##### Table of Contents



United States
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number: 000-29020
 ViewCast.com, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    75-2528700(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)3701 W. Plano Parkway, Suite 300, Plano, TX
    
    75075(Address of principal executive offices)
    
    (Zip Code)
 (972) 488-7200  (Registrants telephone number including area code)
 N/A  (Former name, former address and former fiscal year, if changed from last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
  32,158,389 shares of common stock, par value $0.0001 per share, outstanding at October 31, 2008




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##### 



ViewCast.com, Inc. and Subsidiaries
Index to Form 10-Q
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at December 31, 2007 and September 30, 2008 (Unaudited)
    
    
    2Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2007 and 2008 (Unaudited)
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the Nine Months ended September 30, 2008 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2007 and 2008 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Result of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    19SIGNATURES
    
    
    20Rule 13a-14(a)/15d-14(a) CEO CertificationRule 13a-14(a)/15d-14(a) CFO CertificationSection 1350 CEO CertificationSection 1350 CFO Certification
   1




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    September 30,2007
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,135,416
    
    
    $
    2,823,516Accounts
receivable, less allowance for doubtful accounts of
$30,390 and $68,163 at December 31, 2007 and September 30,
2008, respectively
    
    
    2,261,133
    
    
    
    2,141,958Inventories, net
    
    
    2,367,200
    
    
    
    2,047,347Prepaid expenses
    
    
    243,614
    
    
    
    274,547Total current assets
    
    
    6,007,363
    
    
    
    7,287,368Property and equipment, net
    
    
    721,413
    
    
    
    730,670Intangible assets, net
    
    
    323,367
    
    
    
    338,462Deposits
    
    
    45,566
    
    
    
    47,520Total assets
    
    $
    7,097,709
    
    
    $
    8,404,020LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    456,641
    
    
    $
    689,626Accrued expenses
    
    
    927,857
    
    
    
    1,264,767Current maturities of long-term debt
    
    
    21,345
    
    
    
    32,742Total current liabilities
    
    
    1,405,843
    
    
    
    1,987,135Long-term debt less current maturities
    
    
    28,157
    
    
    
    43,948Stockholder note payable
    
    
    5,141,361
    
    
    
    5,141,361Stockholder accrued interest
    
    
    192,994
    
    
    
    254,770Commitments and contingenciesStockholders equity:Preferred stock,
$0.0001 par value, authorized 5,000,000 shares:Series B
convertible  issued and outstanding shares 
800,000  liquidation value of $15 per share as of December
31, 2007 and September 30, 2008
    
    
    80
    
    
    
    80Series C
convertible  issued and outstanding shares 
200,000  liquidation value of $31 per share as of December
31, 2007 and September 30, 2008
    
    
    20
    
    
    
    20Series E
convertible  issued and outstanding shares 
80,000  liquidation value of $102 per share as of December
31, 2007 and September 30, 2008
    
    
    8
    
    
    
    8Common stock, $.0001 par value, authorized 100,000,000 shares:Issued shares  32,341,753 and 32,369,489 at December 31,
2007 and September 30, 2008, respectively
    
    
    3,234
    
    
    
    3,237Additional paid-in capital
    
    
    69,990,960
    
    
    
    70,065,628Accumulated deficit
    
    
    (69,653,042
    )
    
    
    (69,080,261
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders equity
    
    
    329,354
    
    
    
    976,806Total liabilities and stockholders equity
    
    $
    7,097,709
    
    
    $
    8,404,020
   2




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Net sales
    
    $
    4,094,062
    
    
    $
    4,737,996
    
    
    $
    11,502,918
    
    
    $
    13,059,547Cost of sales
    
    
    1,792,269
    
    
    
    1,477,905
    
    
    
    4,863,589
    
    
    
    4,095,159Gross profit
    
    
    2,301,793
    
    
    
    3,260,091
    
    
    
    6,639,329
    
    
    
    8,964,388Operating expenses:Selling, general and
administrative
    
    
    1,678,922
    
    
    
    2,083,424
    
    
    
    4,792,774
    
    
    
    5,670,497Research and development
    
    
    596,291
    
    
    
    753,649
    
    
    
    1,572,792
    
    
    
    2,248,215Depreciation and amortization
    
    
    104,984
    
    
    
    123,340
    
    
    
    264,139
    
    
    
    350,375Total operating expenses
    
    
    2,380,197
    
    
    
    2,960,413
    
    
    
    6,629,705
    
    
    
    8,269,087Operating income
    
    
    (78,404
    )
    
    
    299,678
    
    
    
    9,624
    
    
    
    695,301Other (income) expense:Interest expense, net
(including $74,451, $42,792,
$221,439,
and $130,201 of expense to
related parties,
respectively)
    
    
    83,781
    
    
    
    45,597
    
    
    
    232,370
    
    
    
    138,679Interest (income)
    
    
    (4,663
    )
    
    
    (6,263
    )
    
    
    (28,726
    )
    
    
    (27,559
    )Other (income)
    
    
    
    
    
    
    
    
    
    
    (250,000
    )
    
    
    Total other (income) expense
    
    
    79,118
    
    
    
    39,334
    
    
    
    (46,356
    )
    
    
    111,120Income tax expense
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    11,400NET INCOME (LOSS)
    
    $
    (157,522
    )
    
    $
    255,344
    
    
    $
    55,980
    
    
    $
    572,781Preferred stock dividends
    
    
    (206,494
    )
    
    
    (205,000
    )
    
    
    (612,749
    )
    
    
    (615,029
    )Net income (loss) applicable to
common stockholders
    
    $
    (364,016
    )
    
    $
    50,344
    
    
    $
    (556,769
    )
    
    $
    (42,248
    )Net income (loss) per shareBasic
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.00
    )Diluted
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.00
    )Weighted average number of
common shares outstandingBasic
    
    
    32,065,582
    
    
    
    32,107,992
    
    
    
    31,591,058
    
    
    
    32,087,810Diluted
    
    
    32,065,582
    
    
    
    48,035,557
    
    
    
    31,591,058
    
    
    
    32,087,810
   3




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
 (UNAUDITED)
 Series B
    
    
    Series C
    
    
    Series EConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    EquityBalances, December 31, 2007
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    32,341,753
    
    
    $
    3,234
    
    
    $
    69,990,960
    
    
    $
    (69,653,042
    )
    
    $
    (11,906
    )
    
    $
    329,354Stock based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,788
    
    
    
    
    
    
    
    
    
    
    
    67,788Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,165
    
    
    
    2
    
    
    
    3,881
    
    
    
    
    
    
    
    
    
    
    
    3,883Employee stock issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,571
    
    
    
    1
    
    
    
    2,999
    
    
    
    
    
    
    
    
    
    
    
    3,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    572,781
    
    
    
    
    
    
    
    572,781Balances, September 30, 2008
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    32,369,489
    
    
    $
    3,237
    
    
    $
    70,065,628
    
    
    $
    (69,080,261
    )
    
    $
    (11,906
    )
    
    $
    976,806
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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 For the nine months endedSeptember 30,2007
    
    
    2008Operating activities:Net income
    
    $
    55,980
    
    
    $
    572,781Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Bad debt expense
    
    
    38,344
    
    
    
    43,759Depreciation of property and equipment
    
    
    221,839
    
    
    
    257,793Amortization of software development costs
    
    
    42,300
    
    
    
    92,581Stock based compensation expense
    
    
    29,862
    
    
    
    67,788Common stock issued to employee
    
    
    
    
    
    
    3,000Changes in operating assets and liabilitiesAccounts receivable
    
    
    426,226
    
    
    
    75,416Inventories
    
    
    (828,987
    )
    
    
    319,853Prepaid expenses
    
    
    (125,842
    )
    
    
    (30,933
    )Deposits
    
    
    (12,097
    )
    
    
    (1,954
    )Accounts payable
    
    
    (336,772
    )
    
    
    232,985Accrued expenses and stockholder accrued interest
    
    
    23,322
    
    
    
    398,685Net cash provided by (used in) operating activities
    
    
    (465,825
    )
    
    
    2,031,754Investing activities:Capitalized software development costs
    
    
    (137,761
    )
    
    
    (107,676
    )Purchase of property and equipment
    
    
    (510,704
    )
    
    
    (218,688
    )Net cash used in investing activities
    
    
    (648,465
    )
    
    
    (326,364
    )Financing activities:Proceeds from exercise of stock options
    
    
    16,946
    
    
    
    3,883Net proceeds from exercise of warrants
    
    
    936,433
    
    
    
    Repayments of long-term debt
    
    
    (8,097
    )
    
    
    (21,173
    )Net cash provided by (used in) financing activities
    
    
    945,282
    
    
    
    (17,290
    )Net increase (decrease) in cash and cash equivalents
    
    
    (169,008
    )
    
    
    1,688,100Cash and cash equivalents, beginning of period
    
    
    567,509
    
    
    
    1,135,416Cash and cash equivalents, end of period
    
    $
    398,501
    
    
    $
    2,823,516Supplemental cash flow information:Cash paid for interest
    
    $
    91,498
    
    
    $
    76,904Non-cash items:Acquisition of property and equipment under capital leases
    
    $
    59,710
    
    
    $
    48,362
   5




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ViewCast.com, Inc. and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation
   2. Accounts Receivable
   For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    55,405
    
    
    $
    57,304
    
    
    $
    30,756
    
    
    $
    30,390Bad debt expense
    
    
    13,695
    
    
    
    16,845
    
    
    
    38,344
    
    
    
    43,759Uncollectible
accounts written
off
    
    
    
    
    
    
    (5,986
    )
    
    
    
    
    
    
    (5,986
    )Ending balance
    
    $
    69,100
    
    
    $
    68,163
    
    
    $
    69,100
    
    
    $
    68,163
 3. Inventories
  December 31,
    
    
    September 30,2007
    
    
    2008(Unaudited)Purchased materials
    
    $
    1,351,377
    
    
    $
    970,491Finished goods
    
    
    1,015,823
    
    
    
    1,076,856$
    2,367,200
    
    
    $
    2,047,347
  6




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##### Table of Contents



4. Accrued Expenses
  December 31,
    
    
    September 30,2007
    
    
    2008(Unaudited)Accrued compensation
    
    $
    174,030
    
    
    $
    315,303Accrued warranty
    
    
    133,940
    
    
    
    203,064Accrued inventory purchases
    
    
    55,713
    
    
    
    171,055Customer deposits
    
    
    22,435
    
    
    
    44,754Deferred rent
    
    
    100,555
    
    
    
    80,290Deferred revenue
    
    
    174,084
    
    
    
    203,570Accrued taxes and other
    
    
    267,100
    
    
    
    246,731$
    927,857
    
    
    $
    1,264,767
 5. Warranty Reserves
   For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    90,154
    
    
    $
    168,849
    
    
    $
    117,636
    
    
    $
    133,940Charged to expense
    
    
    33,380
    
    
    
    42,153
    
    
    
    118,625
    
    
    
    104,728Usage
    
    
    (3,840
    )
    
    
    (7,938
    )
    
    
    (116,567
    )
    
    
    (35,604
    )Ending balance
    
    $
    119,694
    
    
    $
    203,064
    
    
    $
    119,694
    
    
    $
    203,064
 6. Property and Equipment
  EstimatedUseful Life
    
    
    December 31,
    
    
    September 30,(Years)
    
    
    2007
    
    
    2008(Unaudited)Service equipment
    
    
    3
    
    
    $
    242,362
    
    
    $
    242,362Computer equipment
    
    
    3
    
    
    
    309,112
    
    
    $
    391,352Software
    
    
    3
    
    
    
    182,110
    
    
    $
    184,038Leasehold improvements
    
    
    1 to 6
    
    
    
    130,409
    
    
    $
    167,057Office furniture and equipment
    
    
    5
    
    
    
    890,300
    
    
    $
    1,036,5341,754,293
    
    
    
    2,021,343Less accumulated depreciation
and amortization
    
    
    
    
    
    
    (1,032,880
    )
    
    
    (1,290,673
    )$
    721,413
    
    
    $
    730,670
  7




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##### Table of Contents



7. Stockholder Term Note
   December 31,
    
    
    September 30,2007
    
    
    2008Outstanding Primary Principal Amount, with
interest due at a rate per annum equal to prime
plus 1.0% (8.25% and 6.00% at December 31, 2007
and September 30, 2008, respectively), due
December 31, 2009
    
    $
    1,250,000
    
    
    $
    1,250,000Outstanding Secondary Principal Amount, with
interest due at a rate per annum equal to the
Applicable Federal Rate (3.88% and 2.38% at
December 31, 2007 and September 30, 2008,
respectively), due December 31, 2009
    
    
    3,891,361
    
    
    
    3,891,361Other long-term debt
    
    
    49,502
    
    
    
    76,690Total long-term debt
    
    
    5,190,863
    
    
    
    5,218,051Less current maturities
    
    
    (21,345
    )
    
    
    (32,742
    )Total long-term debt less current maturities
    
    $
    5,169,518
    
    
    $
    5,185,309
 8. Warrants
  WarrantsWeighted-Number
    
    
    Exercise
    
    
    Averageof Warrants
    
    
    Price
    
    
    Exercise PriceOutstanding and exercisable
at December 31, 2007
    
    
    2,500,000
    
    
    
    0.48
    
    
    $
    0.48Granted
    
    
    Exercised
    
    
    Cancelled
    
    
    Outstanding and exercisable
at September 30, 2008
    
    
    2,500,000
    
    
    
    0.48
    
    
    $
    0.48
   8




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##### Table of Contents



9. Net loss Per Share Data
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net income (loss) applicable to common
stockholders
 numerator for basic and diluted
earnings per share
    
    $
    (364,016
    )
    
    $
    50,344
    
    
    $
    (556,769
    )
    
    $
    (42,248
    )Weighted  average common shares
outstanding  denominator for basic
earnings per share
    
    
    32,065,582
    
    
    
    32,107,992
    
    
    
    31,591,058
    
    
    
    32,087,810Dilutive potential common shares:Stock options
    
    
    
    
    
    
    241,291
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible preferred stock  Series E
    
    
    
    
    
    
    15,686,274
    
    
    
    
    
    
    
    Weighted  average common shares and
dilutive potential common shares
outstanding  denominator for dilluted
earning per share
    
    
    32,065,582
    
    
    
    48,035,557
    
    
    
    31,591,058
    
    
    
    32,087,810Net income (loss) per share:Basic
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.00
    )Diluted
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.00
    )
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Anti-dilutive securities excluded from
diluted earnings per share:Stock options
    
    
    2,984,850
    
    
    
    2,915,850
    
    
    
    2,732,225
    
    
    
    3,711,476Public and private warrants
    
    
    2,500,000
    
    
    
    2,500,000
    
    
    
    3,224,363
    
    
    
    2,500,000Convertible preferred stock  Series B
    
    
    2,206,896
    
    
    
    2,206,896
    
    
    
    2,206,896
    
    
    
    2,206,896Convertible preferred stock  Series C
    
    
    3,333,333
    
    
    
    3,333,333
    
    
    
    3,333,333
    
    
    
    3,333,333Convertible preferred stock  Series E
    
    
    15,686,274
    
    
    
    
    
    
    
    15,686,274
    
    
    
    15,686,274
 10. Stock-Based Compensation
    9




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##### Table of Contents



Stock OptionsWeighted-AverageNumber
    
    
    Price Per
    
    
    Exercise Priceof Shares
    
    
    Share
    
    
    Per ShareOutstanding at January 1, 2008
    
    
    2,660,850
    
    
    $
    0.20 - $7.14
    
    
    $
    1.99Granted
    
    
    1,657,500
    
    
    
    0.30 -   0.48
    
    
    
    0.37Exercised
    
    
    (19,165
    )
    
    
    0.20 -   0.22
    
    
    
    0.20Canceled/forfeited
    
    
    (104,500
    )
    
    
    0.22 -   3.56
    
    
    
    1.27Outstanding at September 30, 2008
    
    
    4,194,685
    
    
    $
    0.20 - $7.14
    
    
    $
    1.38
  Weighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Range of
    
    
    Outstanding at
    
    
    Remaining
    
    
    Average
    
    
    Exercisable at
    
    
    AverageExercise
    
    
    September 30,
    
    
    Contractual
    
    
    Exercise
    
    
    September 30,
    
    
    ExercisePrices
    
    
    2008
    
    
    Life
    
    
    Price
    
    
    2008
    
    
    Price$
    0.20 - 1.00
    
    
    
    2,974,335
    
    
    
    5.9
    
    
    $
    0.39
    
    
    
    1,189,829
    
    
    $
    0.411.01 - 2.00
    
    
    
    541,350
    
    
    
    2.3
    
    
    
    1.12
    
    
    
    541,350
    
    
    
    1.122.01 - 3.00
    
    
    
    81,000
    
    
    
    1.7
    
    
    
    2.50
    
    
    
    81,000
    
    
    
    2.513.01 - 4.00
    
    
    
    57,500
    
    
    
    0.2
    
    
    
    3.49
    
    
    
    57,500
    
    
    
    3.494.01 - 5.00
    
    
    
    12,500
    
    
    
    0.9
    
    
    
    4.53
    
    
    
    12,500
    
    
    
    4.535.01 - 6.00
    
    
    
    116,000
    
    
    
    1.1
    
    
    
    5.44
    
    
    
    116,000
    
    
    
    5.446.01 - 7.00
    
    
    
    2,000
    
    
    
    0.4
    
    
    
    7.00
    
    
    
    2,000
    
    
    
    7.007.01 - 7.14
    
    
    
    410,000
    
    
    
    0.8
    
    
    
    7.09
    
    
    
    410,000
    
    
    
    7.094,194,685
    
    
    
    4.6
    
    
    $
    1.38
    
    
    
    2,410,179
    
    
    $
    2.12
  10




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##### Table of Contents



11. Income Taxes
   12. Accounts Receivable Loan Facility
  13. Preferred Stock Dividends
  14. Related Party Transactions and Subsequent Event
    11




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    Overview
 ® ®
   12




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##### Table of Contents



Critical Accounting Policies
  
    
    Revenue Recognition We apply provisions of Securities and Exchange Commission
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements as
revised by SAB 104, Revenue Recognition, SOP 97-2, Software Revenue Recognition, as
amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, with
Respect to Certain Transactions and EITF 00-21, Revenue Arrangements with Multiple
Deliverables to transactions involving sales of our hardware and software products.
Under these guidelines, we recognize revenue on transactions where persuasive evidence
of an arrangement exists, title has transferred, product payment is not contingent upon
performance of installation or service obligations, the price is fixed or determinable
and payment is reasonably assured. We accrue warranty costs and sales allowances for
promotional activities at time of shipment based on historical experience. In
addition, we defer revenue associated with maintenance and support contracts and
recognize revenue ratably over the contract term.
    
    Allowance for Doubtful Accounts We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required
payments. If the financial condition of our customers or distribution partners were to
deteriorate, resulting in an impairment of their ability to make payments, additional
allowances may be required.
    
    Excess and Obsolete Inventories We write down our inventories for estimated
obsolescence and unmarketable inventory equal to the difference between the cost of the
inventory and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions are less than those projected by
management, additional write-downs may be required.
    
    Deferred Taxes We record a valuation allowance to reduce our deferred tax assets
to an amount that we believe is more likely than not to be realized. In our opinion,
realization of our net operating loss carryforward is not reasonably assured, and a
valuation allowance has been provided against deferred tax assets in excess of deferred
tax liabilities in the accompanying consolidated financial statements. However, should
we in the future determine that realization of deferred tax assets in excess of
recorded amounts is likely, an adjustment to the deferred tax assets would increase
income in the period such determination was made.
  13




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##### Table of Contents



Results of Operations
 Three and Nine Months Ended September 30, 2008 compared to
Three and Nine Months Ended September 30, 2007.
 Net Sales.
 ViewCast Niagara® Streaming/Encoding System Sales. ®
 Osprey Product Sales .
 Other Revenues.
 Cost of Sales and Gross Profit .
    14




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##### Table of Contents



Selling, General and Administrative Expense .
 Research and Development Expense.
 Depreciation and Amortization Expense.
 Other (Income) Expense.
 Net Income.
 Liquidity and Capital Resources
     15




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16




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Off-Balance Sheet Arrangements
   17




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Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
 Item 4. Controls and Procedures
    18




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PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    Election of directors for one-year terms.
 Number of Votes
    
    
    Number of Votes
    
    
    Number of Votes
    
    
    BrokerNominees
    
    For
    
    
    Against
    
    
    Abstaining
    
    
    Non-VotesGeorge C. Platt
    
    
    42,308,532
    
    
    
    41,751
    
    
    
    79,282
    
    
    
    3,681,895David T. Stoner
    
    
    42,316,032
    
    
    
    34,251
    
    
    
    79,282
    
    
    
    3,681,895Joseph Autem
    
    
    42,306,855
    
    
    
    43,428
    
    
    
    79,282
    
    
    
    3,681,895Sherel Horsley
    
    
    42,350,018
    
    
    
    265
    
    
    
    79,282
    
    
    
    3,681,895John Slocum, Jr.
    
    
    42,350,018
    
    
    
    265
    
    
    
    79,282
    
    
    
    3,681,895
 2.
    
    Ratification of KBA Group LLP as the Companys independent registered public
accounting firm for the fiscal year 2008.
 Number of Votes
    
    
    Number of Votes
    
    
    Number of Votes
    
    
    BrokerFor
    
    
    Against
    
    
    Abstaining
    
    
    Non-Votes42,356,257
    
    
    
    25,841
    
    
    
    47,467
    
    
    
    3,681,895
 
 Item 5. Other Information
   
 Item 6. Exhibits
   19




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SIGNATURES
  ViewCast.com, Inc.
(Registrant)Date: November 14, 2008
    BY:
    /s/ David T. StonerDavid T. StonerChief Executive Officer
Principal Executive OfficerBY:
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer
Principal Financial and Accounting Officer  20




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EXHIBIT INDEX
 ExhibitPage No.
    
    Description of Exhibit31.1
    
    
    Rule 13a-14(a)/15d-14(a) CEO Certification31.2
    
    
    Rule 13a-14(a)/15d-14(a) CFO Certification32.1
    
    
    Section 1350 CEO Certification32.2
    
    
    Section 1350 CFO Certification
  21