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EX-23.1 - EX-23.1 - VIEWCAST COM INC | c16189exv23w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K/A
þ | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2010.
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Transition period from to .
Commission File Number: 0-29020
ViewCast.com, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 75-2528700 | |
(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
organization) |
3701 W. Plano Parkway, Suite 300, Plano, TX | 75075 | |
(Address of principal executive offices) | (Zip Code) |
972-488-7200
Registrants telephone number, including area code
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.0001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).Yes o No þ
The aggregate market value of the common stock held by non-affiliates of the registrant as of June
30, 2010 was $6,590,341.
As of March 15, 2011, there were 39,016,318 shares of the registrants common stock (par value
$0.0001) outstanding.
Documents incorporated by reference: None.
TABLE OF CONTENTS
Table of Contents
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Annual Report on Form 10-K included under Business,
Managements Discussion and Analysis of Financial Condition 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 ViewCasts 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 industrys actual results, levels
of activity, performance, or achievements expressed or implied by such forward-looking statements
to differ from expected results. 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, the effect of our accounting policies and other risks detailed in this
Annual Report on Form 10-K and our 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.
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.
References in this Report to ViewCast, the Company, we, us, and our refer to
ViewCast.com, Inc. and its subsidiaries.
Item 1. | Business |
Overview
ViewCast.com, Inc., doing business as ViewCast Corporation (ViewCast), develops
industry-leading hardware and software for the capture, management, transformation and delivery of
digital media over IP and mobile networks. ViewCasts solutions simplify the complex workflows
required for these tasks, allowing broadcasters, businesses, and governments to reach and expand
their use and distribution of their digital media easily and effectively. ViewCasts Niagara®
streaming appliances, Osprey® video capture cards, and ViewCast Media Platform (VMp) software
suite provide the highly reliable technology required to deliver the multi-platform experiences
driving todays digital media market. ViewCast markets and sells its products and professional
services worldwide directly to end-users or through indirect channels including original equipment
manufacturers (OEMs), value-added resellers (VARs), resellers, distributors and computer system
integrators. ViewCast is focused on growth by leveraging the digital media market
expansion and our product solutions to capitalize on sales opportunities. We believe that emphasis
on revenue and market share growth will enable us to realize long-term profitability and
stockholder value.
On March 13, 2009, ViewCast completed the purchase of certain assets from Ancept Media Server,
LLC (the Ancept Assets) related to the development and licensing of software products that
provide the management of the life cycle phases of digital media pursuant to the terms of the Asset
Purchase Agreement dated March 5, 2009, as amended, by and between ViewCast and Ancept Media
Server, LLC. ViewCasts wholly-owned subsidiary, ViewCast Online Solutions, Inc., was renamed
Ancept Corporation and operates this business. The lead software product, rebranded as VMp
Production and the core of VMp, has been an established digital asset management (DAM) solution
capable of supporting the needs of large enterprises, while remaining flexible and affordable to
serve the needs of small to medium businesses. Fortune 1000 companies, educators, small businesses
and public sector organizations have chosen Ancept to help meet their media production, management
and distribution needs.
The combined company has an expanded global business presence and offers a complete set of
solutions for the transformation, management and delivery of live and on-demand video content to
broadband and mobile networks.
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ViewCast was incorporated in Delaware in February 1994 as MultiMedia Access Corporation. We
changed our name to ViewCast.com, Inc. on April 8, 1999. ViewCast has four wholly-owned
subsidiaries: VideoWare, Inc., Osprey Technologies, Inc., Ancept Corporation previously known as
ViewCast Online Solutions, Inc. and ViewCast Technology Services Corporation, all Delaware
corporations. Our principal executive offices are located at 3701 W. Plano Parkway, Suite 300,
Plano, Texas 75075. Our Internet address is www.viewcast.com.
Our common stock trades on the Over-the-Counter Bulletin Board (OTC BB) under the symbol
VCST-OB.
Market Background and Market Drivers
The sum of all forms of video (TV, video on demand, Internet, and P2P) will account for over
91 percent of global consumer traffic by 2013. Internet video alone will account for over 60% of
consumer Internet traffic in 2013. (Cisco® Visual Networking Index)
ViewCast has seen digital media move to the mainstream as a strategic business tool for
enterprisesincluding education and corporate enterprise, and consumer segmentswhile
advertising, media and entertainment look to capitalize on increased viewership over a variety of
devices. As ViewCast looks at existing and emerging market application areas, we observed they
exhibit common requirements: Capture, ingest, transform, index, manage, govern, deliver, and
report.
ViewCast believes theres a growing demand for a general-purpose digital media framework to
support multiple application areas across various lines of business and vertical markets and has
created a wide-ranging framework for building audiences, organizing workflows and creating new
revenue streams in todays digital media marketplace.
ViewCast believes its market opportunity is now expanded to approximately $1.5 billion in 2011
expanding to $2.2 billion by 2014 based on 2010 Frost & Sullivan reports regarding DAM and a
portion of the encoding market, along with managements estimates. The DAM market alone is
estimated to reach $902 million in revenues in 2011 reaching $1.29 billion by 2014, as the market
continues to mature (also according to 2010 Frost & Sullivan reports). The rapid expansion of
these markets, especially toward high definition, more powerful and reliable performance, and
greater ease of use, has underscored the need for structured, secure and scalable digital asset and
media management solutions delivered comprehensively, from one trusted provider. We believe that
ViewCast can capably fill that role.
Market Drivers
We believe the following factors are driving the market for our digital media equipment and
management systems:
| Transition to digitized Internet Protocol (IP) distribution platform for information,
content and communication; |
| Increase adoption of webcasting, streaming and video applications for business
efficiency; |
| Increase in adoption of high-definition content demand drives the need for advanced
solutions; |
| Proliferation of digital assets within media and entertainment, business, educational,
and government entities; |
| Evolution of digital asset management with web content management creates increased
value for managing online presence; |
| Increase in DAM technology within new markets such as advertising, publishing,
telecommunications and life sciences as new standards are adopted;
|
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| Increase in advertising spend (TV vs. Web); |
| The value proposition in terms of investment, efficiency, flexibility and speed
continues to increase demand on the enterprise side; and |
| Rising adoption of mobile video worldwide is expected to drive the demand for efficient
video compression solutions and delivery solutions. |
How ViewCast Addresses the Market
ViewCast believes it is well-positioned to address the expanding digital media market for the
following reasons:
| ViewCast is a streaming industry pioneer |
| The streaming media industry was built on our first digital media
product line, Osprey® video capture cards |
||
| More than 370,000 Osprey video capture cards have been deployed
globally |
| ViewCast develops hardware and software products that transform, manage and deliver
digital video, audio, images and media files over broadband and mobile networks. |
| ViewCast Media Platform VMp® digital asset management software |
||
| ViewCast Niagara® encoding systems for video and audio |
||
| ViewCast Osprey® cards for capturing video and audio |
| Our products simplify the complex workflows required for the delivery of news, sports,
music and other video content to computers and mobile devices. |
| We sell to broadcasters, businesses, educators and governments to repurpose their
content, reach new markets, expand their audiences and create new revenue streams. |
| ViewCast has an expanded global business presence with a complete portfolio of solutions
that encompass live and on-demand video encoding, digital asset management and delivery
solutions. |
ViewCast Advantage
We believe we provide the following advantages:
| Proprietary designs and proven performance, |
||
| Third-party integration capabilities, |
||
| Established relationships with other industry leaders, |
||
| Broad portfolio of solutions: |
| Capture Cards, Appliances, Software, |
| Strong brand and product awareness: |
| Osprey Cards, Niagara Encoders, ViewCast Media Platform software, |
| Solutions for multiple markets, and multiple applications, |
||
| Global presence, and |
||
| Reputation for reliable, advanced technology and design: |
| Controlled engineering & manufacturing process. |
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Corporate Growth and Value
ViewCast has become widely regarded as a leading global provider of high-quality digital media
communication products. We intend to achieve our goals by leveraging the markets expansion with
our current and future products internally developed or acquired to capitalize on sales
opportunities. Specifically, our ability to achieve our goals depends on the following:
| Rapidly Growing Market. Media, enterprise, government, and network communication
sectors are adopting and allocating funds for digital media technologies; |
| Profitability and Increasing Revenue. ViewCast believes that a focus on revenue and
market share growth, both organically and through acquisition, will enable us to realize
long-term profitability and enhanced stockholder value; |
| Strong Products and Brand Equity. ViewCast is positioned for the market with well-known
solutions that appeal to a broad range of industries and continues investment in efficient
and selective product and feature development for increased ROI and acceptance in market; |
| Sales Focus. Expanded and knowledgeable sales presence to address the large growing
global market through well-established and new worldwide indirect channels and large
account & OEM business development; and |
| Maintain Capitalization and Efficient Operations. ViewCast expects to maintain
capitalization to sustain rapid growth in revenue and market share for working capital and
investing in growth areas of sales, marketing, and research and development. |
ViewCast Products and Services
The ViewCast solutions family includes:
| Osprey Video® line of capture cards, |
||
| Niagara® line of video encoding systems and related SimulStream® and Niagara SCX®
software, |
||
| ViewCast Media Platform (VMp) DAM software suite including ViewCast Media
Production, |
||
| Professional services and support, and |
||
| Other complementary products and technologies from leading providers. |
ViewCast solutions provide a bridge between digital assets and delivery networks. Our
customers seek to have their digital assets, including MS Office documents, PDF files and still
image files, in addition to audio and video media, processed in one or more of the following ways:
| Ingest/Encode |
||
| Index |
||
| Transform |
||
| Manage |
||
| Search/Access |
||
| Edit |
||
| Workflow, and |
||
| Deliver (Live or on-demand) to users and devices on delivery networks, such as
enterprise, web, IPTV, digital signage, and mobile. |
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Table of Contents
Osprey Video Products. Since the inception of Internet streaming media, starting with
Progressive Networks (now RealNetworks®) in 1997, ViewCast Osprey Video has been a major player in
pioneering efforts of the streaming media industry. Throughout the streaming media markets
emergence and high-rate growth, Osprey
Video has maintained its position as an industry-leading developer and manufacturer of digital
media capture technology. Moreover, Osprey Video products have enabled many companies to deliver
on key applications like Internet TV, mobile streaming, webcasting, and more recently, video
signage.
| Designed for video acquisition/capture/streaming |
| Award-winning capture cards for streaming from the first card for Web streaming to
professional-quality cards for Internet TV: |
| Analog /Digital Audio & Video |
||
| Standard & High Definition |
||
| PCI & PCI Express |
||
| Composite, Component & SDI Video, Y/C, S-Video |
||
| Balanced & Unbalanced Audio |
Niagara Streaming Systems and Software. The ViewCast Niagara family of streaming media
encoders have been designed from the ground up to provide reliable, pre-configured, plug-and-play
solutions enabling the user to quickly encode and stream premium quality audio and video over the
Internet or corporate network. The Niagara systems are built upon the well-known ViewCast Osprey
Video streaming capture boards. These systems include a mix of Osprey analog and digital capture
boards along with our remote encoder management software (Niagara SCX®) and streaming productivity
software (SimulStream®) resulting in a powerful, reliable, and cost-effective streaming media
platform.
| Complete systems designed for live video streaming: |
| Acquire, transform, and deliver video content to IP and mobile networks |
||
| Dedicated, embedded operating systems, optimized for video encoding |
| Features Niagara SCX® and SimulStream® software technology: |
| Stream a single video source in multiple formats, bitrates and resolutions simultaneously |
||
| Configure & control encoding into multiple formats over the network
through an easy-to-use Web interface allowing scalability and remote access |
We believe our Niagara products offer unique advantages to application developers, integrators
and OEMs including extensive Software Developments Kits (SDKs). These streaming appliances
comply with the most popular industry video standards, and we provide expert support and
development staff to enable custom development of required applications.
ViewCast Media Platform (VMp) Software. Since the asset acquisition from Ancept in March
2009, ViewCast has expanded its software solutions into DAM and workflow software solutions known
as VMp. ViewCast develops software solutions to manage and automate media, from production to
scheduling, editing, processing and content distribution. These solutions enable ViewCasts
customers to save operating costs while scaling their media management applications and automating
complex workflows.
The available modules VMp Live, VMp Portal and VMp Production include comprehensive
support for live video sources and events as well as archived or on-demand content. The VMp
modules, as well as third-party applications, can access this functionality through a robust Web
services application programming interface (API).
| Comprehensive File Management |
| Unlike other digital management solutions the VMp software manages
dozens of audio and video formats, hundreds of image formats, Microsoft® Office
docs and Adobe® PDF files. |
||
| Full-featured solution supports the needs of large enterprises, while
remaining flexible and affordable to serve the needs of small to medium businesses. |
| Complete Life Cycle Management |
| From ingest to delivery the VMp software enables and automates
content production; manages distribution and publishing; controls access and usage
of content; significantly reduce costs. |
| Includes live event management, which allows scheduling, recording and
delivery of live video
from encoder and video sources on the network.
|
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VMp Production is the core module and has been an established DAM solution capable of
supporting the needs of large enterprises, while remaining flexible and affordable to serve the
needs of small to medium businesses. With the VMp Live and VMp Portal modules and additional new
features available in 2011, ViewCasts current and future customers will continue to benefit from
their investment in the ViewCast Media Platform. By adding ViewCasts industry-leading Osprey and
Niagara IP video encoding solutions, we have created a wide-ranging framework available for
building audiences, organizing workflows and creating new revenue streams.
Marketing and Sales
ViewCast serves a variety of markets including:
| Broadcasters and Narrowcasters, |
| Federal, State, and Local Government, |
| Small, Medium, and Large Enterprises, |
| Mobile and Wireline Carriers, |
| Education and Training, |
| Retail and Consumer Package Goods, |
| Content Delivery Networks, |
| Digital Signage Integrators, and |
| Other industry verticals such as advertising, medical and insurance. |
Our solutions are globally marketed to media and entertainment, Internet, corporate,
financial, educational, security, healthcare, governmental and network enterprises. We also market
our products and services directly or via third-party distribution channels including, but not
limited to, OEMs, VARs, distributors, 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.
Our product revenue has been well diversified among various end-users who purchase from our
direct and indirect channels. During 2010, two distributors generated more than 10% of our sales,
Jeff Burgess and Associates, Inc. (12.6%) and Graphics Distribution, Inc. (18.7%) due to general
increased sales volume and uptick in integrator activity. In addition, one of our OEM customers,
Cisco Systems, Inc. generated 17.3% of our 2010 sales. We plan to build upon our established
customer base by expanding our distribution and sales force and expanding our product market
awareness and reach.
Our sales and marketing program utilizes direct business development and indirect reseller,
OEM and VAR channels that enhances our ability to cover domestic and international geographical
territories and market segments in an efficient and cost-effective manner. Under the terms of the
indirect channel 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 support and enhance our
channels of distribution to encourage placement of ViewCast video products into the marketplace.
Production and Supply
We build our Osprey video products using contract manufacturers in the United States and Asia.
Our operations personnel in the Carrollton, Texas area are responsible for parts planning,
procurement, Niagara system assembly, software loading, final testing and inspection to quality
standards. We plan for most high-volume production to be handled through large OEMs or contract
manufacturers.
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We have been and will continue to be dependent on third parties for the supply and
manufacturing of our subassemblies, 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 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 Osprey video card products and Niagara system products are customer installable.
For those customers who need assistance with Niagara products, we utilize our channels to install
and provide service. Further, we maintain an in-house technical support group to assist our
channels and customers as required. The VMp software solution is typically installed and
customized with assistance from the ViewCast professional services group or authorized third party.
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
maintenance and support on our products.
Research and Development
We focus our research and development activities on digital media applications, process
management and new features for expanded market opportunities. 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 enhance our research and development, and potentially reduce
costs. During the 2009 and 2010 fiscal years we expended approximately $3.0 million and $3.8
million, respectively, in research and development activities; plus capitalized software
development costs and patents of $0.5 million and $51 thousand, respectively. No significant
portion of such expenses was borne directly by our customers.
New products or feature enhancements are scheduled for launch in 2011 in the Osprey, Niagara
and VMp product families that will provide new capabilities and features for digital media
applications. We believe these products and services will be competitive and feature unique
capabilities. We will maintain integration efforts with third party application software and
hardware for our products and services.
Competition
The market for digital media software, systems and services is highly competitive and
characterized by the frequent introduction of new products and features based upon innovative
technologies. We compete with numerous well-established manufacturers and suppliers of video
streaming technologies, videoconferencing, networking, telecommunications, DAM and multimedia
products, certain of which dominate the existing network or video communications market for such
products. In addition, we are aware of others that are developing, and in some cases have
introduced, new products and services for digital media communications and management.
We are not aware of any direct competitors that compete in all of our digital media product
families and applications. However, among our direct competitors competing with one or more of our
products or applications are: VBrick, Digital Rapids, Opentext, and EMC. Electronics manufacturers
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 two patents
pending covering certain aspects of a confidence monitor and system and a media encoder system.
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.
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We believe that product recognition is an important competitive factor and, accordingly, we
promote the ViewCast®, Osprey®, Niagara®, SimulStream®, Niagara SCX®, VMp and Ancept names, among
others, in connection with our marketing activities, and have applied for or received trademark or
service mark registration for such names. Our use of these marks and our trade names may be
subject to challenge by others, which, if
successful, could have a material adverse effect on our operations.
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. Compliance with
environment laws, both domestic and foreign, may also precipitate changes in materials or processes
related to our products and packing materials and may cause us to be subject to additional
requirements for testing, certifications or disposal. We do not believe the cost of compliance
with environment laws will be material to the Company.
Personnel
As of March 15, 2011, our personnel consisted of eighty-four (84) people, three (3) of whom
are in executive positions, twenty-seven (27) of whom are engaged in engineering, research and
development, twenty-two (22) of whom are engaged in marketing and sales activities, thirteen (13)
of whom are engaged in operations, ten (10) of whom are providing support and professional services
and nine (9) 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.
Item 1A. | Risk Factors |
Not required.
Item 1B. | Unresolved Staff Comments |
None.
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Item 2. | Properties |
Our principal executive offices are located in approximately 18,676 square feet of leased
space in Plano, Texas. We use this space for administration, marketing, research and development
and some of our sales activities. The primary lease term expires in April 2011 and provides for a
base annual rent expense of $204,547. In 2010 ViewCast entered into an amendment to the lease
wherein, effective May 1, 2011, the term of lease shall be extended with the termination date being
July 31, 2021 and the base annual rent expense increases to $244,003. Our manufacturing
and distribution operations are located in approximately 16,575 square feet of leased space in
Carrollton, Texas. The lease expires in February 2012 and provides for a base annual rent expense
of $71,257.
Our Ancept subsidiary will continue to operate its engineering, support and services
operations at its current location in Bloomington, Minnesota and Grand Forks, North Dakota and
other sites. Our finance, administration, sales and marketing functions are based at ViewCast
headquarters in Plano, Texas
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 |
There are no material legal proceedings pending to which we are a party, or of which any of
our property is the subject, other than ordinary, routine litigation incidental to the business.
Item 4. | Submission of Matters to a Vote of Security Holders |
None.
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PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities |
Common Stock Price Range
As of March 15, 2011, there were 39,016,318 shares of our common stock outstanding. The
following table sets forth, for the periods indicated, the high and low sales prices for the common
stock on the OTC-BB. Our common stock is traded on the OTC-BB under the symbol VCST.OB. 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.
Common Stock | ||||||||
Fiscal 2009 | High | Low | ||||||
1st Quarter |
$ | 0.41 | $ | 0.30 | ||||
2nd Quarter |
$ | 0.40 | $ | 0.28 | ||||
3rd Quarter |
$ | 0.34 | $ | 0.15 | ||||
4th Quarter |
$ | 0.26 | $ | 0.15 |
Common Stock | ||||||||
Fiscal 2010 | High | Low | ||||||
1st Quarter |
$ | 0.41 | $ | 0.30 | ||||
2nd Quarter |
$ | 0.40 | $ | 0.28 | ||||
3rd Quarter |
$ | 0.34 | $ | 0.15 | ||||
4th Quarter |
$ | 0.26 | $ | 0.15 |
On March 15, 2011, the last reported sales price for our common stock as reported on the
OTC-BB was $0.26. As of March 15, 2011, there were approximately 285 holders of record of the
common stock.
Dividend Policy
We have never paid cash dividends on our common stock. The Board of Directors does not
anticipate declaring 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.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On December 30, 2010, ViewCast received subscriptions of $745,000 from the private placement
of 2,950,847 shares of common stock. The purchase price per share of common stock was
approximately $0.2525, which was the weighted average closing price for the ten trading days
immediately prior to December 30, 2010. Two of the investors are David Brandenburg and Diana L.
Brandenburg. Mr. Brandenburg is one of our directors. They acquired the shares of Common Stock on
the same terms as the other investors. There are no additional material relationships between the
Company and the investors aside from entering into subscription agreements. Each of the investors
is an accredited investor as defined under Rule 501 promulgated pursuant to the Securities Act of
1933, as amended (the Securities Act), and the shares of Common Stock were issued pursuant to
Rule 506 promulgated pursuant to the Securities Act.
10
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Purchases of Equity Securities by the Issuer and the Affiliated Purchasers
None.
Item 6. | Selected Financial Data |
Not required.
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following information should be read in conjunction with our consolidated financial
statements and related notes thereto included elsewhere in this Report. The following discussion
may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual
results could differ materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to these differences include, but are not limited to, those
discussed above under Special Note Regarding Forward-Looking Statements.
Overview
ViewCast.com, Inc., doing business as ViewCast Corporation (ViewCast), develops
industry-leading hardware and software for the capture, management, transformation and delivery of
digital media over IP and mobile networks. ViewCasts solutions simplify the complex workflows
required for these tasks, allowing broadcasters, businesses, and governments to reach and expand
their use and distribution of their digital media easily and effectively. ViewCasts Niagara®
streaming appliances, Osprey® video capture cards, and ViewCast Media Platform (VMp) software
suite provide the highly reliable technology required to deliver the multi-platform experiences
driving todays digital media market. ViewCast markets and sells its products and professional
services worldwide directly to end-users or through indirect channels including original equipment
manufacturers (OEMs), value-added resellers (VARs), resellers, distributors and computer system
integrators. ViewCast is focused on growth by leveraging the digital media market expansion and
our product solutions to capitalize on sales opportunities. We believe that emphasis on revenue
and market share growth will enable us to realize long-term profitability and stockholder value.
On March 13, 2009, ViewCast completed the purchase of the Ancept Assets from Ancept Media
Server, LLC (the Seller) related to the development and licensing of software products that
provide the management of the life cycle phases of digital media pursuant to the terms of the Asset
Purchase Agreement dated March 5, 2009, as amended, by and between ViewCast and the Seller.
ViewCasts wholly owned subsidiary, ViewCast Online Solutions, Inc., was renamed Ancept Corporation
and operates this business. The lead software product, rebranded as VMp Production and the core of
VMp, has been an established digital asset management (DAM) solution capable of supporting the
needs of large enterprises, while remaining flexible and affordable to serve the needs of small to
medium businesses. Fortune 1000 companies, educators, small businesses and public sector
organizations have chosen Ancept to help meet their media production, management and distribution
needs. The combined company has an expanded global business presence and offers a complete set of
solutions for the transformation, management and delivery of live and on-demand video content to
broadband and mobile networks.
ViewCast utilizes significant capital to design, develop and commercialize its products and
intends to fund its 2011 operating activities and sales growth by utilizing existing cash, cash
provided from operations and working capital lines of credit to the extent possible. ViewCast
believes that these items will provide sufficient cash to fund operations for the next 12 months,
however, ViewCast may require additional working capital during the next year to support operations
and the expansion of sales channels and market distribution, to develop and introduce new products
and services, to enhance existing product offerings, to address unanticipated competitive threats
or technical problems, to transition adverse economic conditions and for potential acquisition
transactions. There can be no assurance that 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 the event ViewCast is unable to raise additional capital or execute
other alternatives, it 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 ViewCasts
results of operations or financial position.
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Financial Highlights of 2010
Total revenues for the year ended December 31, 2010 were $17,335,953, a 25% increase from
revenues of $13,905,860 reported in 2009. Gross margin for 2010 increased 19% to $10,473,688, or
60.4% of sales, from $8,782,674, or 63.2% of sales, in the year ended December 31, 2009. While
revenues increased 25%, total operating expenses decreased 5% to $10,850,437 for 2010 when compared
to the $11,446,605 for 2009, resulting in a net loss of $550,997 for the fiscal year of 2010, a
reduction in the net loss of $2,249,350 compared to the net loss of $2,800,347 for the fiscal year
of 2009.
Critical Accounting Policies
Managements 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 U.S (GAAP). 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, 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. In
addition to the items listed above which are affected by estimates, we believe that the following
are critical accounting policies used in the preparation of our consolidated financial statements:
| Revenue Recognition We apply provisions of Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements as revised
by SAB 104, Revenue Recognition, FASB ASC 605, Revenue Recognition and FASB ASC 985,
Software. Under these guidelines, we recognize revenue on transactions where persuasive
evidence of an arrangement exists, title has transferred, product payment is not contingent
upon performance of installation or service obligations, the price is fixed or determinable
and payment is reasonably assured. We accrue warranty costs and sales allowances for
promotional activities at time of shipment based on historical experience. We defer
revenue associated with maintenance and support contracts and recognize revenue ratably
over the contract term. Professional services revenue is recognized as provided. |
| Allowance for Doubtful Accounts We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required payments.
If the financial condition of our customers or distribution partners were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may be
required. |
| Excess and Obsolete Inventories We write down our inventories for estimated
obsolescence and unmarketable inventory equal to the difference between the cost of the
inventory and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions are less than those projected by
management, additional write-downs may be required. |
| Goodwill Arising from the Acquisitions of Business We record goodwill arising from
the acquisition of a business as the excess of the purchase price over the estimated fair
value of the net assets of the business acquired. In accordance with FASB ASC 350,
Intangibles Goodwill and Other, we are required to test goodwill for impairment
annually or more frequently if circumstances indicate potential impairment. Consistent
with this standard, we will review goodwill, as well as other intangible assets and
long-term assets, for impairment annually or more frequently as warranted, and if
circumstances indicate that the recorded value of any such other asset is impaired, such
asset is written down to its new, lower fair value. If any item of goodwill or such other
asset is determined to be impaired, an impairment loss would be recognized equal to the
amount by which the recorded value exceeds the estimated fair market value. |
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Results of Operations
Year Ended December 31, 2010 compared to Year Ended December 31, 2009.
Net Sales. During the year ended December 31, 2010, net sales increased $3,430,093 to
$17,335,953 from $13,905,860 in 2009, representing a 25% increase from 2009. Net sales for Osprey
and Niagara products increased during 2010 compared to the same period in 2009 by 36% in the North
America sales region, 1% in the Europe, Middle East and Africa (EMEA), and 7% in the Pacific
Rim/South America sales regions.
Osprey Product Sales. During the year ended December 31, 2010, Osprey sales increased
$1,910,753 to $9,781,324 from $7,870,571 in 2009, representing a 24% increase from 2009 and 56.4%
of total 2010 net sales, compared to 56.6% in 2009. The increase in sales for 2010 was due to
sales increases in all sales regions. We anticipate further growth in 2011 from broadband
networking providers as they deploy new, higher bandwidth services and technologies and from
integrators with other applications requiring video capture.
ViewCast Niagara® Streaming/Encoding Systems. During the year ended December 31, 2010,
combined systems sales increased $1,183,717 to $5,891,007 from $4,707,290 in 2009, representing a
25% increase from 2009 and 34.0% of total 2010 net sales, compared to 33.9% in 2009. The increase
in sales for 2010 was primarily due to sales increases in the North America sales region. During
2011 we anticipate sales of the Niagara 4100 along with our other Niagara systems and software
will continue to grow during 2011.
Software Licenses and Other Revenues. During the year ended December 31, 2010, other revenues
from software licenses, support and maintenance, and professional services increased $335,623 to
$1,663,622 from $1,327,999 in 2009, representing a 25% increase from the 2009 levels and 9.6% of
total 2010 revenue, compared to 9.5% in 2009. This increase was primarily due to ViewCasts
acquisition of Ancept late in the first quarter of 2009, whose revenues increased $358,740 to
$1,464,108 in 2010 from $1,105,368 in the partial year 2009, representing a 32% increase from the
2009 levels and 8.4% of total revenue in 2010 compared to 7.9% in 2009. We anticipate that Other
Revenue will vary quarter to quarter depending on the mix of software license and professional
service revenues in addition to support and maintenance revenues that are amortized over the
contract period.
Cost of Sales/Gross Profit. During the year ended December 31, 2010, cost of sales increased
$1,739,079 to $6,862,265 from $5,123,186 in 2009, representing a 34% increase from 2009. Gross
profit margin increased $1,691,014 to $10,473,688 from $8,782,674 in 2009, representing a 19%
increase from 2009 and 60.4% of total 2010 net sales, compared to 63.2% in 2009. The increase in
gross profit was due to increased net sales in 2010. The decrease in gross profit margin percentage
was primarily due to a higher percentage of sales derived from the lower margin OEM system
products. In addition, the increased revenues from professional services, support and maintenance
experience a lower margin than the hardware and software products.
We expect 2011 gross profit margins to remain comparable to historical margins in the 55%-68%
range. Margins will be affected quarter to quarter by promotional activities, price adjustments,
cost of materials, inventory obsolescence, new products, and the sales mix between capture cards,
systems and services in any one reporting period.
Selling, General and Administrative Expense. During 2010, selling, general and administrative
expenses decreased $1,336,006 to $6,288,956 from $7,624,962 in 2009, representing an 18% decrease
from 2009 and 36.3% of total 2010 net sales, compared to 54.8% in 2009. The decrease is
attributable to reductions in expenses for sales, customer support, marketing, and finance and
administration, reflecting a decrease in average headcount and related expenses. Additionally,
there were non-recurring expenses of $167,000 during 2009 related to the acquisition of the Ancept
Assets.
Research and Development Expense. During 2010, research and development expense increased
$723,756 to $3,755,971 from $3,032,215 in 2009, representing a 24% increase over 2009 and 21.7% of
total 2010 net sales, compared to 21.8% in 2009. The increase reflects higher new product
prototype and related development expenses compared to 2009. Research and development expenses
fluctuate depending on the number of product introductions planned and as new product prototypes,
testing and certifications are completed.
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Depreciation and Amortization Expense. During 2010, depreciation and amortization expense
increased $16,082 to $805,510 from $789,428 in 2009, representing a 2% increase from 2009. The
increase was primarily due to the amortization of acquired intangible assets and capitalized
software development plus capital expenditures in 2010 for IT infrastructure, test equipment and
demo gear.
Other Income and Expense. During 2010, total other expense increased by $25,058 to $179,248
from $154,190 in 2009, representing a 16% increase from the 2009 levels. Interest expense for 2010
increased $22,910 to $185,741 from $162,831 in 2009, representing a 14% increase from the 2009
levels. The increase in interest expense is principally due to an increased average outstanding
balance in the line of credit. Interest income for 2010 decreased $3,678 to $988 from $4,666 in
2009. The decrease in interest income is primarily due to lower interest rates during the period.
Net Loss. During the year ended December 31, 2010, the net loss decreased $2,249,350 to a net
loss of $550,997 from a net loss of $2,800,347 in 2009. The decrease in net loss was mainly due to
increased revenue and the related gross margins, together with a reduction in total operating
expenses. The net loss per share to the common stockholders, after adjusting for preferred
dividends of $820,000, for the year ended December 31, 2010 was ($0.04) per share, compared to a
net loss of ($0.10) per share, for the year ended December 31, 2009.
Liquidity and Capital Resources
ViewCasts primary sources of funds for conducting its business activities are derived from
sales of its products and services, from its credit facilities and from the placement of its equity
securities with investors. ViewCast requires working capital primarily to increase inventories and
accounts receivable during sales growth, develop products, service debt, purchase capital assets,
and to fund operating losses and strategic acquisitions.
Net cash used by operating activities for the year ended December 31, 2010 totaled $106,719,
an improvement from the cash used by operating activities of $480,682 in 2009. The net cash used
in operating activities for the year ended December 31, 2010 was due to the net loss of $550,997
plus changes in operating assets and liabilities of $577,396 partially offset by non-cash operating
expenses of $1,021,674. The cash used by operating assets and liabilities was principally from
increases in prepaid expenses and accounts receivable, from an increased amount of orders received
in December 2010, partially offset by cash provided from increases in accounts payable and accrued
expenses, and decreases in inventories and deposits.
Net cash used for investing activities during the year ended December 31, 2010 totaled
$156,830, of which $111,111 was used for property and equipment purchased and $51,614 of software
development costs and patents capitalized, which was partially offset by $5,895 cash provided from
proceeds from property and equipment disposal.
During the year ended December 31, 2010, ViewCasts financing activities, provided cash of
$1,543,874 of which $949,157 was provided from an increase in the line of credit and $754,853 from
the sale of stock under a private placement (see Note 10), partially offset by $160,136 cash used
for repayment of long-term debt.
In June 2007, ViewCast entered into a Purchase and Sale Agreement/Security Agreement with
Amegy Bank National Association, a national banking association to provide a line of credit for
working capital. The general borrowing availability under this facility is $1,000,000, reviewed as
growth of business dictates. However, this may be exceeded without penalty. As of December 31,
2010, we have an outstanding balance of $1,041,478 under this facility based on the outstanding
accounts receivable at year end.
Since October 1998, the Company has maintained a credit facility with an entity controlled by
one of its principal stockholders, Mr. H.T. Ardinger. Most recently, ViewCast.com, Inc., Osprey
Technologies, Inc. and VideoWare, Inc. (jointly and severally, the Borrower) amended the terms
and conditions of the loan and security agreement with the Ardinger Family Partnership, Ltd. on
March 10, 2010, effective January 31, 2010. Under the amended terms any amounts outstanding of the
primary principal amount and secondary principal amount mature December 31, 2012, subject to
certain earlier payment conditions. The interest on the primary principal amount will accrue and
be paid monthly based on an interest rate per annum which is the greater of 5.0% or the effective
prime rate plus 0.75% (4.00% as of December 31, 2009 and 2010). Interest on the secondary
principal shall accrue based on the effective Applicable Federal Rate, as defined in the agreement,
(2.64% and 0.32% as of December 31, 2009
and 2010, respectively). The amended terms call for interest to be paid monthly; and
beginning July 31, 2010, minimum monthly principal payments of $21,422 had been made, in additional
to the monthly interest payments. The amended note agreement is secured by all the assets of the
Borrower.
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There were no preferred stock dividends declared or paid during 2010. The Series B and Series
C preferred stock issues carry cumulative dividends of 8% and 9% per year, respectively, and are
generally payable semi-annually in arrears in cash or in ViewCast common stock, at ViewCasts
option. Cumulative dividends in arrears on preferred shares are approximately: Series
B-$5,760,000, Series C-$1,617,500. Holders of Series B and Series C preferred stock have no voting
rights except as required by law.
On December 30, 2010, the Company received net proceeds of $745,000 from the private placement
of 2,950,847 shares of common stock. The purchase price per share of common stock was
approximately $0.2525, which was the weighted average closing price for the ten trading days
immediately prior to December 30, 2010. The investors included David W. Brandenburg, a principal
stockholder and member of the Board of Directors of the Company, and his spouse.
At December 31, 2010, ViewCast had working capital of $2,812,488 and cash and cash equivalents
of $1,648,476. ViewCast expects to obtain additional working capital by increasing sales,
maintaining reduced operating expenses, borrowing under its loan facilities and through other
initiatives that may include raising additional equity. ViewCast utilizes significant capital to
design, develop and commercialize its products and intends to fund its operating activities and
sales growth during the next twelve months by utilizing existing cash, cash contributed from
operations and its available working capital lines of credit. ViewCast anticipates it may require
additional working capital during 2011 to support the expansion of sales channels and market
distribution, to develop and introduce new products and services, to enhance existing product
offerings, to address unanticipated competitive threats or technical problems, to transition
adverse economic conditions, to service its debt, and for potential acquisition transactions.
Although ViewCast has no firm arrangements with respect to additional capital financing, on an
ongoing basis, it considers proposals received from potential investors relating to the issuance of
equity securities in exchange for a cash investment in ViewCast. There can be no assurance that
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. ViewCast
intends to actively pursue other strategic merger and acquisition opportunities to the extent
possible. 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 ViewCasts results of
operations or financial position.
At December 31, 2010, ViewCast had no material commitments for capital expenditures.
Operating Leases
The following table summarizes ViewCasts operating leases with definitive payment terms that
will require cash outlays in the future. These future cash payment amounts are as of December 31,
2010:
Contractual Obligations | (In thousands) | |||||||||||||||||||||||
and Commitments: | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||
Operating leases |
$ | 307 | $ | 239 | $ | 243 | $ | 243 | $ | 1,692 | $ | 2,724 | ||||||||||||
$ | 307 | $ | 239 | $ | 243 | $ | 243 | $ | 1,692 | $ | 2,724 | |||||||||||||
ViewCast is obligated under various operating lease agreements, primarily for office
facilities that expire at various dates through 2021. The scheduled monthly base rental payments
for facilities range from $6,492 to $20,232 and differ from the monthly rental expense due to free
or varied monthly rental payments during the term of the lease agreements.
15
Table of Contents
Off Balance Sheet Arrangements
ViewCast does not have any off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on ViewCasts financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Not required.
16
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Item 8. | Financial Statements |
ViewCast.com, Inc. and Subsidiaries
Index to Consolidated Financial Statements
Index to Consolidated Financial Statements
18 | ||||
19 | ||||
20 | ||||
21 | ||||
22 | ||||
23 |
17
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Report of Independent Registered Public Accounting Firm
To the Board of Directors
ViewCast.com, Inc.
ViewCast.com, Inc.
We have audited the accompanying consolidated balance sheets of ViewCast.com, Inc. and subsidiaries
(the Company) as of December 31, 2010 and 2009 and the related consolidated statements of
operations, stockholders equity (deficit) and cash flows for the years then ended. The Companys
management is responsible for these consolidated financial statements. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. Our audits also included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, 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 financial position of ViewCast.com, Inc. as of December 31, 2010 and 2009
and the results of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/S/ BKD, LLP
Dallas, Texas
March 31, 2011
Dallas, Texas
March 31, 2011
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VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, | December 31, | |||||||
2009 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 368,151 | $ | 1,648,476 | ||||
Accounts receivable, less allowance for doubtful accounts of
$69,767 and $76,436 at December 31, 2009 and 2010, respectively |
1,208,929 | 2,204,125 | ||||||
Inventories, net |
2,283,348 | 2,215,249 | ||||||
Prepaid expenses |
208,804 | 278,928 | ||||||
Total current assets |
4,069,232 | 6,346,778 | ||||||
Property and equipment, net |
575,032 | 331,466 | ||||||
Capitalized software development costs, net |
1,364,418 | 982,503 | ||||||
Goodwill |
620,002 | 620,002 | ||||||
Intangible assets, net |
170,717 | 163,247 | ||||||
Deposits |
48,433 | 32,637 | ||||||
Total assets |
$ | 6,847,834 | $ | 8,476,633 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
||||||||
Current liabilities: |
||||||||
Line of credit |
$ | 92,321 | $ | 1,041,478 | ||||
Accounts payable |
730,395 | 1,078,639 | ||||||
Accrued expenses and other current liabilities |
1,033,167 | 1,129,650 | ||||||
Current maturities of long-term debt and stockholder notes payable |
157,133 | 284,523 | ||||||
Total current liabilities |
2,013,016 | 3,534,290 | ||||||
Long-term debt, less current maturities |
46,698 | 26,464 | ||||||
Stockholder notes payable, less current maturities |
5,012,827 | 4,755,759 | ||||||
Total liabilities |
7,072,541 | 8,316,513 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity (deficit): |
||||||||
Preferred stock,
$0.0001 par value, authorized 5,000,000 shares: |
||||||||
Series B convertible issued and outstanding shares 800,000 liquidation
value
of $16 and 17 per share as of December 31, 2009 and 2010 respectively |
80 | 80 | ||||||
Series C convertible issued and outstanding shares 200,000 liquidation
value
of $32 and $33 per share as of December 31, 2009 and 2010, respectively |
20 | 20 | ||||||
Series E convertible issued and outstanding shares 80,000 liquidation value
of $105 and $107 per share as of December 31, 2009 and 2010 respectively |
8 | 8 | ||||||
Common stock,
$.0001 par value, authorized 100,000,000 shares;
issued shares -
36,126,306 and 39,277,815 at December 31, 2009
and 2010, respectively |
3,613 | 3,927 | ||||||
Additional paid-in capital |
71,705,762 | 72,641,272 | ||||||
Accumulated deficit |
(71,922,284 | ) | (72,473,281 | ) | ||||
Treasury stock,
261,497 shares at cost |
(11,906 | ) | (11,906 | ) | ||||
Total stockholders equity (deficit) |
(224,707 | ) | 160,120 | |||||
Total liabilities and stockholders equity (deficit) |
$ | 6,847,834 | $ | 8,476,633 | ||||
The accompanying notes are an integral part of these consolidated statements.
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VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, | ||||||||
2009 | 2010 | |||||||
Net revenue |
$ | 13,905,860 | $ | 17,335,953 | ||||
Cost of revenue |
5,123,186 | 6,862,265 | ||||||
Gross profit |
8,782,674 | 10,473,688 | ||||||
Operating expenses: |
||||||||
Selling, general and administrative |
7,624,962 | 6,288,956 | ||||||
Research and development |
3,032,215 | 3,755,971 | ||||||
Depreciation and amortization |
789,428 | 805,510 | ||||||
Total operating expenses |
11,446,605 | 10,850,437 | ||||||
Operating loss |
(2,663,931 | ) | (376,749 | ) | ||||
Other income (expense): |
||||||||
Interest expense (including $154,426
and $82,966
to related parties) |
(162,831 | ) | (185,741 | ) | ||||
Interest income |
4,666 | 988 | ||||||
Other |
3,975 | 5,505 | ||||||
Total other expense, net |
(154,190 | ) | (179,248 | ) | ||||
Net loss before income taxes |
(2,818,121 | ) | (555,997 | ) | ||||
Income tax benefit |
17,774 | 5,000 | ||||||
NET LOSS |
$ | (2,800,347 | ) | $ | (550,997 | ) | ||
Preferred stock dividends |
(820,000 | ) | (820,000 | ) | ||||
Net loss applicable to common stockholders |
$ | (3,620,347 | ) | $ | (1,370,997 | ) | ||
Net loss per share |
||||||||
Basic |
$ | (0.10 | ) | $ | (0.04 | ) | ||
Diluted |
$ | (0.10 | ) | $ | (0.04 | ) | ||
Weighted average number of common shares
outstanding |
||||||||
Basic |
35,171,107 | 36,046,372 | ||||||
Diluted |
35,171,107 | 36,046,372 | ||||||
The accompanying notes are an integral part of these consolidated statements.
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VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2009 AND 2010
YEARS ENDED DECEMBER 31, 2009 AND 2010
Series B | Series C | Series E | ||||||||||||||||||||||||||||||||||||||||||||||
Convertible | Convertible | Convertible | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | Accumulated | Treasury | Stockholders | |||||||||||||||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Shares | Par Value | Shares | Par Value | Capital | Deficit | Stock | Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
Balances, December 31, 2008 |
800,000 | $ | 80 | 200,000 | $ | 20 | 80,000 | $ | 8 | 32,419,886 | $ | 3,242 | $ | 70,153,562 | $ | (69,121,937 | ) | $ | (11,906 | ) | $ | 1,023,069 | ||||||||||||||||||||||||||
Stock based compensation expense |
| | | | | | | | 195,280 | | | 195,280 | ||||||||||||||||||||||||||||||||||||
Employee stock purchase plan issuance |
| | | | | | 55,106 | 6 | 14,435 | | | 14,441 | ||||||||||||||||||||||||||||||||||||
Exercise of stock options |
| | | | | | 10,000 | 1 | 2,849 | | | 2,850 | ||||||||||||||||||||||||||||||||||||
Exercise of warrants |
| | | | | | 2,500,000 | 250 | 939,750 | | | 940,000 | ||||||||||||||||||||||||||||||||||||
Stock issuance for acquisition |
1,141,314 | 114 | 399,886 | 400,000 | ||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | (2,800,347 | ) | | (2,800,347 | ) | ||||||||||||||||||||||||||||||||||
Balances, December 31, 2009 |
800,000 | 80 | 200,000 | 20 | 80,000 | 8 | 36,126,306 | 3,613 | 71,705,762 | (71,922,284 | ) | (11,906 | ) | (224,707 | ) | |||||||||||||||||||||||||||||||||
Stock based compensation expense |
| | | | | | | | 155,971 | | | 155,971 | ||||||||||||||||||||||||||||||||||||
Employee stock purchase plan issuance |
| | | | | | 53,603 | 5 | 9,848 | | | 9,853 | ||||||||||||||||||||||||||||||||||||
Stock issued for services |
| | | | | | 147,059 | 14 | 24,986 | | | 25,000 | ||||||||||||||||||||||||||||||||||||
Stock issued in private placement |
| | | | | | 2,950,847 | 295 | 744,705 | | | 745,000 | ||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | (550,997 | ) | | (550,997 | ) | ||||||||||||||||||||||||||||||||||
Balances, December 31, 2010 |
800,000 | $ | 80 | 200,000 | $ | 20 | 80,000 | $ | 8 | 39,277,815 | $ | 3,927 | $ | 72,641,272 | $ | (72,473,281 | ) | $ | (11,906 | ) | $ | 160,120 | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated statements.
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VIEWCAST.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended | ||||||||
December 31, | ||||||||
2009 | 2010 | |||||||
Operating activities: |
||||||||
Net loss |
$ | (2,800,347 | ) | $ | (550,997 | ) | ||
Adjustments to reconcile net loss to net cash
used in operating activities: |
||||||||
Bad debt expense (gain) |
(175 | ) | 6,669 | |||||
Depreciation of property and equipment |
446,729 | 364,510 | ||||||
Amortization of software and intangible assets |
342,699 | 440,999 | ||||||
Warranty reserve expense |
44,808 | 34,030 | ||||||
Stock based compensation expense |
195,280 | 155,971 | ||||||
Common stock issued to vendor for services |
| 25,000 | ||||||
Loss (gain) on disposition of property and equipment |
973 | (5,505 | ) | |||||
Changes in operating assets and liabilities: (net of effect
of acquisition) |
||||||||
Accounts receivable |
1,606,223 | (1,001,865 | ) | |||||
Inventories |
540,888 | 68,099 | ||||||
Prepaid expenses |
143,700 | (70,124 | ) | |||||
Deposits |
(256 | ) | 15,796 | |||||
Accounts payable |
(376,497 | ) | 348,245 | |||||
Accrued expenses and other current liabilities |
(454,861 | ) | 62,453 | |||||
Stockholder accrued interest |
(169,846 | ) | | |||||
Net cash used in operating activities |
(480,682 | ) | (106,719 | ) | ||||
Investing activities: |
||||||||
Capitalized software development costs and patents |
(520,806 | ) | (51,614 | ) | ||||
Purchase of property and equipment |
(195,458 | ) | (111,111 | ) | ||||
Cash paid for acquisition |
(1,031,422 | ) | | |||||
Proceeds from disposition of property and equipment |
| 5,895 | ||||||
Net cash used in investing activities |
(1,747,686 | ) | (156,830 | ) | ||||
Financing activities: |
||||||||
Proceeds from sale of common stock |
14,441 | 754,853 | ||||||
Proceeds from exercise of employee stock options |
2,850 | | ||||||
Net proceeds from exercise of warrants |
940,000 | | ||||||
Net proceeds from line of credit |
92,321 | 949,157 | ||||||
Repayments of long-term debt including $128,534 to related party in 2010 |
(32,776 | ) | (160,136 | ) | ||||
Net cash provided by financing activities |
1,016,836 | 1,543,874 | ||||||
Net increase (decrease) in cash and cash equivalents |
(1,211,532 | ) | 1,280,325 | |||||
Cash and cash equivalents, beginning of year |
1,579,683 | 368,151 | ||||||
Cash and cash equivalents, end of year |
$ | 368,151 | $ | 1,648,476 | ||||
Supplemental cash flow information: |
||||||||
Cash paid for interest |
$ | 332,677 | $ | 185,741 | ||||
Non-cash items: |
||||||||
Stock issued for acquisition |
$ | 400,000 | $ | | ||||
Acquisition of property and equipment under capital leases |
$ | 39,403 | $ | 10,224 |
The accompanying notes are an integral part of these consolidated statements.
22
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements
1. The Company and Description of Business and Future Liquidity Needs
The accompanying consolidated financial statements include the accounts of ViewCast.com, Inc.
dba ViewCast Corporation and its wholly-owned subsidiaries, VideoWare, Inc., Osprey Technologies,
Inc., Ancept Corporation, previously known as ViewCast Online Solutions, Inc., and ViewCast
Technology Services Corporation (collectively, ViewCast or the Company). The Company develops
industry-leading hardware and software for the capture, management, transformation and delivery of
digital media over IP and mobile networks. ViewCasts solutions simplify the complex workflows
required for these tasks, allowing broadcasters, businesses, and governments to reach and expand
their use and distribution of their digital media easily and effectively. ViewCasts Niagara®
streaming appliances, Osprey® video capture cards, and ViewCast Media Platform (VMp) software
suite provide the highly reliable technology required to deliver the multi-platform experiences
driving todays digital media market. ViewCast markets and sells its products and professional
services worldwide directly to end-users or through indirect channels including original equipment
manufacturers (OEMs), value-added resellers (VARs), resellers, distributors and computer system
integrators.
In March 2009, ViewCast purchased certain assets from Ancept Media Server, LLC (the
Ancept Assets) pursuant to the terms of the Asset Purchase Agreement dated March 5, 2009, as
amended, by and between ViewCast and Ancept Media Server, LLC. (Seller). ViewCasts wholly owned
subsidiary, ViewCast Online Solutions, Inc., was renamed Ancept Corporation (Ancept) and operates
this business. The lead software product, rebranded as VMp Production, is an established digital
asset management (DAM) solution capable of supporting the needs of large enterprises, while
remaining flexible and affordable to serve the needs of small to medium businesses. Fortune 1000
companies, educators, small businesses and public sector organizations have chosen Ancept to help
meet their media production, management and distribution needs. The Company has an expanded global
business presence and offers a complete set of solutions for the transformation, management and
delivery of live and on-demand video content to broadband and mobile networks.
During the year ended December 31, 2010, the Company incurred a net loss of $550,997 and used
cash in operations of $106,719. At December 31, 2010, the Company has working capital of
$2,812,488 and cash and cash equivalents of $1,648,476. The Company expects to obtain additional
working capital by increasing sales, maintaining efficient operating expenses, borrowing on its
line of credit and through other initiatives that may include raising additional capital. The
Company believes that these items will provide sufficient cash to fund operations for the next 12
months, however, the Company may require additional working capital during 2011 to support
operations and the expansion of sales channels and market distribution, to develop and introduce
new products and services, to enhance existing product offerings, to address unanticipated
competitive threats or technical problems, and for potential acquisition transactions. There can
be no assurance that additional financing will be available to the Company on acceptable terms, or
at all. Additional equity financing may involve substantial dilution to our then existing
stockholders. In the event the Company is unable to raise additional capital or execute other
alternatives, it 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
Companys results of operations and financial position.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its
subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been
eliminated in consolidation.
23
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
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.
Cash and cash equivalents are at risk to the extent that they exceed Federal Deposit Insurance
Corporation insured amounts of $250,000 per institution for interest bearing accounts.
Non-interest bearing accounts are fully insured through December 31, 2012, at all FDIC insured
institutions.
Accounts Receivable
The Companys accounts receivable are primarily due from resellers and distributors of its
video products. Credit is extended based on evaluation of each customers financial condition and,
generally collateral is not required except for certain international customers. Accounts
receivable are generally due within 30 days and are stated net of an allowance for doubtful
accounts. Accounts are considered past due if outstanding longer than contractual payment terms.
The Company records an allowance on a specific basis by considering a number of factors, including
the length of time trade accounts are past due, the Companys previous loss history, the
credit-worthiness of individual customers, economic conditions affecting specific customer
industries and economic conditions in general. The Company writes-off accounts receivable when
they become uncollectible and payments subsequently received on such receivables are credited
against write-offs in the period the payment is received.
Changes in the Companys allowance for doubtful accounts for the years ended December 31, 2009
and 2010 are as follows:
Year ended December 31, | ||||||||
2009 | 2010 | |||||||
Beginning balance |
$ | 82,317 | $ | 69,767 | ||||
Bad debt expense (recoveries) |
(175 | ) | 6,669 | |||||
Uncollectible accounts written off |
(12,375 | ) | | |||||
Ending balance |
$ | 69,767 | $ | 76,436 | ||||
Inventories
Inventories consist primarily of purchased electronic components and finished goods. Finished
goods include computer system products, along with the related documentation manuals and packaging
materials. Inventories are carried at the lower of cost or market, cost being determined using
average cost. In order to assess the ultimate realization of inventories, the Company is required
to make judgments as to the future demand requirements compared to current or committed inventory
levels. Write downs are made to the lower of cost or market when projected demand requirements
decrease due to market conditions, technological obsolescence and product life cycle changes.
Property and Equipment
Property and equipment is recorded at cost, less accumulated depreciation. Depreciation is
determined using the straight-line method over the estimated useful lives, generally two to seven
years, of the related assets. Leasehold improvements are amortized over the shorter of the useful
life or the remaining term of the related leases. Expenditures for repairs and maintenance are
charged to operations as incurred; renewals and betterments are capitalized. Gains and losses on
the disposition of property and equipment are recorded in the period incurred.
24
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
Capitalized Software Development Costs
Costs of developing new software products and substantial enhancements to existing software
products are expensed as incurred as research and development expenses. When technological
feasibility is established, additional costs incurred are capitalized. Amortization of capitalized
software development costs begins when products are available for general release to customers, and
is computed using the greater of the revenue method or the straight-line method over a period not
to exceed three years. Capitalized software development costs also include the internally
developed software that was acquired in the Ancept acquisition.
Intangible Assets and Amortization
Legal fees and similar capitalizable costs relating to patents, copyrights, and trademarks are
capitalized as appropriate. Patent costs are generally amortized on a straight-line basis over 17
years. Customer lists and non-compete agreements are being amortized over their estimated useful
lives of three to seven years.
Intangible assets consist of the following:
December 31, 2009 | December 31, 2010 | |||||||||||||||
Gross carrying | Accumulated | Gross carrying | Accumulated | |||||||||||||
amount | amortization | amount | amortization | |||||||||||||
Customer Lists |
$ | 60,000 | $ | 9,581 | $ | 60,000 | $ | 21,581 | ||||||||
Non-Compete agreements |
24,000 | 6,387 | 24,000 | 14,387 | ||||||||||||
Patents |
124,665 | 21,980 | 145,200 | 29,985 | ||||||||||||
$ | 208,665 | $ | 37,948 | $ | 229,200 | $ | 65,953 | |||||||||
The estimated aggregate amortization expense for the succeeding years are as follows:
2011 |
$ | 28,527 | ||
2012 |
22,140 | |||
2013 |
20,527 | |||
2014 |
10,946 | |||
2015 |
8,527 | |||
Thereafter |
72,580 | |||
$ | 163,247 | |||
The weighted average remaining amortization period for intangible assets at December 31, 2010
is 10.4 years.
Impairment of Long-Lived Assets
Assets that are held and used are analyzed for impairment whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable. Impairment is recognized
when the estimated undiscounted cash flow generated by those assets is less than the carrying
amounts of such assets. The amount of impairment is the excess of the carrying amount over the
fair value of such assets. Assets held for sale are carried at the lower of carrying amount or
fair value less selling costs. No impairment charges were recognized during 2009 and 2010.
Goodwill
Goodwill is tested annually for impairment. If the implied fair value of goodwill is lower
than its carrying amount, goodwill impairment is indicated and goodwill is written down to its
implied fair value. Subsequent increases in goodwill value are not recognized in the financial
statements. No impairment of goodwill was recognized during 2009 and 2010.
25
Table of Contents
ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
Revenue Recognition
The Company recognizes revenue in accordance with Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in financial Statement as revised by SAB
104, Revenue Recognition, FASB ASC 605, Revenue Recognition and FASB ASC 985, Software. 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.
Product sales are 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 collectability
is reasonably assured. Transactions that do not meet all these requirements are deferred until the
point at which these requirements are satisfied. Maintenance and support are recognized monthly
over the contract term. Professional services revenues contracts are generally sold separately and
revenues are recognized as provided.
Taxes Collected From Customers and Remitted To Government Authorities
Taxes collected from customers and remitted to governmental authorities are presented in the
accompanying statements of operations on a net basis.
Shipping and Handling Costs
Shipping and handling costs are included in cost of revenue in the accompanying statements of
operations.
Net Earnings Per Share
Basic earnings per share (EPS) is calculated by dividing net income or loss applicable to
common stockholders by the weighted-average number of common shares outstanding during the period.
Diluted earnings per share is calculated by using the weighted-average number of common shares
outstanding during the period increased to include the number of additional shares of common stock
that would have been outstanding if the dilutive potential shares of common stock had been issued.
Dilutive potential shares of common stock include convertible preferred stock, options and warrants
which are exercisable based on the average market price during the year. For 2009 and 2010, the
computation of diluted loss per share excludes the convertible preferred stock, options and
warrants as they are anti-dilutive. The following table sets forth the computation of basic and
diluted earnings per share:
Year Ended December 31, | ||||||||
2009 | 2010 | |||||||
Net loss applicable to common stockholders
- numerator for basic and diluted loss per share |
$ | (3,620,347 | ) | $ | (1,370,997 | ) | ||
Weighted average common shares outstanding denominator for
basic loss per share |
35,171,107 | 36,046,372 | ||||||
Net loss per share: |
||||||||
Basic |
$ | (0.10 | ) | $ | (0.04 | ) | ||
Diluted |
$ | (0.10 | ) | $ | (0.04 | ) | ||
26
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
The following table sets forth the anti-dilutive securities excluded from diluted earnings per
share:
Anti-dilutive securities excluded from diluted earnings per share: |
||||||||
Stock options |
4,554,881 | 4,670,291 | ||||||
Public and private warrants |
2,500,000 | | ||||||
Convertible preferred stock Series B |
2,206,896 | 2,206,896 | ||||||
Convertible preferred stock Series C |
3,333,333 | 3,333,333 | ||||||
Convertible preferred stock Series E |
13,333,333 | 13,333,333 |
Warranty Reserves
Reserves are provided for the estimated warranty costs when revenue is recognized. The costs
of warranty obligations are estimated based on the Companys warranty policy or applicable
contractual warranty obligations, historical experience of known product failure rates and use of
materials and service delivery charges incurred in correcting product failures. Specific warranty
accruals may be made if unforeseen technical problems arise. If actual experience, relative to
these factors, adversely differs from these estimates, additional warranty expense may be required.
The following table below shows the roll forward of the warranty reserve for the years ended
December 31, 2009 and 2010:
Year ended December 31, | ||||||||
2009 | 2010 | |||||||
Beginning balance |
$ | 199,446 | $ | 155,850 | ||||
Charged to expense |
44,808 | 34,030 | ||||||
Usage |
(88,404 | ) | (33,962 | ) | ||||
Ending balance |
$ | 155,850 | $ | 155,918 | ||||
Risk 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 commercial banks in Texas. The Company sells its products and services primarily
to end users, 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 discloses the number of customers that accounted for more
than 10% of annual sales and receivable balances:
Customer Exceeding 10% | Customer Exceeding 10% of Year-End | |||||||||||||||
of Net Sales | Accounts Receivable Balance | |||||||||||||||
Number of | Combined | Number of | Combined | |||||||||||||
Year | Customers | Percent | Customers | Percent | ||||||||||||
2009 |
3 | 39 | % | 2 | 42 | % | ||||||||||
2010 |
3 | 49 | % | 3 | 58 | % |
The Company believes it has no significant credit risk in excess of recorded reserves.
27
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Significant
estimates used in preparing these financial statements are related primarily to accounts receivable
allowances, inventory valuation, warranty reserves, deferred tax asset valuation allowances and
stock options. Management believes the estimates used in preparing the financial statements are
reasonable; however, 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. Deferred tax assets are recognized when it becomes more likely
than not that the assets will be realized. The Company files tax returns with the U.S. Federal and
various state jurisdictions and is no longer subject to income tax examinations for years before
2006.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the years ended December
31, 2009 and 2010 was $866,612 and $675,861, respectively.
Fair Value of Financial Instruments
The Company believes that the carrying amount 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. The Company also has
long-term debt with its primary shareholder.
Stock-Based Compensation
The Company accounts for all share-based payment awards made to employees and directors
including stock options and employee stock purchases based on estimated fair values. The Company
estimates the fair value of share-based payment awards on the date of grant using an option-pricing
model and the value of the portion of the award that is ultimately expected to vest is recognized
as expense over the requisite service period, net of forfeitures.
The Company uses the Black-Scholes option-pricing model (Black-Scholes) as its method of
valuation. The fair value is amortized on a straight-line basis over the requisite service periods
of the awards, which is generally the vesting period. The fair value of share-based payment awards
on the date of grant as determined by the Black-Scholes model is affected by the Companys stock
price as well as other assumptions. These assumptions include, but are not limited to the expected
stock price volatility over the term of the awards, the actual and projected employee stock option
exercise behaviors and an estimated forfeiture rate. The weighted-average estimated value of
employee stock options granted during the years ended December 31, 2009 and 2010 was estimated
using the Black-Scholes model with the following weighted-average assumptions:
Year Ended | ||||||||
December 31, | ||||||||
2009 | 2010 | |||||||
Expected volatility |
132 | % | 132 | % | ||||
Risk-free interest rate |
2.81 | % | 2.62 | % | ||||
Expected dividends |
0.0 | % | 0.0 | % | ||||
Expected term in years |
4.48 | 4.58 |
28
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
3. Acquisition
On March 13, 2009, the Company acquired certain assets (the Ancept Assets) of Ancept Media
Server, LLC (Seller) for $1,431,422. The Company (i) paid to the Sellers lender $1,000,000 in
cash, (ii) paid to the Seller $31,422 in cash, (iii) issued to the Seller Company common stock of
$400,000 which resulted in the issuance of 1,141,314 shares based on the weighted average closing
price of the Companys common stock for the ten trading days immediately prior to the closing of
the transaction, which was $0.35, and (iv) assumed deferred revenue liabilities related to the
Ancept Assets. The primary purpose of the acquisition was to enable the Company to expand its
global business presence with a complete portfolio of solutions that encompasses live and on-demand
video encoding, management and delivery. ViewCasts wholly-owned subsidiary ViewCast Online
Solutions, Inc. was renamed Ancept Corporation (Ancept) and this subsidiary operates the Ancept
business.
The following table summarizes the assets acquired and liabilities assumed as of the closing
date:
Accounts receivable |
$ | 160,760 | ||
Prepaid expenses |
415 | |||
Software |
850,000 | |||
Customer related intangible assets |
60,000 | |||
Non-compete agreements |
24,000 | |||
Goodwill |
620,002 | |||
Property and equipment |
15,583 | |||
Total assets acquired |
1,730,760 | |||
Liabilities assumed |
(299,338 | ) | ||
Net assets acquired |
$ | 1,431,422 | ||
The acquisition was accounted for using the purchase method of accounting. Intangible assets
are being amortized over their estimated useful life of three to seven years. The purchase price
allocated to the intangible assets was determined by managements estimate with the assistance of a
professional valuation group. Goodwill represents the excess of purchase consideration over the
fair value of assets acquired. The goodwill acquired may be amortized for federal income tax
purposes.
The following unaudited pro forma summary approximates the consolidated results of operations
as if the acquisition disclosed above had occurred as of January 1, 2009, after giving effect to
certain adjustments, including allocation of specifically identifiable expenses. The pro forma
financial information does not purport to be indicative of the results of operations that would
have occurred had the transactions taken place at the beginning of the period presented or
indicative of future results of operations.
Year ended | ||||
December 31, | ||||
2009 | ||||
(Unaudited) | ||||
Net sales |
$ | 14,066,487 | ||
Net loss applicable to common stockholders |
$ | (2,807,661 | ) | |
Basic and diluted net loss per common share
applicable to common stockholders |
$ | (0.08 | ) | |
Weighted average number of common shares outstanding |
||||
Basic |
35,396,243 | |||
Diluted |
35,396,243 |
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
4. Inventories
Inventories consist of the following:
December 31, | ||||||||
2009 | 2010 | |||||||
Purchased materials |
$ | 1,077,135 | $ | 1,073,360 | ||||
Finished goods |
1,330,783 | 1,433,645 | ||||||
Inventory obsolescence reserve |
(124,570 | ) | (291,756 | ) | ||||
$ | 2,283,348 | $ | 2,215,249 | |||||
5. Property and Equipment
Property and equipment, consists of the following:
Estimated | ||||||||||
Useful Life | December 31, | |||||||||
(Years) | 2009 | 2010 | ||||||||
Service equipment |
3 | $ | 242,362 | $ | 242,362 | |||||
Computer equipment |
2 to 7 | 497,139 | 579,059 | |||||||
Software |
3 to 5 | 207,531 | 207,908 | |||||||
Leasehold improvements |
1 to 5 | 172,697 | 174,429 | |||||||
Office furniture and equipment |
5 to 7 | 1,284,884 | 1,319,238 | |||||||
2,404,613 | 2,522,996 | |||||||||
Less accumulated depreciation and
amortization |
(1,829,581 | ) | (2,191,530 | ) | ||||||
$ | 575,032 | $ | 331,466 | |||||||
6. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following:
December 31, | ||||||||
2009 | 2010 | |||||||
Accrued compensation |
$ | 123,882 | $ | 207,189 | ||||
Accrued warranty |
155,850 | 155,918 | ||||||
Accrued inventory purchases |
50,450 | 75,983 | ||||||
Customer deposits |
28,919 | 57,164 | ||||||
Deferred rent |
46,258 | 15,386 | ||||||
Deferred revenue |
353,458 | 426,929 | ||||||
Accrued taxes and other |
274,350 | 191,081 | ||||||
$ | 1,033,167 | $ | 1,129,650 | |||||
30
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
7. Line of Credit
On June 29, 2007, the Company entered into a Purchase and Sale Agreement/Security Agreement
with Amegy Bank National Association (Amegy), a national banking association. This agreement
provides the Company with an accounts receivable loan facility to provide a source of working
capital with advances generally limited to 85% of submitted accounts receivable. Upon collection
of an account receivable, the remaining fifteen percent is rebated to the Company less the Amegy
fixed and variable discounts. The Amegy fixed discount equals 0.2% of the account receivable for
the first 15 days the account receivable is outstanding plus an additional 0.2% for each additional
15 day period, up to 1.2% for receivables 76 to 90 days outstanding. The variable discount is
calculated for each day that the amount advanced by Amegy is outstanding until repaid by collection
of the account receivable and equals the prime rate plus 1.5% divided by 360 multiplied by the
advance amount for each account receivable. The general borrowing availability under this facility
is $1,000,000, reviewed as growth of business dictates. However, this may be exceeded without
penalty. To secure the amounts due under the agreement, the Company granted Amegy a security
interest in all of its assets owned as of the date of the agreement or thereafter acquired. The
Company had $92,321 outstanding as of December 31, 2009 and $1,041,478 outstanding as of December
31, 2010 under this facility based on the outstanding accounts receivable at year end.
8. Long-term Debt
Stockholder Term Notes
Since October 1998, the Company has maintained a credit facility with an entity controlled by
one of its principal stockholders, Mr. H.T. Ardinger. Most recently, ViewCast.com, Inc., Osprey
Technologies, Inc. and VideoWare, Inc. (jointly and severally, the Borrower) amended the terms
and conditions of the loan and security agreement with the Ardinger Family Partnership, Ltd. on
March 10, 2010, to be effective as of January 31, 2010. Under the amended terms any amounts
outstanding of the primary principal amount and secondary principal amount mature December 31,
2012, subject to certain earlier payment conditions. The interest on the primary principal amount
will accrue and be paid monthly based on an interest rate per annum which is the greater of 5.0% or
the effective prime rate plus 0.75% (4.00% as of December 31, 2009 and 2010). Interest on the
secondary principal shall accrue based on the effective Applicable Federal Rate, as defined in the
agreement, (2.64% and 0.32% as of December 31, 2009 and 2010, respectively). The amended terms
call for interest to be paid monthly; and beginning July 31, 2010, minimum monthly principal
payments of $21,422, in addition to the monthly interest payments. The amended note agreement is
secured by all the assets of the Borrower.
Long-term debt consists of the following:
December 31, | ||||||||
2009 | 2010 | |||||||
Outstanding Primary Principal Amount |
$ | 1,250,000 | $ | 1,121,466 | ||||
Outstanding Secondary Principal Amount |
3,891,361 | 3,891,361 | ||||||
Other debt |
75,297 | 53,919 | ||||||
Total long-term debt |
5,216,658 | 5,066,746 | ||||||
Less current maturities |
(157,133 | ) | (284,523 | ) | ||||
Total long-term debt, less current maturities |
$ | 5,059,525 | $ | 4,782,223 | ||||
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
The following are the scheduled maturities of long-term debt at December 31, 2010:
Year ended December 31, | ||||
2011 |
$ | 284,523 | ||
2012 |
4,780,183 | |||
2013 |
2,040 | |||
$ | 5,066,746 | |||
9. Income Taxes
The Company records a valuation allowance 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 Companys net operating loss carryforward is not reasonably assured, and a valuation allowance
of $27,142,000 and $27,339,000 has been provided against deferred tax assets in excess of deferred
tax liabilities in the accompanying consolidated financial statements at December 31, 2009 and
2010, respectively.
The components of the Companys net deferred taxes are as follows:
Year ended December 31, | ||||||||
2009 | 2010 | |||||||
Deferred tax assets (liability): |
||||||||
Net operating loss carryforwards |
$ | 26,787,000 | $ | 26,731,000 | ||||
Deferred revenue |
130,000 | 158,000 | ||||||
Goodwill and other intangibles |
(9,000 | ) | (19,000 | ) | ||||
Stock based compensation |
145,000 | 202,000 | ||||||
Inventory reserve |
46,000 | 108,000 | ||||||
Allowance for doubtful accounts |
26,000 | 28,000 | ||||||
Accrued liabilities |
121,000 | 120,000 | ||||||
Property and equipment |
36,000 | 75,000 | ||||||
Software development costs |
(140,000 | ) | (64,000 | ) | ||||
Total deferred tax assets |
27,142,000 | 27,339,000 | ||||||
Less: valuation allowance |
(27,142,000 | ) | (27,339,000 | ) | ||||
Net deferred taxes |
$ | | $ | | ||||
The reconciliation between the income tax expense (benefit) calculated by applying statutory
rates to net loss and the income tax benefit reported in the accompanying consolidated financial
statements is as follows:
Year ended December 31, | ||||||||
2009 | 2010 | |||||||
U.S. federal statutory rate applied to pretax income |
$ | (1,032,000 | ) | $ | (206,000 | ) | ||
Change in valuation allowance |
1,014,000 | 197,000 | ||||||
Other |
| 4,000 | ||||||
$ | (18,000 | ) | $ | (5,000 | ) | |||
At December 31, 2010 the Company has federal income tax net operating loss carryforwards of
approximately $72,000,000, which expire at various dates beginning in 2010. 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.
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
10. Stockholders Equity
Preferred Stock
As of December 31, 2010 and 2009, 800,000 shares of Series B Convertible Preferred Stock are
outstanding at a stated value of $10 per share. Mr. H. T. Ardinger, a principal stockholder of the
Company, holds 400,000 shares of Series B Convertible Preferred Stock, with the remainder held by
other existing stockholders. 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.
As of December 31, 2010 and 2009, 200,000 shares of Series C Convertible Preferred Stock are
outstanding at a stated value of $10 per share held by H.T. Ardinger, Jr., a principal stockholder
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.
Subject to the liquidation rights of the holders of any parity stock, upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, holders of Series B Preferred
Stock and Series C Preferred Stock shall be entitled to be paid, out of the assets of the Company
available for distribution to stockholders, the liquidation preference of $10.00 per share of
Series B Preferred Stock and $25.00 per share of Series C Preferred Stock, plus, without
duplication, an amount in cash or shares of common stock, at the Companys option, equal to all
accumulated and unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up (including an amount equal to a prorated dividend for the period from the last dividend
payment date to the date fixed for liquidation, dissolution or winding-up), before any distribution
is made on any junior stock, including, without limitation, any class of common stock of the
Company.
Holders of Series B and Series C Preferred Stock have no voting rights except on amendments to
the Companys 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. The Series B and
Series C Preferred Stock issues carry cumulative dividends of 8% and 9% per year, respectively, and
are generally payable semi-annually in arrears in cash or common stock of the Company, at the
Companys option. There were no preferred stock dividends declared or paid during 2009 and 2010.
Cumulative dividends on Series B and Series C preferred shares in arrears at December 31, 2010 are
$5,760,000 and $1,617,500.
In December 2006, the Company retired certain debt from the Ardinger Family Partnership, Ltd.
in exchange for certain Company securities, including 80,000 shares of ViewCasts Series E
Convertible Preferred Stock with each share having a stated value of $100 with voting rights on an
as converted basis with the common stock and accrues no dividends. The Series E preferred stock
provides for a conversion option to common stock at $0.60 per share of common stock, subject to
certain requirements. The liquidation preference on the Series E is the $100 per share stated value
multiplied by 105% if the liquidation event occurs after December 11, 2009 and on or before
December 11, 2010; and 107% if the liquidation event occurs after December 11, 2010.
Common Stock
During 2009, the Company received $2,850 in proceeds from the exercise of 10,000 of its
outstanding employee stock options, with a weighted-average exercise price of approximately $0.29
per share. During 2010, the Company had no proceeds from the exercise of its outstanding employee
stock options. On March 19, 2009, in connection with the Ancept acquisition, the Company issued
1,141,314 shares based on the weighted average closing price of the Companys common stock for the
ten trading days immediately prior to the closing of the transaction, which was $0.35. During 2009
and 2010, the Company received $14,441 and $9,852 in proceeds from the purchase of 55,106 and
53,603 shares of the Common Stock by employees through the 2005 Employee Stock Purchase Plan.
In January 2010, the Company issued 147,059 shares of common stock with a market value of
$25,000 to a vendor in exchange for services. On December 30, 2010, the Company received net
proceeds of $745,000 from the private placement of 2,950,847 shares of common stock. The purchase
price per share of common stock was approximately $0.2525, which was the weighted average closing
price for the ten trading days immediately prior to
December 30, 2010. The investors included David W. Brandenburg, a principal stockholder and
member of the Board of Directors of the Company, and his spouse.
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
Stock Option Plan
In October 2005, the Company adopted the ViewCast 2005 Stock Incentive Plan, which replaced
the Companys expired stock option plans (the 1995 Employee Stock Option Plan and the 1995 Director
Stock Option Plan) and become the sole plan for providing equity-based incentive compensation to
the Companys employees, non-employee directors and other service providers. Options granted under
the expired stock option plans will continue to be subject to the terms of those plans in effect
before the effective date of the 2005 Stock Incentive Plan. The plan allows for the grant of stock
options, restricted stock, restricted stock units, stock appreciation rights, performance awards
and other incentive awards to employees, non-employee directors and other service providers of the
Company and its affiliates who are in a position to make a significant contribution to the success
of the Company and its affiliates. The purposes of the plan are to attract and retain individuals,
further align employee and stockholder interests, and closely link compensation with Company
performance. The plan is administered by the Board of Directors.
The maximum number of shares available for grant under the plan is 6,000,000 shares of Common
Stock, plus any shares of Common Stock subject to outstanding awards under the Companys prior
stock option plans as of the date the plan was approved by ViewCasts stockholders that later cease
to be subject to such awards for any reason other than such awards having been exercised or
expired. The number of shares available for award under the plan is subject to adjustment for
certain corporate changes in accordance with the provisions of the plan.
Following is a summary of stock option activity from January 1, 2009 through December 31,
2010:
Stock Options | ||||||||||
Weighted- | ||||||||||
Exercise | Average | |||||||||
Number | Price Per | Exercise Price | ||||||||
of Shares | Share | Per Share | ||||||||
Outstanding at January 1, 2009 |
4,065,935 | $0.20 $7.14 | $ | 1.42 | ||||||
Granted |
1,587,500 | 0.33 0.33 | 0.33 | |||||||
Exercised |
(10,000 | ) | 0.29 0.29 | 0.29 | ||||||
Canceled/forfeited |
(1,480,972 | ) | 0.29 7.14 | 2.78 | ||||||
Outstanding at December 31, 2009 |
4,162,463 | $0.20 $3.52 | $ | 0.52 | ||||||
Granted |
1,800,000 | 0.17 0.27 | 0.19 | |||||||
Canceled/forfeited |
(1,175,378 | ) | 0.17 3.52 | 0.45 | ||||||
Outstanding at December 31, 2010 |
4,787,085 | $0.17 $1.09 | $ | 0.41 | ||||||
The weighted-average grant-date fair value of options granted was $0.29 and $0.16 for the
years ended December 31, 2009 and 2010, respectively.
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
The following information applies to options outstanding at December 31, 2010:
Weighted- | ||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||
Range of | Outstanding at | Remaining | Average | Exercisable at | Average | |||||||||||||||
Exercise | December 31, | Contractual | Exercise | December 31, | Exercise | |||||||||||||||
Prices | 2010 | Life | Price | 2010 | Price | |||||||||||||||
$0.01 1.00 |
4,312,335 | 4.7 | $ | 0.33 | 2,789,420 | $ | 0.39 | |||||||||||||
1.01 1.09 |
474,750 | 0.2 | 1.09 | 474,750 | 1.09 | |||||||||||||||
4,787,085 | 4.3 | 0.41 | 3,264,170 | 0.49 | ||||||||||||||||
At December 31, 2010, the balance of unearned stock-based compensation to be expensed in
future periods related to unvested share-based awards, as adjusted for expected forfeitures, is
approximately $249,000. The weighted-average period over which the unearned stock-based
compensation is expected to be recognized is approximately three years.
Employee Stock Purchase Plan
In October 2005, the Company established the ViewCast 2005 Employee Stock Purchase Plan (the
ESPP) to provide employees of the Company with an opportunity to purchase common stock through
payroll deductions. Under the ESPP, 1,000,000 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 IRS Code.
Under the ESPP, each offering is for a period of six months ending March 31 and September 30
of each year. 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
employees cash compensation during an offering period, and 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 ninety-five percent (95%) of the market price of Common Stock
at the end of each offering period (the Exercise Date). The Purchase Price may be changed by the
Board or its committee but in any case shall never be lower than 85% to the fair market value of a
share of Common Stock on the Exercise Date. ViewCast pays all expenses incurred in
connection with the implementation and administration of the ESPP.
During 2009 and 2010, 55,106 and 53,603 shares of common stock were issued under the ESPP.
Warrants
At December 31, 2008, the Company had outstanding private warrants to purchase 2,500,000
shares of common stock of the Company with exercise prices of $0.48 per share and expiration dates
in December 2013. On February 27, 2009, the Company entered into an amendment to the warrants to
purchase common stock, dated December 11, 2006, (the Amendment) by and between the Company and
the Ardinger Family Partnership, Ltd., the holder of the warrants. The general partner of the
Ardinger Family Partnership, Ltd. is H.T. Ardinger, Jr., the Companys largest stockholder.
Pursuant to the Amendment, the Company agreed to reduce the per share warrant exercise price to the
average closing price for the five consecutive trading days ending on February 27, 2009 on the
Over-The-Counter Bulletin Board in exchange for the Ardinger Family Partnership agreeing to
exercise the warrant on or prior to March 5, 2009 with the proceeds to be used by the Company for
the acquisition of Ancept Assets (see Note 3). On March 5, 2009, the Ardinger Family Partnership,
Ltd. exercised the outstanding warrant to purchase 2,500,000
shares of the Companys unregistered common stock at the amended exercise price of $0.376 per
share and the Company received proceeds of $940,000. At December 31, 2009 and 2010, the Company
had no outstanding warrants.
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
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 sixty percent (60%)
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. The Company
discontinued matching contributions under this plan in April 2009. The Company made $21,453 and $0
matching contributions to this plan, for the years ended December 31, 2009 and 2010, respectively.
Effective January 1, 2011, the Company resumed matching contributions under this plan.
12. Commitments and Contingencies
The Company leases offices and manufacturing space at various locations under non-cancelable
operating leases extending through 2021. 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:
Operating | ||||
Leases | ||||
Year ended December 31: |
||||
2011 |
$ | 306,840 | ||
2012 |
238,731 | |||
2013 |
243,320 | |||
2014 |
242,788 | |||
Thereafter |
1,691,734 | |||
Total minimum lease payments |
$ | 2,723,413 | ||
Rent expense was $422,969 and $417,761 for the years ended December 31, 2009 and 2010,
respectively.
13. Related Party Transactions
As discussed in Note 8, the Company has two outstanding notes payable to an entity controlled
by one of its principal stockholders, Mr. H.T. Ardinger.
In addition, the source of a significant portion of the cash paid to Seller for the purchase
of the Ancept Assets (more fully described in Note 3) was obtained by the Company pursuant to the
warrant exercise on March 5, 2010 by H.T. Ardinger and the Ardinger Family Partnership, Ltd. for
the purchase 2,500,000 shares of the Companys unregistered common stock at an amended exercise
price of $0.376 per share, pursuant to which the Company received proceeds of $940,000. See Note
10 for related party warrant activity.
As discussed in Note 10, on December 30, 2010, the Company received net proceeds of $745,000
from the private placement of 2,950,847 shares of common stock. The purchase price per share of
common stock was approximately $0.2525, which was the weighted average closing price for the ten
trading days immediately prior to December 30, 2010. One of the investors included David W.
Brandenburg, a principal stockholder and member of the Board of Directors of the Company, and his
spouse.
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ViewCast.com, Inc.
Notes to the Consolidated Financial Statements Continued
Notes to the Consolidated Financial Statements Continued
14. Current Economic Conditions
The current protracted economic decline continues to present companies with difficult
circumstances and challenges, which in some cases have resulted in large and unanticipated declines
in the fair value of certain assets, declines in the volume of business, constraints on liquidity
and difficulty obtaining financing. The financial statements have been prepared using values and
information currently available to the Company.
Current economic and financial market conditions could adversely affect the Companys results
of operations in future periods. The current instability in the financial markets may make it
difficult for certain of the Companys customers to obtain financing, which may significantly
impact the volume of future sales which could have an adverse impact on the Companys future
operating results.
In addition, given the volatility of current economic conditions, the values of assets and
liabilities recorded in the financial statements could change rapidly, resulting in material future
adjustments in allowances for accounts receivable, inventory and valuation of intangibles and
goodwill.
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Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended (the Exchange Act) are designed to provide reasonable assurance
that information required to be disclosed by us in the reports we file or submit under the Exchange
Act, is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the Securities and Exchange Commission and that such information is accumulated and
communicated to our management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure. As required by
Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, with the
participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our disclosure controls and procedures as of December 31, 2010. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2010, our
disclosure controls and procedures were effective in providing such reasonable assurance.
Managements Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the
Company. Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the
United States of America.
The Companys internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management, under the supervision of the Companys Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the effectiveness of internal control over financial reporting
based on the framework in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management
concluded that the Companys internal control over financial reporting was effective as of December
31, 2010 under the criteria set forth in the Internal ControlIntegrated Framework.
This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by our registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only managements report in this
Annual Report on Form 10-K.
There have been no changes in the Companys internal control over financial reporting
identified in connection with the evaluation that occurred during the Companys last fiscal quarter
that has materially affected, or that is reasonably likely to materially affect, the Companys
internal control over financial reporting.
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Item 9B. | Other Information |
None.
PART III
Item 10. | Directors, Executive Officers and Corporate Governance |
Directors
The names of the nominees for Director and certain other information about them as of March
30, 2011 are set forth below.
Name | Age | Director Since | Position Held with Company | |||
George C. Platt |
70 | 1999 | Chairman of the Board | |||
David T. Stoner |
54 | 2008 | President and Chief Executive Officer | |||
Joseph Autem |
53 | 1999 | Director | |||
Sherel D. Horsley |
68 | 2006 | Director | |||
John W. Slocum, Jr. |
70 | 2006 | Director | |||
David W. Brandenburg |
66 | 2008 | Director |
George C. Platt has served as a director since September 1999 and currently serves as
Chairman of the Board. Mr. Platt joined ViewCast as Chief Executive Officer and President in
September 1999. In October 2005, he relinquished the role of President, and he retired from the
position of Chief Executive Officer in July 2008. From 1991 through 1999, Mr. Platt was employed
by Intecom, Inc., a Dallas-based provider of multimedia telecommunications products and services,
holding the positions of Chief Executive Officer and President. Prior to his employment with
Intecom, Inc., Mr. Platt was the President of SRX, an entrepreneurial startup company. Before
that, he was a Group Vice President (Business Communications Group) at Rolm Corporation until its
acquisition by International Business Machines Corporation, or IBM, and prior to his employment at
Rolm Corporation, Xerox employed him for fifteen years, where he attained the position of
Operations Manager, Southeast Region. Mr. Platt holds an M.B.A. from the University of Chicago and
a B.S. degree from Northwestern University. For over a decade, Mr. Platt served as a director for
Intervoice, Inc., a publicly held company, until it was acquired by Convergys in the fall of 2008.
During the most recent five years he did not serve as a committee member after his son joined
Intervoice as a senior executive.
Mr. Platt brings to the Board of Directors a broad base of experience including operations,
sales and business development and provides a senior management and public company board
perspective from his experience in various organizations. Further, his contacts domestically and
globally continue to be beneficial to ViewCast.
David T. Stoner has served as a director since May 2008 and moved to his current position as
President and Chief Executive Officer in August 2008. Mr. Stoner joined ViewCast as Vice President
of Operations in August 1996 and became President and Chief Operating Officer in October 2005.
From August 1994 to August 1996, Mr. Stoner was Vice President of Engineering for the Connectworks
Division of Connectware, Inc., a wholly owned subsidiary of AMP, Inc. From July 1986 to August
1994, Mr. Stoner was employed by Visual Information Technologies, Inc. (VITec), a manufacturer of
video, imaging, and graphics products, which was purchased by Connectware, Inc. At VITec, Mr.
Stoner was responsible for the development of hardware and software products, and served in various
positions including Vice President of Engineering. From January 1979 to July 1986, Mr. Stoner
served in various engineering positions at Texas Instruments, Inc. Mr. Stoner received his B.S.
degree in Electrical Engineering from the University of Kansas. In the prior five years, Mr.
Stoner has not served as a director
on a public company board except for ViewCast.
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Mr. Stoner brings to the Board of Directors executive management input and leadership from his
role as CEO of ViewCast, technical and industry insight, and operations and engineering experience
in various organizations.
Joseph Autem has served as a director since January 1999. He currently serves as a Managing
Director of CFO Partners since October 2009. Additionally, he is the general partner of Autem,
L.L.C., an investment company formed in May 1999. Previously, Mr. Autem was a director of
Broadcast.com, Inc. from September 1996 through August 1999. From July 1998 to the present he has
served as a consultant to various companies, including a prior role as the President and a Director
of Paralegals Plus, Inc. which filed for bankruptcy in November 2008. Mr. Autem was the Chief
Financial Officer of Luminant from January 1999 until July 1999. Mr. Autem previously served as
Senior Vice President and Chief Financial Officer of CS Wireless, Inc., a privately held company
that provides wireless video and high speed internet access, from June to July 1998 and as a
partner of Vision Technology Partners, a private investment company, from March 1997 to June 1998.
From July 1996 to December 1996, Mr. Autem served as Chief Financial Officer of Broadcast.com, Inc.
From 1992 to 1996, Mr. Autem served as Vice President of Finance, Secretary, Treasurer and Chief
Financial Officer of OpenConnect Systems, Inc., a software company. Earlier in his career, Mr.
Autem was in public practice with the national accounting firm, Arthur Anderson. Mr. Autem holds a
B.S. in Accounting from Pittsburg State University. In the prior five years, Mr. Autem has not
served as a director on a public company board except for ViewCast.
Mr. Autem brings to the Board of Directors financial and accounting experience and insight
developed within the technology industry.
Sherel D. Horsley has been a director since June 2006. He is retired from Texas Instruments,
Inc. where he performed 35 years of service covering a variety of marketing and business
development leadership roles, including field marketing assignments. His last position at TI was
Senior Vice President and product manager of Digital Imaging, where he was responsible for product
development, sales and marketing for all products based on TIs Digital Light Processing
Technology. Mr. Horsley was vice chairman of the Electronic Industries Alliance (EIA) and a member
of the EIA Board of Governors and Executive Committee. He was also a past board member of the
Consumer Electronics Association. During his career, Mr. Horsley received recognition for his work
on numerous projects, and led a team that won the prestigious Malcolm Baldrige National Quality
Award in 1992. In the prior five years, Mr. Horsley has not served as a director on a public
company board except for ViewCast.
Mr. Horsley brings to the Board of Directors marketing engineering and product development
experience from a leading global technology company.
John W. Slocum, Jr. has served as director since June 2006. Professor Slocum holds the title
of Professor Emeritus in the Cox School of Business, Southern Methodist University in Dallas,
Texas. Professor Slocum has taught on the faculties of the University of Washington, Pennsylvania
State University, Ohio State University, the International University of Japan, and the Tuck School
at Dartmouth College. He is the author of 28 books and currently serves as the co-editor of the
Journal of World Business, Organizational Dynamics, and Journal of Leadership and Organizational
Studies. Professor Slocum has also served as a management consultant to organizations such as
ARAMARK, Lockheed Martin, Celanese, Prudential Bache Indonesia, among others. He is on the
executive development staff of programs for the Governors of Oklahoma and Texas, SMU, and the
University of North Texas Health Sciences, among others. Professor Slocum is currently on the
board of advisors for Kisco Senior Living, LLC of Carlsbad, California. In the prior five years,
Professor Slocum has not served as a director on a public company board except for ViewCast.
Professor Slocum brings to the Board of Directors a management and organizational perspective
developed during his academic years as a professor at a top business school along with his
experience from consulting with various organizations.
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David W. Brandenburg has served as director since December 2008. Mr. Brandenburg is a former
Chairman and Vice Chairman of the Board of Directors, Chief Executive Officer and President of
Intervoice, a publicly held company acquired by Convergys in the fall of 2008. Intervoice
developed and delivered enhanced services platforms to cellular service providers that enabled them
to provide voice, text and video messaging and other enhanced services to their customers.
Intervoice also provided Interactive Voice Response systems to Fortune 1000
and other companies. Mr. Brandenburg first joined Intervoice in 1990 as Chief Operating
Officer after having served as a director since 1989. He was promoted to President of Intervoice
in 1991 where he served until December 1994 when he relinquished his position of President and
assumed the position of Vice Chairman of the Board until May 1995. He re-joined Intervoice as
Chief Executive Officer in June 2000 and also served as Chairman of the Board from December 2000
until his retirement in November 2004. In June of 2007, Mr. Brandenburg re-joined the Intervoice
Board of Directors as Chairman. He served in this position until the company was acquired by
Convergys in September 2008. Mr. Brandenburg also served as President and Chief Executive Officer
of AnswerSoft, Inc. a global provider of call center software automation solutions from November
1997 to May 1998, at which time it completed a merger with Davox Corporation. Davox subsequently
changed its name to Concerto Software, Inc. and, following a merger with Aspect Communications
Corp., is now part of Aspect Software, Inc., a privately-held company. Mr. Brandenburgs current
principal occupation is serving as a private, self-employed investor and philanthropist. He is
Chairman and Chief Executive Officer of the Brandenburg Life Foundation, a 501(c)(3) charitable
foundation which he founded with his wife in 1996. Mr. Brandenburg received a BSEE from the
University of Michigan and a MSEE from Southern Methodist University. In the prior five years, Mr.
Brandenburg has served as a director on a public company board as described above for ViewCast and
Intervoice.
Mr. Brandenburg brings to the Board of Directors experience ranging from business operations
and strategy to public company boards along with a stockholder perspective from his experience as a
substantial investor in various organizations.
There are no family relationships among the directors, executive officers, or other
significant employees of ViewCast.
Executive Officers
The following table contains information as of March 31, 2011 regarding the executive officers
of ViewCast. Each holds the offices listed below and will hold such positions until the next
regular meeting of the Board of Directors to be held immediately following the Annual Meeting of
Stockholders or until their successors are chosen and qualified by the Board of Directors:
Name | Age | Office Held with Company | ||
David T. Stoner |
54 | President and Chief Executive Officer | ||
Laurie L. Latham |
54 | Chief Financial Officer and Senior Vice President of Finance and Administration | ||
Adrian Guihat |
51 | Chief Technical Officer and Senior Vice President of Product Development |
David T. Stoners information can be found with the information under Directors.
Laurie L. Latham has served as Chief Financial Officer and Senior Vice President of Finance
and Administration of ViewCast since December 1999. From 1997 until she joined ViewCast, Ms.
Latham served as Senior Vice President and Chief Financial Officer of Perivox Corporation, an
interactive communications and direct marketing company. From 1994 through 1997, she was the Vice
President of Finance and Administration at Axis Media Corporation. Prior to joining Axis Media
Corporation, Ms. Latham had been in public practice with national and regional accounting firms,
including KPMG Peat Marwick, and was the Vice President of Finance and Administration for Medialink
International Corporation, a food industry technology company located in California. In addition,
Ms. Lathams earlier career experience included roles within the oil and gas, real estate and
agricultural industries. Ms. Latham received her B.B.A. from the University of Texas and is a
Certified Public Accountant.
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Adrian Giuhat serves as Chief Technical Officer and Senior Vice President of Product
Development, a recent role he began in September 2010. Prior to joining ViewCast, Mr. Giuhat was a
Senior Vice President and CTO of Nexstar Broadcasting Group, a public company that owns and
operates 62 TV stations in 14 U.S. states, from 2008 until joining ViewCast. From 2003 to 2008, he
was founder and CTO for AvantGuard Technologies a product
development, data warehousing, technology consulting company, which defined, developed, and
marketed web based products used in video distribution, print advertising and pre-sales lead
management. During 2000 to 2003, Mr. Giuhat was the Senior Vice President of Engineering for
Digital Generation (DG) Systems (currently known as DG FastChannel Inc.), a leader in content
distribution of digital media to over 1,000 TV and 7,000 radio stations across the United States
and Canada. Prior to 2000, Mr. Giuhat held senior level product development and management roles
with ADC-Teledata, an Israeli telecom company, and with DSC-Alcatel USA, a multi-national telecom
provider company. Early in his career, Mr. Giuhat held management engineering roles with Nortel
Networks-BNR and Olivetti International. Mr. Giuhat received his M.Sc. and B.S. from the
University of Bucharest and M.B.A. from Ottawa University.
Corporate Governance
Board Leadership Structure
The positions of Director, President and Chief Executive Officer are held by Mr. Stoner. In
these roles, Mr. Stoner has general charge, supervision and control of the business and affairs of
ViewCast and is responsible generally for assuring that policy decisions of the Board are
implemented as adopted. As part of his duties, Mr. Stoner is also responsible for planning
ViewCasts growth, for stockholder relations and relations with investment bankers and other
similar financial institutions and financial advisors, for exploring opportunities for mergers,
acquisitions and new business, and for performing such other duties as the Board may from time to
time assign. The position of Chairman of the Board is held by Mr. Platt who previously served as
President and Chief Executive Officer of ViewCast. As the Chairman of the Board, Mr. Platt
provides leadership to the Board and works with the Board to define its structure and activities in
the fulfillment of its responsibilities. We believe this Board leadership structure is appropriate
for our Company at this time, in that the role of Chairman of the Board working with the President
and Chief Executive Officer who is also a Director on the Board promotes experience, leadership and
direction for our Company.
The Board recognizes, however, that other leadership models may be appropriate, depending on
the circumstances, and that no single Board leadership model is most effective in all circumstances
for any company. For this reason, the Board periodically reviews its leadership structure to ensure
that the stockholders are best served thereby.
Oversight of Risk Management
The Boards role in the Companys risk oversight process includes receiving regular reports
from members of senior management regarding operational, financial, legal, regulatory and strategic
areas including possible areas of material risk to the Company. Both management and the Board have
responsibility for risk management though the Board has the ultimate oversight responsibility for
the risk process. The Audit Committee assists the Board in its oversight of the Companys risk
assessment and risk management policies. The Audit Committee focuses on financial risk, including
internal controls, and receives an annual risk assessment report prepared internally.
Code of Ethics
The Company has adopted a Corporate Compliance Program Guidelines and Ethics Policy that
applies to all employees and officers of the Company and its subsidiaries, including the principal
executive officer and principal financial and accounting officer. This policy meets the
requirements of a code of ethics as defined by Item 406 of Regulation S-K and was filed as
Exhibit 14.1 to the Companys report on Form 10-KSB for the fiscal year ended December 31, 2003.
The Code of Conduct and Ethics is available on our website at www.viewcast.com under
the Company Investor Relations. You may obtain a copy of the Code of Conduct and Ethics, free of
charge, by sending a request in writing to Cordia Leung at the following address: Cordia Leung,
ViewCast.com, Inc., 3701 W. Plano Parkway, Suite 300, Plano, TX 75075.
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Stockholder Communications with the Board of Directors.
Stockholders may send written communications to our Board of Directors by delivering them to
The Board of Directors, Viewcast.com, Inc., at 3701 W. Plano Parkway, Suite 300, Plano, TX 75075.
All stockholder communications will be forwarded to the Chairman of the Board of Directors or, if
addressed to the Audit or Compensation Committee, forwarded to the appropriate committee chairman.
Meetings of the Board of Directors and Committees
Meetings. The Board of Directors held a total of six meetings during ViewCasts fiscal year
ended December 31, 2010. Each Director attended in person or telephonically at least 75% of the
meetings held by the Board of Directors and all committees thereof on which he served.
It is our policy that all directors and nominees should attend the annual meeting of
stockholders. All of our directors attended the 2010 Annual Meeting.
The Board of Directors has established two standing committees: the Audit and Compensation
Committees.
Audit Committee. The Audit Committee oversees and monitors ViewCasts financial reporting
process and internal control system, reviews and evaluates the audit performed by ViewCasts
independent registered public accounting firm and reports any substantive issues found during the
audit to the Board and reviews and evaluates the internal audit program. The Audit Committee is
directly responsible for the appointment, compensation and oversight of the work of our independent
registered public accounting firm. The Audit Committee will also review and approve all
transactions with affiliated parties. The Board of Directors has adopted a written charter for the
Audit Committee, which can be located in the investor relations section of our website at
www.viewcast.com.
Directors Autem, Horsley and Slocum serve as the members of the Audit Committee. All members
of the committee are independent directors as defined under the NASDAQ Stock Market listing
standards. The Audit Committee met four times in the 2010 fiscal year.
The Board of Directors has determined that Mr. Autem qualifies as an Audit Committee
Financial Expert as that term is defined by applicable SEC rules, and the Board of Directors has
designated him as such.
Nomination of Directors. The Board of Directors currently does not have a standing nominating
committee and consequently has no nominating committee charter. The Board of Directors believes
that it is appropriate under existing circumstances for the Company not to have a nominating
committee because the Board is comprised of only six members, four of whom are independent as
defined under the NASDAQ Stock Market listing standards. Currently, each member of the Board of
Directors participates in the consideration of director nominees.
The Board of Directors does not have a formal policy with regard to the consideration of any
director candidates recommended by stockholders because the Board believes it can adequately
evaluate any such recommendation on a case-by-case basis. However, the Board of Directors would
consider for possible nomination, qualified nominees recommended by stockholders. Stockholders who
wish to propose a qualified candidate for consideration should submit complete information as to
the identity and qualifications of that person to the Secretary of the Company at 3701 W. Plano
Parkway, Suite 300, Plano, Texas 75075 sufficiently in advance of an annual meeting.
Absent special circumstances, the Board of Directors will continue to nominate qualified
incumbent directors whom the Board believes will continue to make important contributions to the
Board and the Company. The Board generally requires that nominees be persons of sound ethical
character, be able to represent all stockholders fairly, have demonstrated professional
achievement, have meaningful experience and have a general appreciation of the major business
issues facing ViewCast. The Board of Directors does not have a formal process for identifying and
evaluating nominees for director. However, the Board will evaluate all candidates, whether
recommended by stockholders or otherwise, in accordance with the above criteria.
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Further, the Board strives to nominate directors who represent an appropriate mix of
backgrounds and experiences to best enhance the functions of the Board. The Board does not have a
formal diversity policy in place. However, it does consider diversity in the broadest sense when
seeking and reviewing potential Board nominees, thus including factors such as age, sex, race,
ethnicity and geographic location, as well as a variety of experience and educational backgrounds
(such as operations, finance, accounting and marketing experience and education).
Compensation Committee. The Compensation Committee reviews and approves salaries and bonuses
for all officers, administers options outstanding under ViewCasts stock incentive plans, provides
advice and recommendations to the Board regarding directors compensation and carries out the
responsibilities required by the rules of the SEC. The Compensation Committee believes that its
processes and oversight should be directed toward attracting, retaining and motivating employees
and non-employee directors to promote and advance the interests and strategic goals of the Company.
The Compensation Committee does not have any employee members. As requested by the Compensation
Committee, the Chief Executive Officer will provide information and may participate in discussion
regarding compensation for other executive officers. The Compensation Committee does not routinely
utilize outside compensation consultants but considers other general industry information and
trends if available. The Board of Directors has not adopted a written charter for the Compensation
Committee.
The Compensation Committee has relied on ViewCasts outside legal counsel for advice as to its
obligations under applicable corporate, securities, tax and employment laws, for assistance in
interpreting its obligations under compensation plans and agreements, and for drafting plans and
agreements to document business decisions. The Compensation Committee has the right to select other
legal counsel.
Directors Brandenburg, Horsley and Slocum serve as the members of the Compensation Committee,
with Mr. Slocum serving as Chairman. All members of the Compensation Committee are independent
directors as defined under the NASDAQ Stock Market listing standards. The Compensation Committee
met one time in the 2010 fiscal year.
Compliance with Section 16(a) Beneficial Ownership Reporting
Section 16(a) of the Exchange Act requires ViewCasts officers, directors and persons who
beneficially own more than 10% of a registered class of ViewCasts equity securities to file
reports of ownership and change in ownership with the SEC. Officers, directors and greater than
10% stockholders are required to furnish ViewCast with copies of Section 16(a) forms they file.
To ViewCasts knowledge, based solely on review of the copies of such reports furnished to
ViewCast, and written representations that no other reports were required during the year ended
December 31, 2010, all of ViewCasts officers, directors and greater than 10% beneficial owners
complied with the applicable Section 16(a) requirements, except that Mr. Brandenburg belatedly
reported five transactions. Mr. Brandenburg is now current in his Section 16(a) filings.
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Item 11. | Executive Compensation |
Executive Officer Compensation
The table below set forth for 2009 and 2010 the compensation of each of our named executive
officers.
SUMMARY COMPENSATION TABLE
Non-Equity | ||||||||||||||||||||||||||||
Option | Incentive Plan | All other | ||||||||||||||||||||||||||
Salary (1) | Bonus (1) | Awards (2) | Compensation | Compensation (3) | Total | |||||||||||||||||||||||
Name and Principal Positions | Year | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
David Stoner, CEO and President |
2010 | 198,875 | 4,031 | 28,742 | | | 231,648 | |||||||||||||||||||||
2009 | 200,667 | | 58,953 | | 1,075 | 260,695 | ||||||||||||||||||||||
Laurie Latham, CFO and Sr. VP
Finance and Administration |
2010 | 171,125 | 3,469 | 21,557 | | | 196,151 | |||||||||||||||||||||
2009 | 172,667 | | 36,846 | | 925 | 210,438 | ||||||||||||||||||||||
Adrian Giuhat, CTO and Sr. VP
Product Development (4) |
2010 | 59,564 | 3,469 | 43,660 | | | 106,693 | |||||||||||||||||||||
Gary Klembara, Sr. VP Sales (5) |
2009 | 150,690 | | 29,500 | 14,250 | (6) | 875 | 195,315 |
(1) | The figures shown for salary and bonus represent amounts earned for the fiscal year,
whether or not actually paid during such year, and include amounts deferred pursuant
non-incentive deferred compensation plans. |
|
(2) | Represents the aggregate grant date fair value for options to purchase shares of
ViewCast.com, Inc. common stock granted to the named executive during the applicable year
calculated in accordance with FASB ASC Topic 718 for financial statement purposes. For more
information concerning the assumptions used for these calculations, please refer to the
discussion under the caption Stock-Based Compensation in the Managements Discussion and
Analysis and footnotes to the audited financial statements, included in our Annual Report on
Form 10-K for the year ended December 31, 2010. |
|
(3) | The named executive officers participate in certain group life, health, disability insurance
and medical reimbursement plans, not disclosed in the Summary Compensation Table, that are
generally available to salaries employees and do not discriminate in scope, terms and
operation. The figure shown for each named executive officer is for employer contributions to
a qualified deferred compensation plan (401(k) plan). Our 401(k) plan provides employees with
an opportunity to defer compensation for retirement. Employees may contribute up to 60% of
compensation, subject to IRS limits. ViewCast matches 50% of the first 4% of employee
contributions annually. The Company match was suspended on April 1, 2009 and was resumed
January 1, 2011. |
|
(4) | Mr. Giuhats employment began in September 2010. |
|
(5) | Mr. Klembaras employment with the Company ended in November 2009. |
|
(6) | Represents amounts earned for services rendered during the fiscal year under our Sr. VP of
Sales and Business Compensation Plan, whether or not actually paid during such fiscal year.
Incentive was earned in 2009 based on achievement of 80% or better of the cumulative quota for
sales at the end of each quarter through December 2009. |
Compensation Plans
2005 Stock Incentive Plan.
In October 2005, the Company adopted the ViewCast 2005 Stock Incentive Plan (the 2005 Plan),
which replaced its expired stock option plans (the 1995 Employee Stock Option Plan (the 1995
Employee Plan) and the 1995 Director Stock Option Plan (the Director Plan) and became the sole
plan for providing equity-based incentive compensation to ViewCasts employees, non-employee
directors and other service providers. Options granted under the expired stock option plans will
continue to be subject to the terms of those plans in effect before the effective date of the 2005
Plan. The plan allows for the grant of stock options, restricted stock, restricted stock units,
stock appreciation rights, performance awards and other incentive awards to employees, non-employee
directors and other service providers of ViewCast and its affiliates who are in a position to make
a significant contribution to the success of ViewCast and its affiliates. The purposes of the plan
are to attract and retain individuals, further align employee and stockholder interests, and
closely link compensation with ViewCasts performance. The Compensation Committee of the Board of
Directors currently administers options outstanding under the 2005 Plan, the 1995 Employee Plan and
the Director Plan.
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In October 2009, the Company adopted an amendment to the 2005 Plan to increase the number of
available shares under the 2005 Plan from 3,000,000 to 6,000,000 subject to any adjustments in
accordance with the previously approved 2005 Plan. As amended, the maximum number of shares
available for grant under the 2005 Plan is 6,000,000 shares of Common Stock, plus any shares of
Common Stock subject to outstanding awards under ViewCasts prior stock option plans as of the date
the 2005 Plan was approved by ViewCasts stockholders that later cease to be subject to such awards
for any reason other than such awards having been exercised or expired. Such shares shall, as of
the date such shares cease to be subject to such awards, cease to be available for grant under the
prior stock options plans, but shall be available for issuance under the 2005 Plan. The number of
shares available for award under the plan is subject to adjustment for certain corporate changes in
accordance with the provisions of the plan.
Employee Stock Purchase Plan.
In October 2005, the Company established the ViewCast 2005 Employee Stock Purchase Plan (the
ESPP) to provide employees of the Company with an opportunity to purchase common stock through
payroll deductions. The plan replaced the Companys 1995 employee stock purchase plan which
expired in April 2005. Under the ESPP, 1,000,000 shares of Common Stock have been reserved for
issuance, subject to certain anti-dilution adjustments. The ESPP is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the Code).
Under the ESPP, each ESPP offering is for a period of six months ending March 31 and September
30 of each year. 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
employees cash compensation during an offering period, and not more than $25,000 per year.
Amounts withheld from payroll are applied at the end of each offering period to purchase shares of
Common Stock. Participants may withdraw their contributions at any time before stock is purchased,
and in the event of withdrawal such contributions will be returned to participants. The purchase
price of the Common Stock is equal to ninety-five percent (95%) of the market price of Common Stock
at the end of each offering period (the Exercise Date). The Purchase Price may be changed by the
Board of Directors or its committee but in any case shall never be lower than 85% of the fair
market value of a share of Common Stock on the Exercise Date. ViewCast pays all expenses
incurred in connection with the implementation and administration of the ESPP. In 2009 and 2010,
Ms. Latham participated in the ESPP.
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Stock Awards and Stock Option Grants Outstanding
The following table set forth information regarding stock awards and similar equity
compensation outstanding at December 31, 2010, whether granted in 2010 or earlier, including awards
that have been transferred other than for value.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
Option Awards | ||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||
Plan Awards: | ||||||||||||||||||||
Number of | Number of | |||||||||||||||||||
Securities | Number of | Securities | ||||||||||||||||||
Underlying | Securities | Underlying | ||||||||||||||||||
Unexercised | Underlying | Unexercised | Option | Option | ||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise Price | Exercise | ||||||||||||||||
Name | Exercisable | Unexercisable | Options (#) | ($) | Date | |||||||||||||||
David T. Stoner |
100,000 | (1) | 1.0940 | 2/28/2011 | ||||||||||||||||
60,000 | (1) | 0.4850 | 7/3/2012 | |||||||||||||||||
50,000 | (1) | 0.2850 | 4/19/2015 | |||||||||||||||||
62,500 | (2) | 0.4200 | 7/10/2014 | |||||||||||||||||
70,833 | (3) | 4,167 | 0.4800 | 2/8/2015 | ||||||||||||||||
187,500 | (4) | 0.4800 | 2/8/2015 | |||||||||||||||||
111,111 | (5) | 88,889 | 0.3300 | 4/15/2016 | ||||||||||||||||
200,000 | (6) | 0.1700 | 4/1/2017 | |||||||||||||||||
Laurie L. Latham |
100,000 | (1) | 1.0940 | 2/28/2011 | ||||||||||||||||
60,000 | (1) | 0.4850 | 7/3/2012 | |||||||||||||||||
50,000 | (1) | 0.2850 | 4/19/2015 | |||||||||||||||||
62,500 | (2) | 0.4200 | 7/10/2014 | |||||||||||||||||
59,028 | (3) | 3,472 | 0.4800 | 2/8/2015 | ||||||||||||||||
187,500 | (4) | 0.4800 | 2/8/2015 | |||||||||||||||||
69,444 | (5) | 55,556 | 0.3300 | 4/15/2016 | ||||||||||||||||
150,000 | (6) | 0.1700 | 4/1/2017 | |||||||||||||||||
Adrian Giuhat |
200,000 | (7) | 0.2645 | 9/8/2017 |
(1) | Fully vested on December 31, 2006. |
|
(2) | Fully vested on July 10, 2008. |
|
(3) | 1/3rd vested on 2/8/2009; with 1/36th vesting each month thereafter. |
|
(4) | 15/36th vested on 3/31/2009; with 1/36th vesting each month
thereafter. |
|
(5) | 12/36th vested on 4/14/2010; with 1/36th vesting each month
thereafter. |
|
(6) | 12/36th will vest on 4/1/2011; with 1/36th vesting each month
thereafter. |
|
(7) | 12/36th will vest on 9/8/2011; with 1/36th vesting each month
thereafter. |
Employment Agreements
We have entered into employment agreements with Mr. Stoner and Ms. Latham. Effective
September 6, 2010, we have also entered into an employment agreement with Mr. Giuhat. These
employment agreements are currently in effect through August 2012 for Mr. Stoner and Ms. Latham and
March 2012 for Mr. Giuhat, and are renewed annually with ongoing automatic one- year renewals
unless ViewCast or the executive elects in advance not to renew the agreement. Each such
employment agreement provides for (i) annual base compensation ($215,000 for Mr. Stoner and
$185,000 for Ms. Latham and Mr. Giuhat); (ii) incentive compensation, at our Board of Directors
discretion, in an amount up to 30% of base salary at 100% achievement, increasing in a linear
fashion for performance in excess of 100%, with no limit, based 50% on meeting profitability goals
and 50% on meeting revenue growth targets and such other criteria as determined by the Board of
Directors, and (iii) for an eighteen month non-compete and non-solicitation period upon
termination. Mr. Stoner and Ms. Latham voluntarily reduced their cash compensation below that
provided under their agreements for part of the 2009 and 2010 calendar year.
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Under the employment agreement, each executive will be entitled to (i) a lump sum amount equal
to six months of annual salary in effect on the date of termination, (ii) beginning six months
after termination, the continuation of salary for six months, and (iii) the reimbursement for six
months of COBRA premiums if employment is terminated by ViewCast without cause or by the executive
due to a significant change in the nature and scope of the authority,
powers, functions, benefits or duties attached to his or her position. In the event ViewCast
terminates employment following a change in control, the executive will be entitled to (i) a lump
sum amount equal to six months of annual salary in effect on the date of termination, and (ii)
beginning six months after termination, continuation of salary for six months.
In 2010, ViewCast had provided Mr. Stoner and Ms. Latham the incentive compensation
opportunities promised under their employment agreements by means of a 2010 Executive Incentive
Compensation Plan. Revenue goals under this plan were $4,200,000; $4,550,000; $4,750,000 and
$5,000,000 for the first through the fourth quarters of 2010, with a total annual goal of
$18,500,000. Profit goals under this plan, which requires a minimum of $100,000 profit for any
period, were $100,000; $100,000; $280,017 and $510,077 for the first through the fourth quarters of
2010, with a total annual goal of $743,065. In 2010, neither executive accrued a bonus under this
plan.
In 2009, ViewCast had provided Mr. Stoner and Ms. Latham the incentive compensation
opportunities promised under their employment agreements by means of a 2009 Executive Incentive
Compensation Plan. Revenue goals under this plan were $4,762,437; $5,261,705; $5,694,043 and $
6,031,815 for the first through the fourth quarters of 2009, for a total annual goal of
$21,750,000. Profit goals under this plan, which requires a minimum of $100,000 profit for any
period, were $100,000; $101,468; $234,896 and $517,180 for the first through the fourth quarters of
2009, for a total annual goal of $891,133. In 2009, neither executive accrued a bonus under this
plan.
On November 12, 2009, Mr. Klembaras employment with ViewCast ended. Prior to November 12,
2009, we had entered into an employment agreement with Mr. Klembara. The employment agreement
provided: (i) for annual base compensation of $175,000; (ii) for incentive compensation deemed
appropriate for the position, at our Board of Directors discretion, which may be earned for each
calendar year; and (iii) for an eighteen month non-compete and non-solicitation period upon
termination of employment of Mr. Klembara. Mr. Klembara voluntarily reduced his cash compensation
below $175,000 for part of the 2009 calendar year.
In 2009, ViewCast provided Mr. Klembara the incentive compensation opportunities promised
under his employment agreement by means of a Sr. Vice President, Sales Incentive Compensation Plan
2009. Under this plan, Mr. Klembara was eligible to earn quarterly and cumulative commissions
based on 2009 revenues, less certain expenses and charge backs. Mr. Klembara had additional
incentive compensation opportunities to earn quarterly and annual bonus based on profit. The
quarterly and annual goals were the same as the quarterly and annual profit and revenue goals for
the 2009 Executive Incentive Compensation Plan. The cumulative revenue goal for each quarter was
the sum of the revenue goal for that quarter and any prior quarters in 2009.
Mr. Klembaras target cumulative commission for each quarter in 2009 was the sum of $18,750
for that quarter plus $18,750 for each of the prior quarters or $75,000 cumulative total for 2009,
and he would have been entitled to 60% of his cumulative commissions on reaching 80% of his
cumulative revenue goal, and 100% of those commissions on reaching 100% of his cumulative revenue
goal. Under the plan for exceeding 100% of the cumulative goal, Mr. Klembara would have earned
cumulative accelerators of 15% up to 110%, 25% over 110% to 120%, 50% over 120% to 125%, and 75%
over 125% to 130%. Accelerators for achievement between these percentage points would have been
prorated, as would achievement beyond 130%. In 2009, Mr. Klembara accrued a commission of $14,250
under this plan.
The employment of all other ViewCast officers is at will and may be terminated by ViewCast
or the officer at any time, for any reason or no reason.
Director Compensation
In May 1995, ViewCast adopted a 1995 Director Option Plan (the Director Plan) under which
only outside directors were eligible to receive non-statutory stock options. The Director Plan
terminated on April 21, 2005. As amended and approved by stockholder vote during 2002, a total of
500,000 shares of Common Stock were authorized for issuance under the Director Plan. As of March
31, 2011, options to purchase an aggregate of 40,000 shares at exercise prices ranging from $0.26
to $0.755 per share had been granted and were outstanding under the Director Plan.
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The exercise price of each option granted under the Director Plan is equal to the fair market
value of the Common Stock on the date of grant. Each share grant vests at the rate of 25% of the
option shares upon the first
anniversary of the date of grant and one forty-eighth of the options shares per month
thereafter, unless terminated sooner upon termination of the optionees status as a director or
otherwise pursuant to the Director Plan. On December 22, 2005, the Board of Directors of ViewCast
approved accelerating the vesting of out-of-the-money unvested options previously awarded to
employees, officers and directors under ViewCasts stock option plans with an exercise price
greater than $0.30 per share. The number of out-of-the-money unvested options under the Director
Plan that were accelerated in 2005 and were held by directors as of August 31, 2010 are as follows:
Joseph Autem 14,376 options. In the event of a merger of ViewCast with or into another
corporation or a consolidation, acquisition of assets or other change in control transaction
involving ViewCast, each option becomes exercisable unless assumed or an equivalent option
substituted by the successor corporation.
Except for the Chairman of the Board of the Company, Directors who are not independent
directors or employees currently receive no cash compensation for serving on the Board of Directors
other than reimbursement of reasonable expenses incurred in attending meetings. Following Mr.
Platts retirement on July 31, 2008 from the position of Chief Executive Officer of the Company, he
has continued as Chairman of the Board of the Company. For services rendered to ViewCast as
Chairman of the Board, Mr. Platt receives annual compensation of $65,000. Mr. Platt receives no
additional cash compensation for serving as Chairman other than reimbursement of reasonable
expenses incurred in attending meetings. Mr. Platt voluntarily reduced his cash compensation below
$65,000 for part of the 2009 and 2010 calendar year.
On June 20, 2006 and as subsequently modified on October 8, 2008, the Board of Directors of
ViewCast.com, Inc. approved the policy for the compensation of independent directors by
compensating such individuals with cash and equity designed to both reward such independent
directors for services rendered to the Corporation and to link a portion of their compensation to
the performance of the Corporation by means of equity grants as follows:
| Each independent director of the Corporation shall be paid a cash retainer
equal to $500 per month with an additional cash payment for each meeting of the Board of
Directors of the Corporation equal to $1,000 if attended in person and $250 if attended by
telephone; and |
| Each independent director of the Corporation who has not previously served on
the Board of Directors of the Corporation shall be granted options under the 2005 Stock
Incentive Plan, as described below, to acquire 50,000 shares of the Corporation upon the
appointment to the Board of Directors with such option grant to vest one year from the
date of grant; and |
| Each independent director of the Corporation shall be granted options under
the 2005 Stock Incentive Plan to acquire 25,000 shares of the Corporation each year
immediately following the date of the Corporations annual meeting, provided that such
independent director shall have served as a director of the Corporation at least twelve
months prior to the date of such grant, with such option grant to vest one year from the
date of grant. |
The exercise price of each option granted to an independent director under the 2005 Plan is
equal to the fair market value of the Common Stock on the date of grant. As of March 31, 2011,
options to purchase an aggregate of 508,335 shares at an exercise price ranging from $0.17 to
$0.475 per share had been granted to independent directors and were outstanding under the 2005 Plan
and 16,665 options previously granted have been exercised at an exercise price of $0.20 per share.
49
Table of Contents
The following table sets forth information regarding compensation earned by the non-employee
directors of ViewCast.com, Inc. during the last fiscal year ending December 31, 2010.
Director Compensation Table
Fees Earned or Paid | Option Awards ($) | |||||||||||
Name | in Cash ($) (1) | (2) | Total ($) | |||||||||
George C. Platt, Chairman |
60,125 | 7,186 | 67,311 | |||||||||
Joseph Autem |
10,400 | 8,641 | 19,041 | |||||||||
David W. Brandenburg |
10,475 | 8,641 | 19,116 | |||||||||
Sherel D Horsley |
11,150 | 8,641 | 19,791 | |||||||||
John W Slocum, Jr |
10,150 | 8,641 | 18,791 |
(1) | Includes meeting fees earned during the fiscal year, whether such fees were paid
currently or deferred. |
|
(2) | Represents the aggregate grant date fair value for options to purchase shares of
ViewCast.com, Inc. common stock granted to the director during the applicable year
calculated in accordance with FASB ASC Topic 718 for financial statement purposes. For more
information concerning the assumptions used for these calculations, please refer to the
discussion under the caption Stock-Based Compensation in the Managements Discussion and
Analysis and footnotes to the audited financial statements, included in our Annual Report on
Form 10-K for the year ended December 31, 2010. As of December 31, 2010, the aggregate
outstanding option awards to each non-employee director were: Mr. Platt 732,500; Mr.
Autem 165,000; Mr. Brandenburg 100,000; Mr. Horsley 150,000; Mr. Slocum 133,335. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters |
The following table sets forth information as of March 31, 2011, based on information obtained
from public records and our books and records regarding the persons named below, with respect to
the beneficial ownership of shares of our Common Stock and Series E Preferred, respectively, by:
(i) each person or a group known by us to be the owner of more than five percent (5%) of each class
of our outstanding voting securities, (ii) each director, (iii) each executive officer and (iv) all
officers and directors as a group. Except as otherwise indicated, each person shown in the table
has voting and investment power with respect to the shares listed next to his or her name. Except
as otherwise indicated, the address for each person listed in the table below is c/o ViewCast.com,
Inc., 3701 W. Plano Parkway, Suite 300, Plano, TX 75075.
Percentage of | Percentage of | |||||||||||||||
Shares of Common | Outstanding | Shares of Series E | Outstanding Series E | |||||||||||||
Name and Address of | Stock Beneficially | Common Stock | Preferred Stock | Preferred Stock | ||||||||||||
Beneficial Owner | Owned | Owned (1), (2) | Beneficially Owned | Owned | ||||||||||||
H.T. ARDINGER, JR. |
27,296,659 | (3) | 48.07 | % | 80,000 | (11) | 100 | % | ||||||||
1990 Lakepointe Dr.
Lewisville, TX 75057 |
||||||||||||||||
DAVID W. BRANDENBURG |
4,584,934 | (4) | 11.73 | % | | | ||||||||||
GEORGE C. PLATT |
757,194 | (5) | 1.91 | % | | | ||||||||||
DAVID T. STONER |
722,105 | (6) | 1.82 | % | | | ||||||||||
LAURIE L. LATHAM |
620,133 | (7) | 1.57 | % | | | ||||||||||
SHEREL D. HORSLEY |
125,000 | (8) | * | | | |||||||||||
JOSEPH AUTEM |
148,200 | (9) | * | | | |||||||||||
JOHN W. SLOCUM, JR. |
135,000 | (10) | * | | | |||||||||||
ADRIAN GIUHAT |
25,000 | * | ||||||||||||||
All executive officers and
directors as a group
(eight (8) persons) |
7,117,566 | 17.27 | % | | |
* | Less than one percent (1%) |
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Table of Contents
(1) | A person is deemed to be the beneficial owner of securities that can be acquired by such
person within 60 days from March 31, 2011 upon the exercise of warrants or options. Each
beneficial owners percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and which are
exercisable within 60 days from March 31, 2011 have been exercised. Unless otherwise
indicated, we believe that all persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned by them. |
|
(2) | Based on a total of 39,016,318 shares issued and outstanding which excludes treasury stock,
plus, for each person listed, any Common Stock that person has the right to acquire within 60
days from March 31, 2011 pursuant to options, warrants, conversion privileges, etc. |
|
(3) | Information is based on filings made with the U.S. Securities and Exchange Commission (the
SEC) under Sections 13 or 16 of the Securities Exchange Act of 1934, as amended (the
Exchange Act) and includes: (i) 181,501 shares owned by Mr. Ardingers spouse, (ii)
5,562,687 shares owned by Ardinger Family Trust, (iii) 1,103,448 shares of Common Stock
reserved for issuance upon the conversion of $4,000,000 of Series B Convertible Preferred
Stock to Common Stock at $3.625 per share, (iv) 3,333,333 shares of Common Stock reserved for
issuance upon the conversion of $2,000,000 of Series C Convertible Preferred Stock to Common
Stock at $0.60 per share, and (v) 13,333,333 shares of Common Stock reserved for issuance upon
the conversion of $8,000,000 of Series E Convertible Redeemable Preferred Stock to Common
Stock at $0.60 per share owned by Ardinger Family Partnership, Ltd.. |
|
(4) | Information is based on filings made with the SEC under Sections 13 or 16 of the Exchange Act
and includes: (i) 400,000 shares owned by Mr. Brandenburgs spouse and (ii) the following
shares issuable under the 2005 Plan upon exercise of options: (i) 50,000 shares issuable upon
exercise at $0.315 per share, and (ii) 25,000 shares issuable upon exercise at $0.17 per
share. |
|
(5) | Includes the following shares issuable under the 1995 Employee Plan and the 2005 Plan upon
exercise of options: (i) 200,000 shares issuable upon exercise at $0.33 per share, (ii) 50,000
shares issuable upon exercise at $0.17 per share, (iii) 70,000 shares issuable upon exercise
at $0.485 per share, (iv) 70,000 shares issuable upon exercise at $0.285 per share, (v) 12,500
shares issuable upon exercise at $0.42 per share, and (vi) 130,000 shares issuable upon
exercise at $0.48 per share. |
|
(6) | Includes the following shares issuable under the 1995 Employee Plan and the 2005 Plan upon
exercise of options: (i) 138,889 shares issuable upon exercise at $0.33 per share, (ii) 72,222
shares issuable upon exercise at $0.17 per share, (iii) 60,000 shares issuable upon exercise
at $0.485 per share, (iv) 50,000 shares issuable upon exercise at $0.285 per share, (v) 62,500
shares issuable upon exercise at $0.42 per share, and (vi) 262,500 shares issuable upon
exercise at $0.48 per share. |
|
(7) | Includes the following shares issuable under the 1995 Employee Plan and the 2005 Plan upon
exercise of options: (i) 62,500 shares issuable upon exercise at $0.33 per share, (ii) 54,167
shares issuable upon exercise at $0.17 per share, (iii) 60,000 shares issuable upon exercise
at $0.485 per share, (iv) 50,000 shares issuable upon exercise at $0.285 per share, (v) 62,500
shares issuable upon exercise at $0.42 per share, and (vi) 250,000 shares issuable upon
exercise at $0.48 per share. |
|
(8) | Includes the following shares issuable under the 2005 Plan upon exercise of options: (i)
50,000 shares issuable upon exercise at $0.20 per share, (ii) 25,000 shares issuable upon
exercise at $0.42 per share, (iii) 25,000 shares issuable upon exercise at $0.475 per share,
and (iv) 25,000 shares issuable upon exercise at $0.17 per share. |
|
(9) | Includes the following shares issuable under the Directors Plan upon exercise of options: (i)
10,000 shares issuable upon exercise at $0.755 per share, (iii) 10,000 shares issuable upon
exercise at $0.26 per share, (iv) 10,000 shares issuable upon exercise at $0.615 per share,
(v) 10,000 shares issuable upon exercise at $0.37 per share; includes under the 2005 Plan: (i)
25,000 shares issuable upon exercise at $0.39 per share, (ii) 25,000 shares issuable upon
exercise at $0.42 per share, (iii) 25,000 shares issuable upon exercise at $0.475 per share,
and (iv) 25,000 shares issuable upon exercise at $0.17 per share. |
|
(10) | Includes the following shares issuable under the 2005 Plan upon exercise of options: (i)
33.335 shares issuable upon exercise at $0.20 per share, (ii) 25,000 shares issuable upon
exercise at $0.42 per share, (iii) 25,000 shares issuable upon exercise at $0.475 per share,
and (iv) 25,000 shares issuable upon exercise at $0.17 per share. |
|
(11) | All of these shares are held through the Ardinger Family Partnership, Ltd. |
51
Table of Contents
Equity Compensation Plan Information
The following table sets forth certain information as of December 31, 2010 concerning
outstanding awards and securities available for future issuance pursuant to ViewCasts equity
compensation plans.
Number of securities remaining | ||||||||||||
Number of securities to | Weighted-average | available for future issuance | ||||||||||
be issued upon exercise | exercise price of | under equity compensation | ||||||||||
of outstanding options, | outstanding options, | plans (excluding securities | ||||||||||
Plan category | warrants and rights | warrants and rights | reflected in column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders |
4,787,085 | $ | 0.41 | 3,264,170 | ||||||||
Equity compensation plans not approved by security holders |
| | | |||||||||
Total |
4,787,085 | $ | 0.41 | 3,264,170 | ||||||||
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Relationships and Related Transactions
Since October 1998, the Company has maintained a credit facility with an entity controlled by
one of its principal stockholders, Mr. H.T. Ardinger. Most recently, ViewCast.com, Inc., Osprey
Technologies, Inc. and VideoWare, Inc. (jointly and severally, the Borrower) amended the terms
and conditions of the loan and security agreement with the Ardinger Family Partnership, Ltd. on
March 31, 2011. Under the amended terms any amounts outstanding of the primary principal amount
and secondary principal amount mature December 31, 2014, subject to certain earlier payment
conditions. The interest on the primary principal amount will accrue and be paid monthly based on
an interest rate per annum which is the greater of 5.0% or the effective prime rate plus 0.75%
(4.00% as of December 31, 2009 and 2010). Interest on the secondary principal shall accrue based
on the effective Applicable Federal Rate, as defined in the agreement, (2.64% and 0.32% as of
December 31, 2009 and 2010, respectively). The amended terms call for interest to be paid monthly,
and beginning December 31, 2011, shall require minimum monthly principal payments of $21,422, in
addition to the monthly interest payments. The amended note agreement is secured by all the assets
of the Borrower.
On March 5, 2009, H.T. Ardinger and the Ardinger Family Partnership, Ltd. exercised the
outstanding warrant to purchase 2,500,000 shares of the Companys unregistered common stock at an
amended exercise price of $0.376 per share and the Company received proceeds of $940,000. On March
13, 2009, the Company completed the purchase of certain assets from Ancept Media Server, LLC
(Seller) related to the development and licensing of software products that provide the
management of the life cycle phases of digital media (the Ancept Assets) pursuant to the terms of
the Asset Purchase Agreement dated March 5, 2009, as amended, by and between the Company and Seller
(the Purchase Agreement). The source of a significant portion of the cash paid to Seller was
obtained by the Company pursuant to the warrant exercise by H.T. Ardinger and the Ardinger Family
Partnership, Ltd. on March 5, 2009.
On December 30, 2010, the Company received net proceeds of $745,000 from the private placement
of 2,950,847 shares of common stock. The purchase price per share of common stock was
approximately $0.2525, which was the weighted average closing price for the ten trading days
immediately prior to December 30, 2010. One of the investors included David W. Brandenburg, a
principal stockholder and member of the Board of Directors of the Company, and his spouse.
52
Table of Contents
Independence of Directors
The Board of Directors is comprised of a majority of directors who qualify as independent
according to NASDAQ Stock Market listing standards. Based upon the term independent as defined
by NASDAQ Stock Market listing standards, the Board of Directors has determined that four of our
six directors (Joseph Autem, Sherel D. Horsley, John W. Slocum, Jr. and David W. Brandenburg) are
independent. All members of each of the Audit Committee and the Compensation Committee are
independent directors.
Annually, the Board of Directors reviews the relationships that each director has with us and
our affiliates as well as the criteria and standards for determining independence. Upon review,
the Board of Directors affirmatively determines which directors are considered independent.
None of the executive officers of ViewCast served as a member of the board of directors or as
a member of the compensation committee or similar board committee of another entity during 2010,
which entity had an executive officer serving on the Board of ViewCast or its Compensation
Committee. Consequently, there are no interlocking relationships that might affect the
determination of the compensation of executive officers of ViewCast.
Item 14. | Principal Accountant Fees and Services |
Audit and Audit Related Fees
Subject to ratification by the stockholders, the Board of Directors has appointed BKD, LLP as
our independent registered public accounting firm for the 2011 fiscal year. During the fiscal
years ended December 31, 2009 and December 31, 2010, the Company had retained BKD, LLP, to provide
audit and other services as follows:
2009 | 2010 | |||||||
Audit (1) |
$ | 116,275 | $ | 111,825 | ||||
Audit Related Fees (2) |
5,000 | | ||||||
Tax Fees (3) |
20,925 | 23,050 | ||||||
TOTAL |
$ | 142,200 | $ | 134,875 | ||||
(1) | Consists primarily of quarterly review and annual audit services |
|
(2) | Consists primarily of review services for Form S-8 |
|
(3) | Consists primarily of Federal and State tax services |
The Audit Committee does not have a policy for the pre-approval of non-audit services to
be provided by the Companys independent registered public accounting firm. Any such services
would be considered on a case-by-case basis. The Audit Committee approved the tax fees for
services provided by the independent auditors in fiscal years 2009 and 2010.
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Table of Contents
Item 15. | Exhibits and Financial Statement Schedules. |
(a) | Documents filed as part of the Report: |
1. | Financial Statements: Consolidated Balance Sheets at December 31, 2009 and 2010 Consolidated Statements of Operations for the years ended December 31, 2009 and 2010 Consolidated Statements of Stockholders Equity (Deficit) for the years ended December 31, 2009 and 2010 Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2010 Notes to Consolidated Financial Statements. |
2. | All other schedules are omitted because of they are not required or because the
required information is given in the consolidated financial statements or notes
thereto. |
3. | Exhibits: |
EXHIBIT INDEX
Exhibit No. | Description of Exhibit | |||
2.1 | Agreement and Plan of Merger and Reorganization (1) |
|||
2.2 | Asset Purchase Agreement between ViewCast.com, Inc. and Ancept Media Server, LLC, dated
March 5, 2009 (26) |
|||
2.3 | First Amendment to Asset Purchase Agreement between ViewCast.com, Inc. and Ancept Media
Server, LLC, dated March 13, 2009 (26) |
|||
3.1 | Certificate of Incorporation (1) |
|||
3.2 | Amendment to Certificate of Incorporation (1) |
|||
3.3 | Restated Bylaws (4) |
|||
3.4 | Certificate of Designation of Series B Convertible Preferred Stock (2) |
|||
3.5 | Certificate of Designation of Series C Convertible Preferred Stock (6) |
|||
3.6 | Certificate of Designation of Series D Redeemable Convertible Preferred Stock (7) |
|||
3.7 | Certificate of Designation of Series E Convertible Redeemable Preferred Stock (20) |
|||
4.1 | Form of Common Stock Certificate (1) |
|||
4.2 | Form of Warrant Certificate (1) |
|||
4.3 | Form of Warrant Agreement between ViewCast and Continental Stock Transfer & Trust Company
(1) |
|||
4.4 | Form of Representatives Warrant Agreement (1) |
|||
4.5 | Notice of Extension of Warrant Expiration Date and Exercise Price Adjustment (5) |
|||
4.6 | Warrant Issued to Ardinger Family Partnership, LTD (20) |
|||
10.1 | Form of Indemnification Agreement between ViewCast and Executive Officers and Directors (1) |
|||
10.2 | Working Capital Line of Credit Loan Agreement between ViewCast and the Ardinger Family
Partnership, LTD (3) |
|||
10.3 | Sublease Agreement between ViewCast and Host Communications, Inc. (6) |
|||
10.4 | Reserved. |
54
Table of Contents
Exhibit No. | Description of Exhibit | |||
10.5 | Revolving Loan Agreement between MMAC Communications Corp. and Keltic Financial Partners,
LP dated as of October 11, 2002 (7) |
|||
10.6 | Guarantee of Payment and Performance from ViewCast.com, Inc. to Keltic Financial Partners,
LP dated as of October 11, 2002 (7) |
|||
10.7 | Subordination Agreement by and among Keltic Financial Partners, LP, MMAC Communications
Corp. and ViewCast.com, Inc. dated as of October 11, 2002 (7) |
|||
10.8 | General Security Agreement by and between MMAC Communications Corp. and Keltic Financial
Partners, LP dated as of October 11, 2002 (7) |
|||
10.9 | Revolving Note by MMAC Communications Corp. in favor of Keltic Financial Partners, LP dated
as of October 11, 2002 (7) |
|||
10.10 | ViewCast.com, Inc. 2005 Stock Incentive Plan (14) |
|||
10.11 | ViewCast.com, Inc. 2005 Employee Stock Purchase Plan (15) |
|||
10.12 | Reserved. |
|||
10.13 | Reserved. |
|||
10.14 | Reserved. |
|||
10.15 | Form of Amended and Restated Security Agreement dated October 15, 2003 between
ViewCast.com, Inc. and the Ardinger Family Partnership, LTD (8) |
|||
10.16 | Form of Amended and Restated Pledge Agreement dated October 15, 2003 between ViewCast.com,
Inc. and the Ardinger Family Partnership, LTD (8) |
|||
10.17 | Form of First Amendment to the Revolving Loan Agreement dated October 11, 2003 between
Delta Computec Inc. and Keltic Financial Partners, LP (8) |
|||
10.18 | Reserved. |
|||
10.19 | Reserved. |
|||
10.20 | Third Amendment dated as of December 10, 2004 to Revolving Loan Agreement between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002 (9) |
|||
10.21 | Fourth Amendment dated as of January 10, 2005 to Revolving Loan Agreement between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002 (9) |
|||
10.22 | Fifth Amendment dated as of February 15, 2005 to Revolving Loan Agreement between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002 (9) |
|||
10.23 | Notice of Lower Temporary Conversion Price dated March 21, 2005 (10) |
|||
10.24 | Letter Agreement Amending Revolving and Term Credit Facility dated March 22, 2005 (10) |
|||
10.25 | Sixth Amendment, dated as if April 15, 2005, to Revolving Loan Agreement Between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002 (11) |
|||
10.26 | Seventh Amendment, dated as if July 15, 2005, to Revolving Loan Agreement Between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002 (12) |
|||
10.27 | Letter Agreement Amending Revolving and Term Credit Facility dated July 22, 2005 (13) |
|||
10.28 | Eighth Amendment, dated as if October 11, 2005, to Revolving Loan Agreement Between MMAC
Communications Corp. and Keltic Financial Partners, LP dated as of October 11, 2002 (16) |
|||
10.29 | Reserved. |
55
Table of Contents
Exhibit No. | Description of Exhibit | |||
10.30 | Office Lease Agreement between ViewCast and TR Plano Parkway Partners, L.P. (17) |
|||
10.31 | Letter Agreement Amending Revolving and Term Credit Facility dated March 20, 2006 (18) |
|||
10.32 | Office Lease Agreement between ViewCast and Valwood Centreport, LP (19) |
|||
10.33 | Registration Rights Agreement by and among ViewCast and Ardinger Family Partnership, Ltd.
Dated as of December 11, 2006 (20) |
|||
10.34 | Second Amended Loan and Security Agreement dated as of December 11, 2006 (20) |
|||
10.35 | Exchange Agreement dated as of December 11, 2006 by and among ViewCast, Osprey
Technoligies, Inc. and Videoware, Inc. and Ardinger Family Partnership, Ltd. (20) |
|||
10.36 | Employment Agreement by and between ViewCast Corporation and David T. Stoner effective as
of March 1, 2007 (21) |
|||
10.37 | 2007 Executive Incentive Compensation Plan for David T. Stoner (21) |
|||
10.38 | Employment Agreement by and between ViewCast Corporation and Laurie L. Latham effective as
of March 1, 2007 (21) |
|||
10.39 | 2007 Executive Incentive Compensation Plan for Laurie L. Latham (21) |
|||
10.40 | Purchase and Sale Agreement/Security Agreement by and among ViewCast.com, Inc., Osprey
Technologies, Inc., Videoware, Inc. and Amegy Bank National Association, dated June 29,
2007 (22) |
|||
10.41 | Amendment to Purchase and Sale Agreement/Security Agreement by and among ViewCast.com,
Inc., Osprey Technologies, Inc., Videoware, Inc. and Amegy Bank National Association, dated
June 29, 2007 (22) |
|||
10.42 | Employment Agreement by and between ViewCast.com, Inc. and Gary Klembara effective
September 1, 2007 (23) |
|||
10.43 | First Amendment to Amended and Restated Security Agreement by and among Ardinger Family
Partnership, Ltd., ViewCast.com, Inc., Osprey Technologies, Inc. and Videoware, Inc. (24) |
|||
10.44 | First Amendment to Warrant to Purchase Common Stock by and between ViewCast.com, Inc. and
Ardinger Family Partnership, Ltd., dated February 27, 2009. (25) |
|||
10.45 | Second Amendment to Amended and Restated Security Agreement by and among Ardinger Family
Partnership, Ltd., ViewCast.com, Inc., Osprey Technologies, Inc. and Videoware, Inc. (28) |
|||
10.46 | Third Amendment to Amended and Restated Security Agreement by and among Ardinger Family
Partnership, Ltd., ViewCast.com, Inc., Osprey Technologies, Inc. and Videoware, Inc. (29) |
|||
10.47 | Subscription agreement by and between ViewCast.com, Inc. and John J. Scamardella, dated
December 30, 2010. (30) |
|||
10.48 | Subscription agreement by and between ViewCast.com, Inc. and Stuart Barab, dated December
30, 2010. (30) |
|||
10.49 | Subscription agreement by and between ViewCast.com, Inc. and Lionel L. Dace, dated December
30, 2010. (30) |
|||
10.50 | Subscription agreement by and between ViewCast.com, Inc. and John A. Doyle, dated December
30, 2010. (30) |
|||
10.51 | Subscription agreement by and between ViewCast.com, Inc. and Diana L. Brandenburg, dated
December 30, 2010. (30) |
|||
10.52 | Subscription agreement by and between ViewCast.com, Inc. and David W. Brandenburg, dated
December 30, 2010. (30) |
56
Table of Contents
Exhibit No. | Description of Exhibit | |||
21.1 | Subsidiaries of ViewCast.com, Inc. (1) |
|||
23.1 | Consent of BKD, LLP* |
|||
31.1 | Rule 13a-14(a)/15d-14(a) Certifications * |
|||
32.1 | Statement 1350 Certifications * |
* | Filed herewith. |
|
(1) | Incorporated by reference to the Registration Statement on Form SB-2 and all amendments
thereto as declared effective on February 4, 1997 |
|
(2) | Incorporated by reference to Form 8-K filed March 15, 1999. |
|
(3) | Incorporated by reference to Form 10-KSB filed March 26, 1999. |
|
(4) | Incorporated by reference to Form S-3 filed June 30, 2000. |
|
(5) | Incorporated by reference to Form 8-K filed January 23, 2002. |
|
(6) | Incorporated by reference to Form 10-K filed April 16, 2002. |
|
(7) | Incorporated by reference to Form 8-K filed October 25, 2002. |
|
(8) | Incorporated by reference to Form 10-QSB filed November 14, 2003. |
|
(9) | Incorporated by reference to Form 8-K filed March 25, 2005. |
|
(10) | Incorporated by reference to Form 8-K filed March 25, 2005. |
|
(11) | Incorporated by reference to Form 8-K filed April 21, 2005. |
|
(12) | Incorporated by reference to Form 8-K filed July 18, 2005. |
|
(13) | Incorporated by reference to Form 8-K filed July 27, 2005. |
|
(14) | Incorporated by reference to Appendix A to Proxy Statement filed September 9, 2005. |
|
(15) | Incorporated by reference to Appendix B to Proxy Statement filed September 9, 2005. |
|
(16) | Incorporated by reference to Form 8-K filed October 17, 2005. |
|
(17) | Incorporated by reference to Form 8-K filed January 17, 2006. |
|
(18) | Incorporated by reference to Form 8-K filed March 23, 2006. |
|
(19) | Incorporated by reference to Form 8-K filed November 2, 2006. |
|
(20) | Incorporated by reference to Form 8-K filed December 15, 2006. |
|
(21) | Incorporated by reference to Form 10-KSB/A filed April 30, 2007. |
|
(22) | Incorporated by reference to Form 8-K filed July 6, 2007. |
|
(23) | Incorporated by reference to Form 8-K filed September 5, 2007. |
|
(24) | Incorporated by reference to Form 8-K filed November 4, 2008. |
|
(25) | Incorporated by reference to Form 8-K filed March 5, 2009. |
|
(26) | Incorporated by reference to Form 8-K filed March 23, 2009. |
|
(27) | Incorporated by reference to Form 10-KSB filed March 30, 2004. |
|
(28) | Incorporated by reference to Form 8-K filed August 5, 2009. |
|
(29) | Incorporated by reference to Form 8-K filed March 15, 2010. |
|
(30) | Incorporated by reference to Form 8-K filed January 6, 2011 |
57
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date | ViewCast.com, Inc. | |||
April 29, 2011 | By: | /s/ Laurie L. Latham | ||
Laurie L. Latham | ||||
Chief Financial Officer and Senior Vice President of Finance and Administration |
POWER OF ATTORNEY
Know all people by these presents, that each person whose signature appears below constitutes
and appoints David T. Stoner and Laurie L. Latham, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any amendments to this
annual report on Form 10-K, and to file the same, with all exhibits thereto, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as he or she might or
could do in person, hereby confirming all that said attorneys-in-fact and agents or either of them,
or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
Date
April 29, 2011 | By: | /s/ David T. Stoner | ||
David T. Stoner | ||||
Director and Chief Executive Officer (Principal Executive Officer) |
||||
April 29, 2011 | By: | /s/ Laurie L. Latham | ||
Laurie L. Latham | ||||
Chief Financial Officer and Senior Vice President of Finance and Administration (Principal Accounting and Financial Officer) |
||||
April 29, 2011 | By: | /s/ George C. Platt | ||
George C. Platt | ||||
Director | ||||
April 29, 2011 | By: | /s/ Joseph W. Autem | ||
Joseph W. Autem | ||||
Director | ||||
April 29, 2011 | By: | /s/ Sherel D. Horsley | ||
Sherel D. Horsley | ||||
Director | ||||
April 29, 2011 | By: | /s/ John W. Slocum, Jr. | ||
John W. Slocum, Jr. | ||||
Director | ||||
April 29, 2011 | By: | /s/ David W. Brandenburg | ||
David W. Brandenburg | ||||
Director |
58
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EXHIBIT INDEX FOR DOCUMENTS FILED WITH THIS REPORT
Exhibit | ||||
No. | Description of Exhibit | |||
23.1 | Consent of BKD, LLP |
|||
31.1 | Rule 13a-14(a)/15d-14(a) Certifications |
|||
32.1 | Section 1350 Certifications |