##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-KSB
 þ
    
    Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2007.
 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: 0-29020
 ViewCast.com, Inc.
  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)
  
    
  o
 þ o
 þ
 o þ
 State issuers revenues for its most recent fiscal year.
    $15,993,541
    o þ




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##### 



TABLE OF CONTENTS
 Item
    
    
    
    PageNo.
    
    
    
    No.Part I1.
    
    Description of Business
    
    
    32.
    
    Description of Property
    
    
    93.
    
    Legal Proceedings
    
    
    94.
    
    Submission of Matters to a Vote of Security Holders
    
    
    9Part II5.
    
    Market for Common Equity and Related Stockholder Matters and Related Small Business Issuer Purchases of Equity Securities
    
    
    106.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    117.
    
    Financial Statements
    
    
    168.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    368A(T).
    Controls and Procedures
    
    
    368B.
    
    Other Information
    
    
    36Part III9.
    
    Directors, Executive Officers, Promoters, Control Person and Corporate Governance; Compliance with Section 16(a) of the Exchange Act
    
    
    3710.
    
    Executive Compensation
    
    
    3711.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    3712.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    3713.
    
    Exhibits
    
    
    3814.
    
    Principal Accountant Fees and Services
    
    
    40Consent of KBA Group LLPRule 13a-14(a)/15d-14(a) CertificationsStatement 1350 Certifications




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PART I
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
   
 Item 1. Description of Business
 Overview
 ® ®
   3




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Industry Background and Market Drivers
    
    
    The return on investment for deployment of media streaming solutions appears to drive
deployments from both the technology standpoint and from the perspective of customer
demand. Viewers want to access media content over the Internet and are willing to pay for
it and/or to allow advertisements.
    
    Simultaneously technology enhancements such as higher compression rates, better caching,
smart control of bandwidth utilization and higher resolution will likely spur further
growth as the viewing experience for end-users gets better.
    
    Online video-on-demand based business models are expected to drive further penetration
of streaming platforms. Various entertainment portals and media companies are entering the
market to convert the Internet into a profitable medium.
    
    The value proposition in terms of investment, flexibility and speed has started to
increase demand on the enterprise side. The main applications for this market segment are
in corporate communications, signage and training.
  4




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How ViewCast Addresses the Industry
   Webcasting,
    
    
    
    
    
    
    
    
    
    Training,News, Sports,
    
    Public
    
    Corporate
    
    Marketing,
    
    Distance
    
    SecurityEntertainment
    
    Access
    
    Comm.
    
    Advertising
    
    Learning
    
    SurveillanceBroadcasters and Narrowcasters
    
    
    P
    
    
    
    P
    
    
    
    
    
    
    
    PNetworks: Internet, Telco, Cable, Mobile
    
    
    P
    
    
    
    P
    
    
    
    PCorporate Enterprises
    
    
    P
    
    
    
    P
    
    
    
    P
    
    
    
    P
    
    
    
    P
    
    
    
    PEducation, Government, Religion
    
    
    P
    
    
    
    P
    
    
    
    P
    
    
    
    P
    
    
    
    P
    
    
    
    P
 Drivers for Growth and Value
 
    
    Rapidly Growing Market. Media, enterprise, government, and network communication
sectors are rapidly adopting and allocating funds for digital media technologies due to the
increase in broadband penetration and customer demand for Internet-delivered media.
    
    Strong Products and Brand Equity. ViewCast is positioned for the market with well
known products that appeal to a broad range of industries and to continue investment in
research and development projects.
    
    Two-Pronged Sales Focus. Well established worldwide indirect channels and large
account & OEM business development.
    
    Industry/Technology Relationships. ViewCast product strategies leverage key marketing
and development relationships with notable technology industry leaders.
    
    Profitability and Increasing Revenue.Viewcast believes that a focus on revenue and
market share growth will enable us to realize long-term profitability and enhanced
shareholder value.
    
    Maintain Efficient Operations.We will continue to monitor expenses during 2008 while
investing in growth areas of sales, marketing, and research and development.
    
    Continue to Increase and Enhance Our Industry and Technology Relationships.We have
established significant industry partnerships with leaders in the technology and video
industry. We intend to strengthen these partnerships and continue to establish new
partnerships to enhance endorsements, referrals, technology, product development, channel
distribution, and sales. We seek companies who can add valuable services, technology or
bundling opportunities to our product offerings with the potential of future
co-development, merger or acquisition by ViewCast.
 
 5




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ViewCast Products and Services
 ® ®
 Osprey Video Products. ®
 ® ®
   Niagara Streaming Systems.
 ® ®
 ® ® ® ® ® ®
 6




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Marketing and Sales
     Production and Supply
   7




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Installation, Service and Maintenance
   Research and Development
   Competition
   Patents, Copyrights, Trademarks and Proprietary Information
  ® ® ® ® ® ®
  8




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Government Regulation
  Employees
  
 Item 2. Description of Property
   
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  9




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PART II
 
 Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities
 Common Stock Price Range
  Common Stock
    
    Public WarrantsFiscal 2006
    
    High
    
    Low
    
    High
    
    Low1st Quarter
    
    $
    0.27
    
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.062nd Quarter
    
    $
    0.24
    
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    0.063rd Quarter
    
    $
    0.23
    
    
    $
    0.13
    
    
    $
    0.10
    
    
    $
    0.034th Quarter
    
    $
    0.59
    
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.07
 Common Stock
    
    Public WarrantsFiscal 2007
    
    High
    
    Low
    
    High
    
    Low1st Quarter (1)
    
    $
    0.53
    
    
    $
    0.38
    
    
    $
    0.20
    
    
    $
    0.102nd Quarter
    
    $
    0.47
    
    
    $
    0.36
    
    
    
    
    
    
    
    3rd Quarter
    
    $
    0.54
    
    
    $
    0.37
    
    
    
    
    
    
    
    4th Quarter
    
    $
    0.54
    
    
    $
    0.35
    
    
    
    
    
    
    
    
 (1) Public Warrants sales price information for
2007 is through January 29, 2007, the last trading day prior to
expiration.  Dividend Policy
  10




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Item 6. Managements Discussion and Analysis or Plan of Operation
 Overview
 ® ® ®
   Financial Highlights of 2007
   11




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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.
 Results of Operations
 Year Ended December 31, 2007 compared to Year Ended December 31, 2006.
 Net Sales .
 Osprey Product Sales .
 12




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ViewCast Niagara® Streaming/Encoding Systems.
 Other Revenues .
 Cost of Sales/Gross Profit .
  Selling, General and Administrative Expense .
 Research and Development Expense.
 Depreciation Expense.
 Other Income and Expense
 Net Income (Loss) .
 13




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Liquidity and Capital Resources
          14




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Operating Leases
  Contractual Obligations
    
    (In thousands)and Commitments:
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    TotalOperating leases
    
    $
    308
    
    
    $
    289
    
    
    $
    292
    
    
    $
    149
    
    
    $
    13
    
    
    $
    1,051
  Off Balance Sheet Arrangements
  15




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##### Table of Contents



Item 7. Financial Statements
 ViewCast.com, Inc. and Subsidiaries
Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    17Consolidated Balance Sheets at December 31, 2006 and 2007
    
    
    18Consolidated Statements of Operations for the years ended December 31, 2006 and 2007
    
    
    19Consolidated Statements of Stockholders Equity (Deficit) for the years ended December 31, 2006 and 2007
    
    
    20Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2007
    
    
    21Notes to Consolidated Financial Statements
    
    
    22
 16




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,
  Share-Based Payment
 
 17




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2006
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    567,509
    
    
    $
    1,135,416Accounts receivable, less allowance for doubtful accounts of
$30,756 and $30,390 at December 31, 2006 and 2007 respectively
    
    
    2,084,723
    
    
    
    2,261,133Inventories, net
    
    
    2,155,212
    
    
    
    2,367,200Prepaid expenses
    
    
    148,039
    
    
    
    243,614Total current assets
    
    
    4,955,483
    
    
    
    6,007,363Property and equipment, net
    
    
    446,758
    
    
    
    721,413Intangible assets, net
    
    
    177,737
    
    
    
    323,367Deposits
    
    
    59,107
    
    
    
    45,566Total assets
    
    $
    5,639,085
    
    
    $
    7,097,709LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    982,472
    
    
    $
    456,641Accrued expenses
    
    
    1,020,535
    
    
    
    927,857Current maturities of long-term debt
    
    
    2,807
    
    
    
    21,345Total current liabilities
    
    
    2,005,814
    
    
    
    1,405,843Long-term debt less current maturities
    
    
    491
    
    
    
    28,157Stockholder note payable
    
    
    5,141,361
    
    
    
    5,141,361Stockholder accrued interest
    
    
    10,561
    
    
    
    192,994Commitments and contingenciesStockholders equity (deficit):Preferred stock, $0.0001 par value, authorized 5,000,000 shares:Series B convertible  issued and outstanding shares - 800,000 - liquidation value
of $14 and $15 per share as of December 31, 2006 and 2007 respectively
    
    
    80
    
    
    
    80Series C convertible  issued and outstanding shares - 200,000 - liquidation value
of $30 and $31 per share as of December 31, 2006 and 2007 respectively
    
    
    20
    
    
    
    20Series E convertible  issued and outstanding shares - 80,000 - liquidation value
of $101 and $102 per share as of December 31, 2006 and 2007 respectively
    
    
    8
    
    
    
    8Common stock, $.0001 par value, authorized 100,000,000 shares:Issued shares   28,752,143 and 32,341,753 at December 31, 2006
and 2007, respectively
    
    
    2,875
    
    
    
    3,234Additional paid-in capital
    
    
    68,986,065
    
    
    
    69,990,960Accumulated deficit
    
    
    (70,496,284
    )
    
    
    (69,653,042
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders equity (deficit)
    
    
    (1,519,142
    )
    
    
    329,354Total liabilities and stockholders equity (deficit)
    
    $
    5,639,085
    
    
    $
    7,097,709
  18




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VIEWCAST.COM,
INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended December 31,2006
    
    
    2007Net sales
    
    $
    13,981,096
    
    
    $
    15,993,541Cost of sales
    
    
    6,280,863
    
    
    
    6,388,191Gross profit
    
    
    7,700,233
    
    
    
    9,605,350Operating expenses:Selling, general and administrative
    
    
    6,253,183
    
    
    
    6,252,972Research and development
    
    
    1,956,082
    
    
    
    2,074,120Depreciation and amortization
    
    
    338,431
    
    
    
    369,506Total operating expenses
    
    
    8,547,696
    
    
    
    8,696,598Operating income (loss)
    
    
    (847,463
    )
    
    
    908,752Other income (expense):Interest expense (including $936,709 and
$295,463 of expense to related parties)
    
    
    (938,533
    )
    
    
    (305,966
    )Interest income
    
    
    24,731
    
    
    
    33,216Loss on disposal of fixed assets
    
    
    (13,219
    )
    
    
    (25,560
    )Other
    
    
    23,395
    
    
    
    250,000Total other expense
    
    
    (903,626
    )
    
    
    (48,310
    )Income tax expense
    
    
    
    
    
    
    (17,200
    )NET INCOME (LOSS)
    
    $
    (1,751,089
    )
    
    $
    843,242Preferred stock dividends
    
    
    (819,243
    )
    
    
    (819,243
    )Net income (loss) applicable to common stockholders
    
    $
    (2,570,332
    )
    
    $
    23,999Net income (loss) per shareBasic
    
    $
    (0.10
    )
    
    $
    0.00Diluted
    
    $
    (0.10
    )
    
    $
    0.00Weighted average number of common shares outstandingBasic
    
    
    25,792,662
    
    
    
    31,714,363Diluted
    
    
    25,792,662
    
    
    
    47,726,772
  19




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##### Table of Contents



VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2007
 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
    
    
    Equity (Deficit)Balances, December 31, 2005
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    
    
    
    $
    
    
    
    
    25,889,456
    
    
    $
    2,589
    
    
    $
    59,718,393
    
    
    $
    (68,745,195
    )
    
    $
    (11,906
    )
    
    $
    (9,036,019
    )Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,384
    
    
    
    
    
    
    
    
    
    
    
    8,384Conversion of stockholder line of
credit and note payable into
Series E Preferred stock,
common stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    8
    
    
    
    2,862,687
    
    
    
    286
    
    
    
    9,259,288
    
    
    
    
    
    
    
    
    
    
    
    9,259,582Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,751,089
    )
    
    
    
    
    
    
    (1,751,089
    )Balances, December 31, 2006
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    28,752,143
    
    
    $
    2,875
    
    
    $
    68,986,065
    
    
    $
    (70,496,284
    )
    
    $
    (11,906
    )
    
    $
    (1,519,142
    )Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,875
    
    
    
    
    
    
    
    
    
    
    
    51,875Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,000
    
    
    
    6
    
    
    
    16,940
    
    
    
    
    
    
    
    
    
    
    
    16,946Exercise of stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,534,610
    
    
    
    353
    
    
    
    936,080
    
    
    
    
    
    
    
    
    
    
    
    936,433Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843,242
    
    
    
    
    
    
    
    843,242Balances, December 31, 2007
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    80,000
    
    
    $
    8
    
    
    
    32,341,753
    
    
    $
    3,234
    
    
    $
    69,990,960
    
    
    $
    (69,653,042
    )
    
    $
    (11,906
    )
    
    $
    329,354
  20




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,2006
    
    
    2007Operating activities:Net income (loss)
    
    $
    (1,751,089
    )
    
    $
    843,242Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Bad debt expense
    
    
    17,585
    
    
    
    (366
    )Depreciation of property and equipment
    
    
    195,067
    
    
    
    305,775Amortization of intangible assets
    
    
    143,364
    
    
    
    63,731Stock based compensation expense
    
    
    8,384
    
    
    
    51,875Loss on disposition of property and equipment
    
    
    13,219
    
    
    
    25,560Changes in operating assets and liabilitiesAccounts receivable
    
    
    (797,532
    )
    
    
    (176,044
    )Inventories
    
    
    (143,721
    )
    
    
    (203,471
    )Prepaid expenses
    
    
    (74,965
    )
    
    
    (95,575
    )Deposits
    
    
    (29,781
    )
    
    
    13,541Accounts payable
    
    
    400,209
    
    
    
    (525,831
    )Accrued expenses
    
    
    (222,842
    )
    
    
    (92,678
    )Stockholder accrued interest
    
    
    1,688,159
    
    
    
    182,433Net cash provided by (used in) operating activities
    
    
    (553,943
    )
    
    
    392,192Investing activities:Capitalized software development costs
    
    
    (181,976
    )
    
    
    (209,361
    )Purchase of property and equipment
    
    
    (390,120
    )
    
    
    (554,797
    )Proceeds from disposition of property and equipment
    
    
    3,711
    
    
    
    Net cash used in investing activities
    
    
    (568,385
    )
    
    
    (764,158
    )Financing activities:Net proceeds from stockholder line of credit
    
    
    250,000
    
    
    
    Proceeds from exercise of employee stock options
    
    
    
    
    
    
    16,946Net proceeds from exercise of warrants
    
    
    
    
    
    
    936,433Repayments of long-term debt
    
    
    (8,036
    )
    
    
    (13,506
    )Net cash provided by financing activities
    
    
    241,964
    
    
    
    939,873Net increase (decrease) in cash and cash equivalents
    
    
    (880,364
    )
    
    
    567,907Cash and cash equivalents, beginning of period
    
    
    1,447,873
    
    
    
    567,509Cash and cash equivalents, end of period
    
    $
    567,509
    
    
    $
    1,135,416Supplemental cash flow information:Cash paid for interest
    
    $
    8,458
    
    
    $
    117,855Supplemental non-cash flow activities:Conversion of Stockholder debt to common stock,
Series E convertible preferred stock and warrants
    
    $
    9,259,582
    
    
    $
    Conversion of Stockholder accrued interest to Stockholder
note payable
    
    $
    3,891,361
    
    
    $
    Acquisition of assets under capital leases
    
    $
    
    
    
    $
    59,710Property and equipment reclassed to inventory
    
    $
    
    
    
    $
    8,517
  21




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##### Table of Contents



ViewCast.com, Inc.
 
 Notes to the Consolidated Financial Statements
 1. The Company and Description of Business
 ® ®
  2. Summary of Significant Accounting Policies
 Principles of Consolidation
  Cash and Cash Equivalents
  Accounts Receivable
  22




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Year ended December 31,2006
    
    
    2007Beginning balance
    
    $
    13,171
    
    
    $
    30,756Bad debt expense
    
    
    17,585
    
    
    
    (366
    )Ending balance
    
    $
    30,756
    
    
    $
    30,390
 Inventories
  Property and Equipment
  Intangible Assets and Amortization
    December 31, 2006
    
    December 31, 2007Average life
    
    Gross carrying
    
    Accumulated
    
    Gross carrying
    
    Accumulated(years)
    
    amount
    
    amortization
    
    amount
    
    amortizationCapitalized Software Costs
    
    
    3
    
    
    $
    966,717
    
    
    $
    867,985
    
    
    $
    1,163,455
    
    
    $
    926,514Patents
    
    
    17
    
    
    
    83,409
    
    
    
    4,404
    
    
    
    96,032
    
    
    
    9,606$
    1,050,126
    
    
    $
    872,389
    
    
    $
    1,259,487
    
    
    $
    936,120
  2008
    
    2009
    
    2010
    
    Thereafter
    
    TotalCapitalized Software Costs
    
    $
    103,940
    
    
    $
    87,590
    
    
    $
    45,411
    
    
    $
    
    
    
    $
    236,941Patents
    
    
    5,649
    
    
    
    5,649
    
    
    
    5,649
    
    
    
    69,479
    
    
    
    86,426$
    109,589
    
    
    $
    93,239
    
    
    $
    51,060
    
    
    $
    69,479
    
    
    $
    323,367
 23




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 Impairment of Long-Lived Assets
  Revenue Recognition
   Net Earning Per Share
  Year Ended December 31,2006
    
    
    2007Net income (loss) applicable to common stockholders
 numerator for basic and diluted earnings per share
    
    $
    (2,570,332
    )
    
    $
    23,999Weighted  average common shares outstanding  denominator for
basic earnings per share
    
    
    25,792,662
    
    
    
    31,714,363Dilutive potential common shares:Stock options
    
    
    
    
    
    
    197,503Warrants
    
    
    
    
    
    
    128,632Convertible preferred stock  Series E
    
    
    
    
    
    
    15,686,274Weighted  average common shares and dilutive potential common
shares outstanding  denominator for dilluted earning per share
    
    
    25,792,662
    
    
    
    47,726,772Net income (loss) per share:Basic
    
    $
    (0.10
    )
    
    $
    0.00Diluted
    
    $
    (0.10
    )
    
    $
    0.00
 24




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Twelve Months Ended December 31,2006
    
    2007Stock options
    
    
    2,739,700
    
    
    
    1,904,600Public and private warrants
    
    
    4,746,482
    
    
    
    2,500,000Convertible preferred stock  Series B
    
    
    2,206,896
    
    
    
    2,206,896Convertible preferred stock  Series C
    
    
    3,333,333
    
    
    
    3,333,333Convertible preferred stock  Series E
    
    
    3,137,255
    
    
    
    
 Warranty Reserves
   Year ended December 31,2006
    
    
    2007Beginning balance
    
    $
    57,667
    
    
    $
    117,636Charged to expense
    
    
    127,237
    
    
    
    162,256Usage
    
    
    (67,268
    )
    
    
    (145,952
    )Ending balance
    
    $
    117,636
    
    
    $
    133,940
 Risks and Uncertainties
  Customers Exceeding 10%
    
    Customers exceeding 10% of Year-of Net Sales
    
    End Accounts Receivable BalanceNumber of
    
    Combined
    
    Number of
    
    CombinedYear
    
    Customers
    
    Percent
    
    Customers
    
    Percent2006
    
    
    1
    
    
    
    13
    %
    
    
    2
    
    
    
    29
    %2007
    
    
    3
    
    
    
    41
    %
    
    
    3
    
    
    
    47
    %
   25




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 Use of Estimates
  Income Taxes
   Advertising Costs
  Fair Value of Financial Instruments
  Stock-Based Compensation
   26




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
    Year EndedDecember 31,2006
    
    2007Expected volatility
    
    
    109
    %
    
    
    105
    %Risk-free interest rate
    
    
    4.76
    %
    
    
    4.50
    %Expected dividends
    
    
    0.0
    %
    
    
    0.0
    %Expected term in years
    
    
    4.08
    
    
    
    3.91
  Recent Accounting Pronouncements
    27




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  3. Inventories
  December 31,2006
    
    
    2007Purchased materials
    
    $
    1,410,411
    
    
    $
    1,351,377Finished goods
    
    
    744,801
    
    
    
    1,015,823$
    2,155,212
    
    
    $
    2,367,200
 4. Property and Equipment
  EstimatedUseful Life
    

    December 31,(Years)
    
    2006
    
    
    2007Service equipment
    
    3
    
 $

    
    
    
$
    242,362Computer equipment
    
    3 to 7
    
    
       408,174
    

    

    309,112Software
    
    3 to 5
    
    
    132,909
    
    
    
    182,110Leasehold improvements
    
    1 to 5
    
    
    121,746
    
    
    
    130,409Office furniture and equipment
    
    5 to 7
    
    
    604,768
    
    
    
    890,3001,267,597
    
    
    
    1,754,293Less accumulated depreciation and
amortization
    
    
    
    
    (820,839
    )
    
    
    (1,032,880
    )$
    446,758
    
    
    $
    721,413
 5. Accrued Expenses
  December 31,2006
    
    
    2007Accrued compensation
    
   $
    217,445
    
    
    $
    174,030Accrued warranty
    
    
    117,636
    
    
    
    133,940Accrued inventory purchases
    
    
    95,068
    
    
    
    55,713Customer deposits
    
    
    166,844
    
    
    
    22,435Deferred rent
    
    
    118,496
    
    
    
    100,555Deferred revenue
    
    
    71,857
    
    
    
    174,084Accrued taxes and other
    
    
    233,189
    
    
    
    267,100$
    1,020,535
    
    
    $
    927,857
 28




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 6. Stockholder Line of Credit
   7. Long-term Debt
 Stockholder Term Note
   December 31, 2006
    
    
    December 31, 2007Aggregate of the Outstanding Principal (Primary Principal Amount), with interest due
at
a rate per annum equal to the lesser of prime plus 1.0% (9.25% and 8.25% at December
31, 2006 and 2007 respectively) or 9.5% fixed rate, due December 31, 2009.
    
    $
    1,250,000
    
    
    $
    1,250,000Accrued and Outstanding Interest (Secondary Principal Amount), with interest due at a
rate per annum equal to the lesser of Applicable Federal Rate (4.73% and 3.88% at
December 31, 2006 and 2007 respectively) or 9.5% fixed rate, due December 31, 2009.
    
    
    3,891,361
    
    
    
    3,891,361Other debt
    
    
    3,298
    
    
    
    49,502Total long-term debt
    
    
    5,144,659
    
    
    
    5,190,863Less current maturities
    
    
    (2,807
    )
    
    
    (21,345
    )Total long-term debt less current maturities
    
    $
    5,141,852
    
    
    $
    5,169,518
  Long-term Notes
    
    
    StockholderYear ended December 31
    
    Payable
    
    
    Accrued Interest2008
    
    $
    21,345
    
    
    $
    2009
    
    
    5,161,335
    
    
    
    192,9942010
    
    
    8,183
    
    
    
    $
    5,190,863
    
    
    $
    192,994
 29




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 8. Conversion of Ardinger Debt to Equity
  9. Income Taxes
   Year ended December 31,2006
    
    
    2007Deferred tax assets:Net operating loss carryforwards
    
    $
    26,129,000
    
    
    $
    25,934,000Deferred revenue
    
    
    31,000
    
    
    
    64,000Patent
    
    
    4,000
    
    
    
    Accrued liabilities
    
    
    209,000
    
    
    
    144,000Property and equipment
    
    
    63,000
    
    
    
    74,000Software development costs
    
    
    355,000
    
    
    
    235,000Total deferred tax assets
    
    
    26,791,000
    
    
    
    26,451,000Net deferred tax assets
    
    
    26,791,000
    
    
    
    26,451,000Less: valuation allowance
    
    
    (26,791,000
    )
    
    
    (26,451,000
    )Net deferred taxes
    
    $
    
    
    
    $
    
 30




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Year ended December 31,2006
    
    
    2007U.S. federal
statutory rate applied to pretax income (loss)
    
    $
    (595,000
    )
    
    $
    293,000State tax net of federal benefit
    
    
    
    
    
    
    Change in valuation allowance
    
    
    552,000
    
    
    
    (340,000
    )Other
    
    
    43,000
    
    
    
    64,000$
    
    
    
    $
    17,000
   10. Stockholders Equity (Deficit)
 Preferred Stock
      31




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 Common Stock
   Stock Option Plan
    Stock OptionsWeighted-AverageNumber
    
    
    Price Per
    
    
    Exercise Priceof Shares
    
    
    Share
    
    
    Per ShareOutstanding at January 1, 2006
    
    
    3,124,642
    
    
    $
    0.20-$9.00
    
    
    $
    2.07Granted
    
    
    155,000
    
    
    
    0.20 - 0.39
    
    
    
    0.23Exercised
    
    
    Canceled/forfeited
    
    
    (745,042
    )
    
    
    0.20 - 5.50
    
    
    
    1.25Outstanding at December 31, 2006
    
    
    2,534,600
    
    
    $
    0.20-$9.00
    
    
    $
    2.20Granted
    
    
    1,395,000
    
    
    
    0.39 - 0.48
    
    
    
    0.43Exercised
    
    
    (55,000
    )
    
    
    0.29 - 0.41
    
    
    
    0.31Canceled/forfeited
    
    
    (1,213,750
    )
    
    
    0.20 - 9.00
    
    
    
    0.72Outstanding at December 31, 2007
    
    
    2,660,850
    
    
    $
    0.20-$7.14
    
    
    $
    1.99
  32




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Weighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Range of
    
    Outstanding at
    
    
    Remaining
    
    
    Average
    
    
    Exercisable at
    
    
    AverageExercise
    
    December 31,
    
    
    Contractual
    
    
    Exercise
    
    
    December 31,
    
    
    ExercisePrices
    
    2007
    
    
    Life
    
    
    Price
    
    
    2007
    
    
    Price$  0.01 - 1.00
    
    
    1,401,500
    
    
    
    6.2
    
    
    $
    0.40
    
    
    
    869,958
    
    
    $
    0.401.01 - 2.00
    
    
    541,350
    
    
    
    3.2
    
    
    
    1.12
    
    
    
    541,350
    
    
    
    1.122.01 - 3.00
    
    
    110,000
    
    
    
    2.1
    
    
    
    2.51
    
    
    
    110,000
    
    
    
    2.513.01 - 4.00
    
    
    67,500
    
    
    
    0.9
    
    
    
    3.50
    
    
    
    67,500
    
    
    
    3.504.01 - 5.00
    
    
    12,500
    
    
    
    1.8
    
    
    
    4.53
    
    
    
    12,500
    
    
    
    4.535.01 - 6.00
    
    
    116,000
    
    
    
    2.0
    
    
    
    5.50
    
    
    
    116,000
    
    
    
    5.506.01 - 7.00
    
    
    2,000
    
    
    
    1.3
    
    
    
    7.00
    
    
    
    2,000
    
    
    
    7.007.01 - 8.00
    
    
    410,000
    
    
    
    1.7
    
    
    
    7.10
    
    
    
    260,000
    
    
    
    7.102,660,850
    
    
    
    4.4
    
    
    $
    1.99
    
    
    
    1,979,308
    
    
    $
    2.03
 Employee Stock Purchase Plan
   Warrants
  33




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Weighted-Number
    
    
    Exercise
    
    
    Averageof Warrants
    
    
    Price
    
    
    Exercise PriceOutstanding and exercisable
at January 2006
    
    
    4,483,982
    
    
    $
    0.28 - 1.00
    
    
    $
    0.31Granted
    
    
    2,500,000
    
    
    
    0.48
    
    
    
    0.48Exercised
    
    
    
    
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding and exercisable
at December 2006
    
    
    6,983,982
    
    
    $
    0.28 - 1.00
    
    
    $
    0.37Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (3,534,610
    )
    
    
    0.28
    
    
    
    0.28Cancelled
    
    
    (949,372
    )
    
    
    0.28 - 1.00
    
    
    
    0.42Outstanding and exercisable
at December 2007
    
    
    2,500,000
    
    
    $
    0.48
    
    
    $
    0.48
      11. Employee Benefit Plan
  34




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 12. Commitments and Contingencies
  Operating LeasesYear ended December 31:2008
    
    $
    308,1642009
    
    
    288,6992010
    
    
    292,0142011
    
    
    149,4942012
    
    
    12,984Total minimum lease payments
    
    $
    1,051,355
  13. Related Party Transactions
     14. Accounts Receivable Loan Facility
  35




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 
 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
       
 Item 8B. Other Information
  36




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##### Table of Contents



PART III
 
 Item 9. Directors, Executive Officers, Promoters, Control Persons, and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act
  
 Item 10. Executive Compensation
  
 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  Equity Compensation Plan Information
  Number of securities to be
    
    
    
    
    
    Number of securities remainingissued upon exercise of
    
    Weighted-average exercise
    
    available for future issuance underoutstanding options,
    
    price of outstanding options,
    
    equity compensation plans (excludingwarrants and rights
    
    warrants and rights
    
    securities reflected in column (a))Plan category
    
    (a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    
    2,660,850
    
    
    $
    1.99
    
    
    
    3,216,044Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,660,850
    
    
    $
    1.99
    
    
    
    3,216,044
 
 Item 12. Certain Relationships and Related Transactions, and Director Independence
  37




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##### Table of Contents



Item 13. Exhibits.
 
 EXHIBIT INDEX
 Exhibit No.
    
    Description of Exhibit2.1
    
    
    Agreement and Plan of Merger and Reorganization (1)3.1
    
    
    Certificate of Incorporation (1)3.2
    
    
    Amendment to Certificate of Incorporation (1)3.3
    
    
    Restated Bylaws (4)3.4
    
    
    Certificate of Designation of Series B Convertible Preferred Stock (2)3.5
    
    
    Certificate of Designation of Series C Convertible Preferred Stock (6)3.6
    
    
    Certificate of Designation of Series D Redeemable Convertible Preferred Stock (7)3.7
    
    
    Certificate of Designation of Series E Convertible Redeemable Preferred Stock (20)4.1
    
    
    Form of Common Stock Certificate (1)4.2
    
    
    Form of Warrant Certificate (1)4.3
    
    
    Form of Warrant Agreement between ViewCast and Continental Stock Transfer & Trust
Company (1)4.4
    
    
    Form of Representatives Warrant Agreement (1)4.5
    
    
    Notice of Extension of Warrant Expiration Date and Exercise Price Adjustment (5)4.6
    
    
    Warrant Issued to Ardinger Family Partnership, LTD (20)10.1
    
    
    Form of Indemnification Agreement between ViewCast and Executive Officers and
Directors (1)10.2
    
    
    Working Capital Line of Credit Loan Agreement between ViewCast and the Ardinger
Family Partnership, LTD (3)10.3
    
    
    Sublease Agreement between ViewCast and Host Communications, Inc. (6)10.4
    
    
    Reserved.10.5
    
    
    Revolving Loan Agreement between MMAC Communications Corp. and Keltic Financial
Partners, LP dated as of October 11, 2002 (7)10.6
    
    
    Guarantee of Payment and Performance from ViewCast.com, Inc. to Keltic Financial
Partners, LP dated as of October 11, 2002 (7)10.7
    
    
    Subordination Agreement by and among Keltic Financial Partners, LP, MMAC
Communications Corp. and ViewCast.com, Inc. dated as of October 11, 2002 (7)10.8
    
    
    General Security Agreement by and between MMAC Communications Corp. and Keltic
Financial Partners, LP dated as of October 11, 2002 (7)10.9
    
    
    Revolving Note by MMAC Communications Corp. in favor of Keltic Financial Partners, LP
dated as of October 11, 2002 (7)10.10
    
    
    ViewCast.com, Inc. 2005 Stock Incentive Plan (14)10.11
    
    
    ViewCast.com, Inc. 2005 Employee Stock Purchase Plan (15)10.12
    
    
    Reserved.10.13
    
    
    Reserved.10.14
    
    
    Reserved.10.15
    
    
    Form of Amended and Restated Security Agreement dated October 15, 2003 between
ViewCast.com, Inc. and the Ardinger Family Partnership, LTD (8)
 38




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.16
    
    
    Form of Amended and Restated Pledge Agreement dated October 15, 2003 between
ViewCast.com, Inc. and the Ardinger Family Partnership, LTD (8)10.17
    
    
    Form of First Amendment to the Revolving Loan Agreement dated October 11, 2003
between Delta Computec Inc. and Keltic Financial Partners, LP (8)10.18
    
    
    Reserved.10.19
    
    
    Reserved.10.20
    
    
    Third Amendment dated as of December 10, 2004 to Revolving Loan Agreement between
MMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002 (9)10.21
    
    
    Fourth Amendment dated as of January 10, 2005 to Revolving Loan Agreement between
MMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002 (9)10.22
    
    
    Fifth Amendment dated as of February 15, 2005 to Revolving Loan Agreement between
MMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002 (9)10.23
    
    
    Notice of Lower Temporary Conversion Price dated March 21, 2005 (10)10.24
    
    
    Letter Agreement Amending Revolving and Term Credit Facility dated March 22, 2005 (10)10.25
    
    
    Sixth Amendment, dated as if April 15, 2005, to Revolving Loan Agreement Between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002
(11)10.26
    
    
    Seventh Amendment, dated as if July 15, 2005, to Revolving Loan Agreement Between
MMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002 (12)10.27
    
    
    Letter Agreement Amending Revolving and Term Credit Facility dated July 22, 2005 (13)10.28
    
    
    Eighth Amendment, dated as if October 11, 2005, to Revolving Loan Agreement Between
MMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002 (16)10.29
    
    
    Reserved.10.30
    
    
    Office Lease Agreement between ViewCast and TR Plano Parkway Partners, L.P. (17)10.31
    
    
    Letter Agreement Amending Revolving and Term Credit Facility dated March 20, 2006 (18)10.32
    
    
    Office Lease Agreement between ViewCast and Valwood Centreport, LP (19)10.33
    
    
    Registration Rights Agreement by and among ViewCast and Ardinger Family Partnership,
Ltd. Dated as of December 11, 2006 (20)10.34
    
    
    Second Amended Loan and Security Agreement dated as of December 11, 2006 (20)10.35
    
    
    Exchange Agreement dated as of December 11, 2006 by and among ViewCast, Osprey
Technoligies, Inc. and Videoware, Inc. and Ardinger Family Partnership, Ltd. (20)10.36
    
    
    Employment Agreement by and between ViewCast Corporation and David T. Stoner
effective as of March 1, 2007 (21)10.37
    
    
    2007 Executive Incentive Compensation Plan for David T. Stoner (21)10.38
    
    
    Employment Agreement by and between ViewCast Corporation and Laurie L. Latham
effective as of March 1, 2007 (21)10.39
    
    
    2007 Executive Incentive Compensation Plan for Laurie L. Latham (21)10.40
    
    
    Purchase and Sale Agreement/Security Agreement by and among ViewCast.com, Inc.,
Osprey Technologies, Inc., Videoware, Inc. and Amegy Bank National Association, dated
June 29, 2007 (22)10.41
    
    
    Amendment to Purchase and Sale Agreement/Security Agreement by and among
ViewCast.com, Inc., Osprey Technologies, Inc., Videoware, Inc. and Amegy Bank
National Association, dated June 29, 2007 (22)
 39




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.42
    
    
    Employment Agreement by and between ViewCast.com, Inc. and Gary Klembara effective
September 1, 2007 (23)14.1
    
    
    Code of Ethics (24)21.1
    
    
    Subsidiaries of ViewCast.com, Inc. (25)23.1
    
    
    Consent of KBA Group LLP *31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certifications *32.1
    
    
    Statement 1350 Certifications *
 
 *
    
    Filed herewith.(1)
    
    Incorporated by reference to the Registration Statement on Form SB-2 and all amendments
thereto as declared effective on February 4, 1997(2)
    
    Incorporated by reference to Form 8-K filed March 15, 1999.(3)
    
    Incorporated by reference to Form 10-KSB filed March 26, 1999.(4)
    
    Incorporated by reference to Form S-3 filed June 30, 2000.(5)
    
    Incorporated by reference to Form 8-K filed January 23, 2002.(6)
    
    Incorporated by reference to Form 10-K filed April 16, 2002.(7)
    
    Incorporated by reference to Form 8-K filed October 25, 2002.(8)
    
    Incorporated by reference to Form 10-QSB filed November 14, 2003.(9)
    
    Incorporated by reference to Form 8-K filed March 25, 2005.(10)
    
    Incorporated by reference to Form 8-K filed March 25, 2005.(11)
    
    Incorporated by reference to Form 8-K filed April 21, 2005.(12)
    
    Incorporated by reference to Form 8-K filed July 18, 2005.(13)
    
    Incorporated by reference to Form 8-K filed July 27, 2005.(14)
    
    Incorporated by reference to Appendix A to Proxy Statement filed September 9, 2005.(15)
    
    Incorporated by reference to Appendix B to Proxy Statement filed September 9, 2005.(16)
    
    Incorporated by reference to Form 8-K filed October 17, 2005.(17)
    
    Incorporated by reference to Form 8-K filed January 17, 2006.(18)
    
    Incorporated by reference to Form 8-K filed March 23, 2006.(19)
    
    Incorporated by reference to Form 8-K filed November 2, 2006.(20)
    
    Incorporated by reference to Form 8-K filed December 15, 2006.(21)
    
    Incorporated by reference to Form 10-KSB/A filed April 30, 2007.(22)
    
    Incorporated by reference to Form 8-K filed July 6, 2007.(23)
    
    Incorporated by reference to Form 8-K filed September 5, 2007.(24)
    
    Incorporated by reference to Form 10-KSB filed March 30, 2004.(25)
    
    Incorporated by reference to Item 1. Description of BusinessOverview of this report. 
 Item 14. Principal Accountant Fees and Services
  
 40




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##### Table of Contents



SIGNATURES
  Date                  
                
                    
              ViewCast.com, Inc.March 31, 2008
    By:
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer and Senior Vice President of Finance
and Administration  Date                  
                
                    
              ViewCast.com, Inc.March 31, 2008
    By:
    /s/ George C. PlattGeorge C. PlattDirector and Chief Executive Officer

Principal Executive Officer March 31, 2008
    By:
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer and Senior Vice President of
Finance
and Administration

Principal Accounting Officer March 31, 2008
    By:
    /s/ Joseph W. AutemJoseph W. AutemDirector March 31, 2008
    By:
    /s/ Sherel D. HorsleySherel D. HorsleyDirector March 31, 2008
    By:
    /s/ John W. Slocum, Jr.John W. Slocum, Jr.Director 41




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##### Table of Contents



EXHIBIT INDEX FOR DOCUMENTS FILED WITH THIS REPORT
 ExhibitNo.
    
    Description of Exhibit23.1
    
    
    Consent of KBA Group LLP31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certifications32.1
    
    
    Section 1350 Certifications
 42