##### 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 June 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
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS
  o þ




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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 June 30, 2005 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months
ended June 30, 2004 and 2005 (Unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Deficit for the Six Months
ended June 30, 2005 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months
ended June 30, 2004 and 2005 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    19Item 3. Controls and Procedures
    
    
    26PART II. OTHER INFORMATION
    
    
    27SIGNATURES
    
    
    28Rule 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,
    
    June 30,2004
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    372,175
    
    
    $
    658,397Accounts receivable, less allowance for doubtful accounts
of $28,751 and $53,333 at December 31, 2004 and
June 30, 2005 respectively
    
    
    3,520,620
    
    
    
    3,521,927Inventories
    
    
    1,620,278
    
    
    
    1,783,220Prepaid expenses
    
    
    134,261
    
    
    
    276,135Total current assets
    
    
    5,647,334
    
    
    
    6,239,679Property and equipment, net
    
    
    1,298,715
    
    
    
    1,071,339Goodwill
    
    
    1,041,430
    
    
    
    1,041,430Customer contracts, net
    
    
    241,389
    
    
    
    163,888Software development costs, net
    
    
    184,396
    
    
    
    153,663Deposits
    
    
    109,430
    
    
    
    105,030Total assets
    
    $
    8,522,694
    
    
    $
    8,775,029LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    1,153,150
    
    
    $
    1,428,411Accrued expenses
    
    
    1,389,159
    
    
    
    1,771,018Deferred revenue
    
    
    672,127
    
    
    
    1,186,384Stockholder line of credit
    
    
    2,900,000
    
    
    
    3,450,000Short-term debt, other
    
    
    313,170
    
    
    
    Current maturities of long-term debt
    
    
    127,175
    
    
    
    166,376Series D redeemable convertible preferred stock
    
    
    1,506,700
    
    
    
    Total current liabilities
    
    
    8,061,481
    
    
    
    8,002,189Long-term debt less current maturities
    
    
    22,808
    
    
    
    16,173Stockholder note payable
    
    
    6,794,422
    
    
    
    6,756,036Stockholder accrued interest
    
    
    1,626,754
    
    
    
    1,847,916Commitments 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 - 23,104,942 and 25,889,456 at December 31, 2004
and June 30, 2005, respectively
    
    
    2,310
    
    
    
    2,589Additional paid-in capital
    
    
    57,715,654
    
    
    
    59,718,391Accumulated deficit
    
    
    (65,688,929
    )
    
    
    (67,556,459
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders deficit
    
    
    (7,982,771
    )
    
    
    (7,847,285
    )Total liabilities and stockholders deficit
    
    $
    8,522,694
    
    
    $
    8,775,029
  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 six months endedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Net sales
    
    $
    4,822,615
    
    
    $
    5,625,916
    
    
    $
    9,801,635
    
    
    $
    11,082,092Cost of sales (includes depreciation of $184,309
and $208,538 for the six months ended
June 30, 2004 and 2005, respectively)
    
    
    2,890,970
    
    
    
    3,454,040
    
    
    
    5,900,330
    
    
    
    6,744,838Gross profit
    
    
    1,931,645
    
    
    
    2,171,876
    
    
    
    3,901,305
    
    
    
    4,337,254Operating expenses:Selling, general and administrative
    
    
    1,773,714
    
    
    
    1,773,968
    
    
    
    3,456,623
    
    
    
    3,741,100Research and development
    
    
    511,803
    
    
    
    679,192
    
    
    
    936,936
    
    
    
    1,293,959Depreciation and amortization
    
    
    100,076
    
    
    
    132,555
    
    
    
    202,997
    
    
    
    231,270Total operating expenses
    
    
    2,385,593
    
    
    
    2,585,715
    
    
    
    4,596,556
    
    
    
    5,266,329Operating loss
    
    
    (453,948
    )
    
    
    (413,839
    )
    
    
    (695,251
    )
    
    
    (929,075
    )Other expense:Interest expense
    
    
    (203,927
    )
    
    
    (239,097
    )
    
    
    (423,847
    )
    
    
    (452,162
    )Debt conversion expense
    
    
    (1,233,723
    )
    
    
    (14,612
    )
    
    
    (1,233,723
    )
    
    
    (485,798
    )Other
    
    
    8,097
    
    
    
    522
    
    
    
    6,831
    
    
    
    (495
    )Total other expense
    
    
    (1,429,553
    )
    
    
    (253,187
    )
    
    
    (1,650,739
    )
    
    
    (938,455
    )Net loss before income taxes
    
    
    (1,883,501
    )
    
    
    (667,026
    )
    
    
    (2,345,990
    )
    
    
    (1,867,530
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (1,883,501
    )
    
    $
    (667,026
    )
    
    $
    (2,345,990
    )
    
    $
    (1,867,530
    )Preferred dividends
    
    
    (204,250
    )
    
    
    (204,250
    )
    
    
    (408,500
    )
    
    
    (406,255
    )Net loss applicable to common stockholders
    
    $
    (2,087,751
    )
    
    $
    (871,276
    )
    
    $
    (2,754,490
    )
    
    $
    (2,273,785
    )Net loss per share  basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.03
    )
    
    $
    (0.13
    )
    
    $
    (0.09
    )Weighted average number of common shares
outstanding  basic and diluted
    
    
    21,449,056
    
    
    
    25,575,667
    
    
    
    21,068,838
    
    
    
    24,301,950
  4




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
FOR THE SIX MONTHS ENDED JUNE 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,867,530
    )
    
    
    
    
    
    
    (1,867,530
    )Balance, June 30, 2005
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    25,889,456
    
    
    $
    2,589
    
    
    $
    59,718,391
    
    
    $
    (67,556,459
    )
    
    $
    (11,906
    )
    
    $
    (7,847,285
    )
  5




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 For the six months endedJune 30,2004
    
    2005Operating activities:Net loss
    
    $
    (2,345,990
    )
    
    $
    (1,867,530
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation of fixed assets
    
    
    309,806
    
    
    
    331,574Amortization of software development costs
    
    
    
    
    
    
    30,733Amortization of customer contracts
    
    
    77,500
    
    
    
    77,501Non-cash charges to interest expense
    
    
    75,694
    
    
    
    1,938Non-cash debt conversion expense
    
    
    1,233,723
    
    
    
    485,798Gain on disposition of property and equipment
    
    
    1,329
    
    
    
    Non-cash consulting fees exchanged for options, warrants
and common stock
    
    
    3,797
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    256,427
    
    
    
    (1,307
    )Inventories
    
    
    (199,139
    )
    
    
    (162,942
    )Prepaid expenses
    
    
    (28,318
    )
    
    
    (141,874
    )Deferred charges
    
    
    (70,000
    )
    
    
    Deposits
    
    
    4,328
    
    
    
    4,400Accounts payable
    
    
    (181,696
    )
    
    
    275,261Accrued expenses and stockholder accrued interest
    
    
    290,432
    
    
    
    601,082Deferred revenue
    
    
    225,163
    
    
    
    514,257Net cash provided by operating activities
    
    
    (346,944
    )
    
    
    148,891Investing activities:Capitalized software development costs
    
    
    (94,690
    )
    
    
    Purchase of property and equipment
    
    
    (195,706
    )
    
    
    (104,198
    )Proceeds from disposition of property and equipment
    
    
    682
    
    
    
    Net cash used in investing activities
    
    
    (289,714
    )
    
    
    (104,198
    )Financing activities:Net proceeds from stockholder line of credit
and advances
    
    
    855,000
    
    
    
    550,000Proceeds from exercise of common stock
    
    
    4,034
    
    
    
    Proceeds from exercise of employee stock options
    
    
    1,066
    
    
    
    10,518Net repayments short-term debt, other
    
    
    (51,726
    )
    
    
    (313,170
    )Repayment of long-term debt
    
    
    (84,441
    )
    
    
    (5,819
    )Net cash used in financing activities
    
    
    723,933
    
    
    
    241,529Net increase in cash and cash equivalents
    
    
    87,275
    
    
    
    286,222Cash and cash equivalents, beginning of period
    
    
    299,764
    
    
    
    372,175Cash and cash equivalents, end of period
    
    $
    387,039
    
    
    $
    658,397Supplemental cash flow information:Cash paid for interest
    
    $
    60,562
    
    
    $
    20,203Supplemental 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 six months endedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Beginning balance
    
    $
    103,884
    
    
    $
    34,822
    
    
    $
    86,247
    
    
    $
    28,751Bad debt expense
    
    
    8,711
    
    
    
    18,511
    
    
    
    25,730
    
    
    
    35,303Uncollectible accounts written
off, net of recoveries
    
    
    (5,970
    )
    
    
    
    
    
    
    (5,352
    )
    
    
    (10,721
    )Ending balance
    
    $
    106,625
    
    
    $
    53,333
    
    
    $
    106,625
    
    
    $
    53,333
 3. Inventories
  December 31,
    
    June 30,2004
    
    2005(Unaudited)Purchased Materials
    
    $
    491,922
    
    
    $
    662,589Finished Goods
    
    
    1,128,356
    
    
    
    1,120,630$
    1,620,278
    
    
    $
    1,783,220
 4. Accrued Expenses
  December 31,
    
    June 30,2004
    
    2005(Unaudited)Stockholder accrued interest
(short-term)
    
    $
    400,040
    
    
    $
    608,897Accrued compensation
    
    
    524,561
    
    
    
    623,372Accrued legal & professional
    
    
    47,024
    
    
    
    43,080Accrued warranty
    
    
    57,744
    
    
    
    67,698Accrued rent
    
    
    20,833
    
    
    
    11,799Accrued inventory purchases
    
    
    45,960
    
    
    
    107,423Customer deposits
    
    
    32,376
    
    
    
    Accrued taxes and other
    
    
    260,621
    
    
    
    308,749$
    1,389,159
    
    
    $
    1,771,018
 5. Warranty Reserves
  8




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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 six months endedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Beginning balance
    
    $
    58,419
    
    
    $
    59,416
    
    
    $
    60,260
    
    
    $
    57,744Charged to expense
    
    
    6,430
    
    
    
    8,657
    
    
    
    13,415
    
    
    
    19,008Usage
    
    
    (7,484
    )
    
    
    (375
    )
    
    
    (16,309
    )
    
    
    (9,054
    )Ending balance
    
    $
    57,365
    
    
    $
    67,698
    
    
    $
    57,365
    
    
    $
    67,698
 6. Property and Equipment
  EstimatedUseful Life
    
    December 31,
    
    June 30,(Years)
    
    2004
    
    2005(Unaudited)Computer equipment
    
    
    3 to 7
    
    
    $
    2,025,628
    
    
    $
    2,084,115Service assets
    
    
    3
    
    
    
    901,299
    
    
    
    939,725Software
    
    
    3 to 5
    
    
    
    650,012
    
    
    
    652,774Leasehold improvements
    
    
    1 to 5
    
    
    
    91,295
    
    
    
    91,295Office furniture and equipment
    
    
    5 to 7
    
    
    
    691,247
    
    
    
    695,7704,359,481
    
    
    
    4,463,679Less accumulated depreciation and
amortization
    
    
    
    
    
    
    (3,060,766
    )
    
    
    (3,392,340
    )$
    1,298,715
    
    
    $
    1,071,339
 7. Short-term Debt
 Stockholder Line of Credit
  9




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ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  (Continued)
   Keltic Asset Based Revolving Credit Facility
    December 31, 2004
    
    June 30, 2005(Unaudited)$3.5 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 6.25% at
December 31, 2004 and June
30, 2005, respectively)
plus 3.0% or 9.5% fixed
rate, due December 2005.
    
    $
    2,900,000
    
    
    $
    3,450,000$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 (5.25% and 6.25% at
December 31, 2004 and June
30, 2005, respectively)
plus 2.5% or 6.5% fixed
rate, due October 2005.
    
    
    313,170
    
    
    
    $
    3,213,170
    
    
    $
    3,450,000
 10




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  (Continued)
 8. Long -Term Debt
 Stockholder Term Note
   December 31, 2004
    
    June 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 6.25% at December 31,
2004 and June 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
    
    
    34,823
    
    
    
    29,002Total long-term debt
    
    
    6,944,405
    
    
    
    6,938,585Less current maturities
    
    
    (127,175
    )
    
    
    (166,376
    )Total long-term debt less current maturities
    
    $
    6,817,230
    
    
    $
    6,772,209
 9. Series D Redeemable Convertible Preferred Stock
   10. Conversion of Convertible Debt to Equity
  11




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  (Continued)
    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
    )
   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




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements  (Continued)
 11. Net Loss Per Share
   For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Stock options
    
    
    3,196,119
    
    
    
    2,954,009
    
    
    

    3,271,297
    
    
    
    2,909,061Public and private warrants
    
    
    4,509,997
    
    
    
    4,790,982
    
    
    
    4,401,502
    
    
    
    4,805,815Convertible debentures
    
    
    95,000
    
    
    
    
    
    
    
    126,667
    
    
    
    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
    
    
    
    41,200
    
    
    
    1,004,466
    
    
    
    362,28914,345,811
    
    
    
    13,326,420
    
    
    
    14,344,161
    
    
    
    13,617,394
 12. Stock-Based Compensation
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Net loss applicable to common
stockholders:
    
    $
    (2,087,751
    )
    
    $
    (871,276
    )
    
    $
    (2,754,490
    )
    
    $
    (2,273,785
    )As reportedDeduct total stock-based compensation
under fair value based method for all
awards, net of related tax expense
    
    
    (313,142
    )
    
    
    (163,832
    )
    
    
    (625,337
    )
    
    
    (277,504
    )Pro forma
    
    $
    (2,400,893
    )
    
    $
    (1,035,108
    )
    
    $
    (3,379,827
    )
    
    $
    (2,551,289
    )Net loss per share:As reported
    
    $
    (0.10
    )
    
    $
    (0.03
    )
    
    $
    (0.13
    )
    
    $
    (0.09
    )Pro forma  basic and diluted
    
    $
    (0.11
    )
    
    $
    (0.04
    )
    
    $
    (0.16
    )
    
    $
    (0.10
    )
 Share-Based Payment,
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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements  Continued
 Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.
 Stock-Based Compensation
 13. Segment Information
  Video Communications Products and Services -
 IT Services and Products 
 Corporate -
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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements  Continued
  Summary of Sales by Geographic Area for the Three Months Ended (Unaudited):
 VideoCommunicationsIT Services,
    
    Products &Products
    
    Services
    
    Total
    
    %June 30, 2005United States
    
    $
    3,104,910
    
    
    $
    1,397,610
    
    
    $
    4,502,520
    
    
    
    80.04
    %Europe
    
    
    
    
    
    
    553,127
    
    
    
    553,127
    
    
    
    9.83
    %Pacific Rim
    
    
    
    
    
    
    413,246
    
    
    
    413,246
    
    
    
    7.35
    %Other
    
    
    
    
    
    
    157,023
    
    
    
    157,023
    
    
    
    2.79
    %Total
    
    $
    3,104,910
    
    
    $
    2,521,006
    
    
    $
    5,625,916
    
    
    
    100.00
    %June 30, 2004United States
    
    $
    2,721,282
    
    
    $
    1,116,002
    
    
    $
    3,837,284
    
    
    
    79.57
    %Europe
    
    
    
    
    
    
    496,715
    
    
    
    496,715
    
    
    
    10.30
    %Pacific Rim
    
    
    
    
    
    
    374,448
    
    
    
    374,448
    
    
    
    7.76
    %Other
    
    
    
    
    
    
    114,168
    
    
    
    114,168
    
    
    
    2.37
    %Total
    
    $
    2,721,282
    
    
    $
    2,101,333
    
    
    $
    4,822,615
    
    
    
    100.00
    %
 Summary of Sales by Geographic Area for the Six Months Ended (Unaudited):
 VideoCommunicationsIT Services,
    
    Products &Products
    
    Services
    
    Total
    
    %June 30, 2005United States
    
    $
    6,004,623
    
    
    $
    2,750,589
    
    
    $
    8,755,212
    
    
    
    79.00
    %Europe
    
    
    
    
    
    
    1,062,587
    
    
    
    1,062,587
    
    
    
    9.59
    %Pacific Rim
    
    
    
    
    
    
    894,498
    
    
    
    894,498
    
    
    
    8.07
    %Other
    
    
    
    
    
    
    369,796
    
    
    
    369,796
    
    
    
    3.34
    %Total
    
    $
    6,004,623
    
    
    $
    5,077,470
    
    
    $
    11,082,093
    
    
    
    100.00
    %June 30, 2004United States
    
    $
    5,434,481
    
    
    $
    2,180,320
    
    
    $
    7,614,801
    
    
    
    77.69
    %Europe
    
    
    
    
    
    
    1,101,438
    
    
    
    1,101,438
    
    
    
    11.24
    %Pacific Rim
    
    
    
    
    
    
    871,332
    
    
    
    871,332
    
    
    
    8.89
    %Other
    
    
    
    
    
    
    214,064
    
    
    
    214,064
    
    
    
    2.17
    %Total
    
    $
    5,434,481
    
    
    $
    4,367,154
    
    
    $
    9,801,635
    
    
    
    100.00
    %
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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements  Continued
 Summary of Operations by Operating Segment for the Three Months Ended June 30, 2005:
 VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    3,107,312
    
    
    $
    2,537,098
    
    
    $
    
    
    
    $
    5,644,410Intersegment sales
    
    
    (2,402
    )
    
    
    (16,092
    )
    
    
    
    
    
    
    (18,494
    )Revenue from external customers
    
    $
    3,104,910
    
    
    $
    2,521,006
    
    
    $
    
    
    
    $
    5,625,916Gross profit
    
    $
    686,154
    
    
    $
    1,485,722
    
    
    $
    
    
    
    $
    2,171,876Operating income (loss)
    
    $
    83,847
    
    
    $
    (127,986
    )
    
    $
    (369,700
    )
    
    $
    (413,839
    )
 Summary of Operations by Operating Segment for the Three Months Ended June 30, 2004:
 VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    2,722,699
    
    
    $
    2,115,454
    
    
    $
    
    
    
    $
    4,838,153Intersegment sales
    
    
    (1,417
    )
    
    
    (14,121
    )
    
    
    
    
    
    
    (15,538
    )Revenue from external customers
    
    $
    2,721,282
    
    
    $
    2,101,333
    
    
    $
    
    
    
    $
    4,822,615Gross profit
    
    $
    642,081
    
    
    $
    1,289,564
    
    
    $
    
    
    
    $
    1,931,645Operating income (loss)
    
    $
    23,159
    
    
    $
    (206,715
    )
    
    $
    (270,392
    )
    
    $
    (453,948
    )
 16




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements  Continued
 Summary of Operations by Operating Segment for the Six Months Ended June 30, 2005:
 VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    6,008,331
    
    
    $
    5,093,561
    
    
    $
    
    
    
    $
    11,101,892Intersegment sales
    
    
    (3,708
    )
    
    
    (16,092
    )
    
    
    
    
    
    
    (19,800
    )Revenue from external customers
    
    $
    6,004,623
    
    
    $
    5,077,469
    
    
    $
    
    
    
    $
    11,082,092Gross profit
    
    $
    1,326,505
    
    
    $
    3,010,749
    
    
    $
    
    
    
    $
    4,337,254Operating income (loss)
    
    $
    86,730
    
    
    $
    (379,116
    )
    
    $
    (636,689
    )
    
    $
    (929,075
    )Total assets
    
    $
    5,130,588
    
    
    $
    3,400,660
    
    
    $
    243,781
    
    
    $
    8,775,029Goodwill
    
    $
    1,041,430
    
    
    $
    
    
    
    $
    
    
    
    $
    1,041,430Customer contracts, net
    
    $
    163,888
    
    
    $
    
    
    
    $
    
    
    
    $
    163,888Software development costs
    
    $
    
    
    
    $
    153,663
    
    
    $
    
    
    
    $
    153,663Capital additions
    
    $
    42,887
    
    
    $
    21,757
    
    
    $
    39,554
    
    
    $
    104,198
 Summary of Operations by Operating Segment for the Six Months Ended June 30, 2004:
 VideoCommunicationsIT Services,
    
    Products &
    
    UnallocatedProducts
    
    Services
    
    Corporate
    
    TotalTotal sales
    
    $
    5,437,466
    
    
    $
    4,381,275
    
    
    $
    
    
    
    $
    9,818,741Intersegment sales
    
    
    (2,985
    )
    
    
    (14,121
    )
    
    
    
    
    
    
    (17,106
    )Revenue from external customers
    
    $
    5,434,481
    
    
    $
    4,367,154
    
    
    $
    
    
    
    $
    9,801,635Gross profit
    
    $
    1,201,168
    
    
    $
    2,700,137
    
    
    $
    
    
    
    $
    3,901,305Operating income (loss)
    
    $
    (105,707
    )
    
    $
    (151,219
    )
    
    $
    (438,325
    )
    
    $
    (695,251
    )Total assets
    
    $
    5,455,692
    
    
    $
    2,658,081
    
    
    $
    315,806
    
    
    $
    8,429,579Goodwill
    
    $
    1,041,430
    
    
    $
    
    
    
    $
    
    
    
    $
    1,041,430Customer contracts, net
    
    $
    318,889
    
    
    $
    
    
    
    $
    
    
    
    $
    318,889Capital additions
    
    $
    145,811
    
    
    $
    40,698
    
    
    $
    30,941
    
    
    $
    217,450
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ViewCast.com, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements  Continued
 14. Related Party Transaction
  15. Subsequent Events
  18




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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
 ® ®
  Video Communications Products and Services â Ô
 IT Services and Products
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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.
 
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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 Six Months Ended June 30, 2005 compared to Three and Six Months Ended June 30, 2004.
 Net Sales .
 Video Communications Product and Service Sales .
 Osprey Product Sales .
 Video Communications System and Applications Software Products.
 IT Services and Products.
  Other Revenues .
 Cost of Sales and Gross Margins .
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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued)
    Selling, General and Administrative Expense .
 Research and Development Expense.
 Other Expense
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ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued)
  Net Loss .
 Liquidity and Capital Resources
       23




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##### Table of Contents



ViewCast.com, Inc. and Subsidiaries
Managements Discussion and Analysis or
Plan of Operation  (Continued)
        24




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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
  25




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ViewCast.com, Inc. and Subsidiaries
Controls and Procedures
 
 Item 3. Controls and Procedures
   
    
    insufficient resources to perform an appropriate review and supervision of the
preparation of accounting records;
    
    insufficient resources to complete the preparation of the financial statements on a
timely basis;
    
    insufficient resources to support efficient preparation and independent auditor review
of the consolidated financial statements; and
    
    insufficient resources to oversee the preparation of the consolidated financial
statements.
  
    
    filling all vacancies in the accounting and finance departments with new personnel with
expertise in accounting, controls and financial reporting,
    
    adding temporary accounting staff to assist new personnel, and
    
    appointing a replacement to the Companys former controller.
  26




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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)
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SIGNATURES
  ViewCast.com, Inc.(Registrant)BY:Date: August 15, 2005
    
    /s/ George C. PlattGeorge C. PlattChief Executive OfficerPrincipal Executive Officer/s/ Laurie L. LathamLaurie L. LathamChief Financial OfficerPrincipal Financial Officer
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EXHIBIT INDEX
 ExhibitNumber31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications32.1
    
    Section 1350 Certifications
 29