##### 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, 2010
 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
(State or other jurisdiction of incorporation or organization)
    
    75-2528700(I.R.S. Employer Identification No.)3701 W. Plano Parkway, Suite 300, Plano, TX(Address of principal executive offices)
    
    75075(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
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o(Do not check if a smaller reporting
company)
    
    Smaller Reporting
Company þ
 o þ
  As of October 31, 2010, there were 36,065,471 outstanding shares of common stock, par value $0.0001
per share.




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at December 31, 2009 and September 30, 2010
(Unaudited)
    
    
    3Condensed
Consolidated Statements of Operations for the Three and Nine Months
ended September 30, 2009 and 2010 (Unaudited)
    
    
    4Condensed
Consolidated Statement of Stockholders Deficit for the Nine
Months
ended September 30, 2010 (Unaudited)
    
    
    5Condensed
Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 2009 and 2010 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    21Item 4T. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Reserved
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
     2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    September 30,2009
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    368,151
    
    
    $
    872,347Accounts receivable, less allowance for doubtful accounts of
$69,767 and $69,878 at December 31, 2009 and September 30, 2010, respectively
    
    
    1,208,929
    
    
    
    2,041,233Inventories, net
    
    
    2,283,348
    
    
    
    2,163,203Prepaid expenses
    
    
    208,804
    
    
    
    239,575Total current assets
    
    
    4,069,232
    
    
    
    5,316,358Property and equipment, net
    
    
    575,032
    
    
    
    385,071Goodwill
    
    
    620,002
    
    
    
    620,002Intangible assets, net
    
    
    1,535,135
    
    
    
    1,247,365Deposits
    
    
    48,433
    
    
    
    32,637Total assets
    
    $
    6,847,834
    
    
    $
    7,601,433LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Line of credit
    
    $
    92,321
    
    
    $
    875,568Accounts payable
    
    
    730,395
    
    
    
    947,714Accrued expenses
    
    
    679,709
    
    
    
    987,952Deferred revenue
    
    
    353,458
    
    
    
    425,430Current maturities of long-term debt and stockholder notes payable
    
    
    157,133
    
    
    
    283,689Total current liabilities
    
    
    2,013,016
    
    
    
    3,520,353Long-term debt, less current maturities
    
    
    46,698
    
    
    
    33,651Stockholder notes payable, less current maturities
    
    
    5,012,827
    
    
    
    4,820,026Total liabilities
    
    
    7,072,541
    
    
    
    8,374,030Commitments and contingenciesStockholders deficit:Preferred stock,
$0.0001 par value, authorized 5,000,000 shares:Series B convertible  issued and outstanding shares  800,000  liquidation value
of $16 and $17 per share as of December 31, 2009 and September 30, 2010, respectively
    
    
    80
    
    
    
    80Series C convertible  issued and outstanding shares  200,000  liquidation value
of $32 and $33 per share as of December 31, 2009 and September 30, 2010, respectively
    
    
    20
    
    
    
    20Series E convertible  issued and outstanding shares  80,000  liquidation value
of $105 per share as of December 31, 2009 and September 30, 2010
    
    
    8
    
    
    
    8Common stock,
$0.0001 par value, authorized 100,000,000 shares:Issued shares 
36,126,306 and 36,309,048 at December 31, 2009
and September 30, 2010, respectively
    
    
    3,613
    
    
    
    3,630Additional paid-in capital
    
    
    71,705,762
    
    
    
    71,850,666Accumulated deficit
    
    
    (71,922,284
    )
    
    
    (72,615,095
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders deficit
    
    
    (224,707
    )
    
    
    (772,597
    )Total liabilities and stockholders deficit
    
    $
    6,847,834
    
    
    $
    7,601,433
   3




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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 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Net sales
    
    $
    2,961,865
    
    
    $
    4,546,551
    
    
    $
    10,460,494
    
    
    $
    12,365,435Cost of sales
    
    
    1,031,559
    
    
    
    1,813,220
    
    
    
    3,852,289
    
    
    
    4,793,275Gross profit
    
    
    1,930,306
    
    
    
    2,733,331
    
    
    
    6,608,205
    
    
    
    7,572,160Operating expenses:Selling, general and administrative
    
    
    1,713,214
    
    
    
    1,494,843
    
    
    
    6,088,107
    
    
    
    4,695,644Research and development
    
    
    752,374
    
    
    
    997,469
    
    
    
    2,339,009
    
    
    
    2,830,564Depreciation and amortization
    
    
    207,585
    
    
    
    189,902
    
    
    
    569,595
    
    
    
    618,601Total operating expenses
    
    
    2,673,173
    
    
    
    2,682,214
    
    
    
    8,996,711
    
    
    
    8,144,809Operating income (loss)
    
    
    (742,867
    )
    
    
    51,117
    
    
    
    (2,388,506
    )
    
    
    (572,649
    )Other income (expense):Interest expense (including $43,190, $20,669, $112,986, and
$64,810 of expense to related parties, respectively)
    
    
    (44,782
    )
    
    
    (49,126
    )
    
    
    (118,669
    )
    
    
    (126,039
    )Interest income
    
    
    1,498
    
    
    
    209
    
    
    
    4,322
    
    
    
    372Gain on disposal of fixed assets
    
    
    3,975
    
    
    
    5,505
    
    
    
    3,975
    
    
    
    5,505Total other expense, net
    
    
    (39,309
    )
    
    
    (43,412
    )
    
    
    (110,372
    )
    
    
    (120,162
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    $
    (782,176
    )
    
    $
    7,705
    
    
    $
    (2,498,878
    )
    
    $
    (692,811
    )Preferred stock dividends
    
    
    (205,000
    )
    
    
    (205,000
    )
    
    
    (615,000
    )
    
    
    (615,000
    )Net loss applicable to common stockholders
    
    $
    (987,176
    )
    
    $
    (197,295
    )
    
    $
    (3,113,878
    )
    
    $
    (1,307,811
    )Net loss per shareBasic and Diluted
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )Weighted average number of common shares outstandingBasic and Diluted
    
    
    35,832,230
    
    
    
    36,047,551
    
    
    
    34,937,662
    
    
    
    36,029,193
   4




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
 FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2010 (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
    
    
    DeficitBalances, December 31, 2009
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    36,126,306
    
    
    $
    3,613
    
    
    $
    71,705,762
    
    
    $
    (71,922,284
    )
    
    $
    (11,906
    )
    
    $
    (224,707
    )Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,005
    
    
    
    
    
    
    
    
    
    
    
    115,005Employee stock purchase plan issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,683
    
    
    
    3
    
    
    
    4,913
    
    
    
    
    
    
    
    
    
    
    
    4,916Stock issued for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,059
    
    
    
    14
    
    
    
    24,986
    
    
    
    
    
    
    
    
    
    
    
    25,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (692,811
    )
    
    
    
    
    
    
    (692,811
    )Balances, September 30, 2010
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    36,309,048
    
    
    $
    3,630
    
    
    $
    71,850,666
    
    
    $
    (72,615,095
    )
    
    $
    (11,906
    )
    
    $
    (772,597
    )
   5




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 For the nine months endedSeptember 30,2009
    
    
    2010Operating activities:Net loss
    
    $
    (2,498,878
    )
    
    $
    (692,811
    )Adjustments
to reconcile net loss to net cash used in operating activities:Bad debt expense
    
    
    43,015
    
    
    
    111Depreciation of property and equipment
    
    
    330,419
    
    
    
    283,442Amortization of intangible assets
    
    
    239,176
    
    
    
    335,159Stock based compensation expense
    
    
    150,087
    
    
    
    115,005Loss (gain) on disposition of property and equipment
    
    
    973
    
    
    
    (5,505
    )Stock issued for services
    
    
    
    
    
    
    25,000Changes in operating assets and liabilities: (net of effect of acquisition)Accounts receivable
    
    
    1,583,141
    
    
    
    (832,415
    )Inventories
    
    
    413,689
    
    
    
    120,145Prepaid expenses
    
    
    106,635
    
    
    
    (30,771
    )Deposits
    
    
    (259
    )
    
    
    15,796Accounts payable
    
    
    (241,402
    )
    
    
    217,319Accrued expenses
    
    
    (445,940
    )
    
    
    308,243Deferred revenue
    
    
    311,296
    
    
    
    71,972Stockholder accrued interest
    
    
    (169,846
    )
    
    
    Net cash used in operating activities
    
    
    (177,894
    )
    
    
    (69,310
    )Investing activities:Capitalized software development and patent costs
    
    
    (397,960
    )
    
    
    (47,389
    )Purchase of property and equipment
    
    
    (180,384
    )
    
    
    (83,646
    )Cash paid for acquisition
    
    
    (1,031,422
    )
    
    
    Proceeds from disposition of property and equipment
    
    
    
    
    
    
    5,895Net cash used in investing activities
    
    
    (1,609,766
    )
    
    
    (125,140
    )Financing activities:Proceeds from sale of common stock
    
    
    8,560
    
    
    
    4,916Proceeds from exercise of employee stock options
    
    
    2,850
    
    
    
    Net proceeds from exercise of warrants
    
    
    940,000
    
    
    
    Net proceeds from line of credit
    
    
    
    
    
    
    783,247Repayments of long-term debt including $0 and $64,267 (unaudited)
to related party
    
    
    (24,721
    )
    
    
    (89,517
    )Net cash provided by financing activities
    
    
    926,689
    
    
    
    698,646Net increase (decrease) in cash and cash equivalents
    
    
    (860,971
    )
    
    
    504,196Cash and cash equivalents, beginning of period
    
    
    1,579,683
    
    
    
    368,151Cash and cash equivalents, end of period
    
    $
    718,712
    
    
    $
    872,347Supplemental cash flow information:Cash paid for interest
    
    $
    288,515
    
    
    $
    126,039Non-cash items:Stock issued for acquisition
    
    $
    400,000
    
    
    $
    Acquisition of property and equipment under capital leases
    
    $
    33,152
    
    
    $
    10,225
   6




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##### Table of Contents



ViewCast.com,
Inc. and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation and Liquidity
 ® ®
      7




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 2. Acquisition
   Accounts receivable
    
    $
    160,760Prepaid expenses
    
    
    415Software
    
    
    850,000Customer related intangible assets
    
    
    60,000Non-compete agreements
    
    
    24,000Goodwill
    
    
    620,002Property and equipment
    
    
    15,583Total assets acquired
    
    
    1,730,760Liabilities assumed
    
    
    (299,338
    )Net assets acquired
    
    $
    1,431,422
   For the nine months endedSeptember 30, 2009(Unaudited)Net sales
    
    $
    10,621,121Net loss applicable to common stockholders
    
    
    (3,121,192
    )Basic and diluted net loss per common share
applicable to common stockholders
    
    $
    (0.09
    )Weighted average number of common shares outstanding
(basic and diluted)
    
    
    35,238,667
  8




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 3. Accounts Receivable
   For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    116,192
    
    
    $
    94,440
    
    
    $
    82,317
    
    
    $
    69,767Bad debt expense
    
    
    9,140
    
    
    
    (24,562
    )
    
    
    43,015
    
    
    
    111Ending balance
    
    $
    125,332
    
    
    $
    69,878
    
    
    $
    125,332
    
    
    $
    69,878
 4. Inventories
  December 31,
    
    
    September 30,2009
    
    
    2010(Unaudited)Purchased materials
    
    $
    1,077,135
    
    
    $
    1,204,626Finished goods
    
    
    1,330,783
    
    
    
    1,159,337Reserve
    
    
    (124,570
    )
    
    
    (200,760
    )$
    2,283,348
    
    
    $
    2,163,203
 5. Intangible Assets
  December 31,
    
    
    September 30,2009
    
    
    2010(Unaudited)Customer lists
    
    $
    60,000
    
    
    $
    60,000Non-compete agreements
    
    
    24,000
    
    
    
    24,000Capitalized software
    
    
    2,733,950
    
    
    
    2,762,287Patents
    
    
    124,665
    
    
    
    143,717Less accumulated amortization
    
    
    (1,407,480
    )
    
    
    (1,742,639
    )$
    1,535,135
    
    
    $
    1,247,365
  9




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
  Period ended December 31,2010
    
    
    
    $
    105,8402011
    
    
    
    
    380,5352012
    
    
    
    
    257,5242013
    
    
    
    
    145,3382014
    
    
    
    
    212,218Thereafter
    
    
    
    
    145,910$
    1,247,365
 6. Accrued Expenses
  December 31,
    
    
    September 30,2009
    
    
    2010(Unaudited)Accrued compensation
    
    $
    123,882
    
    
    $
    281,152Accrued warranty
    
    
    155,850
    
    
    
    173,252Accrued inventory purchases
    
    
    50,450
    
    
    
    205,114Customer deposits
    
    
    28,919
    
    
    
    28,557Deferred rent
    
    
    46,258
    
    
    
    23,187Accrued taxes and other
    
    
    274,350
    
    
    
    276,690$
    679,709
    
    
    $
    987,952
 7. Warranty Reserves
   For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    205,528
    
    
    $
    214,123
    
    
    $
    199,446
    
    
    $
    155,850Charged to expense
    
    
    13,856
    
    
    
    8,790
    
    
    
    46,567
    
    
    
    72,358Usage
    
    
    (10,755
    )
    
    
    (49,661
    )
    
    
    (37,384
    )
    
    
    (54,956
    )Ending balance
    
    $
    208,629
    
    
    $
    173,252
    
    
    $
    208,629
    
    
    $
    173,252
  10




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 8. Property and Equipment
  EstimatedUseful Life
    
    
    December 31,
    
    
    September 30,(Years)
    
    
    2009
    
    
    2010(Unaudited)Service equipment
    
    
    3
    
    
    $
    242,362
    
    
    $
    242,362Computer equipment
    
    
    2 to 7
    
    
    
    497,139
    
    
    
    554,605Software
    
    
    3 to 5
    
    
    
    207,531
    
    
    
    207,907Leasehold improvements
    
    
    1 to 5
    
    
    
    172,697
    
    
    
    172,697Office furniture and equipment
    
    
    5 to 7
    
    
    
    1,284,884
    
    
    
    1,317,9622,404,613
    
    
    
    2,495,533Less accumulated depreciation and
amortization
    
    
    
    
    
    
    (1,829,581
    )
    
    
    (2,110,462
    )$
    575,032
    
    
    $
    385,071
 9. Line of Credit
  10. Long-Term Debt
   11




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
  December
31, 2009
    
    

September
30, 2010(Unaudited)Primary Principal Amount
    
    $
    1,250,000
    
    
    $
    1,185,733Secondary Principal Amount
    
    
    3,891,361
    
    
    
    3,891,361Other debt
    
    
    75,297
    
    
    
    60,272Total long-term debt
    
    
    5,216,658
    
    
    
    5,137,366Less current maturities
    
    
    (157,133
    )
    
    
    (283,689
    )Total long-term debt less current maturities
    
    $
    5,059,525
    
    
    $
    4,853,677
 11. Warrants
  12. Earnings Per Share Data
   12




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net loss applicable to common stockholders- numerator for basic and diluted earnings per share
    
    $
    (987,176
    )
    
    $
    (197,295
    )
    
    $
    (3,113,878
    )
    
    $
    (1,307,811
    )Weighted  average common shares outstanding- denominator for basic and dilluted earning per share
    
    
    35,832,230
    
    
    
    36,047,551
    
    
    
    34,937,662
    
    
    
    36,029,193Net loss per share:Basic
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )Diluted
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )Anti-dilutive securities excluded from diluted earnings per share:Stock options
    
    
    5,286,660
    
    
    
    5,194,385
    
    
    
    4,652,985
    
    
    
    4,641,092Convertible 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
    
    
    13,333,333
    
    
    
    13,333,333
    
    
    
    13,333,333
    
    
    
    13,333,333
 13. Stock-Based Compensation
      13




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
  Stock OptionsWeighted-AverageNumber
    
    
    Price Per
    
    
    Exercise Priceof Shares
    
    
    Share
    
    
    Per ShareOutstanding at December 31, 2009
    
    
    4,162,463
    
    
    $
    0.20         -         $3.52
    
    
    $
    0.52Granted
    
    
    1,640,000
    
    
    
    0.17 - 0.26
    
    
    
    0.18Canceled/forfeited
    
    
    (548,078
    )
    
    
    0.17 - 3.52
    
    
    
    0.71Outstanding at September 30, 2010
    
    
    5,254,385
    
    
    $
    0.17         -         $1.81
    
    
    $
    0.39
  Weighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Range of
    
    
    
    
    
    Outstanding at
    
    
    Remaining
    
    
    Average
    
    
    Exercisable at
    
    
    AverageExercise
    
    
    
    
    
    September 30,
    
    
    Contractual
    
    
    Exercise
    
    
    September 30,
    
    
    ExercisePrices
    
    
    
    
    
    2010
    
    
    Life
    
    
    Price
    
    
    2010
    
    
    Price$0.01 - 1.00
    
    
    
    
    
    
    4,757,335
    
    
    
    5.1
    
    
    $
    0.32
    
    
    
    2,654,287
    
    
    $
    0.391.01 - 2.00
    
    
    
    
    
    
    497,050
    
    
    
    0.4
    
    
    $
    1.12
    
    
    
    497,050
    
    
    $
    1.125,254,385
    
    
    
    4.7
    
    
    $
    0.39
    
    
    
    3,151,337
    
    
    $
    0.51
 14. Income Taxes
  15. Related Party Transactions
  16. Preferred Stock Dividend
   14




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
 ® ®
  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, FASB ASC 605, Revenue Recognition and FASB ASC 985, Software. 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.
  15




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
 
    
    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 determine in the future
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.
 
    
    Purchase Accounting, Goodwill and Intangible Assets We use the purchase method of
accounting for our business acquisitions, accordingly, the statement of operation include
the results of acquired businesses since the date of acquisition. The assets acquired and
liabilities assumed are recorded at their estimated fair value as determined by management
and supported by an independent third-party valuation.
 
    
    Goodwill Arising from the Acquisitions of Business We record goodwill arising from the
acquisition of a business as the excess of the purchase price over the estimated fair value
of the net assets of the business acquired. In accordance with FASB ASC 350, Intangibles
  Goodwill and Other, we are required to test goodwill for impairment annually or more
frequently if circumstances indicate potential impairment. Consistent with this standard,
we will review goodwill, as well as other intangible assets and long-term assets, for
impairment annually or more frequently as warranted, and if circumstances indicate that the
recorded value of any such other asset is impaired, such asset is written down to its new,
lower fair value. If any item of goodwill or such other asset is determined to be
impaired, an impairment loss would be recognized equal to the amount by which the recorded
value exceeds the estimated fair market value.
  16




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
 Results of Operations
 Three and Nine Months Ended September 30, 2010 compared to
Three and Nine Months Ended September 30, 2009.
 Net Sales . ®
  Osprey Product Sales .
 ViewCast Niagara® Streaming/Encoding System Sales.
 Software Licenses and Other Revenues .
 Cost of Sales/Gross Profit .
  17




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
  Selling, General and Administrative Expenses .
 Research and Development Expense.
 Depreciation and Amortization Expense.
 Other Income (Expense)
 Net Income / Loss
  18




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
 Liquidity and Capital Resources
          19




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
    Off Balance Sheet Arrangements
   20




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ViewCast.com, Inc. and Subsidiaries
Quantitative and Qualitative Disclosure About Market Risk
 
 Item 3. Quantitative and Qualitative Disclosure About Market Risk
   21




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ViewCast.com, Inc. and Subsidiaries
Controls and Procedures
 
 Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   22




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PART II: OTHER INFORMATION
 
   
   
   
   
  
    
    23




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SIGNATURES
  ViewCast.com, Inc.(Registrant)BY:Date: November 15, 2010
    /s/ David T. StonerDavid T. StonerChief Executive Officer
Principal Executive OfficerDate: November 15, 2010
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer
Principal Financial and Accounting Officer  24




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber10.49
    
    
    Employment Agreement by and between ViewCast.com,
Inc. and Adrian Giuhat, as of September 7, 2010,
filed as Exhibit 10.49 to the Companys Current
Report on Form 8-K filed on September 9, 2010, is
incorporated herein by reference as Exhibit 10.49.31.1
    
    
    Principal Executive Officers Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 is attached to this Form 10-Q as Exhibit 31.1.31.2
    
    
    Principal Financial Officers Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 is attached to this Form 10-Q as Exhibit 31.2.32.1
    
    
    Principal Executive Officers Certification
furnished Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 is attached to this
Form 10-Q as Exhibit 32.1.32.2
    
    
    Principal Financial Officers Certification
furnished Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 is attached to this
Form 10-Q as Exhibit 32.2.
  25