##### 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: June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-29020
 ViewCast.com, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    75-2528700(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)3701 W. Plano Parkway, Suite 300, Plano, TX
    
    75075(Address of principal executive offices)
    
    (Zip Code)
 (972) 488-7200  (Registrants telephone number including area code)
 N/A  (Former name, former address and former fiscal year, if changed from last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
  As of July 31, 2009, there were 35,832,230 shares of common stock, par value $0.0001 per share.




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets at December 31, 2008 and June 30, 2009 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2008 and 2009 (Unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Six Months ended June 30, 2009 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2008 and 2009 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    23Item 4T. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26Rule 13a-14(a)/15d-14(a) CEO CertificationRule 13a-14(a)/15d-14(a) CFO CertificationSection 1350 CEO CertificationSection 1350 CFO Certification
   1




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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,
    
    
    June 30,2008
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,579,683
    
    
    $
    758,770Accounts receivable, less allowance for doubtful accounts of
$82,317 and $116,192 at December 31, 2008 and June 30, 2009, respectively
    
    
    2,654,217
    
    
    
    1,742,010Inventories, net
    
    
    2,824,236
    
    
    
    2,233,352Prepaid expenses
    
    
    352,089
    
    
    
    245,078Total current assets
    
    
    7,410,225
    
    
    
    4,979,210Property and equipment, net
    
    
    772,290
    
    
    
    710,298Goodwill
    
    
    
    
    
    
    620,002Intangible assets, net
    
    
    423,028
    
    
    
    1,472,558Deposits
    
    
    48,177
    
    
    
    48,544Total assets
    
    $
    8,653,720
    
    
    $
    7,830,612LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,106,892
    
    
    $
    419,970Accrued expenses
    
    
    1,143,882
    
    
    
    1,462,921Stockholder accrued interest
    
    
    169,846
    
    
    
    Current maturities of long-term debt and stockholder notes payable
    
    
    159,032
    
    
    
    152,854Total current liabilities
    
    
    2,579,652
    
    
    
    2,035,745Long-term debt, less current maturities
    
    
    38,172
    
    
    
    27,413Stockholder notes payable, less current maturities
    
    
    5,012,827
    
    
    
    5,012,827Total liabilities
    
    
    7,630,651
    
    
    
    7,075,985Commitments and contingenciesStockholders equity:Preferred stock, $0.0001 par value, authorized 5,000,000 shares:Series B convertible  issued and outstanding shares  800,000  liquidation value
of $16 per share as of December 31, 2008 and June 30, 2009
    
    
    80
    
    
    
    80Series C convertible  issued and outstanding shares  200,000  liquidation value
of $31 and $32 per share as of December 31, 2008 and June 30, 2009, respectively
    
    
    20
    
    
    
    20Series E convertible  issued and outstanding shares  80,000  liquidation value
of $104 per share as of December 31, 2008 and June 30, 2009
    
    
    8
    
    
    
    8Common stock, $0.0001 par value, authorized 100,000,000 shares:Issued shares   32,419,886 and 36,093,727 at December 31, 2008
and June 30, 2009, respectively
    
    
    3,242
    
    
    
    3,609Additional paid-in capital
    
    
    70,153,562
    
    
    
    71,601,455Accumulated deficit
    
    
    (69,121,937
    )
    
    
    (70,838,639
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders equity
    
    
    1,023,069
    
    
    
    754,627Total liabilities and stockholders equity
    
    $
    8,653,720
    
    
    $
    7,830,612
   3




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)
 For the three months ended
    
    
    For the six months endedJune 30,
    
    
    June 30,2008
    
    
    2009
    
    
    2008
    
    
    2009Net sales
    
    $
    4,205,085
    
    
    $
    3,281,594
    
    
    $
    8,321,551
    
    
    $
    7,498,629Cost of sales
    
    
    1,279,645
    
    
    
    1,242,693
    
    
    
    2,617,254
    
    
    
    2,820,730Gross profit
    
    
    2,925,440
    
    
    
    2,038,901
    
    
    
    5,704,297
    
    
    
    4,677,899Operating expenses:Selling, general and administrative
    
    
    1,912,023
    
    
    
    2,128,778
    
    
    
    3,587,073
    
    
    
    4,374,893Research and development
    
    
    748,922
    
    
    
    850,592
    
    
    
    1,494,566
    
    
    
    1,586,635Depreciation and amortization
    
    
    114,782
    
    
    
    204,342
    
    
    
    227,035
    
    
    
    362,010Total operating expenses
    
    
    2,775,727
    
    
    
    3,183,712
    
    
    
    5,308,674
    
    
    
    6,323,538Operating income (loss)
    
    
    149,713
    
    
    
    (1,144,811
    )
    
    
    395,623
    
    
    
    (1,645,639
    )Other income (expense):Interest expense (including $36,844, $36,331, $87,409, and
$69,795 of expense to related parties, respectively)
    
    
    (40,421
    )
    
    
    (38,244
    )
    
    
    (93,082
    )
    
    
    (73,887
    )Interest income
    
    
    8,840
    
    
    
    1,690
    
    
    
    21,296
    
    
    
    2,824Total other expense
    
    
    (31,581
    )
    
    
    (36,554
    )
    
    
    (71,786
    )
    
    
    (71,063
    )Income tax expense
    
    
    (1,600
    )
    
    
    
    
    
    
    (6,400
    )
    
    
    NET INCOME (LOSS)
    
    $
    116,532
    
    
    $
    (1,181,365
    )
    
    $
    317,437
    
    
    $
    (1,716,702
    )Preferred stock dividends
    
    
    (205,000
    )
    
    
    (205,000
    )
    
    
    (410,029
    )
    
    
    (410,000
    )Net loss applicable to common stockholders
    
    $
    (88,468
    )
    
    $
    (1,386,365
    )
    
    $
    (92,592
    )
    
    $
    (2,126,702
    )Net loss per shareBasic
    
    $
    (0.00
    )
    
    $
    (0.04
    )
    
    $
    (0.00
    )
    
    $
    (0.06
    )Diluted
    
    $
    (0.00
    )
    
    $
    (0.04
    )
    
    $
    (0.00
    )
    
    $
    (0.06
    )Weighted average number of common shares outstandingBasic
    
    
    32,103,001
    
    
    
    35,824,591
    
    
    
    32,091,629
    
    
    
    34,488,047Diluted
    
    
    32,103,001
    
    
    
    35,824,591
    
    
    
    32,091,629
    
    
    
    34,488,047
   4




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY  FOR THE SIX MONTHS ENDED JUNE 30, 2009

(UNAUDITED)
 Series B
    
    
    Series C
    
    
    Series EConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    EquityBalances, December 31, 2008
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    32,419,886
    
    
    $
    3,242
    
    
    $
    70,153,562
    
    
    $
    (69,121,937
    )
    
    $
    (11,906
    )
    
    $
    1,023,069Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,850
    
    
    
    
    
    
    
    
    
    
    
    96,850Employee stock purchase plan issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,527
    
    
    
    2
    
    
    
    8,558
    
    
    
    
    
    
    
    
    
    
    
    8,560Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    1
    
    
    
    2,849
    
    
    
    
    
    
    
    
    
    
    
    2,850Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500,000
    
    
    
    250
    
    
    
    939,750
    
    
    
    
    
    
    
    
    
    
    
    940,000Stock issuance for acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,141,314
    
    
    
    114
    
    
    
    399,886
    
    
    
    
    
    
    
    
    
    
    
    400,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,716,702
    )
    
    
    
    
    
    
    (1,716,702
    )Balances, June 30, 2009
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    36,093,727
    
    
    $
    3,609
    
    
    $
    71,601,455
    
    
    $
    (70,838,639
    )
    
    $
    (11,906
    )
    
    $
    754,627
   5




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)
 For the six months endedJune 30,2008
    
    
    2009Operating activities:Net income (loss)
    
    $
    317,437
    
    
    $
    (1,716,702
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Bad debt expense
    
    
    26,914
    
    
    
    33,875Depreciation of property and equipment
    
    
    170,504
    
    
    
    219,884Amortization of intangible assets
    
    
    56,531
    
    
    
    142,126Stock based compensation expense
    
    
    49,039
    
    
    
    96,850Common stock issued to employee for services
    
    
    3,000
    
    
    
    Changes in operating assets and liabilities : (net of effect of acquisition)Accounts receivable
    
    
    245,464
    
    
    
    1,039,092Inventories
    
    
    446,643
    
    
    
    590,884Prepaid expenses
    
    
    (1,846
    )
    
    
    107,426Deposits
    
    
    (2,128
    )
    
    
    (367
    )Accounts payable
    
    
    338,566
    
    
    
    (686,922
    )Accrued expenses
    
    
    57,054
    
    
    
    19,701Stockholder accrued interest
    
    
    45,427
    
    
    
    (169,846
    )Net cash provided by (used in) operating activities
    
    
    1,752,605
    
    
    
    (323,999
    )Investing activities:Capitalized software development costs
    
    
    (105,296
    )
    
    
    (257,656
    )Purchase of property and equipment
    
    
    (143,759
    )
    
    
    (142,309
    )Cash paid for acquisition
    
    
    
    
    
    
    (1,031,422
    )Net cash used in investing activities
    
    
    (249,055
    )
    
    
    (1,431,387
    )Financing activities:Proceeds from sale of common stock
    
    
    3,883
    
    
    
    8,560Proceeds from exercise of employee stock options
    
    
    
    
    
    
    2,850Net proceeds from exercise of warrants
    
    
    
    
    
    
    940,000Repayments of long-term debt
    
    
    (13,463
    )
    
    
    (16,937
    )Net cash provided by (used in) financing activities
    
    
    (9,580
    )
    
    
    934,473Net increase (decrease) in cash and cash equivalents
    
    
    1,493,970
    
    
    
    (820,913
    )Cash and cash equivalents, beginning of period
    
    
    1,135,416
    
    
    
    1,579,683Cash and cash equivalents, end of period
    
    $
    2,629,386
    
    
    $
    758,770Supplemental cash flow information:Cash paid for interest
    
    $
    47,656
    
    
    $
    243,733Non-cash items:Stock issued for acquisition
    
    $
    
    
    
    $
    400,000Acquisition of property and equipment under capital leases
    
    $
    48,362
    
    
    $
    
   6




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ViewCast.com, Inc. and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation and Liquidity
     2. Recent issued Accounting Pronouncements
    7




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
  3. 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
    8




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 For the threemonths ended
    
    
    For the six months endedJune 30,
    
    
    June 30,2008
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net sales
    
    $
    4,638,879
    
    
    $
    9,253,180
    
    
    $
    7,659,256Net loss applicable to common stockholders
    
    
    (77,301
    )
    
    
    (32,219
    )
    
    
    (2,134,016
    )Basic and diluted net loss per common share
applicable to common stockholders
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.06
    )Weighted average number of common shares outstanding
(basic and diluted)
    
    
    33,244,568
    
    
    
    33,233,006
    
    
    
    34,942,050
 4. Accounts Receivable
   For the three months ended
    
    
    For the six months endedJune 30,
    
    
    June 30,2008
    
    
    2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    44,325
    
    
    $
    103,961
    
    
    $
    30,390
    
    
    $
    82,317Bad debt expense
    
    
    12,979
    
    
    
    12,231
    
    
    
    26,914
    
    
    
    33,875Ending balance
    
    $
    57,304
    
    
    $
    116,192
    
    
    $
    57,304
    
    
    $
    116,192
 5. Inventories
  December 31,
    
    
    June 30,2008
    
    
    2009(Unaudited)Purchased materials
    
    $
    1,670,260
    
    
    $
    869,579Finished goods
    
    
    1,207,518
    
    
    
    1,489,473Reserve
    
    
    (53,542
    )
    
    
    (125,700
    )$
    2,824,236
    
    
    $
    2,233,352
  9




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 6. Intangible Assets
  December 31,
    
    
    June 30,2008
    
    
    2009(Unaudited)Customer lists
    
    $
    
    
    
    $
    60,000Non-compete agreements
    
    
    
    
    
    
    24,000Capitalized software
    
    
    1,385,215
    
    
    
    2,481,867Patents
    
    
    102,594
    
    
    
    113,598Less accumulated amortization
    
    
    (1,064,781
    )
    
    
    (1,206,907
    )$
    423,028
    
    
    $
    1,472,558
  For the three months ended
    
    
    For the six months ended2008
    
    
    2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Customer lists
    
    $
    
    
    
    $
    2,000
    
    
    $
    
    
    
    $
    2,387Non-compete agreements
    
    
    
    
    
    
    3,001
    
    
    
    
    
    
    
    3,581Capitalized software
    
    
    27,703
    
    
    
    82,735
    
    
    
    53,688
    
    
    
    133,076Patents
    
    
    1,426
    
    
    
    1,573
    
    
    
    2,843
    
    
    
    3,082$
    29,129
    
    
    $
    89,309
    
    
    $
    56,531
    
    
    $
    142,126
  Year ended December 31,2009
    
    $
    189,4612010
    
    
    349,6592011
    
    
    285,2902012
    
    
    173,2032013
    
    
    140,112Thereafter
    
    
    334,833$
    1,472,558
  10




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 7. Accrued Expenses
  December 31,
    
    
    June 30,2008
    
    
    2009(Unaudited)Accrued compensation
    
    $
    302,310
    
    
    $
    292,414Accrued warranty
    
    
    199,446
    
    
    
    205,528Accrued inventory purchases
    
    
    39,595
    
    
    
    27,043Customer deposits
    
    
    122,321
    
    
    
    69,182Deferred rent
    
    
    73,484
    
    
    
    59,871Deferred revenue
    
    
    156,611
    
    
    
    496,398Accrued taxes and other
    
    
    250,115
    
    
    
    312,485$
    1,143,882
    
    
    $
    1,462,921
 8. Warranty Reserves
   For the three months ended
    
    
    For the six months endedJune 30,
    
    
    June 30,2008
    
    
    2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    164,156
    
    
    $
    201,201
    
    
    $
    133,940
    
    
    $
    199,446Charged to expense
    
    
    28,748
    
    
    
    23,316
    
    
    
    62,575
    
    
    
    32,711Usage
    
    
    (24,055
    )
    
    
    (18,989
    )
    
    
    (27,666
    )
    
    
    (26,629
    )Ending balance
    
    $
    168,849
    
    
    $
    205,528
    
    
    $
    168,849
    
    
    $
    205,528
  11




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 9. Property and Equipment
  EstimatedUseful Life
    
    
    December 31,
    
    
    June 30,(Years)
    
    
    2008
    
    
    2009(Unaudited)Service equipment
    
    
    3
    
    
    $
    242,362
    
    
    $
    242,362Computer equipment
    
    
    2 to 7
    
    
    
    420,398
    
    
    
    450,961Software
    
    
    3 to 5
    
    
    
    184,038
    
    
    
    184,038Leasehold improvements
    
    
    1 to 5
    
    
    
    172,697
    
    
    
    172,697Office furniture and equipment
    
    
    5 to 7
    
    
    
    1,136,470
    
    
    
    1,263,7992,155,965
    
    
    
    2,313,857Less accumulated depreciation and amortization
    
    
    
    
    
    
    (1,383,675
    )
    
    
    (1,603,559
    )$
    772,290
    
    
    $
    710,298
 10. Long-Term Debt
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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 The Companys long-term debt consists of:
 December 31, 2008
    
    
    June 30, 2009(Unaudited)Aggregate of the Outstanding Principal
(Primary Principal Amount) as amended, with
interest only due monthly at a rate per annum
equal to the greater of 5.00% or prime plus
0.75%. (4.00% at December 31, 2008 and June
30, 2009), beginning in January 2010, minimum
monthly principal payments of $21,422 will be
made, matures December 31, 2012
    
    $
    1,250,000
    
    
    $
    1,250,000Accrued and Outstanding Interest (Secondary
Principal Amount), currently interest only
due monthly at a rate per annum equal to the
lesser of Applicable Federal Rate (2.85% and
2.25% at December 31, 2008 and June 30, 2009,
respectively) or 9.50% fixed rate, matures
December 31, 2012.
    
    
    3,891,361
    
    
    
    3,891,361Other debt
    
    
    68,670
    
    
    
    51,733Total long-term debt
    
    
    5,210,031
    
    
    
    5,193,094Less current maturities
    
    
    (159,032
    )
    
    
    (152,854
    )Total long-term debt less current maturities
    
    $
    5,050,999
    
    
    $
    5,040,240
 11. Warrants
  12. Earnings Per Share Data
   13




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net loss applicable to common stockholders
 numerator for basic and diluted earnings per share
    
    $
    (88,468
    )
    
    $
    (1,386,365
    )
    
    $
    (92,592
    )
    
    $
    (2,126,702
    )Weighted  average common shares outstanding
 denominator for basic and dilluted earning per share
    
    
    32,103,001
    
    
    
    35,824,591
    
    
    
    32,091,629
    
    
    
    34,488,047Net loss per share:Basic
    
    $
    (0.00
    )
    
    $
    (0.04
    )
    
    $
    (0.00
    )
    
    $
    (0.06
    )Diluted
    
    $
    (0.00
    )
    
    $
    (0.04
    )
    
    $
    (0.00
    )
    
    $
    (0.06
    )Anti-dilutive securities excluded from diluted
earnings per share:Stock options
    
    
    3,995,184
    
    
    
    4,790,435
    
    
    
    3,550,406
    
    
    
    4,538,935Warrants
    
    
    2,500,000
    
    
    
    
    
    
    
    2,500,000
    
    
    
    Convertible preferred stock  Series B
    
    
    2,206,896
    
    
    
    2,206,896
    
    
    
    2,206,896
    
    
    
    2,206,896Convertible preferred stock  Series C
    
    
    3,333,333
    
    
    
    3,333,333
    
    
    
    3,333,333
    
    
    
    3,333,333Convertible preferred stock  Series E
    
    
    15,686,274
    
    
    
    13,333,333
    
    
    
    15,686,274
    
    
    
    13,333,333
 13. Stock-Based Compensation
      14




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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, 2008
    
    
    4,065,935
    
    
    $
    0.20  $7.14
    
    
    $
    1.42Granted
    
    
    1,587,500
    
    
    
    0.33
    
    
    
    0.33Exercised
    
    
    (10,000
    )
    
    
    0.29
    
    
    
    0.29Canceled/forfeited
    
    
    (65,250
    )
    
    
    0.30  7.00
    
    
    
    3.20Outstanding at June 30, 2009
    
    
    5,578,185
    
    
    $

    0.20  $7.14
    
    
    $
    1.09
  Weighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Outstanding at
    
    
    Remaining
    
    
    Average
    
    
    Exercisable at
    
    
    AverageRange of Exercise
    
    June 30,
    
    
    Contractual
    
    
    Exercise
    
    
    June 30,
    
    
    ExercisePrices
    
    2009
    
    
    Life
    
    
    Price
    
    
    2009
    
    
    Price$0.01  1.00
    
    
    4,414,835
    
    
    
    5.8
    
    
    $
    0.37
    
    
    
    1,844,113
    
    
    $
    0.401.01  2.00
    
    
    541,350
    
    
    
    1.7
    
    
    
    1.12
    
    
    
    541,350
    
    
    
    1.122.01  3.00
    
    
    81,000
    
    
    
    1.1
    
    
    
    2.50
    
    
    
    81,000
    
    
    
    2.503.01  4.00
    
    
    2,500
    
    
    
    1.0
    
    
    
    3.52
    
    
    
    2,500
    
    
    
    3.524.01  5.00
    
    
    12,500
    
    
    
    0.3
    
    
    
    4.53
    
    
    
    12,500
    
    
    
    4.535.01  6.00
    
    
    116,000
    
    
    
    0.5
    
    
    
    5.44
    
    
    
    116,000
    
    
    
    5.447.01  8.00
    
    
    410,000
    
    
    
    0.2
    
    
    
    7.09
    
    
    
    310,000
    
    
    
    7.095,578,185
    
    
    
    4.8
    
    
    $
    1.09
    
    
    
    2,907,463
    
    
    $
    1.53
  15




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ViewCast.com, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements  Continued
 14. Income Taxes
   15. Related Party Transactions and Subsequent Event
   16. Accounts Receivable Loan Facility
  17. Preferred Stock Dividend
   16




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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, SOP 97-2, Software Revenue Recognition, as
amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, with
Respect to Certain Transactions and EITF 00-21, Revenue Arrangements with Multiple
Deliverables to transactions involving sales of our hardware and software products.
Under these guidelines, we recognize revenue on transactions where persuasive evidence
of an arrangement exists, title has transferred, product payment is not contingent upon
performance of installation or service obligations, the price is fixed or determinable
and payment is reasonably assured. We accrue warranty costs and sales allowances for
promotional activities at time of shipment based on historical experience. In
addition, we defer revenue associated with maintenance and support contracts and
recognize revenue ratably over the contract term.
  17




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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 acquisition, accordingly, the statement of operation
include the results of acquired business 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 is recorded as the excess of the
purchase price over the estimated fair value of the net assets of the business
acquired. Statement of Financial Accounting Standards No. 142 (Goodwill and Other
Intangible Assets) provides that goodwill is to be tested 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.
  18




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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 Six Months Ended June 30, 2009 compared to
Three and Six Months Ended June 30, 2008.
 Net Sales. ® ®
 Osprey Product Sales .
 ViewCast Niagara® Streaming/Encoding System Sales.
 Software Licenses and Other Revenues.
  19




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
 Cost of Sales/Gross Profit .
  Selling, General and Administrative Expenses .
 Research and Development Expense.
 Depreciation and Amortization Expense.
  Other Income (Expense).
  20




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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis of Financial Condition and Results of Operations  Continued
 Net Income (Loss).
 Liquidity and Capital Resources
        21




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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
   22




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Quantitative and Qualitative Disclosure About Market Risk
 
 Item 3. Quantitative and Qualitative Disclosure About Market Risk
     23




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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
   24




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##### Table of Contents



PART II: OTHER INFORMATION
 
   
   
   
   
   
    
    25




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SIGNATURES
  ViewCast.com, Inc.
(Registrant)Date: August 14, 2009
    By:
    /s/ David T. StonerDavid T. StonerChief Executive Officer
Principal Executive OfficerDate: August 14, 2009
    By:
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer
Principal Financial and Accounting Officer  26




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EXHIBIT INDEX
 ExhibitNumber31.1
    
    
    Rule 13a-14(a)/15d-14(a) CEO Certification31.2
    
    
    Rule 13a-14(a)/15d-14(a) CFO Certification32.1
    
    
    Section 1350 CEO Certification32.2
    
    
    Section 1350 CFO Certification
  27