toand ~~net~~marketable ~~loss~~securities onas ~~its~~of ~~discontinued~~March ~~operations~~31, ~~business~~2007 bywere ~~using~~$2.8 ~~the~~million. ~~statement of~~This ~~operations.~~can Inbe ~~March~~compared ~~2005~~to cash, acash ~~lawsuit~~equivalents, ~~was~~and ~~settled~~marketable securities of $4.3 million at December 31, 2006. The decrease in ~~the~~cash, ~~Company’s~~cash ~~favor~~equivalents, and ~~resulted~~marketable in securities can be principally attributed to the ~~Company~~loss ~~being~~from ~~paid~~operations ~~$0.1~~during ~~million~~the quarter.

8. Revenues ~~Subsequent Event~~

On July 27, 2005, the Company and a holder of the subordinated debt amended the 4.95% subordinated note in the principal amount of $3.1 million to extend the maturity date from March 31, 2006 to March 31, 2008 in exchange for the payment by Viewpoint of $0.1 million to the holder of the subordinated note. In addition, the Company and the holder entered into a Stock Purchase Agreement, dated as of July 27, 2005, under which the Company issued 1.3 million shares of Company common stock in a private placement to the holder at a purchase price of $1.55 per share (resulting in aggregate gross proceeds of $2.0 million). The securities offered and sold in the private placement have not been registered under the Securities Act of 1933, as amended and were sold in reliance upon the exemption from securities registration afforded by Regulation D. In connection with the private placement, the Company entered into a Registration Rights Agreement with the holder pursuant to which the Company is required to file a registration statement with the SEC covering the shares within 45 days of the closing of the private placement (see Note 1).

	Three Months Ended March 31,
	Three Months Ended March 31,
	2007		2006		% Change
Advertising systems	$	1,110	$	1,595	(30	)%
Search		1,485		1,789	(17	)%
Services		719		553	30	%
Licenses		6		46	(87	)%
Total revenues	$	3,320	$	3,983	(17	)%

17 Viewpoint offers an online advertising campaign management and deployment product. In July 2005, the Company deployed a new product, incorporating the Viewpoint Creative Innovator product and Unicast’s UCP ad delivery system into one system. This system, known as the “Unicast Ad Platform” (“UAP”), permits publishers, advertisers, and their agencies to manage the process of deploying online advertising campaigns. The Company charges customers on a cost per thousand (“CPM”) impression basis, and recognizes revenue when the impressions are served, so long as all other revenue recognition criteria are satisfied. The Company also provides another advertising services product whereby the Company purchases media space from web-site publishers and resells that space to advertisers. The Company acts as a principal party in the transaction, assumes the title to the media space purchased, and assumes the risks of collection and therefore recognizes the entire amount billed to the customer as revenue and the cost of the media space as cost of sales.

~~Item~~ Additionally 2in March 2004 Viewpoint entered the internet search business by launching the Viewpoint Toolbar on a test basis. ~~Management~~In April 2004, the Company ended the test phase and began delivering the Viewpoint Toolbar Version 1.0. Search revenue is generated when a customer uses the Viewpoint Toolbar to search the internet and clicks on a sponsored advertisement included in the search results. The Viewpoint Toolbar’s ~~Discussion~~search results are provided by Yahoo!, which collects a fee from the advertiser and ~~Analysis~~remits a percentage of ~~Financial~~the ~~Condition~~fee ~~and~~to ~~Results~~Viewpoint. Revenue generated is a function of ~~Operations~~the number of Viewpoint Toolbars performing searches, the number of searches

~~The following discussion should be read in conjunction with the consolidated financial statements and~~ ~~notes~~17 ~~thereto.~~

~~In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking~~ ~~statements~~ that ~~involve~~are ~~risks~~sponsored ~~and uncertainties that could cause actual results to differ materially from the results implied~~ by ~~the forward looking statements. Factors that might cause or contribute to such differences include~~advertisers, ~~but are not limited to, those discussed in~~ the ~~section~~number ~~entitled “Factors That May Affect Future Results~~ of ~~Operations.”~~advertisements ~~You~~that ~~should~~are ~~carefully~~clicked ~~review the risks described in other documents we file from time to time with the Securities and Exchange Commission, including any future reports to be filed in 2005 and our Annual Report~~ on ~~Form~~by ~~10-K~~Viewpoint ~~for~~Toolbar ~~2004. When used in this report~~searchers, the ~~words~~rate ~~“will”,~~advertisers ~~“expects,”~~pay ~~“anticipates,”~~for ~~“intends,” “plans,”~~those ~~“believes~~advertisements,” ~~“seeks,” “targets,” “estimates,”~~ and ~~similar~~the ~~expressions~~percentage ~~are~~retained ~~generally~~by ~~intended~~Yahoo! tofor ~~identify~~providing ~~forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of~~ the ~~date of~~ ~~this Quarterly Report on Form 10-Q~~results. ~~We undertake no obligation to publicly release any revisions to the forward–looking statements or reflect events or circumstances after the date of this document.~~

~~Overview~~ Viewpoint has a creative services group that builds content in the Viewpoint format for customers. Viewpoint charges customers fees for these services based on the estimated time and materials to complete a creative project including an acceptable profit margin. Revenue is recognized on a proportional performance basis if all other revenue recognition criteria are satisfied. During 2006 and 2007, the Company continued its strategy of concentrating on executing larger creative projects.

~~Viewpoint~~ The Company also generated revenues ~~Corporation~~ by ~~(“Viewpoint”~~selling orlicenses to the ~~“Company”)~~Viewpoint isgraphical aplatform ~~leading~~principally to internet ~~interactive~~ content ~~media~~publishers. ~~Company~~In ~~that~~June ~~focuses~~2005, onViewpoint ~~using~~announced ~~its~~that ~~graphical~~for ~~platform’s~~all non-special-purpose-licenses, ~~capabilities~~ it towas ~~provide~~discontinuing ~~consumers,~~the ~~advertisers,~~practice ~~and~~of ~~website~~charging ~~publishers~~customers ana ~~enhanced~~license fee for ~~internet~~ the ~~experience.~~use ~~Since~~of ~~2003~~the weViewpoint ~~have~~Media ~~extended~~Player ~~the~~and ~~historical~~related ~~imaging~~technologies. ~~capabilities~~The Viewpoint of Media ~~our~~Player ~~proprietary~~will ~~graphics~~no ~~technology~~longer torequire ~~develop~~ a ~~search~~broadcast ~~business~~key ~~that~~to ~~provides~~display content, thereby ~~internet~~ giving ~~consumers~~all developers a ~~flexible~~free ~~graphical~~license ~~searching~~to ~~experience~~the ~~and~~Viewpoint anDistribution ~~advertising~~Network. ~~delivery~~ However, ~~system~~Viewpoint ~~that~~will ~~specializes~~still incharge ~~deploying~~for ~~video~~certain ~~and~~licenses ~~rich~~requiring ~~media advertising~~customization. ~~The~~ By ~~Company~~providing ~~supplements~~the ~~its~~standard ~~revenues~~license infor ~~these~~free, ~~product~~the ~~segments~~Company byplans ~~using~~to ~~its~~extend the ~~in-house~~ Viewpoint ~~services~~Media ~~team~~Player’s toreach ~~build~~into ~~sophisticated~~new ~~content~~channels ~~that~~of isdistribution ~~used~~beyond bythe ~~customers in~~estimated ~~each~~120 ~~product~~million ~~segment~~computers it currently resides within. ~~Finally,~~Viewpoint ~~the~~believes ~~Company~~that ~~licenses~~this ~~its~~strategy ~~platform~~supports tothe ~~internet~~advertising business—by potentially making the ~~publishers~~player ~~enabling~~more ~~them~~pervasive—as towell ~~deploy~~as ~~graphical~~providing ~~sophisticated~~stronger ~~content~~distribution atfor ~~their websites~~the search business.

~~On March 17, 2004, Viewpoint entered the internet search business by launching a toolbar search product~~ ~~which~~ The ~~the~~ Company ~~calls~~recognized ~~the “Viewpoint Toolbar~~$1.”1 ~~The~~million ~~Viewpoint~~in ~~Toolbar~~advertising ~~attaches~~systems torevenue ~~the Internet~~during ~~Explorer browser, enabling web surfers to conduct internet searches without leaving~~ the ~~web~~ ~~page~~three ~~they~~months ~~are~~ended ~~viewing.~~March ~~When a user enters a term or phrase in the search field of the Viewpoint Toolbar~~31, ~~search~~2007 ~~results~~compared ~~appear~~to ~~not~~$1.6 ~~only~~million asfor ~~text links listed on a search results page but also as thumbnail icons of~~ the ~~web~~same ~~pages~~period ~~themselves~~ in ~~a “tray” that descends from the Viewpoint Toolbar~~2006. ~~Additionally,~~This ifrevenue ~~a user visits certain internet search engine sites the Viewpoint Toolbar~~was ~~will~~generated ~~simultaneously~~by ~~receive~~delivering aadvertising ~~user’s~~impressions ~~search~~to ~~request~~websites ~~and provide the user comparative thumbnail search results~~ in ~~the~~several ~~Viewpoint~~different ~~Toolbar~~formats ~~search~~including ~~results tray~~video. ~~Search~~The ~~results~~revenue ~~delivered~~is toprimarily ~~users~~driven ~~of the Viewpoint Toolbar are supplied~~ by ~~Yahoo!~~a ~~Inc.~~reduction ~~and~~in ~~its~~pricing ~~wholly-owned~~for ~~subsidiary,~~a ~~Overture~~key ~~Services~~customer, ~~Inc.~~ ~~(“Yahoo!”).~~as ~~Under~~well ~~its~~as ~~Agreement with Yahoo!, Viewpoint receives~~ a ~~share~~reduction ~~of the fees advertisers pay to Yahoo! to be listed~~ in the ~~search~~amount ~~results~~of asmedia amanagement ~~“sponsored~~for ~~link”~~the quarter.

On Search ~~June~~revenues ~~29,~~were ~~2005~~$1.5 million for the three months ended March 31, ~~Viewpoint~~2007 ~~delivered~~compared ~~Version~~to 3$1.08 million ofin the ~~Viewpoint~~three ~~Toolbar~~months toended ~~the~~March ~~market~~31, 2006. ~~Version~~Search ~~3.0~~revenues are generated ~~includes~~when ausers ~~digital~~of ~~photo~~the ~~management~~Viewpoint ~~application~~Toolbar ~~built~~are ~~into~~provided ~~the~~search ~~Toolbar’s~~results ~~features.~~from ~~Capabilities~~advertisers ofthat ~~the~~they ~~application~~click ~~include~~on to see. These advertisers then pay a ~~system~~fee to ~~manage~~Yahoo!, ~~folders~~which remits a percentage of ~~photographs,~~the ~~edit~~fee ~~photographs,~~to ~~send~~Viewpoint. ~~photographs~~The Company had installed 8.7 million ~~via~~Viewpoint ~~email~~Toolbars orthrough ~~store~~December ~~them~~31, ~~online~~2004, 12.4 ~~Additionally~~million through March 2005, 21.4 ~~users~~million ~~may~~through ~~order~~December ~~prints~~31, or2005 ~~other~~,26.6 ~~related~~million ~~merchandise~~through December 31, 2006 and ~~goods~~28.2 million through anMarch ~~online~~31, ~~service provider~~2007. ~~Viewpoint~~Internet ~~manages~~users ~~the~~can ~~prices~~uninstall ~~charged~~the ~~for photographic~~Viewpoint ~~orders~~Toolbar, and ~~the~~through ~~online~~December ~~service~~31, ~~provider~~2004, ~~remits~~3.3 tomillion ~~Viewpoint~~users ~~net~~who ~~proceeds~~had ~~charged~~accepted ~~for~~the installation of the ~~products after~~Toolbar ~~deducting~~had ~~for~~later ~~their~~uninstalled ~~standard~~it ~~costs~~during ~~for~~2004. ~~the~~The ~~products~~total asof uninstalled ~~provided~~toolbars had increased to ~~Viewpoint~~9.9 Wemillion ~~will~~by ~~begin~~December 31, 2005, 13.5 ~~recognizing~~million ~~revenues~~by ~~for~~December ~~such~~31, ~~orders~~2006, inand ~~the~~14.1 ~~third~~million ~~quarter~~by ofMarch ~~2005~~31, 2007.

~~Beginning~~ Service inrevenues ~~2004~~were ~~Viewpoint~~$0.7 ~~began~~million ~~offering~~for anthe ~~online~~three ~~advertising~~months ~~campaign~~ended ~~management~~March ~~and deployment product known as “Creative Innovator.” Creative Innovator permits publishers~~31, ~~advertisers, and~~2007 ~~their~~compared ~~agencies~~ to ~~manage the process of deploying online advertising campaigns~~$0.6 ~~This~~million ~~process includes~~for ~~creating~~ the ~~advertising~~same ~~assets,~~period ~~selecting~~in ~~the~~2006. ~~sites~~The onCompany ~~which~~believes ~~the~~that ~~advertisements~~it will be ~~deployed,~~ ~~setting~~able ~~the~~to ~~metrics (ad rotation, the frequency with which an ad may be deployed, and others)~~increase ~~associated~~revenues ~~with~~in ~~the~~this ~~campaign,~~segment adif ~~deployment,~~licensees ~~and~~continue ~~tracking of campaign results. Creative Innovator enables users~~ to ~~manage~~ask ~~advertising~~the ~~campaigns~~Company ~~across~~for ~~many~~assistance ~~sites.~~in Inbuilding ~~March~~more ~~2004,~~content ~~Viewpoint~~using ~~announced~~ the ~~availability~~Viewpoint ofPlatform ~~“AirTime,” an extension of Creative Innovator that permits users~~ to ~~manage~~ ~~and~~be ~~deploy~~used ~~online~~at ~~video~~their ~~advertising campaigns~~websites.

On The ~~January~~Company 3,essentially ~~2005,~~eliminated ~~Viewpoint~~the ~~purchased~~sale of all ~~the~~but ~~outstanding~~special-purposes ~~stock~~licenses ofin ~~Unicast~~June ~~Corporation~~2005 ~~(“Unicast”), a~~and ~~leader~~believes inthat ~~the~~revenues ~~delivery~~in ofthis ~~interstitial~~segment ~~and~~will ~~superstitial~~be ~~video~~insignificant ~~internet~~in ~~advertisements~~2007. ~~Unicast delivered video~~

~~advertisements for its customers using a format that complements Viewpoint’s in-page and in-stream~~ ~~video~~Cost ~~advertising~~of ~~provided by AirTime. Additionally, Unicast generated monthly~~ revenues from dozens of advertisers who purchased advertising on some of the internet’s most active websites including Microsoft’s MSN, Yahoo! and America Online. Viewpoint believes that the addition of Unicast will significantly accelerate the Company’s growth in its advertising systems segment.

Viewpoint provides fee-based professional services for creating content and implementing visualization solutions. Clients include both content-related licensees and advertisers who use Creative Innovator as well as internal services provided to our marketing team. Our professional services group uses the Viewpoint platform, as well as a spectrum of tools and other technologies to create enhanced rich media solutions for a client’s particular purpose, whether over the web, intranet systems or offline media and applications. We provide the support our clients need to implement the rich media content, to fully utilize the enhanced software, or to maximize the branding potential of the advertising opportunity. Clients supported during the first six months of 2005 include America Online, Toyota Motor Services, General Electric and Sony Electronics.

	Three Months Ended
	March 31,						%
		2007			2006		Change
Cost of Revenues:
Advertising Systems	$	452		$	1,040		(57	)%
Percentage of Advertising Systems Revenues		41	%		65	%

Search	$	43		$	36		19	%
Percentage of Search Revenues		3	%		2	%

Services	$	481		$	663		(27	)%
Percentage of Services Revenues		67	%		120	%

Licenses	$	-		$	6		(100	)%
Percentage of Licenses Revenues		-	%		13	%

~~Viewpoint~~ Cost ~~began~~of ~~business~~revenues ~~in 1987 as a software maker focused primarily on products that enabled content~~from ~~authors~~advertising tosystems ~~create~~was ~~images in three dimensions and to “paint” artistic images digitally~~$0. ~~Viewpoint~~4 ~~initiated~~million ~~internet~~for ~~activities with~~ the ~~release~~three ofmonths aended ~~beta~~March ~~version of the Viewpoint Media Player in 1999. Simultaneously~~31, ~~Viewpoint released a suite of free content authoring tools specifically~~ ~~designed~~2007 tocompared ~~enable customers who published digital content on their websites~~ to ~~create~~$1.0 ~~material~~million ~~that can~~for bethe ~~“read”~~same orperiod ~~“played~~last ~~back” by the VMP~~year. ~~With~~These ~~the~~costs consist ~~VMP~~of ~~residing on~~ the web-hosting ~~consumer’s computer~~ and ~~interpreting~~employee ~~instructions~~fees ~~delivered~~associated bywith ~~our~~serving ~~customers’ web sites~~advertising content, ~~web~~costs ~~sites~~for ~~can transmit~~media ~~relatively~~space ~~small~~at ~~files~~websites ~~that~~when ~~can~~we ~~yield~~package ~~“rich”~~the media onspace ~~the end user’s computer.~~with ~~In this way~~delivery, ~~website~~and ~~owners~~costs ~~can deploy digital content representing three-dimensional views~~ of ~~their products,~~developing ~~include~~certain ~~pre-set~~advertisements ~~animations,~~in ~~and~~contracts ~~provide~~that ~~high-resolution two-dimensional views, video, audio,~~include ~~text,~~a ~~and~~combined ~~other~~price ~~media~~for developing ~~types.~~creative ~~For~~material ~~example, several of our licensing~~ and ~~creative~~delivering ~~services~~that ~~customers~~material. ~~are~~Included ~~auto~~in ~~manufacturers~~the ~~that~~current ~~deploy~~period ~~from~~is ~~their~~a ~~websites~~favorable 3Dadjustment ~~representations~~ of ~~their~~$0.2 ~~vehicles which~~million related ~~viewers~~to ~~can~~an ~~interact~~over-accrual ~~with~~from bya ~~“opening”~~prior ~~doors, zooming in on features, configuring accessories, or swapping colors~~period.

~~Viewpoint~~ The ~~has~~Company aincurs ~~limited~~cost ~~operating~~of ~~history~~revenues ~~upon~~related ~~which~~to anSearch ~~evaluation~~revenue offor the ~~Company~~hosting ~~and~~services ~~its~~associated ~~prospects can~~with beproviding ~~based~~search results. ~~Viewpoint~~Bandwidth ~~has~~costs ~~had~~utilized ~~significant~~in ~~quarterly~~providing ~~and~~results ~~annual~~has ~~operating~~been ~~losses since its inception~~minimal, and, ~~as of June 30, 2005, had an accumulated deficit of $256.5 million. Viewpoint’s prospects must be considered in light of~~ the ~~risks~~Company ~~and~~believes ~~difficulties frequently encountered by early stage technology companies. There can be no assurance~~ that ~~Viewpoint~~these costs will ~~achieve~~stay ~~or sustain profitability~~consistent.

19 Cost of revenues for services consists primarily of salaries, consulting fees and overhead for those who provide fee-based content creation and engineering professional services. Cost of revenues for services of $0.5 million for the three months ended March 31, 2007 decreased by $0.2 million compared to the same period last year. The decrease in cost of revenues for services is attributable to a reduction in force that took place in March 2006. The Company believes that the costs for services as a percentage of revenue will improve during the remainder of 2007 as the Company continues to move the department to a variable cost model.

~~RESULTS~~ Sales OFand ~~OPERATIONS~~marketing

The following table sets forth for the three and six months ended June 30, 2005 and 2004, the Company’s consolidated statements of operations expressed as a percentage of total revenues for the periods indicated:

		March 31,
	2007			2006			% Change
		(dollars in thousands)
Sales and Marketing	$	1,195		$	1,578		(24	)%
Percentage of total revenues		36	%		40	%

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Statements of Operations Data
Revenues:
Search	36	%	—	%	38	%	0	%
Advertising Systems	18		1		16		1
Services	24		39		23		40
Related party services	5		24		6		25
Licenses	4		5		3		6
Related party licenses	13		31		14		28
Total revenues	100		100		100		100
Cost of revenues:
Search	1		—		1		—
Advertising Systems	13		—		11		0
Services	15		28		15		24
Licenses	0		—		0		0
Total cost of revenues	29		28		27		24
Gross profit	71		72		73		76
Operating expenses:
Sales and marketing	19		34		21		31
Research and development	18		31		19		28
General and administrative	40		66		39		58
Depreciation	3		7		4		7
Amortization of intangible assets	3		—		3		—
Restructuring charges related to office closure	—		—		—		—
Total operating expenses	83		138		86		124
Loss from operations	(11	)	(66	)	(13	)	(48	)
Other income (expense):
Interest and other income, net	0		1		0		1
Interest expense	(5	)	(8	)	(5	)	(8	)
Changes in fair values of warrants to purchase common stock and
conversion options of convertible notes	10		109		7		(56	)
Loss on conversion	—		(8	)	—		(13	)
Other income (expense)	5		94		2		(76	)
Income (loss) before provision for income taxes	(6	)	28		(11	)	(124	)
Provision for income taxes	0		1		—		1
Net income (loss) from continuing operations	(6	)	27		(11	)	(125	)
Adjustment to net income (loss) on disposal of discontinued operations	—		1		1		1
Net income (loss)	(6	)%	28	%	(10	)%	(124	)%

Sales and marketing expenses include salaries and benefits, sales commissions, non-cash stock-based compensation charges, consulting fees, and travel and entertainment expenses for our sales and marketing personnel. Sales and marketing expenses also include the cost of programs aimed at increasing revenue, such as advertising, trade shows, and public relations.

20 Sales and marketing expenses of $1.2 million for the three months ended March 31, 2007 decreased by $0.4 million compared to the same period last year. The decrease was principally due to a reduction in sales and marketing salaries resulting from a decrease in force and the discontinuance of licensing fees paid to Fotomat. In addition, the average employee’s salary expense decreased due to the addition of lower paid employees

~~Critical~~ 19 ~~Accounting Policies and Estimates~~

~~Viewpoint’s discussion~~ ~~and~~Research ~~analysis of its financial condition~~ and ~~results~~development of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances though actual results may differ from these estimates under different assumptions or conditions. For a complete description of the Company’s accounting policies, see Note 2 to the consolidated financial statements included in the Company’s 2004 annual report on Form 10-K.

Described below are the areas where we believe that the estimates, judgments or assumptions that we have made, if different, would have yielded the most significant differences in our financial statements:

	March 31,
	2007			2006			% Change
	(dollars in thousands)
Research and development	$	810		$	1,088		(26	)%
Percentage of total revenues		24	%		27	%

~~Revenue~~ Research ~~Recognition~~and development expenses consist primarily of salaries and benefits for software developers, and contracted development related to the Company’s product development efforts. The Company expenses as incurred research and development costs necessary to establish the technological feasibility of its internally developed software products and technologies. To date, the establishment of technological feasibility of the Company’s products and general release has substantially coincided. As a result, the Company has not capitalized any software development costs since costs qualifying for such capitalization have not been significant. Additionally, the Company capitalizes costs of software, consulting services, hardware and payroll-related costs incurred to purchase or develop internal-use software during the application development stage. The Company expenses costs incurred during preliminary project assessment.

The Company’s ~~recognizes~~research ~~revenue~~and indevelopment ~~accordance~~efforts ~~with~~are ~~Statement~~primarily ofdirected ~~Position~~at ~~(“SOP”)~~creating ~~97-2,~~new ~~“Software Revenue~~technology Recognition,” as amended, Emerging Issues Task Force (“EITF”) No. 00-21 “Revenue Arrangements with Multiple Deliverables,” and Staff Accounting Bulletin (“SAB”) No. 101 “Revenue Recognition in ~~Financial~~an ~~Statements”~~effort asto ~~amended~~improve bythe ~~SAB~~overall ~~No.~~quality ~~104~~of ~~“Revenue Recognition.”~~Viewpoint’s ~~Per~~products: ~~SOP 97-2 and SAB No. 101, as amended by SAB No. 104,~~ the ~~Company recognizes~~Viewpoint ~~revenue~~Media ~~when~~Player ~~the~~and ~~following criteria are met: (a) persuasive evidence of an arrangement exists~~Enliven, ~~(b) delivery~~its ~~has~~proprietary ~~occurred~~software ortools ~~services~~for ~~have~~creating ~~been~~digital ~~rendered,~~content; ~~(c)~~advertising ~~the~~systems ~~Company’s~~products; ~~fee is fixed or determinable,~~ and ~~(d)~~the ~~collectibility~~Viewpoint ~~is reasonably assured~~Toolbar.

~~Viewpoint generates revenues through four sources: (a) search advertising, (b) advertising systems,~~ ~~(c)~~ Research ~~services,~~ and ~~(d)~~development ~~software~~expenses ~~licenses.~~decreased ~~Search revenue, as explained in more detail below, is derived from a share of the fees charged~~ by ~~Yahoo!~~$0.3 tomillion ~~advertisers who pay~~ for ~~sponsored links when a customer clicks on~~ the ~~paid~~three ~~link~~months onended ~~the~~March ~~results~~31, ~~provided~~2007 bycompared ~~the Viewpoint Toolbar. Advertising systems revenue is generated by charging customers~~ to ~~host~~the ~~and/or~~same ~~deliver~~period ~~advertising~~last ~~campaigns based on a cost per thousand (“CPM”) impressions~~year. ~~Service~~The ~~revenues~~most ~~are~~significant ~~generated~~change ~~from~~resulted ~~fee-based professional~~from ~~services,~~salaries ~~customer~~which ~~support~~decreased ~~services~~by ~~(maintenance~~$0.2 ~~arrangements),~~million ~~and~~associated ~~training~~with ~~services~~a ~~performed~~35% ~~for customers~~decrease ~~that~~in ~~license~~ the ~~Company’s~~number ~~products.~~of ~~License~~employees ~~revenues~~in ~~are~~this ~~generated~~group ~~from~~during ~~licensing~~ the ~~rights~~past ~~to use products directly to customers and indirectly through Value Added Resellers (“VARs”)~~year.

~~Search revenue is generated when a customer uses the Viewpoint Toolbar to search the internet, and~~ ~~clicks~~General ~~on a sponsored advertisement included in the search results. The Viewpoint Toolbar’s search results are provided by Yahoo!, who collects a fee from the advertiser~~ and ~~remits~~administrative a percentage of the fee to Viewpoint. Revenue generated is a function of the number of Viewpoint Toolbars performing searches, the number of searches that are sponsored by advertisers, the number of advertisements that are clicked on by Viewpoint Toolbar searchers, the rate advertisers pay for those advertisements, and the percentage retained by Yahoo! for providing the results.

Viewpoint also offers an online advertising campaign management and deployment product. This advertising system permits publishers, advertisers, and their agencies to manage the process of deploying online advertising campaigns. The Company charges customer on a cost per thousand (“CPM”) impression basis, and recognizes revenue when the impressions are served, so long as all other revenue recognition criteria are satisfied. The Company also provides another advertising services product whereby the Company purchases media space from web-site publishers and re-sell that space to advertisers. The Company acts as a principal party in the transaction, assumes the title to the inventory purchased, and assumes the risks of collection and therefore recognizes the entire amount billed to the customer as revenue.

	March 31,
	2007			2006			% Change
		(dollars in thousands)
General and Administrative	$	2,078		$	2,359		(12	)%
Percentage of total revenues		63	%		59	%

On General ~~June~~and ~~14,~~administrative ~~2005,~~expenses ~~Viewpoint~~primarily ~~announced~~consist ~~that it was discontinuing the practice~~ of ~~charging~~corporate ~~customers a~~overhead ~~license fee for the use~~ of the ~~Viewpoint~~Company, ~~Media~~which ~~Player~~includes salaries and benefits related ~~technologies. The Viewpoint Media Player will no longer require a broadcast key~~ to ~~display content~~finance, ~~thereby~~human ~~giving~~resources, ~~all~~MIS, ~~developers free access to the Viewpoint Distribution Network. By providing the license for free~~legal, ~~the~~and ~~Company plans~~executive topersonnel ~~extend~~along ~~the~~with ~~Viewpoint~~other ~~Media~~administrative ~~Player’s~~costs ~~reach~~such into new channels of distribution beyond the estimated 120 million computers it currently resides within. Viewpoint believes that this strategy supports the advertising business - by potentially making the player more pervasive – as ~~well~~facilities ascosts, ~~providing strong~~legal, ~~backing~~accounting toand ~~the~~investor ~~search~~relations fees, and ~~photo~~insurance ~~management distribution strategies~~expense.

21 General and administrative expenses decreased by $0.3 million, or 12%, for the year ended December 31, 2007 compared to the same period last year. The decrease in general and administrative expenses was due primarily to a decrease in salaries and fringe benefits.

~~License revenues from direct customers included sales of perpetual and term-based licenses for broadcasting~~ ~~digital~~Depreciation ~~content~~expense ~~in the Viewpoint format. License revenues were recognized up-front provided no further significant obligations exist and the resulting receivable was deemed collectible by management.~~

Fees from licenses sold together with fee-based professional services were generally recognized upon delivery of the software, provided that the payment of the license fees were not dependent upon the performance of the services, and the services were not essential to the functionality of the licensed software. If the services were essential to the functionality of the software, or payment of the license fees were dependent upon the performance of the services, both the software license and service fees were recognized in accordance with SOP 81-1 “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” The percentage of completion method were used for those arrangements in which reasonably dependable estimates were available. If reasonably dependable estimates were not available due to the complexity of the services to be performed, the Company deferred recognition of any revenues for the project until the project was completed, delivered and accepted by the customer, provided all other revenue recognition criteria were met and no further significant obligations exist.

		March 31,
	2007				2006			% Change
	(dollars in thousands)
Depreciation	$		115		$	117		(2	)%
Percentage of total revenues			4	%		3	%

~~For arrangements involving multiple elements, the Company defers revenue for the undelivered elements~~ ~~based~~ Depreciation onexpense ~~their~~was ~~relative~~flat ~~fair value and recognizes the difference between the total arrangement fee and the amount deferred~~ for the ~~undelivered~~three ~~elements~~months asended ~~revenue.~~March ~~The~~31, determination of fair value of each undelivered element in multiple element arrangements is based on the price charged when the same element is sold separately. For maintenance and technical support elements2007, ~~the~~compared ~~Company uses renewal rates~~ to ~~determine~~ the ~~price~~same when sold separately. The Company accounts for multiple element arrangements which involve only fee-based professional services in accordance with EITF 00-21. For licenses sold that include updates over a period oflast ~~time the Company recognizes the license revenue over the period in which updates are provided~~year.

~~Standard terms for service arrangements, which are typically billed and collected on an installment~~ ~~basis,~~20 require final payment within 90 days of completion of the services. Standard terms for license arrangements required payment within 90 days of the contract date, which typically coincided with delivery. Probability of collection is based upon the assessment of the customer’s financial condition through the review of their current financial statements and/or credit reports. For follow-on sales to existing customers, prior payment history is also used to evaluate probability of collection. The Company’s arrangements with customers do not contain product return rights. If the fee is not fixed or determinable, revenue is recognized as payments become due or as cash is received from the customer. If a nonstandard acceptance period is required, revenues are recognized upon the earlier of customer acceptance or the expiration of the acceptance period.

~~Percentage~~ Amortization of ~~Completion~~intangible assets

The Company recognizes revenue in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended, Emerging Issues Task Force (“EITF”) Issue No. 00-21 “Revenue Arrangements with Multiple Deliverables,” Staff Accounting Bulletin (“SAB”) No. 101 “Revenue Recognition in Financial Statements” and SAB No. 104 “Revenue Recognition.” Per SOP 97-2 and SAB No. 101, the Company recognizes revenue when the following criteria are met: (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the Company’s fee is fixed or determinable, and (d) collectibility is reasonably assured.

		March 31,
		2007		2006				% Change
	(dollars in thousands)
Amortization of intangible assets	$	128			$	110		16	%
Percentage of total revenues		4	%			3	%

~~Fee-based professional services for customized software development are performed on a fixed-fee or~~ ~~time-and-materials~~ Amortization ~~basis under separate service arrangements. Revenues for fixed-fee arrangements are recognized over the pattern~~ of ~~performance~~intangible inassets ~~accordance~~relates ~~with~~to the ~~provisions~~amortization of ~~SAB~~patents, ~~No.~~trademarks ~~101. The~~and ~~pattern~~other ofintangible ~~performance~~assets ~~for~~acquired ~~service~~in ~~arrangements is measured by~~ the ~~percentage~~Unicast ofacquisition. ~~costs~~Intangible ~~incurred and accrued to date for each contract~~assets, ~~which~~excluding ~~primarily consist of direct labor costs~~goodwill, ~~cost of outsourcing,~~ ~~and~~determined ~~overhead,~~ to ~~the~~have ~~estimated~~been ~~total~~acquired ~~cost~~included ~~for~~trademarks, ~~each~~and ~~contract~~website atpartner ~~completion~~relationships. ~~The~~Viewpoint ~~percentage~~will ~~approximates the percentage of a customer’s contract that has been completed and would~~ be ~~available~~amortizing ~~for~~these ~~the customer~~intangible toassets ~~use~~over atan ~~that~~effective ~~point in time~~7.5 ~~Use~~year oflife ~~this~~principally ~~method is based on the availability of reasonably dependable estimates. If reasonably dependable estimates are not available~~ due to the ~~complexity of~~longer ~~the~~life ~~services~~estimated ~~to be performed, the Company defers recognition of any revenues~~ for the ~~project~~more ~~until the~~valuable ~~project is completed, delivered and accepted by the customer, provided all other revenue recognition~~website ~~criteria~~partner ~~are met and no further significant obligations exist~~relationships.

22 Restructuring charges

Reserve for Bad Debt

			March 31,
		2007		2006			% Change
	(dollars in thousands)
Restructuring charges	$	-		$	92		(100	) %
Percentage of total revenues		-	%		2	%

We The ~~perform~~Company ~~ongoing~~implemented ~~credit~~a ~~evaluations~~restructuring ofplan ~~our~~in ~~customers~~March ~~and~~2006 ~~adjust~~designed ~~credit~~to ~~limits~~streamline ~~based~~the ~~upon~~services ~~payment history~~business. ~~and~~Under ~~the~~this ~~customer’s~~plan ~~current~~the ~~credit~~Company ~~worthiness,~~eliminated as10 ~~determined~~positions byin athe ~~review~~services ofgroup ~~their~~and ~~current~~relocated ~~credit~~the ~~information.~~management ~~The~~of ~~Company~~the ~~regularly~~group ~~monitors~~from ~~collections~~its ~~and~~New ~~payments~~York ~~from~~office ~~our~~to ~~customers~~its ~~and maintains~~existing aLos ~~provision~~Angeles ~~for~~office. ~~estimated~~This ~~credit~~restructuring ~~losses~~plan ~~based~~was ~~upon~~completed ~~historical~~by ~~experience~~March 31, 2006 and ~~any~~the ~~specific customer~~severance ~~collection~~was ~~issues~~paid ~~that~~in the second quarter of 2006. No restructuring costs have been ~~identified~~incurred in the current period.

~~Valuation~~ Interest ofand ~~Goodwill~~other ~~and~~income, ~~Intangible~~net ~~Assets~~

We assess goodwill for impairment annually unless events occur that require more frequent reviews. Long-lived assets, including amortizable intangibles, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Discounted cash flow analyses are used to assess non-amortizable intangible impairment while undiscounted cash flow analyses are used to assess long-lived asset impairment. If an assessment indicates impairment, the impaired asset is written down to its fair market value based on the best information available. Estimated fair market value is generally measured with discounted estimated future cash flows. Considerable management judgment is necessary to estimate undiscounted and discounted future cash flows. Assumptions used for these cash flows are consistent with internal forecasts.

		March 31,
	2007			2006			% Change
	(dollars in thousands)
Interest and other income, net	$	51		$	79		(35	) %
Percentage of total revenues		2	%		2	%

~~On an on-going basis, management reviews the value and period of amortization or depreciation of long-lived~~ ~~assets,~~ Interest ~~including goodwill~~ and other ~~intangible~~income, ~~assets. During this review~~net, weprimarily ~~re-evaluate~~consists ~~the significant assumptions used in determining the original cost~~ of ~~long-lived~~interest ~~assets.~~and ~~Although~~investment ~~the~~income ~~assumptions may~~on ~~vary from transaction to transaction~~cash, ~~they generally include revenue growth, operating results,~~ cash ~~flows~~equivalents and ~~other~~marketable ~~indicators of value~~securities. ~~Management~~As ~~then~~a ~~determines~~result, ~~whether~~interest ~~there~~and ~~has~~other ~~been~~income, annet, ~~impairment~~fluctuates ofwith ~~the~~changes ~~value~~in ofthe ~~long-lived~~Company’s ~~assets~~cash, ~~based~~cash ~~upon~~equivalents ~~events~~and ormarketable ~~circumstances~~securities ~~that~~balances ~~have~~and ~~occurred~~market ~~since~~interest ~~acquisition~~rates. ~~The impairment policy is consistently applied in evaluating impairment for each of our wholly owned subsidiaries and investments.~~

~~Investments~~Interest expense

We record an impairment charge when we believe an investment asset has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future.

	March 31,
	2007			2006			% Change
	(dollars in thousands)
Interest expense	$	(204	)	$	(287	)	29	%
Percentage of total revenues		(6	) %		(7	) %

~~Derivatives~~ Interest expense consists of interest paid and accrued, and amortization of debt discount and debt issue costs on the Company’s outstanding subordinated notes and the debt assumed based upon the Unicast acquisition on January 3, 2005. The decrease is primarily the result of a lowering of the effective borrowing rate on the

~~In 2002 and 2003, the Company issued convertible notes and warrants which would require Viewpoint to~~ ~~issue~~21 shares of common stock upon conversion of these securities. The Company accounts for the fair values of these outstanding warrants to purchase common stock and conversion options of its convertible notes in accordance with SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” and EITF Issue No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” which requires the Company to bifurcate and separately account for the conversion option and warrants as embedded derivatives contained in the Company’s convertible notes. The Company is required to carry these embedded derivatives on its balance sheet at fair value and the unrealized changes in the value of these embedded derivatives are reflected in net income as changes in fair values of warrants to purchase common stock and conversion options of convertible notes. Such changes in fair value are recorded as an adjustment to reconcile net loss to net cash used in operating activities in the consolidated statement of cash flows. In 2004, the convertible notes were converted into common stock.

~~Contingencies~~ subordinated notes and ~~Litigation~~a principal payment of $0.2 million resulting from a restructuring that occurred in March 2007. The notes were executed and funded during the first quarter of 2003. During March and June 2004, all of the convertible notes were converted into shares of the Company’s common stock.

We Changes ~~evaluate contingent liabilities including threatened or pending litigation~~ in ~~accordance~~fair ~~with~~value ~~SFAS No. 5, “Accounting for Contingencies” and record accruals when the outcome~~ of ~~these~~warrants ~~matters is~~to ~~deemed~~purchase ~~probable~~common ~~and the liability is reasonably estimable. We make these assessments based on the facts and circumstances and in some instances based in part on the advice of outside legal counsel.~~stock

	March 31,
	2007			2006			% Change
	(dollars in thousands)
Changes in fair value of warrants to purchase common stock	$	157		$	(628	)	(125	) %
Percentage of total revenues		5	%		(16	) %

~~Restructuring~~ Based on the provisions of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” and EITF Issue No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the Company records gains and losses based upon changes in the Company’s common stock value and the number of common stock equivalents that the associated financial instruments may be settled in.

~~Restructuring~~ For ~~activities~~the ~~include~~three ~~the~~months ~~recognition~~ended ofMarch ~~severance~~31, ~~expenses~~2007, ~~upon~~the ~~management~~Company ~~approval~~recorded of income based on the ~~restructuring~~change ~~plan,~~in the ~~determination~~fair value of the ~~employees~~original warrants of $0.2 million related to bea ~~terminated~~decrease in the Company’s stock price. For the three months ended March 31, ~~communication~~2006, the Company recorded expense of ~~benefit arrangements~~$0.6 tobased ~~employees~~on ~~and,~~the ~~with~~change ~~respect~~in tothe ~~costs~~fair ~~associated~~values ~~with~~of ~~lease~~the ~~terminations,~~warrants related to an ~~estimation of~~increase ~~sublease~~in ~~payments~~the Company’s stock price.

~~Financial~~ Provision ~~Results~~for income taxes

Viewpoint reported total revenue of $6.6 million for the three months ended June 30, 2005, compared to $2.8 million for the same period last year. Operating loss for the second quarter of 2005 was $0.8 million compared to $1.9 million in the second quarter of 2004. The improvement in operating loss compared to the second quarter 2004 resulted principally from the increase in revenue from our search and ad systems segments offset by additional operating expenses incurred following our acquisition of Unicast on January 3, 2005. Net loss for the second quarter 2005 was $0.4 million, or a loss of $0.01 per share, compared to net income of $0.8 million, or a gain of $0.01 per share, in the second quarter of 2004. The net loss in the second quarter of 2005 included a non-cash gain of $0.6 million to recognize the impact of the Company’s decreased stock price on its outstanding warrants. Net income in the second quarter of 2004 included a non-cash gain of $3.1 million to recognize the impact of the Company’s decreased stock price on its outstanding conversion options related to the Company’s convertible debt and warrant financing.

	March 31,
	2007			2006			% Change
	(dollars in thousands)
Provision for income taxes	$	12		$	7		71	%
Percentage of total revenues		0	%		-	%

~~Viewpoint reported total revenues of $12.2 million for the six months ended June 30, 2005, compared~~ to Provision ~~$6.4 million~~ for ~~the~~income ~~same~~taxes ~~period~~consists ~~last~~primarily year. Operating loss for the six months ended June 30, 2005 was $1.6 million compared to $3.1 million for the six months ended June 30, 2004. The improvement in operating loss compared to the six months ended June 30, 2004 resulted principally from the increase in revenue from the Company’s search and ad systems segments offset by additional operating expenses incurred following the acquisition of ~~Unicast~~certain onminimum ~~January~~state 3,income ~~2005.~~taxes ~~Net~~as ~~loss~~well ~~for~~as ~~the~~foreign ~~six~~tax ~~months ended June 30, 2005 was $1~~withholdings.2 million, or a loss of $0.02 per share, compared to a net loss of $7.9 million, or a loss of $0.15 per share, in the six months ended June 30, 2004. The net loss in the six months ended June 30, 2005 included a non-cash gain of $0.8 million to recognize the impact of the Company’s decreased stock price on its outstanding warrants. Net loss in the six months ended June 30, 2004 included non-cash loss of $3.6 million to recognize the impact of the Company’s increased stock price on its outstanding conversion options related to the Company’s convertible debt and warrant financing, and the loss on the conversion of the Company’s convertible debt in 2004, amounting to a loss of $0.8 million.

~~Viewpoint’s cash, cash equivalents, and marketable securities as of June 30, 2005 were $4.6 million.~~ ~~This~~Factors ~~can~~That beMay ~~compared~~Affect toFuture ~~cash,~~Results ~~cash equivalents, and marketable securities~~ of $8.7 million at December 31, 2004. The decrease in cash, cash equivalents, and marketable securities can be attributed to the completion of the Unicast acquisition which reduced the Company’s cash position by $1.3 million related to amounts paid to the sellers and negative net working capital assumed and paid as well as losses from operations and increases in accounts receivable associated with our growing search and ad systems businesses.Operations

~~Revenues~~ We believe that in the future our results of operations could be affected by various factors including:

24We have a history of losses and expect to incur losses in the future, which may cause our share price to decline. These factors raise substantial doubts about our ability to continue as a going concern.

	Months Ended June 30,				%
	2005		2004		Change
Three months ended:
Search	$	2,393	$	—		N/A
Advertising Systems		1,163		37		3,043
Services		1,564		1,066		47
Related party services		354		686		(48	)
Licenses		227		144		58
Related party licenses		872		872		—
Total revenues	$	6,573	$	2,805		134	%
Six months ended:
Search	$	4,573	$	8		57,063	%
Advertising Systems		1,895		37		5,022
Services		2,807		2,589		8
Related party services		749		1,600		(53	)
Licenses		382		384		(1	)
Related party licenses		1,745		1,779		(2	)
Total revenues	$	12,151	$	6,397		90	%

We may have to obtain financing on less favorable terms, which could dilute current stockholders’ ownership interests in the company.
OnOur ~~March~~stock ~~17,~~may ~~2004~~be ~~Viewpoint~~de-listed from ~~entered the internet search business~~NASDAQ, bywhich ~~launching~~may ~~the~~adversely ~~Viewpoint~~affect ~~Toolbar on~~our aability ~~test basis. In April 2004, the Company ended the test phase, and began delivering the Viewpoint Toolbar Version 1.0. Search revenue is generated when a customer uses the Viewpoint Toolbar~~ to ~~search the~~raise ~~internet,~~capital and ~~clicks on a sponsored advertisement included in the search results. The Viewpoint Toolbar~~stockholders’s ~~search~~ability ~~results are provided by Yahoo!, who collects a fee from the advertiser and remits a percentage of the fee~~ to ~~Viewpoint. Revenue generated is a function of the number of Viewpoint~~sell ~~Toolbars~~their performing searches, the number of searches that are sponsored by advertisers, the number of advertisements that are clicked on by Viewpoint Toolbar searchers, the rate advertisers pay for those advertisements, and the percentage retained by Yahoo! for providing the resultsshares.
~~Viewpoint~~If ~~also~~our ~~offers~~common anstock ~~online~~were ~~advertising~~to ~~campaign~~be ~~management~~de-listed from ~~and~~NASDAQ ~~deployment~~after ~~product.~~December ~~The product permits publishers~~31, ~~advertisers,~~2008 ~~and~~we ~~their~~would ~~agencies~~be toin ~~manage~~default ~~the process~~ of ~~deploying~~certain ~~online~~loan ~~advertising campaigns.~~covenants ~~The~~which ~~Company charges customers on a cost per thousand impression (“CPM”) basis,~~could ~~and~~require ~~recognizes revenue when~~ the ~~impressions~~accelerated ~~are~~payment ~~served,~~of soour ~~long as all other revenue recognition criteria are satisfied. On January~~ $3~~, 2005 Viewpoint purchased Unicast Communications Corp~~.~~, which specializes in the ad systems business principally delivering video advertisements. Unicast generated $6.1~~ 4 million insubordinated ~~revenues~~loan ~~during~~that ~~2004.~~is ~~The~~scheduled ~~Company expects revenues from advertising systems~~ to ~~continue to~~mature ~~grow~~ in ~~future~~September ~~quarters~~2009.
~~Viewpoint~~Our ~~has~~efforts ~~a creative services group that builds content in the Viewpoint format for customers. Viewpoint charges customers fees for these services based on the estimated time and materials~~ to ~~complete~~ adistribute ~~creative~~our ~~project~~graphically ~~for~~enhanced ~~the~~toolbar ~~customer~~may ~~including~~experience ansetbacks ~~acceptable~~limiting ~~profit~~or ~~margin.~~reducing ~~Revenue~~our issearch ~~recognized on a percentage-of-completion basis if all other~~ revenue ~~recognition criteria are satisfied~~. ~~During 2005, the Company continued its strategy of concentrating on executing larger creative projects which improved overall financial performance of the segment.~~

~~The Company also generated revenues by selling licenses to the Viewpoint graphical platform principally~~ to22 internet content publishers. On June 14, 2005, Viewpoint announced that it was discontinuing the practice of charging customers a license fee for the use of the Viewpoint Media Player and related technologies. The Viewpoint Media Player will no longer require a broadcast key to display content, thereby giving all developers free access to the Viewpoint Distribution Network. By providing the license for free, the Company plans to extend the Viewpoint Media Player’s reach into new channels of distribution beyond the estimated 120 million computers it currently resides within. Viewpoint believes that this strategy supports the advertising business - by potentially making the player more pervasive – as well as providing strong backing to the search and photo management distribution strategies.

~~Prior to 2004, licenses were generally 15 months in duration. Revenues were recognized upon the completion~~ ~~of the sales and delivery process so long as all other revenue recognition criteria were satisfied.~~ The ~~Company~~success ~~supplemented~~of ~~its~~our ~~license~~graphically ~~revenue~~enhanced bysearch ~~providing~~operations ~~content~~depends ~~development services to licensees. The service revenues were recognized~~ on ausers ~~percentage~~satisfaction ofwith ~~completion~~search ~~basis~~results assupplied ~~computed~~ by ~~comparing the incurred costs of the project to the total estimated project cost and applying this percentage against the total contracted revenue~~Yahoo!.
25 We may be unable to successfully replace our search results vendor when our distribution contract with Yahoo! Expires in March 2008.
~~During~~ Our ~~the~~software ~~first~~products ~~five~~may ~~months~~be ofwrongly ~~2005~~labeled ~~the Company continued to recognize license sales upon delivery so long~~ as ~~all~~spyware ~~other~~or ~~revenue~~adware ~~recognition~~which ~~criteria~~might ~~are~~lead ~~satisfied.~~to ~~Since~~its ~~January~~uninstallation ~~2004,~~causing ~~licenses had generally been sold for~~ a 12decrease ~~month term. The Company also adopted a new licensing price structure~~ in ~~2004~~our ~~whereby larger license sales, that are made less frequently, contain product upgrades when and if available for a period of 12 months~~revenues. ~~These license sales are amortized over the license periods, due to the significance of the post contract customer support which include when and if available upgrades.~~
~~During October 2003, the Company entered into an amended license agreement with America Online, Inc.~~ ~~(“AOL”)~~Our ~~which~~business ~~provided~~may ~~for~~not ~~payments~~grow byif ~~AOL of $10.0 million which were received in~~ the ~~fourth~~ ~~quarter~~internet ofadvertising ~~2003.~~market ~~The~~does ~~agreement~~not ~~contains~~continue ~~multiple~~to ~~elements~~develop ~~consisting~~or ofif awe ~~perpetual~~are ~~broadcast license,~~unable ~~a perpetual source code license, quarterly updates~~ to ~~the~~successfully ~~source~~implement ~~code~~our ~~through~~business ~~December 2005, and maintenance and consulting services~~model. The Company will recognize revenue from this agreement ratably as license and services revenue through December 2005 which represents the duration of the Company’s obligation for post-contract support of the source code element, including quarterly upgrades and maintenance requirements. Approximately $0.9 million is recognized each quarter as related party license revenue and $0.1 million as related party services revenue.
~~During 2004, the Company began to focus more resources on its Search and Advertising systems segments.~~ ~~License~~Our ~~revenue~~failure ~~will stay relatively constant through the end of 2005, as twelve month licenses that contained upgrades when and if available that were entered into prior~~ to ~~the~~successfully ~~change~~compete inmay ~~license~~hinder ~~fee structure~~our ~~in June 2005 are recognized~~growth. ~~The Company believes that, consistent with the new business model, license revenue will be minimal in 2006.~~
~~Search revenues were $2.4 million for the three months ended June 30, 2005 compared to the three months~~ ~~ended~~Our ~~June 30, 2004 in which the Company did not recognize search revenue. Search~~ revenues ~~are~~will ~~generated when~~be ~~users~~subject ~~of the Viewpoint Toolbar are provided search results from advertisers that they click on~~ to ~~see.~~seasonal ~~These advertisers then pay a fee to Yahoo!, who remits a percentage of the fee to Viewpoint~~fluctuations. The Company had installed 1.5 million Viewpoint Toolbars through June 30, 2004, 8.7 million through December 31, 2004, 12.5 million through March 31, 2005 and 16.1 through June 30, 2005. Internet users can uninstall the Viewpoint Toolbar, and through December 31, 2004, 3.3 million users who had accepted the installation of the Toolbar had later uninstalled it during 2004. The total of uninstalled toolbars had increased to 6.7 million by June 30, 2005.
~~Search~~ We ~~revenues~~may ofenter ~~$4.6~~into ~~million~~business ~~for~~combinations ~~the~~and ~~six~~strategic ~~months~~alliances ~~ended~~which ~~June~~could ~~30,~~be ~~2005~~difficult ~~compared~~ to ~~revenues~~integrate ofand ~~less than~~may ~~$0.1~~disrupt ~~million for the six months ended June 30, 2004. The increase in revenues is associated with the acceleration of~~ our ~~search~~ business ~~which began after June 30, 2004~~. ~~The Company believes that search revenues will continue to increase in 2005 if it is able to continue to increase the number of Viewpoint Toolbars that are distributed and remain installed.~~
~~The Company recognized $1.2 million in advertising systems revenue during the three months ended June~~ ~~30,~~We ~~2005~~may ~~compared~~need to ~~revenues~~develop ofnew ~~less~~products ~~than~~or ~~$0.1~~other ~~million~~untested ~~for~~methods ~~the~~of ~~three~~increasing ~~months~~sales ~~ended~~with ~~June~~our ~~30,~~existing ~~2004. This~~products ~~revenue~~or ~~was~~distribution ~~generated~~network ~~by delivering advertising impressions~~ to ~~websites~~generate insales ~~several different formats including video~~ and byif ~~selling~~we ~~website~~are ~~advertising~~unsuccessful ~~inventory~~the ~~on behalf of website publishers.~~growth ~~A significant portion~~ of ~~this~~our ~~revenue~~business ~~came~~may ~~from~~cease ~~clients~~or ~~who had used Unicast to deliver video advertising prior to the January 3, 2005 merger with Viewpoint~~decline.
~~Ad systems revenues of $1.9 million for the six months ended June 30, 2005 compared to revenues of~~ ~~less~~We ~~than~~will ~~$0.1~~need ~~million for the six months ended June 30, 2004. The growth compared~~ to ~~the~~keep ~~prior~~pace ~~period is~~with ~~the~~rapid ~~result~~technological ~~of the~~changes ~~Company’s entry into the ad systems business late~~ in the ~~second~~internet ~~quarter of~~search ~~2004~~ and ~~the~~advertising ~~purchase of Unicast in January of 2005~~industries. ~~Growth in this segment accelerated during the second quarter and will continue to increase during 2005 if the Company is able to attract more clients and websites to its various ad serving formats.~~
~~Service revenues of $1.6 million for the three months ended June 30, 2005 compare to $1.1 million for~~ ~~the~~Our ~~same~~ad ~~period~~campaign inmanagement ~~2004.~~and ~~The~~deployment ~~increase~~solution inmay ~~revenues~~not isbe ~~due~~successful toand ~~increases~~may incause ~~the~~business ~~number of clients with projects in excess of $50,000 who were not related parties~~disruption.
~~Services revenues of $ 2.8 million for the six months ended June 30, 2005 compared to revenues of $2.6~~ ~~million~~We ~~for~~might ~~the~~experience ~~six~~significant ~~months~~defects ~~ended June 30, 2004. The Company’s revenues during 2004 included $0.5 million from a service project that was completed~~ in ~~the~~our ~~third quarter of 2003 for which the Company received a final payment and recognized revenue in February 2004~~products. Excluding this item, the adjusted increase in revenues is due to increases in the number of clients with projects in excess of $50,000 who were not related parties. The Company believes that it will be able to increase revenues in this segment if licensees continue to ask the Company for assistance in building
26 Our technical systems are vulnerable to interruption and damage.
~~more content using the Viewpoint Platform to be used at their websites. The Company believes the elimination~~ ofOur ~~the~~management ~~license~~team ~~fee~~has ~~will~~only ~~further~~recently ~~increase~~started ~~revenues~~working ~~in this area as companies will have even more of an inclination to use the Viewpoint platform~~together.
~~Related party service revenues of $0.4 million for the three months ended June 30, 2005 decreased by~~ ~~approximately~~Our ~~$0.3~~stock ~~million,~~is ~~or 48%~~volatile, ~~compared~~which tocould ~~the~~subject ~~same~~us ~~period last year. Revenues included as related party service revenues relate~~ to ~~contracts~~class ~~that~~action ~~were entered into with AOL prior to December 2003~~litigation.
~~Related party service revenues of $0.7 million for the six months ended June 30, 2005 decreased by~~ ~~approximately~~Our ~~$0.9~~charter ~~million~~documents orcould ~~53%~~make ~~compared~~it tomore ~~the~~difficult ~~same period last year. We believe that revenue in this segment will be significantly lower in 2005 since there is only one remaining agreement~~ for ~~the~~ ~~Company~~an tounsolicited ~~provide~~third ~~services~~party to ~~AOL~~acquire ~~that was executed in 2003~~us.
~~License~~ The ~~revenues~~market ~~of $0.2 million~~ for ~~the~~digital ~~three~~visualizations ~~months~~solutions ~~ended~~is ~~June~~characterized ~~30, 2005 increased~~ by ~~approximately $0.1~~rapidly ~~million~~changing ~~or 58% for the three months ended June 30~~technology, ~~2005,~~and ~~compared~~if towe ~~the~~do ~~same~~not ~~period~~respond ~~last~~in ~~year. License~~a ~~revenues~~timely ~~for the second quarter of 2005 primarily represent four licenses the Company sold during 2004~~manner, ~~which~~our ~~provided~~products ~~upgrade rights,~~ and ~~are~~technologies ~~therefore~~may ~~being recognized ratably over 12 months, and recognition of a $0.1 million renewal of a 2002 license that did~~ not ~~contain~~succeed ~~upgrades or maintenance, and was therefore recognized entirely~~ in ~~the second quarter of 2005. License revenues for the second~~ ~~quarter of 2004 were essentially generated from~~ the ~~sale of licenses without upgrade rights where the Company recognized the total value of the contract in the second quarter~~marketplace.
~~License revenues of $0.4 million for the six months ended June 30, 2005, compared to $0.4 million for~~ ~~the~~We ~~same~~may ~~period last year. Revenues in this segment will remain relatively constant in 2005, and will~~ be ~~minimal~~unable into ~~2006~~protect asour ~~the~~intellectual ~~Company~~property ~~is offering the license for free beginning in June 2005~~rights.
~~Related~~ We ~~party~~may ~~license~~be ~~revenues~~liable ~~of $0.9 million and $1.7 million~~ for ~~the~~infringing ~~three~~on ~~and six month periods ended June 30, 2005 respectively were consistent with~~ the ~~amount~~intellectual inproperty ~~the~~rights ~~same~~or ~~period in 2004, as the Company was working under the same contract~~others. ~~Revenues in this segment will remain relatively constant in 2005 and be eliminated in 2006.~~
27 Regulatory and legal uncertainties could harm our business.
~~Cost~~ Changes in regulations or user concerns regarding privacy and protection of ~~revenues~~user data could adversely affect our business.

	June 30,						%
	2005			2004			Change
	(dollars in thousands)
Three months ended:
Search	$	49		$	—			N/A
Percentage of Search Revenues		2	%		N/A
Six months ended:
Search	$	95		$	—			N/A
Percentage of Search Revenues		2	%		—	%
Three months ended:
Advertising Systems	$	847		$	6			14,017	%
Percentage of Advertising Systems Revenues		73	%		16	%
Six months ended:
Advertising Systems	$	1,365		$	6			22,650	%
Percentage of Advertising Systems Revenues		72	%		16	%
Three months ended:
Services	$	1,026		$	792			30	%
Percentage of Services Revenues		53	%		45	%
Six months ended:
Services	$	1,836		$	1,543			19	%
Percentage of Services Revenues		52	%		37	%
Three months ended:
Licenses	$	1		$	3			(67	)%
Percentage of Licenses Revenues		0	%		0	%
Six months ended:
Licenses	$	3		$	4			(25	)%
Percentage of Licenses Revenues		0	%		0	%

Internet security poses a risk to our business.

~~The Company incurs cost of revenues related to Search revenue for the hosting services associated with~~ ~~providing~~23 search results. Bandwidth costs utilized in providing results has been minimal. The Company believes that as Search revenue increases, the hosting services associated with this revenue will increase although we do not anticipate an increase in the costs as a percentage of revenues.

~~Cost of revenues from advertising systems was $0.8 million and $1.4 million for the three and six month~~ ~~periods~~Recent ~~ended~~Accounting ~~June~~Pronouncements 30, 2005 respectively. These costs consist of the web-hosting and employee fees associated with serving advertising content, costs for media space at websites when we package the media space with delivery, and costs of developing certain advertisements in contracts that include a combined price for developing creative material and delivering that material. The Company is continually evaluating pricing for hosting services in order to reduce the delivery expenses to the greatest extent practicable. During the third quarter of 2004, the Company separated creative development from delivery contracts which will separate the creative development revenues and costs into services revenues and costs. The Company believes that as advertising system revenue increases, expenses for bandwidth will increase. However, the Company believes that costs as a percentage of revenue will decrease since it will receive improved pricing efficiencies for hosting and delivery services. It does not anticipate bundling the costs of media frequency or developing creative advertising with contracts for delivery of such advertising impressions.

~~Cost~~ In ofJune ~~revenues~~2006, the FASB issued Interpretation No. 48, “Accounting for ~~services~~Uncertainty ~~consists~~in ~~primarily~~Income Taxes, an interpretation of ~~salaries~~FASB Statement No. 109” (“FIN 48”), ~~consulting~~which ~~fees~~clarifies ~~and~~the ~~overhead~~accounting for ~~those~~uncertainty ~~who~~in ~~provide~~income ~~fee-based~~taxes ~~content~~recognized ~~creation~~in ~~and~~a ~~engineering~~company’s ~~professional~~financial ~~services~~statements. ~~Cost~~The ofinterpretation ~~revenues~~prescribes ~~for services~~a ofrecognition ~~$1.0~~threshold and ~~$1.8~~measurement ~~million~~attribute criteria for the ~~three~~financial statement recognition and ~~six~~measurement ~~months~~of ~~ended~~an ~~June~~uncertain ~~30,~~tax ~~2005,~~position ~~respectively,~~taken ~~increased~~or byexpected ~~$0.2~~to ~~million~~be ortaken ~~30%~~in ~~for~~a ~~the~~tax ~~three~~return. ~~month~~The ~~period~~interpretation ~~and~~also ~~$0.3~~provides ~~million~~guidance oron ~~19%~~derecognition, ~~for~~classification, ~~the~~interest ~~six~~and ~~month period~~penalties, ~~compared~~accounting toin ~~the~~interim ~~same~~ periods, ~~last~~disclosure ~~year~~and transition. The ~~increase~~Company inadopted ~~cost~~the provisions of ~~revenues~~FIN ~~for~~48 ~~services~~on January is1, ~~attributable to~~2007. Since the ~~increase~~Company indoes ~~service~~not ~~revenues~~have ~~adjusted~~any ~~for~~uncertain tax positions, the ~~payment~~implementation of $0FIN 48 did not have a material impact on its consolidated financial statements.5 ~~million~~At inMarch ~~the~~31, ~~second~~2007 ~~quarter~~there were no ofaccrued ~~2004~~liabilities ~~that~~for tax-related tointerest ~~work~~and ~~performed~~penalties, inwhich ~~2003~~the Company recognizes as general and administrative expense as incurred. ~~The~~Since the Company ~~believes~~has ~~that~~incurred ~~the~~net ~~costs~~losses for ~~services as~~tax apurposes ~~percentage~~since ofinception, ~~revenue~~all ~~will~~tax years remain ~~fairly~~open ~~constant~~to inexamination ~~2005~~by major taxing jurisdictions, which include the federal government and the states of New York and California.

28 In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (FAS 157). FAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. We will be required to adopt the provisions of FAS 157 beginning with our first quarter ending March 31, 2008. We do not believe that the adoption of the provisions of FAS 157 will materially impact our consolidated financial statements.

~~Sales~~ In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and ~~marketing~~Financial Liabilities — Including an Amendment of FASB Statement No. 115” which is effective for fiscal years beginning after November 15, 2007. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We are currently evaluating the potential impact of this statement.

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Sales and Marketing	$	1,228		$	945			30	%
Percentage of total revenues		19	%		34	%
Six months ended:
Sales and Marketing	$	2,503		$	1,996			25	%
Percentage of total revenues		21	%		31	%

LIQUIDITY AND CAPITAL RESOURCES

~~Sales and marketing expenses include salaries and benefits, sales commissions, non-cash stock-based~~ ~~compensation~~Liquidity ~~charges, consulting fees,~~ and ~~travel~~Capital ~~and~~Resources entertainment expenses for our sales and marketing personnel. Sales and marketing expenses also include the cost of programs aimed at increasing revenue, such as advertising, trade shows, and public relations.

~~Sales~~ Cash, cash equivalents, and ~~marketing~~marketable ~~expenses~~securities oftotaled $1.2.8 million ~~for~~at ~~the~~March ~~three~~31, ~~months ended June 30~~2007, ~~2005~~down ~~increased~~from by $04.3 million orat ~~30%~~December compared to the same period last year. The increase was principally due to an increase in personnel costs in sales and marketing associated with the Unicast acquisition. Personnel costs including commissions increased by $0.3 million31, ~~in addition to ad serving marketing costs increasing by $0~~2006.1 ~~million. This was offset by a decrease in Search marketing costs of $0.2 million which coincided with the launch of the toolbar in the first quarter of 2004.~~

Sales and marketing expenses of $2.5 million for the six months ended June 30, 2005 increased by $0.5 million or 25% compared to the same period last year. The increase was principally due to an increase in personnel costs in sales and marketing associated with the Unicast acquisition. Personnel costs including commissions increased by $0.6 million, in addition to ad serving marketing costs which increased by $0.1 million. This was offset by a decrease in Search marketing costs of $0.2 million which was launched in the first quarter of 2004.

	March 31,
	2007			2006
	(dollars in millions)
Cash (used in) operating activities	$	(1.2	)	$	(1.7	)
Cash (used in) investing activities		(1.0	)		(1.2	)
Cash (used in) provided by financing activities		(0.3	)		0.3

~~Research~~ Operating ~~and~~activities ~~development~~

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Research and development	$	1,147		$	860			33	%
Percentage of total revenues		18	%		31	%
Six months ended:
Research and development	$	2,353		$	1,773			33	%
Percentage of total revenues		19	%		28	%

In the three months ended March 31, 2007, cash used in operating activities was $1.2 million, a decrease of $0.5 million compared to the three months ended March 31, 2006. The decrease in the use of cash is primarily due to a decrease in net loss of $1.9 million offset by a decrease in cash from receivables of $1.2 million.

~~Research and development expenses consist primarily of salaries and benefits for software developers,~~ ~~contracted~~Investing ~~development~~activities efforts, and non-cash stock-based compensation charges related to the Company’s product development efforts. The Company expenses as incurred research and development costs necessary to establish the technological feasibility of its internally developed software products and technologies. To date, the establishment of technological feasibility of the Company’s products and general release has substantially coincided. As a result, the Company has not capitalized any software development costs since costs qualifying for such capitalization have not been significant. Additionally, the Company capitalizes costs of software, consulting services, hardware and payroll-related costs incurred to purchase or develop internal-use software, if technological feasibility has been established, it is probable that the project will be completed and the software will be used as intended. The Company expenses costs incurred during preliminary project assessment, research and development, re-engineering, training and application maintenance.

~~Beginning~~ In ~~in 2004,~~ the ~~Company~~three ~~expanded~~months ~~its~~ended ~~research~~March ~~and~~31, ~~development~~2007, ~~efforts~~cash ~~beyond~~used ~~changes~~ in ~~the overall~~investing ~~quality~~activities ofwas ~~the Viewpoint Media Player to efforts to build the Viewpoint Toolbar for searching~~$1. ~~During~~0 ~~2005~~million, ~~efforts~~primarily inas ~~this~~a ~~area~~result ~~have~~of ~~focused~~net onpurchases ~~the development~~ of amarketable ~~more~~securities ~~flexible frame for the Toolbar which would facilitate adding different software tools to its capabilities and the development~~ of ~~a photosharing capability which was released on June 29, 2005~~$0.9 ~~In addition, during 2005 efforts have been focused on building an ad delivery system that combines the capabilities of Unicast’s and Viewpoint’s products~~million.

29 In the three months ended March 31, 2006, cash used in investing activities was $1.2 million, primarily as a result of net purchases of marketable securities of $1.1 million.

~~Research and development expenses increased by $0.3 million, or 33%, for the three months ended June~~ ~~30,~~24 2005 compared to the same period last year. The most significant change resulted from salaries which increased by $0.3 million associated with employees added as a result of the Unicast acquisition. Salaries and fringe benefits represent 95% of the costs in this department.

~~Research~~ ~~and~~Financing ~~development~~activities expenses increased by $0.6 million, or 33%, for the six months ended June 30, 2005 compared to the same period last year. The most significant change resulted from salaries which increased by $0.6 million associated with employees added as a result of the Unicast acquisition.

~~General~~ In the three months ended March 31, 2007, net cash used by financing activities was $0.3 million, resulting from the $0.2 million charge related to the troubled debt restructuring that was recorded as a reduction in debt proceeds and ~~administrative~~the repayment of Unicast debt.

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
General and Administsrative	$	2,654		$	1,845			44	%
Percentage of total revenues		40	%		66	%
Six months ended:
General and Administsrative	$	4,741		$	3,727			27	%
Percentage of total revenues		39	%		58	%

In the three months ended March 31, 2006, net cash provided by financing activities was $0.3 million, resulting from the exercise of stock options of $0.8 million which was offset by cash used for the repayment of debt totaling $0.5 million.

~~General~~ As ~~and administrative expenses primarily consist~~ of ~~corporate~~March ~~overhead~~31, of2007, the Company, ~~which~~had ~~includes salaries~~cash ~~and~~commitments ~~benefits~~totaling ~~related~~approximately to$9.2 ~~finance,~~million ~~human~~through ~~resources~~2011, ~~MIS,~~related ~~legal,~~mainly ~~and~~long-term ~~executive~~notes ~~personnel~~and ~~along with~~future ~~other~~minimum ~~administrative~~lease ~~costs~~payments ~~such~~for asoffice ~~facilities costs~~space, ~~legal, accounting and investor relations~~ ~~fees, insurance expense,~~ and ~~bad debt expense~~equipment.

General and administrative expenses increased by $0.8 million, or 44%, for the three months ended June 30, 2005 compared to the same period last year. Non-cash stock based compensation increased by $0.5 million related to a charge taken on extending the options of a former executive at June 30, 2005. Salary and fringe benefit costs increased by $0.2 million due primarily to accruals for a severance payment and reclassifications of certain employees to this department.

	Payments Due By Period
	(dollars in thousands)
									More than 5
	Total		1 Year or Less		2-3 Years		4-5 Years		Years
Long-Term Debt Obligations	$	3,350	$	–	$	3,350	$	–	$	–
Operating Lease Obligations		2,555		791		1,764		–		–
Interest Payments on Long-Term Debt Obligations		597		166		364		67		–
Unicast Debt Obligations		2,329		221		700		1,408		–
Purchase Obligations		395		395		–		–		–
Total	$	9,226	$	1,573	$	6,178	$	1,475	$	–

~~General and administrative expenses increased by $1.0 million, or 27%, for the six months ended June~~ ~~30, 2005 compared to the same period last year. Salary and fringe benefit costs increased by $0.4 million due primarily to new employees associated with the Unicast acquisition. In addition, non~~Long-~~cash stock-based~~Term ~~compensation~~Debt ~~increased by $0.4 million related to a charge taken on a modification of options granted to a former executive at June 30, 2005.~~

~~Depreciation~~ In ~~expense~~March 2007, the Company and a holder of the subordinated debt amended the 4.95% subordinated note in the principal amount of $3.1 million (referred to herein as the “Holder”) to extend the maturity date from March 31, 2008 to September 30, 2009 in exchange for the payment by Viewpoint of $0.2 million to the holder of the subordinated note, and adding $0.3 million to the principle of the note. In addition, the amended note also extended the aforementioned de-listing covenant until December 31, 2008. Also see Note 3 to the accompanying financial statements.

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Depreciation	$	220		$	205			7	%
Percentage of total revenues		3	%		7	%
Six months ended:
Depreciation	$	453		$	424			7	%
Percentage of total revenues		4	%		7	%

Other Transactions

~~Depreciation~~ ~~expense~~ On ~~increased~~March by12, ~~less~~2007, ~~than~~the Company $0entered into a Purchase Agreement to acquire all of the outstanding partnership interests of Makos Advertising, L.1P. ~~million~~On April 30, 2007, the Company Corporation completed the Purchase Agreement. In exchange for the ~~three~~all ~~and~~of ~~six~~the ~~month~~outstanding partnership ~~periods~~interests of Makos Advertising, L.P., the Company issued an aggregate ~~ended~~of ~~June~~0.7 30million shares of Company common stock to the partners of Makos Advertising, L.P. ~~2005~~and paid $0.6 million in cash.

~~Amortization~~ The number of ~~intangible~~shares ~~assets~~issuable and the amount of cash payable by the Company are subject to adjustment based on (i) the difference in the estimated net book value of Makos Advertising, L.P. based on the year-end balance sheet as compared to the net book value as of the closing date of the transaction and (ii) subsequent receipt by the Company of accounts receivable outstanding on the closing date of the transaction.

30 The Company also paid off outstanding debt in the form of a line of credit owed by Makos Advertising, L.P. in the amount of approximately $0.1 million and also assumed outstanding debt relating to another line of credit in the amount of approximately $0.1 million.

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Amortization of intangible assets	$	179		$	1			17,800	%
Percentage of total revenues		3	%		—	%
Six months ended:
Amortization of intangible assets	$	357		$	4			8,825	%
Percentage of total revenues		3	%		—	%

The Company entered into a Securities Purchase Agreement with certain accredited investors, dated as of May 4, 2007, under which The Company issued 13.3 million shares of the Company common stock in a private placement to such accredited investors at a purchase price of $0.40 per share (resulting in aggregate gross proceeds of $5.3 million ). The investors in the transaction also received warrants to purchase an additional 3.3 million shares of common stock at an exercise price of $0.45 per share (subject to certain adjustments). Such warrants are not

~~Amortization of intangible assets relates to the amortization of patents, trademarks and other intangible~~ ~~assets~~25 acquired in the Unicast acquisition. Intangible assets, excluding Goodwill, included trademarks, acquired technology and website partner relationships. Viewpoint will be amortizing these values over the useful lives which range from 3 to 10 years.

~~Interest~~exercisable for six months following issuance and ~~other~~have ~~income~~an aggregate term of three and one-half years. On May 7, ~~net~~2007 the Company announced the closing of the transaction and the receipt of $5.3 million.

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Interest and other income, net	$	32		$	27			19	%
Percentage of total revenues		0	%		1	%
Six months ended:
Interest and other income, net	$	56		$	46			22	%
Percentage of total revenues		0	%		1	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Interest~~ The ~~and~~Company ~~other~~is ~~income,~~subject ~~net,~~to ~~primarily~~concentration ~~consists~~ of ~~interest~~credit risk and ~~investment~~interest ~~income~~rate onrisk related to cash, cash equivalents and marketable securities. AsCredit arisk ~~result,~~is ~~interest~~managed ~~and~~by ~~other~~limiting ~~income,~~the ~~net,~~amount ~~fluctuates~~of securities placed with ~~changes~~ any one issuer, investing in high-quality marketable securities and securities of the U.S. government and limiting the average maturity of the overall portfolio. The majority of the Company’s ~~cash~~portfolio, ~~cash~~which ~~equivalents~~is classified ~~and~~as ~~marketable~~available-for-sale, is comprised of fixed income securities ~~balances~~that ~~and~~are subject to the risk of market interest rate fluctuations, and all of the Company’s securities are subject to risks associated with the ability of the issuers to perform their obligations under the instruments. The Company may suffer losses in principal if forced to sell securities, which have declined in market value due to changes in interest rates.

~~Interest~~Item ~~expense~~4. Disclosure Controls and Procedures

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Interest expense	$	(339	)	$	(236	)		44	%
Percentage of total revenues		(5	)%		(8	)%
Six months ended:
Interest expense	$	(655	)	$	(486	)		35	%
Percentage of total revenues		(5	)%		(8	)%

Based on our management’s evaluation, with the participation of our chief executive officer and our chief financial officer, as of March 31, 2007, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) were ineffective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding disclosure.

~~Interest~~ Our ~~expense~~chief ~~consists~~executive ofofficer ~~interest paid~~ and ~~accrued,~~chief ~~and~~financial ~~amortization~~officer ofreached ~~debt~~the ~~discount~~conclusion ~~and~~expressed ~~debt issue~~in ~~costs~~the onpreceding ~~the~~paragraph ~~Company’s~~because ~~outstanding~~we ~~convertible,~~failed ~~subordinated~~to ~~notes~~prepare and report the ~~debt~~information ~~assumed from~~required ~~Unicast~~by ~~following~~Schedule ~~the~~14A ~~acquisition~~within onthe ~~January~~time 3,period ~~2005.~~as specified ~~The~~in ~~increase~~the isrules ~~the~~and ~~result~~forms of ~~interest expense recorded on~~ the ~~Unicast debt~~SEC.

~~Loss~~ We onbelieve ~~conversion~~that our failure to prepare and file with the SEC the information incorporated by reference described above within the time periods specified in the rules and forms of ~~debt~~the SEC resulted from an inadequacy in our disclosure controls and procedures, which have remediated in the second quarter of 2007

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Loss on conversion of debt	$	—		$	(212	)		(100	)%
Percentage of total revenues		—	%		(8	)%
Six months ended:
Loss on conversion of debt	$	—		$	(810	)		(100	)%
Percentage of total revenues		—	%		(13	)%

31 by appointing one employee specifically responsible for monitoring SEC reporting deadlines that reports directly to the CEO.

~~On March 17, 2004, one of the institutional investors holding the convertible notes converted $0.9~~ ~~million~~There ofhave ~~outstanding~~been ~~notes~~no ~~for~~changes ~~shares~~in ofour ~~the~~internal ~~Company’s common stock. The Company recorded~~control aover ~~loss~~financial ofreporting ~~$1.4~~identified ~~million related to the change~~ in the ~~fair~~evaluation ~~value~~that ofoccurred ~~the~~during ~~conversion feature at~~ the ~~time~~ offirst ~~the~~quarter ~~conversion. In addition, on the same day as the conversion, the Company sold 1.5 million shares~~ of ~~common~~our ~~stock~~fiscal inyear a2007 ~~private~~that ~~placement~~have tomaterially ~~the institutional investor~~affected, ~~for $3.7 million~~ or ~~$2.45~~are ~~per~~reasonably ~~share.~~likely to ~~The Company recorded a loss on conversion of debt in the amount of $0.6 million~~affect, ~~which~~our ~~represented the~~internal ~~write-off~~control ofover ~~unamortized~~financial ~~debt issuance costs of $0~~reporting.1 million and the difference between the carrying value of the convertible notes and the fair value of the common stock issued based upon the closing price of the Company’s stock on the day of the sale in the amount of $0.5 million.

~~During the period beginning on April 15, 2004 and May 20, 2004 – a period which covered 25 consecutive~~ ~~trading~~27 days – the dollar volume-weighted average price of the Company’s common stock exceeded 150% of the conversion price applicable to the outstanding convertible notes and the Company determined to exercise its right to convert the outstanding notes into shares of Company common stock. Accordingly, on May 20, 2004, the Company informed the institutional investors holding the outstanding convertible notes that it would exercise its right to convert that debt. On June 18, 2004, the Company completed the conversion of the remaining outstanding convertible notes of $1.8 million and the related outstanding interest into 1.7 million shares of Viewpoint common stock. In addition, the Company recorded a loss on conversion which represented the difference between the fair value of the common stock issued in exchange for the notes and the carrying value of the convertible notes on the date of conversion. This change was primarily comprised of the write-off of unamortized loan discount and debt issuance costs.

~~Changes~~ PART inII ~~fair~~- ~~value~~OTHER ofINFORMATION ~~warrants to purchase common stock and conversion options of convertible notes~~

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Changes in fair value of warrants to purchase common stock and conversion options of convertible notes	$	648		$	3,050			(79	)%
Percentage of total revenues		10	%		109	%
Six months ended:
Changes in fair value of warrants to purchase common stock and conversion options of convertible notes	$	830		$	(3,553	)		(123	)%
Percentage of total revenues		7	%		(56	)%

Item 6. Exhibits

The Company bi-furcated the fair value of the conversion options from the new convertible notes since the conversion options were determined to not be clearly and closely related to the debt host. In addition, since the effective registration of the securities underlying the conversion options is an event outside of the control of the Company, the Company recorded the fair value of the conversion options as long-term liabilities, as it was assumed that the Company would be required to net-cash settle the underlying securities.

Exhibit Number		Exhibit Title
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
		Sarbanes-Oxley Act of 2002.

~~The Company recorded income or loss based on the decrease or increase, respectively, in the fair values~~ of28 the new conversion options and original warrants in the Company’s consolidated statements of operations. The amortization of discount on the new convertible notes and debt issue costs were accounted for using the effective interest method.

~~In March 2004, one of the institutional investors holding the convertible notes converted $0.9 million~~ ofSIGNATURES ~~outstanding notes with Company common stock.~~

~~For~~ Pursuant to the ~~three~~requirements ~~months~~of ~~ended June 30, 2005,~~ the ~~Company~~Securities ~~recorded~~Exchange ~~income~~Act ~~based~~of on1934, the ~~change~~Registrant inhas ~~the~~duly ~~fair value~~caused ofthis ~~the~~report ~~original~~to ~~warrants~~be ofsigned ~~$0.6~~on ~~million.~~its ~~The~~behalf ~~Company~~by ~~recorded income for~~ the ~~three~~undersigned, ~~months ended~~thereunto ~~June~~duly ~~30,~~authorized.

		VIEWPOINT CORPORATION


Dated: May 10, 2007		By: /s/ PATRICK VOGT
		Patrick Vogt
		President and Chief Executive Officer




Dated: May 10, 2007		By: /s/ CHRISTOPHER C. DUIGNAN
		Christopher C. Duignan
		Chief Financial Officer

~~2004 based on the decrease in fair values of the conversion options of its convertible notes of $2.3~~ ~~million~~29 ~~and warrants of $0.7 million.~~

For the six months ended June 30, 2005, the Company recorded income based on the change in the fair value of the original warrants of $0.8 million. For the six months ended June 30, 2004, the Company recorded a loss based on the increase in fair values of the conversion options of its convertible notes of $3.0 million and warrants of $0.6 million.

Provision for income taxes

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Provision for income taxes	$	9		$	25			(64	)%
Percentage of total revenues		—	%		1	%
Six months ended:
Provision for income taxes	$	12		$	35			(66	)%
Percentage of total revenues		—	%		1	%

Provision for income taxes consists primarily of certain minimum state and local income taxes.

Adjustment to net loss on disposal of discontinued operations

	June 30,
	2005			2004			% Change
	(dollars in thousands)
Three months ended:
Adjustment to net loss on disposal
of discontinued operations, net of tax	$	—		$	20			(100	)%
Percentage of total revenues		—	%		1	%
Six months ended:
Adjustment to net loss on disposal
of discontinued operations, net of tax	$	145		$	39			272	%
Percentage of total revenues		1	%		1	%

In December 1999, the Board of Directors of the Company approved a plan to focus exclusively on its interactive media technologies and digital content creation services and to correspondingly divest itself of its prepackaged software graphics business. Accordingly, these operations are reflected as discontinued operations for all periods presented in the accompanying consolidated statements of operations.

The decrease in the adjustment to net loss on disposal of discontinued operations for the three months ended June 30, 2005 was less then $0.1 million. The increase in the adjustment to net loss on disposal of discontinued operations for the six months ended June 30, 2005, represents a settlement of a lawsuit in the Company’s favor related to discontinued operations.

The adjustment to net loss on disposal of discontinued operations for the three and six months ended June 30, 2004 represents royalty payments received for certain prepackaged software.

Factors That May Affect Future Results of Operations

We believe that in the future our results of operations could be affected by various factors including:

Ÿ We have a history of losses and expect to incur losses in the future, which may cause our share price to decline. Ÿ We may have to obtain financing on less favorable terms, which could dilute current stockholders’ ownership interests in the Company. Ÿ Our business is difficult to evaluate because we have a limited operating history and have only relatively recently launched our search toolbar and creative innovator products. Ÿ Our competitors in the search business include much larger companies such as Google, Microsoft, Yahoo! and others that have significantly greater resources than we do to build a business. Ÿ Our efforts to distribute our graphically enhanced search toolbar may experience setbacks limiting or reducing our search revenue. Ÿ The success of our graphically enhanced search operations depends on users’ satisfaction with search results supplied by Yahoo!. Ÿ We may be unable to successfully replace our search results vendor when our distribution contract with Yahoo! expires in March 2006. Ÿ Our software products may be wrongly labeled as spyware or adware which might lead to its uninstallation causing a decrease in our revenues. Ÿ Our business may not grow if the internet advertising market does not continue to develop or if we are unable to successfully implement our business model. Ÿ Our failure to successfully compete may hinder our growth. Ÿ Our revenues will be subject to seasonal fluctuations.

Ÿ We may enter into business combinations and strategic alliances which could be difficult to integrate and may disrupt our business. Ÿ We may need to develop new products or other untested methods of increasing sales with our existing products or distribution network to generate sales and if we are unsuccessful the growth of our business may cease or decline. Ÿ We will need to keep pace with rapid technological change in the internet search and advertising industries. Ÿ Our ad campaign management and deployment solution may not be successful and may cause business disruption. Ÿ We might experience significant defects in our products. Ÿ Our technical systems are vulnerable to interruption and damage. Ÿ Our stock price is volatile, which could subject us to class action litigation. Ÿ Our charter documents could make it more difficult for an unsolicited third party to acquire us. Ÿ The market for digital visualization solutions is characterized by rapidly changing technology, and if we do not respond in a timely manner, our products and technologies may not succeed in the marketplace. Ÿ We may be unable to protect our intellectual property rights. Ÿ We may be liable for infringing the intellectual property rights of others. Ÿ Regulatory and legal uncertainties could harm our business. Ÿ Internet security poses risks to our entire business.

Recent Accounting Pronouncements

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”), which clarifies that the term “conditional asset retirement”, as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 requires that a liability be recognized for the fair value of a conditional asset retirement obligation when incurred, if the fair value of the liability can be reasonably estimated. Uncertainty about the timing and method of settlement of a conditional asset retirement obligation would be factored into the measurement of the liability when sufficient information exists. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. Management believes that the future adoption of FIN 47 will not have a material impact on the Company’s financial statements.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and SFAS No. 3.” This statement provides guidance on the accounting for and reporting of accounting changes and error corrections. It requires, unless impracticable, retrospective application for reporting a change in accounting principle, unless the newly adopted accounting principle specifies otherwise, and reporting of a correction of an error. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of this statement is not expected to materially impact the Company’s consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources

Cash, cash equivalents, and marketable securities totaled $4.6 million at June 30, 2005, down from $8.7 million at December 31, 2004.

	June 30,
	2005			2004
	(dollars in millions)
Cash used in operating activities	$	(3.7	)	$	(4.7	)
Cash provided by (used in) investing activities		1.0			(6.7	)
Cash provided by financing activities		0.4			3.9

Operating activities

In the six months ended June 30, 2005, cash used in operating activities was $3.7 million, a decrease of $1.0 million compared to the six months ended June 30, 2004. The decrease is primarily due to the Company’s improved operating performance, and the payment received of 1.9 million from Unicast receivables related to balances that existed prior to the acquisition. This was offset by the payment of Unicast liabilities of $2.6 million related to balances prior to the acquisition. The decrease in the net loss number was due to a charge for the six months ended June 30, 2004 related to the change in fair value of warrants to purchase common stock and conversion feature of convertible debt and loss on conversion of debt of $4.4 million. The convertible notes associated with this charge were converted into equity during 2004, and therefore the expense related to the conversion option did not occur in 2005.

Investing activities

In the six months ended June 30, 2005, cash provided by investing activities was $1.0 million, primarily due to the net proceeds from sales and maturities of marketable securities. Capital expenditures were $0.3 million.

In the six months ended June 30, 2004, cash used in investing activities was $6.7 million, primarily due to net purchases of marketable securities of $6.5 million. Capital expenditures were $ 0.2 million.

Financing activities

In the six months ended June 30, 2005, net cash provided by financing activities was $0.4 million, resulting solely from the exercise of stock options.

In the six months ended June 30, 2004, net cash provided by financing activities was $3.9 million. This primarily resulted from the issuance of 1.5 million shares of common stock to an institutional investor on March 16, 2004 for $3.7 million.

As of June 30, 2005, the Company had cash commitments totaling approximately $12.5 million through 2011, related to long-term convertible notes, and future minimum lease payments for office space, and equipment.

		Payments Due By Period
		(dollars in thousands)
	Total		1 Year or Less		2-3 Years		4-5 Years		More than 5 Years
Long-Term Debt Obligations		3,500		450		3,050		—		—
Operating Lease Obligations		4,412		939		1,965		1,508		—
Interest Payments on Long-Term
Debt Obligations		532		166		295		66		5
Employee Agreement		165		165		—		—		—
Unicast Debt Obligations		3,155		389		778		648		1,340
Purchase Obligations		719		719		—		—		—
Total		12,483		2,828		6,088		2,222		1,345

Unicast Acquisition

Under the terms of the agreement, Viewpoint issued an aggregate of 1.1 million shares of Viewpoint common stock, with a fair value of $3.0 million to the selling stockholders of Unicast and paid $0.4 million in cash and acquisition costs of $0.1 million. Viewpoint also assumed negative net working capital from Unicast of $1.2 million. Based upon the working capital calculation during the period following the acquisition Viewpoint has no additional obligation to issue shares or pay cash to the selling stockholders of Unicast.

Additionally, long-term debt issued by Unicast (“Unicast notes”) remains outstanding at the Unicast subsidiary level following the closing. This debt is comprised primarily of two notes. Unicast issued an unsecured promissory note dated February 27, 2004 in the principal amount of $1.0 million. This promissory note bears interest at 5% per annum, compounding annually, and matures in February 2011. No payments of principal or interest are due until the maturity date. In addition, Unicast issued an amended and restated secured promissory note dated February 27, 2004 in the principal amount of $2.0 million. This promissory note bears interest of 5% per annum and is collateralized by substantially all of the Unicast subsidiary’s assets. Concurrently with the closing of the Unicast acquisition, Viewpoint made a payment of $0.3 million to the secured note holder which was applied towards reducing the amount outstanding under the promissory note. Viewpoint will become an additional obligor under the promissory note and Viewpoint’s assets will become additional collateral to secure the obligations if certain contingencies occur, such as Viewpoint’s failure to operate the Unicast ad-serving business through the Unicast subsidiary or the ad-serving business fails to achieve certain revenue targets. No payments under the secured promissory note are due until March 2006. All unpaid principal and interest is payable in 60 equal monthly installments from March 2006 through March 2011 amounting to $2.2 million.

Viewpoint assessed the values of assets other than working capital assets purchased in the acquisition. Tangible equipment value was determined based on fair market value at the date of acquisition. The remaining useful life of this equipment was predominantly determined to be one year. Intangible values acquired included trademarks, acquired technology, website partner relationships and goodwill. Acquired technology was determined to have a life of three years while the other intangible values were determined to have a life of 5-10 years. Unicast had no in-process research and development.

Goodwill was determined based upon the residual value based upon fair value of the common stock issued, the cash paid less the liabilities assumed less the identifiable asset values. Values assigned to goodwill and other acquired assets and liabilities are preliminary and are subject to adjustment based upon finalizing the fair values of acquired assets and liabilities. During the quarter ended June 30, 2005, the Company changed its initial estimate of

the fair value of the acquired website relationships and certain liabilities the affect of which increased goodwill by less then $0.1 million from the amounts recorded at March 31, 2005. Consideration paid for the acquisition amounted to $3.5 million, made up of cash consideration of $0.4 million, acquisition costs of $0.1 million and the issuance of 1.1 million shares of common stock valued at $3.0 million.

Convertible Notes

On December 31, 2002, the Company completed a private placement of convertible notes and warrants in which it issued to three institutional investors, 4.95% convertible notes having an aggregate principal amount of $7.0 million, and warrants to purchase 0.7 million shares of Company common stock. The warrants expire on December 31, 2006, and are exercisable at a price of $2.26 per share.

On March 25, 2003, the Company entered into Redemption, Amendment and Exchange Agreements with the three institutional investors with whom it had completed the private placement of convertible notes and warrants on December 31, 2002. The Company recorded a loss for the quarter ended June 30, 2003, on the early extinguishment of the original convertible notes in the amount of $1.7 million of which $0.7 related to the write-off of deferred loan costs. In conjunction with the extinguishment, the Company paid $3.3 million, issued new convertible notes in the principal amount of $2.7 million and issued $1.4 million shares of its common stock with a market value of $0.7 million. The difference between (i) the carrying value of the outstanding convertible notes exchanged and (ii) cash paid and the fair value of the common stock and new convertible notes issued, amounted to $1.0 million and was included in the loss on early extinguishment of debt.

During 2004 all of the outstanding convertible notes were converted to common stock. As of June 30, 2005, warrants to purchase 0.7 million shares remain outstanding.

Subordinated Notes

On March 26, 2003, Viewpoint Corporation entered into a Securities Purchase Agreement with three other accredited investors, pursuant to which it received $3.5 million in exchange for an aggregate of $3.5 million principal amount of 4.95% subordinated notes and 3.6 million shares of Viewpoint common stock. The subordinated notes are scheduled to mature on March 31, 2006. Interest on these notes is payable quarterly in arrears in cash. The Company has the right at any time to redeem up to all of the outstanding notes at par plus accrued and unpaid interest.

On July 23, 2005 a holder of subordinated notes in the principal amount of $3.0 million agreed to extend the maturity date of those notes to March 31, 2008. The Company paid a fee of less than $1.0 million to secure this agreement. Simultaneously the Company sold this holder approximately 1.4 million shares of common stock for $2.0 million.

Amended and Restated Notes

Other Transactions

In October 2003, the Company entered into an amended license agreement with AOL which provided for payments by AOL of $10.0 million. The agreement contains multiple elements consisting of a perpetual broadcast license, a perpetual source code license, quarterly updates to the source code through December 2005, and maintenance and consulting services. The Company will recognize revenue from this agreement ratably, through

December 31, 2005, which represents the duration of the Company’s obligation for post-contract customer support including quarterly upgrades and maintenance requirements.

The Company implemented a restructuring plan in September 2003, which was designed to streamline the business. Under the plan the Company eliminated 24 sales and marketing, research and development, and general and administrative positions. The Company incurred a restructuring charge of $0.5 million related to severance arrangements. The charge was recorded on the income statement as a restructuring and impairment charge. This restructuring plan was completed by September 30, 2003. In November 2003, however, the Company increased the restructuring charge by $0.1 million in settlement of an action brought by one of the terminated employees. In January 2004 the Company recorded a non-cash adjustment of less then $0.1 million to the restructuring accrual to reflect payments that were less than originally contemplated under the plan. This restructuring plan was completed by June 30, 2004.

The Company had cash, cash equivalents and marketable securities of $4.6 million at June 30, 2005. During the quarter ended June 30, 2005, net cash used in operations amounted to $0.4 million. As of June 30, 2005, the Company had an accumulated deficit of $256.5 million. There can be no assurance that Viewpoint will achieve or sustain positive cash flows from operations or profitability.

The Company believes that its current cash, cash equivalents, and marketable securities balances and cash provided by expected future operations are sufficient to meet its operating cash flow needs and anticipated capital expenditure requirements through the next twelve months. This includes the payment of $0.5 million in subordinated notes due in March 2006.

The Company has contingency plans for 2005 if expected revenue targets are not achieved. These plans include further workforce reductions as well as reductions in overhead and capital expenditures. The Company may seek additional funds when necessary through public or private equity financing or from other sources to fund operations and pursue growth, although there are no assurances that the Company can obtain such financing with reasonable terms.

Other then the shares sold on July 27, 2005, the Company has no commitment for additional financing and may experience difficulty in obtaining additional financing on favorable terms, if at all. Any financing the Company obtains may contain covenants that restrict the Company’s freedom to operate the business or may have rights, preferences or privileges senior to the Company’s common stock and may dilute the Company’s current shareholders’ ownership interest in Viewpoint. If the Company is unable to achieve profitable operations and/or raise additional capital, future operations will need to be scaled back further or discontinued.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to concentration of credit risk and interest rate risk related to cash, cash equivalents and marketable securities. Credit risk is managed by limiting the amount of securities placed with any one issuer, investing in high-quality marketable securities and securities of the U.S. government and limiting the average maturity of the overall portfolio. The majority of the Company’s portfolio, which is classified as available-for-sale, is comprised of fixed income securities that are subject to the risk of market interest rate fluctuations, and all of the Company’s securities are subject to risks associated with the ability of the issuers to perform their obligations under the instruments. The Company may suffer losses in principal if forced to sell securities, which have declined in market value due to changes in interest rates.

Item 4. Controls and Procedures

As required by Rule 13a-15(b), Viewpoint management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13a-15(d), Viewpoint management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report, including changes created by the Unicast Acquisition, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security holders

The Annual Meeting of Stockholders of Viewpoint Corporation was held on June 22, 2005. A proposal to elect eight (8) members of the Board of Directors to serve for a one-year term expiring at the annual meeting of stockholders in 2006 was approved by the stockholders with the nominees receiving the following votes:

	For	Withheld
Jerry Amato	45,542,179	350,252
Thomas Bennett	45,220,203	672,228
James Crabbe	45,561,966	330,465
Stephen Duff	45,562,889	329,542
Samuel Jones	45,527,397	365,034
Dennis Raney	45,563,563	328,868
Robert Rice	44,647,075	1,245,356
Patrick Vogt	45,561,468	330,963

Stockholders ratified the appointment of PricewaterhouseCoopers LLP as independent public accountants of the Company for the 2005 fiscal year. This proposal received 45,773,590 votes in favor and 90,249 against, with 28,592 abstaining. Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit Number		Exhibit Title
10.1		Consulting Agreement of Brian O’Donoghue
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

The Company filed a report on Form 8-K on May 5, 2005, to furnish its press release concerning its results of operations for the quarterly period ending on March 31, 2005.

On June 10, 2005, the Company filed a report on Form 8-K announcing the resignation of its Senior Vice President of Corporate Development and General Counsel of the Company and the hiring of a Vice President and General Counsel of the Company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VIEWPOINT CORPORATION
Dated: August 9, 2005	By:	/s/ JAY S. AMATO
		Jay S. Amato President and Chief Executive Officer
Dated: August 9, 2005	By:	/s/ WILLIAM H. MITCHELL
		William H. Mitchell Chief Financial Officer
Dated: August 9, 2005	By:	/s/ CHRISTOPHER C. DUIGNAN
		Christopher C. Duignan Chief Accounting Officer

Filing Compare · ENLIVEN MARKETING TECHNOLOGIES CORP