VIEWCAST COM INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 2001.

or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Transition period from to .
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Commission File Number: 0-29020

VIEWCAST.COM, INC.
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(Exact Name of Registrant as Specified in its Charter)

Delaware 75-2528700
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(State of Incorporation) (I.R.S. Employer Identification No.)

17300 Dallas Parkway, Suite 2000, Dallas, TX 75248
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(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone Number, Including Area Code: 972-488-7200
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Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] or No [ ].

Indicate by a check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ].

The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of March 31, 2002 was $8,481,235. As of
March 31, 2002, there were 20,764,535 shares of the Company's common stock (par
value $0.0001) outstanding.

Documents incorporated by reference: Proxy Statement, Part III.

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

The statements contained in this Report on Form 10-K and in the Annual
Report that are not purely historical statements are forward-looking statements
within the meaning of Section 21E of the Securities and Exchange Act of 1934,
including statements regarding the Company's expectations, beliefs, hopes,
intentions or strategies regarding the future. These forward-looking statements
involve risks and uncertainties. Our actual results may differ materially form
those indicated in the forward-looking statements. Please see "Special Note
Regarding Forward-Looking Statements" and the factors and risks discussed in
other reports filed from time to time with the Securities and Exchange
Commission.

OVERVIEW

ViewCast.com, Inc., doing business as ViewCast Corporation, ("ViewCast")
develops and markets a variety of products and services that enable networked
video communications. We are a leading global provider of enterprise-wide, video
communication products for both real-time and on-demand applications. ViewCast
maximizes the value of video through its products and services: Osprey(R) Video
provides the streaming media industry's de facto standard capture cards,
Niagara(TM) provides integrated hardware and software applications for encoding,
streaming and managing rich media content, Viewpoint VBX(TM) Systems delivers a
wide array of video distribution, gatewaying and conferencing solutions for both
digital and analog enterprise video communication, and ViewCast Online provides
a rich media Application Service Provider ("ASP") solution for Business to
Business ("B2B") and media communication needs. From streaming digital video on
the Internet to distribution of broadcast-quality video throughout the corporate
enterprise, plus comprehensive video software applications, ViewCast provides
the complete range of video communications solutions.

Our customers acquire ViewCast's video products and services to communicate
over a variety of networks for security, education, training, marketing and
sales, customer service, broadcasting, videoconferencing, financial trading, and
to reduce travel and other costs while increasing productivity. Corporations,
media organizations, financial institutions, educational networks, healthcare
facilities, and government agencies utilize our products and services, as do
their customers, vendors and others with whom they may communicate. Our
technologies enable users to encode and archive video content, broadcast video
over networks, deliver video from web sites, provide interactive video
communication (video conferencing), and distribute video within a network. We
market and support our products and services either directly or through
arrangements with leading OEMs, system integrators, resellers and application
developers worldwide.

ViewCast's senior executives are: President and Chief Executive Officer
George C. Platt, Chief Financial Officer Laurie L. Latham, Senior Vice President
of Sales and Marketing Harry E. Bruner, Senior Vice President/General Manager of
Osprey(R) Technologies Division Neal Page, and Vice President of Operations and
Systems David T. Stoner. Our business was established in 1994 and became a
public company in 1997. Our common stock and public warrants currently trade on
the OTC BB under the symbol "VCST-OB" and "VCSTW-OB". We are located in Dallas,
Texas with the Osprey technology office in Morrisville, North Carolina and sales
and support in North America and London, UK.

INDUSTRY BACKGROUND

Low cost and highly versatile networks have propagated throughout the media,
business, government, and education arenas creating an increased desire for
including video applications along with embedded data and voice services. In
many instances the organizations also integrate the new technology into their
new systems, legacy technologies and a variety of networks within and outside of
their enterprises. We believe businesses will increasingly seek manufacturers,
integrators and suppliers of video communications technology to implement
workable solutions for their applications. We believe there will be increased
usage of products and services that enable video communication within the
desired quality, scalability and affordability parameters.

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Video Communications

Video enhances communications over networks, whether it is video streaming,
broadcasting or conferencing. Video is a component of "rich media", which
includes audio, data, animation and other technologies alone or in combination.
To transmit live video images (which may contain over 90 million bits per second
of data) over communications networks, video content must be digitized and
significantly compressed to fit the capacity of these networks (as low as 28,800
bits per second). As video is compressed, redundant data is eliminated and other
data is "blended" with similar data to preserve the essence of the original
image. The available bandwidth of the network is in inverse proportion to the
video compression required. After transmission, the video image is reconstructed
for display at the receiving end. The quality of the reconstructed video image
is a function of the following:

o the sophistication of the video and audio compression algorithms;

o the capacity that networks, global and enterprise, have to transmit
real-time data (bandwidth);

o the power of the video and audio hardware; and

o the speed and power of PCs and workstations (clients).

We believe cost-effective video communication applications and services are
now attainable because the performance, capabilities and cost of these four key
elements continue to improve significantly. Video can utilize existing network
capabilities and equipment but is enhanced with the appropriate matching of
hardware, software and networks for the specific application.

Streaming Video

Streaming video allows both audio and video content to begin playing at the
viewer's computer or work station before the content has been fully received,
therefore a viewer does not have to wait for the full data content file to be
downloaded before hearing and viewing the file. Network streaming video makes it
possible to receive the impact of video communications on most computers. The
advent of the commercial streaming video market has resulted in specialized
businesses that offer substantially improved capabilities to produce, host,
aggregate, and deliver media over the Internet. These broadband and CDN (Content
Delivery Networks) businesses offer services similar to traditional ISPs, but
they optimize their network and services to effectively deliver video to
clients. These providers are enabling the demand for rich media to be fulfilled
from one geographic location to another but often seek partners and providers to
supply technologies to create content or to move content within enterprises or
across multiple network standards.

Enterprise Video, Videoconferencing and Video Distribution

Video in the enterprise, particularly the familiar application of video
conferencing, has been in a state of continuous change since 1995. The problems
impeding adoption have been both technological and cultural. Bringing high
quality, easy-to-use, cost-efficient, real-time, two-way video to conference
rooms and desktops has not been a trivial task. The technology barriers have
made recent advancements in that Internet Protocol (IP) has become a practical
video delivery medium, enterprise video may be extended beyond point to point
video conferencing to multiple or remote sites, video equipment and bandwidth
usage cost has dropped, and ability to support users outside the enterprise. But
the cultural roadblocks - productivity issues, ease of use, familiarity,
"intuitiveness", and spontaneity - have remained largely unaddressed and have
become barriers to mass adoption.

Productivity issues can be addressed by application software but ultimately
the mass adoption of business video will not happen until several specific
barriers are overcome:

o Integrated applications--Business video must be made more compelling for
more applications than just videoconferencing, and seamlessly extended
to Internet users integrating streaming technologies and collaboration
and data sharing application software.

o Ease of use - Using video to communicate must be as simple, intuitive,
and spontaneous as using the telephone.

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o Unified user experience - The user interface needs to be identical
regardless of where the user is located --at the home office, at a field
office, or working at home.

But in the wider context of enterprise video all the barriers identified--
the technology, the quality, the effects of delay and jitter, the ease of use,
implementation complexity, preserving network security, and per-minute
costs--are all addressed when the proper combination of technologies are
applied.

Technologies we already offer at ViewCast.

HOW VIEWCAST TECHNOLOGIES ADDRESS THE INDUSTRY.

The chart below shows video applications and the ViewCast products and services
that address them

ViewCast provides:

o TECHNOLOGY -- Our video technology provides a competitive edge to
differentiate our products from those of our competitors and to increase
our ability to develop customer driven applications.

o PRODUCTS AND APPLICATIONS -- Our products consist of Video Subsystems,
such as capture cards and codecs for encoding, decoding and streaming,
Video Systems, and Application Software for digital and analog video. We
manufacture and distribute worldwide our Osprey(R) capture cards and
codecs, Niagara(TM) Streaming Systems, and Viewpoint VBX(TM) Systems.

o EXPERTISE AND SERVICES -- Our comprehensive video expertise enables us
to assist resellers and customers in identifying their communication
needs and determine appropriate media mechanisms for their business
requirements. Technical services can be provided by our internal
personnel and/or our channel partners if required by our customers.

To successfully implement our products, we provide installation, training,
customer service, integration, customization, and contract development. Our
software and firmware integration modules and drivers allow us to integrate our
products and systems into a variety of video communication standards and
software applications. Our products function on several network standards (some
concurrently) and interface with a variety of equipment and PC systems.

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THE VIEWCAST STRATEGY

Our objective is to be the premier supplier of products and services for
networked video communications. ViewCast has tailored its capture cards and
codecs, its video streaming and enterprise systems and its software offerings to
address the requirements of professional media groups, businesses and
governmental agencies. Key elements of our strategy include:

o LEVERAGE OUR EXPERTISE, DEVELOPMENT AND TECHNOLOGY -- By building
on our core competencies, we maximize our return on development,
increase margins in our product offerings, and address the essential
areas of the growing video communications market. Therefore, we believe
we are positioned to grow organically with the market, build market
share and add revenues to our top line.

o EXTEND PROFESSIONAL PRODUCT OFFERINGS BUILDING ON OUR LEADERSHIP IN
THE VIDEO COMMUNICATIONS MARKET -- We have introduced the Niagara
Streaming Systems and Osprey 2000 MPEG2 capture card and codec product
family in early 2001. The Osprey 540 capture card will be available by
mid-year 2002. Two new software applications, Niagara SCX Remote Encoder
Control and Osprey SimulStream, were introduced late in 2001. Viewpoint
VBX enhancements continue to be made on both the hardware and software
capabilities. We intend to focus our product offerings to add
significant value by continuing to develop competitive hardware products
and application software. We believe our recognized technological
expertise will allow us to lead the industry and capture market share.

o EXPAND AND LEVERAGE OUR STRATEGIC PARTNERSHIPS -- We have
established significant industry partnerships with leaders in the
networked 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 or technology to
our offerings with the potential of future co-development, merger or
acquisition by ViewCast.

o EXPAND SALES, MARKETING, AND CHANNEL DEVELOPMENT EFFORTS --
Critical to our success is an effective worldwide sales, marketing, and
channel partner program. During 2001 we expanded our sales and marketing
efforts, both domestically and internationally, through additional
reseller marketing programs, improved web site communications, focused
lead generation and follow-up programs, developing product/user
databases, building brand identity and increasing channel partners.
During 2002 we must make these efforts more effective to increase sales
as the economy recovers and expand on our successes in the market. Our
strategy is to utilize a combination of our direct sales force,
resellers, system integrators, OEMs and custom application developers to
distribute our product and service solutions.

o IMPLEMENT GROWTH AND STRATEGIC ALTERNATIVES -- We have developed
and are progressing on plans and alternatives to increase the revenue
growth rate and financial resources of the company, including possible
divestitures and acquisitions.

VIEWCAST PRODUCTS

ViewCast offers an array of products that can be used for multiple video
communication applications in the private and public sectors. Our
standards-based and multi-standards based products complement each other and can
be used in a variety of ways to best serve our customers' needs. Our products
also work within the framework of legacy systems, and are flexible enough to
meet present and future needs. The ViewCast product family includes the
Osprey(R) line of video capture cards and codecs, the Niagara(TM) Streaming
Systems, and the Viewpoint VBX(TM) video distribution and switching system.

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VIDEO CAPTURE CARDS AND CODECS

OSPREY VIDEO CAPTURE CARDS, CODECS AND VIDEO PERIPHERAL PRODUCTS. Under the
well-known Osprey(R) brand, we design, develop, manufacture and market
standards-based video and audio capture cards, codecs, and peripheral products
for multimedia applications. During 2000 and 2001, we developed and launched
several new Osprey products that incorporate features to address the high
quality video and audio requirements of professional videographers working
within media, corporate and governmental enterprises. Osprey(R) cards and codecs
are sold worldwide through OEMs, integrators, and a worldwide network of VARs
and distributors and recommended by both Real Networks and Microsoft. This
product line includes:

(1) introduced in 2001 (2) available in 2002

We believe our Osprey(R) capture cards offer unique advantages to
application developers, integrators and OEMs including a cross-platform API
(application programming interface). These cards are in compliance with most
popular industry video standards, and we provide an expert support and
development staff to enable custom development of required applications.

Our Osprey(R) codecs provide the necessary capability to allow the one-way
transmission of live broadcasts over the Internet and intranets. The codecs
capture, digitize, compress, transmit, receive, decompress and display
full-motion video. The codecs are compatible with multiple video and audio
compression standards and can be used for PCs and workstations that are based on
the standard PCI-bus.

VIDEO SYSTEMS

NIAGARA STREAMING SYSTEMS(TM). Our Niagara Streaming Systems series of rack
mount and portable systems provide a powerful, low-cost, turnkey option for the
growing sector of professional media creators, broadcasters and production
professionals seeking state-of-the-art streaming solutions. The Niagara product
line consists of a series of capture/encoding systems and streaming servers plus
accessories and optional software and professional video equipment. Our Niagara
Streaming Systems are designed to simplify the encoding and streaming of video.
This product family offers capabilities that remove deployment barriers. Niagara
Streaming Systems are fully integrated and optimized for media systems with
Osprey(R) video devices and software, encoding management and control software,
media capture software, and video encoding and streaming software.

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Key benefits and features of our Niagara Streaming Systems are:

o Quality and Capacity -- All Niagara capture/encoding systems are
configured with Real Networks RealProducer and Microsoft Windows Media
Encoder. All Niagara streaming servers are configured with Real
Networks RealServer or Microsoft Windows Media Server. Our Osprey(R)
cards provide the optimal quality encoding and the capacity to allow
multiple streams or multiple bit rates from one Niagara server.

o Professional Platforms and Configurations -- Our Niagara product line
includes portable field encoders and rack-mounted systems for the
prosumer, corporate, ISP and media professional. All systems provide a
variety of options for professional audio and video inputs, including
DV and SDI.

o Price Performance -- We believe our Niagara systems deliver quality
performance to our customers at an attractive price point based on the
current market.

o Quick Start to Dependable Streaming -- Niagara systems are fully
optimized and fully configured.

o Exclusive Software Enhancements -- Niagara SCX Remote Encoder Control
Software and Osprey SimulStream software are included on every Niagara
Encoding System to deliver increased productivity, control and value
for encoding.

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o Added Value Bundling -- Value added packages of additional hardware,
software and applications deliver increased versatility and value to
the marketplace including added storage capacity, control, cataloging,
indexing, mixing and special effects options.

Niagara Streaming Systems are distributed directly or through channels to
prosumers and to video professionals in media and entertainment enterprises,
corporations, ISPs, broadband networks, CDNs, educational institutions and
governmental agencies.

VIEWPOINT VBX(TM) SYSTEMS.

Our Viewpoint VBX(TM) enterprise-wide video communication system provides
switching, distribution, conferencing and gateway capabilities between broadband
and narrowband networks and between desktops, conference rooms, and a variety of
video communication resources. The VBX system is a combination of hardware and
software to run and manage the server switch and codec array, plus, for each end
point, a combination of hardware and software to connect and operate the system
for broadcasting, conferencing and monitoring. The Viewpoint VBX product line is
primarily used in controlling, managing, transporting, and bridging on-premise
business video communications. When off-premise participants are included, fully
integrated Viewpoint H.320 and H.323 codecs from ViewCast or many off the shelf
codecs such as Polycom, Vbrick, and others extend the reach of video.

Viewpoint VBX's conferencing, switching, and codec product line has been
applied to manage and deliver multiple simultaneous TV quality video connections
to desktops, conference rooms, boardrooms, classrooms, lobbies, visitor centers,
medical centers, trading floors, securities trading centers, industrial process
control centers, courtrooms, correctional facilities, banks, and airports.
Virtually every conceivable type of video source has at one time or another been
distributed around the office or around the globe by a Viewpoint VBX - video
from VCRs, DVD players, satellite receivers, cable TV receivers, security
cameras, desktop workstation cameras, conference room cameras, and process
control system video. Display devices range from PC workstations, TV sets,
plasma displays, film recorders, streaming encoders, video projectors, and LCD
video.

Whatever the application for video, ViewCast technologies either constitute
the entire end-to-end solution or bring together technologies from multiple
vendors into a common user experience while extending their value to a wider
audience. ViewCast extends the value of investment in videoconference room
systems from market leaders like Polycom and Tandberg to desktops throughout the
Enterprise. Similarly, we extend the value of these systems to users wherever
they need video. As an example, we do not manufacture medical imaging equipment,
but we make it simple and convenient for doctors to share broadcast quality
video from a variety of imaging systems from major manufacturers.

Benefits of the Viewpoint VBX(TM) include:

o OPTIMAL VIDEO QUALITY - The Viewpoint VBX(TM)'s enterprise distribution
of uncompressed, TV-quality video provides full resolution, and frame
rate video to the desktop or other viewing device with no compressions
artifacts or codec latency. Regardless of the application, the highest
possible video quality is maintained. The addition of MPEG-2 codecs to
the Viewpoint VBX(TM) extends the TV quality of local VBX communication
to multiple sites outside the enterprise.

o SCALABILITY - The Viewpoint VBX environment can be within a small
enterprise or expanded into large, global multi-location environment.
Multiple VBX and Codec Array chassis can be interconnected locally or
across various networks scaling to hundreds of sites but operating as
one contiguous video network.

o VARIETY OF APPLICATIONS - The variety of business video applications
that can be implemented by the Viewpoint VBX at the same time. The VBX
environment is a collection of technologies that manage, control, and
deliver a common user experience in a variety of applications including
video conferencing, video/program content distribution, distance
learning, security, surveillance, video resource sharing, and personal
video communication.

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o INTERFACE WITH THE MAJOR VIDEO COMMUNICATIONS STANDARDS INCLUDING
INTERNET. - The server and codec array support a suite of video
communication standards, including H.323 (video over TCP/IP networks),
MPEG-2, and H.320 (video over ISDN). Users can choose a video quality
and price performance level based on the content and purpose of each
call. The H.323 and MPEG-2 codecs take advantage of the investment in
backbone LAN and WAN networks and the Internet to transport video
without incurring per-minute charges for circuit-switched networks such
as ISDN. The Viewpoint VBX(TM) can be integrated with our Niagara(TM)
Streaming System to enable a supported standards-based video
communication system for originating streaming video broadcasts in
either Real Networks or Microsoft formats.

o USER CONVENIENCE - The desktop interface with integrated directory
allows any user to control video connections using familiar, intuitive
methods. Viewpoint VBX(TM) simplifies video communication by integrating
support for multiple applications and multiple standards into a single
platform with a single user interface.

o NEGLIGIBLE LOCAL AREA NETWORK BANDWIDTH IMPACT - Local VBX clients do
not require high bandwidth networks to extend television quality video
to the desktop. Uncompressed, TV-quality video is distributed within the
premise by the Viewpoint VBX(TM) over standard unshielded twisted pair
(UTP) cabling and provides relief to the LAN, using the LAN only for
client-server control.

o BRIDGE BETWEEN LEGACY AND NEW EQUIPMENT - Viewpoint VBX(TM) systems are
compatible with any NTSC or PAL audio and video communication products
from third party vendors. This capability provides a growth path to new
technology.

Software development kits (SDKs) are available for the Viewpoint VBX(TM),
allowing integrators to customize applications to take advantage of the
Viewpoint VBX(TM) capabilities. Viewpoint VBX(TM) systems are suited for the
implementation of video enabled customer service systems, especially for
Internet e-commerce applications. SNMP support is available for all supported
codecs, enabling network managers to monitor and manage the status of VBX
communication resources using standard network management tools.

VIEWCAST ONLINE SERVICE

ViewCast has created a patent-pending process for providing the creation,
management, distribution and viewing of streaming media. Our process is embedded
within the outsourced service models that we have developed to address the
business market. We have developed extensive account management, measurement,
and upload capabilities with a secure database that is optimized for media
management and delivery.

We currently offer this service, called EZStream(SM), in the U.S. from our
Internet site. We believe a new strategic alliance, channel, or licensing
arrangement with a network or ISP company will provide additional growth for
this service.

VIDEO COMMUNICATION APPLICATIONS

Our product family is designed to meet the fundamentals of video-based
applications. Most large entities have a need for many of these video
applications at the same time--and few resources can provide a unified solution.
Video communication applications include:

o Digital archiving of video by encoding at the highest available level to
create a master digital file. Then the archival file can be copied,
manipulated, edited and streamed as needed for current and future
purposes.

o MPEG transcoding - Archived video files are transcoded from MPEG into
popular streaming formats.

o Premise video distribution, where corporate video or broadcast
television channels are delivered to desktops, lobbies, waiting rooms,
visitor centers, or other locations within a facility.

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o Distance learning, an enhanced video conferencing application where an
instructor can interactively control cameras and manage other video
sources to interactively share live and prerecorded content to
participants in distant locations.

o "Personal Security"-- security / surveillance video is captured and
distributed locally and beyond the monitoring station to individuals at
their desks for informational, collaborative, or personal safety
purposes.

o High-definition video collaboration where broadcast quality video is
essential--telemedicine, courtroom arraignment, etc.

o Internet streamed video, where corporate messages and promotional videos
are shared one way to viewers on the Internet.

o Media, news and entertainment broadcasting of live and archived video
within the enterprise and delivered to Internet users.

o Video On Demand (VOD) allows stored-video content to be played back to a
user's system in real-time. This entails compressing a video "clip" and
storing it on a server that is available to the user through the
relevant web page.

o Videoconferencing - Traditional video conferencing between video enabled
conference rooms. Desktop video conferencing where some or all
participants remain at their PC workstations. Multi-party video
conferencing supporting multiple protocols over multipoint bridges.

o Streaming Video Gateway -- Our Viewpoint VBX(TM) and Niagara(TM)
Streaming encoder systems can be combined to deliver solutions for
origination of streaming video broadcasts. For example, an H.320 codec
combined with a Niagara(TM) encoder can be configured as a gateway
device, turning any H.320 conferencing system into a web video broadcast
site. Viewpoint VBX(TM) systems can also be used as camera
concentrators, allowing the selection of any connected camera as the
source of a web video broadcast.

o Specific Industry Applications within specific industries such as the
financial and health industries. For instance, in the health and medical
industry, our products allow doctors to collaborate via
videoconferencing, to receive computed tomography (CT) scans,
ultrasounds and other diagnostic tests at locations remote from the
hospital or patient and to take part in educational and training
broadcasts.

MARKETING AND SALES

We market our products and services primarily via third-party distribution
channels including, but not limited to, OEMs, resellers and system integrators.
These relationships are non-exclusive and typically require that these resellers
participate in the marketing, installation and technical support of our
products. In addition, we plan to continue to expand our distribution channels
both domestically and internationally.

Our video communication products and services are marketed primarily to
media and entertainment, Internet, corporate, financial, educational,
security/telejustice, healthcare, governmental and network enterprises. In
addition, our products are sold or licensed to integrators and value added
resellers to integrate with their products or services.

Our web sites redesigned during 2001 and included a backend database to
track, capture, qualify and distribute contact information to the sales
organization. This procedure also provides the means to build an opt-in e-mail
list to receive monthly information from ViewCast. Our website has experienced
significant increase in traffic and product inquiry. In early 2002, we added a
retail storefront sales channel to the website offering Osprey and Niagara
hardware and software.

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The Reseller Marketing program enhances our ability to cover domestic and
international geographical territories and market segments in an efficient and
cost-effective manner. This multi-tiered program provides benefits and rewards
to our reseller partners for aggressively marketing ViewCast products and
services. Under the terms of the new reseller program, an authorized reseller of
ViewCast products must meet certain qualifications regarding its business,
personnel, product and market knowledge, and support and service capabilities.
Through this authorized reseller program, we intend to expand and enhance
channels of distribution that will most effectively place ViewCast products into
the marketplace.

PRODUCTION AND SUPPLY

We build our current products using contract manufacturers in the U.S. and
Asia. Our operations personnel in Dallas, Texas are responsible for parts
planning, procurement, final testing and inspection to quality standards. We
plan for most high-volume production to be handled through large OEMs or
contract manufacturers.

We have been and will continue to be dependent on third parties for the
supply and manufacture of our components and electronic parts, including
standard and custom-designed components. We generally do not maintain supply
agreements with such third parties but instead purchase components and
electronic parts pursuant to purchase orders in the ordinary course of business.
We are substantially dependent on the ability of our third-party manufacturers
and suppliers to meet our design, performance and quality specifications.

INSTALLATION, SERVICE AND MAINTENANCE

Most of our subsystem products are customer installable. We depend on our
resellers to install and service the majority of our system products. Further,
we maintain a small in-house technical support group to assist our resellers and
customers as required.

We offer limited warranties covering workmanship and materials, during which
period our resellers or ViewCast will replace parts or make repairs. We maintain
an in-house staff of engineering personnel and offer telephone support to assist
resellers and end-users during normal business hours.

In addition, we enter into annual contracts with end-users to provide
software and hardware maintenance on our products.

RESEARCH AND DEVELOPMENT

We continue to focus on research and development activities related to video
communications applications. Our recent development efforts have been devoted to
the design and development of our products and software applications, primarily
in the streaming sector. These include media processing devices (CPUs, DSPs),
operating system software, standard computer I/O interfaces, media devices,
media API software, and application software such as SimulStream and SCX. We
will continue to make investments in core video technology and processing
techniques, focusing on how to best apply the latest advancements in the
industry into commercially viable products. In some cases, strategic
partnerships will be utilized to offset some research and development costs.

New products are scheduled for launch in 2002 in the Osprey(R) and
Niagara(TM) product families that will provide new capabilities and features for
professional streaming video applications. We believe these products will be
competitive and feature unique capabilities that will enhance leading video
applications. We believe these products will keep us in a leadership position in
the marketplace.

We are focusing on expanding the Viewpoint VBX(TM) hardware and software
products to address both market and technology driven applications in the
switching, distribution, gateway and conferencing space, providing specific
industry applications, software revisions and extending support for new codecs.

We will continue integration efforts with third party application software
and hardware for our products and services.

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COMPETITION

The market for video communication systems and services is highly
competitive and characterized by the frequent introduction of new products based
upon innovative technologies. We compete with numerous well-established
manufacturers and suppliers of video streaming technologies, videoconferencing,
networking, telecommunications and multimedia products, certain of which
dominate the existing video communications market for such products. In
addition, we are aware of others that are developing, and in some cases have
introduced, new video communications systems.

We are not aware of any direct competitors that compete in all of our
product families and applications. However, among our direct competitors
competing with one or more of our products or applications are Zydacron, Inc.,
VCON, Ltd., Winnov, LP, Optibase Ltd., Video Network Communications, Inc.,
Avistar Communications Corp., Pinnacle Systems, Inc., Tandberg Inc., and
Polycom, Inc. Electronics manufacturers such as Cisco Systems, Inc. may be sales
channels for our products but also actively compete for business in this market.

PATENTS, COPYRIGHTS, TRADEMARKS AND PROPRIETARY INFORMATION

We hold a U.S. patent covering certain aspects of compressed video and have
a patent pending covering certain aspects of a process to create, manage,
distribute and view streaming video. Although we do not believe these patents or
any other patent is essential to our business operations, we may apply for
additional patents relating to other aspects of our products. We also rely on
copyright laws to protect our software applications, which we consider
proprietary.

We believe that product recognition is an important competitive factor and,
accordingly, we promote the ViewCast(R), Osprey(R), Niagara(TM), ViewCast Online
Solutions(TM), Viewpoint VBX(TM), SimulStream(TM), WorkFone, Niagara SCX(TM) and
EZStream(SM) names, among others, in connection with our marketing activities,
and have applied for or received trademark registration for such names. Our use
of these marks may be subject to challenge by others, which, if successful,
could have a material adverse effect on us.

We also rely on confidentiality agreements with our directors, employees,
consultants and manufacturers and employ various methods to protect the source
codes, concepts, ideas, proprietary know-how and documentation of our
proprietary technology. However, such methods may not afford us complete
protection, and there can be no assurance that others will not independently
develop similar know-how or obtain access to our know-how or software codes,
concepts, ideas and documentation. Furthermore, although we have and expect to
continue to have confidentiality agreements with our directors, employees,
consultants, manufacturers, and appropriate vendors, there can be no assurance
that such arrangements will adequately protect our trade secrets.

We purchase certain components that are incorporated into our products from
third-party suppliers and rely on their assurances that such components do not
infringe on the patents of others. A successful claim against any components
used in our products could affect our ability to manufacture, supply and support
our products. We use commercially reasonable efforts to ensure third-party
supplied components are non-infringing, but there can be no assurances against
future claims.

GOVERNMENT REGULATION

We are subject to Federal Communications Commission regulations relating to
electromagnetic radiation from our products, which impose compliance burdens on
us. In the event we redesign or otherwise modify our products or complete the
development of new products, we will be required to comply with Federal
Communications Commission regulations with respect to such products. Our foreign
markets require us to comply with additional regulatory requirements.

13

EMPLOYEES

As of February 28, 2001, we had seventy (70) employees, five (5) of whom are
in executive positions, twenty-eight (28) of whom are engaged in engineering,
research and development, sixteen (16) of whom are engaged in marketing and
sales activities, fourteen (14) of whom are engaged in operations and seven (7)
of whom are in finance and administration. None of our employees are represented
by a labor union. We consider our employee relations to be satisfactory.

14

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this Report on Form 10-K under "Business",
"Management's Discussion and Analysis of Financial Conditions and Results Of
Operations", and elsewhere in the Report constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements include statements regarding ViewCast's expectations, beliefs, hopes,
intentions or strategies regarding the future. These statements involve known
and unknown risks, uncertainties, and other factors that may cause our or our
industry's actual results, levels of activity, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to, product demand and market acceptance risks, the impact
of competitive products and pricing, product development, commercialization and
technological difficulties, capacity and supply constraints or difficulties,
general business and economic conditions, the availability of sufficient working
capital, the ability to service our debt, continued significant losses, the
effect of our accounting polices and other risks detailed in the Annual Report
on Form 10-K for the year ended December 31, 2000, as amended, the Registration
Statements on Form S-3 filed on April 26, 2000 and June 30, 2000 and other
filings with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terminology
such as "may", "will", "expects", "should", "anticipates", "believes",
"estimates", "predicts", "plans", "potential", "intends" or "continue" or the
negative of such terms or other comparable terminology.

Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking statements
after the date of this report to conform such statements to actual results.

ITEM 2. PROPERTIES

Our executive offices and some of our sales, design and development
activities were relocated early in 2002 and are located in approximately 14,731
square feet of leased space in Dallas, Texas. The lease expires in December 2005
and provides for a base annual rent of $243,061. Our assembly operations are
located in approximately 7,760 square feet of leased space in Dallas, Texas. The
lease expires in August 2003 and provides for a base annual rent of $63,740.

The Osprey(R) product development activities are located in approximately
11,900 square feet of leased space in Morrisville, North Carolina. The main
lease for approximately 10,000 square feet expires in December 2002 and provides
for a base annual rent of $129,550. The remaining 1,900 square feet expires in
January 2005 and provides for a base annual rent of $23,831. The lease expiring
during 2002 will either be extended or new space will be obtained within the
same geographic area.

We also lease office space for domestic sales offices in Burlingame, CA, and
Mt. Arlington, NJ. All such leases are on a month-to-month or an annual lease
basis. The Burlingame, CA sales office will not be extended after the lease
expires in June 2002. The remaining sales office lease provides for a base
annual rent of $20,400 for the domestic sale office.

We believe that our facilities are adequate for our current and reasonable
foreseeable future needs and our current facilities can accommodate expansion,
as required.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any litigation that we believe could have a
material adverse effect on our business or us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(None)

15

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

COMMON STOCK PRICE RANGE

Our Common Stock prior to April 4, 2002 was traded on the Nasdaq under the
symbol "VCST." Our Public Warrants prior to April 4, 2002 were traded on the
Nasdaq under the symbol "VCSTW." As of March 31, 2002, there were 20,764,535
shares of Common Stock and 2,616,348 Public Warrants outstanding. The following
table sets forth, for the periods indicated, the high and low sales prices for
the Common Stock and the Public Warrants on the Nasdaq. As of April 4, 2002 our
Common Stock and Public Warrants are traded on the OTC-BB under the symbol
"VCST.OB" and "VCSTW.OB" respectively. These over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, markdown or commission and
may not represent actual transactions. The trading market in our securities may
at times be relatively illiquid due to low trading volume.

On March 28, 2002, the last reported sales prices for the Common Stock and
the Public Warrants as reported on the Nasdaq were $0.46 and $0.30,
respectively.

In February 2002, ViewCast received a Nasdaq Staff Determination indicating
that it failed to comply with the minimum net tangible assets or minimum
stockholders' equity requirements for continued listing, set forth in
Marketplace Rule 4310(c)(2)(B) and that its common stock is therefore subject to
delisting from The Nasdaq SmallCap Market. Marketplace Rule 4310(c)(2)(B) states
that "For continued inclusion, the issuer shall maintain: (i) stockholders'
equity of $2.5 million; (ii) market capitalization of $35 million; or (iii) net
income of $500,000 in the most recently completed fiscal year or two of the last
three most recently completed fiscal years." ViewCast requested a hearing before
a Nasdaq Listing Qualifications Panel to review the Staff Determination, but was
unable to meet Nasdaq's timetable for compliance and was delisted from Nasdaq
after trading closed on April 3, 2002. ViewCast began trading on the
Over-the-Counter-Bulletin Board (OTC-BB) effective with the opening of business
on April 4, 2002.

16

DIVIDEND POLICY

We have never paid cash dividends on our Common Stock. The Board of
Directors does not anticipate paying cash dividends in the foreseeable future as
it intends to retain future earnings to finance the expansion of our business
and for general corporate purposes. The payment of future cash dividends will
depend on such factors as our earnings levels, anticipated capital requirements,
operating and financial condition, consent from our lenders and other factors
deemed relevant by our Board of Directors.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"Managements Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
the Form 10-K. Our historical financial results are not necessarily indicative
of results to be expected for any future period.

17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Report on Form 10-K contains forward-looking statements that involve
risks and uncertainties. Actual results may differ materially form those
indicated in the forward-looking statements. Please see the "Special Note
Regarding Forward-Looking Statements" elsewhere in the Report on Form 10-K.

OVERVIEW

ViewCast.com, Inc., doing business as ViewCast Corporation, ("ViewCast")
develops and markets a variety of products and services that enable networked
video communications. We are a leading global provider of enterprise-wide, video
communication products for both real-time and on-demand applications. ViewCast
maximizes the value of video through its products and services: Osprey(R) Video
provides the streaming media industry's de facto standard capture cards,
Niagara(TM) provides integrated hardware and software applications for encoding,
streaming and managing rich media content, Viewpoint VBX(TM) Systems delivers a
wide array of video distribution, gatewaying and conferencing solutions for both
digital and analog enterprise video communication, and ViewCast Online provides
a rich media Application Service Provider ("ASP") solution for Business to
Business ("B2B") and media communication needs. From streaming digital video on
the Internet to distribution of broadcast-quality video throughout the corporate
enterprise, plus comprehensive video software applications, ViewCast provides
the complete range of video communications solutions.

Our customers acquire ViewCast's video products and services to communicate
over a variety of networks for security, education, training, marketing and
sales, customer service, broadcasting, videoconferencing, financial trading, and
to reduce travel and other costs while increasing productivity. Corporations,
media organizations, financial institutions, educational networks, healthcare
facilities, and government agencies utilize our products and services, as do
their customers, vendors and others with whom they may communicate. Our
technologies enable users to encode and archive video content, broadcast video
over networks, deliver video from web sites, provide interactive video
communication (video conferencing), and distribute video within a network. We
market and support our products and services either directly or through
arrangements with leading OEMs, system integrators, resellers and application
developers worldwide.

Our business was established in 1994 and became a public company in 1997.
Our common stock and public warrants currently trade on the OTC BB under the
symbol "VCST-OB" and "VCSTW-OB". We are located in Dallas, Texas with the Osprey
technology office in Morrisville, North Carolina and sales and support in North
America and London, UK.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000.

NET SALES. Net sales for the year ended December 31, 2001 decreased 23.8% to
$7,950,887 from $10,439,404 reported in 2000. We believe the overall decrease
was due principally to slowing demand for information technology ("IT") spending
and capital expenditures primarily as result of depressed economic conditions in
the United States. These conditions were further impacted by declining demand
during the last 3.5 months of 2001 in the wake of the September 11, 2001
terrorist attacks, affecting sales of all ViewCast products.

OSPREY PRODUCT SALES. During the year ended December 31, 2001, sales of
Osprey(R) video peripheral products decreased 13.4% over 2000 levels and
represented 81.8% of total 2001 revenues, compared to 72.0% of total revenues in
2000. 2001 domestic channel sales for Osprey products declined 29.8% over 2000
levels reflecting U.S. economic conditions, the demise of many ".com" companies,
and declining purchases from one of its major OEM partners. This decline was
offset in part by channel sales growth in Western Europe and the Pacific Rim of
22.3% and 28.5%, respectively. In September 2001, ViewCast announced
modifications to its popular Osprey-500 video capture card to make it "streaming
neutral" to allow customers the ability to use a broader range of software
applications including Windows Media Encoder, RealNetworks' RealSystem Producer,
Adobe Premier 6.0, Media 100's Cleaner 5, Sorrenson Broadcaster and other
leading applications, as well as streaming directly to Windows Media and Real

18

formats. We also introduced our new Osprey SimulStream(TM) software for use with
the Osprey-210, Osprey-220, Osprey-500 and Osprey-2000 series of products.
SimulStream gives users the ability to simultaneously output multiple video and
audio streams with independent capture settings from a single Osprey capture
card. By taking what used to be six separate encoding tasks and making it a
single session, SimulStream reduces encoding time up to 83% while greatly
improving the video and audio on the resulting streams. In January 2002, we
announced the opening of our new e-commerce site featuring the Osprey
streaming/capture cards as well as, Osprey SimulStream and Niagara SCX software
products. In addition to the new e-commerce offerings, the site offers a full
range of online order processing and tracking services, technical support
content and easy access to product drivers and upgrades. We believe the
e-commerce site will serve as a complement to our distribution strategy and make
it easier for our customers to purchase our products. The utilization of
e-commerce will allow single unit purchases to be made quickly and easily,
therefore providing the resellers more time to deliver the personalized support
necessary for volume purchases. With these product enhancements, the addition of
our e-commerce strategy and the anticipated economic recovery in the U.S.
market, we expect a substantial rebound in subsystem product sales during 2002.

NIAGARA(R) STREAMING/ENCODING SYSTEMS AND VIEWPOINT VBX(TM) VIDEO
DISTRIBUTION SYSTEM SALES. During the year ended December 31, 2001, combined
systems sales totaled $1,119,243 a decrease of 52.6% compared to the prior year.
System revenues have been most clearly impacted by the economic slowdown and the
general softening and postponement of IT spending, especially in the financial
services sector. In May 2001 through November 2001, we reduced and reorganized
our workforce associated with the product lines and focused our system sales,
marketing and development efforts on education/distance learning, financial
services, security/telejustice and media network applications. In September
2001, ViewCast announced the sale of VBX video distribution and conferencing
systems to HSBC Bank USA through its reseller Delta Computer Group. The systems
provide video distribution capabilities for HSBC's New York and New Jersey
locations, as well as connectivity to VBX systems in Europe and Hong Kong. In
December 2001, we sold VBX equipment to Siemens Information and Communications
Group who was chosen to supply a division of The Standard Bank of South Africa a
fully integrated trading solution incorporating their HiPath Product suite. The
offering incorporates the Viewpoint VBX video communication system as an
integrated touch screen application providing video conferencing and video
broadcast capability with point and click ease. Phase I of the project
incorporated our video solution in the Johannesburg and Pretoria offices in
South Africa and we expect additional follow-on business during 2002 with Phase
II installations in Durban and Capetown.

In March 2001, ViewCast introduced its new Niagara(R) Streaming and Encoding
Systems which are fully integrated rack mount and portable platforms that allow
corporations, broadcasters, productions houses, Internet ASPs and content
producers to stream live video content or create archived video-on-demand
content for viewing over the Internet or Corporate intranets. The exclusive
Niagara SCX(TM) software allows remote encoder control and monitoring across
networks using industry standard protocols, while its SimulStream(TM) software
allows simultaneous multiple bit rate streaming in Real and Windows formats
using only one capture card. The Niagara(R) family of products incorporates the
performance of the Osprey(R)-220, Osprey(R)-500 or Osprey(R)-2000 into its
capabilities. In October 2001, ViewCast also announced that it would bundle
Accordent Technologies' Presenter PRO software with its ViewCast NiagaraMax
portable streaming systems. PresenterPRO enables companies to create live and on
demand streaming presentations enhanced by synchronized PowerPoint slides,
pictures, Flash, URLs, and other features to create professional streaming
presentations in minutes.

With the expected easing of customer budget constraints, the enhanced
interest in video gateways and videoconferencing systems as a viable, cost
effective alternative to business travel, and the addition of new software to
differentiate its products, ViewCast is encouraged by increased sales activities
and expects an improved trend in systems sales during 2002.

OTHER REVENUES. Other revenues consisting of software maintenance, training,
installation, engineering consulting fees and professional services amounted
$324,975 for the year ended December 31, 2001, a decline of 42.7% from the
$566,742 reported in 2000. Installation and maintenance revenues during 2001
decreased in proportion to declining system revenues while other revenues in
2000 included $156,000 of engineering consulting fees for contract development
of the Osprey(R)-500 video capture card with no comparable sales in 2001

19

COST OF GOODS SOLD/GROSS MARGIN. Cost of goods sold totaled $3,575,411 for
the year ended December 31, 2001, a decline of 25.2% from the prior year period
reflecting the decrease in sales from 2000. Gross profit margin for the year
ended December 31, 2001 was 55.0% compared to 54.2% in 2000. Improved gross
margins during 2001 reflect increased unit sales of new subsystem products with
improved profit margins. We anticipate that our margins will remain in the 50% -
56% range during 2002 and will be affected in the short-term by promotional
activities, price adjustments, the introduction of new products and sales mix of
our system vs. subsystem products in any one reporting period.

At December 31, 2001, some portion of inventory, net of reserves, of one of
our product lines is at a higher than desired level based on the most recent
level of sales. We have developed a program to reduce this inventory to desired
levels over the near term and believe no loss will be incurred on its
disposition. No estimate can be made of a range of amounts of loss that are
reasonably possible should the program not be successful.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for year ended December 31, 2001 totaled $7,604,415, a
decrease of 20.3% from $9,545,307 reported last year. The decrease reflects
workforce reductions and reorganization efforts from May 2001 through December
2001 to trim operating expenses in all product groups. Sales and sales support
expenses decreased 29% over last year while finance and administrative, customer
support and marketing expenses decreased 12.9%, 12.7%, and 9.0%, respectively
compared to a year ago.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for 2001
totaled $4,200,571, an increase of 4.9% over 2000 levels reflecting an increase
in hardware and software engineers and expenses associated with the development,
testing and certification of ViewCast's Osprey(R)-2000 line of video capture
cards, the development and introduction of the Osprey SimulStream software, the
Niagara(R) line of streaming encoders and streaming servers, and the development
of ViewCast Online business applications and systems. The Company continues to
invest in new product development to ensure its ability to compete in the
distribution and streaming sectors of the video and audio communications
industry and to establish and maintain the Company as a leading provider in its
target markets.

RESTRUCTURING. In April 2001, ViewCast's Board of Directors approved a plan
of restructuring that included a reduction in the Company's workforce to
decrease operating expenses. Charges during 2001 included costs of $219,604 for
employee severance and benefits associated with the involuntary termination of
26 employees. Personnel reductions were made in the Company's finance and
administration), marketing and sales, operations, and engineering, research and
development departments.

OTHER (INCOME) EXPENSE. Total other expense for the twelve months ended
December 31, 2001 totaled $491,287, an increase of 101.3% over the prior year
period reflecting the addition of interest expense and amortization of debt
issue costs associated with ViewCast's 7% Senior Convertible Debentures,
interest from additional line-of-credit borrowings and reduction of interest
income earned on the Company's cash and cash equivalents during the nine months
ended September 30, 2001. These expenses were partially offset by other income
of $154,165 from the sale of available-for-sale securities and forfeiture of
conversion inducement fees.

NET LOSS. Net loss for the year ended December 31, 2001 was $9,072,955, an
increase in loss of 2.1% from 2000. Net loss for 2001 reflects decreases in net
sales and increases in research and development expense, partially offset by
declining selling, general and administrative expenses and improving gross
margins.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999.

NET SALES. Net sales for the year ended December 31, 2000 increased 43.6% to
$10,439,404 from $7,270,080 reported in 1999. The increase is attributed to
growth from our video peripheral and video system products during 2000 compared
to 1999.

20

OSPREY PRODUCT SALES. During the year ended December 31, 2000, sales of
Osprey(R) video peripheral products increased 48.7% over 1999 and represented
72.0% of total 2000 revenues, compared to 69.5% of total revenues in 1999.
Osprey product sales increased during 2000 due to continued strong demand for
our capture cards and codecs plus the introduction of the new Osprey-500 product
line late in the second quarter. The Osprey-500 product was co-developed with
Microsoft as their first digital video capture card.

NIAGARA(R) STREAMING/ENCODING SYSTEMS AND VIEWPOINT VBX(TM) VIDEO
DISTRIBUTION SYSTEM SALES. System sales, which include Niagara(TM) streaming
systems and Viewpoint VBX(TM) video distribution systems, increased 15.0% in
2000 compared to 1999 and represented approximately 22.6% of total 2000 revenues
compared to 28.2% of total revenues in 1999. The improvement in our system sales
is attributed to a more focused product definition to the marketplace and better
sales execution. During 2000, we released new Viewpoint VBX(TM) product
enhancements and targeted specific vertical markets.

OTHER REVENUES. Other revenue from online services, maintenance and
engineering development fees accounted for the remaining 5.4% of total revenues
for 2000.

COST OF GOODS SOLD/GROSS MARGIN. Cost of goods sold increased $833,753 to
$4,782,130 for the year ended December 31, 2000 compared to 1999 primarily due
to the increase in our product sales described above. Our gross profit margin
for 2000 was 54.2%, representing an increase from the 45.7% margin reported
during 1999. Gross profit margins showed an increase of approximately 8.5% over
1999 levels due to improved product designs, manufacturing efficiencies and new
product introductions in our Osprey video peripheral product family.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general, and
administrative expense increased to $9,545,307 for the year ended December 31,
2000 from $7,543,409 reported during 1999 primarily due to increases of our
sales staff and related sales activity costs. Additional marketing and customer
support expenditures contributed to the increase. The increases in sales,
marketing and customer support were partially offset by an overall decrease in
administrative expenses during 2000 over 1999 levels primarily generated by
reduction in bad debt expense.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense increased
$1,072,408 or 36.6% to $4,003,169 during 2000 compared to 1999, principally due
to development staff increases and expenses related to new product testing for
the Osprey 500, Osprey 210/220, and VBX Software Version 2.5 released in 2000,
and for the Osprey 2000 and Niagara system product introductions in 2001.

OTHER INCOME (EXPENSE). For the year ended December 31, 2000, other income
(expense) decreased $460,124 to $243,997, primarily due to the reduction in
amortization of debt issue costs associated with our line of credit financing
consummated in October 1998, which were fully amortized by October 1999. In
addition, we had and increase in interest income generated by higher average
cash and cash equivalent balances during the year. The current year interest
expense includes amortization of debt issue costs and interest expense related
to the issuance of 7% Senior Convertible Debentures on April 28, 2000.

NET LOSS. Net loss for the year ended December 31, 2000 was $8,888,985, an
increase in loss of 4.9% from 1999. Net loss for 2000 reflects increases in net
sales offset by and increases cost of goods sold, selling, general and
administrative and research and development expense.

LIQUIDITY AND CAPITAL RESOURCES

ViewCast's primary sources of funds for conducting its business activities
are derived from sales of its products and from sales of its debt and equity
securities. ViewCast requires liquidity and working capital primarily to fund
operating losses, increases in inventories and accounts receivable associated
with expected sales growth, development of its products, debt service and for
capital expenditures.

Net cash used in operating activities for the year ended December 31, 2001
totaled $8,898,974 due primarily to the reported net loss of $9,072,955,
adjusted for net non-cash operating expenses of $969,698, and to changes in
operating assets and liabilities of $795,717, principally due to decreases in
accounts

21

payable and accrued liabilities offset in part by improved trade receivable
collections and inventory reductions.

ViewCast utilized cash of $405,982 during the year ended December 31, 2001
for capital purchases of computer equipment, test equipment and purchased
software to aid the development and testing of its products; for demonstration
equipment to showcase its products; and for software development costs
associated with its streaming media software applications. These uses were
offset in part by $208,675 of proceeds from the sale of available-for-sale
securities in June of 2001.

During 2001, ViewCast's financing activities generated cash in the amount
of $6,049,569 principally from short-term borrowings, issuance of Series C
Convertible Preferred Stock and from the sale of common stock under the terms of
the ViewCast's Employee Stock Purchase Plan ("ESPP"). During March through
October 2001, ViewCast borrowed $3,938,396 under the terms of its working
capital credit facility primarily to fund operating expenses and inventory
purchases of its Osprey(R)-500 and Osprey(R)-2000 subsystem products. In
November 2001, ViewCast received $2.0 million in gross proceeds from the sale of
200,000 shares of newly created Series C Convertible Preferred Stock at $10.00
to Mr. H.T. Ardinger, a principal shareholder and Chairman of the Board of the
ViewCast. The Series C preferred stock is convertible into common stock of
ViewCast at a fixed price of $0.60 per share, subject to certain requirements,
and carries a dividend of 9% payable semiannually in cash or common stock of the
ViewCast, at the ViewCast's option. ViewCast intends to use the proceeds for
working capital and general corporate initiatives. Also, for the offering
periods ended March 31, 2001 and September 30, 2001, ViewCast received $106,569
from the sale of 190,566 shares of common stock pursuant to its ESPP.

In August 2001, ViewCast offered certain of its private warrant holders the
right to exercise their warrants at a temporarily reduced exercise price of
$0.75 per share of common stock for a period of 30-days. As an inducement for
exercise of the warrants, exercising warrant holders received a like number of
new warrants to purchase ViewCast common stock at $1.00 per share. ViewCast
received proceeds of $24,999 from the exercise of the 33,332 warrants pursuant
to this offer and issued 33,332 new five-year warrants to purchase common stock
at $1.00 per share which expire February 2007.

ViewCast classifies its equity securities that are free of trading
restrictions, or to become free of trading restrictions within one year, as
"available-for-sale". Available-for-sale securities at December 31, 2000 and
2001, is comprised solely of DynTek, Inc. ("DYTK") shares that it acquired in a
strategic business alliance in 1998. Because all of the DYTK shares held by
ViewCast are available for trading under Rule 144 of the Securities and Exchange
Commission, those shares are presented at their fair market valued in the
consolidated balance sheets as of December 31, 2000 and 2001. The quoted market
price of DYTK shares at December 31, 2000, December 31, 2001 and March 28, 2002
was $0.88, $2.12, and $2.10, respectively. In June 2001, ViewCast sold 100,000
shares of DYTK stock at selling prices that averaged $2.09 per share. Realized
gains on the stock transactions totaled $47,425.

In January 2002, ViewCast extended the expiration date of its outstanding
public and public equivalent common stock purchase warrants to February 3, 2005
from February 3, 2002. Additionally, effective March 1, 2002, ViewCast decreased
the effective exercise price per share of common stock of the warrants from
$4.19 to $1.00. The warrants are redeemable by ViewCast under certain
conditions. As of December 31, 2001, there were 3,799,680 public and public
equivalent warrants outstanding. The exercise price reduction and extension of
the expiration date also applies to the issuance of up to 262,500 public
warrants upon exercise of certain representative warrants.

In December 2001, ViewCast temporarily decreased the conversion price of
its outstanding Series B Convertible Preferred Stock from $3.625 per share to
$0.60 per share for a period of ninety (90) days. Pursuant to Section 8(b) of
the Certificate of Designations of Series B Convertible Preferred Stock,
ViewCast was required to temporarily lower the Series B conversion price in
conjunction with the issuance of Series C Convertible Preferred Stock in
November 2001. In March 2002, holders of $1,450,000 principal amount of Series B
Convertible Preferred Stock converted their Series B shares into 2,416,666
shares of common stock at $0.60 per share.

At December 31, 2001, ViewCast had a working capital deficit of $928,157
and cash, cash equivalents and available-for sale securities of $3,268,921.
ViewCast has experienced an overall sales decrease of

22

23.8% during 2001 compared to 2000 levels and, while wary of current economic
conditions, anticipates that revenues will rebound during 2002 with the
introduction of new products, business relationships and if economic conditions
improve. ViewCast plans to improve its working capital position by increasing
sales and lower operating expenses, by increases, if any, in the value of the
DYTK stock, by exercise of warrants and, as necessary, by additional equity
financing such as the $2,000,000 received for the Series C Preferred Stock in
November 2001. ViewCast also anticipates that losses will continue in 2002 at a
lower level than 2001, and until such time as total profit margins from the
sales of its products exceed its total development, selling, administrative and
financing costs. In April 2001, ViewCast's Board of Directors approved a plan of
restructuring to reduce its workforce and decrease operating expenses. In May
2001 through November 2001, ViewCast reorganized its operations, reduced its
workforce by 26 individuals and trimmed other related operating expenses. As a
direct result of these measures, total general and administrative expenses
decreased $1.94 million, or 20.3%, from 2000 levels. ViewCast will remain
vigilant and proactive in managing its operating expenses.

In October 1998, the ViewCast entered into a working capital line of credit
financing arrangement with an entity controlled by one of its principal
stockholders, who is currently Chairman of the Board. In February 2001, ViewCast
amended the facility to increase the credit line commitment from $9.0 million to
$12.0 million, extend the maturity date of the agreement to March 15, 2003, and
expand the asset base for lending to include DYTK shares owned by ViewCast. The
availability of funds under this facility is subject to certain borrowing base
limitations based principally on outstanding accounts receivable, inventory and
market value of DYTK shares. At December 31, 2001, ViewCast had exceeded its
borrowing base by $1.45 million and had utilized $6.35 million of the
line-of-credit facility. The noteholder has agreed to waive through April 30,
2002 the repayment of any outstanding financing that may be in excess of the
borrowing base from time to time. The facility will continue to be utilized for
working capital by ViewCast to the extent possible depending on future levels of
accounts receivable, inventory and market value of DYTK shares. During the first
quarter of 2002, ViewCast borrowed an additional $248,608 under the terms of the
line of credit financing arrangement.

ViewCast utilizes significant capital to design, develop and commercialize
its products and intends to fund its 2002 operating activities and sales growth
by utilizing proceeds from the Series C Preferred Stock offering, its available
working capital line of credit, cash contributed from operations and sales of
its available-for-sale securities to the extent possible. ViewCast anticipates
it will require additional equity financing in the during 2002 for working
capital to develop and introduce new products and services, to enhance existing
product offerings, to address unanticipated competitive threats, technical
problems, and adverse economic conditions. Although ViewCast has no firm
arrangements with respect to additional financing, it is currently considering
several proposals by potential investors relating to the issuance of convertible
preferred stock or other equity in exchange for a cash investment in ViewCast.
ViewCast has retained an investment banking firm to assist in revenue and
strategic alternatives, including divestitures and acquisitions. There can be no
assurance that any such additional financing will be available to ViewCast on
acceptable terms, or at all. Additional equity financing may involve substantial
dilution to our then existing stockholders. In response to the economic slowdown
and to enhance financial performance and increase revenue, ViewCast intends to
actively pursue other alternatives, including strategic merger and acquisition
activities. In the event we are unable to raise additional capital or execute
other alternatives, we may be required to sell segments of the business, or
substantially reduce or curtail our activities. Such actions could result in
charges that could be material to the ViewCast's results of operations or
financial position.

At December 31, 2001, ViewCast had no material commitments for capital
expenditures.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. ViewCast adopted SFAS 133 in
January 1, 2001. SFAS No. 133, as amended, requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges will be recognized in earnings. During the year ended December 31,
2001, ViewCast

23

had no hedging transactions, and the adoption of this standard did not have a
significant impact on its financial position, results of operations or cash
flows.

In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
addresses financial accounting and reporting for business combinations. Under
SFAS No. 141 all business combinations initiated after June 30, 2001 and
business combinations with a date of acquisition of July 1, 2001 or later are to
be accounted for using the purchase method of accounting. In June 2001, the FASB
issued SFAS No. 142, Goodwill and Other Intangible Assets, which addresses
accounting and reporting for intangible assets acquired individually or with a
group of other assets, other than those acquired in a business combination, at
acquisition and accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. Under SFAS No. 142, goodwill and certain
other intangible assets will no longer be amortized but will remain on the
balance sheet and will be reviewed for impairment using the guidance as
established in this Statement. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001, except for goodwill and intangibles acquired
after June 30, 2001, which will be immediately subject to the nonamortization
and amortization provisions of this Statement. We anticipate the adoption of
these standards will not have a significant impact on our consolidated financial
position, results of operations or cash flows unless we make future business
acquisitions.

In August 2001, the FASB issued SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which is effective for fiscal years beginning
after December 15, 2001. SFAS 144 supersedes FASB Statement No. 121, Accounting
for the Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, and the accounting and reporting provisions relating to the
disposal of a segment of a business of Accounting Principles Board Opinion No.
30. We are currently assessing the impact of SFAS 144 on our consolidated
financial position, results of operations and cash flows but do not anticipate a
significant impact on the operating results or financial position of ViewCast.

In September of 2001, the FASB Emerging Issues Task Force ("EITF"), issued
EITF Issue No. 01-09, Accounting for Consideration Given by Vendor to a Customer
or a Reseller of the Vendor's Products, which is a codification of EITF Issues
No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products, No. 00-14, Accounting for Certain Sales
Incentives, and No. 00-22, Accounting for 'Points' and Certain Other Time-or
Volume-Based Sales Incentive Offers and Offers for Free Products or Services to
be Delivered in the Future. EITF 00-25, as codified by EITF 01-09, established
the treatment in the statement of operations of vendor consideration to
resellers of a vendor's products. EITF 00-25 and 01-09 are effective for the
interim and year-end periods beginning after December 15, 2001. We are currently
assessing the impact of the adoption of this EITF on our consolidated financial
position, results of operations and cash flows but do not anticipate a
significant impact on the operating results or financial position of ViewCast.

CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. We review the accounting policies we use in reporting our
financial results on a regular basis. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis we evaluate our
estimates, including those related to accounts receivable, inventories,
investments, warranty obligations, income taxes, restructuring and contingencies
and litigation. Our estimates are based on historical experience and other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. We
believe that the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

o Revenue Recognition - We recognized hardware product revenue using the
guidance from SEC Staff Accounting Bulletin No. 101, Revenue Recognition
in Financial Statements and Statement of Financial Accounting Standards
No. 48, Revenue Recognition When Right of Return Exists. We recognize
software revenue in accordance with SOP 97-2, Software Revenue
Recognition, as amended by SOP 98, Modification of SOP 97-2, Software
Revenue Recognition, with Respect to

24

o Certain Transactions. Under these guidelines, we defer revenue
recognition on transactions where persuasive evidence of an arrangement
does not exist, title has not transferred, product payment is contingent
upon performance of installation or service obligations, the price is
not fixed or determinable or payment is not reasonably assured. In
addition we defer revenue associated with maintenance and support
contracts and recognize revenue ratably over their term.

o 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.

o Excess and Obsolete Inventory - We write down our inventory 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 inventory write-downs may be required.

o Warranty - We provide for the estimated cost of hardware and product
warranties at the time revenue is recognized. While we engage in quality
programs and processes, our warranty obligation is affected by product
failure rates, material usage and service delivery costs incurred in
correcting a product failure. Should actual product failure rates,
material usage or service delivery costs differ from our estimates,
revisions to the estimated warranty liability may be required.

o 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.

o Available-for-Sale Securities - We currently hold equity securities of a
Nasdaq publicly traded company DYTK. DYTK shares are stated at fair
value each reporting period based on quoted market prices. Future
adverse changes in market conditions or poor operating results of this
underlying investment could result in losses or an inability to recover
the carrying value of the investment that may not be reflected in the
investment's current carrying value, thereby requiring an impairment
charge in the future.

o Capitalized Software - We currently expense the costs of developing new
software products and substantial enhancements to existing software
products until technological feasibility has been established, after
which time additional costs incurred are capitalized in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed."
Amortization of capitalized software development costs begins when
products are available for general release to customers, and is computed
using the straight-line method over a period not to exceed three years.
Future adverse changes in market conditions or poor market performance
of these software products could result in losses or an inability to
recover the carrying value of the investment that may not be reflected
in the investment's current carrying value, thereby requiring an
impairment charge in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

All of our sales transactions during 2001 were denominated in U.S. dollars
and the majority of our operations is based in the U.S. and, accordingly, is
also denominated in U.S. dollars. We do have a foreign-based sales office in the
London area where transactions are denominated in the foreign currency. The
impact of fluctuations in the relative value of that currency for 1999, 2000 and
2001 was not material.

25

Our interest income earned on cash and cash equivalents is subject to
interest rate risk from the changes in the general level of U.S. interest rates,
particularly short-term rates.

We hold marketable securities in DYTK that are subject to the market risks
of the public U.S. stock markets, in particular the Nasdaq Stock Market. As of
December 31, 2001, the market value of our DYTK investment was $2,417,457. If
the market price of DYTK common stock decreases, our assets and working capital
may decrease proportionately.

26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

VIEWCAST.COM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors.......................................... 28

Consolidated Balance Sheets a December 31, 2000 and 2001................ 29

Consolidated Statements of Operations for the years ended
December 31, 1999, 2000 and 2001...................................... 30

Consolidated Statements of Stockholders' Equity (Deficit) for the
years ended December 31, 1999, 2000 and 2001.......................... 31

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000 and 2001...................................... 34

Notes to Consolidated Financial Statements.............................. 35

27

Report of Independent Auditors

The Board of Directors
ViewCast.com, Inc.

We have audited the accompanying consolidated balance sheets of ViewCast.com,
Inc. and subsidiaries as of December 31, 2000 and 2001, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2001. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
ViewCast.com, Inc. and subsidiaries at December 31, 2000 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. As more fully described in Note 1, the Company is dependent upon the
proceeds from additional sales of its equity securities or other alternative
financing, has incurred recurring losses from operations, has a working capital
deficit and anticipates negative cash flow from operations during 2002. These
conditions raise substantial doubt about the ability of the Company to continue
as a going concern. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.

ERNST & YOUNG LLP

Dallas, Texas
March 18, 2002

28

VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

See accompanying notes.

29

VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

30

VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

31

VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)-(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

32

VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)-(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

See accompanying notes.

33

VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

34

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY AND DESCRIPTION OF BUSINESS

The accompanying consolidated financial statements include the accounts of
ViewCast.com, Inc. dba ViewCast Corporation and its wholly-owned subsidiaries,
ViewCast Online Solutions, Inc. (formerly, Viewpoint Systems, Inc.), VideoWare,
Inc. and Osprey Technologies, Inc. (collectively, the Company). The Company
operates in one business segment and is engaged in designing, developing and
marketing advanced, standards-based video products and services that enable
real-time and on-demand video communication over the Internet and corporate
networks. The Company's Osprey(R) line of video capture and video
compression-decompression cards, its Viewpoint VBX(TM) video distribution
system, and its Niagara(TM) line of Internet encoding and streaming video
servers deliver business applications to encode and archive video content,
broadcast video over computer networks (streaming video), deliver video from web
sites (on-demand streaming video), provide interactive video communication
(video conferencing), and distribute video within a network. The Company's
Online Solutions division provides a rich media application service provider
solution for business to business and media communication needs. The Company
markets its products and services directly to end-users, through original
equipment manufacturers, value-added resellers and computer system integrators,
worldwide.

The Company utilizes significant capital to design, develop and
commercialize its products. During 2002, the Company expects to fund sales
growth and related operational activities by utilizing its working capital line
of credit, cash contributed from operations, and proceeds from sales of its
available-for-sale securities to the extent possible. At December 31, 2001, the
Company had exceeded its line-of-credit borrowing base by $1.45 million and had
utilized $6.35 million of the credit facility. The noteholder has agreed to
waive through April 30, 2002 the repayment of any outstanding financing that may
be in excess of the borrowing base from time to time (See Note 7 regarding the
working capital line of credit). The Company anticipates that additional
financing will be needed during 2002 in order to meet its working capital
requirements and has had preliminary discussions with potential sources of
financing, and may seek additional financing to provide additional working
capital in the future. Such financing may include the issuance of convertible
preferred stock or other equity securities, conversion of debt to equity
securities, exercise of warrants, divestiture of business segments, or any
combination thereof. The Company has retained an investment banking firm to
assist in revenue and strategic alternatives, including divestitures and
acquisitions. The can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. Additional equity
financing may involve substantial dilution to the Company's then existing
stockholders. In the event the Company is unable to raise additional capital, it
may be required to curtail its activities. Such actions could result in charges
that could be material to the Company's results of operations or financial
position.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As reflected in the
accompanying consolidated financial statements, the Company incurred significant
losses of $8,473,674, $8,888,985 and $9,072,955, for the years ended December
31, 1999, 2000 and 2001, respectively. These losses, in conjunction with the
matters discussed above, raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPALS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All material inter-company accounts and
transactions have been eliminated in consolidation.

35

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.

INVENTORY

Inventory consists primarily of purchased electronic components and
computer system products, along with the related documentation manuals and
packaging materials. Inventory is carried at the lower of cost or market, cost
being determined on a standard cost basis, which approximates average cost.

At December 31, 2001, some portion of inventory, net of reserves, of one of
the Company's product lines is at a higher than desired level based on the most
recent level of sales. Management has developed a program to reduce this
inventory to desired levels over the near term and believes no loss will be
incurred on its disposition. No estimate can be made of a range of amounts of
loss that are reasonably possible should the program not be successful.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Depreciation is determined
using the straight-line method over the estimated useful lives, generally three
to five years, of the related assets. Leasehold improvements are amortized over
shorter of the useful life or the length of the related leases. Expenditures for
repairs and maintenance are charged to operations as incurred; renewals and
betterments are capitalized.

SOFTWARE DEVELOPMENT COSTS

Costs of developing new software products and substantial enhancements to
existing software products are expensed as incurred until technological
feasibility has been established, after which time additional costs incurred are
capitalized in accordance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." Amortization of capitalized software development costs
begins when products are available for general release to customers, and is
computed using the straight-line method over a period not to exceed three years.

REVENUE RECOGNITION

The Company recognizes revenue from its hardware product sales, including
freight charges, in accordance with SEC Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements, and Statement of Financial
Accounting Standards No. 48, Revenue Recognition When Right of Return Exists.
The Company recognizes software revenue in accordance with 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. Under these
guidelines, the Company recognizes 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. The Company accrues
warranty costs and sales allowances for promotional activities at time of
shipment based on historical experience. Following is a description of our
revenue recognition policies:

o Product Sales - Revenue from Product sales is recognized upon
shipment provided title and risk of loss has passed to the
customer, there is evidence of an arrangement, fees are fixed or
determinable and collectibility is reasonably assured.

o System Implementations - System transactions in which the Company
has the sole responsibility for installation, product revenues
are deferred until completion of the installation process and
system acceptance by the customer.

36

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

o Services - Post contract elements of software maintenance and
support are offered and priced separately after the initial
90-day software warranty expires and are recognized ratably over
the maintenance/support period on a straight-line basis.

o Training - Training revenues are based upon objective evidence of
fair value and are recognized as these services are provided.

o Other Revenues - Other revenues include maintenance, support,
training and installation as well as engineering contract
services, professional services, and content hosting and
distribution services that are recognized as services are
provided. Other revenues have historically represented less than
10% of total revenues and are presented combined with product
sales in the consolidated statements of operations.

NET LOSS PER SHARE

Basic earnings per share is calculated by dividing net loss by the number
of weighted average common shares outstanding for the period. Since the Company
has reported net losses for all periods presented, the computation of diluted
loss per share excludes the effects of convertible preferred stock, convertible
debt, options, and warrants since their effect is anti-dilutive. (See Note 10.)

Loss per share calculations for the years ended December 31, 1999, 2000 and
2001 are as follows:

DEFERRED CHARGES

Deferred charges at December 31, 2000 and 2001 consisted of legal,
accounting and lead manager fees and expenses associated with the issuance of
$4.45 million principal amount 7% senior convertible debentures in April 2000.
During September and October of 2000, holders of $3.5 million principal amount
of 7% senior convertible debentures converted their notes to common stock of the
Company and accordingly, a proportionate share of issue costs in the amount
$914,872 was charged against additional paid in capital. Deferred charges
amortized to interest for the years ended December 31, 2000 and 2001 were
$134,370 and $69,530, respectively.

During 1999, the Company amortized deferred charges associated with the
issuance of 8% senior convertible notes in December 1997, as well as fees
associated with the procurement of a $9 million working capital credit facility
in October 1998. Deferred charges amortized to interest expense for the year
ended December 31, 1999 was $584,151.

37

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

RISKS AND UNCERTAINTIES

Financial instruments that potentially subject the Company to credit risk
consist principally of cash, cash equivalents and trade accounts receivable. The
Company invests its cash and cash equivalents with a Texas commercial bank and a
commercial brokerage firm. The brokerage firm maintains accounts in several
banks throughout the country and in government securities. The Company sells its
products and services primarily to distributors and resellers without requiring
collateral; however, the Company routinely assesses the financial condition of
its customers and maintains allowances for anticipated losses. The following
table outlines the number of customers that accounted for more than 10% of
annual sales and receivable balances:

The Company believes it has no significant credit risk in excess of
provided reserves.

The Company is substantially dependent on its third-party suppliers and
manufacturers to supply its components and electronic parts, including standard
and custom-designed components.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes
wherein deferred tax assets and liabilities are determined based upon the
differences between the financial statement and tax bases of assets and
liabilities, as measured by enacted tax rates expected to be in effect when
these differences reverse.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising expense for the
years ended December 31, 1999, 2000 and 2001 was $448,859, $732,906 and
$526,777, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company believes that the carrying amount of certain of its financial
instruments, which include cash equivalents, accounts receivable, accounts
payable, short-term debt and accrued expenses, approximate fair value due to the
short-term maturities of these instruments. At December 31, 2000 and 2001,
available-for-sale securities consist of the investment in equity securities of
a strategic business alliance partner and are stated at fair market value as
determined by quoted market prices. Gross unrealized gains (losses), which have
been included as a separate component of stockholders' equity, were ($2,325,582)
and $1,493,436 at December 31, 2000 and 2001, respectively. No unrealized
holding gains or losses were included in earnings during the years ended
December 31, 1999, 2000 and 2001 (See Note 5).

38

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation. SFAS 123 defines a fair-value based method of accounting for an
employee stock option or similar equity instrument. As permitted by SFAS 123,
the Company has elected to continue to measure the cost of its stock-based
compensation plans using the intrinsic-value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. See Note 10 to the Consolidated Financial Statements for
additional information concerning stock-based compensation.

SEGMENT INFORMATION

Under Statement of Financial Accounting Standards No. 131 (SFAS 131),
Disclosures about Segments of an Enterprise and Related Information, the Company
operated, for all periods presented, in a single segment.

COMPREHENSIVE INCOME

Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting
Comprehensive Income, requires that total comprehensive income be disclosed with
equal prominence as net income and earnings per share. Comprehensive income is
defined as changes in stockholders' equity exclusive of transactions with owners
such as capital contributions and dividends.

The Company translates assets and liabilities of its foreign operations,
whose functional currency is the local currency, at year-end exchange rates.
Revenues and expenses are translated at the average rates of exchange prevailing
during the year. Adjustments resulting from translating the financial statements
of foreign operations are accumulated in other comprehensive income, which is
reflected as a separate component of stockholders' equity. Additionally, the
Company classifies equity securities it owns that are free of trading
restrictions or to become free of trading restrictions within one year as
"available-for-sale". Available-for-sale securities are carried at fair value
based on quoted market prices, and unrealized gains and losses are accumulated
in other comprehensive income, which is a separate component of stockholders'
equity. If a market value adjustment results in a loss of value due to an
other-than-temporary impairment, a loss will be transferred from accumulated
other comprehensive income and charged to other income in the consolidated
statement of operations. (See Note 5)

Components of comprehensive of income (loss) for 1999, 2000 and 2001 are as
follows:

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets for impairment when events or
changes in circumstances indicate that the carrying value of such assets may not
be recoverable. This review consists of a comparison of the carrying value of
the asset with the asset's expected future undiscounted cash flows without
interest costs. Estimates of expected future cash flows represent management's
best estimate based on reasonable and supportable assumptions and projections.
If the expected future cash flow exceeds the carrying value of the asset, no
impairment is recognized. If the carrying value of the asset exceeds the
expected future cash

39

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

flows, impairment is measured by the excess of the carrying value over the fair
value of the asset. Any impairment provisions recognized are permanent and may
not be restored in the future. The Company recognized no impairment expense for
the years ended December 31, 1999, 2000 and 2001.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. ViewCast adopted SFAS 133 on
January 1, 2001. SFAS No. 133, as amended, requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges will be recognized in earnings. During the year ended December 31,
2001, ViewCast had no hedging transactions, and the adoption of this standard
did not have any impact on its financial position, results of operations or cash
flows.

In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
addresses financial accounting and reporting for business combinations. Under
SFAS No. 141 all business combinations initiated after June 30, 2001 and
business combinations with a date of acquisition of July 1, 2001 or later are to
be accounted for using the purchase method of accounting. In June 2001, the FASB
issued SFAS No. 142, " Goodwill and Other Intangible Assets", which addresses
accounting and reporting for intangible assets acquired individually or with a
group of other assets, other than those acquired in a business combination, at
acquisition and accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. Under SFAS No. 142, goodwill and certain
other intangible assets will no longer be amortized but will remain on the
balance sheet and will be reviewed for impairment using the guidance as
established in this Statement. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001, except for goodwill and intangibles acquired
after June 30, 2001, which will be immediately subject to the nonamortization
and amortization provisions of this Statement. The adoption of these standards
by the Company is not expected to have a significant impact on the Company's
financial position, results of operations or cash flows.

In August 2001, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, which is effective for fiscal years beginning after December 15, 2001.
SFAS No. 144 supersedes FASB Statement No. 121, Accounting for the Impairment or
Disposal of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and
the accounting and reporting provisions relating to the disposal of a segment of
a business of Accounting Principles Board Opinion No. 30. The Company is
currently assessing the impact of SFAS No. 144 on the Company's consolidated
financial position, results of operations and cash flows.

In September 2001, the FASB Emerging Issues Task Force ("EITF"), issued
EITF Issue No. 01-09, Accounting for Consideration Given by Vendor to a Customer
or a Reseller of the Vendor's Products, which is a codification of EITF Issues
No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products, No. 00-14, Accounting for Certain Sales
Incentives, and No. 00-22, Accounting for 'Points' and Certain Other Time-or
Volume-Based Sales Incentive Offers and Offers for Free Products or Services to
be Delivered in the Future. EITF 00-25, as codified by EITF 01-09, established
the treatment in the statement of operations of vendor consideration to
resellers of a vendor's products. EITF 00-25 and 01-09 are effective for the
interim and year-end periods beginning after December 15, 2001. The Company is
currently assessing the impact of the adoption of this EITF on our consolidated
financial position, results of operations and cash flows.

3. BUSINESS RESTRUCTURING

Results of operations for 2001 include charges of $219,604 for resizing and
restructuring the Company's operations and workforce. Charges were recorded
throughout 2001 in accordance with a plan

40

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

of restructuring approved by the Company's Board of Directors and included
severance costs for work force reductions of 26 employees. Reductions were made
in the Company's sales, development, customer support, marketing, manufacturing
and finance and administration departments in an effort to reduce operating
expenses. There was no liability for the restructuring activity outstanding as
of December 31, 2001. No restructuring charges were charged to operations during
1999 and 2000.

4. INVENTORY

Inventory consists of the following:

5. INVESTMENT IN EQUITY SECURITIES

In September 1998, the Company entered into a strategic business alliance
with DynTek, Inc. ("DYTK"), formerly TekInsight.com, Inc., that included a stock
purchase agreement whereby the Company acquired 1,240,310 shares of DYTK common
stock in exchange for 1,000,000 shares of the Company's common stock. The shares
issued by the Company and DYTK are not registered under the Securities Act of
1933, as amended, and may not be sold, transferred or otherwise distributed in
the absence of such registration or an applicable exemption therefrom.

At December 31, 2000 and 2001, all DYTK stock was available for sale within
the next twelve months; and accordingly, was classified as a current asset and
stated at fair market value of $.88 and $2.12 per share, respectively as
determined by quoted market prices. At March 28, 2002, the quoted market price
of DYTK shares was $2.10. In June 2001, the Company sold 100,000 shares of DYTK
stock at selling prices that averaged $2.09 per share. Realized gains on the
stock transactions totaled $47,425.

6. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following:

41

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. SHAREHOLDER LINE OF CREDIT AND OTHER SHORT-TERM DEBT

Short-term debt consists of the following:

In October 1998, the Company entered into a working capital line of credit
facility for up to $9 million with an entity controlled by one of its principal
stockholders, Mr. H.T. Ardinger, who also currently serves as a director, and
Chairman of the Board of Directors of the Company. This one-year, renewable
facility bears interest at 12% per annum and is secured by all assets of the
Company. The availability of funds under this facility is subject to certain
borrowing base limitations based principally on qualifying accounts receivable
and inventory. A portion of the proceeds from this facility was used to retire a
Texas commercial bank line of credit. As an incentive to advance the line of
credit, Mr. Ardinger was issued 200,000 three-year warrants to purchase Company
stock at $4.50 per share. The value of the warrants of $1.33 per share, as
determined using the Black-Sholes option valuation model, was charged to
interest expense over the initial term of the note. On October 17, 2000, the
Company renewed the working capital facility for one year through and until
October 22, 2001 inclusive of a provision for automatic renewal through October
22, 2002. In February 2001, the Company amended the facility to increase the
credit line commitment from $9.0 million to $12.0 million, extend the maturity
date of the agreement to March 15, 2003, and expand the asset base for lending
to include certain marketable securities owned by the Company. At December 31,
2001, the Company had exceeded the borrowing base on its existing line of credit
by $1.45 million. The noteholder has agreed to waive through April 30, 2002 the
repayment of any outstanding financing that may be in excess of the borrowing
base from time to time. During 2001 and the first quarter of 2002, the Company
borrowed an additional $3,938,396 and $248,608 pursuant to the terms of the
facility, respectively.

Interest paid during the years ended December 31, 1999, 2000 and 2001 was
$422,169, $323,021 and $567,350, respectively.

8. LONG-TERM DEBT

Long-term debt consists of the following:

42

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

On December 9, 1997, the Company sold $5,000,000 aggregate principal amount
of 8% senior convertible notes due 2002 (the "Notes") at an initial offering
price of 100% of the principal amount thereof, less 8% gross commission. The
Notes were convertible to common stock of the Company at the initial conversion
price of $4.625 per share. In August 1998, the Company exchanged $3,640,000 of
its 8% senior convertible notes for 364,000 shares of a newly created Series A
convertible preferred stock. The Series A preferred stock carried a dividend of
8.5% per year payable in cash or common stock of the Company, at the Company's
option, and was convertible into Common Stock of the Company at a fixed
conversion price of $3.625 per share. In February through April 1999, holders of
$1,360,000 principal amount of 8% convertible notes exchanged their notes for
317,313 shares of common stock of the Company at conversion prices ranging from
of $3.625 to $4.625 per share completing the exchange of all 8% convertible
notes outstanding at December 31, 1998.

On April 28, 2000, the Company sold $4,450,000 aggregate principal amount
of 7% Senior Convertible Debentures Due 2004 (the "Debentures") pursuant to a
placing agreement dated March 28, 2000, and amended on April 28, 2000, by and
among the Company and RP&C International Inc. and RP&C International Limited
(the "Lead Managers") at an initial offering price of 100% of the principal
amount thereof, less 8% gross commission. In addition, the Company issued the
Lead Managers a warrant (the "Warrant") on April 28, 2000, in the name of RP&C
International (Guernsey) Limited, pursuant to Regulation S, to purchase an
aggregate of 89,000 shares of Common Stock, at an exercise price of $5.00 per
share, subject to adjustment in the event of adjustment of the Conversion Price
of the Debentures. The Warrant has a term of five (5) years and may be exercised
as to all or any lesser number of shares of Common Stock covered thereby,
commencing twelve (12) months after the date of issuance.

Unless previously redeemed, the Debentures are convertible into shares of
Common Stock of the Company at the option of the holder at any time at a fixed
conversion price of $5.00 per share of Common Stock, subject to adjustment in
certain circumstances (the "Conversion Price"). Upon voluntary conversion of any
Debenture by its holder, no payment will be made for interest accrued during the
period (i) from the most recent interest payment date preceding the applicable
conversion date, or (ii) from the date of issuance of the Debentures if the
Debenture is converted before the first interest payment (absent default by the
Company, in which event interest shall continue to accrue at a specified default
rate). Debentures which are converted prior to the first interest payment date
of November 1, 2000 will be converted at a ten percent (10%) discount from the
then effective Conversion Price, and Debentures which are converted prior to the
second interest payment date of May 1, 2001 will be converted at a five percent
(5%) discount from the then effective Conversion Price.

During September through October 2000, holders of $3,500,000 principal
amount of the Debentures exchanged their notes for 777,777 shares of common
stock of the Company at a conversion price of $4.50 per share. As an incentive
for early conversion, the Company paid debenture holders $124,530, which amount
has been classified to interest expense.

9. INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes.
SFAS 109 requires a valuation allowance to be recorded when it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. In the opinion of management, realization of the Company's net
operating loss carryforward is not reasonably assured, and a valuation allowance
of $16,181,000 and $21,750,000 has been provided against deferred tax assets in
excess of deferred tax liabilities in the accompanying consolidated financial
statements at December 31, 2000 and 2001, respectively.

43

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The components of the Company's net deferred taxes are as follows:

A reconciliation between the federal income tax benefit calculated by
applying U.S. federal statutory rates to net loss and the absence of a tax
benefit reported in the accompanying consolidated financial statements is as
follows:

At December 31, 2001 the Company has federal income tax net operating loss
carryforwards of approximately $54,400,000, which expire as follows:

44

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company is subject to limitations existing under Internal Revenue Code
Section 382 (Change of Control) relating to the availability of the operating
loss carryforward.

No income taxes were paid during the years ended December 31, 1999, 2000
and 2001.

10. STOCKHOLDERS' EQUITY

PREFERRED STOCK

In August 1998, the Company exchanged $3,640,000 of its 8% senior
convertible notes for 364,000 shares of a newly created Series A convertible
preferred stock. The Series A preferred stock carried a dividend of 8.5% per
year payable in cash or common stock of the Company, at the Company's option,
and was convertible into Common Stock of the Company at a fixed conversion price
of $3.625 per share (subject to certain conditions). In September 1998, holders
of 30,000 shares of Series A preferred stock converted their shares into 82,770
shares of common stock of the Company and in January through August 1999,
holders of 334,000 shares of Series A preferred stock converted their shares
into 921,505 shares of common stock completing the conversion of all outstanding
shares Series A preferred stock.

In December 1998 through February 1999, the Company received net proceeds
of $8,834,346 from the private placement of 945,000 shares of Series B
convertible preferred stock at $10 per share. Two principal stockholders of the
Company purchased $4,000,000 and $2,000,000 of the offering, respectively and
other existing stockholders purchased the balance of $3.45 million. The Series B
preferred stock is convertible into common stock of the Company at a fixed price
of $3.625 per share, subject to certain requirements, and carries a dividend of
8% per year payable in cash or common stock of the Company, at the Company's
option.

In November 2001, the Company received net proceeds of $2,000,000 from the
private placement of 200,000 shares of Series C convertible preferred stock at
$10 per share with H.T. Ardinger, Jr., a principal shareholder and Chairman of
the Board of the Company. The Series C preferred stock is convertible into
common stock of the Company at a fixed price of $0.60 per share, subject to
certain requirements, and carries a dividend of 9% per year payable in cash or
common stock of the Company, at the Company's option.

Holders of Series B and Series C preferred stock have no voting rights
except on amendments to the Company's Articles of Incorporation to change the
authorized shares, or par value, or to alter or change the powers or preferences
of their respective preferred stock issues.

In December 2001, the Company temporarily decreased the Conversion Price of
its outstanding Series B Convertible Preferred Stock from $3.625 per share to
$0.60 per share for a period of ninety (90) days. Pursuant to Section 8(b) of
the Certificate of Designations of Series B Convertible Preferred Stock, the
Company was required to temporarily lower the Series B Conversion Price in
conjunction with the issuance of Series C Convertible Preferred Stock in
November of 2001. Notice was given to Preferred B Stockholders on December 7,
2001 and the temporary Conversion Price Reduction expired at 5:00 p.m. on March
7, 2002. In March 2002, holders of $1,450,000 principal amount of Series B
Convertible Preferred Stock converted their Series B shares into 2,416,666
shares of common stock at $0.60 per share.

COMMON STOCK

During 1999, the Company issued 2,461 shares of common stock to Series A
preferred stockholders of record on June 1, 1999 as payment of $21,192 of 8.5%
dividends accrued for the six months ended June 15, 1999. Series A preferred
dividends were paid semi-annually on June 15th and December 15th of each year in
cash or, at the option of the Company, in common stock. The common stock was
valued at the average of the market prices for the 20 consecutive stock exchange
business days ending ten stock exchange business

45

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

days prior to the dividend payment date. The computed common stock value at
December 15, 1998 and June 15, 1998 was $1.81 and $8.61 per share, respectively.

During 1999, the Company issued 34,127 shares of Company common stock to
Series B preferred stockholders of record on June 1, 1999 as payment of $293,841
of 8.0% accrued dividends for the six months ended June 15, 1999. During 1999,
the Company also issued 91,881 shares of common stock to Series B preferred
stockholders of record on December 1, 1999 as payment of $379,035 of 8.0%
dividends accrued for the six months ended December 15, 1999. Series B preferred
dividends are paid semi-annually on June 15th and December 15th of each year in
cash or, at the option of the Company, in common stock. The common stock is
valued at the average of the market prices for the 20 consecutive stock exchange
business days ending ten stock exchange business days prior to the dividend
payment date. The computed common stock value at June 15, 1999 and December 15,
1999 was $8.61 and $4.13 per share, respectively.

During 2000, the Company issued 127,097 shares of Company common stock to
Series B preferred stockholders of record on June 1, 2000 as payment of $378,091
of 8.0% accrued dividends for the six months ended June 15, 2000. Also during
2000, the Company issued 276,129 shares of common stock to Series B preferred
stockholders of record on December 1, 2000 as payment of $380,000 of 8.0%
dividends accrued for the six months ended December 15, 2000. The computed
common stock value at June 15, 2000 and December 15, 2000 was $2.97 and $1.37
per share, respectively.

During 2001, the Company issued 391,849 shares of Company common stock to
Series B preferred stockholders of record on June 1, 2001 as payment of $376,874
of 8.0% accrued dividends for the six months ended June 15, 2001. Also during
2001, the Company issued 591,664 shares of common stock to Series B preferred
stockholders of record on December 1, 2001 as payment of $379,036 of 8.0%
dividends accrued for the six months ended December 15, 2001. The computed
common stock value at June 15, 2001 and December 15, 2001 was $0.96 and $0.64
per share, respectively.

During 1999, the Company received $1,922,037 from the exercise of 525,791
private and public warrants to purchase 543,710 common shares of the Company at
exercise prices ranging from $3.00 to $4.19 per share.

During 2000, the Company received $3,758,188 from the exercise of 1,097,245
private and public warrants to purchase 1,116,556 common shares of the Company
at exercise prices ranging from $3.00 to $4.50 per share. Additionally, during
August 2000, the Company received $2,450 for the partial exercise of 17,500
underwriter warrants to purchase 17,500 public warrants of the Company at an
exercise price of $0.14 per public warrant.

In August 2001, the Company offered certain of its private warrant holders
the right to exercise their warrants at a temporarily reduced exercise price of
$0.75 per share of common stock for a period of 30-days. As an inducement for
exercise of the warrants, exercising warrant holders received a like number of
new warrants to purchase Company stock at $1.00 per share. The Company received
proceeds of $24,999 from the exercise of 33,332 warrants pursuant to this offer
and issued 33,332 new five-year warrants to purchase common stock at $1.00 per
share which expire in February 2007.

During 1999, the Company received $3,564,641 from the exercise of stock
options to purchase 1,341,622 common shares of the Company at exercise prices
ranging from $.10 to $5.84 per share.

During 2000, the Company received $348,127 from the exercise stock options
to purchase 115,521 common shares of the Company at exercise prices ranging from
$2.06 to $4.63 per share.

During 1999, the Company received $99,810 in proceeds from the sale of
44,220 shares of common stock to employees under the terms of the Company's
Employee Stock Purchase Plan. The employee purchase price for the offering
periods ended April 30, 1999 and October 31, 1999 was $1.46 and $3.85 per share,
respectively.

46

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

During 2000, the Company received $165,490 in proceeds from the sale of
99,990 shares of common stock to employees under the terms of the Company's
Employee Stock Purchase Plan. The employee purchase price for the offering
periods ended April 30, 2000 and October 31, 2000 was $3.04 and $1.21 per share,
respectively. In October 2000, the Board of Directors of the Company amended the
ESPP to change the commencement dates of the six-month offering periods from
April 1 and November 1 to March 1 and October 1 of each year.

During 2001, the Company received $106,569 in proceeds from the sale of
190,556 shares of common stock to employees under the terms of the Company's
Employee Stock Purchase Plan. The employee purchase price for the offering
periods ended March 31, 2001 and September 30, 2001 was $0.62 and $0.48 per
share, respectively.

During 2000, the Company issued 2,500 shares of common stock to a law firm
as partial payment for legal services rendered in connection with the Debenture
offering. The number of common shares issued was determined by dividing the fair
market value of services by an average of the common stock market prices on the
date of issuance. The value of legal services was $15,000 and the computed price
was $6.00 per share.

In May 1999, the Company registered, in a Registration Statement on Form
S-3, 7,933,463 shares of common stock underlying non-redeemable common stock
purchase warrants and publicly traded redeemable common stock purchase warrants
for offer and sale by the persons holding the warrants. The Company also
registered 290,360 shares of common stock underlying warrants held by Network 1
Financial Securities, Inc. received as compensation for services as managing
underwriter of the Company's initial public offering in 1997, 69,888 shares of
common stock held by RP&C International, Ltd. and 183,108 shares of common stock
underlying redeemable and non-redeemable warrants held by RP&C International and
Rauscher, Pierce & Resfnes. The common stock may be offered by its holders or
their successors in interest from time to time in transactions on the Nasdaq
SmallCap Market ("Nasdaq") or in privately negotiated transactions at current
market prices or at negotiated prices. The Company will not receive the proceeds
of sales of the common stock by its holders, but has received and will receive
proceeds from the exercise of warrants, to the extent they are exercised. See
Warrants below.

In April 2000, the Company registered, in a Registration Statement on Form
S-3, 2,606,896 shares of common stock underlying 945,000 shares of Series B
Convertible Preferred Stock ("Series B Preferred Stock"). Each share of Series B
Preferred Stock is convertible to common stock at a conversion price of $3.625
per share for each $10.00 liquidation value of Series B Preferred Stock. The
Company also registered 126,008 shares of common stock issued as dividends on
the Series B Preferred Stock as well as 40,000 shares of common stock underlying
warrants issued as compensation for services rendered in connection with the
offering of Series B Preferred Stock. The common stock may be offered by its
holders or their successors in interest from time to time in transactions on the
Nasdaq SmallCap Market (Nasdaq) or in privately negotiated transactions at
current market prices or at negotiated prices. ViewCast will not receive any new
proceeds from the conversion of the Series B Preferred Stock to common stock,
but received gross proceeds of $9,450,000 from the issuance of the Series B
Preferred Stock in December 1998 through February 1999. ViewCast will receive
proceeds of up to $145,000 from the exercise of warrants (to the extent the
warrants are exercised).

In June 2000, the Company registered, in a Registration Statement on Form
S-3, (i) up to 1,334,454 shares of common stock and (ii) up to 140,000
Redeemable Common Stock Purchase Warrants ("Public Warrants"). Up to 988,889 of
the shares of common stock are issuable upon conversion of $4,450,000 principal
amount of 7% Senior Convertible Debentures Due 2004. Up to 89,000 of the common
shares are issuable upon exercise of a private warrant to purchase common stock.
The Company offered and sold the Debentures and issued the warrant on April 28,
2000 pursuant to Regulation S under the Securities Act of 1933. The Debentures
are currently convertible and the private warrant becomes exercisable April 28,
2001. Up to 254,065 of the shares of common stock are shares issuable to certain
of the selling securityholders upon exercise of certain Public Warrants and upon
exercise of private warrants. The remaining 2,500 shares of common stock covered
by the Registration Statement are currently issued and outstanding shares. Each
Public Warrant entitles the holder to purchase 1.074 shares of common stock at

47

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

$4.50 per share, subject to adjustment under certain circumstances. The Public
Warrants are exercisable at any time through February 3, 2002, unless earlier
redeemed by the Company. The Company may redeem all, but not less than all, of
the Public Warrants, at any time, upon notice of not less than thirty (30) days,
at a price of $.10 per Public Warrant, provided that the per share closing price
or bid quotation of the Company's common stock, as reported on Nasdaq, for any
twenty trading days within a period of thirty consecutive trading days, ending
on the fifth day prior to the day on which the Company gives notice of
redemption, has been at least 150% (currently $6.75, subject to adjustment) of
the initial public offering price per share of our common stock (which was
$4.50). The Public Warrants included in this prospectus are, issuable upon
exercise of certain private warrants.

The common stock and Public Warrants covered by the Registration Statement
may be offered by selling securityholders or their successors in interest from
time to time in transactions on the Nasdaq SmallCap Market (Nasdaq) or in
privately negotiated transactions at current market prices or at negotiated
prices. The Company will not receive any of the proceeds from the sale of
securities by selling securityholders.

In July 1999, stockholders of the Company approved a proposal to increase
the number of authorized shares of common stock of the Company from 30,000,000
shares to 40,000,000 shares.

STOCK OPTION PLANS

In April 1995, the Company adopted its 1995 Stock Plan (the 1995 Stock
Option Plan) under which 2,000,000 shares of the Company's common stock was
reserved for issuance to officers, key employees and consultants of the Company.
The objectives of the stock plan are to attract and retain qualified personnel
for positions of substantial responsibility and to provide additional incentives
to employees and consultants to promote the success of the Company's business.
Options granted under the plan may be incentive stock options or non-qualified
stock options. The plan is administered by the Board of Directors. The options
are granted at the discretion of the Board of Directors at an option price per
share not less than fair market value at the date of grant. In July 1999 and
August 2000, stockholders of the Company approved proposals to increase the
number of shares available for issuance under the 1995 Stock Plan to 4,900,000
and 5,900,000, respectively.

In April 1995, the Company also adopted the 1995 Director Option Plan under
which 250,000 shares of the Company's common stock are reserved for issuance to
outside directors of the Company. The objective of the director plan is to
attract and retain qualified personnel for service as outside directors of the
Company and to encourage their continued service to the Board. Only
non-qualified stock options may be granted. Grants under the plan are automatic
and nondiscretionary and are issued at an option price per share not less than
fair market value at the date of grant.

The Company has issued non-qualified stock options to non-employees and
consultants of the Company and accounts for these issuances by estimating their
fair value at date of grant using the Black-Scholes option-pricing model. An
expense is recognized ratably over the vesting period of the option provided all
material terms of the agreement are defined. In instances where the terms are
not defined, the option is accounted for as a variable plan and an expense is
recognized over the expected period of benefit of the option. Expenses related
to these options are recorded based on an estimate of the options value computed
at the end of each reporting period. The final expense for the variable plan is
recorded when all material terms, i.e. - the number and exercise price of the
options, are known and the options have been earned. Expense of $65,347, $28,588
and $9,603 has been recognized for the years ended December 31, 1999, 2000 and
2001, respectively. These amounts have been aggregated with the valuation of
warrants and disclosed as a component of Consolidated Statements of
Stockholders' Equity.

48

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Following is a summary of stock option activity from December 31, 1998
through December 31, 2001:

The weighted-average grant-date fair value of options granted was $4.96,
$3.07 and $0.92 for the years ended December 31, 1999, 2000 and 2001,
respectively.

The following information applies to options outstanding at December 31,
2001:

Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting
For Stock Based Compensation, requires the disclosure of pro forma net income
and earnings per share information computed as if the Company had accounted for
its employee stock options granted subsequent to December 31, 1994 under the
fair value method set forth in SFAS 123. The fair value for these options was
estimated at the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions:

49

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimated, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options. In addition, because SFAS 123 is applicable only to
options granted subsequent to December 31, 1994, the pro forma information
presented below is not necessarily indicative of the effects on reported net
income in future years.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. Pro forma
information for the years ended December 31, 1999, 2000 and 2001 is as follows:

EMPLOYEE STOCK PURCHASE PLAN

In May 1995, the Company established an Employee Stock Purchase Plan (ESPP)
to provide employees of the Company with an opportunity to purchase common stock
through payroll deductions. Under the ESPP, 250,000 shares of common stock have
been reserved for issuance, subject to certain antidilution adjustments. The
ESPP is intended to qualify as an employee stock purchase plan within the
meaning of Section 423 of the Internal Revenue Code. In August 2000,
stockholders of the Company approved a proposal to increase the number of shares
available for issuance under the ESPP from 250,000 to 500,000 shares and in June
2001, stockholders approved a proposal to increase the number of shares
available for issuance under the ESPP from 500,000 to 1,000,000 shares.

Each ESPP offering is for a period of six months and in October 2000, the
Board of Directors of the Company amended the ESPP to change the commencement
dates of the six-month offering periods from April 1 and November 1 to March 1
and October 1. Eligible employees may participate in the ESPP by authorizing
payroll deductions during an offering period within a percentage range
determined by the Board of Directors. Initially, the amount of authorized
payroll deductions is not more than ten percent of an employee's cash
compensation during an offering period, but not more than $25,000 per year.
Amounts withheld from payroll are applied at the end of each offering period to
purchase shares of common stock. Participants may withdraw their contributions
at any time before stock is purchased, and in the event of withdrawal such
contributions will be returned to participants. The purchase price of the common
stock is equal to eighty-five percent (85%) of the lower of (i) the market price
of common stock immediately before the beginning of the applicable offering
period or (ii) the market price of common stock at the end of each offering
period. The Company pays all expenses incurred in connection with the
implementation and administration of the ESPP. The ESPP terminates in April
2005.

50

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

WARRANTS

The Company has issued private warrants to purchase common stock of the
Company in connection with the issuance and repayment of certain notes payable,
as inducement for early exercise of private warrants and as compensation for
services rendered by various consultants. Additionally, the Company has issued
public warrants to purchase common stock of the Company in connection with its
initial public offering and concurrent debt retirement and debt for equity
exchange.

Following is a summary of warrant activity from December 31, 1998 through
December 31, 2001:

In addition, at December 31, 2001 the Company's lead underwriter for the
initial public offering and assigns held warrants to purchase 122,500 full units
at $6.44 per unit and 17,500 partial units at $6.30 per share, each full unit
consisting of one share of common stock at $6.30 and one public warrant at
$0.14. Each Public Warrant, when exercised, entitles the holder to purchase
1.074 shares of common stock at $4.50.

At December 31, 2001, the Company had outstanding 2,616,348 redeemable
common stock public warrants that were issued in connection with the Company's
initial public offering, as well as 1,183,332 redeemable private warrants, with
terms similar to the public warrants, that were issued in connection with the
early exercise of private warrants during 1998. When initially issued, each
redeemable warrant entitled the holder to purchase 1.0 share of common stock at
$4.50, subject to adjustment under certain circumstances. In October 1998, the
Company reduced the effective exercise price of its then redeemable warrants
from $4.50 to $4.19 per share of common stock in accordance with the provisions
of its warrant agreements, whereby each redeemable warrant currently entitles
the holder to purchase 1.074 shares for

51

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

$4.50. Both the public and private redeemable warrants expire February 4, 2002
and are redeemable by the Company, upon notice of not less than thirty days, at
a price of $.10 per warrant, provided that the closing price or bid price of the
common stock for any twenty trading days within a period of thirty consecutive
trading days ending on the fifth day prior to the day on which the Company gives
notice of redemption has been at least $6.75 (subject to adjustment under
certain circumstances).

At December 31, 2001, the Company also had outstanding 295,440
non-redeemable private warrants with exercise prices ranging from $1.00 to $5.00
per share and with varying expiration dates through February 2007.

During February 1999, the Company issued 40,000 three-year warrants to
purchase Company common stock at $3.625 per share for services rendered in
connection with its Series B convertible preferred stock offering (see Note 10 -
Preferred Stock).

In April 2000, the Company issued to Lead Managers of the Debentures
offering a warrant to purchase 89,000 shares of Common Stock at an exercise
price of $5.00 per share, subject to adjustment in the event of adjustment of
the Conversion Price of the Debentures. The warrant has a term of five (5) years
and may be exercised as to all or any lesser number of shares of Common Stock
covered thereby, commencing twelve months after the date of issuance.

In August 2000, the Company issued 17,500 Public Warrants upon partial
exercise of representative warrants at an exercise price of $0.14 per warrant.

In August 2001, the Company offered certain of its private warrant holders
the right to exercise their warrants at a temporarily reduced exercise price of
$0.75 per share of common stock for a period of 30-days. As an inducement for
exercise of the warrants, exercising warrant holders received a like number of
new warrants to purchase Company stock at $1.00 per share. The Company received
proceeds of $24,999 from the exercise of 33,332 warrants pursuant to this offer
and issued 33,332 new five-year warrants to purchase common stock at $1.00 per
share which expire in February 2007.

In January 2002, the Company extended the expiration date of its
outstanding public and public equivalent common stock purchase warrants to
February 3, 2005 from February 3, 2002. Additionally, effective March 1, 2002,
the Company decreased the effective exercise price per share of common stock
from $4.19 to $1.00, which was above the market price at that date. The warrants
are redeemable by the Company under certain conditions and as of December 31,
2001 there were 3,799,680 public and public equivalent warrants outstanding. The
reduction of the exercise price and the extension of the expiration date also
apply to the issuance of up to 122,500 public warrants upon exercise of certain
representative warrants.

11. EMPLOYEE BENEFIT PLAN

Effective March 1, 1997, the Company adopted a profit sharing plan pursuant
to Section 401(k) of the Internal Revenue Code whereby participants may elect to
contribute up to twenty percent (20%) of their compensation subject to statutory
limitations. The plan provides for discretionary matching and profit sharing
contributions by the Company. All employees are eligible to participate in the
plan provided they meet minimum age requirement of eighteen. For the years ended
December 31, 1999, 2000 and 2001, the Company made no matching or profit sharing
contributions.

12. COMMITMENTS AND CONTINGENCIES

The Company leases various office and manufacturing space under
non-cancelable operating leases extending through 2005. The Company also leases
certain office and computer equipment under non-cancelable operating leases.
Future minimum operating lease payments with initial or remaining terms of one
year or more are as follows:

52

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Rent expense was $595,169, $774,531 and $760,259 for the years ended
December 31, 1999, 2000 and 2001, respectively.

In September 1999, the Company entered into an employment contract with its
Chief Executive Officer for an initial term of 18 months that provides for a
minimum annual salary and incentives based generally on the Company's
performance. The agreement provides for automatic one-year renewals upon the
expiration of the initial term unless terminated by either party upon 60-day
prior written notice.

13. RELATED PARTY TRANSACTIONS

During 1999, the Company paid consulting fees to its then Chairman and
acting Chief Executive Officer in the amount of $147,000 until his resignation
in September 1999.

In October 1998, the Company entered into a working capital line of credit
facility with a partnership controlled by one of its principal stockholders and
now Chairman of the Board of the Company, H. T. Ardinger, Jr.. The one-year,
renewable facility, bears interest at 12% per annum and is collateralized by all
assets of the Company (See Note 7). During 1999, 2000 and 2001, the Company paid
interest of $389,943, $289,123 and 500,850, respectively to the partnership.

In December 1998 through February 1999, the Company received $9.45 million
in gross proceeds from the sale of 945,000 shares of a newly created Series B
convertible preferred stock at $10 per share. Two principal stockholders of the
Company purchased $4,000,000 and $2,000,000, respectively and other existing
stockholders purchased the balance of $3.45 million. The Series B preferred
stock is convertible into common stock of the Company at a fixed price of $3.625
per share, subject to certain requirements, and carries a dividend of 8% per
year payable in cash or common stock of the Company, at the Company's option.

During 1999, the Company received $2,129,207 proceeds from the exercise of
802,549 stock options by officers and directors of the Company at exercise
prices ranging from $.20 to $4.03 per share.

During February 2000, the Company received $390,000 proceeds from the
exercise of 130,000 private warrants by Mr. Ardinger, Chairman of the Board of
the Company, at an exercise price of $3.00 per share.

In November 2001, the Company received net proceeds of $2,000,000 from the
private placement of 200,000 shares of Series C convertible preferred stock at
$10 per share with H.T. Ardinger, Jr., a principal shareholder and Chairman of
the Board of the Company. The Series C preferred stock is convertible into
common stock of the Company at a fixed price of $0.60 per share, subject to
certain requirements, and carries a dividend of 9% per year payable in cash or
common stock of the Company, at the Company's option.

53

VIEWCAST.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

14. SUBSEQUENT EVENTS (UNAUDITED)

In February 2002, the Company received a Nasdaq Staff Determination
indicating that it failed to comply with the minimum net tangible assets or
minimum stockholders' equity requirements for continued listing, set forth in
Marketplace Rule 4310(c)(2)(B) and that its common stock is therefore subject to
delisting from The Nasdaq SmallCap Market. ViewCast requested a hearing before a
Nasdaq Listing Qualifications Panel to review the Staff Determination, but was
unable to meet Nasdaq's timetable for compliance and was delisted from Nasdaq
after the close of trading on April 3, 2002. The Company began trading on the
Over-the-Counter (OTC) Bulletin Board effective with the opening of business on
April 4, 2002.

15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no disagreements concerning any matter of accounting
principle or financial statement disclosure between the Company and its
independent auditors.

54

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The information required by this item is incorporated by reference to
disclosure in the Company's Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this report ("Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to the
Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the
Proxy Statement.

55

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) The following consolidated financial statements required by this
item are included in Part II Item 8 of this report:

Report of Independent Auditors ....................................... 28

Consolidated Balance Sheets a December 31, 2000 and 2001 ............. 29

Consolidated Statements of Operations for the years ended
December 31, 1999, 2000 and 2001 ................................... 30

Consolidated Statements of Stockholders' Equity (Deficit) for the
years ended December 31, 1999, 2000 and 2001 ....................... 31

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000 and 2001 ................................... 34

Notes to Consolidated Financial Statements ........................... 35

(2) The following financial statement schedule is filed as a part of
this report under Schedule II on page 59: Valuation and
Qualifying Accounts for the three years ended December 31, 2001.
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated
financial statements and notes thereto in Item 8 above.

(3) Listing of Exhibits:

EXHIBIT INDEX

56

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)

5(a) Form of Opinion of Thacher Proffit Wood as to the legality of securities being
registered.

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)

10(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 Unisys(TM)(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)

57

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.(5)

10(cc) Working Capital Line of Credit Loan Agreement between ViewCast and the Ardinger Family
Partnership, Ltd.(5)

10(dd) Sublease Agreement between ViewCast and Host Communications, Inc.

21 List of Subsidiaries of ViewCast.(1)

23 Consent of Ernst & Young LLP

- ----------

(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 10-QSB filed November 13, 1998

(4) Incorporated by reference to Form 8-K filed March 15, 1999.

(5) Incorporated by reference to Form 10-KSB filed March 26, 1999.

(b) Reports on Form 8-K

On November 14, 2001, the Company filed a Form 8-K describing the
receipt of $2.0 million gross proceeds from the sale of 200,000 shares
of Series C Convertible Preferred Stock at $10 per share.

58

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
VIEWCAST.COM, INC. AND SUBSIDIARIES

(1) Uncollectible accounts written off, net of recoveries.

(2) Inventory written off, net of recoveries.

59

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

60

INDEX TO EXHIBITS