##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For
the transition period from ________ to _______
 Commission File Number: 0-29020
 ViewCast.com, Inc.
  Delaware
    
    75-2528700(State or other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer Incorporation
Identification No.)
 17300
Dallas Parkway, Suite 2000, Dallas, TX 75248
 972/488-7200
  þ o
  o þ
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 o o
 APPLICABLE ONLY TO CORPORATE ISSUERS
  o þ




---



ViewCast.com, Inc. and Subsidiaries
 Index to Form 10-QSB
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at December 31, 2004 and September 30, 2005 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months
ended September 30, 2004 and 2005 (Unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Deficit for the Nine Months
ended September 30, 2005 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 2004 and 2005 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    17Item 3. Controls and Procedures
    
    
    24PART II. OTHER INFORMATION
    
    
    25SIGNATURES
    
    
    26Rule 13a-14(a)/15d-14(a) CertificationsSection 1350 CertificationsRule 13a-14(a)/15d-14(a) CertificationsSection 1350 Certifications
  2




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    September 30,2004
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    247,121
    
    
    $
    8,078Accounts receivable, less allowance for doubtful accounts
of $13,382 and $67,213 at December 31, 2004 and
September 30, 2005 respectively
    
    
    1,045,403
    
    
    
    1,319,501Inventories
    
    
    1,557,389
    
    
    
    2,120,010Prepaid expenses
    
    
    106,986
    
    
    
    134,748Assets of discontinued operations
    
    
    5,113,778
    
    
    
    5,344,727Total current assets
    
    
    8,070,677
    
    
    
    8,927,064Property and equipment, net
    
    
    223,810
    
    
    
    252,079Software development costs, net
    
    
    184,396
    
    
    
    138,297Deposits
    
    
    43,811
    
    
    
    29,326Total assets
    
    $
    8,522,694
    
    
    $
    9,346,766LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    690,274
    
    
    $
    976,704Accrued expenses
    
    
    904,921
    
    
    
    1,590,410Deferred revenue
    
    
    41,897
    
    
    
    30,655Stockholder line of credit
    
    
    2,900,000
    
    
    
    4,050,000Current maturities of long-term debt
    
    
    121,432
    
    
    
    218,673Series D redeemable convertible preferred stock
    
    
    1,506,700
    
    
    
    Liabilities of discontinued operations
    
    
    1,907,740
    
    
    
    1,968,417Total current liabilities
    
    
    8,072,964
    
    
    
    8,834,859Long-term debt less current maturities
    
    
    11,325
    
    
    
    5,497Stockholder note payable
    
    
    6,794,422
    
    
    
    6,698,456Stockholder accrued interest
    
    
    1,626,754
    
    
    
    1,898,014Commitments and contingencies
    
    
    
    
    
    
    Stockholders deficit:Preferred stock, $0.0001 par value, authorized 5,000,000 shares:Series B convertible  issued and outstanding shares - 800,000
    
    
    80
    
    
    
    80Series C convertible  issued and outstanding shares - 200,000
    
    
    20
    
    
    
    20Common stock, $.0001 par value, authorized 100,000,000 shares:Issued shares - 23,104,942 and 25,889,456 at December 31, 2004
and September 30, 2005, respectively
    
    
    2,310
    
    
    
    2,589Additional paid-in capital
    
    
    57,715,654
    
    
    
    59,718,391Accumulated deficit
    
    
    (65,688,929
    )
    
    
    (67,799,234
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders deficit
    
    
    (7,982,771
    )
    
    
    (8,090,060
    )Total liabilities and stockholders deficit
    
    $
    8,522,694
    
    
    $
    9,346,766
  3




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net sales
    
    $
    2,553,378
    
    
    $
    3,213,971
    
    
    $
    6,920,530
    
    
    $
    8,291,440Cost of sales
    
    
    1,057,111
    
    
    
    1,334,280
    
    
    
    2,730,107
    
    
    
    3,401,000Gross profit
    
    
    1,496,267
    
    
    
    1,879,691
    
    
    
    4,190,423
    
    
    
    4,890,440Operating expenses:Selling, general and administrative
    
    
    1,199,880
    
    
    
    1,417,956
    
    
    
    3,482,048
    
    
    
    4,058,344Research and development
    
    
    449,022
    
    
    
    479,041
    
    
    
    1,385,958
    
    
    
    1,773,000Depreciation and amortization
    
    
    29,595
    
    
    
    47,765
    
    
    
    100,169
    
    
    
    139,973Total operating expenses
    
    
    1,678,497
    
    
    
    1,944,762
    
    
    
    4,968,175
    
    
    
    5,971,317Operating loss
    
    
    (182,230
    )
    
    
    (65,071
    )
    
    
    (777,752
    )
    
    
    (1,080,877
    )Other expense:Interest expense
    
    
    (203,671
    )
    
    
    (253,506
    )
    
    
    (602,427
    )
    
    
    (687,445
    )Debt conversion expense
    
    
    
    
    
    
    
    
    
    
    (1,233,723
    )
    
    
    (485,798
    )Other
    
    
    8,802
    
    
    
    1,436
    
    
    
    8,802
    
    
    
    1,477Total other expense
    
    
    (194,869
    )
    
    
    (252,070
    )
    
    
    (1,827,348
    )
    
    
    (1,171,766
    )Loss from continuing operations
    
    
    (377,099
    )
    
    
    (317,141
    )
    
    
    (2,605,100
    )
    
    
    (2,252,643
    )Income (loss) from discontinued operations
    
    
    (53,998
    )
    
    
    74,366
    
    
    
    (171,986
    )
    
    
    142,338NET LOSS
    
    $
    (431,097
    )
    
    $
    (242,775
    )
    
    $
    (2,777,086
    )
    
    $
    (2,110,305
    )Preferred dividends
    
    
    (206,494
    )
    
    
    (206,494
    )
    
    
    (614,994
    )
    
    
    (612,749
    )Net loss applicable to common stockholders
    
    $
    (637,591
    )
    
    $
    (449,269
    )
    
    $
    (3,392,080
    )
    
    $
    (2,723,054
    )Net loss per share  basic and diluted:Contining operations
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.15
    )
    
    $
    (0.12
    )Discontinued operations
    
    
    (0.00
    )
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    0.01Net loss per share  basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.16
    )
    
    $
    (0.11
    )Weighted average number of common shares
outstanding  basic and diluted
    
    
    22,825,105
    
    
    
    25,627,959
    
    
    
    21,658,534
    
    
    
    24,745,561
  4




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005
 (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, 2005
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    23,104,942
    
    
    $
    2,310
    
    
    $
    57,715,654
    
    
    $
    (65,688,929
    )
    
    $
    (11,906
    )
    
    $
    (7,982,771
    )Sale of common stock, employee
stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,056
    
    
    
    5
    
    
    
    10,513
    
    
    
    
    
    
    
    
    
    
    
    10,518Conversion of Preferred D
shares to common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,739,458
    
    
    
    274
    
    
    
    1,992,224
    
    
    
    
    
    
    
    
    
    
    
    1,992,498Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,110,305
    )
    
    
    
    
    
    
    (2,110,305
    )Balance, September 30, 2005
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    25,889,456
    
    
    $
    2,589
    
    
    $
    59,718,391
    
    
    $
    (67,799,234
    )
    
    $
    (11,906
    )
    
    $
    (8,090,060
    )
  5




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 For the nine months endedSeptember 30,2004
    
    
    2005Operating activities:Net loss from continuing operations
    
    $
    (2,605,100
    )
    
    $
    (2,252,643
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Income (loss) from discontinued operations
    
    
    (171,986
    )
    
    
    142,338Depreciation of fixed assets
    
    
    100,169
    
    
    
    93,874Amortization of software development costs
    
    
    
    
    
    
    46,099Non-cash charges to interest expense
    
    
    78,775
    
    
    
    Non-cash debt conversion expense
    
    
    1,233,723
    
    
    
    485,798Loss on disposition of property and equipment
    
    
    (340
    )
    
    
    121Non-cash consulting fees exchanged for options, warrants
and common stock
    
    
    3,797
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (118,870
    )
    
    
    (274,098
    )Inventories
    
    
    (206,738
    )
    
    
    (562,621
    )Prepaid expenses
    
    
    12,697
    
    
    
    (27,762
    )Deferred charges
    
    
    (61,823
    )
    
    
    Deposits
    
    
    4,327
    
    
    
    14,485Accounts payable
    
    
    18,857
    
    
    
    286,430Accrued expenses and stockholder accrued interest
    
    
    523,860
    
    
    
    956,749Deferred revenue
    
    
    (50,601
    )
    
    
    (11,242
    )Net cash used in continuing operations
    
    
    (1,239,253
    )
    
    
    (1,102,472
    )Net cash provided by discontinued operations
    
    
    1,001,967
    
    
    
    81,722Net cash used in operating activities
    
    
    (237,286
    )
    
    
    (1,020,750
    )Investing activities:Capitalized software development costs
    
    
    (139,543
    )
    
    
    Purchase of property and equipment
    
    
    (119,474
    )
    
    
    (122,264
    )Proceeds from disposition of property and equipment
    
    
    133
    
    
    
    Net cash used in continuing operations
    
    
    (258,884
    )
    
    
    (122,264
    )Net cash used in discontinued operations
    
    
    (178,532
    )
    
    
    (99,157
    )Net cash used in investing activities
    
    
    (437,416
    )
    
    
    (221,421
    )Financing activities:Net proceeds from stockholder line of credit
    
    
    1,250,000
    
    
    
    1,150,000Proceeds from sale of common stock
    
    
    4,034
    
    
    
    10,518Proceeds from exercise of employee stock options
    
    
    1,066
    
    
    
    Net repayments of long-term debt
    
    
    (61,072
    )
    
    
    (4,553
    )Net cash provided by continuing operations
    
    
    1,194,028
    
    
    
    1,155,965Net cash used in discontinued operations
    
    
    (639,304
    )
    
    
    (152,837
    )Net cash provided by financing activities
    
    
    554,724
    
    
    
    1,003,128Net decrease in cash and cash equivalents
    
    
    (119,978
    )
    
    
    (239,043
    )Cash and cash equivalents, beginning of period
    
    
    160,375
    
    
    
    247,121Cash and cash equivalents, end of period
    
    $
    40,397
    
    
    $
    8,078Supplemental cash flow information:Cash paid for interest
    
    $
    37,763
    
    
    $
    2,841Supplemental non-cash flow operating activities:Purchase of property and equipment with long-term debt
    
    $
    21,744
    
    
    $
    Conversion of 7% convertible debentures to common stock
    
    $
    870,000
    
    
    $
    Conversion of Series D redeemable convertible preferred
stock to common stock
    
    $
    
    
    
    $
    1,506,700
  6




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 
 Notes to the Condensed Consolidated Financial Statements
 1. Basis of Presentation
     2. Accounts Receivable
  7




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
  For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Beginning balance
    
    $
    101,817
    
    
    $
    37,964
    
    
    $
    72,032
    
    
    $
    13,382Bad debt expense
    
    
    
    
    
    
    27,431
    
    
    
    25,730
    
    
    
    62,734Uncollectible accounts written
off, net of recoveries
    
    
    (4,514
    )
    
    
    1,818
    
    
    
    (459
    )
    
    
    (8,903
    )Ending balance
    
    $
    97,303
    
    
    $
    67,213
    
    
    $
    97,303
    
    
    $
    67,213
 3. Inventories
  December 31,
    
    
    September 30,2004
    
    
    2005(Unaudited)Purchased materials
    
    $
    491,922
    
    
    $
    844,053Finished goods
    
    
    1,065,467
    
    
    
    1,275,957$
    1,557,389
    
    
    $
    2,120,010
 4. Discontinued Operations
    For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net sales
    
    $
    2,562,727
    
    
    $
    2,985,069
    
    
    $
    7,997,208
    
    
    $
    8,989,692Cost of sales
    
    
    1,988,306
    
    
    
    2,268,937
    
    
    
    6,215,640
    
    
    
    6,947,055Gross profit
    
    
    574,421
    
    
    
    716,132
    
    
    
    1,781,568
    
    
    
    2,042,637Operating expenses
    
    
    619,961
    
    
    
    620,849
    
    
    
    1,926,836
    
    
    
    1,860,624Operating income (loss)
    
    
    (45,540
    )
    
    
    95,283
    
    
    
    (145,268
    )
    
    
    182,013Other expense:
    
    
    8,458
    
    
    
    7,052
    
    
    
    26,718
    
    
    
    25,810Net income (loss) before taxes
    
    
    (53,998
    )
    
    
    88,231
    
    
    
    (171,986
    )
    
    
    156,203Income tax expense
    
    
    
    
    
    
    13,865
    
    
    
    
    
    
    
    13,865Net income (loss)
    
    $
    (53,998
    )
    
    $
    74,366
    
    
    $
    (171,986
    )
    
    $
    142,338
 8




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
  December 31,
    
    
    September 30,2004
    
    
    2005(Unaudited)Cash and cash equivalents
    
    $
    125,054
    
    
    $
    305,000Accounts receivable, less allowance for doubtful accounts
    
    
    2,475,217
    
    
    
    2,824,631Inventories
    
    
    62,889
    
    
    
    52,853Prepaid expenses
    
    
    27,275
    
    
    
    163,262Property and equipment, net
    
    
    1,074,905
    
    
    
    766,794Goodwill
    
    
    1,041,430
    
    
    
    1,041,430Customer contracts, net
    
    
    241,389
    
    
    
    125,138Deposits
    
    
    65,619
    
    
    
    65,619Accounts payable
    
    
    (462,876
    )
    
    
    (409,196
    )Accrued expenses
    
    
    (484,238
    )
    
    
    (387,661
    )Deferred revenue
    
    
    (630,230
    )
    
    
    (994,001
    )Short-term debt, other
    
    
    (313,170
    )
    
    
    (148,641
    )Current maturities of long-term debt
    
    
    (5,743
    )
    
    
    (11,075
    )Long-term debt less current maturities
    
    
    (11,483
    )
    
    
    (17,843
    )Total net assets of discontinued operations
    
    $
    3,206,038
    
    
    $
    3,376,310
    9




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
 5. Accrued Expenses
  December 31,
    
    September 30,2004
    
    2005(Unaudited)Stockholder accrued interest (short-term)
    
    $
    400,040
    
    
    $
    811,445Accrued compensation
    
    
    189,124
    
    
    
    198,758Accrued legal & professional
    
    
    47,024
    
    
    
    17,999Accrued warranty
    
    
    57,744
    
    
    
    58,543Accrued rent
    
    
    20,833
    
    
    
    7,281Accrued inventory purchases
    
    
    45,960
    
    
    
    261,907Accrued taxes and other
    
    
    144,197
    
    
    
    234,476$
    904,921
    
    
    $
    1,590,410
 6. Warranty Reserves
   For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2004
    
    2005
    
    2004
    
    2005(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Beginning balance
    
    $
    57,366
    
    
    $
    67,698
    
    
    $
    60,000
    
    
    $
    57,744Charged to expense
    
    
    21,059
    
    
    
    13,180
    
    
    
    40,744
    
    
    
    32,188Usage
    
    
    (41,248
    )
    
    
    (22,334
    )
    
    
    (63,567
    )
    
    
    (31,389
    )Ending balance
    
    $
    37,177
    
    
    $
    58,543
    
    
    $
    37,177
    
    
    $
    58,543
 10




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
 7. Property and Equipment
  EstimatedUseful Life
    
    December 31,
    
    September 30,(Years)
    
    2004
    
    2005(Unaudited)Computer equipment
    
    
    3 to 7
    
    
    $
    1,070,307
    
    
    $
    1,151,917Software
    
    
    3 to 5
    
    
    
    592,188
    
    
    
    612,214Leasehold improvements
    
    
    1 to 5
    
    
    
    23,232
    
    
    
    23,232Office furniture and equipment
    
    
    5 to 7
    
    
    
    656,059
    
    
    
    637,8152,341,786
    
    
    
    2,425,178Less accumulated depreciation and
amortization
    
    
    
    
    
    
    (2,117,976
    )
    
    
    (2,173,099
    )$
    223,810
    
    
    $
    252,079
 8. Short-term Debt
 Stockholder Line of Credit
    11




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
   December 31, 2004
    
    
    September 30, 2005(Unaudited)$4.0 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
(5.25% and 6.75% at December 31, 2004 and September 30,
2005, respectively) plus 3.0% or 9.5% fixed rate, due
December 2005.
    
    $
    2,900,000
    
    
    $
    4,050,000$
    2,900,000
    
    
    $
    4,050,000
 9. Long -Term Debt
 Stockholder Term Note
   December 31, 2004
    
    September 30, 2005(Unaudited)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 (5.25% and 6.75% at December 31, 2004 and
September 30, 2005, respectively) plus 3.0% or 9.5% fixed rate,
due December 31, 2006 (See Note 7).
    
    $
    6,909,582
    
    
    $
    6,909,582Other long-term debt
    
    
    17,597
    
    
    
    13,044Total long-term debt
    
    
    6,927,179
    
    
    
    6,922,626Less current maturities
    
    
    (121,432
    )
    
    
    (218,673
    )Total long-term debt less current maturities
    
    $
    6,805,747
    
    
    $
    6,703,953
 10. Series D Redeemable Convertible Preferred Stock
  12




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
   11. Conversion of Convertible Debt to Equity
    Increase inPrincipal
    
    
    
    
    
    
    CommonNumber
    
    
    Amount
    
    
    Debt
    
    
    Stock, ParConversion of Series D Redeemable
    
    of Equity
    
    
    of Debt
    
    
    Conversion
    
    
    and Paid inConvertible Preferred Shares
    
    Securities
    
    
    Reduction
    
    
    Expense
    
    
    CapitalConversion shares under original terms
    
    
    974,254Principal amount converted into equity
    
    
    
    
    
    $
    1,506,700
    
    
    
    
    
    
    $
    (1,506,700
    )Additional conversion shares under lowered
conversion terms
    
    
    1,765,204
    
    
    
    
    
    
    $
    485,798
    
    
    
    (485,798
    )2,739,458
    
    
    $
    1,506,700
    
    
    $
    485,798
    
    
    $
    (1,992,498
    )
  13




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
   Number
    
    
    Principal
    
    
    
    
    
    
    Increase inof Equity
    
    
    Amount
    
    
    
    
    
    
    CommonSecurities
    
    
    Converted
    
    
    Debt
    
    
    Stock, ParConversion of 7% Senior Convertible
    
    and
    
    
    into
    
    
    Conversion
    
    
    and Paid inDebentures
    
    Warrants
    
    
    Equity
    
    
    Expense
    
    
    CapitalConversion shares under original terms
    
    
    174,000Additional conversion shares under lowered
conversion terms
    
    
    1,947,947
    
    
    
    
    
    
    $
    1,074,730
    
    
    $
    (1,074,730
    )Principal amount converted into equity
    
    
    
    
    
    $
    870,000
    
    
    
    
    
    
    
    (870,000
    )Warrant issues under lowered conversion terms
    
    
    635,970
    
    
    
    
    
    
    
    158,993
    
    
    
    158,993$
    870,000
    
    
    $
    1,233,723
    
    
    $
    (2,103,723
    )
 12. Net Loss Per Share
   For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Stock options
    
    
    3,046,124
    
    
    
    3,151,701
    
    
    
    3,191,577
    
    
    
    2,969,575Public and private warrants
    
    
    4,835,482
    
    
    
    4,746,482
    
    
    
    4,509,997
    
    
    
    4,790,982Convertible debentures
    
    
    
    
    
    
    
    
    
    
    95,000
    
    
    
    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
    
    
    
    3,333,333Redeemable convertible preferred Stock  Series D
    
    
    1,004,466
    
    
    
    
    
    
    
    1,004,466
    
    
    
    271,71714,426,301
    
    
    
    13,438,412
    
    
    
    14,341,269
    
    
    
    13,572,502
 13. Stock-Based Compensation
  14




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net loss applicable to common
stockholders:
    
    $
    (637,591
    )
    
    $
    (449,269
    )
    
    $
    (3,392,080
    )
    
    $
    (2,723,054
    )As reportedDeduct total stock-based compensation
under fair value based method for all
awards, net of related tax expense
    
    
    (314,349
    )
    
    
    (140,231
    )
    
    
    (939,686
    )
    
    
    (417,735
    )Pro forma
    
    $
    (951,940
    )
    
    $
    (589,500
    )
    
    $
    (4,331,766
    )
    
    $
    (3,140,789
    )Net loss per share:As reported
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.16
    )
    
    $
    (0.11
    )Pro forma  basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.20
    )
    
    $
    (0.13
    )
 Share-Based Payment, Accounting for
Stock-Based Compensation Accounting for Stock Issued
to Employees.
 Stock-Based Compensation
 15




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ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  Continued
 14. Related Party Transaction
  15. Subsequent Events
   16




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##### Table of Contents



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
    Overview
 ® ®
  Discontinued Operations
   17




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Managements Discussion and Analysis or
Plan of Operation  (Continued)
  Critical Accounting Policies
  
    
    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 the contract term.
    
    Allowance for Doubtful Accounts We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required payments.
If the financial condition of our customers or distribution partners were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may be
required.
    
    Excess and Obsolete Inventories We write down our inventories for estimated
obsolescence and unmarketable inventory equal to the difference between the cost of the
inventory and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions are less than those projected by
management, additional write-downs may be required.
    
    Deferred Taxes We record a valuation allowance to reduce our deferred tax assets to
an amount that we believe is more likely than not to be realized. In our opinion,
realization of our net operating loss carryforward is not reasonably assured, and a
valuation allowance has been provided against deferred tax assets in excess of deferred
tax liabilities in the accompanying consolidated financial statements. However, should we
in the future determine that realization of deferred tax assets in excess of recorded
amounts is likely, an adjustment to the deferred tax assets would increase income in the
period such determination was made.
 18




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Managements Discussion and Analysis or
Plan of Operation  (Continued)
 Results of Operations
 Three and Nine Months Ended September 30, 2005 compared to
Three and Nine Months Ended September 30, 2004.
 Net Sales .
 Osprey Product Sales .
 Video Communication System and Application Software Products.
 Other Revenues .
 Cost of Sales and Gross Margins .
  Selling, General and Administrative Expense .
 Research and Development Expense.
 19




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Managements Discussion and Analysis or
Plan of Operation  (Continued)
  Other Expense
   Net Loss from Continuing Operations .
 Net Loss from Discontinued Operations
 Net Loss
 Liquidity and Capital Resources
  20




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ViewCast.com, Inc. and Subsidiaries
 Managements Discussion and Analysis or
Plan of Operation  (Continued)
        21




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ViewCast.com, Inc. and Subsidiaries
 Managements Discussion and Analysis or
Plan of Operation  (Continued)
        22




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Managements Discussion and Analysis or
Plan of Operation  (Continued)
    Off-Balance Sheet Arrangements
  23




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ViewCast.com, Inc. and Subsidiaries
 Controls and Procedures
 
 Item 3. Controls and Procedures
   24




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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.
    
    ExhibitsExhibits filed with this report:
(See Exhibit Index)
 25




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##### Table of Contents



SIGNATURES
  ViewCast.com, Inc.
(Registrant)BY:Date: November 14, 2005
    
    /s/ George C. Platt
 George
C. PlattChief Executive OfficerPrincipal Executive Officer/s/ Laurie L. Latham
 Laurie
L. LathamChief Financial OfficerPrincipal Financial Officer
 26




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EXHIBIT INDEX
 Number
 31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications32.1
    
    Section 1350 Certifications
 27