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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-KSB/A
 þ
    
    Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the fiscal year ended December 31, 2005.
 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
    
    (I.R.S. EmployerOrganization)
    
    Identification No.)3701 W. Plano Parkway, Suite 300, Plano, TX
    
    75075(Address of Principal Executive Offices)
    
    (Zip Code)
  
    
   o
 þ o
 o
 o þ
 $11,559,204
   o þ




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##### 



TABLE OF CONTENTS
 Item
    
    PageNo.
    
    No.Part I1. Description of Business
    
    
    32. Description of Property
    
    
    103. Legal Proceedings
    
    
    104. Submission of Matters to a Vote of Security Holders
    
    
    10Part II5. Market For Common Equity and Related Stockholder Matters
    
    
    116. Managements Discussion and Analysis or Plan of Operation
    
    
    127. Financial Statements
    
    
    188. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
    
    
    418A. Controls and Procedures
    
    
    418B. Other information
    
    
    41Part III9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of the Exchange Act
    
    
    4210. Executive Compensation
    
    
    4511. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    5012. Certain Relationships and Related Transactions
    
    
    5213. Exhibits
    
    
    5214. Principal Accountant Fees and Services
    
    
    57Consent of Grant Thornton 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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Discontinued Operations  Sale of Delta Computec Inc. Operating Assets
   Key Elements Regarding Video Communications
   
    
    the sophistication of the video and audio compression algorithms;
    
    the capacity of a network to transmit data (bandwidth); and
    
    the speed and power of PCs and workstations.
  Industry Background and Market Drivers
  
    
    receiving entertainment content (sports, music videos),
    
    monitoring processes (manufacturing),
    
    holding two-way meetings (conferencing),
    
    distributing timely news and other third-party information (financial and world
events),
    
    delivering messages to an audience (CEOcasts, financial reporting, sales motivation),
 4




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
    
    providing education and training,
    
    delivering marketing and advertising
messages, and
    
    maintaining and gathering security
information.
 e-commerce
  How ViewCast Addresses the Industry
   ViewCast IVN
    
    Niagara MediaOsprey Video
    
    Servers and
    
    Encoders, ServersCapture Cards
    
    Gateway
    
    and SoftwareVideo Content Capture
    
    
    x
    
    
    
    
    
    
    
    xVideo Conversion/Editing
    
    
    x
    
    
    
    
    
    
    
    xDesktop Video Conferencing
    
    
    
    
    
    
    xGroup Video Conferencing
    
    
    
    
    
    
    xDistance Learning and Training
    
    
    x
    
    
    
    x
    
    
    
    xPremise Distribution of TV/Video
    
    
    x
    
    
    
    x
    
    
    
    xSecurity and Surveillance
    
    
    x
    
    
    
    x
    
    
    
    xVideo Analysis
    
    
    x
    
    
    
    x
    
    
    
    xMarketing and Promotional
    
    
    x
    
    
    
    x
    
    
    
    xMedia and Entertainment
    
    
    x
    
    
    
    
    
    
    
    x
 The ViewCast Strategy
  
    
    Focus Our Products on Vertical Market Applications Leveraging our current expertise
and successful products and services, we are emphasizing features and functions that
provide an application solution for our customers. Thus, we believe we are positioned to
grow with the market and the economy to build market share
 5




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and add revenues.
    
    Expand Sales, Marketing and Distribution We believe investment in additional
marketing and sales initiatives will be appropriate with the market more conducive to
technology purchases including the system and application software areas. Our strategy is
to utilize a combination of increased marketing exposure with our direct sales force,
resellers, system integrators, OEMs and custom application developers to distribute and
expand our product and service solutions.
    
    Maintain Efficient Operations We will continue to monitor expenses during 2006.
    
    Implement Growth and Strategic Alternatives/Increase Financial Strength We intend to
continue our progress on plans and initiatives to increase the revenue growth rate and
financial resources of ViewCast, including potential new capital resources and product,
technology or channel related acquisitions.
    
    Continue to Increase and Enhance Our Strategic Partnerships 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.
 ViewCast Products and Services
  Osprey Video Capture Cards, Codecs and Video Peripheral Products.
  Niagara Streaming Systems.
   6




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ViewCast IVN Systems. ViewCast
Interactive Video Network
  Marketing and Sales
    Production and Supply
   Installation, Service and Maintenance
  7




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Research and Development
   Competition
   Patents, Copyrights, Trademarks and Proprietary Information
    8




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Government Regulation
  Employees
  9




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Item 2. Description of Property
   
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Number ofNumber of
    
    
    Number of
    
    
    Votes
    
    
    BrokerNominees
    
    Votes For
    
    
    Votes Against
    
    
    Abstaining
    
    
    Non-VotesH.T. Ardinger
    
    
    21,715,085
    
    
    
    84,817
    
    
    
    
    
    
    
    830.837Joseph Autem
    
    
    21,746,485
    
    
    
    53,417
    
    
    
    
    
    
    
    830.837David A. Dean
    
    
    21,746,485
    
    
    
    53,417
    
    
    
    
    
    
    
    830.837George C. Platt
    
    
    21,730,185
    
    
    
    69,717
    
    
    
    
    
    
    
    830.837
  Number of Votes
    
    Number of Votes
    
    Number of Votes
    
    BrokerFor
    
    Against
    
    Abstaining
    
    Non-Votes3,354,142
    
    227,460
    
    76,750
    
    18,972,387
  Number of Votes
    
    Number of Votes
    
    Number of Votes
    
    BrokerFor
    
    Against
    
    Abstaining
    
    Non-Votes3,451,185
    
    195,117
    
    12,050
    
    18,972,387
  Number of Votes
    
    Number of Votes
    
    Number of Votes
    
    BrokerFor
    
    Against
    
    Abstaining
    
    Non-Votes21,703,912
    
    13,362
    
    82,628
    
    830,837
 10




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PART
II
 
 Item 5. Market For Common Equity and Related Stockholder Matters
 Common Stock Price Range
 A
 Common Stock
    
    
    Public WarrantsFiscal 2004
    
    High
    
    
    Low
    
    
    High
    
    
    Low1st Quarter
    
    $
    0.48
    
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.162nd Quarter
    
    
    0.80
    
    
    
    0.33
    
    
    
    0.35
    
    
    
    0.163rd Quarter
    
    
    0.43
    
    
    
    0.26
    
    
    
    0.25
    
    
    
    0.154th Quarter
    
    
    0.41
    
    
    
    0.24
    
    
    
    0.15
    
    
    
    0.10
 Common Stock
    
    
    Public WarrantsFiscal 2005
    
    High
    
    
    Low
    
    
    High
    
    
    Low1st Quarter
    
    $
    0.44
    
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.062nd Quarter
    
    
    0.42
    
    
    
    0.22
    
    
    
    0.08
    
    
    
    0.083rd Quarter
    
    
    0.36
    
    
    
    0.26
    
    
    
    0.19
    
    
    
    0.064th Quarter
    
    
    0.34
    
    
    
    0.20
    
    
    
    0.09
    
    
    
    0.06
  Dividend Policy
  11




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Item 6. Managements Discussion and Analysis or Plan of Operation
 Overview
    Discontinued Operations
   Financial Highlights of 2005
   12




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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, 2005 compared to Year Ended December 31, 2004.
 Net Sales.
 Osprey Product Sales .
 ViewCast IVN Video Distribution Systems and Niagara® Streaming/Encoding Systems.
 13




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Other Revenues.
 Cost of Goods Sold/Gross Margins.
  Selling, General and Administrative Expense.
 Research and Development Expense.
 Other Expense.
  Loss from Discontinued Operations.
 Net Loss.
 14




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Liquidity and Capital Resources
          15




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16




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Operating Leases
  Contractual Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    (In thousands)and Commitments:
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalOperating leases
    
    $
    265
    
    
    $
    249
    
    
    $
    237
    
    
    $
    207
    
    
    $
    205
    
    
    $
    68
    
    
    $
    1,231
  New Accounting Standards
 Share-Based Payment, Accounting for Stock
-Based Compensation Accounting for Stock Issued to
Employees.
  Off Balance Sheet Arrangements
  17




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Item 7. Financial Statements and Supplementary Data
 ViewCast.com, Inc. and Subsidiaries
Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    19Consolidated Balance Sheets at December 31, 2004 and 2005
    
    
    20Consolidated Statements of Operations for the years ended
December 31, 2004 and 2005
    
    
    21Consolidated Statements of Stockholders Deficit for the
years ended December 31, 2004 and 2005
    
    
    22Consolidated Statements of Cash Flows for the years ended
December 31, 2004 and 2005
    
    
    23Notes to Consolidated Financial Statements
    
    
    24
 18




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19




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2004
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    247,121
    
    
    $
    1,447,873Accounts receivable, less allowance for doubtful accounts
of $13,382 and $13,171 at December 31, 2004 and
December 31, 2005 respectively
    
    
    1,045,403
    
    
    
    1,304,776Inventories
    
    
    1,557,389
    
    
    
    2,011,491Prepaid expenses
    
    
    106,986
    
    
    
    73,074Assets of discontinued operations
    
    
    5,113,778
    
    
    
    Total current assets
    
    
    8,070,677
    
    
    
    4,837,214Property and equipment, net
    
    
    223,810
    
    
    
    284,828Software development costs, net
    
    
    184,396
    
    
    
    122,931Deposits
    
    
    43,811
    
    
    
    29,326Total assets
    
    $
    8,522,694
    
    
    $
    5,274,299LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    690,274
    
    
    $
    582,263Accrued expenses
    
    
    946,818
    
    
    
    1,243,377Stockholder line of credit
    
    
    2,900,000
    
    
    
    3,350,000Current maturities of long-term debt
    
    
    121,432
    
    
    
    142,389Series D redeemable convertible preferred stock
    
    
    1,506,700
    
    
    
    Liabilities of discontinued operations
    
    
    1,907,740
    
    
    
    Total current
liabilities
    
    
    8,072,964
    
    
    
    5,318,029Long-term debt less current maturities
    
    
    11,325
    
    
    
    3,298Stockholder note payable
    
    
    6,794,422
    
    
    
    6,775,230Stockholder accrued interest
    
    
    1,626,754
    
    
    
    2,213,761Commitments and contingenciesStockholders 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 December 31, 2005, respectively
    
    
    2,310
    
    
    
    2,589Additional paid-in capital
    
    
    57,715,654
    
    
    
    59,718,393Accumulated deficit
    
    
    (65,688,929
    )
    
    
    (68,745,195
    )Treasury stock, 261,497 shares at cost
    
    
    (11,906
    )
    
    
    (11,906
    )Total stockholders
deficit
    
    
    (7,982,771
    )
    
    
    (9,036,019
    )Total liabilities and stockholders deficit
    
    $
    8,522,694
    
    
    $
    5,274,299
  20




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VIEWCAST.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended December 31,2004
    
    
    2005Net sales
    
    $
    9,439,042
    
    
    $
    11,559,204Cost of sales
    
    
    3,684,884
    
    
    
    4,864,926Gross profit
    
    
    5,754,158
    
    
    
    6,694,278Operating expenses:Selling, general and administrative
    
    
    4,599,165
    
    
    
    5,470,746Research and development
    
    
    1,831,776
    
    
    
    2,284,566Depreciation and amortization
    
    
    130,667
    
    
    
    190,322Total operating expenses
    
    
    6,561,608
    
    
    
    7,945,634Operating loss
    
    
    (807,450
    )
    
    
    (1,251,356
    )Other expense:Interest expense
    
    
    (814,047
    )
    
    
    (950,588
    )Debt conversion expense
    
    
    (1,233,723
    )
    
    
    (485,798
    )Other
    
    
    73,848
    
    
    
    1,477Total other expense
    
    
    (1,973,922
    )
    
    
    (1,434,909
    )Income tax expense
    
    
    
    
    
    
    (28,250
    )Loss from continuing operations
    
    
    (2,781,372
    )
    
    
    (2,714,515
    )Loss from discontinued operations
    
    
    (64,000
    )
    
    
    (341,751
    )NET LOSS
    
    $
    (2,845,372
    )
    
    $
    (3,056,266
    )Preferred dividends
    
    
    (909,015
    )
    
    
    (819,243
    )Net loss applicable to common stockholders
    
    $
    (3,754,387
    )
    
    $
    (3,875,509
    )Net loss per share  basic and diluted:Continuing operations
    
    $
    (0.17
    )
    
    $
    (0.14
    )Discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Net loss per share  basic and diluted
    
    $
    (0.17
    )
    
    $
    (0.16
    )Weighted average number of common shares
outstanding  basic and diluted
    
    
    21,954,576
    
    
    
    24,964,955
  21




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VIEWCAST.COM,
INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
 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
    
    
    DeficitBalances, January 1, 2004
    
    
    800,000
    
    
    $
    80
    
    
    
    200,000
    
    
    $
    20
    
    
    
    20,950,118
    
    
    $
    2,095
    
    
    $
    55,597,946
    
    
    $
    (62,843,557
    )
    
    
    
    
    
    $
    (11,906
    )
    
    $
    (7,255,322
    )Conversion of 7% senior convertible
debentures to common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,121,947
    
    
    
    212
    
    
    
    1,944,518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,944,730Sale of common stock, employee
stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,545
    
    
    
    2
    
    
    
    9,334
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,336Exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,332
    
    
    
    1
    
    
    
    1,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,066Value of options and warrants issued
for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,798
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,798Warrants issued to converting
debenture holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,993Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,845,372
    )
    
    
    
    
    
    
    
    
    
    
    (2,845,372
    )Balances, December 31, 2004
    
    
    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
    
    
    
    10,515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,520Conversion of Preferred D
shares to common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,739,458
    
    
    
    274
    
    
    
    1,992,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,992,498Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,056,266
    )
    
    
    
    
    
    
    
    
    
    
    (3,056,266
    )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
    )
  22




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VIEWCAST.COM,
INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,2004
    
    
    2005Operating activities:Net loss from continuing operations
    
    $
    (2,781,372
    )
    
    $
    (2,714,515
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Loss from discontinued operations
    
    
    (64,000
    )
    
    
    (341,751
    )Bad debt expense
    
    
    (58,191
    )
    
    
    20,722Depreciation of fixed assets
    
    
    130,667
    
    
    
    128,857Amortization of software development costs
    
    
    
    
    
    
    61,465Non-cash charges to interest expense
    
    
    87,528
    
    
    
    Non-cash debt conversion expense
    
    
    1,233,723
    
    
    
    485,798Gain (loss) on disposition of property and equipment
    
    
    (137
    )
    
    
    121Non-cash consulting fees exchanged for options, warrants
and common stock
    
    
    3,797
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (90,302
    )
    
    
    (280,095
    )Inventories
    
    
    (65,344
    )
    
    
    (454,102
    )Prepaid expenses
    
    
    (23,652
    )
    
    
    33,912Deferred charges
    
    
    23,177
    
    
    
    Deposits
    
    
    4,328
    
    
    
    14,485Accounts payable
    
    
    (155,645
    )
    
    
    (108,011
    )Accrued expenses and stockholder accrued interest
    
    
    649,807
    
    
    
    883,566Deferred revenue
    
    
    (54,668
    )
    
    
    Net cash used in continuing operations
    
    
    (1,160,284
    )
    
    
    (2,269,548
    )Net cash provided by discontinued operations
    
    
    556,107
    
    
    
    238,138Net cash used in operating activities
    
    
    (604,177
    )
    
    
    (2,031,410
    )Investing activities:Capitalized software development costs
    
    
    (184,396
    )
    
    
    Purchase of property and equipment
    
    
    (147,987
    )
    
    
    (189,996
    )Net cash used in continuing operations
    
    
    (332,383
    )
    
    
    (189,996
    )Net cash provided by (used in)
discontinued operations
    
    
    (197,124
    )
    
    
    3,270,723Net cash provided by (used in)
investing activities
    
    
    (529,507
    )
    
    
    3,080,727Financing activities:Net proceeds from stockholder line of credit
    
    
    1,600,000
    
    
    
    450,000Proceeds from sale of common stock and warrant
    
    
    9,337
    
    
    
    10,520Proceeds from exercise of employee stock options
    
    
    1,066
    
    
    
    Repayments of long-term debt
    
    
    (62,404
    )
    
    
    (6,262
    )Net cash provided by
continuing operations
    
    
    1,547,999
    
    
    
    454,258Net cash used in
discontinued operations
    
    
    (327,569
    )
    
    
    (302,823
    )Net cash provided
by financing activities
    
    
    1,220,430
    
    
    
    151,435Net increase in cash and cash equivalents
    
    
    86,746
    
    
    
    1,200,752Cash and cash equivalents, beginning of period
    
    
    160,375
    
    
    
    247,121Cash and cash equivalents, end of period
    
    $
    247,121
    
    
    $
    1,447,873Supplemental cash flow information:Cash paid for interest
    
    $
    37,846
    
    
    $
    3,596Supplemental non-cash flow operating activities:Purchase of property and equipment with long-term debt
    
    $
    21,745
    
    
    $
    Conversion of 7% convertible debentures to common stock
    
    $
    870,000
    
    
    $
    Conversion of Series D redeemable convertible preferred
stock to common stock
    
    $
    
    
    
    $
    1,506,700
  23




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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
  24




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
   Year ended December 31,2004
    
    
    2005Beginning balance
    
    $
    72,032
    
    
    $
    13,382Bad debt expense
    
    
    (58,191
    )
    
    
    20,722Uncollectible accounts written
off, net of recoveries
    
    
    (459
    )
    
    
    (20,933
    )Ending balance
    
    $
    13,382
    
    
    $
    13,171
 Inventories
   Property and Equipment
  Software Development Costs
  December 31, 2004
    
    December 31, 2005Average
    
    Gross
    
    
    
    
    
    Grosslife
    
    carrying
    
    Accumulated
    
    carrying
    
    Accumulated(years)
    
    amount
    
    amortization
    
    amount
    
    amortizationCapitalized Software
    
    
    3
    
    
    $
    851,635
    
    
    $
    667,239
    
    
    $
    851,635
    
    
    $
    728,704
 25




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  2006
    
    $
    61,4652007
    
    
    61,466$
    122,931
 Impairment of Long-Lived Assets
  Revenue Recognition
   Net Loss Per Share
   For the Year Ended December 31,2004
    
    2005Stock options
    
    
    3,117,095
    
    
    
    3,015,150Public and private warrants
    
    
    4,575,094
    
    
    
    4,782,082Convertible debentures
    
    
    76,000
    
    
    
    Convertible preferred stock  Series B
    
    
    2,206,896
    
    
    
    2,206,896Convertible preferred stock  Series C
    
    
    3,333,333
    
    
    
    3,333,333Redeemable convertible preferred Stock  Series D
    
    
    1,004,466
    
    
    
    217,37314,312,884
    
    
    
    13,554,834
 Deferred Charges
  26




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 Warranty Reserves
   Year ended December 31,2004
    
    
    2005Beginning balance
    
    $
    60,260
    
    
    $
    57,744Charged to expense
    
    
    48,931
    
    
    
    48,279Usage
    
    
    (51,447
    )
    
    
    (48,356
    )Ending balance
    
    $
    57,744
    
    
    $
    57,667
 Risks and Uncertainties
  Customers exceeding 10% ofCustomers Exceeding 10%
    
    Year - End Accounts Receivableof Net Sales
    
    BalanceNumber of
    
    Combined
    
    Number of
    
    CombinedYear
    
    Customers
    
    Percent
    
    Customers
    
    Percent2004
    
    
    2
    
    
    
    27
    %
    
    
    2
    
    
    
    33
    %2005
    
    
    0
    
    
    
    0
    %
    
    
    2
    
    
    
    22
    %
   Use of Estimates
  27




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 Income Taxes
  Advertising Costs
  Fair Value of Financial Instruments
  Stock-Based Compensation
    2004
    
    2005Risk-free interest rate
    
    
    3.87
    %
    
    
    4.15
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Volatility factor of the
market price of the
Companys common stock
    
    
    111
    %
    
    
    108
    %Expected life of the options
(years)
    
    
    4.8
    
    
    
    4.5
 28




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  2004
    
    
    2005Net loss applicable to common
stockholders:
    
    $
    (2,845,372
    )
    
    $
    (3,056,266
    )As reportedDeduct total stock-based compensation
under fair value based method for all
awards
    
    
    (1,255,882
    )
    
    
    (569,478
    )Pro forma
    
    $
    (4,101,254
    )
    
    $
    (3,625,744
    )Net loss per share:As reported
    
    $
    (0.17
    )
    
    $
    (0.16
    )Pro forma  basic and diluted
    
    $
    (0.23
    )
    
    $
    (0.15
    )
 Share-Based Payment,
 Stock-Based Compensation
 Reclassifications of Prior Year Amounts
  3. Inventories
  Year ended December 31,2004
    
    
    2005Purchased materials
    
    $
    491,922
    
    
    $
    775,232Finished goods
    
    
    1,065,467
    
    
    
    1,236,259$
    1,557,389
    
    
    $
    2,011,491
 29




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 4. Discontinued Operations
   Period JanuaryYear ended
    
    
    1 to NovemberDecember 31,
    
    
    18,2004
    
    
    2005Net sales
    
    $
    11,087,880
    
    
    $
    10,424,717Cost of sales
    
    
    8,576,500
    
    
    
    8,030,885Gross profit
    
    
    2,511,380
    
    
    
    2,393,832Operating expenses
    
    
    2,543,137
    
    
    
    2,236,181Operating income (loss)
    
    
    (31,757
    )
    
    
    157,651Other expense:
    
    
    (32,243
    )
    
    
    (485,543
    )Net loss before taxes
    
    
    (64,000
    )
    
    
    (327,892
    )Income tax expense
    
    
    
    
    
    
    (13,859
    )Net (loss)
    
    $
    (64,000
    )
    
    $
    (341,751
    )
  December 31,2004Cash and cash equivalents
    
    $
    125,054Accounts receivable, less allowance for doubtful accounts
    
    
    2,475,217Inventories
    
    
    62,889Prepaid expenses
    
    
    27,275Property and equipment, net
    
    
    1,074,905Goodwill
    
    
    1,041,430Customer contracts, net
    
    
    241,389Deposits
    
    
    65,619Accounts payable
    
    
    (462,876
    )Accrued expenses
    
    
    (484,238
    )Deferred revenue
    
    
    (630,230
    )Short-term debt, other
    
    
    (313,170
    )Current maturities of long-term debt
    
    
    (5,743
    )Long-term debt less current maturities
    
    
    (11,483
    )Total net assets of discontinued operations
    
    $
    3,206,038
 30




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 5. Property and Equipment
  EstimatedUseful Life
    
    
    Year ended December 31,(Years)
    
    
    2004
    
    
    2005Computer equipment
    
    
    3 to 7
    
    
    $
    1,070,307
    
    
    $
    1,185,281Software
    
    
    3 to 5
    
    
    
    592,188
    
    
    
    625,835Leasehold improvements
    
    
    1 to 5
    
    
    
    23,232
    
    
    
    23,232Office furniture and equipment
    
    
    5 to 7
    
    
    
    656,059
    
    
    
    658,5622,341,786
    
    
    
    2,492,910Less accumulated depreciation and
amortization
    
    
    
    
    
    
    (2,117,976
    )
    
    
    (2,208,082
    )$
    223,810
    
    
    $
    284,828
 6. Accrued Expenses
  Year ended December 31,2004
    
    
    2005Stockholder accrued interest (short-term)
    
    $
    400,040
    
    
    $
    758,086Accrued compensation
    
    
    189,124
    
    
    
    126,026Accrued warranty
    
    
    57,744
    
    
    
    57,667Accrued inventory purchases
    
    
    45,960
    
    
    
    71,162Accrued taxes and other
    
    
    253,950
    
    
    
    230,436$
    946,818
    
    
    $
    1,243,377
 7. Stockholder Line of Credit and Other Short-term Debt
 Stockholder Line of Credit
   31




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
    December 31, 2004
    
    December 31, 2005$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 plus 3.0% (6.75% and 7.25% at
December 31, 2004 and December 31, 2005, respectively) or 9.5%
fixed rate, due June 2006.
    
    $
    2,900,000
    
    
    $
    3,350,000$
    2,900,000
    
    
    $
    3,350,000
 8. Long-term Debt
 Stockholder Term Note
   December 31, 2004
    
    
    December 31, 2005Stockholder term note with an entity controlled by a principal
stockholder of the Company, collateralized by all assets of
Borrower, with interest due at a rate per annum equal to the
lesser of prime plus 3.0% (6.75% and 7.25% at December 31,
2004 and December 31, 2005, respectively) or 9.5% fixed rate,
due December 31, 2007 (See Note 7).
    
    $
    6,909,582
    
    
    $
    6,909,582Other long-term debt
    
    
    17,597
    
    
    
    11,335Total long-term debt
    
    
    6,927,179
    
    
    
    6,920,917Less current maturities
    
    
    (121,432
    )
    
    
    (142,389
    )Total long-term debt less current maturities
    
    $
    6,805,747
    
    
    $
    6,778,528
 32




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Long - Term
    
    
    StockholderNotes
    
    
    AccruedYear ended December 31:
    
    Payable
    
    
    Interest2006
    
    $
    142,380
    
    
    $
    263,8082007
    
    
    6,778,037
    
    
    
    2,213,7612008
    
    
    500
    
    
    
    Total
    
    $
    6,920,917
    
    
    $
    2,477,569
  9. Series D Redeemable Convertible Preferred Stock
  10. Conversion of Convertible Debt to Equity
   33




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the 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
    )
 11. Income Taxes
  34




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  Year ended December 31,2004
    
    
    2005Deferred tax assets:Net operating loss carryforwards
    
    $
    23,052,000
    
    
    $
    25,388,000Revenue deferred for financial statements,
recognized for tax
    
    
    672,000
    
    
    
    9,000Excess of tax over financial statement basis of
patent
    
    
    11,000
    
    
    
    8,000Accruals deductible for tax purposes when paid
    
    
    386,000
    
    
    
    138,000Excess of tax over financial statement basis of
property and equipment
    
    
    219,000
    
    
    
    203,000Excess of tax over financial statement basis of
software development costs
    
    
    688,000
    
    
    
    493,000Total deferred tax assets
    
    
    25,028,000
    
    
    
    26,239,000Deferred tax liabilities:Excess of financial statement over tax basis of goodwill and customer contracts
    
    
    (57,000
    )
    
    
    Net deferred tax assets
    
    
    24,971,000
    
    
    
    26,239,000Less: valuation allowance
    
    
    (24,971,000
    )
    
    
    (26,239,000
    )Net deferred taxes
    
    $
    
    
    
    $
    
  Year ended December 31,2004
    
    
    2005U.S. federal statutory rate applied to pretax loss
    
    $
    (967,000
    )
    
    $
    (1,025,000
    )State tax net of federal benefit
    
    
    
    
    
    
    19,000Change in valuation allowance
    
    
    927,000
    
    
    
    1,017,000Other
    
    
    40,000
    
    
    
    17,000$
    
    
    
    $
    28,000
   YearEnded
    
    Amount2009
    
    $
    2,700,0002010
    
    
    4,700,0002011
    
    
    4,000,0002012
    
    
    5,400,0002018
    
    
    7,700,0002019
    
    
    13,200,0002020
    
    
    8,100,0002021
    
    
    8,500,0002022
    
    
    4,400,0002023
    
    
    2,700,0002024
    
    
    3,600,0002025
    
    
    3,800,000
 35




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  12. Stockholders Deficit
 Preferred Stock
     Common Stock
    Stock Option Plans
  36




---



##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
       Stock OptionsWeighted-AverageNumber
    
    
    Price Per
    
    
    Exercise Priceof Shares
    
    
    Share
    
    
    Per ShareOutstanding at January 1, 2004
    
    
    3,416,561
    
    
    $
    0.20 - $9.00
    
    
    $
    2.55Granted
    
    
    103,250
    
    
    
    0.39 - 0.49
    
    
    
    0.41Exercised
    
    
    (4,332
    )
    
    
    0.20 - 0.28
    
    
    
    0.25Canceled/forfeited
    
    
    (696,313
    )
    
    
    0.20 - 5.95
    
    
    
    2.66Outstanding at December 31, 2004
    
    
    2,819,166
    
    
    $
    0.20 - $9.00
    
    
    $
    2.45Granted
    
    
    578,000
    
    
    
    0.22 - 0.41
    
    
    
    0.28Exercised
    
    
    Canceled/forfeited
    
    
    (272,524
    )
    
    
    0.20 - 6.59
    
    
    
    2.19Outstanding at December 31, 2005
    
    
    3,124,642
    
    
    $
    0.20 - $9.00
    
    
    $
    2.07
 37




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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
    
    2005
    
    
    Life
    
    
    Price
    
    
    2005
    
    
    Price$
    0.01 - 1.00
    
    
    1,551,693
    
    
    
    5.9
    
    
    $
    0.37
    
    
    
    1,495,965
    
    
    $
    0.371.01 - 2.00
    
    
    596,399
    
    
    
    5.0
    
    
    
    1.15
    
    
    
    596,149
    
    
    
    1.152.01 - 3.00
    
    
    162,200
    
    
    
    3.4
    
    
    
    2.61
    
    
    
    162,200
    
    
    
    2.613.01 - 4.00
    
    
    177,000
    
    
    
    1.5
    
    
    
    3.80
    
    
    
    177,000
    
    
    
    3.804.01 - 5.00
    
    
    67,500
    
    
    
    2.6
    
    
    
    4.37
    
    
    
    67,500
    
    
    
    4.375.01 - 6.00
    
    
    142,850
    
    
    
    3.3
    
    
    
    5.43
    
    
    
    142,850
    
    
    
    5.436.01 - 7.00
    
    
    2,000
    
    
    
    3.3
    
    
    
    7.00
    
    
    
    2,000
    
    
    
    7.007.01 - 8.00
    
    
    410,000
    
    
    
    3.7
    
    
    
    7.10
    
    
    
    260,000
    
    
    
    7.108.01 - 9.00
    
    
    15,000
    
    
    
    3.3
    
    
    
    9.00
    
    
    
    15,000
    
    
    
    9.003,124,642
    
    
    
    4.9
    
    
    $
    2.07
    
    
    
    2,918,664
    
    
    $
    1.85
 Employee Stock Purchase Plan
   Warrants
  38




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
  WarrantsWeighted-Number
    
    
    Exercise
    
    
    Averageof Warrants
    
    
    Price
    
    
    Exercise PriceOutstanding and exercisable
at January 2004
    
    
    3,922,012
    
    
    $
    1.00 - 5.00
    
    
    $
    1.09Granted
    
    
    650,970
    
    
    
    0.45
    
    
    
    0.45Exercised
    
    
    
    
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding and exercisable
at December 2004
    
    
    4,572,982
    
    
    
    0.45 - 5.00
    
    
    
    1.00Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Cancelled
    
    
    (89,000
    )
    
    
    5.00
    
    
    
    5.00Outstanding and exercisable
at December 2005
    
    
    4,483,982
    
    
    $
    0.45 - 1.00
    
    
    $
    0.85
     13. Employee Benefit Plan
  39




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##### Table of Contents



ViewCast.com, Inc.
Notes to the Consolidated Financial Statements  Continued
 14. Commitments and Contingencies
  OperatingLeasesYear ended December 31:2006
    
    $
    265,2742007
    
    
    249,2072008
    
    
    236,6352009
    
    
    207,2212010
    
    
    204,5472011
    
    
    68,182Total minimum lease payments
    
    $
    1,231,066
  15. Related Party Transactions and Subsequent Events
     40




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##### Table of Contents



Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
   
 Item 8B. Other Information
  41




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##### Table of Contents



PART III
 
 Item 9. Directors, Executive Officers, Promoters, and Control Persons; Compliance with Section
16(a) of the Exchange Act
 Directors
  Name
    
    Age
    
    Director Since
    
    Office Held with CompanyH. T. Ardinger
    
    
    81
    
    
    
    1999
    
    
    Chairman of the BoardJoseph Autem
    
    
    48
    
    
    
    1999
    
    
    DirectorGeorge C. Platt
    
    
    65
    
    
    
    1999
    
    
    Director and Chief Executive Officer
 H.T. Ardinger
 Joseph Autem
 George C. Platt
 42




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##### Table of Contents



Executive Officers
  Name
    
    Age
    
    
    Office Held with CompanyGeorge C. Platt
    
    
    65
    
    
    Chief Executive OfficerLaurie L. Latham
    
    
    49
    
    
    Chief Financial Officer and Senior
Vice President of Finance and AdministrationDavid T. Stoner
    
    
    49
    
    
    Chief Operating Officer and PresidentHorace S. Irwin
    
    
    64
    
    
    Senior Vice President of Marketing and Business DevelopmentRobert Greenberg
    
    
    47
    
    
    Vice President of Marketing
 George C. Platts
 Laurie L. Latham
 David T. Stoner
 Horace S. Irwin
 Robert Greenberg
 43




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##### Table of Contents



Meetings of the Board of Directors and Committees
   Compensation Committee.
  Audit Committee.
   Nomination of Directors
   44




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##### Table of Contents



Code of Ethics
   Shareholder Communications with the Board of Directors.
 Compliance with Section 16(a) of the Securities Exchange Act of 1934
   
 Item 10. Executive Compensation
 Director Compensation
  45




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##### Table of Contents



Summary Compensation Table
  Summary Compensation Table
 Long TermCompensation -SecuritiesAnnual
    
    Annual
    
    UnderlyingCompensation
    
    Compensation
    
    OptionsPrincipal Position
    
    Fiscal Year
    
    Salary ($)
    
    Bonus ($)
    
    (in shares)George C. Platt
    
    
    2005
    
    
    
    190,833
    
    
    
    
    
    
    
    80,000Chief Executive Officer
    
    
    2004
    
    
    
    204,000
    
    
    
    
    
    
    
    and President
    
    
    2003
    
    
    
    216,000
    
    
    
    
    
    
    
    Laurie L. Latham
    
    
    2005
    
    
    
    145,167
    
    
    
    
    
    
    
    50,000Chief Financial Officer
    
    
    2004
    
    
    
    140,000
    
    
    
    
    
    
    
    and Sr. Vice-President
    
    
    2003
    
    
    
    143,750
    
    
    
    
    
    
    
    David T. Stoner
    
    
    2005
    
    
    
    147,167
    
    
    
    
    
    
    
    50,000Chief Operations Officer
    
    
    2004
    
    
    
    140,000
    
    
    
    
    
    
    
    and President
    
    
    2003
    
    
    
    139,100
    
    
    
    
    
    
    
    Horace S. Irwin
    
    
    2005
    
    
    
    130,200
    
    
    
    
    
    
    
    20,000Sr. Vice President of Sales
    
    
    2004
    (1)
    
    
    70,000
    
    
    
    
    
    
    
    45,000and Business DevelopmentRobert Greenberg
    
    
    2005
    (2)
    
    
    71,625
    
    
    
    
    
    
    
    45,000Vice President of
MarketingJohn DeVito
    
    
    2005
    (3)
    
    
    158,854
    
    
    
    17,000
    
    
    
    President of DCi
    
    
    2004
    
    
    
    172,092
    
    
    
    34,815
    
    
    
    2003
    
    
    
    172,092
    
    
    
    
    
    
    
    
 
 (1)
    
    Mr. Irwin assumed his current duties with ViewCast in May
2005 and joined ViewCast in June 2004.(2)
    
    Mr. Greenberg assumed his duties with ViewCast in May 2005.(3)
    
    Mr. DeVito resigned in November 2005. 46




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##### Table of Contents



Option Grants in Last Fiscal Year
  Option Grants in Last Fiscal Year
 % of TotalOptionsGranted ToEmployees
    
    Exercise orOptions
    
    in Fiscal
    
    Base Price
    
    ExpirationName
    
    Granted
    
    Year
    
    per Share
    
    DateGeorge C. Platt
    
    
    80,000
    (1)
    
    
    14.60
    
    
    $
    0.285
    
    
    
    04/19/15Laurie L. Latham
    
    
    50,000
    (1)
    
    
    9.12
    
    
    
    0.285
    
    
    
    04/19/15David T. Stoner
    
    
    50,000
    (1)
    
    
    9.12
    
    
    
    0.285
    
    
    
    04/19/15Horace S. Irwin
    
    
    20,000
    (1)
    
    
    3.65
    
    
    
    0.285
    
    
    
    04/19/15Robert Greenberg
    
    
    45,000
    (2)
    
    
    8.21
    
    
    
    0.220
    
    
    
    12/22/15
 
 (1)
    
    The option granted during 2005 to the named executive vests with one third on July 31, 2005, one-third of October 31, 2005 and the
remainder on December 31, 2005.(2)
    
    The options granted during 2005 to the named executive vests 50% on 12/31/2005, and upon achieving the performance criteria of pre-tax
net income equal to or greater than $1,500,000, the remainder vests
1/24th each month beginning on 1/31/2007 over thirty-six months. Year -End Option Values
  Fiscal Year-End Option Values
 Number of Shares
    
    Value of UnexercisedUnderlying Unexercised
    
    In-the Money OptionsOptions at December 31, 2005
    
    at December 31, 2005(1)Name
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableGeorge C. Platt
    
    
    650,000
    
    
    
    150,000
    
    
    $
    
    
    
    $
    Laurie L. Latham
    
    
    320,000
    
    
    
    
    
    
    
    
    
    
    
    David T. Stoner
    
    
    340,000
    
    
    
    
    
    
    
    
    
    
    
    Horace S. Irwin
    
    
    65,000
    
    
    
    
    
    
    
    
    
    
    
    Robert Greenberg
    
    
    22,500
    
    
    
    22,500
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents the difference between the exercise price of the outstanding options and the
fair market value of the Common Stock on December 31, 2005 of $0.22 per share if the fair
market price per share exceeds the exercise price.  2005 Stock Incentive Plan
  47




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##### Table of Contents



Employee Stock Purchase Plan
   48




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##### Table of Contents



Employment Agreements
 (1)
   
 (1)
    
    Represents Mr. Platts options consist of five separate option grants that become
exercisable or vest as follows provided Mr. Platt is employed by ViewCast as of the applicable
vesting date: (i)
    
    an option for 50,000 shares that vested as of September 17, 2000;(ii)
    
    an option for 200,000 shares that vested in equal installments of 4,166 shares per month beginning in October, 2000;(iii)
    
    an option for 50,000 shares that will vest immediately on the date following three consecutive calendar quarters of
profitability
as defined under generally accepted accounting principles;(iv)
    
    an option for 50,000 shares, of which 16,666 shares of such option will vest when the average closing price of
Common Stock,
for a twenty out of thirty consecutive trading day period, has doubled in price from the exercise price of the
option, and of which
33,334 shares of such option will vest in equal installments of 1,388 share per month thereafter;(v)
    
    an option for 50,000 shares, of which 16,666 shares of such option will vest when the average closing price of
Common Stock,
for a twenty out of thirty consecutive trading day period, has tripled in price from the exercise price of the
option, and of which
33,334 shares of such option will vest in equal installment of 1,388 shares per month thereafter.
  49




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##### Table of Contents



Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
  Amount and Nature
    
    Percentage ofName and Address
    
    of
    
    Outstanding Sharesof Beneficial Owner
    
    Beneficial Ownership
    
    Owned (1),(2)H.T. ARDINGER, JR
    
    
    8,041,889
    (3)
    
    
    24.61990 Lakepointe Dr.
Lewisville, TX 75057GEORGE C. PLATT
    
    
    790,694
    (4)
    
    
    2.43701 W. Plano Parkway, Suite 300
Plano, TX 75075LAURIE L. LATHAM
    
    
    351,892
    (5)
    
    
    1.13701 W. Plano Parkway, Suite 300
Plano, TX 75075HORACE S. IRWIN
    
    
    67,092
    (6)
    
    
    *3701 W. Plano Parkway, Suite 300
Plano, TX 75075DAVID T. STONER
    
    
    350,994
    (7)
    
    
    1.13701 W. Plano Parkway, Suite 300
Plano, TX 75075JOSEPH AUTEM
    
    
    122,366
    (8)
    
    
    *3701 W. Plano Parkway, Suite 300
Plano, TX 75075ROBERT GREENBERG
    
    
    27,499
    (9)
    
    
    *3701 W. Plano Parkway, Suite 300
Plano, TX 75075All named executive officers and
    
    
    9,752,426
    
    
    
    29.8directors as a group
(seven (7) persons)
 
 *
    
    Less than one percent (1%)(1)
    
    A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from
March 31, 2006 upon the exercise of warrants or options. Each beneficial owners percentage ownership is determined
by assuming that options or warrants that are held by such person (but not those held by any other person) and which
are exercisable within 60 days from March 31, 2006 have been exercised. Unless otherwise indicated, we believe that
all persons named in the table have sole voting and investment power with respect to all shares of Common Stock
beneficially owned by them.(2)
    
    Based on a total of 25,627,959 shares issued and outstanding excluding treasury stock plus, for each person listed, any
Common Stock that person has the right to acquire within 60 days from March 31, 2006 pursuant to options, warrants,
conversion privileges, etc.(3)
    
    Includes (i) 189,835 shares owned by Mr. Ardingers wife, (ii) 1,096,000 shares of Common Stock reserved for
issuance upon the exercise of outstanding warrants at $0.275 per share, (iii) 1,103,448 shares of Common Stock
reserved for issuance upon the conversion of $4,000,000 of Series B Convertible Preferred Stock to Common Stock at
$3.625 per share, (iv) 3,333,333 shares of Common Stock reserved for issuance upon the conversion of $2,000,000 of
Series C Convertible Preferred Stock to Common Stock at $0.60 per share, and (v) the following shares that are
exercisable under the 1995 Directors Option Plan upon the exercise of options: 15,000 shares exercisable at $9.00 per 50




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##### Table of Contents



share, 10,000 shares exercisable at $2.75 per share, 10,000 shares exercisable at $0.8305
per share, 9,166 shares exercisable at $0.29 per share, 10,000 shares exercisable at
$0.6765 per share, and 10,000 shares exercisable at $0.407 per share.(4)
    
    Includes the following shares issuable under the 1995 Option Plan upon exercise of
options (i) 250,000 shares exercisable at $7.09 per share, (ii) 50,000 shares exercisable
at $2.50 per share, (iii) 200,000 shares exercisable at $1.094 per share, (iv) 70,000
shares exercisable at $0.485 per share and (v) 80,000 shares exercisable at $0.285 per
share.(5)
    
    Includes the following shares issuable under the 1995 Option Plan upon exercise of
options (i) 100,000 shares exercisable at $5.50 per share, (ii) 10,000 shares exercisable
at $2.50 per share, (iii) 100,000 shares exercisable at $1.094 per share, (iv) 60,000
shares exercisable at $0.485 per share and (v) 50,000 shares exercisable at $0.285 per
share.(6)
    
    Includes the following shares issuable under the 1995 Option Plan upon exercise of
options (i) 45,000 shares exercisable at $0.39 per share and (ii) 20,000 shares
exercisable at $0.285 per share.(7)
    
    Includes the following shares issuable under the 1995 Option Plan upon exercise of
options (i) 100,000 shares of exercisable at $4.00 per share, (ii) 5,000 shares
exercisable at $2.0625 per share, (iii) 15,000 exercisable at $5.5005 per share, (iv)
10,000 shares exercisable at $2.50 per share, (v) 100,000 shares exercisable at $1.094 per
share, (vi) 60,000 shares exercisable at $0.485 per share and (v) 50,000 shares
exercisable at $0.285 per share.(8)
    
    Includes the following shares issuable under the 1995 Directors Option Plan upon
exercise of options (i) 15,000 shares exercisable at $3.1250 per share, (ii) 10,000 shares
exercisable at $7.1405 per share, (iii) 10,000 shares exercisable at $2.50 per share, (iv)
10,000 shares exercisable at $0.755 per share, (v) 9,166 shares exercisable at $0.26 per
share, (vi) 10,000 shares exercisable at $0.615 per share, (vii) 10,000 shares exercisable
at $0.37 per share; and includes 40,000 shares issuable under the 1995 Option Plan upon
exercise of options at $3.6250 per share.(9)
    
    Includes the following shares issuable under the 2005 Stock Incentive Plan upon
exercise of options (i) 22,500 shares exercisable at $0.22 per share. 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
    
    
    3,124,642
    
    
    $
    2.07
    
    
    
    2,979,752Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,124,642
    
    
    $
    2.07
    
    
    
    2,979,752
 51




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##### Table of Contents



Item 12. Certain Relationships and Related Transactions
     
 Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
 (a)
    
    The following consolidated financial statements required by this item are included in Part II Item 8 of this
report:
 Report of Independent Registered Public Accounting Firm
    
    
    19Consolidated Balance Sheets as of December 31, 2004 and 2005
    
    
    20Consolidated Statements of Operations for the years ended
December 31, 2004 and 2005
    
    
    21Consolidated Statements of Stockholders Deficit for the
years December 31, 2004 and 2005
    
    
    22Consolidated Statements of Cash Flows for the years ended
December 31, 2004 and 2005
    
    
    23Notes to Consolidated Financial Statements
    
    
    24
 52




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##### Table of Contents



(b)
    
    Listing of Exhibits:
 EXHIBIT INDEX
 ExhibitPageNo.
    
    Description of Exhibit2
    
    Agreement and Plan of Merger and Reorganization (1)3(a)
    
    Certificate of Incorporation (1)3(b)
    
    Amendment to Certificate of Incorporation (1)3(c)
    
    Restated By-Laws (6)3(d)
    
    Certificate of Designations of Series B Convertible Preferred Stock (3)3(e)
    
    Certificate of Designations of Series C Convertible Preferred Stock (9)3.1
    
    Certificate of Designation of Series D Redeemable Convertible Preferred Stock of
ViewCast.com, Inc. dated as of October 10, 2002. (12)4(a)
    
    Form of Common Stock Certificate (1)4(b)
    
    Form of Warrant Certificate (1)4(c)
    
    Form of Warrant Agreement between ViewCast and Continental Stock Transfer & Trust
Company (1)4(d)
    
    Form of Representatives Warrant Agreement (1)4(e)
    
    Form of Trust Indenture  $5,000,000 8% Senior Convertible Notes Due 2002 (2)4(f)
    
    Form of Lead Managers Warrant Agreement (2)4(g)
    
    Notice of Extension of Warrant Expiration Date and Exercise Price Adjustment (8)5(a)
    
    Form of Opinion of Thacher Proffit Wood LLP as to the legality of securities being
registered. (5)9(a)
    
    Voting Trust Agreement between Robert M. Sterling, Jr. and Thomas E. Brown (1)9(b)
    
    Voting Trust Agreement between Robert P. Bernardi and Richard Bernardi (1)9(c)
    
    Form of Lock-Up Agreement (1)9(d)
    
    Lock-Up Agreement with Robert Sterling Trust (1)9(e)
    
    Lock-Up Agreement with Robert Bernardi Trust (1)9(f)
    
    Lock-Up Agreement with Michael Nissenbaum (1)10(a)
    
    Modified Employment Agreement between ViewCast and Glenn A. Norem (1)10(b)
    
    Modified Consulting Agreement between ViewCast and Sterling Capital Group Inc. (1)10(c)
    
    Form of Indemnification Agreement between ViewCast and Executive Officers and
Directors (1)10(d)
    
    1995 Stock Option Plan (1)10(e)
    
    1994 Stock Option Plan (1)
 53




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##### Table of Contents



ExhibitPageNo.
    
    Description of Exhibit10(f)
    
    1993 Viewpoint Stock Plan (1)10(g)
    
    1995 Director Option Plan (1)10(h)
    
    Lease Agreement between ViewCast and Metro Squared, L P(1)10(i)
    
    Employee Stock Purchase Plan (1)10(j)
    
    Licensing Agreement between ViewCast and Boca Research, Inc. (1)10(k)
    
    Agreement between ViewCast and UnisysÔ(1)10(l)
    
    Employment Agreement between ViewCast and Philip M. Colquhoun (1)10(m)
    
    Employment Agreement between ViewCast and William S. Leftwich (1)10(n)
    
    Employment Agreement between ViewCast and David T. Stoner (1)10(o)
    
    Employment Agreement between ViewCast and Neal Page (1)10(p)
    
    Employment Agreement between ViewCast and A. David Boomstein (1)10(r)
    
    Lease between ViewCast and Burlingame Home Office, Inc. (1)10(s)
    
    Lease between ViewCast and Family Funds Partnership (1)10(t)
    
    Agreement between ViewCast and Catalyst Financial Corporation (1)10(u)
    
    Promissory Note by ViewCast payable to Robert Rubin dated September 5, 1996. (1)10(v)
    
    Promissory Note by ViewCast payable to M. Douglas Adkins dated November 15, 1996.
(1)10(w)
    
    Promissory Note by ViewCast payable to H.T. Ardinger dated November 15, 1996. (1)10(x)
    
    Promissory Note by ViewCast payable to H.T. Ardinger dated January 15, 1997. (1)10(y)
    
    Promissory Note by ViewCast payable to Adkins Family Partnership, Ltd. dated January
15, 1997. (1)10(z)
    
    Lease between ViewCast and the Air Force Association. (2)10(aa)
    
    Lease between ViewCast and Airport Boulevard Partners, LLC. (2)10(bb)
    
    Stock Purchase Agreement between ViewCast and Tadeo Holdings, Inc. (4)10(cc)
    
    Working Capital Line of Credit Loan Agreement between ViewCast and the Ardinger
Family Partnership, Ltd. (4)10(dd)
    
    Employee Stock Option Plan
Amendment No. 1 (7)10(ee)
    
    Sublease Agreement between ViewCast and Host Communications, Inc. (9)10(ff)
    
    Employee Stock Option Plan Amendment No. 2 (10)10(gg)
    
    Letter Agreement dated May 6, 2002 between ViewCast and the Ardinger Family
Partnership, Ltd. to exchange available -for-sale securities for a principal reduction in asset
based lending line-of-credit (11)10.1
    
    Asset Purchase Agreement among Delta Computec Inc., NQL Inc. and ViewCast.com,
Inc. dated as of May 31, 2002. (12)10.2
    
    Registration Rights Agreement by and among ViewCast.com, Inc. and Delta Computec
Inc. dated as of October 11, 2002. (12)10.3
    
    Non-Competition Agreement by and among Delta Computec Inc., NQL Inc. and
ViewCast.com, Inc. dated as of October 11, 2002 (12)10.4
    
    Escrow Agreement by and among ViewCast.com, Inc., Delta Computec Inc. and The
 54




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##### Table of Contents



ExhibitPageNo.
    
    Description of ExhibitBank of New York Trust Company of Florida, N.A. dated as of October 11, 2002. (12)10.5
    
    Revolving Loan Agreement between MMAC Communications Corp. and Keltic Financial
Partners, LP dated as of October 11, 2002. (12)10.6
    
    Guaranty of Payment and Performance from ViewCast.com, Inc. to Keltic Financial
Partners, LP dated as of October 11, 2002. (12)10.7
    
    Subordination Agreement by and among Keltic Financial Partners, LP, MMAC
Communication Corp. and ViewCast.com, Inc. dated as of October 11, 2002. (12)10.8
    
    General Security Agreement by and between MMAC Communications Corp. and Keltic
Financial Partners, LP dated as of October 11, 2002. (12)10.9
    
    Revolving Note by MMAC Communications Corp. in favor of Keltic Financial Partners,
LP dated as of October 11, 2002. (12)10.10
    
    Lease by and between Forsgate Industrial Complex and Delta Computec Inc. dated as of
July 23, 1991. (12)10.11
    
    Second Amendment to Lease by and between Forsgate Industrial Complex and Delta
Computec Inc. dated as of March 29, 2001. (12)10.12
    
    Sublease Agreement by and between Delta Computec Inc. and Ameriban Inc. dated as of
December 31, 1997. (12)10.13
    
    Third Amendment to Sublease Agreement and Renewal of Sublease by and between Delta
Computec Inc. and Ameriban, Inc. dated as of January 3, 2001. (12)10.14
    
    Employment Agreement by and between ViewCast Corporation and John DeVito dated as
of August 6, 2002. (12)10.15
    
    Form of Amended and Restated Security Agreement dated October 15, 2003 between
ViewCast.com, Inc. and the Ardinger Family Partnership, LTD. (13)10.16
    
    Form of Amended and Restated Pledge Agreement dated October 15, 2003 between
ViewCast.com, Inc. and the Ardinger Family Partnership, LTD. (13)10.17
    
    Form of First Amendment to the Revolving Loan Agreement dated October 11, 2003
between Delta Computec Inc. and Keltic Financial Partners, LP. (13)10.18
    
    1995 Director Option Plan Amendment No. 2 (15)10.19
    
    Second Amendment dated as of October 10, 2004 to Revolving Loan Agreement between
MMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002. (12)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. (16)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. (16)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. (16)10.23
    
    Notice of Lower Temporary Conversion Price dated March 21, 2005. (17)10.24
    
    Letter Agreement Amending Revolving and Term Credit Facility dated March 22, 2005.
(17)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. (18)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. (19)10.27
    
    Letter Agreement Amending Revolving and Term Credit Facility dated July 22, 2005.
(20)10.28
    
    Eighth Amendment, dated as if October 11, 2005, to Revolving Loan Agreement Between
 55




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##### Table of Contents



ExhibitPageNo.
    
    Description of ExhibitMMAC Communications Corp. and Keltic Financial Partners, LP dated as of October 11,
2002. (21)10.29
    
    Letter Agreement dated November 18, 2005 Releasing John DeVito from obligations relating to
DeVitos confidentiality, non-competition and non-solicitation obligations contained in the
Employment Agreement dated as of August 6, 2002 by and between ViewCast and John DeVito. (22)10.30
    
    Office Lease Agreement between ViewCast and TR Plano Parkway Partners, L.P. (23)10.31
    
    Letter Agreement Amending Revolving and Term Credit Facility dated March 20, 2006. (24)14.1
    
    Code of Ethics (14)21
    
    List of Subsidiaries of ViewCast. (1)23.1
    
    Consent of Grant Thornton 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 10-KSB/A filed April 15, 1998.(3)
    
    Incorporated by reference to Form 8-K filed March 15, 1999.(4)
    
    Incorporated by reference to Form 10-KSB filed March 26, 1999.(5)
    
    Incorporated by reference to Form S-3 filed May 6, 1999.(6)
    
    Incorporated by reference to Form S-3 filed June 30, 2000.(7)
    
    Incorporated by reference to Form S-8 POS filed October 16, 2000.(8)
    
    Incorporated by reference to Form 8-K filed January 23, 2002.(9)
    
    Incorporated by reference to Form 10-K filed April 16, 2002.(10)
    
    Incorporated by reference to Form 8-K filed May 7, 2002.(11)
    
    Incorporated by reference to Form 10-Q filed May 20, 2002.(12)
    
    Incorporated by reference to Form 8-K filed October 25, 2002.(13)
    
    Incorporated by reference to Form 10-Q filed November 14, 2003.(14)
    
    Incorporated by reference to Form 10-KSB filed on
March 30, 2004.(15)
    
    Incorporated by reference to Form S-8 filed September 17, 2004.(16)
    
    Incorporated by reference to Form 8-K filed March 25, 2005.(17)
    
    Incorporated by reference to Form 8-K filed March 25, 2005.(18)
    
    Incorporated by reference to Form 8-K filed April 21, 2005.(19)
    
    Incorporated by reference to Form 8-K filed July 18, 2005.(20)
    
    Incorporated by reference to Form 8-K filed July 27, 2005.(21)
    
    Incorporated by reference to Form 8-K filed October 17, 2005.(22)
    
    Incorporated by reference to Form 8-K filed November 23, 2005.(23)
    
    Incorporated by reference to Form 8-K filed January 17, 2005.(24)
    
    Incorporated by reference to Form 8-K filed March 22, 2006. 56




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  2004
    
    
    2005Audit (1)
    
    $
    98,210
    
    
    $
    113,026Audit Related Fees (2)
    
    
    8,400
    
    
    
    11,260Tax Fees (3)
    
    
    24,175
    
    
    
    29,846All Other Fees
    
    
    735
    
    
    
    2,080TOTAL
    
    $
    131,520
    
    
    $
    156,212
 
 (1)
    
    Consists primarily of quarterly review and annual audit services(2)
    
    Consists primarily of 401(k) audit and Form S-8 review services(3)
    
    Consists primarily of Federal and State tax services  57




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##### Table of Contents



SIGNATURES
  Date
    
    ViewCast.com, Inc.May 1, 2006
    
    By:
    
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer and Senior Vice President of Financeand Administration
  Date
    
    ViewCast.Com, Inc.May 1, 2006
    
    By:
    
    /s/ H.T. Ardinger, Jr.H.T. Ardinger, Jr.Director and Chairman of the BoardMay 1, 2006
    
    By:
    
    /s/ George C. PlattGeorge C. PlattDirector and Chief Executive OfficerPrincipal Executive OfficerMay 1, 2006
    
    By:
    
    /s/ Laurie L. LathamLaurie L. LathamChief Financial Officer and Senior Vice President of Financeand AdministrationPrincipal Accounting OfficerMay 1, 2006
    
    By:
    
    /s/ Joseph W. AutemJoseph W. AutemDirector
 58




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##### Table of Contents



EXHIBIT INDEX FOR DOCUMENTS FILED WITH THIS REPORT
 ExhibitNo.
    
    Description of Exhibit23.1
    
    Consent Of Grant Thornton LLP31.1
    
    Rule 13a-14(a)/15d -14(a) Certifications32.1
    
    Section 1350 Certifications
 59