Basis of Presentation and Liquidity

6 Months Ended

Jun. 30, 2013

Basis of Presentation and Liquidity

1. Basis of Presentation and Liquidity

The accompanying consolidated interim unaudited financial statements include the accounts of ViewCast.com, Inc. doing business as ViewCast Corporation and its wholly-owned subsidiaries, VideoWare, Inc., Osprey Technologies, Inc., ViewCast Solutions, Inc. p/k/a Ancept Corporation, 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. ViewCast’s 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. ViewCast’s Niagara® streaming appliances and Osprey® video capture cards provide the highly reliable technology required to deliver the multi-platform experiences driving today’s 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.

These consolidated interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included for the three and six months period ended June 30, 2013. The condensed consolidated balance sheet of the Company as of December31, 2012 has been derived from the audited consolidated balance sheet as of that date. The results for the three and six months period ended June 30, 2013 are not necessarily indicative of the results that may be expected for the full year. The unaudited financial statements included in this filing should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s annual report on Form 10-K, as amended by Amendment No.1 there to, for the year ended December31, 2012.

During the six months ended June 30, 2013, net cash provided from operating activities was $278,789resulting from a net loss of $1,603,427, plus non-cash operating expense of $216,542 and net cash provided from changes in operating assets and liabilities of $1,665,674. At June 30, 2013, the Company had working capital of $457,041 and cash and cash equivalents of $434,706. The Company expects to obtain additional working capital by increasing revenue, reducing operating expenses, borrowing on its line of credit and through other initiatives that may include raising additional capital through issuing debt and/or equity securities. There can be no assurance that additional capital will be available to the Company on acceptable terms, or at all. Additional equity financing may involve substantial dilution to its then existing stockholders. 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 2013 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. In the event the Company is unable to raise additional debt and/or equity capital or execute other alternatives, it may be required to sell segments of the business, or substantially reduce or curtail its activities. However, no assurance can be given that we will be able to sell any segments of the business on terms that are acceptable to us. Such actions could result in charges that could be material to ViewCast’s results of operations or financial position.

On August 14, 2013, the Company entered into a Factoring Agreement (the “Factoring Agreement”) with Variosystems, Inc. whereby Variosystems agreed to advance $200,000 to the Company on or before August 15, 2013, and an additional amount of up to $150,000 on or before December 31, 2013 at the request of the Company, but with the final authority and approval to pay at the final, irrevocable option of Variosystems.   

In consideration for agreeing to advance such funds to the Company, Variosystems will have the right to factor certain of the Company’s invoices at a rate of 15% of the gross amount due to Variosystems.  In addition, Variosystems will have a joint and equal security interest with Ardinger on all of the Company’s assets.

The term of the Factoring Agreement is open, and may be terminated by Variosystems at its sole discretion upon written notice to the Company.