-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EMdc3Ft2gS2zwGx7YDpU3h6ST09DNvL/jekgZ9AdxHQgTr24FPwpQFGfcQIMA1rO IFVRYN3dOYC5Q90yASsVTw== 0001023175-05-000170.txt : 20050812 0001023175-05-000170.hdr.sgml : 20050812 20050812145453 ACCESSION NUMBER: 0001023175-05-000170 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050812 DATE AS OF CHANGE: 20050812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADCAST INTERNATIONAL INC CENTRAL INDEX KEY: 0000740726 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 870395567 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13316 FILM NUMBER: 051021010 BUSINESS ADDRESS: STREET 1: 7050 UNION PARK AVENUE, #600 CITY: SALT LAKE CITY STATE: UT ZIP: 84047 BUSINESS PHONE: 801-562-2252 MAIL ADDRESS: STREET 1: 7050 UNION PARK AVENUE #600 CITY: SALT LAKE CITY STATE: UT ZIP: 84047 FORMER COMPANY: FORMER CONFORMED NAME: LASER CORP DATE OF NAME CHANGE: 19920703 10QSB 1 broadcast10qsb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly Period ended June 30, 2005 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transitional period ________ to __________. Commission File Number: 0-13316 BROADCAST INTERNATIONAL, INC. _______________________________________________________________ (Exact name of small business issuer as specified in its charter) Utah 87-0395567 _______________________ ________________________________ (State of Incorporation) (IRS Employer Identification No.) 7050 Union Park Ave. #600, Salt Lake City, Utah 84047 ___________________________________________________________ (Address of Principal Executive Offices) (Zip Code) (801) 562-2252 _______________________________________________ (Issuer's telephone number, including area code) Check whether the issuer (1) 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. ( x ) Yes ( ) No State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding as of July 31, 2005 _____________________ _______________________________ Common Stock 20,839,851 shares Transitional Small Business Disclosure Format: Yes ( ) No ( X ) Broadcast International, Inc. Form 10-QSB Table of Contents Part I - Financial Information Page Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis or Plan of Operation 12 Item 3. Controls and Procedures 16 Part II - Other Information Item 1. Legal Proceedings 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on 8-K 17 Signatures 19 2 Item 1. Financial Information BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET (Unaudited) June 30, ASSETS 2005 - ------ ------------ Current assets Cash and cash equivalents $ 2,267,340 Trade receivable, net 341,874 Inventory 22,642 Prepaid expenses 1,083,270 ------------ Total current assets 3,715,126 ------------ Non-current assets Equipment and leasehold improvements, net 628,621 Patents net 192,273 Other assets 7,824 ------------ Total assets $ 4,543,844 ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------- Current liabilities Accounts payable $ 200,164 Accrued Payroll & related expenses 156,965 Other accrued liabilities 83,540 Unearned revenue 135,304 Current debt obligations 915,153 ----------- Total current liabilities 1,491,126 ----------- Long-term debt Long-term obligations, net of discount of $2,875,000 265,373 Deferred bonus 600,000 ----------- Total liabilities 2,356,499 ----------- Commitments and contingencies - Stockholders' equity Preferred stock, no par value, 10,000,000 shares authorized; no shares issued - Common stock, $.05 par value, 40,000,000 shares authorized; 20,839,851 shares issued and outstanding 1,041,993 Additional paid-in capital 23,941,776 Accumulated deficit (22,796,424) ----------- Total stockholders' equity 2,187,345 ----------- Total liabilities and stockholders' equity $ 4,543,844 =========== See accompanying notes to consolidated condensed financial statements 3
BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended --------------------------- --------------------------- June 30, June 30, June 30, June 30, 2005 2004 2005 2004 ------------- ------------- ------------- ------------- REVENUES: Net sales $ 999,495 $ 1,556,040 $ 1,977,146 $ 2,931,896 Interest and other income 31,390 14,958 34,890 17,403 ------------- ------------- ------------- ------------- 1,030,885 1,570,998 2,012,036 2,949,299 COSTS AND EXPENSES: Cost of sales 1,232,373 1,511,644 2,335,722 2,869,691 Research and development in process - 10,343,945 - 11,519,377 Administrative and general 678,775 296,504 952,291 989,025 Selling and marketing 229,806 265,086 378,225 458,266 Interest 385,885 445,657 635,799 795,306 ------------- ------------- ------------- ------------- 2,526,839 12,862,836 4,302,037 16,631,665 ------------- ------------- ------------- ------------- LOSS FROM OPERATIONS BEFORE INCOME TAXES (1,495,954) (11,291,838) (2,290,001) (13,682,366) Income Tax Benefit - - - - ------------- ------------- ------------- ------------- NET LOSS $ (1,495,954) $(11,291,838) $ (2,290,001) $(13,682,366) ============= ============= ============= ============= TOTAL NET LOSS PER SHARE - Basic and Diluted $ (.07) $ (.59) $ (.11) $ (.73) ============= ============= ============= ============= Weighted average number of shares of Common Stock outstanding - Basic and Diluted 20,755,433 19,019,793 20,718,536 18,663,465 ============= ============= ============= ============= See accompanying notes to consolidated condensed financial statements 4
BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended ----------------------------- June 30, June 30, 2005 2004 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (2,290,001) $ (13,682,366) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 183,440 202,199 Beneficial conversion 449,876 795,230 Amortization of discount on long-term debt 125,000 - Common stock issued for services 235,170 420,000 Common stock and options issued for research and development in process - 10,228,019 Liabilities assumed for research and development in process - 1,291,358 Provision for losses on accounts receivable 6,747 26,000 (Increase) decrease in: Receivables 129,477 (287,645) Inventories (2,576) 50,334 Prepaid and other assets (208,193) (15,903) Increase (decrease) in: Accounts payable and accrued expenses 55,355 70,594 Unearned revenue (69,774) (51,822) -------------- -------------- Net cash used in operating activities (1,385,479) (954,002) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (47,151) (32,779) Technology patents (13,329) (137,552) -------------- -------------- Net cash used in investing activities (60,480) (170,331) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt (35,093) (13,830) Related party note receivable, net - (182,800) Proceeds from the sale of stock 124,980 465,362 Loan proceeds, net 3,449,876 795,230 -------------- -------------- Net cash provided by financing activities 3,539,763 1,063,962 -------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,093,804 (60,371) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 173,536 314,667 -------------- -------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,267,340 $ 254,296 ============== ============== See accompanying notes to consolidated condensed financial statements 5
BROADCAST INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) June 30, 2005 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary, in order to make the financial statements not misleading have been included. Operating results for the three months and the six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2004 included in the Company's Annual Report on Form 10-KSB (file number 000-13316). NOTE B - RECLASSIFICATIONS Certain 2004 financial statement amounts have been reclassified to conform to 2005 presentations. NOTE C - WEIGHTED AVERAGE SHARES The computation of basic earnings (loss) per common share is based on the weighted average number of shares outstanding during each period. The computation of diluted earnings per common share is based on the weighted average number of common shares outstanding during the period, plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding, using the treasury stock method and the average market price per share during the period. Options to purchase 7,775,596 and 6,030,903 shares of common stock at prices ranging from $.02 to $60.00 per share were outstanding at June 30, 2005 and 2004, respectively, but were excluded for the calculation of diluted earnings per share because the effect of stock options was anti-dilutive. NOTE D - STOCK COMPENSATION The Company accounts for stock-based compensation under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No common stock was issued for compensation during the six months and three months ended June 30, 2005, as well as the three months ending June 30, 2005, however during the six months ended June 30, 2004, 5,000 shares of common stock were issued to an individual of the management of the Company. The amount of expense recognized on the 2004 income statement was $20,000, which is included in stock issues for services. No options to purchase shares of the Company's common stock were granted as compensation to employees and management during the three and six months ended June 30, 2005, as well as the three months ended June 30, 2004, 6 however, options to purchase 258,000 shares of the Company's common stock were granted to employees and management for six months ended June 30, 2004. All options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. The options vested during the three and six months ended June 30, 2005 would have the following effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation:
Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Net loss, as reported $ (1,495,954) $(11,291,838) $ (2,290,001) $(13,682,366) Addback: Stock-based employee compensation expense determined under intrinsic value based method for all awards, net of related tax effects - - - - Deduct: Total stock- based employee compensation expense determined under fair value based method for all awards, net of related tax effects (52,427) (124,767) (177,194) (241,973) ------------- ------------- ------------- ------------- Pro forma net loss $ (1,548,381) $(11,416,605) $ (2,467,195) $(13,924,339) ============= ============= ============= ============= (Loss) earnings per share: Basic and diluted - as reported $ (.07) $ (.59) $ (.11) $ (.73) ============= ============= ============= ============= Basic and diluted - pro forma $ (.07) $ (.60) $ (.12) $ (.75) ============= ============= ============= =============
The weighted average fair value of options granted during the six months ended June 30, 2004 was $3.07 per share. The fair value for the options granted in the six months ended June 30, 2004 were estimated at the date of grant using a Black Scholes option pricing model with the following weighted average assumptions: Risk free interest rate 4.04% Expected life (in years) 8 Expected volatility 37.49% Expected dividend yield 0.00% NOTE E - SIGNIFICANT ACCOUNTING POLICIES Patents Patents represent legal and filing costs incurred to apply for United States as well as international patents on the CodecSys technology. Once granted these costs are amortized on a straight-line basis over their useful life, averaging approximately 15 years. As of June 30, 2005 one patent has been granted with the associated amortization expense recognized of $139 for the six months ended June 30, 2005. If all additional patents were granted prior to December 31, 2005 the estimated amortization expense on patents for each of the next five years would be as follows: 7 Year ending December 31: 2005 $ 5,965 2006 11,930 2007 11,930 2008 11,930 2009 11,930 Long-Lived Assets We review our long-lived assets, including patents, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to future un-discounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, then the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Fair value is determined by using cash flow analyses and other market valuations. NOTE F - LONG-TERM NOTES PAYABLE On May 16, 2005, the Company consummated a private placement of $3,000,000 principal amount of 6% Senior Secured Convertible Three-Year Notes and related securities, including common stock warrants and additional investment rights. Specifically, this transaction may ultimately result in gross proceeds to the Company of $13,800,000 if the additional investment rights and warrants to purchase common stock of the Company are exercised in full. In connection with these notes, the Company has filed a registration statement with the Securities and Exchange Commission on Form S-3 registering the shares of common stock issuable upon conversion of all notes convertible to common stock, additional investment rights and warrants to purchase common stock, if they are exercised in the future. The Securities and Exchange Commission has not declared this filing effective. 600,000 A warrants and 600,000 B warrants to purchase common stock with an exercise price of $2.50 and $4.00, respectively, subject to certain reset provisions and potential reductions of the exercise prices, were issued with the debt. The warrants are valued at $1,232,450 and are recorded as a debt discount. In addition, the debt is convertible to common stock at $2.50 per share, with an effective beneficial rate of $1.47 per share after consideration of the value allocated to the warrants. The beneficial conversion feature is valued at $1,767,550 and is recorded as a debt discount. The beneficial conversion feature and the warrants resulted in a total discount to the notes of $3,000,000 which is being amortized over the three-year term of the notes. As of June 30, 2005, $125,000 has been amortized, and future amortization will be approximately $83,333 per month until the note is converted or retired. Additional information regarding this transaction may be found in Form 8-K filed with the Securities and Exchange Commission dated May 16, 2005. 8 NOTE G - SUPPLEMENTAL CASH FLOW INFORMATION For the six months ended June 30, 2005 and 2004, non-cash expenses of $235,170 and $400,000 was recorded in Administrative and General Expense for services rendered by consultants compensated by the issuance of 67,000 and 100,000 shares of common stock, respectively. During the six months ended June 30, 2004, a non-cash expense of $20,000 was recorded in Administrative and General Expense for services rendered by an individual of management compensated by the issuance of 5,000 shares of common stock. For the six months ended June 30, 2005 Broadcast International issued 100,000 shares of common stock and warrants to purchase 120,000 shares of the company's common stock, at a purchase price of $2.50 per share, valued at approximately $351,000 and $331,147, respectively, to the affiliates of a placement agent in connection with the long-term convertible notes described above. Additionally, the placement agent received $240,000 in cash. The cumulative value of the stock, warrants and cash totaling approximately $922,147 was recorded as prepaid expense and will be recognized as interest expense over the three-year term of the notes. As of June 30, 2005, $38,423 has been included in interest expense; future expense recognition will be approximately $25,615 per month. On December 23, 2003, the Company entered into a convertible line of credit for up to $1,000,000 with Meridel LTD and Pascoe Holdings LTD, both foreign corporations. The Company may obtain advances as needed to fund operating expenses. On June 30, 2004, the line of credit was amended to increase the limit from $1,000,000 to $2,000,000 with the original due date of the line of credit extended from March 31, 2005 to April 1, 2006. Any portion of the note under the line of credit is convertible at the lenders sole discretion, for common shares of the Company at the rate of $1.00 per share. During the six months ended June 30, 2005 and 2004, the Company borrowed $449,876 and $795,230, respectively. The balance of the note at June 30, 2005 was $844,966. The note bears an annual interest rate of 6%. Accrued interest, however, is forgiven upon conversion pursuant to the terms of the line of credit. The Company believes the entire amount of the note will be converted, whereby it has recorded only the immediately exercisable beneficial conversion feature of the note into interest expense. During the six months June 30, 2005 and 2004, the Company recorded $449,876 and $795,230, respectively, as there is an immediately convertible beneficial conversion feature associated with the advances made under the line of credit. These amounts are included in interest expense. On May 18, 2004 an Order Confirming the Debtor in Possession's Plan of Reorganization (the Plan) in the bankruptcy case for Interact Devices, Inc. (IDI) was issued. As a result of this action, the Company was issued approximately 50,127,218 shares of the common stock of IDI representing approximately 79% of the outstanding stock of IDI. The Company recorded the following amounts related to the acquisition of research and development in process from IDI from the assumption of liabilities and consolidation of IDI: Receivable from IDI $ (265,008) Liabilities assumed from IDI (1,066,773) Research and development in process 1,291,358 Trade receivables, net 13,506 Inventory 6,997 Prepaid expenses 2,166 Equipment 46,450 Accounts payable and accrued liabilities (28,696) --------------- - 9 In accordance with the Plan, in exchange for the common shares of IDI, the Company issued 120,308 shares of common stock of Broadcast International, Inc. valued at approximately $733,866 to the former creditors of IDI. Additional payments totaling approximately $332,907 will be made to the former IDI creditors in equal quarterly installments of approximately $20,000 over of the next four years, which together total the $1,066,773 liabilities assumed by the Company. Additionally, the principals of Streamware Solutions AB, a Swedish Corporation, purchased 187,500 shares of common stock below fair market value pursuant to a Stock Purchase and Option Grant Agreement dated February 6, 2004. Streamware was issued an additional 1,000,000 shares of common stock pursuant to a Stock Issuance and Option Grant Agreement also dated February 6, 2004. The Company also issued to Streamware or its principals 2,812,500 options to purchase common shares of the Company at an exercise price of $4.50 per share, expiring February 6, 2006, associated with the agreements mentioned above. These agreements were entered concurrently with IDI entering into an amended Partner Agreement with Streamware, and all expenses associated with Streamware and the IDI bankruptcy settlement above were recorded as Research and Development in Process, as part of the on-going development costs of the CodecSys technology. The Company recorded the following related to these agreements: Research and development in process expense, stock issued below market 375,000 Research and development in process expense, additional stock issued 6,000,000 Research and development in process expense, fair value of stock options 3,853,019 Common stock (50,000) Additional paid-in capital (10,178,019) ------------ - The Company paid no cash for income taxes or interest expense during the three and six months ended June 30, 2005 and 2004, but as of June 30, 2005, $22,500 has been accrued due to be paid in November 2005. NOTE H - RECENT ACCOUNTING PRONOUNCEMENTS In December 2004, the FASB issued SFAS No. 123R, Share Based Payment, which requires companies to measure and recognize compensation expense for all stock based payments at fair value. SFAS 123R is effective for small business insurers for interim periods or the fiscal year beginning after December 15, 2005 and, thus, will be effective for us beginning with the first quarter of 2006. Early adoption is encouraged and retroactive application of the provisions of SFAS 123R to the beginning of the fiscal year that includes the effective date is permitted, but not required. We are currently evaluating the impact of SFAS 123R and expect the adoption to have a material impact on our financial position and results of operations. See Stock Compensation in Note 2 of our Notes to Consolidated Financial Statements for more information related to the pro forma effects on our reported net income and net income per share of applying the fair value recognition provisions of the previous SFAS 123, Accounting for Stock Based Compensation, to stock based employee compensation. 10 In December 2004, the FASB issued FASB Staff Position No. FAS 109-1 ("FAS 109-1"), "Application of FASB Statement No. 109, "Accounting for Income Taxes," to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, ("AJCA"). The AJCA introduces a special 9% tax deduction on qualified production activities. FAS 109-1 clarifies that this tax deduction should be accounted for as a special tax deduction in accordance with Statement 109. The Company does not expect the adoption of these new tax provisions to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB 107"), to provide further guidance regarding the interaction of the provisions of SFAS 123R and certain SEC rules and regulations. In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement 154, Accounting Changes and Error Corrections, which requires retrospective application (the application of the changed accounting principle to previously issued financial statements as if that principle had always been used) for voluntary changes in accounting principle unless it is impracticable to do so. Previously the cumulative effect of such changes was recognized in net income of the period of the change. The effective date is for changes made in fiscal year beginning after December 15, 2005. In June 2005, the Emerging Issues Task Force ("EITF") issued three Consensuses that are subject to later ratification by the FASB: The first is EITF 04-5 which establishes a framework for evaluating whether a general partner or a group of general partners controls a limited partnership and therefore should consolidate it. Unless the limited partners have "kick-out rights" allowing them to dissolve or liquidate the partnership or otherwise remove the general partner "without cause", or "participating rights" allowing the limited partners to participate in significant decisions made in the ordinary course of the partnership's business, the general partner(s) hold effective control and should consolidate the limited partnership. This would be effective immediately for newly-formed limited partnerships and for existing limited partnership agreements that are modified. For existing limited partnership agreements that are not modified, it would be effective for the beginning of the first reporting period after December 15, 2005. The Company does not expect the adoption of EITF 04-5 to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. The second Consensus is EITF 05-2 which provides guidance for issuers of debt and preferred-stock instruments with conversion features that may need to be accounted for as derivatives. The Company does not expect the adoption of EITF 05-2 to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. The third Consensus is EITF 05-6, "Determining the Amortization Period for Leasehold Improvements". The guidance requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the lesser of the useful life of the assets or a term that includes renewals that are reasonably assured at the date of the business combination or purchase. The guidance is effective for periods beginning after June 29, 2005. The Company does not expect the adoption of EITF 05-6 to have a material impact on the Company's consolidated financial position, results of operations, or cash flows 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward-Looking Information This report on Form 10-QSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance and similar matters. When used in this report, the words "may," "will," expect," anticipate," "continue," "estimate," "project," "intend," and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company's future plans of operations, business strategy, operating results, and financial position. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. To comply with the terms of the safe harbor, we caution readers that a variety of factors could cause our actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements. These risks and uncertainties, many of which are beyond our control, include (i) the sufficiency of existing capital resources and the Company's ability to raise additional capital to fund cash requirements for future operations; (ii) uncertainties involved in the rate of growth of the Company's business and acceptance of the Company's products and services; (iii) volatility of the stock market, particularly within the technology sector; and (iv) general economic conditions. Although the Company believes the expectations reflected in these forward-looking statements are reasonable, such expectations may prove to be incorrect. Results of Operations for the three months ended June 30, 2005 and June 30, 2004 Revenues The Company generated approximately $999,000 in revenue during the three months ended June 30, 2005. During the same three-month period in 2004, the Company generated revenue of approximately $1,556,000. The decrease in revenue of $557,000 was due primarily to a decrease in sales of equipment to customers of $360,144, a decrease in revenue from video production services of $130,306 and a decrease of $60,053 in customer license fees, due to the expiration of a customer contract during the quarter ended June 30, 2005. Cost of Revenues Costs of Revenues decreased by approximately $279,000 to $1,232,373 for the three months ending June 30, 2005, from $1,511,644 for the three months ending June 30, 2004. The decrease was due primarily to the decreased sales of equipment referenced above, which resulted in a decrease in the cost of equipment sold to the Company's customers of $247,114. The remainder of the decrease was due to a decrease in the cost of delivering the services related to primarily lower employee costs in the quarter ended June 30, 2005 compared to the quarter ended June 30, 2004. There was not a decrease in the cost of equipment relative to the sales price of the equipment. 12 Expenses Operating Expenses for the three months ending June 30, 2005 were $908,581 compared with operating expenses for the three months ending June 30, 2004 of $10,905,535. The decrease of approximately $10,000,000 resulted from the issuance of common stock and grants of options and recording the value thereof as $10,343,945 non cash expenses in the prior year for research and development in process related to the Company's CodecSys technology. This expense was not repeated in the current quarter. Administrative and General expenses increased by $382,271 primarily from an increase in legal fees, and from the issuance of stock for investor relations services. The increase in administrative and general expenses was partially offset by a decrease in selling and marketing expenses of $35,280. Other For the three months ended June 30, 2005, the Company incurred interest expense of $385,885 compared to interest expense for the three months ended June 30, 2004 of $445,657. The full amount of the decrease resulted from the Company recording less interest expense related to a Convertible Note's beneficial conversion feature, the amount of which is calculated as the difference between the conversion price of $1.00 per share and the average trading price of the Company's stock during the quarter and assuming that the note holder will exercise its option to convert and satisfy the obligation through conversion. The decrease was offset by recording interest expense of $147,500 related to recently completed financing, $22,500 of which is payable in cash and the remainder is amortization of note discount. The Company realized a net loss for the three months ending June 30, 2005 of $1,495,954 compared with a net loss for the three months ended June 30, 2004 of $11,291,838. Absent the $10,343,945 Research and Development in Process expense for the quarter ended June 30, 2004, the net loss for the three months ended June 30, 2005 increased by approximately $548,000 when compared to the net loss for the three months ended June 30, 2004 excluding the research and development in progress expense. This approximate $548,000 increase in net loss excluding the impact of the research and development in progress expense as mentioned above is due primarily to the decrease in revenue and the increase in Administrative and General Expenses as discussed above. Results of Operations for the six months ended June 30, 2005 and June 30, 2004 Revenues The Company generated approximately $1,977,147 in revenue during the six months ended June 30, 2005. During the same six-month period in 2004, the Company generated revenue of approximately $2,931,896. The decrease in revenue of $954,749 was primarily a combination of a decrease in sales of equipment to customers of $ 640,015 and a decrease in studio and video production revenue of $249,223. In addition, license fees and advertising fees also decreased, but the decrease was partially offset by an increase in satellite fees. Cost of Revenues Costs of Revenues decreased by approximately $534,000 to $2,335,722 for the six months ended June 30, 2005, from $2,869,691 for the six months ended June 30, 2004. The decrease was due primarily to the decreased sales of equipment referenced above, which resulted in a decrease in the cost of equipment sold to the Company's customers of $436,722. In addition the cost of delivering the services decreased by $138,734 due primarily to a decrease of employee salaries and related expenses. There was not a decrease in the cost of equipment relative to the sales price of the equipment. The decrease in costs of revenues was partially offset by an increase of $18,758 in depreciation and amortization of equipment and leasehold improvements and $60,246 in satellite distribution costs. 13 Expenses Operating Expenses for the six months ending June 30, 2005 were $1,330,516 compared with operating expenses for the six months ending June 30, 2004 of $12,966,668. The decrease of approximately $11,636,000 resulted primarily from one non-cash expense, which included $11,519,377 of research and development in process expenses, related to the Company's CodecSys technology. In addition selling and marketing expenses decreased by approximately $80,000 due primarily to a decrease in trade shows attended and Administrative and General expenses decreased by approximately $36,000. Other For the six months ended June 30, 2005, the Company incurred interest expense of $635,799 compared to interest expense for the six months ended June 30, 2004 of $795,306. The decrease resulted from the Company recording less interest expense related to a Convertible Note's beneficial conversion feature, the amount of which is calculated as the difference between the conversion price of $1.00 per share and the average trading price of the Company's stock during the period and assuming that the note holder will exercise its option to convert and satisfy the obligation through conversion. The decrease was offset by recording interest expense of $147,500 related to recently completed financing, $22,500 of which is payable in cash and the remainder is amortization of a note discount. The Company realized a net loss for the six months ending June 30, 2005 of $2,290,001 compared with a net loss for the six months ended June 30, 2004 of $13,682,366. The decrease in the net loss for the six months ended June 30, 2005 of $11,392,365 resulted almost entirely from the absence of any Research and Development in Process expenses in the current six-month period. The Research and Development in Process expenses recorded for the six months ended June 30, 2004 was $11,519,377. Absent the recording of the Research and Development in Process described above, the net loss for the six months ended June 30, 2005 increased by $127,012 when compared to the net loss less Research and Development in Process expenses for the six months ended June 30, 2004. The increase in net loss resulted primarily from decreased revenue offset by a decrease in various expenses including a reduction in interest expense of $159,507. Liquidity and Capital Resources At June 30, 2005, the Company had cash of approximately $2,267,000 and total current assets of approximately $3,715,000 compared to total current liabilities of $1,491,126 and total stockholder's equity of $2,187,345. For the six months ended June 30, 2005, the Company used $1,385,479 of cash for operating activities compared to cash used for operating activities for the six months ended June 30, 2004 of $954,002. The cash used for operations was provided from proceeds from sales of Company common stock and from loan financing. On May 16, 2005, the Company completed a loan financing with a consortium of four institutional investors ("Lenders"), under the terms of which the Company received $3,000,000 gross proceeds in cash pursuant to a Senior Secured Convertible Note ("Note"). The principal of the Note is due May 16, 2008 with 14 interest at 6% per annum due quarterly. The Note is convertible into 1,200,000 shares of common stock of the Company at $2.50 per share convertible any time during the term of the Note. In addition, the Lenders received A Warrants to acquire 600,000 shares of common stock of the Company exercisable at $2.50 per share and B Warrants to acquire 600,000 shares of common stock of the Company at $4.00 per share (collectively the "Warrants"). The Warrants are exercisable any time for a five-year period beginning on the date of grant. Finally, the Lenders also have an additional investment right to make an additional loan of $3,000,000 on the same terms as the Note and receive additional A and B Warrants with the same terms as the Warrants already received by the Lenders. The additional investment right must be exercised within 90 days following the effective date of an S-3 Registration Statement filed by the Company in connection with this financing. In the event the Lenders exercise their additional investment right and exercise all of their Warrants, the Company would have received approximately $13,800,000 in total from this financing. The Company paid approximately $345,000 in cash for commissions, finders fees and expenses in securing this financing. The Company secured a new customer contract during the quarter ended June 30, 2005, which the Company believes will result in an increase in revenues, although there is no assurance of increased revenue. The Company is in the process of increasing its capacity to service the new contract. The Company estimates that its monthly expenses over the next quarter will exceed its monthly income by between approximately $100,000 and $150,000 per month, depending on the level of activity of the Company and the speed with which the Company can begin generating revenues from the new contract. The Company anticipates that its negative cash flow will diminish as the new contract is fully implemented, which may take until the end of the current fiscal year or longer. However, to the extent the Company continues to experience a revenue shortfall between its revenue and the Company's operating costs even considering the new contract, the Company would have the need for infusions of capital in the next fiscal year. To date, the Company has met its working capital needs through payments received from sales of its common stock and borrowings under a convertible line of credit agreement and the financing described above. There can be no assurance that the Lenders will exercise their additional investment right or exercise their Warrants, which would provide additional investment capital to the Company. Over the next twelve months it is not anticipated that the Company will require additional investment capital even absent the failure of the Lenders to exercise their additional investment right, although there can be no assurance that this will occur. Risk Factors and Cautionary Statements This quarterly report contains certain forward-looking statements. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements, including but not limited to, the following: the ability of the Company to fully implement its new contract and that the Company will derive sufficient revenue from the new contract to fully satisfy the cash needs of the Company at its current level of operations, the ability of the Company to maintain a sufficient customer base to have sufficient revenues to fund and maintain its operations, and the ability of the Company to meet its cash and working capital needs, and to have sufficient revenues to continue operations. 15 Item 3. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. As required by Rule 13a-15(b) of the Exchange Act, we conducted an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2005. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2005 in alerting them in a timely manner to material information required to be included in our reports filed under the Exchange Act. This evaluation, however, did identify a significant deficiency in our disclosure controls and procedures with respect to applying existing accounting literature related to beneficial conversion features and associated accounting entries. Management is taking steps to implement appropriate corrective action in this regard. For the six months ended June 30, 2005, management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, implemented corrective action with respect to a significant deficiency previously identified regarding new and recent accounting pronouncements and required disclosures. This action included changes to the way we obtain and process required information pursuant to which we have acquired and implemented a financial statement disclosure and procedure checklist that will be updated on a regular basis through review of authoritative information sources and consultation with professional service providers. Other than the items described above, there has been no change in our internal control over financial reporting during the period ending June 30, 2005 that has materially affected, or is reasonably likely to materially effect, our internal control over financial reporting. Important Considerations The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management. 16 Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements. Part II - Other Information Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds. On May 16, 2005, the Company issued 100,000 shares of common stock to two affiliates of the placement agent as commissions for securing the Senior Secured Convertible Notes described above. On June 1, 2005, the Company issued 67,000 shares of common stock for services to two individuals. In each of the forgoing transactions, the Company relied on the exemption from registration under the 1933 Act set forth in Section 4(2) thereof. The Company's working capital needs currently prevent it from paying dividends. Moreover, management intends to retain any and all earnings to finance the development of its business, at least in the foreseeable future. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to Vote of Security Holders. None. Item 5. Other Information None. Item 6. Exhibits and Reports on 8-K The Company filed a report on Form 8-K on May 16, 2005. Exhibit No. 3.1 Amended and Restated Articles of Incorporation of the Company 3.2 Bylaws of the Company 18 10.1 Employment Agreement of Rodney M. Tiede dated April 28, 2004 (Incorporated by reference to Exhibit No. 10.1 of the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004 filed with the SEC on May 12, 2004.) 10.2 Employment Agreement of Randy Turner dated April 28, 2004 (Incorporated by reference to Exhibit No. 10.2 of the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004 filed with the SEC on May 12, 2004.) 10.3 Employment Agreement of Reed L. Benson dated April 28, 2004 (Incorporated by reference to Exhibit No. 10.3 of the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004 filed with the SEC on May 12, 2004.) 10.4 Stock Option Plan (Incorporated by reference to Exhibit No. 10.4 of the Company's Annual Report of Form 10-KSB for the year ended December 31, 2003 filed with the SEC on March 30, 2004.) 31.1 Certification of Chief Executive Officer pursuant to Rule 13a -14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Broadcast International, Inc. Date: August 12, 2005 /s/ Rodney M. Tiede _____________________________________________ By: Rodney M. Tiede Its: President and Chief Executive Officer (Principal Executive Officer) Date: August 12, 2005 /s/ Randy Turner _____________________________________________ By: Randy Turner Its: Chief Financial Officer (Principal Financial and Accounting Officer) 19 EX-3.1 2 broadcastex31.txt AMENDED AND RESTATED ARTICLES OF INCORPORATION Amended and Restated ARTICLES OF INCORPORATION Of BROADCAST INTERNATIONAL, INC. Pursuant to the Provisions of Section 16 10a 1007 of the Utah Revised Business Corporation Act, the undersigned corporation hereby restates its Articles of Incorporation for such corporation. FIRST: The name of the Corporation is Broadcast International, Inc. SECOND: The Restated Articles of Incorporation are as follows: ARTICLE I - CORPORATE NAME Broadcast International, Inc. ARTICLE II - DURATION OF CORPORATION The corporation is to have perpetual existence. Article III - CORPORATE PURPOSES The general purposes and objects for which the corporation is organized are: (a) To engage in commercial and industrial consulting services. To manufacture, purchase, or otherwise acquire, and to own, mortgage, pledge, sell, assign, transfer, or otherwise dispose of, and to invest in, trade in, deal in and with goods, wares, merchandise, real and personal property, and services of every class, kind, and description; except that it is not to conduct a banking, safe deposit, trust, insurance, surety, express, railroad, canal, telegraph, telephone, or cemetery company, a building and loan association, mutual fire insurance association, cooperative association, fraternal benefit society, state fair of exposition. To conduct business in, have one or more offices in, and levy, hold, mortgage, sell, convey, lease or otherwise dispose of real and personal property, including franchises, patents, copyrights, trademarks, and licenses, in the State of Utah and in all other states and countries. To contract debts and borrow money, issue and sell or pledge bonds, debentures, notes and other evidences of indebtedness, and to execute such mortgages, transfers of corporate property, or other instruments to secure the payment of corporate indebtedness as required. To purchase the corporate assets of any other corporation and engage in the same or other character of business. To guarantee, endorse, purchase, hold, sell, transfer, mortgage, pledge or otherwise acquire or dispose of the shares of the capital stock of, or any bonds, securities, or other evidences of indebtedness created by any other corporation of the State of Utah or any other state or government, and while owner of such stock to exercise all the rights, powers, and privileges of ownership, including the right to vote on such stock. (b) To acquire by purchase, exchange, gift, bequest, subscription or otherwise, and to hold, own, mortgage, pledge, hypothecate, sell, assign, transfer, exchange or otherwise dispose of or deal in or with its own corporate securities or stock or other securities, including, without limitation, any shares of stock, bonds, debentures, notes, mortgages, or other obligations, and any certificates, receipts or other instruments representing rights or interests therein, or any property or assets created or issued by any person, firm, associations, or corporations, or any government or subdivisions, agencies or instrumentalities thereof; to make payment thereof in any lawful manner or to issue in exchange therefore its own securities or to use its unrestricted and unreserved earned surplus for the purchase of its own shares, and to exercise as owner or holder of any securities any and all rights, powers and privileges in respect thereof. (c) To do each and every thing necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any one or more of the subjects herein enumerated, or which may at any time appear conducive to or expedient for protection or benefit of this corporate, and to do said acts as fully and to the same extent as natural persons might, or could do, in any part of the world as principals, agents, partners, trustees, or otherwise, either alone or in conjunction with any other person, association or corporation. (d) The foregoing clauses shall be construed both as objects and powers and shall not be held to limit or restrict in any manner the general powers of the corporation and the enjoyment and exercise thereof as conferred by the laws of the State of Utah; and it is the intention that the purposes, objects and powers specified in each of the paragraphs of this Article III shall be regarded as independent purposes, objects and powers. ARTICLE IV - SHARES Common Stock: - ------------- (a) The corporation shall have the authority to issue 40,000,000 shares of common stock, each having a par value of $0.05 per share. All common shares issued by the corporation shall be fully paid and nonassessable and shall have equal rights. Fully paid shares of the Corporation shall not be liable to any further call or assessment. Preferred Stock: - --------------- (b) In addition, the corporation shall have the authority to issue 10,000,000 shares of preferred stock, without par value. Such preferred stock may be issued in series. The rights of common stock stated above, the entitlement of the common stock to receive net assets of the corporation upon dissolution, and the voting rights of common stock, shall be subject to the voting and other rights, if any, provided to the holders of preferred stock by these Articles of Incorporation. Except for and subject to those rights expressly granted to the holders of the preferred stock, or except as may be provided by law, the holders of common stock shall have exclusively all other rights of shareholders. This corporation's Board of Directors shall have the authority, without shareholder action, to determine the preferences, limitations and relative rights of any preferred stock (whether in a series or as a class), including without limitation the following: (i) the designation of any series or class of preferred stock; (ii) the number of shares constituting the series or class; (iii) voting rights, if any, complying with the limitations on voting rights stated in this Article IV for preferred stock, except that no condition, limitation, or prohibition on voting shall eliminate any right to vote required by Utah law; (iv) any redemption rights and, if provided, the terms and conditions of such redemption, including without limitation the date or dates upon or after which any preferred stock shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (v) any sinking fund for the redemption or purchase of shares of a series or class, and, if provided, the terms and amount of such sinking fund; (vi) conversion rights and, if provided, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (vii) distribution rights, including without limitation a dividend rate and the determination of whether such rights are cumulative, noncumulative or partially cumulative; and (viii) preference rights over any class or series of shares with respect to distributions, including without limitation any priority as to dividends and as to distributions upon the dissolution of the corporation. The preferred stock of the corporation shall have no voting rights except: (i) the preferred stock shall have voting rights required by applicable law (which required voting rights may be set forth in the preferences, limitations and relative rights of a class or series); (ii) any preferred stock or a class or series may have voting rights with respect to any amendment, alteration or repeal of any provision of the corporation's Articles of Incorporation which adversely affects any right, preferences or limitation of the class or series; and (iii) any preferred stock of a class or series may have voting rights to elect a certain number of directors of the corporation in the event of the corporation's failure to pay dividends on the class or series for a period of time or to make a mandatory redemption payment when due for the class or series. The Board of Directors shall, in accordance with the authority granted to Board of Directors in this Article IV, determine whether any such voting rights, not required by applicable law, shall exist and shall also determine the terms, conditions and limitation of any such voting rights, including without limitation the number of and time period for any such failures to pay dividends necessary for voting rights to occur and the number of directors to be elected by a class or series after such an event. ARTICLE V - COMMENCING BUSINESS The Corporation will not commence business until consideration of a value of at least $1,000 has been received for the issuance of shares. ARTICLE VI - SHAREHOLDER RIGHTS The authorized shares of stock of the Corporation may be issued at such time, upon such terms and conditions, and for such consideration as the Board of Directors shall determine. Shareholders shall not have preemptive rights to acquire unissued shares of the stock of the Corporation. ARTICLE VII - BYLAWS The Directors shall adopt Bylaws which are not inconsistent with law or these Articles for the regulation and management of the affairs of the Corporation. The Bylaws may be amended from time to time or repealed pursuant to law. ARTICLE VIII - REGISTERED OFFICE AND AGENT [Deleted] ARTICLE IX - DIRECTORS [Deleted] ARTICLE X - INCORPORATORS [Deleted] ARTICLE XI - OFFICERS' AND DIRECTORS' CONTRACTS No contract or other transaction between this corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of its directors are directors or officers or are financially interested, shall be either void or void able because of such relationship or interest, or because such director or directors are present at the meeting of the Board of Directors, or a committee thereof, which authorizes, approved or ratifies such contract or transaction, or because his or their votes are counted for such purposes if: (a) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by vote or consent sufficient for the purpose without counting the votes or consents of such interested director; or (b) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; (c) the contract or transaction is fair and reasonable to the corporation. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or committee thereof which authorizes, approved or ratifies such contract or transaction. THIRD: The Restatement contains an amendment which consists of the deletion of Articles VIII, IX, and X which contain the listing of the initial registered office, initial registered agent, initial directors and incorporators. The amendment was adopted by the Board of Directors on August 12, 2005, pursuant to UCA Section 16-10a-1002, which provides that Shareholder approval is not necessary to amend these provisions. FOURTH: The Restatement was adopted by the Board of Directors because Shareholder approval was not required for the amendments adopted. Dated this 12th day of August, 2005 /s/ Rodney M Tiede Rodney M. Tiede, President EX-3.2 3 broadcastex32.txt BYLAWS BYLAWS OF BROADCAST INTERNATIONAL, INC. ARTICLE I OFFICE The Board of Directors shall designate and the Corporation shall maintain a principal office. The location of the principal office may be changed by the Board of Directors. The Corporation may also have offices in such other places as the Board may from time to time designate. The location of the principal office of the Corporation shall be: 7050 Union Park Ave. #600 Midvale, Utah 84047 ARTICLE II SHAREHOLDERS MEETING Section 1. Annual Meetings. The annual meeting of the shareholders of the Corporation shall be held at such place within or without the state of incorporation as shall be set forth in compliance with these Bylaws. The meeting shall be held after the fourth month following the close of the Corporation's fiscal year on such date as soon thereafter as the Board of Directors in its discretion shall determine. This meeting shall be for the election of Directors and for the transaction of such other business as may properly come before it. Section 2. Special Meetings. Special meetings of shareholders, other than those regulated by statute, may be called at any time by the Chief Executive Officer, or a majority of the Directors, and must be called by the Chief Executive Officer upon written request of the holders of 10% of the outstanding shares entitled to vote at such special meeting. Written notice of such meeting stating the place, the date and hour of the meeting, the purpose or purposes for which it is called, and the name of the person by whom or at whose direction the meeting is called shall be given. The notice shall be given to each shareholder of record in the same manner as notice of the annual meeting. No business other than that specified in the notice of the meeting shall be transacted at any such special meeting. Section 3. Notice of Shareholders Meetings. The Secretary shall give written notice stating the place, day, and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, which shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the books of the Corporation, with postage thereon prepaid. Section 4. Place of Meeting. The Board of Directors may designate any place, either within or without the state of incorporation, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the state of incorporation as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. Section 5. Record Date. The Board of Directors may fix a date not less than ten nor more than fifty days prior to any meeting as the record date for the purpose of determining shareholders entitled to notice of and to vote at such meetings of the shareholders. The transfer books may be closed by the Board of Directors for a stated period not to exceed fifty days for the purpose of determining shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose. Section 6. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At a meeting resumed after any such adjournment at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Section 7. Voting. A holder of an outstanding share, entitled to vote at a meeting, may vote at such meeting in person or by proxy. Except as may otherwise be provided in the Articles of Incorporation, every shareholder shall be entitled to one vote for each share standing in his name on the record of shareholders. Except as herein or in the Articles of Incorporation otherwise provided, all corporate action shall be determined by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. Section 8. Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 9. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III BOARD OF DIRECTORS Section 1. General Powers. The business and affairs of the Corporation shall be managed by its Board of "Directors. The Board of Directors may adopt such rules and regulations for the conduct of their meetings and the management of the Corporation as they deem proper. Section 2. Number, Tenure and Qualifications. The number of Directors of the Corporation shall be no less than three (3) and no more than (7). The number of Directors may be varied by amending these Bylaws. Each Director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified. Directors need not be residents of the state of incorporation or shareholders of the Corporation. Section 3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than by this Bylaw, immediately following after and at the same place as the annual meeting of shareholders. The Board of Directors may provide, by resolution the time and place for the holding of additional regular meetings without other notice than this resolution. Section 4. Special Meetings. Special meetings of the Board of Directors may be called by order of the Chairman of the Board, the Chief Executive Officer, or by one-third of the Directors. The Secretary shall give notice of the time, place and purpose or purposes of each special meeting by mailing the same at least two days before the meeting or by telephoning or telegraphing the same at least one day before the meeting to each Director. Section 5. Quorum. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business, but less than a quorum may adjourn any meeting from time to time until a quorum shall be present, whereupon the meeting may be held, as adjourned, without further notice. At any meeting at which a quorum of directors shall be present, even though without any notice, any business may be transacted. Section 6. Manner of Acting. At all meetings of the Board of Directors, each Director shall have one vote. The act of a majority present at a meeting shall be the act: of the Board of Directors, provided a quorum is present. Any action required to be taken or which may be taken at a meeting of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the Board of Directors. Section 7. Vacancies. A vacancy in the Board of Directors shall be deemed to exist in case of death, resignation, or removal of any Director, or if the authorized number of Directors be increased, or if the shareholders fail at any meeting of shareholders at which any Director is to be elected, to elect the full authorized number to be elected at that meeting. Any such vacancy may be filled by the Directors then in office, though less than a quorum. Section 8. Removals. Directors may be removed at any time by the shareholders. Vacancies resulting from any removal shall be filled by the Directors then in office, though less than a quorum, to hold office until the next annual meeting or until his successor is duly elected and qualified, except that any directorship to be filled by reason of removal by the shareholders may be filled by election by the shareholders at the meeting at which the Director is removed. No reduction of the authorized number of Directors shall have the effect of removing any Director prior to the expiration of his term of office. Section 9. Resignation. A Director may resign at any time by delivering written notification thereof to the Chief Executive Officer or Secretary of the Corporation. Resignation shall become effective upon its acceptance by the Board of Directors; provided, however, that if the Board of Directors has not acted thereon within ten days from the date of its delivery, the resignation shall upon the tenth day be deemed accepted. Section 10. Presumption of Assent. A Director of the Corporation who is present at a meeting of the Board of Directors at which action an any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. Section 11. Compensation. By resolution of the Board of Directors, the Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Chairman. The Board of Directors may elect from its own number a Chairman of the Board, who shall preside at all meetings of the Board of Directors, and shall perform such other duties as may be prescribed from time to time by the Board of Directors. In the absence of such an election, the Chief Executive Officer shall serve as Chairman of the Board. ARTICLE IV OFFICERS Section 1. Number. The officers of the Corporation shall be a Chief Executive Officer, President, one or more Vice-Presidents, a Chief Financial Officer, a Secretary, a Treasurer, a general Manager, and a general Counsel, each of whom shall be elected by a majority of the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. In its discretion, the Board of Directors may leave unfilled for any such period as it may determine any office except those of Chief Executive Officer and Secretary. Any two or more offices may be held by the same person, except the offices of Chief Executive Officer and Secretary. The Chief Executive Officer shall be a member of the Board of Directors. Other officers may or may not be directors or shareholders of the Corporation. Section 2. Election and Term of Office. The officers of the Corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Section 3. Resignations. Any officer may resign at any time by delivering a written resignation either to the Chief Executive Officer or to the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery. Section 4. Removal. Any officer or agent may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Any such removal shall require a two-thirds vote of the Board of Directors, exclusive of the officer in question if he is also a Director. Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, or if a new office shall be created, may be filled by the Board of Directors for the unexpired portion of the term. Section 6. Chief Executive Officer. The Chief Executive Officer shall be the chief executive and administrative officer of the company. He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, at meetings of the Board of Directors. He shall exercise such duties as customarily pertain to the office of Chief Executive Officer and shall have general and active supervision over the property, business, and affairs of the company and over its several officers. He may appoint officers, agents, or employees other than those appointed by the Board of Directors. He may sign, execute and deliver in the name of the company powers of attorney, contracts, bonds and other obligations, and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. Section 7. President. The President shall have such powers and perform such duties as may be assigned to him by the Board of Directors or the Chief Executive Officer. In the absence or disability of the Chief Executive Officer, the President shall perform the duties and exercise the powers of the Chief Executive Officer. The President may sign and execute contracts and other obligations pertaining to the regular course of his duties. Section 8. Vice-President. The Vice-President shall have such powers and perform such duties as may be assigned to him by the Board of Directors or the Chief Executive Officer. In the absence or disability of the President, the Vice-President designated by the Board or the Chief Executive Officer shall perform the duties and exercise the powers of the President. A Vice-President may sign and execute contracts and other obligations pertaining to the regular course of his duties. Section 9. Secretary. The Secretary shall, subject to the direction of a designated Vice-President, keep the minutes of all meetings of the stockholders and of the Board of Directors and, to the extent ordered by the Board of Directors or the Chief Executive Officer, the minutes of meetings of all committees. He shall cause notice to be given of meetings of stockholders, of the Board of Directors, and of any committee appointed by the Board. He shall have custody of the corporate seal and general charge of the records, documents and papers of the company not pertaining to the performance of the duties vested in other officers, which shall at all reasonable times be open to the examination of any Director. He may sign or execute contracts with the Chief Executive Officer, President, or a Vice-President thereunto authorized in the name of the company and affix the seal of the company, thereto. He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. He shall be sworn to the faithful discharge of his duties. Assistant Secretaries shall assist the Secretary and shall keep and record such minutes of meetings as shall be directed by the Board of Directors. Section 10. Treasurer, Chief Financial Officer. The Treasurer, Chief Financial Officer shall, subject to the direction of the President, have general custody of the collection and disbursement of funds of the company. He shall endorse on behalf of the company for collection checks, notes and other obligations, and shall deposit the same to the credit of the company in such bank or banks or depositories as the Board of Directors may designate. He may sign, with the Chief Executive Officer or such other persons as may be designated for the purpose by the Board of Directors, all bills of exchange or promissory notes of the company. He shall enter or cause to be entered regularly in the books of the company full and accurate account of all monies received and paid by him on account of the company; shall at all reasonable times exhibit his books and accounts to any Director of the company upon application at the office of the company during business hours; and, whenever required by the Board of Directors or the Chief Executive Officer, shall render a statement of his accounts. He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. Section 11. General Counsel. The General Counsel shall advise and represent the company generally in all legal matters and proceedings, and shall act as counsel to the Board of Directors and the Executive Committee. The General Counsel may sign and execute pleadings, powers of attorney pertaining to legal matters, and any other contracts and documents in the regular course of his duties. Section 12. General Manager. The Board of Directors may employ and appoint a General Manager who, or may not, be one of the officers or Directors of the corporation. He shall be the chief operating officer of the corporation and, subject to the directions of the Board of Directors, shall have general charge of the business operations of the corporation and general supervision over its employees and agents. He shall have the exclusive management of the business of the corporation and of: all of its dealings, but at all times subject to the control of the Board of Directors. Subject to the approval of the Board of Directors or the Executive Committee, he shall employ all employees of the corporation, or delegate such employment to subordinate officers, or such division chiefs, and shall have authority to discharge any person so employed. He shall make a report to the Chief Executive Officer and Directors quarterly, or more often if required to do so, setting forth the result of the operations under his charge, together with suggestions looking to the improvement and betterment of the condition of the corporation, and to perform such other duties as the Board of Directors shall require. Section 13. Other Officers. Other officers shall perform such duties and have such powers as may be assigned to them by the Board of Directors. Section 14. Salaries. The salaries or other compensation of the officers of the corporation shall be fixed from time to time by the Board of Directors, except that the Board of Directors may delegate to any person or group of persons the power to fix the salaries or other compensation of any subordinate officers or agents. No officer shall be prevented from receiving any such salary or compensation by reason of the fact that he is also a Director of the corporation. Section 15. Surety Bonds. In case the Board of Directors shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such sums and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the corporation, including responsibility for negligence and for the accounting for all property, monies or securities of the corporation which may come into his hands. ARTICLE V COMMITTEES Section 1. Executive Committee. The Board of Directors may appoint from among its members an Executive Committee of not less than two nor more than seven members, one of whom shall be the Chief Executive Officer, and shall designate one of such members as Chairman. The Board may also designate one or more of its members as alternates to serve as members of the Executive Committee in the absence of a regular member or members. The Board of Directors reserves to itself alone the power to declare dividends, issue stock, recommend to stockholders any action requiring their approval, change the membership of any committee at any time, fill vacancies therein, and discharge any committee either with or without cause at any time. Subject to the foregoing limitations, the Executive Committee shall possess and exercise all other powers of the Board of Directors during the intervals between meetings. Section 2. Other Committees. The Board of Directors may also appoint from among its own members such other committees as the Board of Directors may determine, which shall in each case consist of not less than two Directors, and which shall have such powers and duties as shall from time to time be prescribed by the Board. The Chief Executive Officer shall be a member ex officio of each committee appointed by the Board of Directors. A majority of the members of any committee may fix its rules of procedure. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 2. Loans. No loan or advances shall be contracted on behalf of the corporation, no negotiable paper or other evidence of its obligation under any loan or advance shall be issued in its name, and no property of the corporation shall be mortgaged, pledged, hypothecated or transferred as security for the payment of any loan, advance, indebtedness or liability of the corporation unless and except as authorized by the Board of Directors. Any such authorization may be general or confined to specific instances. Section 3. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select, or as may be selected by any officer or agent authorized to do so by the Board of Directors. Section 4. Checks and Drafts. All notes, drafts, acceptances, checks, endorsements and evidences of indebtedness of the corporation shall be signed by such officer or officers or such agent or agents of the corporation and in such manner as the Board of Directors from time to time may determine. Endorsements for deposit to the credit of the corporation in any of its duly authorized depositories shall be made in such manner as the Board of Directors from time to time may determine. Section 5. Bonds and Debentures. Every bond or debenture issued by the corporation shall be evidenced by an appropriate instrument which shall be signed by the Chief Executive Officer, President or a Vice-President and by the Treasurer or by the Secretary, and sealed with the seal of the corporation. The seal may be facsimile, engraved or printed. Where such bond or debenture is authenticated with the manual signature of an authorized officer of the corporation or other trustee designated by the indenture of trust or other agreement under which such security is issued, the signature of any of the corporation's officers named thereon may be facsimile. In case any officer who signed, or whose facsimile signature has been used on any such bond or debenture, shall cease to be an officer of the corporation for any reason before the same has been delivered by the corporation, such bond or debenture may nevertheless be adopted by the corporation and issued and delivered as though the person who signed it or whose facsimile signature has been used thereon had not ceased to be such officer. ARTICLE VII CAPITAL STOCK Section 1. Certificate of Shares. The shares of the corporation shall be represented by certificates prepared by the Board of Directors and signed by the Chief Executive Officer, President or the Vice-President and by the Secretary, and sealed with the seal of the corporation or a facsimile. The signatures of such officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or one of its employees. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and dates of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lot, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe. Section 2. Transfer of Shares. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. Section 3. Transfer Agent and Registrar. The Board of Directors shall have power to appoint one or more transfer agents and registrars for the transfer and registration of certificates of stock of any class, and may require that stock certificates shall be countersigned and registered by one or more of such transfer agents and registrars. Section 4. Lost or Destroyed Certificates. The corporation may issue a new certificate to replace any certificate theretofore issued by it alleged to have been lost or destroyed. The Board of Directors may require the owner of such a certificate or his legal representative to give the corporation a bond in such sum and with such sureties as the Board of Directors may direct to indemnify the corporation as transfer agents and registrars, if any, against claims that may be made on account of the issuance of such new certificates. A new certificate may be issued without requiring any bond. Section 5. Consideration for Shares. The capital stock of the corporation shall be issued for such consideration, but not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. In the absence of fraud, the determination of the Board of Directors as to the value of any property or services received in full or partial payment of shares shall be conclusive. Registered Shareholders. The company shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof, in fact, and shall not be bound to recognize any equitable or other claim to or on behalf of this company to any and all of the rights and power incident to the ownership of such stock at any such meeting, and shall have power and authority to execute and deliver proxies and consent on behalf of this company in connection with the exercise by this company of the rights and powers incident to the ownership of such stock. The Board of Directors, from time to time, may confer like powers upon any other person or persons. ARTICLE VIII INDEMNIFICATION Section 1. Indemnification. No officer or Director shal1 be personally liable for any obligations of the corporation or for any duties or obligations arising out of any acts or conduct of said officer or Director performed for or on behalf of the corporation. The corporation shall and does hereby indemnify and hold harmless each person and his heirs and administrators who shall serve at any time hereafter as a Director or officer of the corporation from and against any and all claims, judgment sand liabilities to which such persons shall become subject by reason of his having heretofore or hereafter been a Director or officer of the corporation, or by reason of any action alleged to have been heretofore or hereafter taken or omitted to have been taken by him as such Director or officer, and shall reimburse each such person for all legal and other expenses reasonably incurred by him in connection with any such claim or liability, including power to defend such person from all suits or claims as provided for under the provisions of the Business Corporation Act of the state of incorporation; provided, however, that no such person shall be indemnified against, or be reimbursed for, any expense incurred in connection with any claim or liability arising out of his own negligence or willful misconduct. The rights accruing to any person under the foregoing provisions of this section shall not exclude any other right to which he may lawfully be entitled, nor shall anything herein contained restrict the right of the corporation to indemnify or reimburse such person in any proper case, even though not specifically herein provided for. The corporation, its directors, officers, employees and agents shall be fully protected in taking any action or making any payment, or in refusing so to do in reliance upon the advice of counsel. Section 2. Other Indemnification. The indemnification herein provided shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee, and shall inure to the benefit of the heirs, executors and administrators of such person. Section 3. Insurance. The corporation may purchase and maintain insurance an behalf of any person who is or was a Director, officer or employee of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against liability under the provisions of this section. Section 4. Settlement by Corporation. The right of any person to be indemnified shall be subject always to the right of the corporation by its Board of Directors, in lieu of such indemnity, to settle any such claim, action, suit or proceeding at the expense of the corporation by the payment of the amount of such settlement and the costs and expenses incurred in connection therewith. ARTICLE IX WAIVER OF NOTICE Whenever any notice is required to be given to any shareholder" or Director of the corporation under the provisions of these Bylaws, or under the provisions of the Articles of Incorporation, or under the provisions of the Business Corporation Act of the state of incorporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute a waiver of notice of such meetings, except where attendance is for the express purpose of objecting to the legality of that meeting. ARTICLE X AMENDMENTS These bylaws may be altered, amended, repealed, or new bylaws adopted by the Board of Directors at any regular or special meeting. Any bylaw adopted by the Board may be repealed or changed by action of the shareholders. ARTICLE XI FISCAL YEAR The fiscal year of the corporation shall be fixed and may be varied by resolution of the Board of Directors. ARTICLE XII DIVIDENDS The Board of Directors may at any regular or special meeting, as they deem advisable, declare dividends payable out of the surplus of the corporation. ARTICLE XIII CORPORATE SEAL The seal of the corporation shall be in the form of a circle and shall bear the name of the corporation and the year of incorporation per sample affixed hereto. S E A L /s/ Reed L Benson _________________________________________ Secretary Dated: August 12, 2005 EX-31.1 4 broadcastex311.txt SECTION 302 - CHIEF EXECUTIVE OFFICER CERTIFICATION Exhibit 31.1 Broadcast International, Inc. & Subsidiaries Certification Of Chief Executive Officer PURSUANT TO RULE 13a - 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Rodney Tiede, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Broadcast International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting. 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 12, 2005 /s/ Rodney Tiede - ------------------------------ Rodney Tiede Chief Executive Officer EX-31.2 5 broadcastex312.txt SECTION 302 - CHIEF FINANCIAL OFFICER CERTIFICATION Exhibit 31.2 Broadcast International, Inc. & Subsidiaries Certification Of Chief Financial Officer PURSUANT TO RULE 13a - 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Randy Turner, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Broadcast International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting. 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 12, 2005 /s/ Randy Turner _________________________ Randy Turner Chief Financial Officer EX-32.1 6 broadcastex321.txt SECTION 906 - CHIEF EXECUTIVE OFFICER CERTIFICATION Exhibit 32.1 Broadcast International, Inc. & Subsidiaries Certification Of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 In connection with the quarterly report of Broadcast International, Inc. (the "Company") on Form 10-QSB for the period ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof, Rodney Tiede, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Form 10-QSB fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 12, 2005 /s/ Rodney Tiede __________________________ Rodney Tiede Chief Executive Officer EX-32.2 7 broadcastex322.txt SECTION 906 - CHIEF FINANCIAL OFFICER CERTIFICATION Exhibit 32.2 Broadcast International, Inc. & Subsidiaries Certification Of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 In connection with the quarterly report of Broadcast International, Inc. (the "Company") on Form 10-QSB for the period ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof, Randy Turner, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Form 10-QSB fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 12, 2005 /s/ Randy Turner _______________________ Randy Turner Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----