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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-QSB (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OFTHE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from  to
 Commission File Number: 0-29020 ViewCast.com, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter) Delaware
(State or other Jurisdiction of
Incorporation or Organization)
    
    75-2528700
(I.R.S. Employer Incorporation
Identification No.)
 17300 Dallas Parkway, Suite 2000, Dallas, TX 75248
(Address of principal executive offices) 972/488-7200
(Issuers Telephone Number) Check whether the issuer (1) filed all documents required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 þ
No o APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes o No o APPLICABLE ONLY TO CORPORATE ISSUERS As of October 31, 2004, 22,825,105 shares of the Registrants common stock were
outstanding. Transitional Small Business Disclosure Format (check one): Yes o No þ




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ViewCast.com, Inc. and Subsidiaries
Index to Form 10-QSB PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets at December 31, 2003 and September 30, 2004 (Unaudited)
    
    
    3Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2003 and 2004 (Unaudited)
    
    
    4Consolidated Statement of Stockholders Deficit for the Nine Months ended September 30, 2004 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2003 and 2004 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    18Item 3. Controls and Procedures
    
    
    27PART II. OTHER INFORMATION
    
    
    28SIGNATURES
    
    
    29Rule 13a-14(a)/15d-14(a) CertificationsSection 1350 Certifications
  2




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    September 30,2003
    
    2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    299,764
    
    
    $
    659,851Accounts receivable, less allowance for doubtful accounts
of $86,000 and $102,111 at December 31, 2003 and
September 30, 2004, respectively
    
    
    3,212,595
    
    
    
    2,389,933Inventories
    
    
    1,554,754
    
    
    
    1,769,216Prepaid expenses
    
    
    185,377
    
    
    
    175,690Deferred charges
    
    
    23,177
    
    
    
    85,000Total current assets
    
    
    5,275,667
    
    
    
    5,079,690Property and equipment, net
    
    
    1,578,709
    
    
    
    1,409,567Goodwill
    
    
    1,041,430
    
    
    
    1,041,430Customer contracts, net
    
    
    396,389
    
    
    
    280,139Software development costs, net
    
    
    
    
    
    
    139,543Deposits
    
    
    113,758
    
    
    
    109,431Total assets
    
    $
    8,405,953
    
    
    $
    8,059,800LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    1,289,730
    
    
    $
    1,090,700Accrued expenses
    
    
    1,362,523
    
    
    
    1,709,344Deferred revenue
    
    
    765,777
    
    
    
    846,280Stockholder line of credit
    
    
    1,300,000
    
    
    
    2,550,000Short-term debt, other
    
    
    635,005
    
    
    
    Current maturities of long-term debt
    
    
    1,128,483
    
    
    
    388,496Series D redeemable convertible preferred stock
    
    
    1,419,172
    
    
    
    1,497,947Total current liabilities
    
    
    7,900,690
    
    
    
    8,082,767Long-term debt less current maturities
    
    
    17,224
    
    
    
    8,118Stockholder note payable
    
    
    6,736,843
    
    
    
    6,550,558Stockholder accrued interest
    
    
    1,006,518
    
    
    
    1,338,145Commitments and contingencies
    
    
    
    
    
    
    Stockholders deficit:Convertible preferred stock, $0.0001 par value:Authorized
shares  5,000,000Series B
 issued and outstanding shares  800,000
    
    
    80
    
    
    
    80Series C
 issued and outstanding shares  200,000
    
    
    20
    
    
    
    20Common stock, $.0001 par value:Authorized
shares  100,000,000Issued
shares  20,950,118 and 23,086,602 at December 31, 2003
and September 30, 2004, respectively
    
    
    2,095
    
    
    
    2,308Additional paid-in capital
    
    
    55,597,946
    
    
    
    57,710,353Accumulated deficit
    
    
    (62,843,557
    )
    
    
    (65,620,643
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders deficit
    
    
    (7,255,322
    )
    
    
    (7,919,788
    )Total liabilities and stockholders deficit
    
    $
    8,405,953
    
    
    $
    8,059,800
 The accompanying notes are an integral part of these consolidated statements. 3




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VIEWCAST.COM, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2003
    
    2004
    
    2003
    
    2004Net sales
    
    $
    5,381,014
    
    
    $
    5,116,104
    
    
    $
    14,807,095
    
    
    $
    14,917,738Cost of sales (includes depreciation of service
assets)
    
    
    3,199,561
    
    
    
    3,045,417
    
    
    
    8,661,183
    
    
    
    8,945,747Gross profit
    
    
    2,181,453
    
    
    
    2,070,687
    
    
    
    6,145,912
    
    
    
    5,971,991Operating expenses:Selling, general and administrative
    
    
    1,638,703
    
    
    
    1,753,031
    
    
    
    5,070,495
    
    
    
    5,209,653Research and development
    
    
    523,189
    
    
    
    449,021
    
    
    
    1,871,126
    
    
    
    1,385,958Depreciation and amortization
    
    
    135,575
    
    
    
    96,404
    
    
    
    445,899
    
    
    
    299,401Total operating expenses
    
    
    2,297,467
    
    
    
    2,298,456
    
    
    
    7,387,520
    
    
    
    6,895,012Operating loss
    
    
    (116,014
    )
    
    
    (227,769
    )
    
    
    (1,241,608
    )
    
    
    (923,021
    )Other income (expense):Interest income
    
    
    381
    
    
    
    275
    
    
    
    1,074
    
    
    
    705Interest expense
    
    
    (273,619
    )
    
    
    (215,553
    )
    
    
    (761,904
    )
    
    
    (639,400
    )Debt conversion expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,233,723
    )Other
    
    
    
    
    
    
    11,952
    
    
    
    4,830
    
    
    
    18,353Total other income (expense)
    
    
    (273,238
    )
    
    
    (203,326
    )
    
    
    (756,000
    )
    
    
    (1,854,065
    )NET LOSS
    
    $
    (389,252
    )
    
    $
    (431,095
    )
    
    $
    (1,997,608
    )
    
    $
    (2,777,086
    )Preferred dividends
    
    
    (232,943
    )
    
    
    (206,494
    )
    
    
    (708,020
    )
    
    
    (614,994
    )Net loss applicable to common stockholders
    
    $
    (622,195
    )
    
    $
    (637,589
    )
    
    $
    (2,705,628
    )
    
    $
    (3,392,080
    )Net loss per share  basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.13
    )
    
    $
    (0.16
    )Weighted average number of common shares
outstanding
    
    
    20,632,332
    
    
    
    22,825,105
    
    
    
    20,603,211
    
    
    
    21,658,534
 The accompanying notes are an integral part of these consolidated statements. 4




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VIEWCAST.COM, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
 Series B
    
    
    
    
    
    Series CConvertible
    
    
    
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    
    
    
    Preferred Stock
    
    
    
    
    
    Common Stock
    
    
    
    
    
    Paid-in
    
    Accumulated
    
    Treasury
    
    StockholdersShares
    
    Par Value
    
    Shares
    
    Par Value
    
    Shares
    
    Par Value
    
    Capital
    
    Deficit
    
    Stock
    
    DeficitBalance, January 1, 2004
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    20,950,118
    
    
    $
    2,095
    
    
    $
    55,597,946
    
    
    $
    (62,843,557
    )
    
    $
    (11,906
    )
    
    $
    (7,255,322
    )Conversion of 7% senior convertible
debentures to common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,121,947
    
    
    
    212
    
    
    
    1,944,518
    
    
    
    
    
    
    
    
    
    
    
    1,944,730Sale of common stock, employee
stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,205
    
    
    
    1
    
    
    
    4,033
    
    
    
    
    
    
    
    
    
    
    
    4,034Exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,332
    
    
    
    
    
    
    
    1,065
    
    
    
    
    
    
    
    
    
    
    
    1,065Value of options and warrants issued
for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,798
    
    
    
    
    
    
    
    
    
    
    
    3,798Warrants issued to converting
debenture holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,993
    
    
    
    
    
    
    
    
    
    
    
    158,993Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,777,086
    )
    
    
    
    
    
    
    (2,777,086
    )Balance, September 30, 2004
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    23,086,602
    
    
    $
    2,308
    
    
    $
    57,710,353
    
    
    $
    (65,620,643
    )
    
    $
    (11,906
    )
    
    $
    (7,919,788
    )
 The accompanying notes are an integral part of this consolidated statement. 5




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VIEWCAST.COM, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 For the nine months endedSeptember 30,2003
    
    2004Operating activities:Net loss
    
    $
    (1,997,608
    )
    
    $
    (2,777,086
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation of fixed assets
    
    
    556,783
    
    
    
    465,527Amortization of software development costs
    
    
    60,541
    
    
    
    Amortization of customer contracts
    
    
    29,861
    
    
    
    116,252Non-cash charges to interest expense
    
    
    94,458
    
    
    
    78,775Non-cash debt conversion expense
    
    
    
    
    
    
    1,233,723(Gain) loss on disposition of property and equipment
    
    
    (5,977
    )
    
    
    1,481Consulting fees exchanged for options and warrants
    
    
    587
    
    
    
    3,797Changes in operating assets and liabilities:Accounts receivable
    
    
    77,891
    
    
    
    822,663Inventories
    
    
    (194,128
    )
    
    
    (214,462
    )Prepaid expenses
    
    
    (115,598
    )
    
    
    9,686Deferred charges
    
    
    
    
    
    
    (61,823
    )Deposits
    
    
    3,206
    
    
    
    4,327Accounts payable
    
    
    (24,524
    )
    
    
    (199,031
    )Accrued expenses and stockholder accrued interest
    
    
    984,777
    
    
    
    678,448Deferred revenue
    
    
    168,082
    
    
    
    80,502Net cash provided by (used in) operating activities
    
    
    (361,649
    )
    
    
    242,779Investing activities:Purchase of property and equipment
    
    
    (321,625
    )
    
    
    (298,006
    )Customer contracts
    
    
    (306,230
    )
    
    
    Software development costs
    
    
    
    
    
    
    (139,543
    )Proceeds from disposition of property and equipment
    
    
    6,545
    
    
    
    133Net cash used in investing activities
    
    
    (621,310
    )
    
    
    (437,416
    )Financing activities:Net proceeds from stockholder line of credit
    
    
    1,948,000
    
    
    
    1,250,000Proceeds from sale of common stock
    
    
    10,257
    
    
    
    4,034Proceeds from exercise of employee stock options
    
    
    
    
    
    
    1,066Repayment of short-term debt, other
    
    
    (653,586
    )
    
    
    (635,004
    )Repayment of long-term debt
    
    
    
    
    
    
    (65,372
    )Net cash provided by financing activities
    
    
    1,304,671
    
    
    
    554,724Net increase in cash and cash equivalents
    
    
    321,712
    
    
    
    360,087Cash and cash equivalents, beginning of period
    
    
    288,519
    
    
    
    299,764Cash and cash equivalents, end of period
    
    $
    610,231
    
    
    $
    659,851Supplemental cash flow information:Cash paid for interest
    
    $
    70,895
    
    
    $
    74,736Purchase of property and equipment with long-term debt
    
    $
    
    
    
    $
    21,747Conversion of 7% convertible debentures to common stock
    
    $
    
    
    
    $
    870,000
 The accompanying notes are an integral part of these consolidated statements. 6




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries 
 Notes to the Consolidated Financial Statements
 1.     Basis of Presentation The accompanying unaudited interim consolidated financial statements
include the accounts of ViewCast.com, Inc. and its wholly-owned subsidiaries,
Delta Computec Inc. (DCi), Osprey Technologies, Inc., VideoWare, Inc. and
ViewCast Online Solutions, Inc. (collectively, the Company or ViewCast). All
material inter-company accounts and transactions have been eliminated in
consolidation. The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Certain prior
period balances have been reclassified to conform to current period
presentation. Operating results for the three and nine months ended September
30, 2004 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2004. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Companys Annual Report on Form 10-KSB/A for the year ended December 31, 2003
filed with the Securities and Exchange Commission. The Company utilizes significant capital to design, develop and
commercialize its products and intends to fund its 2004 operating activities
and sales growth by utilizing cash contributed from operations and its
available working capital lines of credit to the extent possible. The Company
anticipates it will require additional working capital during 2004 to support
the expansion of sales channels and market distribution, to develop and
introduce new products and services, to enhance existing product offerings, to
address unanticipated competitive threats or technical problems, to transition
adverse economic conditions and for potential acquisition transactions. In
January 2004, the Company retained Rockland Capital Partners, an investment
banking firm, to assist the Company with its strategic initiatives including
addressing capital requirements. Although the Company has no firm arrangements
with respect to additional financing, it is currently considering proposals by
potential investors relating to the issuance of equity securities in exchange
for a cash investment in the Company. There can be no assurance that
additional financing will be available to the Company on acceptable terms, or
at all. Additional equity financing may involve substantial dilution to our
then existing stockholders. The Company intends to actively pursue other such
strategic merger and acquisition activities to the extent possible. In the
event the Company is unable to raise additional capital or execute other
alternatives, we may be required to sell segments of the business, or
substantially reduce or curtail our activities. Such actions could result in
charges that could be material to the ViewCasts results of operations or
financial position. 2.     Accounts Receivable The Companys accounts receivable are primarily due from resellers and
distributors of our video communications products and services and from
customers in the healthcare, pharmaceutical, financial services and educational
industries to whom we provide information technology services and products.
Credit is extended based on evaluation of each customers financial condition
and, generally collateral is not required except for certain international
customers. Accounts receivable are generally due within 30 days and are stated
net of an allowance for doubtful accounts. Accounts outstanding longer than
contractual payment terms are considered past due. The Company records an
allowance on a specific basis by considering a number of factors, including the
length of time trade accounts are past due, the Companys previous loss
history, the credit-worthiness of individual customers, economic conditions
affecting specific customer industries and economic conditions in general. The
Company writes-off accounts receivable when they become uncollectible and
payments subsequently received on such receivables are credited against
write-offs in the period the payment is received. 7




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ViewCast.com, Inc. and SubsidiariesNotes to the Consolidated Financial Statements  Continued Changes in the Companys allowance for doubtful accounts for the three and
nine months ended September 30, 2003 and 2004 are as follows: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2004
    
    2003
    
    2004(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Beginning balance
    
    $
    147,045
    
    
    $
    106,625
    
    
    $
    144,090
    
    
    $
    86,247Bad debt expense
    
    
    (22,727
    )
    
    
    
    
    
    
    5,001
    
    
    
    25,730Uncollectible accounts written
off, net of recoveries
    
    
    7,381
    
    
    
    (4,514
    )
    
    
    (17,392
    )
    
    
    (9,866
    )Ending Balance
    
    $
    131,699
    
    
    $
    102,111
    
    
    $
    131,699
    
    
    $
    102,111
 3.     Inventories Inventories consists of the following: December 31,
    
    September 30,2003
    
    2004(Unaudited)Purchased materials
    
    $
    468,121
    
    
    $
    505,302Finished goods
    
    
    1,086,633
    
    
    
    1,263,914$
    1,554,754
    
    
    $
    1,769,216
 4.     Accrued Expenses Accrued expenses consist of the following: December 31,
    
    September 30,2003
    
    2004(Unaudited)Stockholder accrued interest
    
    $
    356,844
    
    
    $
    496,363Accrued interest other
    
    
    11,083
    
    
    
    Accrued compensation
    
    
    538,894
    
    
    
    732,820Accrued legal & professional
    
    
    75,077
    
    
    
    69,774Accrued warranty
    
    
    60,000
    
    
    
    37,177Accrued rent
    
    
    23,128
    
    
    
    25,349Accrued inventory purchases
    
    
    56,772
    
    
    
    58,073Customer deposits
    
    
    33,872
    
    
    
    74,073Other
    
    
    206,853
    
    
    
    215,715$
    1,362,523
    
    
    $
    1,709,344
 5. Warranty Reserves Reserves are provided for the estimated warranty costs when revenue is
recognized. The costs of warranty obligations are estimated based on warranty
policy or applicable contractual warranty, historical experience of known
product failure rates and use of materials and service delivery charges
incurred in correcting product failures. Specific warranty accruals may be made
if unforeseen technical problems arise. If actual experience, relative to these
factors, adversely differs from these estimates, additional warranty expense
may be required. 8




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued The following table below shows the roll forward of accrued warranty
expense for the three months and nine months ended September 30, 2003 and 2004: For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2003
    
    2004
    
    2003
    
    2004(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Beginning balance
    
    $
    17,125
    
    
    $
    57,366
    
    
    $
    39,000
    
    
    $
    60,000Charged to expense
    
    
    31,994
    
    
    
    21,059
    
    
    
    68,891
    
    
    
    40,744Usage
    
    
    (4,953
    )
    
    
    (41,248
    )
    
    
    (63,725
    )
    
    
    (63,567
    )Ending Balance
    
    $
    44,166
    
    
    $
    37,177
    
    
    $
    44,166
    
    
    $
    37,177
 6.     Property and Equipment Property and equipment, at cost, consists of the following: EstimatedUseful Life
    
    December 31,
    
    September 30,(Years)
    
    2003
    
    2004(Unaudited)Computer equipment
    
    
    3 to 7
    
    
    $
    1,873,380
    
    
    $
    2,000,080Service assets
    
    
    3
    
    
    
    755,916
    
    
    
    884,542Software
    
    
    3 to 5
    
    
    
    640,997
    
    
    
    650,012Leasehold improvements
    
    
    1 to 5
    
    
    
    88,972
    
    
    
    91,295Office furniture and equipment
    
    
    5 to 7
    
    
    
    660,215
    
    
    
    686,4474,019,480
    
    
    
    4,312,376Less accumulated depreciation
and amortization
    
    
    
    
    
    
    (2,440,771
    )
    
    
    (2,902,809
    )$
    1,578,709
    
    
    $
    1,409,567
 7.     Short-term Debt Since October 1998, the Company has maintained a working capital line of
credit facility with an entity controlled by one of its principal stockholders,
Mr. H.T. Ardinger, who also currently serves as Chairman of the Board of
Directors of the Company. Prior to October 15, 2003, availability of funds
under this facility was subject to certain borrowing base limitations based
principally on qualifying accounts receivable and inventory with interest
payable on demand at 12% and secured by the assets of ViewCast.com, Inc. In
October 2003, ViewCast.com, Inc., Osprey Technologies, Inc. and VideoWare, Inc.
(jointly and severally, the Borrower) amended the terms and conditions of
this credit note and security agreement with the Ardinger Family Partnership,
LTD. (Lender). As of the date of the agreement, the outstanding principal
balance of the indebtedness under the original loan agreement was $7,509,582
and accrued and unpaid interest thereon was $1,243,665. Additionally, in
October 2003 the Company had outstanding $500,000 in advances from Lender for
the purchase of DCi in October 2002. Effective October 15, 2003, the terms and
conditions of the note agreement were amended to establish a long-term payout
for $6,909,582 principal amount of the note and accrued interest of $1,243,665.
Additionally, a new $2.0 million short-term line of credit facility was
established with an initial principal amount $1.1 million consisting of
$600,000 principal amount of the original note and $500,000 of stockholder
advances. The amended note agreement reduces the per annum interest rate on
stockholder notes from 12% to the lesser of prime plus 3.0% or 9.5%, eliminates
the borrowing base requirements based on outstanding accounts receivable and
inventory and is secured by all assets of the Borrower. Effective April 30,
2004, the Company amended the terms and conditions of the credit facility to
increase the credit line of the revolving credit note to $2.25 million and
extended the commencement date for the scheduled payments of the term note and
accrued interest from April 30, 2004 to August 31, 2004. Effective August 13,
2004, the 9




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ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued Company amended the terms and conditions of the credit facility to
increase the credit line of the revolving credit note to $3.0 million and
extended the commencement date for the scheduled payments of the term note and
accrued interest from August 31, 2004 to December 31, 2004. During the nine months ended September 30, 2004, net borrowings under the
new stockholder line of credit note were $1,250,000 resulting in a note
principal balance of $2,550,000 at September 30, 2004. Total accrued interest
on stockholder notes at September 30, 2004 totaled $1,834,528 of which
$1,011,859 has been classified as long-term. At September 30, 2004, the
Company had availability under the stockholder line of credit of $450,000. The Company also maintains a $1.5 million asset based revolving credit
facility with Keltic Financial Partners, LP (Keltic) for working capital
support of DCi operations. Draws on the revolving credit facility are based on
qualifying DCi accounts receivable. The loan balance is reduced as cash
collections are received directly by Keltic. During the nine months ended
September 30, 2004, cash collections in excess of draws reduced the Keltic loan
balance to $0 at September 30, 2004. DCi had availability of $681,000 under
the revolving credit facility at September 30, 2004. The Company has entered
into a Guaranty of Payment and a Performance and Subordination Agreement with
Keltic relating to this facility. On October 11, 2004, the Keltic credit facility was amended to extend the
maturity date of the note to December 31, 2004 and to extend the date related
to penalties for early prepayment or termination of the loan from October 11,
2004 to December 10, 2004. The credit facility continues to be secured by all
DCi assets and is guaranteed by the Company. In October 2004, Keltic was paid
$2,500 in modification fees pertaining to the note amendment. Short-term debt consists of the following: December 31,
    
    September 30,2003
    
    2004(Unaudited)$3.0 million line of credit note payable to
principal
stockholder of the Company, secured by all assets
of Borrower, with interest due on demand at the
lesser of prime plus 3.0% or 9.5% fixed rate, due
December 2004.
    
    $
    1,300,000
    
    
    $
    2,550,000$1.5 million revolving based credit facility payable
to a commercial finance company, collateralized
by all DCi assets and guaranteed by the Company,
with interest payable at the higher of prime plus
2.5% or 6.5% fixed rate, due October 2004.
    
    
    635,005
    
    
    
    0$
    1,935,005
    
    
    $
    2,550,000
 10




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ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued 8.     Long-Term Debt Long-term debt consists of the following: December 31,
    
    September 30,2003
    
    2004(Unaudited)7% Senior Convertible Debentures due April
2004 with interest payable semi-annually
in arrears
    
    $
    950,000
    
    
    $
    Stockholder term note with an entity controlled
by a principal stockholder of the Company,
collateralized by all assets of Borrower, with
interest due at a rate per annum equal to the
lesser of prime plus 3.0% or 9.5% fixed rate,
due April 30, 2006 (See Note 7).
    
    
    6,909,582
    
    
    
    6,909,582Other long-term debt
    
    
    22,968
    
    
    
    37,590Total long-term debt
    
    
    7,882,550
    
    
    
    6,947,172Less current maturities
    
    
    (1,128,483
    )
    
    
    (388,496
    )Total long-term debt less current maturities
    
    $
    6,754,067
    
    
    $
    6,558,676
 In April 2004, the Company received Notices of Conversion from the holders
of $870,000 of the outstanding 7% Senior Convertible Debentures. The terms of
the conversion include a lowered conversion price of the Debentures from $5.00
per share to $0.41 per share of ViewCast common stock or a total of 2,121,947
shares of common stock for the $870,000 converted. Each Debentureholder that
converted its Debentures also received in cash the interest accrued under the
terms of the Debenture for the period of time from November 2, 2003 through
April 28, 2004 in the amount of $35.00 per $1,000 principal amount of
Debentures converted, which would otherwise, pursuant to the terms of the
Debentures, be forfeited upon conversion. In addition, the converting
Debentureholders received 635,970 warrants exercisable for three (3) years into
shares of common stock of the Company (the Warrant Shares) at an exercise
price of $0.45 per Warrant Share, and in connection therewith, were granted
certain piggyback registration rights for the Warrant Shares. In conjunction
with the debenture conversions, the Company has agreed to pay a consulting fee
consisting of hourly fees of $7,000, payable in cash or restricted stock at
ViewCasts option, and of warrants exercisable into 15,000 shares of common
stock with the same terms as the warrants issued to the converting
Debentureholders. The Company accounts for the conversion of convertible debt to equity
securities in accordance with SFAS No. 84, Induced Conversions of Convertible
Debt. In other income (expense), the Company has recognized an imputed amount
for debt conversion expense equal to the fair value of all securities and other
consideration transferred in the transaction in excess of the fair value of
securities issuable pursuant to the original conversion terms. 11




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ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued Number of Equity
    
    Principal Amount
    
    
    
    
    
    Increase in CommonSecurities and
    
    Converted into
    
    Debt Conversion
    
    Stock, Par and PaidConversion of 7% Senior Convertible Debentures
    
    Warrants
    
    Equity
    
    Expense
    
    in CapitalConversion shares under original terms
    
    
    174,000Additional conversion shares under lowered
conversion terms
    
    
    1,947,947
    
    
    
    
    
    
    $
    1,074,730Warrant issues under lowered conversion terms
    
    
    635,970
    
    
    
    
    
    
    
    158,993$
    870,000
    
    
    $
    1,233,723
    
    
    $
    (2,103,723
    )
 This conversion transaction results in a net reduction in convertible debt
and an increase in net equity of $870,000. The debt conversion expense is a
non-cash charge and is a reconciling adjustment in calculating net cash used in
operating activities. 9.     Series D Redeemable Convertible Preferred Stock During October 2002 through June 2003, the Company issued 150,670 shares
of Series D Preferred Stock as partial consideration for the acquisition of DCi
and for related investment banking fees. Each share of Series D Preferred
Stock has a stated value of $10.00 with a conversion option to common stock at
$1.50 per share of Company common stock. The Series D Preferred Stock provides
redemption rights for the holders and the Company, and other rights as
described in the Certificate of Designation of the Series D Preferred Stock.
The Series D Preferred Stock is redeemable at its stated value at the holders
option upon written notice at any time after October 11, 2004, to the extent
permitted by applicable law. At September 30, 2004, the Company had a
consolidated stockholders deficit of $7,919,788 and in accordance with
Delaware law, is precluded from redeeming its outstanding Series D convertible
preferred stock. As a result, no redemption may be paid for Holder Redemption
Notices received by the Company while it has a consolidated stockholders
deficit. The value of the 150,670 shares issued and outstanding at September 30,
2004 reflects a discount of $8,753 from the stated value of $1,506,700 that
will be recorded as imputed interest expense until the initial redemption date
of October 11, 2004. During the nine months ended September 30, 2004, the
Company recognized interest expense of $78,775 on the Series D Preferred Stock.
Imputed dividends recognized during the quarter ended March 31, 2004 in the
amount of $26,259 have been reclassified from additional paid in capital to
interest expense to conform to current period presentation. The Series D
Preferred Stock is redeemable at its stated value at the Companys option upon
written notice at any time after October 11, 2005 or prior to that date if the
Companys common stock has a weighted average closing price of $3.75 per share
for ten consecutive trading days. Holders of Series D redeemable convertible
preferred stock have no voting rights except as required by law. Series D
Preferred Stock of $1,471,172 and $1,497,947 at December 31, 2003 and September
30, 2004, respectively is presented as a current liability because of the
October 11, 2004 initial redemption date. 10.     Net Loss Per Share Basic loss per share is calculated by dividing net loss by the number of
weighted average common shares outstanding for the period. Since the Company
has reported net losses for all periods presented, the computation of diluted
loss per share excludes the effects of convertible preferred stock, convertible
debt, options, and warrants since their effect is anti-dilutive. 12




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ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued Following is a summary of excluded securities: For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2004
    
    2003
    
    2004(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Stock options
    
    
    4,092,287
    
    
    
    3,046,124
    
    
    
    4,246,273
    
    
    
    3,191,577Public and private warrants
    
    
    4,184,512
    
    
    
    4,835,482
    
    
    
    4,184,512
    
    
    
    4,509,997Convertible debentures
    
    
    190,000
    
    
    
    
    
    
    
    190,000
    
    
    
    95,000Convertible 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
    
    
    
    3,333,333Redeemable convertible preferred
stock  Series D
    
    
    1,004,466
    
    
    
    1,004,466
    
    
    
    902,171
    
    
    
    1,004,46615,011,494
    
    
    
    14,426,301
    
    
    
    15,063,185
    
    
    
    14,341,269
 11.     Stock-Based Compensation The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, in its primary financial
statements and has provided supplemental disclosures required by Statement of
Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation and by Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure an
amendment of FASB Statement No. 123. Option exercise prices are equal to the market price on the date of grant.
In general, a portion of the shares under grant become exercisable after one
year and remaining shares vest monthly thereafter on a straight line basis over
the vesting term of the option (typically five years). Options expire after
ten years. SFAS 123 requires the disclosure of pro forma net income and earnings per
share information computed as if the Company had accounted for its employee
stock options granted under the fair value method set forth in SFAS 123. The
fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model. For purposes of pro forma disclosures, the estimated fair value of the
options is amortized as expense over the options vesting periods. Pro forma
information for the three and nine months ended September 30, 2003 and 2004 is
as follows: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2004
    
    2003
    
    2004(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Net loss applicable to common
stockholders:
    
    $
    (622,195
    )
    
    $
    (637,589
    )
    
    $
    (2,705,628
    )
    
    
    (3,392,080
    )As reportedDeduct total stock-based compensation
under fair value based method for all
awards, net of related tax expense
    
    
    (406,177
    )
    
    
    (314,349
    )
    
    
    (1,216,749
    )
    
    
    (939,686
    )Pro forma
    
    $
    (1,028,372
    )
    
    $
    (951,938
    )
    
    $
    (3,922,377
    )
    
    $
    (4,331,766
    )Net loss per share:As reported
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.13
    )
    
    $
    (0.16
    )Pro forma  basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.04
    )
    
    $
    (0.19
    )
    
    $
    (0.20
    )
 13




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ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued 12.      Segment Information Prior to October 2002, the Companys organizational structure was based on
one business segment engaged in the design, development and marketing of video
products, systems and services. Since the acquisition of Delta Computec Inc. in
October 2002, the Company now operates in two distinct business segments as
follows: Video Communications Products and Services This business segment is engaged in designing, developing and marketing
video communications products and services. The operations of the Companys
Osprey® line of video capture and video compression-decompression cards, its
ViewCast IVN and Viewpoint VBX video distribution systems, and its Niagara
line of encoding and streaming products are included in this segment. IT Services and Products This business segment includes the operations of Delta Computec Inc. which
is headquartered in Teterboro, New Jersey and provides customized network
support, Internet and Intranet consulting, networking, maintenance, disaster
recovery services as well as computer and networking product sales to Fortune
500 and 1000 companies. Customers include financial institutions, accounting
firms, healthcare providers, pharmaceutical companies and educational
institutions primarily in the northeastern United States. Corporate The corporate functions of human resources, legal, financial reporting,
accounting, and risk management are located in Dallas, TX. Operating expenses
not distributed to business segments include certain officers salaries,
investor relations, shareholder meetings, and other corporate facility
expenses. The Companys underlying accounting records are maintained on a legal
entity basis for government and public reporting requirements. Segment
disclosures are on a performance basis consistent with internal management
reporting. The Company evaluates performance based on sales, gross margins and
operating income and expense. Not all corporate operating expenses are
distributed to the business segments. 14




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ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued The following tables provide financial data by segment for three and nine
months ended September 30, 2003 and 2004: Summary of Sales by Geographic Area for the Three Months Ended (unaudited): VideoCommunicationsIT Services,
    
    Products &Products
    
    Services
    
    Total
    
    %September 30, 2004United States
    
    $
    2,562,727
    
    
    $
    1,424,450
    
    
    $
    3,987,177
    
    
    
    77.93
    %Europe
    
    
    
    
    
    
    438,044
    
    
    
    438,044
    
    
    
    8.56
    %Pacific Rim
    
    
    
    
    
    
    561,995
    
    
    
    561,995
    
    
    
    10.98
    %Other
    
    
    
    
    
    
    128,888
    
    
    
    128,888
    
    
    
    2.52
    %Total
    
    $
    2,562,727
    
    
    $
    2,553,377
    
    
    $
    5,116,104
    
    
    
    100.00
    %September 30, 2003United States
    
    $
    2,893,706
    
    
    $
    1,606,446
    
    
    $
    4,500,152
    
    
    
    83.63
    %Europe
    
    
    
    
    
    
    292,344
    
    
    
    292,344
    
    
    
    5.43
    %Pacific Rim
    
    
    
    
    
    
    489,605
    
    
    
    489,605
    
    
    
    9.10
    %Other
    
    
    
    
    
    
    98,913
    
    
    
    98,913
    
    
    
    1.84
    %Total
    
    $
    2,893,706
    
    
    $
    2,487,308
    
    
    $
    5,381,014
    
    
    
    100.00
    %
 Summary of Sales by Geographic Area for the Nine Months Ended (unaudited): VideoCommunicationsIT Services,
    
    Products &Products
    
    Services
    
    Total
    
    %September 30, 2004United States
    
    $
    7,997,208
    
    
    $
    3,604,769
    
    
    $
    11,601,977
    
    
    
    77.77
    %Europe
    
    
    
    
    
    
    1,539,482
    
    
    
    1,539,482
    
    
    
    10.32
    %Pacific Rim
    
    
    
    
    
    
    1,433,327
    
    
    
    1,433,327
    
    
    
    9.61
    %Other
    
    
    
    
    
    
    342,952
    
    
    
    342,952
    
    
    
    2.30
    %Total
    
    $
    7,997,208
    
    
    $
    6,920,530
    
    
    $
    14,917,738
    
    
    
    100.00
    %September 30, 2003United States
    
    $
    8,236,406
    
    
    $
    3,981,991
    
    
    $
    12,218,397
    
    
    
    82.52
    %Europe
    
    
    
    
    
    
    942,998
    
    
    
    942,998
    
    
    
    6.37
    %Pacific Rim
    
    
    
    
    
    
    1,354,582
    
    
    
    1,354,582
    
    
    
    9.15
    %Other
    
    
    
    
    
    
    291,118
    
    
    
    291,118
    
    
    
    1.96
    %Total
    
    $
    8,236,406
    
    
    $
    6,570,689
    
    
    $
    14,807,095
    
    
    
    100.00
    %
 15




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued Summary of Operations by
Operating Segment for the Three Months Ended September 30, 2004
(unaudited): VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    2,565,847
    
    
    $
    2,553,377
    
    
    $
    
    
    
    $
    5,119,224Intersegment sales
    
    
    (3,120
    )
    
    
    
    
    
    
    
    
    
    
    (3,120
    )Revenue from external customers
    
    $
    2,562,727
    
    
    $
    2,553,377
    
    
    $
    
    
    
    $
    5,116,104Gross profit
    
    $
    574,421
    
    
    $
    1,496,266
    
    
    $
    
    
    
    $
    2,070,687Operating income (loss)
    
    $
    (45,540
    )
    
    $
    20,828
    
    
    $
    (203,058
    )
    
    $
    (227,770
    )
 Summary of Operations by
Operating Segment for the Three Months Ended September 30, 2003 (unaudited): VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    2,893,706
    
    
    $
    2,500,060
    
    
    $
    
    
    
    $
    5,393,766Intersegment sales
    
    
    
    
    
    
    (12,752
    )
    
    
    
    
    
    
    (12,752
    )Revenue from external customers
    
    $
    2,893,706
    
    
    $
    2,487,308
    
    
    $
    
    
    
    $
    5,381,014Gross profit
    
    $
    797,674
    
    
    $
    1,383,779
    
    
    $
    
    
    
    $
    2,181,453Operating income (loss)
    
    $
    342,363
    
    
    $
    350,897
    
    
    $
    (809,274
    )
    
    $
    (116,014
    )
 Summary of Operations by
Operating Segment for the Nine Months Ended September 30, 2004 (unaudited): VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    8,003,313
    
    
    $
    6,934,651
    
    
    $
    
    
    
    $
    14,937,964Intersegment sales
    
    
    (6,105
    )
    
    
    (14,121
    )
    
    
    
    
    
    
    (20,226
    )Revenue from external customers
    
    $
    7,997,208
    
    
    $
    6,920,530
    
    
    $
    
    
    
    $
    14,917,738Gross profit
    
    $
    1,775,590
    
    
    $
    4,196,401
    
    
    $
    
    
    
    $
    5,971,991Operating income (loss)
    
    $
    (151,247
    )
    
    $
    (130,391
    )
    
    $
    (641,383
    )
    
    $
    (923,021
    )Total assets
    
    $
    4,739,983
    
    
    $
    3,028,893
    
    
    $
    290,924
    
    
    $
    8,059,800Goodwill
    
    $
    1,041,430
    
    
    $
    
    
    
    $
    
    
    
    $
    1,041,430Customer contracts
    
    $
    280,139
    
    
    $
    
    
    
    $
    
    
    
    $
    280,139Capital additions
    
    $
    178,532
    
    
    $
    83,133
    
    
    $
    36,341
    
    
    $
    298,006
 16




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements  Continued Summary of Operations by
Operating Segment for the Nine Months Ended September 30, 2003 (unaudited): VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    8,236,406
    
    
    $
    6,602,325
    
    
    $
    
    
    
    $
    14,838,731Intersegment sales
    
    
    
    
    
    
    (31,636
    )
    
    
    
    
    
    
    (31,636
    )Revenue from external customers
    
    $
    8,236,406
    
    
    $
    6,570,689
    
    
    $
    
    
    
    $
    14,807,095Gross profit
    
    $
    2,228,146
    
    
    $
    3,917,766
    
    
    $
    
    
    
    $
    6,145,912Operating income (loss)
    
    $
    342,738
    
    
    $
    (532,953
    )
    
    $
    (1,051,393
    )
    
    $
    (1,241,608
    )Total assets
    
    $
    5,057,659
    
    
    $
    2,814,834
    
    
    $
    380,405
    
    
    $
    8,252,898Goodwill
    
    $
    1,041,430
    
    
    $
    
    
    
    $
    
    
    
    $
    1,041,430Customer contracts
    
    $
    435,139
    
    
    $
    
    
    
    $
    
    
    
    $
    435,139Capital additions
    
    $
    287,612
    
    
    $
    34,013
    
    
    $
    
    
    
    $
    321,625
 13.     Related Party Transaction Since October 1998, the Company has maintained a working capital line of
credit facility with a partnership controlled by one of its principal
stockholders and Chairman of the Board of the Company, H. T. Ardinger, Jr. (See
Note 7). Effective August 13, 2004, the Company amended the terms and
conditions of the credit facility to increase the credit line of the Revolving
Credit Note from $2.25 million to $3.00 million and extended the commencement
date for scheduled payments of the Term Note and Accrued Interest from August
31, 2004 to December 31, 2004. 14.     Subsequent Events On October 11, 2004, the DCi asset based revolving credit facility with
Keltic Financial Partners, LP (Keltic) was amended to extend the maturity
date of the note to December 31, 2004 and to extend the date related to
penalties for early prepayment or termination of the loan from October 11, 2004
to December 10, 2004. The credit facility continues to be secured by all DCi
assets and is guaranteed by the Company. The Companys Series D Preferred Stock provides redemption rights for the
holders and the Company, and other rights as described in the Certificate of
Designation of the Series D Preferred Stock. The Series D Preferred Stock is
redeemable at its stated value at the holders option upon written notice at
any time after October 11, 2004, to the extent permitted by applicable law.
The Company received a Holder Redemption Notice in the amount of $1,388,450
requesting an effective redemption date of October 15, 2004. At September 30,
2004, the Company had a consolidated stockholders deficit of $7,919,788 and in
accordance with Delaware law, is precluded from redeeming its outstanding
Series D convertible preferred
stock. As a result, no redemption may be paid for Holder Redemption
Notices received by the Company while it has a consolidated stockholders
deficit. 17




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation 
 Item 2.  Managements Discussion and Analysis or Plan of Operation Some of the statements in this Report on Form 10-QSB under Managements
Discussion and Analysis or Plan of Operation and elsewhere in this Report
constitute 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. Forward-looking statements include statements
regarding ViewCasts expectations, beliefs, hopes, intentions or strategies
regarding the future. These statements involve known and unknown risks,
uncertainties, and other factors that may cause ViewCast or our industrys
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to, product demand and market acceptance
risks, the impact of competitive products and pricing, product development,
commercialization and technological difficulties, capacity and supply
constraints or difficulties, general business and economic conditions, the
availability of sufficient working capital, the ability to service our debt,
continued losses, the ability to successfully integrate acquired operations,
the effect of our accounting polices and other risks detailed in our Annual
Report on Form 10-KSB/A for the year ended December 31, 2003 and the
Registration Statements on Form S-3 filed on April 26, 2000 and June 30, 2000
and other filings with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology
such as may, will, expects, should, anticipates, believes,
estimates, predicts, plans, potential, intends or continue or the
negative of such terms or other comparable terminology. Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking
statements after the date of this report to conform such statements to actual
results. Overview ViewCast.com, Inc., doing business as ViewCast Corporation (ViewCast),
develops and markets a variety of products and services that enable networked
video communications and, through its wholly owned subsidiary, Delta Computec
Inc. (DCi), provides professional information technology and customized
network support services. We are a leading global provider of enterprise-wide,
video communication products for both real-time and on-demand applications. Since the acquisition of DCi in October 2002, ViewCast has operated in two
distinct business segments: (1) video communications products and services and
(2) IT services and products. Video Communications Products and Services  This business segment is engaged in designing, developing and marketing
video communications products and services. ViewCasts Interactive Video
Network is a suite of products and offerings that addresses the
processing, distribution, and use of high-quality video throughout the
enterprise in a variety of forms and applications and includes the
Osprey® line of video capture and video compression-decompression cards,
Viewpoint VBX video distribution systems and Niagara line of encoding
and streaming video servers. Corporations, media organizations,
financial institutions, educational networks, healthcare facilities, and
government agencies utilize our products and services, as do their
customers, vendors and others with whom they may communicate. ViewCast
markets its video products and services directly to end-users, through 18




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued)  original equipment manufacturers, value-added resellers and computer
system integrators, worldwide. IT Services and Products  This business segment includes the operations of DCi which provides
customized network support, Internet and Intranet consulting, networking,
maintenance, and disaster recovery services as well as computer and
networking product sales to Fortune 500 and 1000 companies. Customers
include financial institutions, accounting firms, healthcare providers,
pharmaceutical companies and educational institutions primarily in the
northeastern United States. Critical Accounting Policies Managements discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. We review the accounting policies we
use in reporting our financial results on a regular basis. The preparation of
these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. On an on-going basis
we evaluate our estimates, including those related to accounts receivable,
inventories, investments, warranty obligations, income taxes, restructuring and
contingencies and litigation. Our estimates are based on historical experience
and other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. In addition to the items listed above which are affected by
estimates, we believe that the following are among critical accounting policies
used in the preparation of our consolidated financial statements:  
    
    Revenue Recognition We apply provisions of SEC 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 their 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 19




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued)  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. Results of Operations Three and Nine Months Ended September 30, 2004 compared to Three and Nine Months Ended September 30, 2003. Net Sales.Net sales for the quarter ended September 30, 2004 decreased by
4.9% to $5,116,104 from $5,381,014 reported for the same period in 2003. The
decrease was primarily attributable to lower IT product sales. Net sales for
the nine months ended September 30, 2004 increased slightly by 0.7% to
$14,917,738 from $14,807,095 reported during the same period last year. The
overall increase was due principally to increases from our video communications
products and services business segment. Video Communications Product and Service Sales.During the third quarter
ended September 30, 2004, total video communications product and service sales
of $2,553,377 increased by 2.7% compared to third quarter revenues in 2003 of
$2,487,308. During the nine months ended September 30, 2004, total video
communications product and service sales of $6,920,530 increased 5.3% compared
the same period revenues in 2003 of $6,570,689. The improvement was due to
increased sales from both video systems and video capture cards. For the first
nine months of 2004, sales of video products in the United States decreased
9.1% over 2003 levels, while sales in the European and Pacific Rim regions
improved 63.3% and 5.8%, respectively. Sales in all other remaining regions
aggregated increased 17.8% in the first nine months of 2004 over the same
period in 2003. Osprey Product Sales. During the three months ended September 30, 2004,
sales of Osprey® video component and software products increased 16.1% over
2003 levels. During the nine months ended September 30, 2004, sales of Osprey®
video component and software products increased 6.9% over 2003 levels. The
increased Osprey first nine-month revenues reflected a combination of increased
shipments of our Osprey-500 series and Osprey-200 series product families
offset by reductions primarily from the discontinuation of the Osprey 2000
product family. The new Osprey-300, which combines the quality and superiority of the
standard IEEE 1394b card, creating a quality digital video capture card with
full device control capability, began shipping in the third quarter. The
Osprey-300 is also the first ViewCast capture card to be certified for Adobe®
Premiere® Elements, Adobes award-winning non-linear editing software. With the
introduction of new products and product enhancements and as the economy
continues to grow, we expect to continue growth in Osprey product sales during
2004. Video Communications System and Applications Software Products.During the
three months ended September 30, 2004, combined system and software sales
decreased 29.6% over 2003 third quarter video product revenues. During the nine
months ended September 30, 2004, combined system and software sales increased
slightly by 0.5% over 2003 levels. The decrease in three-month sales was due to
decreased sales of ViewCasts Niagara systems, offset by a slight increase in
the IVN product line. Besides some economic and IT spending improvements, the third quarter of
2004 included participation by ViewCast in a major European trade show which
has increased the number of bids, demonstrations and orders from the region of
our video products. IT Services and Products.ViewCasts DCi subsidiary is a provider of
professional information technology and customized network support services to
Fortune 500 and Fortune 1000 corporations, mid-sized companies, hospitals,
health care facilities and financial institutions primarily in the northeastern 20




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued) United States. During the third quarter of 2004, IT services and product
sales decreased 11.4% to $2,562,727 from the $2,893,706 reported in the
comparable 2003 period. IT services and product sales totaled $8,997,208 for
the nine months ended September 30, 2004, a slight decrease of 2.9% over the
first nine months of 2003. The decreases were primarily due to lower product
sales than the prior year. During the quarter and nine months ending September 30, 2004, service fees
provided 91.2% and 86.7%, respectively, of the IT service and product revenues
while product sales provided the remainder. During the quarter and nine months
ending September 30, 2003, service fees provided 82.7% and 84.3%, respectively,
of the IT service and product revenues while product sales provided the
remainder. As end of year budgetary spending progresses during the remainder of 2004,
IT service revenue and related product sales should increase from additional
customer projects. Other Revenues.Other video product and service revenues consist of
software maintenance, training, engineering consulting fees and professional
services and represented 0.8% of consolidated revenues for the nine months
ended September 30, 2004. For the quarter and the nine months ended September
30, 2004 other revenues totaled $44,545 and $123,925, respectively, a slight
decrease over the quarter and the nine months ended September 30, 2003 of
$46,464 and $146,892, respectively. Cost of Sales and Gross Margins.Cost of sales totaled $3,045,417 for the
quarter ended September 30, 2004, a 4.8% decrease from the $3,199,561 reported
for the same period in 2003. Gross profit margin for the quarter ended
September 30, 2004 was $2,070,687 or 40.5% compared to $2,181,453 or 40.5% in
2003. The video products segments margin for the third quarter of 2004 was
58.6% compared to 55.4% in 2003 and contributed 72.3% of the 2004 gross margin
compared to 63.1% of the third quarter gross margin in 2003. The IT services
and products margin for the third quarter of 2004 was 22.4% a decline compared
to 27.8% in 2003 due to lower margins from product sales. Margins on product
sales vary period to period depending on the mix of third-party products sold
and the relative availability of those products in the market. The IT services
and products segment contributed 27.7% of the 2004 gross margin compared to
36.9% of the third quarter gross margin in 2003. Cost of sales totaled $8,945,747 for the nine months ended September 30,
2004, a 3.3% increase from the $8,661,183 reported for the same period in 2003.
Gross profit margin for the nine months ended September 30, 2004 was
$5,971,991 or 40.0% compared to $6,145,912 or 41.5% in 2003. The video
products segments margin for the first nine months of 2004 was 60.6% compared
to 59.4% in 2003 and contributed 70.2% of the 2004 gross margin compared to
63.5% of the gross margin in the same period in 2003. The IT services and
products margin for the first nine months of 2004 was 22.3%, a decline compared
to 27.3% in 2003 due to lower margins from service and product sales. The IT
services and products segment contributed 29.8% of the 2004 gross margin
compared to 36.5% of the first nine months gross margin in 2003. We expect future margins for IT services and products to average in the
20%-30% range compared to the video products segments historical margins in
the 50%-60% range. Margins will be affected quarter to quarter by promotional
activities, price adjustments, cost of materials, inventory obsolescence, the
introduction of new products and the sales mix between products and services in
any one reporting period. Selling, General and Administrative Expense.Selling, general and
administrative (SG&A) expenses for the three and nine months ended September
30, 2004 totaled $1,753,030 and $5,209,653, respectively, an increase from the
$1,638,703 and $5,070,495, respectively, reported last year for the same
periods. The increase reflects the additional sales and marketing activities
and personnel for the video products segment added during the second quarter of
2004 offset by lower expenses in customer support. ViewCast participated in
three major tradeshows during the first nine months of 2004 compared to two in
the prior year in line with our goals of developing further revenue growth and
market awareness. 21




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued) Research and Development Expense.Research and development expense for the
three and nine months ended September 30, 2004 totaled $449,022 and $1,385,958,
respectively, a decrease of 14.2% and 25.9% over 2003 levels, reflecting a
decrease in personnel and related expenses compared to the first nine months of
2003. There were no material research and development expenses associated with
DCi operations during the first nine months of 2003 and 2004. Although
expenses have been reduced, we have continued to develop new products and
features being released throughout 2004 targeting current and expanded market
opportunities. ViewCasts emphasis in development has become focused on
customer applications combined with technological innovation. We expect such
an approach provides more efficient and effective development in relation to
the market and our products. Other (Income) Expense. Total other (income) expense for the third quarter
of 2004 totaled $203,326 compared to $273,238 in 2003, and for the nine months
ended September 30, 2004 totaled $1,854,065 compared to $756,000 in 2003. Other (Income) Expense had a significant increase in expense recognition
due to a one-time charge for debt conversion expense. During the quarter ended
June 30, 2004, ViewCast recognized a non-cash debt conversion charge of
$1,233,723 related to the conversion of $870,000 principal amount of
outstanding 7% convertible debentures into common stock and warrants of
ViewCast. The non-cash charge was recorded in accordance with SFAS No. 84,
Induced Conversions of Convertible Debt. In Other Income (Expense), the
Company has recognized an imputed amount for debt conversion expense equal to
the fair value of all securities and other consideration transferred in the
transaction in excess of the fair value of securities issuable pursuant to the
original conversion terms. This conversion transaction results in a net
reduction in convertible debt and an increase in net equity of $870,000. The
debt conversion expense is a non-cash charge and is a reconciling adjustment in
calculating net cash used in operating activities. See Note 8 to the
Consolidated Financial Statements for further details regarding this
transaction. Interest expense during the third quarters of 2004 and 2003 was $215,553
and $273,619, respectively, representing interest primarily from our
stockholder debt, debentures, DCis line-of-credit financing and amortization
of related issue costs. Interest expense during the first nine months of 2004
and 2003 was $639,400 and $761,904, respectively. Interest expense during the
third quarter and first nine months of 2004 has decreased over 2003 levels by
21.2% and 16.1%, respectively, principally due to interest rate reductions
through amendments to our stockholder debt and DCis line of credit facility
with Keltic Financial Partners, LP. Net Loss.Net loss for the three and nine months ended September 30, 2004
was $431,095 and $2,777,086, respectively. Net Loss was substantially affected
by an increase in expense recognition due to a one-time charge for debt
conversion expense. Excluding the non-cash debt conversion expense of
$1,233,723 described above, net loss for the nine months ended September 30,
2004 would have been $1,543,363, representing a 22.7% improvement compared to
the loss reported for the first nine months of 2003. Liquidity and Capital Resources ViewCasts primary sources of funds for conducting its business activities
are derived from sales of its products and services, from its credit facilities
and from the placement of its equity securities with investors. ViewCast
requires working capital primarily to increase inventories and accounts
receivable during sales growth, develop products, service debt, purchase
capital assets, fund operations and strategic acquisitions. Net cash provided by operating activities for the nine months ended
September 30, 2004 increased to $242,779 due principally to the decrease in
accounts receivable and other accrued liabilities offset by the net loss of
$2,777,086, which includes the non-cash debt conversion expense of $1,233,723.
Compared to the nine months ended June 30, 2003, the net cash provided by
operating activities for the first nine months 22




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued) ended September 30, 2004 improved by $604,428 due to the reduction in the
net operating loss, and improvement in Viewcast net working capital. Cash utilized for investing activities during the nine months ended
September 30, 2004 totaled $437,416 and included purchases of property and
equipment of $128,626 to support new and existing IT service contracts,
purchases of $170,747 for property and equipment to support all product lines,
and purchases of $139,543 for capitalized software development associated with
ViewCasts IVN product line. During the nine months ended September 30, 2004, ViewCasts financing
activities provided cash of $554,724 principally from short-term borrowings
under ViewCasts stockholder line of credit facility of $1,250,000 and proceeds
from the sale of common stock and exercise of stock options of $5,100. These
proceeds were offset by repayment of 7% Debentures, Keltic debt and other
short-term and long-term debt totaling $700,376. Since October 1998, ViewCast has maintained a working capital line of
credit facility with an entity controlled by one of its principal stockholders,
Mr. H.T. Ardinger, who also currently serves as Chairman of the Board of
Directors of ViewCast. Prior to October 15, 2003, availability of funds under
this facility was subject to certain borrowing base limitations based
principally on qualifying accounts receivable and inventory with interest
payable on demand at 12% and secured by the assets of ViewCast.com, Inc. In
October 2003, ViewCast.com, Inc., Osprey Technologies, Inc. and VideoWare, Inc.
(jointly and severally, the Borrower) amended the terms and conditions of
this credit note and security agreement with the Ardinger Family Partnership,
LTD. (Lender). As of the date of the agreement, the outstanding principal
balance of the indebtedness under the original loan agreement was $7,509,582
and accrued and unpaid interest thereon was $1,243,665. Additionally, in
October of 2003 ViewCast had outstanding $500,000 in advances from Lender for
the purchase of DCi in October 2002. Effective October 15, 2003, the terms and
conditions of the note agreement were amended to establish a long-term payout
for $6,909,582 principal amount of the note and accrued interest of
$1,243,665. Additionally, a new $2.0 million short-term line of credit
facility was established with an initial principal amount $1.1 million
consisting of $600,000 principal amount of the original note and $500,000 of
stockholder advances. The amended note agreement reduces the per annum interest
rate on stockholder notes from 12% to the lesser of prime plus 3.0% or 9.5%,
eliminates the borrowing base requirements based on outstanding accounts
receivable and inventory and is secured by all assets of the Borrower.
Effective April 30, 2004, ViewCast amended the terms and conditions of the
credit facility to increase the credit line of the revolving credit note to
$2.25 million and extended the commencement date for the scheduled payments of
the term note and accrued interest from April 30, 2004 to August 31, 2004.
Effective August 13, 2004, ViewCast amended the terms and conditions of the
credit facility to increase the credit line of the revolving credit note to
$3.0 million and extended the commencement date for the scheduled payments of
the term note and accrued interest from August 31, 2004 to December 31, 2004. During the nine months ended September 30, 2004, net borrowings under the
new stockholder line of credit increased $1,250,000 resulting in a note
principal balance of $2,550,000 at September 30, 2004. Total accrued interest
on stockholder notes at September 30, 2004 totaled $1,834,528 of which
$1,011,859 has been classified as long-term. At September 30, 2004, ViewCast
had availability under the stockholder line of credit of $450,000. ViewCast also maintains a $1.5 million asset based revolving credit
facility with Keltic Financial Partners, LP (Keltic) for working capital
support of DCi operations. Draws on the revolving credit facility are based on
qualifying DCi accounts receivable. The loan balance is reduced as cash
collections are received directly by Keltic. During the nine months ended
September 30, 2004, cash collections in excess of draws reduced the Keltic loan
balance to $0 at September 30, 2004. DCi had availability of $681,000 under
the revolving credit facility at September 30, 2004. ViewCast has entered into
a Guaranty of Payment and a Performance and Subordination Agreement with Keltic
relating to this facility. On October 11, 2004, the Keltic credit facility was
amended to extend the maturity date of the note to December 31, 2004 and to
extend the date related to penalties for early prepayment or termination of the 23




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued) loan from October 11, 2004 to December 10, 2004. The credit facility
continues to be secured by all DCi assets and is guaranteed by ViewCast. In April 2004, ViewCast received Notices of Conversion from the holders of
$870,000 of the outstanding 7% Senior Convertible Debentures. The terms of the
conversion include a lowered conversion price of the Debentures from $5.00 to
$0.41 per share of ViewCast common stock or a total of 2,121,947 shares of
common stock for the $870,000 converted. Each Debentureholder that converted
its Debentures also received in cash the interest accrued under the terms of
the Debenture for the period of time from November 2, 2003 through April 28,
2004 in the amount of $35.00 per $1,000 principal amount of Debentures
converted, which would otherwise, pursuant to the terms of the Debentures, be
forfeited upon conversion. In addition, the converting Debentureholders
received 635,970 warrants exercisable for three (3) years into shares of common
stock of ViewCast (the Warrant Shares) at an exercise price of $0.45 per
Warrant Share, and in connection therewith, were granted certain piggyback
registration rights for the Warrant Shares. In conjunction with the debenture
conversions, ViewCast has agreed to pay a consulting fee consisting of hourly
fees of $7,000, payable in cash or restricted stock at ViewCasts option, and
of warrants exercisable into 15,000 shares of common stock with the same terms
as the warrants issued to the converting Debentureholders. This conversion
transaction results in a net reduction in convertible debt and an increase in
net equity of $870,000. During the quarter ended June 30, 2004, ViewCast
recognized a non-cash debt conversion charge of $1,233,723 related to this
transaction that is more fully described in Note 8 to the Consolidated
Financial Statements. ViewCasts Series D Preferred Stock provides redemption rights for the
holders and ViewCast, and other rights as described in the Certificate of
Designation of the Series D Preferred Stock. The Series D Preferred Stock is
redeemable at its stated value at the holders option upon written notice at
any time after October 11, 2004, to the extent permitted by applicable law.
ViewCast received a Holder Redemption Notice in the amount of $1,388,450
requesting an effective redemption date of October 15, 2004. At September 30,
2004, ViewCast had a consolidated stockholders deficit of $7,919,788 and in
accordance with Delaware law, is precluded from redeeming its outstanding
Series D convertible preferred stock. As a result, no redemption may be paid
for Holder Redemption Notices received by ViewCast while it has a consolidated
stockholders deficit. At September 30, 2004, ViewCast had 3,799,680 public and public equivalent
warrants and 122,500 representative warrants outstanding and exercisable at
$1.00. The warrants are redeemable by ViewCast under certain conditions. At September 30, 2004, ViewCast had a consolidated stockholders deficit
of $7,919,788, and in accordance with Delaware law, was precluded from paying
dividends on its outstanding Series B and Series C convertible preferred stock.
As a result, no preferred stock dividends have been declared or paid during
2004. The Series B and Series C preferred stock issues carry cumulative
dividends of 8% and 9% per year, respectively, and are generally payable
semi-annually in arrears in cash or in ViewCast common stock, at ViewCasts
option. Cumulative dividends in arrears on preferred shares are approximately:
Series B-$1,600,000, Series C-$448,000. Holders of Series B and Series C
preferred stock have no voting rights except as required by law. At September 30, 2004, ViewCast had a working capital deficit of
$3,088,077 and cash and cash equivalents of $659,851. From an operational
perspective, ViewCast has reduced the amount of cash utilized in operating
activities compared to the prior year from both improving revenues and reduced
expenditures. During the nine months ended September 30, 2004, ViewCast
experienced a modest sales increase of 0.7% compared to the same period of 2003
and while wary of current economic conditions, anticipates that revenues during
the balance of 2004 will continue to increase over 2003 levels with improvement
anticipated across all business segments. ViewCast strives for productivity
and efficiency in our workforce and operating expenses. During the first nine
months of 2004, ViewCast has decreased consolidated operating expenses by
$492,508, or 6.7%, compared to the same period in 2003. Excluding the non-cash
debt conversion charge of $1,233,723, consolidated net operating loss for the
nine months 24




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued) ended September 30, 2004 was reduced by 22.7%, compared to the same period
in 2003. ViewCast anticipates that losses may continue during 2004, or until
such time as total profit margins from the sales of its products and services
exceeds its total development, selling, administrative and financing costs. ViewCast utilizes significant capital to design, develop and commercialize
its products and intends to fund its operating activities and sales growth
during the next twelve months by utilizing cash contributed from operations and
its available working capital lines of credit to the extent possible. ViewCast
anticipates it will require additional capital during the balance of 2004 for
working capital to support the expansion of sales channels and market
distribution, to develop and introduce new products and services, to enhance
existing product offerings, to address unanticipated competitive threats or
technical problems, to transition adverse economic conditions and to service
its debt. During 2004 ViewCast plans to improve its working capital position
by increasing sales and through other initiatives that may include raising
additional equity, conversion of debt to equity, further acquisitions and by
exercise of warrants if market conditions allow. Certain actions have already
occurred. In October 2003, ViewCast improved its working capital position by
more than $7.0 million through amendments to its stockholder line of credit and
classification of a major portion of its debt and accrued interest as long-term
and has reduced interest expense associated with this debt approximately 16.1%
during the first nine months of 2004 compared to 2003. In January 2004,
ViewCast engaged Rockland Capital Partners, an investment banking firm, to
assist ViewCast with the review, refinement, and implementation of its
strategic initiatives. In April 2004, $870,000 of debentures converted into
equity. ViewCast intends to continue these initiatives and discussions related
to current and potentially new debt and equity relationships. Although
ViewCast has no firm arrangements with respect to additional financing, it is
currently considering proposals relating to the issuance of equity securities
in exchange for a cash investment in ViewCast. There can be no assurance that
additional financing will be available to ViewCast on acceptable terms, or at
all. Additional equity financing may involve substantial dilution to our then
existing stockholders. ViewCast intends to actively pursue other strategic
merger and acquisition activities to the extent possible. In the event we are
unable to raise additional capital or execute other alternatives, we may be
required to sell segments of the business, or substantially reduce or curtail
our activities. Such actions could result in charges that could be material to
ViewCasts results of operations or financial position. At September 30, 2004, ViewCast had no material commitments for capital
expenditures. 25




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued) Off-Balance Sheet Arrangements ViewCast does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on ViewCasts financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors. 26




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ViewCast.com, Inc. and Subsidiaries
Controls and Procedures 
 Item 3.  Controls and Procedures Management, including the Companys President and Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this report. Based upon
that evaluation, the President and Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures were effective,
in all material respects, to ensure that information required to be disclosed
in the reports the Company files and submits under the Exchange Act is
recorded, processed, summarized and reported as and when required. There has been no change in the Companys internal control over financial
reporting identified in connection with the evaluation that occurred during the
Companys last fiscal quarter that has materially affected, or that is
reasonably likely to materially affect, the Companys internal control over
financial reporting. 27




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ViewCast.com, Inc. and Subsidiaries
Other Information 
 PART II: OTHER INFORMATION  Item 1.
    
    Legal Proceedings
(Not Applicable)Item 2.
    
    Changes in Securities and Small Business Issuer Purchases of Equity Securities
(Not Applicable)Item 3.
    
    Defaults Upon Senior Securities
(Not Applicable)Item 4.
    
    Submission of Matters to a Vote of Security Holders
(Not Applicable)Item 5.
    
    Other Information  (a)
    
    (None)(b)
    
    (None)  Item 6.
    
    Exhibits
Exhibits filed with this report:
(See Exhibit Index) 28




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SIGNATURE In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized. ViewCast.com, Inc.
(Registrant)BY:Date: November 15, 2004
    
    /s/ George C. PlattGeorge C. PlattChief Executive Officer
Principal Executive Officer/s/ Laurie L. LathamLaurie L. LathamChief Financial Officer
Principal Financial Officer 29




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EXHIBIT INDEX ExhibitNumber31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications32.1
    
    Section 1350 Certifications
 30