UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

==============================================================================

                            FORM 10-Q

[X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934.

      For the Quarterly Period ended June 30, 2006

                                or
[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934.

     For the transitional period ________ to __________


                 Commission File Number: 0-13316

                  BROADCAST INTERNATIONAL, INC.
      -----------------------------------------------------
      (Exact name of registrant as specified in its charter)

              Utah                                    87-0395567
-------------------------------            --------------------------------
(State or other jurisdiction of         (IRS Employer Identification No.)
incorporation or organization)

      7050 Union Park Ave. #600, Salt Lake City, Utah  84047
     -------------------------------------------------------
       (Address of Principal Executive Offices) (Zip Code)

                          (801) 562-2252
     -------------------------------------------------------
       (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 such shorter period that the
registrant was required to file such 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 ( ) Non-accelerated filer (X)

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 July 20, 2006, there were 24,919,942 shares of the registrant's common
stock, $0.05 par value, outstanding, which is the only class of common or
voting stock the registrant has issued.


                                1

<PAGE>
                  Broadcast International, Inc.
                            Form 10-Q


                        Table of Contents


Part I - Financial Information                                         Page

         Item 1.   Financial Statements                                  3

         Item 2.   Management's Discussion and Analysis of
                   Financial Condition and Results of Operations        17

         Item 3.   Quantitative and Qualitative Disclosures
                   about Market Risk                                    27

         Item 4.   Controls and Procedures                              27

Part II - Other Information

         Item 1.   Legal Proceedings                                    28

         Item 1A.  Risk Factors                                         28

         Item 2.   Unregistered Sales of Equity Securities
                   and Use of Proceeds                                  28

         Item 3.   Defaults Upon Senior Securities                      28

         Item 4.   Submission of Matters to a Vote of Security Holders  28

         Item 5.   Other Information                                    28

         Item 6.   Exhibits                                             29

Signatures                                                              32




                                2

<PAGE>


Item 1. Financial Information

          BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES
              CONSOLIDATED CONDENSED BALANCE SHEETS


                                                     December 31,   June 30,
                                                        2005         2006
                                                                  (Unaudited)
                                                   ------------- -------------
ASSETS:

Current assets
   Cash and cash equivalents                       $    446,491  $    794,643
   Trade accounts receivable, net                     1,186,634     1,175,636
   Inventory                                            235,279        23,556
   Prepaid expense                                      589,370     1,977,292
                                                   ------------- -------------
Total current assets                                  2,457,774     3,971,127
                                                   ------------- -------------
Property and equipment, net                             504,162       402,229
                                                   ------------- -------------
Other assets
   Patents, net                                         201,565       201,180
   Debt offering costs                                  717,721       472,185
   Deposits and other assets                              7,824       108,538
                                                   ------------- -------------
Total other assets                                      927,110       781,903
                                                   ------------- -------------
Total assets                                       $  3,889,046  $  5,155,259
                                                   ============= =============
LIABILITIES AND STOCKHOLDER DEFICIT:

Current liabilities
   Accounts payable                                $  1,176,100  $  1,424,738
   Payroll and related expenses                         185,627       255,239
   Other accrued expenses                               347,400        51,819
   Unearned revenues                                    776,941       694,667
   Current portion of long-term obligations              70,187        70,187
   Derivative valuation                               3,012,000     2,122,700
                                                   ------------- -------------
Total current liabilities                             5,568,255     4,619,350

Long-term liabilities
   Senior convertible debt (net of $2,375,002
    and $1,562,502 discount, respectively)              624,998       937,498
   Other long-term obligations                          105,280        70,187
   Deferred bonus payable                               600,000       600,000
                                                   ------------- -------------
Total liabilities                                     6,898,533     6,227,035
                                                   ------------- -------------

Stockholders' deficit:
   Preferred stock, no par value; 10,000,000 shares
    authorized, none issued                                   -             -
   Common stock, $.05 par value; 40,000,000 shares
    authorized, 21,872,089 and 24,844,942 shares
    issued as of December 31, 2005 and June 30,
    2006, respectively                                1,093,604     1,242,247
   Additional paid-in capital                        21,985,011    28,039,479
   Unexercised stock options and warrants                     -       571,712
   Accumulated deficit                              (26,088,102)  (30,925,214)
                                                   ------------- -------------
Total stockholders' deficit                          (3,009,487)   (1,071,776)
                                                   ------------- -------------

Total liabilities and stockholders' deficit        $  3,889,046  $  5,155,259
                                                   ============= =============

See accompanying notes to consolidated condensed financial statements

                                3

<PAGE>
<TABLE>
<CAPTION>


               BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES
              CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                (Unaudited)


                                            Three Months Ended           Six Months Ended
                                        -------------------------- -----------------------------
                                           June 30,     June 30,        June 30,       June 30,
                                             2005         2006            2005           2006
                                        ------------- ------------- -------------- --------------

                                     <c>           <c>           <c>            <c>
Net sales                               $    999,495  $  4,283,115  $   1,977,147  $   7,063,513

Cost of sales                                994,829     3,999,406      1,858,206      6,737,357
                                        ------------- ------------- -------------- --------------

Gross profit                                   4,666       283,709        118,941        326,156
                                        ------------- ------------- -------------- --------------
Operating expenses:

  Administrative and general                 804,229       963,536      1,208,347      2,211,341
  Selling and marketing                      229,806       219,448        378,225        368,023
  Research and development in process        112,090       296,903        221,461      1,905,199
                                        ------------- ------------- -------------- --------------
Total operating expenses                   1,146,125     1,479,887      1,808,033      4,484,563
                                        ------------- ------------- -------------- --------------
Loss from operations                      (1,141,459)   (1,196,178)    (1,689,092)    (4,158,407)
                                        ------------- ------------- -------------- --------------
Other income (expense):

  Interest income                              3,814         6,303          4,810         11,394
  Interest expense                          (385,885)     (771,571)      (635,799)    (1,208,119)
  Gain on forgiveness of debt                      -             -              -        284,000
  Derivative valuation gain (loss)        (2,974,027)    1,486,500     (2,974,027)       242,500
  Other income (expense)                      27,576        (8,753)        30,080         (8,480)
                                        ------------- ------------- -------------- --------------
Total other income (expense)              (3,328,522)      712,479     (3,574,936)      (678,705)
                                        ------------- ------------- -------------- --------------

Loss before income taxes                  (4,469,981)     (483,699)    (5,264,028)    (4,837,112)

Income tax benefit                                 -             -              -              -
                                        ------------- ------------- -------------- --------------
Net loss                                $ (4,469,981) $   (483,699) $  (5,264,028) $  (4,837,112)
                                        ============= ============= ============== ==============

Loss per share, basic and diluted       $       (.22) $       (.02) $        (.25) $        (.20)
                                        ============= ============= ============== ==============
Weighted average shares,
 basic and diluted                        20,775,400    24,557,300     20,718,500     23,737,415
                                        ============= ============= ============== ==============

   See accompanying notes to consolidated condensed financial statements

                                     4

</TABLE>
<PAGE>
<TABLE>
<CAPTION>






               BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                                           Six Months Ended
                                                                      ---------------------------
                                                                        June 30,       June 30,
                                                                           2005         2006
                                                                      ------------- -------------

                                                                   <c>           <c>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net loss                                                            $ (5,264,028) $ (4,837,112)

  Adjustments to reconcile net loss to net cash used in
  operating activities:
    Depreciation and amortization                                          183,440       135,396
    Beneficial conversion                                                  449,876             -
    Common stock issued for services                                       235,170       100,000
    Accretion of debt discount                                             125,000       812,500
    Common stock issued for acquisition in excess of
     asset valuation                                                             -     1,363,126
    Unexercised options and warrant expense                                      -       571,712
    Derivative liability fair market valuation                           2,974,027      (242,500)
    Gain on forgiveness of debt                                                  -      (284,000)
    Provision for losses on accounts receivable                              6,747         5,225
  Changes in assets and liabilities:
    Receivables                                                            129,477         5,773
    Inventories                                                             (2,576)      211,723
    Debt offering costs                                                     37,781       245,536
    Prepaid and other assets                                              (245,974)      361,363
    Accounts payable and accrued expenses                                   55,355       306,668
    Unearned revenue                                                       (69,774)      (82,274)
                                                                      ------------- -------------
  Net cash used in operating activities                                 (1,385,479)   (1,326,864)
                                                                      ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of equipment                                                    (47,151)      (33,077)
  Technology patents                                                       (13,329)            -
                                                                      ------------- -------------
  Net cash used in investing activities                                    (60,480)      (33,077)
                                                                      ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on debt                                               (35,093)      (35,093)
  Proceeds from the sale of stock                                          124,980     1,243,186
  Loan proceeds, net                                                     3,449,876             -
  Cash provided in acquisition                                                   -       500,000
                                                                      ------------- -------------
  Net cash provided by financing activities                              3,539,763     1,708,093
                                                                      ------------- -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                2,093,804       348,152

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                             173,536       446,491
                                                                      ------------- -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                              $  2,267,340  $    794,643
                                                                      ============= =============



   See accompanying notes to consolidated condensed financial statements

                                     5
</TABLE>
<PAGE>

          BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
                          June 30, 2006

NOTE 1 - BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated
condensed financial statements of Broadcast International, Inc. (the
"Company") contain the adjustments, all of which are of a normal recurring
nature, necessary to present fairly the financial position of the Company at
June 30, 2006 and December 31, 2005 and the results of operations for the
three and six months ended June 30, 2005 and 2006, respectively, with the cash
flows for each of the six month periods ended June 30, 2005 and 2006, in
conformity with U.S. generally accepted accounting principles.  The balance
sheet information at December 31, 2005 is derived from audited consolidated
financial statements; however, certain reclassifications, none of which were
material, have been made to conform to the June 30, 2006 presentation.

These consolidated condensed financial statements should be read in
conjunction with the audited consolidated financial statements and related
notes included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2005.  Operating results for the six months ended June 30,
2006 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2006.

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. We have incurred
losses and have not demonstrated the ability to generate sufficient cash flows
from operations to satisfy our liabilities and sustain operations. These
factors raise substantial doubt about our ability to continue as a going
concern.

Our continuation as a going concern is dependent on our ability to generate
sufficient income and cash flow to meet our obligations on a timely basis and
to obtain additional financing as may be required. We are actively seeking
options to obtain additional capital and financing. We have commenced a
private placement of up to $4,500,000 of our common stock, and as of June 30,
2006, we had raised $1,243,186 (see Note 9). There is no assurance we will be
successful in our efforts. The accompanying statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.

NOTE 3 - RECLASSIFICATIONS

Certain 2005 financial statement amounts have been reclassified to conform to
2006 presentations.

The results of operations for the six months ended June 30, 2006 include a
$113,811 expense reduction in cost of sales with a corresponding increase in
general and administrative expense for costs related to the three months ended
March 31, 2006 for changes in operation related to our information systems
department.

NOTE 4 - WEIGHTED AVERAGE SHARES

The computation of basic earnings (loss) per common share is based on the
weighted average number of shares outstanding during each period.


                                6

<PAGE>

The computation of diluted earnings per common share is based on the weighted
average number of common shares outstanding during the period, plus the common
stock equivalents that would arise from the exercise of stock options and
warrants outstanding, using the treasury stock method and the average market
price per share during the period.  Options and warrants to purchase 6,269,664
and 7,775,596 shares of common stock at prices ranging from $.02 to $45.90 per
share were outstanding at June 30, 2006 and 2005, respectively, but were
excluded for the calculation of diluted earnings per share because the effect
of stock options and warrants was anti-dilutive.

NOTE 5 - STOCK COMPENSATION

Beginning on January 1, 2006, we began accounting for stock-based compensation
under the provisions of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment" (FAS 123R), which requires the recognition of the fair
value of stock-based compensation. We have used the modified prospective
application. Under the fair value recognition provisions for FAS 123R,
stock-based compensation cost is estimated at the grant date based on the fair
value of the awards expected to vest and recognized as expense ratably over
the requisite service period of the award.  We have used the Black-Scholes
valuation model to estimate fair value of our stock-based awards, which
requires various judgmental assumptions including estimated stock price
volatility, forfeiture rates, and expected life.  Our computation of expected
volatility is based on a combination of historical and market-based implied
volatility.  Financial statements for periods prior to 2006 have not been
restated. The following table illustrates our interim net income and earnings
per share for the three and six months ended June 30, 2005 in accordance with
FAS 123R.

                                                 Three Months   Six Months
                                                      2005         2005
                                                 ------------- -------------
 Net loss, as reported                           $ (4,469,981) $ (5,264,028)
 Addback:
   Stock-based employee compensation expense
   determined under intrinsic value based method
   for all awards, net of related tax effects               -             -
 Deduct:
   Total stock-based employee compensation
   expense determined under fair value based
   method for all awards, net of related
   tax effects                                        (52,427)     (177,194)
                                                 ------------- -------------
 Pro forma net loss                              $ (4,522,408) $ (5,441,222)
                                                 ============= =============
 Pro forma (loss) earnings per share:
   Basic and diluted - as reported               $       (.22) $       (.25)
                                                 ============= =============
   Basic and diluted - pro forma                 $       (.22) $       (.26)
                                                 ============= =============

We calculated the fair market value of each option award on the date of grant
using the Black-Scholes option-pricing model. The following assumptions were
used for the options granted for the six months ended June 30, 2006.


                                7

<PAGE>

               Risk-free interest rate     4.58% - 4.59%
               Expected lives in years     10.0
               Dividend yield              0
               Expected volatility         85.80%

Net loss for the three and six months ended June 30,2006 includes $84,962 and
$571,712, respectively of non-cash stock-based compensation expense. Included
in the three months ended June 30, 2006 is $74,600 for the vesting of
unexpired options issued prior to January 1, 2006 and $10,362 (of a total of
$51,808) for repriced options previously granted to executive management which
is being recognized over the remaining vesting period. Included in the six
months ended June 30, 2006 is $342,500 resulting from 175,000 options granted
to two outside directors, $182,440 for the vesting of unexercised options
issued prior to January 1, 2006, $26,048 for repriced options previously
granted to non-executive management employees, and $20,724 (of a total of
$51,808) for repriced options previously granted to executive management which
is being recognized over the remaining vesting period. The impact on our
results of operations for recording stock-based compensation under FAS 123R
for the three and six months ended June 30, 2006 was as follows:

                                                        Three         Six
                                                        Months       Months
                                                     ------------ ------------
  General and administration                         $    37,754  $   462,330
  Research and development in process                     47,208      109,382
                                                     ------------ ------------
  Total                                              $    84,962  $   571,712
                                                     ============ ============


No common stock or options to purchase common stock of the Company were issued
to employees for compensation during the six months ended June 30, 2005.

Due to unexercised options outstanding at June 30, 2006, we will recognize a
total of $1,159,095 of compensation expense over the next three years for
employees and consultants as a result of the adoption of FAS 123R based upon
option award vesting parameters as shown below:


               2006       $  741,636
               2007          251,221
               2008          166,238
                          -----------
               Total      $1,159,095
                          ===========

The following unaudited tables summarize option and warrant activity during
the six months ended June 30, 2006.

                                           Options
                                           and Warrants    Options or Warrants
                                           Outstanding     Price Per Share
                                           -----------     ---------------
     Outstanding at December, 31, 2005        8,122,747
     Options granted                            175,000     $2.25 - $2.30
     Warrants issued                            828,790      2.00
     Expired                                 (2,854,567)     3.50 - 36.25
     Forfeited                                   (2,306)      .55 -  4.00
     Exercised                                        -
                                             -----------
     Outstanding at June 30, 2006             6,269,664     $0.02  - $45.90
                                             ===========



                                9
<PAGE>


                               Outstanding                   Exercisable
                 -------------------------------------- -------------------
                                Weighted-
                                Average     Weighted              Weighted
                                Remaining   Average               Average
Range of           Number      Contractual  Exercise   Number     Exercise
Exercise Prices  Outstanding  Life (years)  Price    Exercisable  Price
---------------------------------------------------------------------------
$       0.02        1,524,168        3.75     $ 0.02    1,524,168   $  0.02
        0.04          248,383        4.09       0.04      248,383      0.04
  0.33- 0.55          987,423        6.36       0.53      987,423      0.53
  2.00- 6.25        3,505,290        2.72       4.88    3,123,123      2.74
  9.50-11.50            2,800        3.78      10.61        2,800     10.61
 36.25-45.90            1,600        4.17      41.08        1,600     41.08
---------------------------------------------------------------------------
$.02 - 45.90        6,269,664        4.81     $ 1.63    5,887,497   $  1.57
===========================================================================

NOTE 6- SIGNIFICANT ACCOUNTING POLICIES

Management Estimates
--------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period.  Actual results could differ from
those estimates.

Cash and Cash Equivalents
-------------------------
We consider all cash on hand and in banks, and highly liquid investments with
maturities of three months or less to be cash equivalents.  At June 30, 2006
and December 31, 2005 we had bank balances in the excess of amounts insured by
the Federal Deposit Insurance Corporation. We have not experienced any losses
in such accounts, and believe we are not exposed to any significant credit
risk on cash and cash equivalents.

Trade Account Receivables
-------------------------
Trade account receivables are carried at original invoice amount less an
estimate made for doubtful receivables based on a review of all outstanding
amounts on a monthly basis. Management determines the allowance for doubtful
accounts by identifying troubled accounts and by using historical experience
applied to an aging of accounts. Trade receivables are written off when deemed
uncollectible. Recoveries of trade receivables previously written off are
recorded when received.

A trade receivable is considered to be past due if any portion of the
receivable balance is outstanding for more than 90 days. After the receivable
becomes past due, it is on non-accrual status and accrual of interest is
suspended.

Inventories
-----------
Inventories consisting of electrical and computer parts are stated at the
lower of cost or market determined using the first-in, first-out method.


                                9

<PAGE>

Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the property,
generally from three to five years.  Repairs and maintenance costs are
expensed as incurred except when such repairs significantly add to the useful
life or productive capacity of the asset, in which case the repairs are
capitalized.

Patents
-------
Patents represent initial legal costs incurred to apply for United States and
international patents on the CodecSys technology, and are amortized on a
straight-line basis over their useful life of approximately 20 years.  We have
filed several patents in the United States and foreign countries. As of June
30, 2006 three foreign countries had approved patent rights. While we are
unsure whether we can develop the technology in order to obtain the full
benefits, the patents themselves hold value and could be sold to those with
more resources to complete the development. On-going legal expenses incurred
for patent follow-up have been expensed from July 2005 forward.

Amortization expense recognized on all patents totaled $315 and $385 for the
three and six months ended June 30, 2006, respectively. Amortization for the
three and six months ended June 30, 2005 was $139.

Estimated amortization expense, if all patents were issued at July 1, 2006,
for each of the next five years is as follows:

         Year ending December 31:

                  2006              $ 5,055
                  2007               10,110
                  2008               10,110
                  2009               10,110
                  2010               10,110

Long-Lived Assets
-----------------
We review our long-lived assets, including patents, whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.  Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future un-discounted net cash
flows expected to be generated by the asset.  If such assets are considered to
be impaired, then the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the estimated fair value of
the assets.  Fair value is determined by using cash flow analyses and other
market valuations.

Income Taxes
------------
We account for income taxes in accordance with the asset and liability method
of accounting for income taxes prescribed by Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes.  Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to the taxable income in the years in which those
temporary differences are expected to be recovered or settled.


                                10

<PAGE>


Revenue Recognition
-------------------
We recognize revenue when evidence exists that there is an arrangement between
us and our customers, delivery of equipment sold or service has occurred, the
selling price to our customers is fixed and determinable with required
documentation, and collectibility is reasonably assured. We recognize as
deferred revenue, payments made in advance by customers for services not yet
provided.

When we enter into a multi-year contract with a customer that has an
established network to provide installation, network management, satellite
transponder and help desk, or a combination of these services, we recognize
this revenue equally over the period of the agreement.  These agreements
typically provide for additional fees, as needed, to be charged if on-site
visits are required by the customer in order to ensure that each customer
location is able to receive network communication. As these on-site visits are
performed, the associated revenue and cost are recognized in the period the
work is completed. If we install, for an additional fee, new or replacement
equipment to an immaterial number of new customer locations, and the equipment
immediately becomes the property of the customer, the associated revenue and
cost are recorded in the period in which the work is completed.

When we enter into a multi-year contract to provide equipment, installation,
network management, satellite transponder, help desk, or a combination of
these services, to a customer for the establishment of a new network (or major
upgrade to an existing network) where substantial revenue is earned for
equipment sales and/or installation work performed at the beginning of the
contact, compared to expected on-going future revenue, we normalize revenue
recognition by deferring earned revenue over the contracted period. These
agreements typically provide for additional fees, once the initial
installations are completed, to be charged if on-site visits are required by
the customer in order to ensure that each customer location is able to receive
network communication. As these on-site visits are performed, the associated
revenue and cost are recognized in the period the work is completed.
Additionally, as immaterial numbers of new sites are added to the network, the
associated revenue and cost are recorded in the period in which the work is
completed.

When we enter into an agreement to perform equipment sales and/or
installation-only services, the revenue and cost are recognized in the period
the work is completed.

Concentration of Credit Risk
-----------------------------
Financial instruments, which potentially subject us to concentration of credit
risk, consist primarily of trade accounts receivable. In the normal course of
business, we provide credit terms to our customers. Accordingly, we perform
ongoing credit evaluations of our customers and maintain allowances for
possible losses which, when realized, have been within the range of
management's expectations.

Our three largest customers' sales revenues accounted for approximately 84%
and 66% of total revenues, with combined balances representing approximately
83% and 17% of our outstanding accounts receivable for the six months ended
June 30, 2006 and 2005, respectively. The three largest customers in 2006 are
not the same as the three largest customers in 2005, as we lost one of those
customers and gained a substantial new customer. Included in the numbers for
2006 above is our single largest customer for the six months ended June 30,
2006, which provided no revenue for the six months ended June 30, 2005;
however, this customer accounted for 67% of our 2006 revenue and represented
70% of our accounts receivable on June 30, 2006. Any material reduction in
revenues generated from any one of our largest customers could harm our
results of operations, financial condition and liquidity.


                                11

<PAGE>


Fair Value of Financial Instruments
-----------------------------------
Our financial instruments consist of cash, receivables, notes receivables,
payables and notes payable.  The carrying amount of cash, receivables and
payables approximates fair value because of the short-term nature of these
items.  The aggregate carrying amount of the notes receivable and notes
payable approximates fair value as the individual notes bear interest at
market interest rates.

NOTE 7- SENIOR SECURED CONVERTIBLE PROMISSORY NOTES

On May 16, 2005, we consummated a private placement of $3,000,000 (original)
principal amount of 6% senior secured convertible notes with four
institutional funds.  The senior secured convertible notes are due May 16,
2008 and were originally convertible into 1,200,000 shares of common stock of
the Company. Additionally, we issued to the note holders a total of 600,000 A
warrants and 600,000 B warrants to purchase common stock with an exercise
price of $2.50 and $4.00, respectively. On March 16, 2006, we entered into a
waiver and amendment agreement (discussed below), which adjusted the
conversion rate of the notes and exercise price of the warrants. The warrants
and the embedded conversion feature and prepayment provision of the senior
secured convertible notes have been accounted for as derivatives pursuant to
EITF 00-19 and SFAS No. 133.

On April 21, 2006, two of the institutional funds converted an aggregate of
$500,000 of their convertible notes into 333,334 shares of common stock of the
Company. Upon completion of this conversion, the principal balance of the
senior secured convertible notes was reduced from $3,000,000 to $2,500,000.

The conversion feature and the prepayment provision of the notes were
accounted for as embedded derivatives and valued on the transaction date using
a Black-Scholes pricing model.  The warrants were accounted for as derivatives
and were valued on the transaction date using a Black-Scholes pricing model as
well.  At the end of each quarterly reporting date, the values of the
derivatives are evaluated and adjusted to current fair value.  The note
conversion feature and the warrants may be exercised at any time and,
therefore, have been reported as current liabilities.  The prepayment
provision may not be exercised by us until May 16, 2007, and then only in
certain limited circumstances.  For all periods since the issuance of the
senior secured convertible notes, the derivative value of the prepayment
provision has been nominal and has not had any offsetting effect on the
valuation of the conversion feature of the notes.

As of June 30, 2006, we recorded an aggregate derivative liability of
$2,122,700. The $889,300 change in valuation from the December 31, 2005
balance of $3,012,000 included $646,800 representing the value of the notes
conversion feature of the 333,334 shares converted (as noted above) on the
conversion date, and $244,500 for the change in fair market value of A and B
warrants and conversion feature of the remaining $2,500,000 principal amount
of the notes at June 30, 2006. The aggregate derivative liability of
$2,122,700 included $1,066,700 for the conversion feature and $1,056,000 for
the warrants.  These values were calculated using the Black-Scholes pricing
model with the following assumptions: (i) risk free interest rate of 5.13%;
(ii) expected life (in years) of 1.88 for the conversion feature and 3.88 for
the warrants; (iii) expected volatility of 86.53%; (iv) expected dividend
yield of 0.00%; and (v) stock trading price of $1.40 per share.

The remaining principal value of $2,500,000 of the senior secured convertible
notes is being accreted over the term of the obligations, for which $222,223
and $472,222 was included in interest expense for the three and six months
ended June 30, 2006, respectively. The notes bear a 6% annual interest rate
payable semi-annually, and for the three and six months ended June 30, 2006,
$39,083 and $84,083 was recorded as interest expense, respectively.


                                12

<PAGE>



The senior secured convertible notes required that we secure an effective
registration statement with the Securities and Exchange Commission within 120
days from May 16, 2005 (September 13, 2005). Section 4(a) of the senior
secured convertible notes enumerates circumstances that are considered an
event of default. The remedies for default provide that if an event of default
occurs and is continuing, the holders may declare the entire then outstanding
principal amount of the notes and any accrued and unpaid interest thereon to
be immediately due and payable in cash.  We were in default under Section
4(a)(viii), related to the effective date of our registration statement,
beginning September 13, 2005 until February 3, 2006, at which time the event
of default was cured and is no longer continuing.  During the default period,
we incurred an aggregate amount due the note holders of $284,000 of which
$66,000 was recorded as interest expense in the three months ended March 31,
2006, and all of which was forgiven by the note holders per the waiver and
amendment agreement.

On March 16, 2006, we entered into a waiver and amendment agreement with the
four institutional funds regarding our above-mentioned default. Under the
terms of the waiver, the institutional funds waived any and all defaults under
the senior secured convertible notes and related transaction agreements.  In
consideration for the $284,000 owed the funds, we and the funds agreed to
amend the transaction agreements as follows: (i) Section 3.12 of the
securities purchase agreement was deleted, which provision gave the funds a
preemptive right to acquire any new securities issued by us; (ii) Section
3.15(c) of the securities purchase agreement was deleted, which provision
prohibited us from completing a private equity or equity-linked financing;
(iii) the conversion price, at which the notes are convertible into shares of
our common stock, was amended to be $1.50 instead of $2.50; (iv) the exercise
price, at which all warrants (A warrants and B warrants) held by the funds are
exercisable, was changed to $2.00; and (v) the notes were amended by adding a
new event of default, which is that if we fail to raise and receive at least
$3,000,000 in cash net proceeds through one or more private or public
placements of our securities by September 30, 2006, we will be in default
under the notes.  Due to applicable anti-dilution provisions, subsequent sales
of our common stock at $1.50 per share pursuant to our private placement
offering (see Note 9) have caused the exercise price of both the A warrants
and the B warrants to be reduced further to $1.50 per share.

NOTE 8- ACQUISITION OF VIDEO PROCESSING TECHNOLOGIES, INC.

On January 27, 2006, we acquired 100% of the common stock of Video Processing
Technologies Inc. (VPTI) in exchange for an aggregate of 994,063 shares of our
common stock. Prior to the acquisition, VPTI had entered into a license
agreement with the University of California, San Diego, related to certain
patent pending technology which management of our company anticipates
incorporating into the CodecSys technology.

The following pro forma condensed combined balance sheets have been prepared
using the historical financial statements of Broadcast International, Inc.
(audited) and Video Processing Technologies, Inc. (unaudited). VPTI was formed
on December 12, 2005 and had no revenues or expenses in 2006 prior to the
acquisition. These statements of operations assume the acquisition had
occurred on December 31, 2005.


                                13

<PAGE>


              Consolidated Condensed Balance Sheets

                                           Video
                            Broadcast    Processing
                          International Technologies               Pro Forma
                              as of        as of      Pro Forma    Combined
                          Dec 31, 2005  Dec 31. 2005 Adjustments  BI and VPTI
                         ------------- ------------ ------------ ------------
                                        (Unaudited)

Cash                     $    446,491  $   500,000  $         -  $    946,491
Other current assets        2,011,253       25,000            -     2,036,253
                         ------------- ------------ ------------ ------------
Total current assets        2,457,744      525,000            -     2,982,744
                         ------------- ------------ ------------ ------------
Total non-current assets    1,431,302      100,000            -     1,531,302
                         ------------- ------------ ------------ ------------
Total assets             $  3,889,046  $   625,000  $         -  $  4,514,046
                         ============= ============ ============ ============

Total current liabilities$  5,568,255  $         -  $         -  $  5,568,255

Total liabilities           6,898,533            -            -     6,898,533

STOCKHOLDERS DEFICIT

Owners' equity             23,078,615      625,000    1,363,126    25,066,741
Accumulated deficit       (26,088,102)           -   (1,363,126)  (27,451,228)
                         ------------- ------------ ------------ ------------
Total liabilities and
 stockholders' deficit   $ 3,889,046   $   625,000  $         -  $  4,514,046
                         ============= ============ ============ =============

Pro Forma Adjustments represent retirement of VPTI owners' equity and excess
between the fair value of assets acquired and market value of equity
exchanged.

NOTE 9- SUPPLEMENTAL CASH FLOW INFORMATION

On January 27, 2006, we acquired 100% of the common stock of Video Processing
Technologies Inc. (VPTI) in exchange for an aggregate of 994,063 shares of our
common stock. In this transaction, we recognized $1,363,126 as non-cash
research and development in process expense. See Note 8.

On February 27, 2006, the Board of Directors approved a private placement
offering in anticipation of raising up to $4,500,000 by selling 3,000,000
shares of common stock of the Company at a price of $1.50 per share.
Additionally, the purchaser of each share will receive a warrant to acquire
one share of common stock of the Company. The warrants have a three-year
exercise period and are exercisable at a $2.00 exercise price. As of June 30,
2006, we had raised proceeds of $1,243,185 from the sale of 828,790 shares of
common stock.

In March 2006, we issued 766,666 shares of our common stock to two
corporations, which provide investor relations services for the Company. The
value of these shares of $1,724,999 was recorded as a prepaid expense and will
be recognized over the service periods as follows:

                2006    $   1,187,499
                2007          487,500
                2008           50,000
                        -------------
                        $   1,724,999
                        =============

During the quarter ended March 31, 2005, we entered into private placement
transactions with qualified investors pursuant to which we sold 41,666 shares
of common stock resulting in $124,980 in proceeds, which concluded the funding
provided under this offering. In each of the transactions, each purchased
share included an attached warrant to acquire one share of our common stock
within one year at a purchase price of $.50 per share greater than the
subscription price of the share purchased, all of which expired before March
31, 2006 and were not exercised.

                                14

<PAGE>


On December 23, 2003, the Company entered into a convertible line of credit
for up to $1,000,000 with Meridel LTD and Pascoe Holdings LTD, both foreign
corporations. The Company obtained advances as needed to fund operating
expenses. On June 30, 2004, the line of credit was amended to increase the
limit from $1,000,000 to $2,000,000 with the original due date of the line of
credit extended from March 31, 2005 to April 1, 2006. Any portion of the note
under the line of credit was convertible at the lenders sole discretion for
common shares of the Company at the rate of $1.00 per share. During the
quarter ended March 31, 2005, we borrowed $449,876, increasing the aggregate
amount borrowed to $844,966. The note bears an annual interest rate of 6%.
Accrued interest, however, is forgiven upon conversion pursuant to the terms
of the line of credit. During the six months ended June 30, 2005, we recorded
$449,876 as convertible beneficial conversion feature associated with the
advances made under the line of credit. This amount is included in interest
expense. On December 30, 2005, all amounts borrowed on the line of credit were
converted to common stock of the Company.

We paid no interest for the six months ended June 30, 2005; however, we paid
$87,833 for interest expense in the six months ended June 30, 2006. No cash
payments for income taxes were made during the six months ended June 30, 2006
or 2005.

NOTE 10- RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, which amends Accounting Principles Board Opinion No. 29, Accounting
for Nonmonetary Transactions.  The guidance in APB Opinion 29 is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged.  The guidance in APB Opinion 29, however,
included certain exceptions to that principle.  SFAS 153 amends APB Opinion 29
to eliminate the exception for nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of nonmonetary
assets that do not have commercial substance.  A nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange.  SFAS 153 is effective for
fiscal periods beginning after June 15, 2005.  We do not expect that the
adoption of SFAS 153 will have a material impact on our financial position or
results of operations.

In December 2004, the FASB issued SFAS No. 123R, Share Based Payment, which
requires companies to measure and recognize compensation expense for all stock
based payments at fair value.  SFAS 123R is effective for interim periods or
the fiscal year beginning after December 15, 2005 and, thus, we have adopted
123R effective January 1, 2006.  As of June 30, 2006, we will recognize
$1,159,095 of compensation expense for employees and consultants a result of
the adoption of 123R over the next three years. See Note 5.

In December 2004, the FASB issued FASB Staff Position No. FAS 109-1 ("FAS
109-1"), "Application of FASB Statement No. 109, "Accounting for Income
Taxes," to the Tax Deduction on Qualified Production Activities Provided by
the American Jobs Creation Act of 2004 ("AJCA"). The AJCA introduces a special
9% tax deduction on qualified production activities. FAS 109-1 clarifies that
this tax deduction should be accounted for as a special tax deduction in
accordance with Statement 109. The Company does not expect the adoption of
these new tax provisions to have a material impact on the Company's
consolidated financial position, results of operations, or cash flows.

                                15

<PAGE>


In May 2005, the FASB issued Statement 154, Accounting Changes and Error
Corrections, which requires retrospective application (the application of the
changed accounting principle to previously issued financial statements as if
that principle had always been used) for voluntary changes in accounting
principle unless it is impracticable to do so.  Previously, the cumulative
effect of such changes was recognized in net income of the period of the
change.  The effective date is for changes made in fiscal years beginning
after December 15, 2005.

In June 2005, the Emerging Issues Task Force issued three consensuses that are
subject to later ratification by the FASB:

The first consensus is EITF 04-5 which establishes a framework for evaluating
whether a general partner or a group of general partners controls a limited
partnership and therefore should consolidate it.  Unless the limited partners
have "kick-out rights" allowing them to dissolve or liquidate the partnership
or otherwise remove the general partner "without cause," or "participating
rights" allowing the limited partners to participate in significant decisions
made in the ordinary course of the partnership's business, the general
partner(s) hold effective control and should consolidate the limited
partnership.  This would be effective immediately for newly-formed limited
partnerships and for existing limited partnership agreements that are
modified.  For existing limited partnership agreements that are not modified,
it would be effective for the beginning of the first reporting period after
December 15, 2005.  We do not expect the adoption of EITF 04-5 will have a
material impact on our consolidated financial position, results of operations
or cash flows.

The second consensus is EITF 05-2 which provides guidance for issuers of debt
and preferred stock instruments with conversion features that may need to be
accounted for as derivatives.  We do not expect the adoption of EITF 05-2 will
have a material impact on our consolidated financial position, results of
operations or cash flows.

The third consensus is EITF 05-6, "Determining the Amortization Period for
Leasehold Improvements."  The guidance requires that leasehold improvements
acquired in a business combination or purchased subsequent to the inception of
a lease be amortized over the lesser of the useful life of the assets or a
term that includes renewals that are reasonably assured at the date of the
business combination or purchase.  The guidance is effective for periods
beginning after June 29, 2005.  We do not expect the adoption of EITF 05-6
will have a material impact on our consolidated financial position, results of
operations or cash flows.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments an amendment of FASB Statements No. 133 and 140."  SFAS
155 amends SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," and SFAS 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities."  SFAS 155 permits fair
value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation; clarifies which
interest-only strips and principal-only strips are not subject to the
requirements of SFAS 133; establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded
derivative requiring bifurcation; clarifies that concentrations of credit risk
in the form of subordination are not embedded derivatives; and, amends SFAS
140 to eliminate the prohibition on a qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial
interest other than another derivative financial instrument.  SFAS 155 is
effective for all financial instruments acquired or issued after December 31,
2006.  We are currently evaluating the impact of SFAS 155.

                                16

<PAGE>



In June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes (an
interpretation of FASB Statement No. 109)" which is effective for fiscal years
beginning after December 15, 2006 with earlier adoption encouraged. This
interpretation was issued to clarify the accounting for uncertainty in income
taxes recognized in the financial statements by prescribing a recognition
threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax
return. We are currently evaluating the potential impact of this
interpretation.


                                17

<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERTIONS

Forward-Looking Information

This quarterly report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.  Any
statements about our expectations, beliefs, plans, objectives, assumptions or
future events or performance that are not historical facts may be
forward-looking.  These statements are often, but not always, made through the
use of words or phrases such as "anticipate," "estimate," "plan," "project,"
"continuing," "ongoing," "expect," "management believes," "we believe," "we
intend" and similar words or phrases.  Accordingly, these statements involve
estimates, assumptions and uncertainties that could cause actual results to
differ materially from those expressed in them.  Any forward-looking
statements are qualified in their entirety by reference to the risk factors
discussed in our Annual Report on Form 10-KSB for the year ended December 31,
2005.  Among the key factors that could cause actual results to differ
materially from the forward-looking statements are the following:

      .  competitive factors;

      .  general economic and market conditions;

      .  rapid technological change;

      .  dependence on commercialization of our CodecSys technology;

      .  dependence on significant customers;

      .  our ability to raise sufficient additional capital;

      .  ineffective internal control systems;

      .  restrictions under our senior secured convertible notes;

      .  our ability to execute our business model;

      .  our ability to hire and retain qualified software personnel;

      .  uncertainty of intellectual property protection; and

      .  one-time or non-recurring events.

Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance on
any forward-looking statements.  Further, any forward-looking statement speaks
only as of the date on which it is made, and we undertake no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the occurrence of
unanticipated events.  New factors emerge from time to time, and it is not
possible for us to predict which factors will arise.  In addition, we cannot
assess the impact of each factor on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.

                                18

<PAGE>



Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles
generally accepted in the United States.  As such, we are required to make
certain estimates, judgments and assumptions that we believe are reasonable
based upon the information available.  These estimates and assumptions affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
periods presented.

Our accounting policies that are the most important to the portrayal of our
financial condition and results, and which require the highest degree of
management judgment, relate to the reserves for doubtful accounts receivable,
valuation of stock and options issued for services, and revenue recognition.

Reserves for Doubtful Accounts Receivable

Management estimates the amount of required reserves for the potential
non-collectibility of accounts receivable based upon past experience of
collection and consideration of other relevant factors.  Past experience,
however, may not be indicative of future collections and therefore we could
incur additional charges in the future to reflect differences between
estimated and actual collections.

Valuation of stock and options

We value and account for the issuance of equity instruments to acquire goods
and services based on the fair value of the goods and services or the fair
value of the equity instrument at the time of issuance, whichever is more
reliably measurable.

Revenue Recognition

We recognize revenue when evidence exists that there is an arrangement between
us and our customers, delivery of equipment sold or service has occurred, the
selling price to our customers is fixed and determinable with required
documentation, and collectibility is reasonably assured. We recognize as
deferred revenue payments made in advance by customers for services not yet
provided.

When we enter into a multi-year contract with a customer that has an
established network, to provide installation, network management, satellite
transponder and help desk, or a combination of these services, we recognize
this revenue equally over the period of the agreement.  These agreements
typically provide for additional fees, as needed, to be charged if on-site
visits are required by the customer in order to ensure that each customer
location is able to receive network communication. As these on-site visits are
performed, the associated revenue and cost are recognized in the period the
work is completed. If we install, for an additional fee, new or replacement
equipment to an immaterial number of new customer locations, and the equipment
immediately becomes the property of the customer, the associated revenue and
cost are recorded in the period in which the work is completed.

When we enter into a multi-year contract to provide equipment, installation,
network management, satellite transponder, help desk, or a combination of
these services, to a customer for the establishment of a new network (or major
upgrade to an existing network) where substantial revenue is earned for
equipment sales and/or installation work performed at the beginning of the
contact, compared to expected on-gong future revenue, we normalize revenue
recognition by deferring earned revenue over the contracted period. These
agreements typically provide for additional fees, once the initial
installations are completed, to be charged if on-site visits are required by
the customer in order to ensure that each customer location is able to receive
network communication. As these on-site visits are performed the associated
revenue and cost are recognized in the period the work is completed.
Additionally, as immaterial numbers of new sites are added to the network, the
associated revenue and cost are recorded in the period in which the work is
completed.

                                19

<PAGE>


When we enter into an agreement to perform equipment sales and/or
installation-only services, the revenue and cost are recognized in the period
the work is completed.

Executive Overview

We continue to need additional capital to fund our operating activities,
including the development of our CodecSys technology.  On February 27, 2006,
our Board of Directors approved a private placement offering in anticipation
of raising up to $4,500,000 by selling 3,000,000 shares of our common stock at
a price of $1.50 per share.  Additionally, the purchaser of each share will
receive a warrant to acquire one share of common stock.  The warrants have a
three-year exercise period and are exercisable at an exercise price of $2.00
per share.  As of June 30, 2006, we had raised approximately $1,243,000 from
the sale of approximately 828,800 shares of our common stock.

The terms of our senior secured convertible notes specify that it is an event
of default if we do not raise at least $3,000,000 by September 30, 2006.  We
are continuing to pursue sales of our common stock pursuant to the private
placement offering and exploring other alternatives for raising capital.
There is no assurance we will be successful in raising the necessary financing
by September 30, 2006.  If we are unable to obtain the required funding by
such date, an event of default will occur absent a waiver or an amendment of
the terms of the notes, of which there can be no assurance.  An event of
default could ultimately result in the holders of the notes declaring the
amounts outstanding due and payable at a premium, together with an increased
default rate of interest.  All of our assets are pledged as collateral for the
obligations due under the notes.  Acceleration of the notes may require us to
seek bankruptcy protection or liquidation.  Even in a bankruptcy proceeding,
however, the holders of the notes, as secured lenders, could obtain our assets
in order to satisfy the obligations due to them under the notes, in which case
we could be forced to terminate operations and liquidate the company.

On January 27, 2006, we acquired 100% of the common stock of Video Processing
Technologies Inc. (VPTI) in exchange for an aggregate of 994,063 shares of our
common stock.  In this transaction, we recognized $1,363,126 as non-cash
research and development in process expense.  Prior to the acquisition, VPTI
had entered into a license agreement with the University of California, San
Diego, related to certain patent pending technology which our management
anticipates incorporating into the CodecSys technology.

On April 24, 2006, two of the institutional fund holders of our outstanding
senior secured convertible notes converted an aggregate of $500,000 of their
convertible notes into 333,334 shares of our common stock.  As a result of
this conversion, the principal balance of the senior secured convertible notes
was reduced from $3,000,000 to $2,500,000.  The outstanding notes are
presently convertible into 1,666,666 shares of our common stock.

The conversion feature and the prepayment provision of the senior secured
convertible notes have been accounted for as embedded derivatives and valued
on the transaction date using a Black-Scholes pricing model.  The related
warrants have been accounted for as derivatives and were valued on the
transaction date using a Black-Scholes pricing model as well.  At the end of
each quarterly reporting date, the values of the embedded derivatives and the
warrants are evaluated and adjusted to current market value.  The note
conversion feature and the warrants may be exercised at any time and,
therefore, have been reported as current liabilities. The

                                20

<PAGE>



prepayment provision may not be exercised by the Company until May 16, 2007,
and then only in certain limited circumstances.  For all periods since the
issuance of the senior secured convertible notes, the derivative value of the
prepayment provision has been nominal and has not had any offsetting effect on
the valuation of the conversion feature of the notes.


Results of Operations for the Six Months ended June 30, 2006 and June 30, 2005

Revenues

We generated $7,063,513 in revenue during the six months ended June 30, 2006.
During the same six-month period in 2005, we generated revenue of $1,977,147.
The increase in revenue of $5,086,366 or 257% was due primarily to the Company
performing approximately $4,709,200 of increased work for a single new
customer. In the first six months of 2006, we recognized revenue of $5,823,933
related to the sale and installation of equipment, which was an increase of
$5,425,545 over the same period in the prior year.  This increase was
partially offset by a decrease of $322,014 in license fee revenue, which was
the result of the Company losing one customer.

Sales revenues from our three largest customers accounted for approximately
84% and 66% of total revenues for the six months ended June 30, 2006 and 2005,
respectively. The three largest customers in 2006 are not the same as the
three largest customers in 2005, as we  lost one of those customers and gained
a substantial new customer. Any material reduction in revenues generated from
any one of our largest customers could harm our results of operations,
financial condition and liquidity.

Cost of Revenues

Cost of revenues increased by approximately $4,879,150 to $6,737,357 for the
six months ended June 30, 2006 from $1,858,206 for the six months ended June
30, 2005.  The increase was due primarily to increased activity in
installation of equipment for our new customer, which resulted in an increase
in the costs related to such installation. In addition, the general operations
department costs increased by approximately $318,650 due to the increase in
installation activity. The increases were partially offset by a decrease of
approximately $99,680 in satellite distribution costs and depreciation and
amortization.

Expenses

General and administrative expenses for the six months ended June 30, 2006
were $2,211,341 compared to $1,208,347 for the six months ended June 30, 2005.
The increase of approximately $1,002,994 resulted from an increase in expenses
incurred for outside consultants of $779,358, expenses of $462,330 for options
and warrants outstanding, and outside director fees of $33,050; offset by an
decrease of $235,170 in investor relations expense. Research and development
in process increased by $1,683,738 for the six months ended June 30, 2006 to
$1,905,199 from $221,461 for the six months ended June 30, 2005.  This
increase resulted primarily from recording a $1,363,126 expense equal to the
excess of cost over book value for the acquisition of Video Processing
Technology, Inc. Additionally, expenses of $153,855 and $109,382 were recorded
for consulting services and unexercised option and warrants vesting during the
six months ended June 30, 2006, respectively.

During the first six months of 2006, we implemented the following new critical
accounting policy related to our stock-based compensation.  Beginning on
January 1, 2006, we began accounting for stock options under the provisions of
Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment"
(FAS 123R), which


                                21

<PAGE>


requires the recognition of the fair value of stock-based compensation.  Under
the fair value recognition provisions for FAS 123R, stock-based compensation
cost is estimated at the grant date based on the fair value of the awards
expected to vest and recognized as expense ratably over the requisite service
period of the award.  We have used the Black-Scholes valuation model to
estimate fair value of our stock-based awards, which requires various
judgmental assumptions including estimated stock price volatility, forfeiture
rates, and expected life.  Our computation of expected volatility is based on
a combination of historical and market-based implied volatility. The $571,712
of increased expense for options and warrants described above reflects the
financial statement impact to us in the six months ended June 30, 2006 related
to this new accounting policy.

Interest Expense

For the six months ended June 30, 2006, we incurred interest expense of
$1,208,119 compared to interest expense for the six months ended June 30, 2005
of $635,799.  The increase of $572,320 resulted primarily from the Company
recording interest expense related to our senior secured convertible notes and
debt offering costs above what was recorded for the first six months of 2005.
Of the $572,320 increase, $187,500 was the increased amount recorded in
interest expense for the accretion of the note liability on our balance sheet,
$61,583 was the increased interest payable on the notes and $207,113
represents the increased amortization of debt offering costs for the six
months ended June 30, 2006 over the amounts recorded in prior year. In
addition, for the six months ended June 30, 2006,  $500,000 was included as
interest expense related to the early conversion of $500,000 of principal of
the senior notes into 333,334 shares of common stock, and a penalty of $66,000
related to a default in the senior notes, which has been cured. These
comparative increases were offset by $449,876 for interest expense related to
the conversion feature of our line of credit included in the period ended June
30, 2005. This line of credit was completely converted in December of 2005.

Net Loss

We realized a net loss for the six months ended June 30, 2006 of $4,837,112
compared with a net loss for the six months ended June 30, 2005 of $5,264,028.
The decrease in the net loss of $426,916 is primarily due to, (i) a gain of
$3,216,527 for derivative valuation, (ii)a $284,000 for gain on forgiveness of
debt related to the accrued penalties on our senior convertible debt and,
(iii) a $207,215 increase in gross margin as a result of increased sales
activity. These gains were offset by an increase of $1,002,994 in general and
administrative expenses, an increase of $1,683,738 in research and development
in process expenses, and an increase of $572,320 in interest expense, all as
described above.


Results of Operations for the Three Months ended June 30, 2006 and June 30,
2005

Revenues

We generated $4,283,115 in revenue during the three months ended June 30,
2006.  During the same three-month period in 2005, we generated revenue of
$999,495.  The increase in revenue of $3,283,620 or 329% was due primarily to
our performing approximately $3,024,300 of increased work for a single new
customer. In the three months ended June 30, 2006, we recognized revenue of
$3,617,674 related to the sale and installation of equipment, which was an
increase of $3,352,745 over the same period in the prior year.  This increase
was partially offset by a decrease of $120,875 in license fee revenue, which
was the result of losing one customer.


                                22

<PAGE>


Cost of Revenues

Cost of revenues increased by approximately $3,004,600 to $3,999,406 for the
three months ended June 30, 2006 from $994,829 for the three months ended June
30, 2005.  The increase was due primarily to increased activity in
installation of equipment for our new customer, which resulted in an increase
in the costs related to such installation. In addition, the general operations
department costs increased by approximately $150,640 due to the increase in
installation activity. The increases were partially offset by a decrease of
approximately $27,750 in depreciation and amortization.

Expenses

General and administrative expenses for the three months ended June 30, 2006
were $963,536 compared to $804,229 for the three months ended June 30, 2005.
The increase of approximately $159,300 resulted from an increase in expenses
incurred for outside consultants of $418,533, expenses of $37,754 for options
and warrants outstanding, and outside director fees of $17,500; offset by an
decrease of (i) $235,170 in investor relations expense, (ii) $24,744 in legal
expenses, and (iii) approximately $62,500 in employee and travel related
expenses. Research and development in process increased by $184,813 for the
three months ended June 30, 2006 to $296,903 from $112,090 for the three
months ended June 30, 2005.  This increase resulted primarily from expenses of
$76,093, $59,019 and $47,208 which were recorded for consulting services,
patent acquisition costs and unexercised option and warrants vesting during
the three months ended June 30, 2006, respectively. The $84,962 of increased
expense for options and warrants described above reflects the financial
statement impact to us in the three months ended June 30, 2006 related to this
new accounting policy.

Interest Expense

For the three months ended June 30, 2006, we incurred interest expense of
$771,571 compared to interest expense for the three months ended June 30, 2005
of $385,686.  The increase of $385,686 resulted from recording interest
expense related to our senior secured convertible notes and debt offering
costs above what was recorded for the three months ended June 30, 2005. Of the
$385,686 increase, $500,000 was included as interest expense related to the
early conversion of $500,000 principal amount of the notes to 333,334 shares
of common stock, $16,583 represents the increased interest payable on the
notes, and $131,564 represents the increased amortization of debt offering
costs. These increases were offset by a $62,499 reduction in the amount
recorded in interest expense to account for the accretion of the note
liability on our balance sheet and $199,962 which was included in interest
expense for the three months ended June 30, 2005 related to the conversion
feature of our line of credit, which was completely converted into equity in
December of 2005.

Net Loss

We realized a net loss for the three months ended June 30, 2006 of $483,699
compared with a net loss for the three months ended June 30, 2005 of
$4,469,981. The decrease in the net loss of $3,986,282 is primarily due to a
$4,460,527 gain for derivative valuation and a $279,043 increase in gross
margin as a result of increased sales activity. These gains were offset by (i)
an increase of $159,307 in general and administrative expenses, (ii) an
increase of $184,813 in research and development in process expenses, and
(iii) an increase of $385,686 in interest expense, all as described above.
Additionally, we recorded a net $36,329 variance in other income (expense),
which increased our net loss for the three months ended June 30, 2006.


                                23

<PAGE>


Liquidity and Capital Resources

At June 30, 2006, we had cash of $794,643 and total current assets of
$3,971,127 compared to total current liabilities of $4,619,350 ($2,122,700 of
which is reflected as the derivative valuation of the embedded derivatives in
our senior secured convertible notes and related warrants) and total
stockholder's deficit of $1,071,776.

For the six months ended June 30, 2006, we used approximately $1,326,864 of
cash for operating activities as compared to cash used for operating
activities for the six months ended June 30, 2005 of $1,385,479. The cash used
for operations was provided in both periods primarily from proceeds from sales
of Company common stock and from loan financing. We expect to continue to
experience negative operating cash flow as long as we continue our CodecSys
technology development or until we increase our sales and operating profit
significantly.

Our audited financial statements included in our Annual Report on Form 10-KSB
for the year ended December 31, 2005 contained a "going concern"
qualification.  We have incurred losses and have not demonstrated the ability
to generate sufficient cash flows from operations to satisfy our liabilities
and sustain operations.  These factors raise substantial doubt about our
ability to continue as a going concern.

On May 16, 2005, we entered into a securities purchase agreement and completed
a financing with a consortium of four institutional funds.  In the financing,
we received $3,000,000 gross proceeds in cash pursuant to the issuance of
senior secured convertible notes to the funds.  We used the proceeds from this
financing to support our CodecSys research and development and for general
working capital purposes.  The senior secured convertible notes are due May
16, 2008 and bear interest at 6% per annum.  Interest-only payments are due
semi-annually and the first payment of $90,000 was made on November 16, 2005.
The notes were originally convertible into 1,200,000 shares of our common
stock at $2.50 per share, convertible any time during the term of the notes.

We were in default under the terms of the securities purchase agreement
because we did not secure an effective registration statement by the deadline
required in the agreement.  We have cured the default by securing the
effective registration statement and satisfied the liquidated damages arising
due to the default by entering into a waiver agreement. The securities
purchase agreement was amended by the waiver agreement dated March 16, 2006,
in which the notes are now convertible into 2,000,000 shares of our common
stock at $1.50 per share.

In connection with the financing, the funds received A warrants to acquire
600,000 shares of our common stock exercisable at $2.50 per share and B
warrants to acquire 600,000 shares of our common stock at $4.00 per share.
The waiver agreement changed the exercise price of the warrants to $2.00 per
share for both the A warrants and the B warrants. Due to applicable
anti-dilution provisions, subsequent sales of our common stock at $1.50 per
share pursuant to our private placement offering have caused the exercise
price of both the A warrants and the B warrants to be reduced further to $1.50
per share.  The warrants are exercisable any time for a five-year period
beginning on the date of grant  We paid approximately $345,000 in cash for
commissions, finders fees and expenses in securing this financing, $240,000 of
which was included in prepaid expenses as of December 31, 2005 and will be
amortized over the term of the notes.

The $1.50 conversion price of the senior secured convertible notes and the
$1.50 exercise price of the warrants are subject to adjustment pursuant to
standard anti-dilution rights.  These rights include (i) equitable adjustments
in the event we effect a stock split, dividend, combination, reclassification
or similar transaction; (ii) "weighted average" price protection adjustments
in the event we issue new shares of common stock or common stock equivalents
in certain transactions

                                24

<PAGE>



at a price less than the then current market price of our common stock; and
(iii) "full ratchet" price protection adjustments in the event we issue new
shares of common stock or common stock equivalents in certain transactions at
a price less than $1.50 per share.

The senior secured convertible notes contain a prepayment provision allowing
us to prepay, in certain limited circumstances, all or a portion of the notes,
subject to a prepayment premium of 25% of the outstanding principal amount of
the notes to be prepaid. Even if we elect to prepay the notes, the note
holders may still convert any portion of the notes being prepaid pursuant to
the conversion feature thereof.

The securities purchase agreement contains, among other things, covenants that
may restrict our ability to obtain additional capital, to declare or pay a
dividend or to engage in other business activities.  A breach of any of these
covenants could result in a default under our senior secured convertible
notes, in which event holders of the notes could elect to declare all amounts
outstanding to be immediately due and payable, which would require us to
secure additional debt or equity financing to repay the indebtedness or to
seek bankruptcy protection or liquidation.  The securities purchase agreement
provides that we cannot do any of the following without the prior written
consent of the holders of at least 85% of the principal amount of the
outstanding senior secured convertible notes:

      .  issue debt securities or incur, assume, suffer to exist, guarantee or
         otherwise become or remain, directly or indirectly, liable with
         respect to certain indebtedness;

      .  except for those created under the securities purchase agreement,
         create, incur, assume or suffer to exist, directly or indirectly, any
         liens, restrictions, security interests, claims, rights of another or
         other encumbrances on or with respect to any of our assets, of any
         kind, whether now owned or hereafter acquired, or any income or
         profits therefrom;

      .  liquidate, wind up or dissolve (or suffer any liquidation or
         dissolution);

      .  convey, sell, lease, license, assign, transfer or otherwise dispose
         of all or any substantial portion of our properties or assets, other
         than transactions in the ordinary course of business consistent with
         past practices, and transactions by non-material subsidiaries, if
         any;

      .  cause, permit or suffer, directly or indirectly, any change in
         control transaction as defined in the senior secured convertible
         notes;

      .  directly or indirectly enter into or permit to exist any transaction
         with any of our affiliates or any of our subsidiaries, if any, except
         for transactions that are in the ordinary course of our business,
         upon fair and reasonable terms, that are fully approved by our Board
         of Directors, and that are no less favorable to us than would be
         obtained in an arm's length transaction with a non-affiliate;

      .  declare or pay a dividend or return any equity capital to any holder
         of any of our equity interests or authorize or make any other
         distribution to any holder of our equity interests in such holder's
         capacity as such, or redeem, retire, purchase or otherwise acquire,
         directly or indirectly, for consideration any of our equity interests
         outstanding (or any options or warrants issued to acquire any of our




                                25
<PAGE>

         equity interests); provided that the foregoing shall not prohibit (i)
         the performance by us of our obligations under the warrants related
         to the senior secured convertible notes or the registration rights
         agreement entered into in connection with the securities purchase
         agreement, or (ii) us and any of our subsidiaries, if any, from
         paying dividends in common stock issued by us or such subsidiary that
         is neither puttable by any holder thereof nor redeemable, so long as,
         in the case of any such common stock dividend made by any such
         subsidiary, the percentage ownership (direct or indirect) of us in
         such subsidiary is not reduced as a result thereof; or

      .  directly or indirectly, lend money or credit (by way of guarantee or
         otherwise) or make advances to any person, or purchase or acquire any
         stock, bonds, notes, debentures or other obligations or securities
         of, or any other interest in, or make any capital contribution to,
         any other person, or purchase or own a future contract or otherwise
         become liable for the purchase or sale of currency or other
         commodities at a future date in the nature of a futures contract,
         with very limited exceptions.

Section 4(a)(xi) of the senior secured convertible notes specifies that it is
an event of default if we do not raise at least $3,000,000 by September 30,
2006.  To date, we have raised approximately $1,243,000 from the sale of our
securities. Although we are continuing our efforts to raise additional
capital, there pursuant to our private placement offering is no assurance that
we will be able to satisfy this financing requirement before September 30,
2006. The remedies for default provide that if an event of default occurs and
is continuing, the holders may declare all of the then outstanding principal
amount of the notes and any accrued and unpaid interest thereon to be
immediately due and payable in cash.  In the event of an acceleration, the
amount due and owing to the holders is 125% of the outstanding principal
amount of the notes and interest on such amount is calculated using the
default rate of 18% per annum if the full amount is not paid within one
business day after acceleration.  An event of acceleration may require us to
seek bankruptcy or liquidation. Even in a bankruptcy proceeding, however, the
holders of the notes, as secured lenders, could obtain our assets in order to
satisfy the obligations due to them under the notes, in which case we could be
forced to terminate operations and liquidate the company

On April 21, 2006, two of the institutional funds converted an aggregate of
$500,000 of their convertible notes into 333,334 shares of our common stock.
Upon completion of this conversion, the principal balance of the senior
secured convertible notes was reduced from $3,000,000 to $2,500,000.

On June 22, 2005, we secured a new customer contract, which has resulted in
revenues of approximately $4,739,750 in the first six months of 2006. We
anticipate that revenues from this customer will continue throughout 2006.  We
are continuing to train our existing installation technicians on the new
equipment and procedures required by this new customer. We are also adding new
installation technicians.

Our monthly operating expenses currently exceed our monthly net sales by
approximately $250,000 per month.  This amount could increase significantly.
Given our current level of CodecSys development activity, we expect our
operating expenses will continue to outpace our net sales until we are able to
generate additional revenue.  Our business model contemplates that sources of
additional revenue include (i) sales from our private communication network
services, (ii) sales resulting from the new customer contract described above,
and (iii) sales related to commercial applications of our CodecSys technology.
Notwithstanding any additional revenue that may be realized for these sources,
we will require additional capital in the near-term to avoid default under out
senior secured convertible notes and to continue our current business
operations.

                                26

<PAGE>


Our long-term liquidity is dependent upon execution of our business model and
the realization of additional revenue and working capital, as described above,
and upon capital needed for continued development of the CodecSys technology.
Commercialization and future applications of the CodecSys technology are
expected to require additional capital estimated to be approximately $2.0
million annually for the foreseeable future.  This estimate will increase or
decrease depending on funds available to us.  The availability of funding will
also determine, in large measure, the timing and introduction of new product
applications in the marketplace.  Capital required for CodecSys is expected to
come from internally generated cash flow from operations or from external
financing.

To date, we have met our working capital needs through funds received from
sales of our common stock, borrowings under a convertible line of credit and
the senior secured convertible note financing described above.  Until our
operations become profitable, we must continue to sell equity or find another
source of operating capital. There can be no assurance that we will be able to
obtain adequate working capital or additional financing at all or on terms
favorable to us.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may impact our financial position
due to adverse changes in financial market prices and rates.  We do not hold
or issue financial instruments for trading purposes or have any derivative
financial instruments.  As discussed above, however, the embedded conversion
feature and prepayment option of our senior secured convertible notes and our
related warrants are deemed to be derivatives and are subject to quarterly
"mark-to-market" valuations.  Our principal exposure to market risk is
currently confined to our cash and cash equivalents.  Because of the
short-term maturities of our cash and cash equivalents, we do not believe that
an increase in market rates would have any significant impact on the realized
value of our investments.  We currently do not hedge interest rate exposure
and are not exposed to the impact of foreign currency fluctuations.


Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").  Our
disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosures.

                                27

<PAGE>


As required by Rule 13a-15(b) of the Exchange Act, we conducted an evaluation,
under the supervision of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of June 30, 2006.  Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of June 30, 2006 in
ensuring that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no change in our internal control over financial reporting for
the quarter ended June 30, 2006 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Important Considerations

The effectiveness of our disclosure controls and procedures and our internal
control over financial reporting is subject to various inherent limitations,
including cost limitations, judgments used in decision making, assumptions
about the likelihood of future events, the soundness of our systems, the
possibility of human error, and the risk of fraud.  Moreover, projections of
any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions and the risk
that the degree of compliance with policies or procedures may deteriorate over
time.  Because of these limitations, there can be no assurance that any system
of disclosure controls and procedures or internal control over financial
reporting will be successful in preventing all errors or fraud or in making
all material information known in a timely manner to the appropriate levels of
management.

                   Part II - Other Information

Item 1.   Legal Proceedings

          None.

Item 1A.  Risk Factors

There have been no material changes in risk factors described in our Annual
Report of Form 10-KSB for the year ended December 31, 2005.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

          None.

Item 3.   Defaults Upon Senior Securities

          None.

Item 4.   Submission of Matters to Vote of Security Holders.

          None.

Item 5.   Other Information

          (a) None.

          (b) None.

                                28

<PAGE>


Item 6.   Exhibits



  Exhibit
  Number                 Description of Document
  ------                 ------------------------

  3.1           Amended and Restated Articles of Incorporation of Broadcast
                International.   (Incorporated by reference to Exhibit No. 3.1
                of the Company's Quarterly Report on Form 10-QSB for the
                quarter ended June 30, 2005 filed with the SEC on August 12,
                2005.)

  3.2           Bylaws of Broadcast International.  (Incorporated by reference
                to Exhibit No. 3.2 of the Company's Quarterly Report on Form
                10-QSB for the quarter ended June 30, 2005 filed with the SEC
                on August 12, 2005.)

  4.1           Specimen Stock Certificate of Common Stock of Broadcast
                International. (Incorporated by reference to Exhibit No. 4.1
                of the Company's Registration Statement on Form SB-2, filed
                under cover of From S-3, pre-effective Amendment No.3 filed
                with the SEC on October 11, 2005.)

  4.2           Form of 6.0% Senior Secured Convertible Note dated May 16,
                2005 executed by Broadcast International in favor of Gryphon
                Master Fund, L.P., GSSF Master Fund, LP, Bushido Capital
                Master Fund, LP and Gamma Opportunity Capital Partners, LP
               (the "Institutional Funds"). (Incorporated by reference to
                Exhibit No. 4.2 of the Company's Registration Statement on
                Form SB-2, filed under cover of From S-3, pre-effective
                Amendment No.3 filed with the SEC on October 11, 2005.)

  4.3           Form of A Warrant issued by Broadcast International to each of
                the Institutional Funds. (Incorporated by reference to Exhibit
                No. 4.3 of the Company's Registration Statement on Form SB-2,
                filed under cover of From S-3, pre-effective Amendment No.3
                filed with the SEC on October 11, 2005.)

  4.4           Form of B Warrant issued by Broadcast International to each of
                the Institutional Funds. (Incorporated by reference to Exhibit
                No. 4.4 of the Company's Registration Statement on Form SB-2,
                filed under cover of From S-3, pre-effective Amendment No.3
                filed with the SEC on October 11, 2005.)

 10.1           Employment Agreement of Rodney M. Tiede dated April 28, 2004.
                (Incorporated by reference to Exhibit No. 10.1 of the
                Company's Quarterly Report on Form 10-QSB for the quarter
                ended March 31, 2004 filed with the SEC on May 12, 2004.)

 10.2           Employment Agreement of Randy L. Turner dated April 28, 2004.
                (Incorporated by reference to Exhibit No. 10.2 of the
                Company's Quarterly Report on Form 10-QSB for the quarter
                ended March 31, 2004 filed with the SEC on May 12, 2004.)

                                29

<PAGE>


 10.3           Employment Agreement of Reed L. Benson dated April 28, 2004.
                (Incorporated by reference to Exhibit No. 10.3 of the
                Company's Quarterly Report on Form 10-QSB for the quarter
                ended March 31, 2004 filed with the SEC on May 12, 2004.)

 10.4           Broadcast International Long-Term Incentive Plan.
                (Incorporated by reference to Exhibit No. 10.4 of the
                Company's Annual Report of Form 10-KSB for the year ended
                December 31, 2003 filed with the SEC on March 30, 2004.)

 10.5           Securities Purchase Agreement dated May 16, 2005 among
                Broadcast International and the Institutional Funds.
               (Incorporated by reference to Exhibit No. 10.5 of the Company's
                Registration Statement on Form SB-2, filed under cover of From
                S-3, pre-effective Amendment No.3 filed with the SEC on
                October 11, 2005.)

 10.6           Security Agreement dated May 16, 2005 between Broadcast
                International and Gryphon Master Fund, L.P., as collateral
                agent for the Institutional Funds. (Incorporated by reference
                to Exhibit No. 10.6 of the Company's Registration Statement on
                Form SB-2, filed under cover of From S-3, pre-effective
                Amendment No.3 filed with the SEC on October 11, 2005.)

 10.7           Registration Rights Agreement dated May 16, 2005 among
                Broadcast International and the Institutional Funds.
                (Incorporated by reference to Exhibit No. 10.7 of the
                Company's Registration Statement on Form SB-2, filed under
                cover of From S-3, pre-effective Amendment No.3 filed with the
                SEC on October 11, 2005.)

 10.8           Stock Purchase and Option Grant Agreement dated February 6,
                2004 among Broadcast International and certain principals and
                shareholders of Streamware Solutions AB. (Incorporated by
                reference to Exhibit No. 10.9 of the Company's Registration
                Statement on Form SB-2, filed under cover of From S-3,
                pre-effective Amendment No.3 filed with the SEC on October 11,
                2005.)

 10.9           Stock Issuance, Stock Transfer and Option Grant Agreement
                dated effective as of February 26, 2004 among Broadcast
                International and certain principals and shareholders of
                Streamware Solutions AB. (Incorporated by reference to Exhibit
                No. 10.10 of the Company's Registration Statement on Form
                SB-2, filed under cover of From S-3,pre-effective Amendment
                No.3 filed with the SEC on October 11, 2005.)

 10.10          Waiver and Amendment Agreement dated March 16, 2006, between
                Broadcast International, Inc. and the Institutional Funds.
                (Incorporated by reference to Exhibit No. 10.14 of the
                Company's Current Report on Form 8-K filed with the SEC on
                March 20, 2006.)

                                30

<PAGE>


 10.11          Agreement and Plan of Acquisition dated January 27, 2006 among
                Broadcast International, Inc., Video Processing Technologies,
                Inc. and UTEK Corporation. (Incorporated by reference to
                Exhibit No. 10.14 of the Company's Quarterly Report on Form
                10-Q for the quarter ended March 31, 2006 filed with the SEC
                on May 11, 2006.)

 14.1           Code of Ethics. (Incorporated by reference to Exhibit No. 14
                of the Company's Annual Report on Form 10-KSB filed with the
                SEC on March 30, 2004.)

 21.1           Subsidiaries. (Incorporated by reference to Exhibit No. 21.1
                on Form 10-KSB of the Company's annual Report filed with the
                SEC on April 1, 2005.)

 31.1           Certification of Chief Executive Officer pursuant to Rule
                13a-14(a) of the Securities Exchange Act of 1934, as amended,
                as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                of 2002.

 31.2           Certification of Chief Financial Officer pursuant to Rule
                13a-14(a) of the Securities Exchange Act of 1934, as amended,
                as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                of 2002.

 32.1           Certification of Chief Executive Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.

 32.2           Certification of Chief Financial Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.


                                31

<PAGE>

                            SIGNATURES

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





                                      Broadcast International, Inc.


Date: August 11, 2006                      /s/ Rodney M. Tiede
                                         ------------------------------------
                                      By:  Rodney M. Tiede
                                      Its: President and Chief Executive
                                      Officer (Principal Executive Officer)


Date: August 11, 2006                      /s/ Randy Turner
                                         ------------------------------------
                                      By:  Randy Turner
                                      Its: Chief Financial Officer (Principal
                                      Financial and Accounting Officer)




                                32