10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

R	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2013.
£	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from __________ to __________.

Commission File Number: 0-13316

BROADCAST INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in its Charter)

Utah	87-0395567
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

6952 S. High Tech Dr. Suite C, Salt Lake City, UT 84047-3766

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, including Area Code: (801) 562-2252

Securities Registered Pursuant to Section 12(b) of the Exchange Act:  None.

Securities Registered Pursuant to Section 12(g) of the Exchange Act:  Common Stock, Par Value $0.05

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act   Yes £      No R

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Exchange Act.    Yes £     No R

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R     No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 Yes £     No £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  £

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

£ Large accelerated filer	£ Accelerated filer
£ Non-accelerated filer (Do not check if a smaller reporting company)	R Smaller reporting company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes  £  No  R

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of June 28, 2013 the last business day of the Registrant’s most recently completed second fiscal quarter, was $7,737,563.

As of March 28, 2014 the Registrant had outstanding 111,370,878 shares of its common stock.

TABLE OF CONTENTS

Page No.

PART I			3
	ITEM 1.	BUSINESS	4
	ITEM 1A.	RISK FACTORS	11
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	17
	ITEM 2.	PROPERTIES	17
	ITEM 3.	LEGAL PROCEEDINGS	17
	ITEM 4.	MINE SAFETY DISCLOUSRES	17
PART II			18
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	18
	ITEM 6.	SELECTED FINANCIAL DATA	19
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	33
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	33
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	34
	ITEM 9A(T).	CONTROLS AND PROCEDURES	34
	ITEM 9B.	OTHER INFORMATION	35
PART III			35
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	35
	ITEM 11.	EXECUTIVE COMPENSATION	38
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	45
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	47
	ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	50
PART IV			50
	ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	50
SIGNATURES			55

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PART I

Cautionary Note Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risk and uncertainties.  Any statements about our expectations, beliefs, plans, objectives, strategies or future events or performance constitute forward-looking statements.  These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend” and similar words or phrases.  Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied therein.  All forward-looking statements are qualified in their entirety by reference to the factors discussed in this report, including, among others, the following risk factors discussed more fully in Item 1A hereof:

· Our inability to consummate the proposed merger with Wireless Ronin;

· loss of customers that historically provided more than 80% of our revenues;

· dependence on commercialization of our CodecSys technology;

· our need and ability to raise sufficient additional capital;

· uncertainty about our ability to repay our outstanding  notes;

· our continued losses;

· delays in adoption of our CodecSys technology;

· concerns of OEMs and customers relating to our financial uncertainty;

· restrictions contained in our outstanding convertible notes;

· general economic and market conditions;

· ineffective internal operational and financial control systems;

· rapid technological change;

· intense competitive factors;

· our ability to hire and retain specialized and key personnel;

· dependence on the sales efforts of others;

· dependence on significant customers;

· uncertainty of intellectual property protection;

· potential infringement on the intellectual property rights of others;

· extreme price fluctuations in our common stock;

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· price decreases due to future sales of our common stock;

· future shareholder dilution; and

· absence of dividends.

Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statement.  Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of future events or developments.  New factors emerge from time to time, and it is not possible for us to predict which factors will arise.  In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ITEM 1.  BUSINESS

Broadcast International, Inc. is a communications services and technology company headquartered in Salt Lake City, Utah.  Broadcast operates two divisions – BI Networks and CodecSys.  Broadcast was incorporated in Utah in 1983 under the name “Laser Corporation,” but did not commence its current business until the year 2000.

Overview of BI Networks

Through BI Networks, we install, manage and support private communication networks for large organizations that have widely-dispersed locations or operations.  Our enterprise clients use these networks to deliver digital signage solutions, training programs, product announcements, entertainment and other communications to their employees and customers.  We use a variety of delivery technologies, including satellite, Internet streaming and WIFI, depending on the industry standard products and equipment sold by other companies.

In July 2009, we entered into a $10.1 million, three-year contract with a national bank to provide technology and digital signage services to approximately 2,100 of its more than 6,000 retail and administrative locations throughout North America.  This digital signage network grew to approximately 2,500 retail banking sites. For the past three years this has been our largest customer, but in December 2012, we were notified that a new vendor would begin servicing the customer.  Although we may continue providing some services, our revenues from this customer have decreased by approximately 90%.  In addition, we have signed a master license agreement to be a vendor for a large religious institution that has in excess of 16,000 churches and other places of worship worldwide to provide digital signage software and services.    This religious organization has paid us for development engineering work, but as yet we have not entered into a statement of work defining the price and terms of a contemplated beta test that will need to be completed and approved before any wider rollout can begin and we do not have any assurance that that will be completed.  Because we have not continued with our largest customer and have not replaced those revenues with new customers, we have severely scaled back our operations.

BI Networks Products and Services

Following are some of the ways in which businesses utilize Broadcast’s products and services.

Internal Business Applications

· Deliver briefings from the CEO or other management

· Launch new products or services

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· Present new marketing campaigns

· Train employees

· Announce significant changes or implement new policies and procedures

· Respond to crisis situations

External Business Applications

· Display advertising in public areas utilizing digital signage

· Make promotional presentations to prospective customers or recruits

· Provide product/service training to customers

· Train and communicate with sales agents, dealers, VARs, franchisees, association members, etc.

· Sponsor satellite media tours

· Provide video/audio news releases

Network-Based Services

Broadcast utilizes satellite technology for various business training and communication applications.  The list that follows describes the comprehensive offering of products and services that attracts companies in need of a satellite solution.

· Network design and engineering

· Equipment and installation

· Network management

· 24/7 help desk services

· On-site maintenance and service

· Full-time or occasional satellite transponder purchases (broadcast time)

· Uplink facilities or remote SNG uplink trucks

Streamed Video Hosting Services

With the advancement of streaming technologies and the increase of bandwidth, the Internet provides an effective platform for video-based business training and communications.  Broadcast management believes that the Internet will become an increasing means of broadband business video delivery.  Consequently, Broadcast has invested in the infrastructure and personnel needed to be a recognized provider of Internet-based services.  Following are the services Broadcast currently provides:

· Dedicated server space

· High-speed, redundant Internet connection

· Secure access

· Seamless links from client's website

· Customized link pages and media viewers

· Testing or self-checks

· Interactive discussion threads

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· Participation/performance reports for managers/administrators

· Notification of participants via email

· Pay-per-view or other e-commerce applications

· Live events

· 24/7 technical support

Production and Content Development Services

To support both satellite and Internet-based delivery platforms, we employ professional production and content development teams and operate full service video and audio production studios.  A list of support services follows:

· In-studio or on-location video/audio production

· Editing/post-production

· Instructional design

· Video/audio encoding for Internet delivery

· Conversion of text or PowerPoint to HTML

· Alternative language conversion

· Access to “off-the-shelf” video training content

Service Revenue

We generate revenue by charging fees for the services we provide, and/or by selling equipment and satellite time.  A typical satellite network generates one-time revenues from the sale and installation of satellite receivers and antennas and monthly revenues from network management services.  On-site maintenance/service, production fees, and occasional satellite time are charged as they are used.

For Internet-based services, we charge customers monthly fees for hosting content, account management, quality assurance and technical support, if requested.  For delivery of content, we generally charge a fee every time a person listens to or watches a streamed audio or video presentation.  Encoding, production and content creation or customization are billed as these services are performed.  We have also entered into content development partnerships with professional organizations that have access to subject matter experts.  In these cases, we produce web-based training presentations and sell them on a pay-per-view basis, sharing revenues with the respective partner.

In the process of creating integrated technology solutions, we have developed proprietary software systems such as its content delivery system, incorporating site, user, media and template controls to provide a powerful mechanism to administer content delivery across multiple platforms and to integrate into any web-based system.  We use our content delivery system to manage networks of thousands of video receiving locations for enterprise clients.

The percentages of revenues derived from our different services fluctuate depending on the customer contracts entered into and the level of activity required by such contracts in any given period.  Of our net sales in 2013 and 2012, approximately 90% were derived from network management related services and approximately 10% were derived from product and content development and all other services.

Our network management and support services are generally provided to customers by our operations personnel located at corporate headquarters.  Our production and content development services are generally provided by personnel from our production studio.  We generally contract with independent service technicians to perform installation and maintenance services at customer locations throughout the United States.

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Overview of Video Compression

Video compression is the process by which video content is converted into a digital data stream for transmission over satellite, cable, Internet or wireless networks.

Video compression is generally accomplished by using a single technique or computer formula to create a particular data stream.  As more and more video content is broadcast and streamed to a rapidly expanding based of new video receivers, such as cell phones, tablets, and notebook computers, the need to stream the video content with the highest possible quality and at the lowest possible bandwidth expands exponentially.  At the same time traditional media desires to keep pace with the new media by transmitting higher and higher quality video to enhance the viewing experience of the consumer and we will experience the expansion of “smart televisions”, movies streamed in high definition and 3D, and entertainment streaming services to the home and computer, all of which increase the need to transmit video using the least amount of bandwidth possible without affecting the quality of the experience.

CodecSys Technology

We have patented our video compression technology and have trademarked it as “CodecSys.”  Initially, we developed this technology for delivering video content for our network customers. However, this proprietary technology has expanded into a much wider application.

Video compression is generally accomplished by using a single technique or computer formula to create a particular data stream.  Our patented CodecSys technology is a software-based video operating system that uses multiple techniques or computer formulas to create a particular data stream.  With CodecSys, video content may be transmitted over substantially decreased bandwidth while maintaining media quality.  We believe that our CodecSys technology offers significant efficiencies and cost savings over traditional hardware solutions associated with video content transmission and storage.

We have developed a video encoding software product based upon its CodecSys technology that operates on multiple hardware platforms and is easily upgradable. In September 2009, CodecSys video encoding technology was certified by Microsoft as an approved software encoding system for use by IPTV providers that use Microsoft operating platforms.  Microsoft was a leading provider of network control software to the IPTV market.

In July 2010, we released CodecSys version 2.0, which was installed in more than 30 large telecoms and labs for evaluation by potential customers. However, we were never able to make any material sales of this product and we have since discontinued making sales presentations and responding to requests for proposals at any potential customers.  Because CodecSys is a software encoding and transcoding system, it also supports  “cloud-based” initiatives.  In October 2011, CodecSys was selected as the compression technology to be used by Fujitsu for its NuVolo cloud based product offering.  We continue to believe that the CodecSys technology has value but we have not been able to commercialize it.

In today's market, any video content to be distributed via satellite, cable, the Internet and other methods must be encoded into a digital stream using any one of numerous codecs.  The most commonly used codecs are now MPEG2, MPEG4, and H.264.  When new codecs are developed that perform functions better than the current standards, all of the video content previously encoded in the old format must be re-encoded to take advantage of the new codec.  Our CodecSys technology eliminates obsolescence in the video compression marketplace by integrating new codecs into its library.  Using a CodecSys switching system to utilize the particular advantages of each codec, we may utilize any new codec as it becomes available by including it in the application library.  Codec switching can happen on a scene-by-scene or even a frame-by-frame basis.

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We believe the CodecSys technology represents an unprecedented shift from currently used technologies for two important reasons.  First, CodecSys allows a change from using only a single codec to compress video content to using multiple codecs and algorithms in the compression and transmission of content.  The CodecSys system selects dynamically the most suitable codecs available from the various codecs stored in its library and matches the codecs with various video settings to compress a single video stream.  As a video frame, or a number of similar frames (a scene), is compressed, CodecSys applies the optimized codec from the library that best compresses that content and matches the codec with the appropriate setting to then perform the compression.  CodecSys repeats the selection throughout the video encoding process, resulting in the use of numerous codecs on a best performance basis.  The resulting file is typically substantially smaller than when a single codec compression method is used.

The second important distinction is that CodecSys is a software encoding system that can be upgraded and improved without changing the hardware on which it is resident, much as a personal computer can have its application software upgraded and changed without replacing the equipment.  In addition, CodecSys software can run equally efficiently on different manufacturers’ equipment.  For example, using the Intel chip currently employed by us, the CodecSys encoding system can run equally as well on IBM equipment and HP equipment, which expands our potential market of customers and opens the possibility of different sales channels as our software can be sold by IBM sales people as well as HP sales people.  In addition, most video encoders currently utilize an application specific integrated circuit (ASIC) chip as the encoding engine and when new developments are made, the customer must purchase new hardware to take advantage of the changes.  Having a software based encoding system means that new changes in technology and encoding algorithms can be downloaded remotely to upgrade the encoding system on the customers already resident hardware.  We believe that having a software based encoding product will slow hardware obsolescence for the customer and be a competitive advantage for CodecSys.

CodecSys Products and Services

In November 2007, we entered into a two-year license agreement with IBM pursuant to which Broadcast licensed its patented CodecSys technology for use by IBM in selling video encoding solutions using IBM’s Cell-BE processing chip.  The initial version of a video encoder running on the IBM platform was completed in a commercially deployable form for sales in 2009, although additional development work was required.  After we had completed substantially all of its development work on the IBM Cell-BE processor chip in the first half of 2009, IBM sales efforts using the Cell-BE processor chip were redirected to products not employing the Cell-BE processor chip.  At approximately the same time, Intel released a newly developed operating chip with sufficient processing capacity to perform the multiple functions required by CodecSys to which Broadcast redirected its development efforts.  This chip is based on x86 architecture, which is the standard in the industry acceptable to almost all users, and it is easier to program applications to this architecture.  The initial version of the CodecSys video encoding system utilizing the Intel chip was first ready for sales presentations and testing in the fourth quarter of 2009, but the CodecSys version 2.0, the first commercial version of the software hardened for sales and deployment was not ready for sales installation until July 1, 2010.

Because we had our CodecSys technology resident on the Intel chip, we were able to market with other manufacturers of computer equipment such as HP.  We have made sales presentations to customers of other hardware manufacturers, but in three years were not able to make any significant sales to those customers.  In September 2009, our CodecSys encoding system was certified by Microsoft as an approved software encoding system for use by IPTV providers, which use Microsoft Media Room software in their delivery and management of their IPTV systems.    However, the certification never resulted in any sales.

In October 2011, Fujitsu North America, after fully testing and evaluating CodecSys and its competitors, selected CodecSys as the compression technology to be employed by Fujitsu in its NuVolo cloud based initiative, which has since been discontinued by Fujitsu.  In December 2011, IBM introduced its video encoding and transcoding service that is accomplished through the Internet cloud.  The encoding engine for this service is CodecSys.  We never derived significant revenue from the service based on the amount of the video encoded by IBM’s customers.

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We have discontinued all development of the CodecSys technology except as it concerns transmission of video for our digital signage customers.

Research and Development

We have spent substantial amounts in connection with its research and development efforts.  These efforts have been dedicated to the development and commercialization of the CodecSys technology.  We have decreased those expenditures from $1,754,163 for the year ended December 31, 2012 to $546,953 for the year ended December 31, 2013 and have now discontinued all research and development expenditures related to CodecSys as a product.  Because of the lack of cash resources we are no longer able to support future research and development activities unless we raise additional capital, succeed in generating revenues from sales of CodecSys products or restructure.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.

Intellectual Property Protection

Because much of our future success and value depends on the CodecSys technology, our patent and intellectual property strategy is of critical importance.  Two provisional patents describing the technology were filed on September 30, 2001.  We have filed for patent protection in the United States and various foreign countries.  Broadcast’s initial U.S. patent related to the CodecSys technology was granted by the U.S. Patent and Trademark Office, or PTO, in August 2007.  Four additional patents have been issued by the PTO.  As of December 31, 2013, we also had eleven patents issued in foreign countries and 20 pending patent applications, including U.S. and foreign counterpart applications and continuations.

We have identified additional applications of the technology, which represent potential patents that further define specific applications of the processes that are covered by the original patents.  We intend to continue building our intellectual property portfolio as development continues and resources are available.

We have registered the “CodecSys” trademark with the PTO, and seek to protect our know-how, trade secrets and other intellectual property through a variety of means, including confidentiality agreements with our employees, customers, vendors, and others.

Major Customers

A small number of customers account for a large percentage of our revenue.  For the year ended December 31, 2013, 85% of our revenues were from our largest customer compared to 89% from this customer for the year ended December 31, 2012. We lost our largest customer in May 2013.

The material reduction in revenues resulting from the loss of this customer and our inability to replace those revenues has required that we severely curtail operations and has resulted in uncertainty as to our ability to continue as an independent entity.

Competition

The communications industry is extremely competitive.  In the private satellite network market, there are many firms that provide some or all of the services we provide.  Many of these competitors are larger than we are and have significantly greater financial resources.  In the bidding process for potential customers, many of our competitors have a competitive advantage in the satellite delivery of content because many own satellite transponders or otherwise have unused capacity that gives them the ability to submit lower bids than we are able to make.  In the satellite network and services segment, we compete with Convergent Media Systems, Globecast, IBM, Cisco, TeleSat Canada and others.  With respect to video conferencing, we compete with Sony, Polycom, Tandberg and others.

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There are several additional major market sectors in which we plan to compete with its CodecSys technology, all with active competitors.  These sectors include the basic codec technology market, the corporate enterprise and small business streaming media market, and the video conferencing market.  These are sectors where we may compete by providing direct services.  Competition in these new market areas will also be characterized by intense competition with much larger and more powerful companies, such as Microsoft and Yahoo, which are already in the video compression and transmission business.  Many of these competitors already have an established customer base with industry standard technology, which we must overcome to be successful.

The video encoders to be sold by channel partners will compete directly against video encoders manufactured and sold by a number of competitors, including  Erickson/Tandberg, Harmonic Scientific Atlanta, Motorola, and Thomson. None of our channel partners have ever produced a video encoder to compete in this market.  Our marketing partners have not been successful in entering this new market, and we have not derived the amount of licensing revenue originally anticipated by management.

On a technology basis, CodecSys competition varies by market sector, with codecs and codec suppliers like Microsoft Windows Media Player, Real Networks’ Real Player, Apple, QuickTime, MPEG2, MPEG4, On2, DivX and many others.  There are several companies, including Akamai, Inktomi, Activate and Loudeye that utilize different codec systems.  These companies specialize in encoding, hosting and streaming content services primarily for news/entertainment clients with large consumer audiences.  We compete directly with the two companies in the broadcast media encoding market that have the largest market share, Erickson/Tandberg and Harmonic. In addition, we compete with Cisco, Harris Corporation, and with many other smaller companies.  Most are larger than us and most have greater financial resources than we have.

Competition in the digital signage business is extremely widespread with competitors in almost every pricing strata.  The industry is fragmented with many providers as there is a relatively low cost of entry into the market with many companies developing a new piece of software and immediately there is another competitor. Large companies such as Harris Corporation and Cisco have digital signage offerings among there many other products.  Scala and Fourwinds Interactive are among the many smaller digital signage companies that offer are primarily digital signage software and service to the general business community and with which we most often compete.

Employees

We currently employ 8 full-time personnel at our executive offices in Salt Lake City, Utah.  We engage independent contractors and employ the services of independent sales representatives and consultants on an “as needed” basis.

Government Regulation

Broadcast has seven licenses issued by the Federal Communications Commission for satellite uplinks, Ethernet, radio connections and other video links between Broadcast facilities and third-party uplinks.  We no longer have, however, a licensed operator to function using the licenses.  Notwithstanding these licenses, all of our activities could be performed outside these licenses with third-party vendors.  All material business activities are subject to general governmental regulations with the exception of actual transmission of video signals via satellite.

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Properties

Our executive offices are located at 6952 S. High Tech Drive, Suite C, Salt Lake City, Utah 84047.  We occupy the space at the executive offices under a month to month lease.  The lease covers approximately 7,500 square feet of office and warehouse space leased at a rate of $3,955 per month plus utilities.  We have no other properties.

Legal Proceedings

We are a defendant in a lawsuit filed in Los Angeles Superior court seeking payment for services rendered by the Plaintiff, Audio Visual Plus, Inc.  The total amount in dispute is $29,235.  We have paid the plaintiff approximately one half of the amount claimed and the action is not proceeding at the present time.

In May 2013, we were named as defendant in a lawsuit filed in the Small Claims Court in the Third Judicial District, State of Utah, seeking payment for services rendered by the plaintiff, Performance Audio.  The total amount in dispute is approximately $9,663.  We have paid approximately one half of the amount claimed and the action is not proceeding at the present time.

In September 2013, we were named as defendant in a lawsuit filed in the Third Judicial District court, Salt Lake County, State of Utah, seeking judgment for damages related to a breach of a termination agreement we entered into with our former landlord when we vacated our former offices.  A default judgment was entered in the matter in the amount of $91,666.66 plus attorneys fees.

On November 4, 2013, we notified AllDigital that we terminated the Merger Agreement pursuant to Section 8.1(b), which permits termination of the Agreement by either party if the Merger is not consummated by October 31, 2013, provided that such failure is not attributable to the terminating party’s failure to perform its obligations under the Merger Agreement. Following delivery of our notice of termination, AllDigital responded by asserting that the Merger did not close because we failed to perform our obligations and that we were not entitled to terminate under Section 8.1(b).  AllDigital further notified us that it was terminating the Merger Agreement for cause based on our alleged breach of the non-solicitation covenants in the Merger Agreement, which AllDigital asserts triggers a termination fee of $100,000 and 4% of our equity on a non-diluted basis, and for various other alleged misrepresentations and breaches.  We dispute AllDigital’s allegations and assertions, deny that AllDigital is entitled to any termination fee and reserve the right to pursue damages from AllDigital arising from AllDigital’s actions in relation to the Merger Agreement.  No litigation has been filed in this matter.

ITEM 1A.  RISK FACTORS

You should carefully consider the following risk factors and all other information contained in this report.  Our business and our securities involve a high degree of risk.

Our independent auditors have expressed doubt as to our ability to continue as a going concern.

Our audited consolidated financial statements for the year ended December 31, 2013 contain a “going concern” qualification.  As discussed in Note 3 of the Notes to Consolidated Financial Statements, we have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  Because of these conditions, our independent auditors have raised substantial doubt about our ability to continue as a going concern.

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If we do not successfully commercialize our CodecSys technology, we may never achieve profitability, retire our convertible debt or be able to raise future capital.

It is imperative that we successfully commercialize our CodecSys technology. We continue to develop this technology for a variety of applications.  We have never been involved in a development project of the size and breadth that is involved with CodecSys and none of our management has ever been involved with a software development project.  Management may lack the expertise and we may not have the financial resources needed for successful development of this technology.  Furthermore, commercialization and future applications of the CodecSys technology are expected to require additional capital estimated to be approximately $2.0 million annually for the foreseeable future, although we have spent considerably more than that in past years.  This estimate will increase or decrease depending on specific opportunities and available funding.  If we are unsuccessful in our CodecSys development and commercialization efforts, it is highly doubtful we will achieve profitable operations, retire our existing convertible indebtedness or be able to raise additional funding in the future.

We need additional capital.  If additional capital is required but is not available, we may have to curtail or cease operations.

If we are unable to generate net sales in excess of operating expenses, we will need to obtain additional financing to continue operations.  We believe external funding may be difficult to obtain, particularly given the prevailing financial market conditions.  If sufficient capital is not available to us, we will be required to pursue one or a combination of the following remedies:  significantly reduce development, commercialization or other operating expenses; sell part or all of our assets; or terminate operations.  The existing turbulence and illiquidity in the credit and financial markets are continuing challenges that have generally made potential funding sources more difficult to access, less reliable and more expensive.  These market conditions have made the management of our liquidity significantly more challenging.  A further deterioration in the credit and financial markets or a prolonged period without improvement could adversely affect our ability to raise additional capital.

We have sustained and may continue to sustain substantial losses.

We have sustained operating losses in each of the last seven years.  Through December 31, 2013, our accumulated deficit was $111,873,431.  We continue to sustain operating losses on a quarterly and annual basis and may continue to do so.

Our success depends on adoption of our CodecSys technology by OEMs and end-users.

The success of our CodecSys technology depends on the adoption of this technology by original equipment manufacturers, or OEMs, like IBM, Fujitsu and HP, as well as end-users.  The OEM qualification and adoption process is complex, time-consuming and unpredictable.  Furthermore, OEMs may elect to maintain their relationships with incumbent technology providers, even when presented with technology that may be superior to the incumbent technology.  Significant delays in the development or OEM adoption of CodecSys will adversely affect our results of operations, financial condition and prospects.

Our continued losses may impact our relationships with OEMs and customers.

Our continued losses may impact our relationships with existing and potential OEMs and customers.  OEMs may be reluctant to partner with us or present our technology in conjunction with their product offerings if they believe our financial condition is marginal or in jeopardy.  OEMs and prospective customers may delay adoption of our CodecSys technology and other products if they believe we are not financially sound enough to support our technology or other product offerings.

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Adverse economic or other market conditions could reduce the purchase of our services by existing and prospective customers, which would harm our business.

Our business is impacted from time to time by changes in general economic, business and international conditions and other similar factors.  Adverse economic or other market conditions negatively affect the business spending of existing and prospective customers.  In adverse market times, our network and other services may not be deemed critical for these customers.  Therefore, our services are often viewed as discretionary and may be deferred or eliminated in times of limited business spending, thereby harming its business.

The recent recession and market turmoil present considerable risks and challenges.  These risks and challenges have reached unprecedented levels and have significantly diminished overall confidence in the national economy, upon which we are dependent.  Such factors could have an adverse impact on our business and prospects in ways that are not predictable or that we may fail to anticipate.

Our systems of internal operational and financial controls may not be effective.

We establish and maintain systems of internal operational and financial controls that provide us with critical information.  These systems are not foolproof, and are subject to various inherent limitations, including cost, 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, any system of internal controls or procedures may not 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.  We have previously experienced significant deficiencies in our required disclosure controls and procedures regarding the updating of certain accounting pronouncements and the reporting of current information required to be filed with the SEC.  We also experienced a significant deficiency and a material weakness in our required disclosure controls and procedures regarding its accounting entries and financial statements, which resulted in the restatement of one accounting period.  Any future deficiency, weakness, malfunction or inadequacy related to internal operational or financial control systems or procedures could produce inaccurate and unreliable information that may harm our business.

We may be unable to respond adequately to rapid changes in technology.

The markets for private communication networks and video encoder systems are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions.  The introduction of new technology and products and the emergence of new industry standards not only impacts our ability to compete, but could also render our products, services and CodecSys technology uncompetitive or obsolete.  If we are unable to adequately respond to changes in technology and standards, we will not be able to serve its clients effectively.  Moreover, the cost to modify our services, products or infrastructure in order to adapt to these changes could be substantial and we may not have the financial resources to fund these expenses.

We face intense competition that could harm our business.

The communications industry is extremely competitive.  We compete with numerous competitors who are much larger than we are and have greater financial and other resources.  In the satellite network and services segment, including digital signage, we compete with Convergent Media Systems, Globecast, IBM, Cisco, Hughes and others.  Our competitors have established distribution channels and significant marketing and sales resources.  Competition results in reduced operating margins for our business and may cause us to lose clients and/or prevent us from gaining new clients critical for our success.

There are several additional major market sectors in which we plan to compete with our CodecSys technology, all with active competitors.  These sectors include the basic codec technology market, the corporate enterprise network market and small business streaming media market.  These are sectors where we may compete by providing direct services.  Competition in these new market areas will also be characterized by intense competition with much larger and more powerful companies, such as Microsoft and Yahoo, which are already in the video compression and transmission business.  Many of these competitors already have established customer bases with industry standard technology, which we must overcome to be successful.

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On a technology basis, CodecSys competition varies by market sector, with codecs and codec suppliers like Microsoft Windows Media Player, Real Networks’ Real Player, Apple QuickTime, MPEG2, MPEG4, On2, DivX and many others.  There are several companies, including Akamai, Inktomi, Activate and Loudeye, which utilize different codec systems.  These companies specialize in encoding, hosting and streaming content services primarily for news/entertainment clients with large consumer audiences.  All are larger and have greater financial resources than we have.  Tandberg/Erickson and Harmonic are two of the largest suppliers of high end video encoders to the broadcast industry and are the incumbent suppliers to many of the customers to which we are selling.

If we fail to hire additional specialized personnel or retain are key personnel in the future, we will not have the ability to successfully commercialize our technology or manage our business.

We still need to hire additional specialized personnel to successfully commercialize our CodecSys technology.  If we are unable to hire or retain qualified software engineers and project managers, our ability to complete further development and commercialization efforts will be significantly impaired.  Our success is also dependent upon the efforts and abilities of its management team.  If we lose the services of certain of our current management team members, we may not be able to find qualified replacements, which would harm the continuation and management of our business.

Our revenue is dependent upon the sales efforts of others.

We are dependent upon the sales and marketing efforts of IBM, HP, Fujitsu and other third-party businesses in order to derive licensing revenue from its CodecSys technology.  Such businesses may not continue their sales efforts which would adversely affect our potential licensing fees.  We are not able to control the sales and marketing efforts of these third parties.  Limited revenues from our historical sources make it even more dependent upon the sales efforts of others.  Given the current recession and market developments, third-party businesses may scale back on sales efforts which could significantly harm our business and prospects.

We rely heavily on a few significant customers and if we lose any of these significant customers, our business may be harmed.

A small number of customers account for a large percentage of our revenue.  Our business model relies upon generating new sales to existing and new customers.  In September 2009 we secured a contract with a large national organization, which became our largest customer.  The contract with this customer terminated May 31, 2013.  We may continue to provide some managed media services to the customer in the future, but in excess of 90% of our revenues from the customer have been lost. As a result of this termination, our revenues have declined substantially and our operations have been substantially curtailed.

There is significant uncertainty regarding our patent and proprietary technology protection.

Our success is dependent upon its CodecSys technology and other intellectual property rights.  If we are unable to protect and enforce these intellectual property rights, competitors will have the ability to introduce competing products that are similar to ours.  If this were to occur, our revenues, market share and operating results would suffer.  To date, we have relied primarily on a combination of patent, copyright, trade secret, and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution to protect its proprietary technology. Our initial U.S. patent related to our CodecSys technology was granted by the PTO in August 2007 and four additional patents related to applications of the technology were subsequently issued by the PTO.  As of December 31, 2012, eleven foreign countries had issued our initial patent.  In addition, we have 20 pending U.S. and foreign patent applications.  If we fail to deter misappropriation of its proprietary information or if we are unable to detect unauthorized use of its proprietary information, then our revenues, market share and operating results will suffer.  The laws of some countries may not protect our intellectual property rights to the same extent as do the laws of the United States.  Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity.  This litigation could result in substantial costs and diversion of resources that would harm our business.

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Our products could infringe on the intellectual property rights of others, which may subject us to future litigation and cause financial harm to its business.

To date, we have not been notified that our services, products and technology infringe the proprietary rights of third parties, but there is the risk that third parties may claim infringement by us with respect to current or future operations.  We expect software developers will increasingly be subject to infringement claims as the number of products and competitors in the industry segment grows and the functionality of products in different industry segments overlaps.  Any of these claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert management’s attention and resources, cause product shipment delays, or require us to enter into royalty or licensing agreements.  These royalty or licensing agreements, if required, may not be available on terms acceptable to us.  A successful claim against us of infringement and failure or inability to license the infringed or similar technology on favorable terms would harm its business.

Our common stock is considered “penny stock” which may make selling the common stock difficult.

Our common stock is considered to be a “penny stock” under the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of the Securities Exchange Act of 1934, as amended.  Under the rules, stock is considered “penny stock” if: (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Stock Market, or even if quoted, has a price less than $5.00 per share; or (iv) is issued by a company with net tangible assets less than $2.0 million, if in business more than a continuous three years, or with average revenues at less than $6.0 million for the past three years.  The principal result or effect of being designated a “penny stock” is that securities broker-dealers cannot recommend our stock but must trade it on an unsolicited basis.

Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account.  Potential investors in Broadcast common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stocks.”  Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investors financial situation, investment experience and investment objectives.  Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

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Trading in our securities could be subject to extreme price fluctuations that could cause the value of your investment to decrease.

Our stock price has fluctuated significantly in the past and could continue to do so in the future.  Our stock is thinly-traded, which means investors will have limited opportunities to sell their shares of common stock in the open market.  Limited trading of our common stock also contributes to more volatile price fluctuations.  The market price of our common stock is also subject to extreme fluctuations because of the nature of the CodecSys technology and the potential for large-scale acceptance or rejection of our technology in the marketplace.  Given these fluctuations, an investment in our common stock could lose value.  A significant drop in our stock price could expose it to the risk of securities class action lawsuits.  Defending against such lawsuits could result in substantial costs and divert management’s attention and resources, thereby causing an investment in stock to lose additional value.

Future sales of our common stock could cause our stock price to decrease.

Substantial sales of our common stock in the public market, or the perception by the market that such sales could occur, could lower our stock price.  As of December 31, 2013, we had 110,233,225 shares of common stock outstanding.  As of December 31, 2013, stock options, including options granted to our employees, and warrants to purchase an aggregate of 43,068,136 shares of our common stock were issued and outstanding, a substantial portion of which were fully exercisable.  As of December 31, 2013, notes convertible into 20,900,000 shares of our common stock were issued and outstanding if they are converted at the conversion rate set forth in the notes, but would be converted into more shares if converted at our current trading value.  As of December 31, 2013, we had granted restricted stock units to members of our board of directors and others, which may be settled at various time in the future by the issuance of 3,093,247 shares of common stockFuture sales of our common stock, or the availability of our common stock for sale, may cause the market price of our common stock to decline.

Any stock ownership interest may be substantially diluted by future issuances of securities.

We may issue shares of our common stock to holders of outstanding convertible notes, stock options and warrants.  The conversion of the convertible notes and the exercise of options and warrants into shares of our common stock will be dilutive to stockholders.  We also expect to continue to offer stock options to our employees and others, and as of December 31 2013, we had approximately 4,319,411 shares of common stock available for future issuance under our 2004 long-term incentive stock option plan and 363,200 shares of common stock available for future issuance under our 2008 equity incentive plan.   To the extent that future stock options are granted and ultimately exercised, there will be further dilution to stockholders.

We have never paid dividends and do not anticipate paying any dividends on our common stock in the future, so any return on an investment in our common stock will depend on the market price of the stock.

We currently intend to retain any future earnings to finance its operations.  The terms and conditions of its convertible notes restrict and limit payments or distributions in respect of its common stock.  The return on any investment in our common stock will depend on the future market price of such common stock and not on any potential dividends.

Current and future legal proceedings against us could be costly and time consuming to defend.

From time to time we are subject to legal proceedings and claims that arise in the ordinary course of business, including claims brought by our customers in connection with commercial disputes, employment-based claims made by our current or former employees, administrative agencies, or government regulators. Litigation, enforcement actions, and other legal proceedings, regardless of their outcome, may result in substantial costs and may divert management’s attention and our resources, which may harm our business, overall financial condition and operating results. In addition, legal claims that have not yet been asserted against us may be asserted in the future.

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ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

Our executive offices are located at 6952 S. High Tech Drive, Suite C, Salt Lake City, Utah 84047.  We occupy the space at the executive offices under a month to month lease.  The lease covers approximately 7,500 square feet of office and warehouse space leased at a rate of $3,955 per month plus utilities.  We have no other properties.

ITEM 3.  LEGAL PROCEEDINGS

We are a defendant in a lawsuit filed in Los Angeles Superior court seeking payment for services rendered by the Plaintiff, Audio Visual Plus, Inc.  The total amount in dispute is $29,235.  We have paid the plaintiff approximately one half of the amount claimed and the action is not proceeding at the present time.

In May 2013, we were named as defendant in a lawsuit filed in the Small Claims Court in the Third Judicial District, State of Utah, seeking payment for services rendered by the plaintiff, Performance Audio.  The total amount in dispute is approximately $9,663.  We have paid approximately one half of the amount claimed and the action is not proceeding at the present time.

In September 2013, we were named as defendant in a lawsuit filed in the Third Judicial District court, Salt Lake County, State of Utah, seeking judgment for damages related to a breach of a termination agreement we entered into with our former landlord when we vacated our former offices.  A default judgment was entered in the matter in the amount of $91,666.66 plus attorneys fees.

On November 4, 2013, we notified AllDigital that we terminated the Merger Agreement pursuant to Section 8.1(b), which permitted termination of the Agreement by either party if the Merger was not consummated by October 31, 2013, provided that such failure was not attributable to the terminating party’s failure to perform its obligations under the Merger Agreement. Following delivery of our notice of termination, AllDigital responded by asserting that the Merger did not close because we failed to perform our obligations and that we were not entitled to terminate under Section 8.1(b).  AllDigital further notified us that it was terminating the Merger Agreement for cause based on our alleged breach of the non-solicitation covenants in the Merger Agreement, which AllDigital asserts triggered a termination fee of $100,000 and 4% of our equity on a non-diluted basis, and for various other alleged misrepresentations and breaches.  We dispute AllDigital’s allegations and assertions, deny that AllDigital is entitled to any termination fee and reserve the right to pursue damages from AllDigital arising from AllDigital’s actions in relation to the Merger Agreement.  No litigation has been filed in this matter.

To the knowledge of management, no other litigation has been filed or, except for one collection matter, threatened.

ITEM 4.  MINE SAFETY DISCLOURES

Not Applicable.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

 AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock Price Range

Our common stock is currently traded on the OTC Bulletin Board under the symbol “BCST.”  The following table sets forth, for the periods indicated, the high and low bid quotations, as adjusted for stock splits of our common stock, as reported by the OTC Bulletin Board, and represents prices between dealers, does not include retail markups, markdowns or commissions, and may not represent actual transactions:

	High Bid		Low Bid
2013
First Quarter	$	.15	$	.07
Second Quarter		.12		.04
Third Quarter		.09		.05
Fourth Quarter		.07		.01
2012
First Quarter	$	.67	$	.31
Second Quarter		.50		.18
Third Quarter		.25		.10
Fourth Quarter		.20		.05

Holders

As of March 28, 2014, we had 111,370,878 shares of our common stock issued and outstanding, and there were approximately 1,400 shareholders of record.

Dividends

We have never paid or declared any cash dividends.  Future payment of dividends, if any, will be at the discretion of our board of directors and will depend, among other criteria, upon our earnings, capital requirements, and financial condition as well as other relative factors.  Management intends to retain any and all earnings to finance the development of our business, at least in the foreseeable future.  Such a policy is likely to be maintained as long as necessary to provide working capital for our operations.  Moreover, our outstanding convertible notes contain restrictive covenants that prohibit us from declaring or paying dividends.

Sales of Unregistered Securities

On March 6, 2014, we issued 729,100 shares of our common stock to one of our former managers in consideration of termination of his employment agreement and compensation. The former manager is an accredited investor and was fully informed regarding his investment.  In the transaction, we relied on the exemption from registration under the Securities Act set forth in Section 4(2) thereof.

On March 6, 2014, we issued 408,553 shares of our common stock to one of our former directors in settlement of restricted stock units he had been granted during his tenure as a member of our Board of Directors.  The former director is an accredited investor and was fully informed regarding his investment.  In the transaction, we relied on the exemption from registration under the Securities Act set forth in Section 4(2) thereof.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We had no purchases of equity securities by the issuer or affiliated purchasers during the fourth quarter of 2013.

ITEM 6.  SELECTED FINANCIAL DATA

Not applicable.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and related notes that are included elsewhere in this report.  This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” or in other parts of this report.  See “Cautionary Note Regarding Forward-Looking Statements.”

Critical Accounting Policies

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

We consider all cash on hand and in banks, and highly liquid investments with maturities of three months or less, to be cash equivalents. At December 31, 2013 and 2012, we had no bank balances in  excess of amounts insured by the Federal Deposit Insurance Corporation. We have not experienced any losses in such accounts, and believe we are not exposed to any significant credit risk on cash and cash equivalents.

Current financial market conditions have had the effect of restricting liquidity of cash management investments and have increased the risk of even the most liquid investments and the viability of some financial institutions.  We do not believe, however, that these conditions will materially affect our business or our ability to meet our obligations or pursue our business plans.

Accounts Receivable

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded as income when received.

A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days. After the receivable becomes past due, it is on non-accrual status and accrual of interest is suspended.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the property, generally from three to five years.  Repairs and maintenance costs are expensed as incurred except when such repairs significantly add to the useful life or productive capacity of the asset, in which case the repairs are capitalized.

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Patents and Intangibles

Patents represent initial legal costs incurred to apply for United States and international patents on the CodecSys technology, and are amortized on a straight-line basis over their useful life of approximately 20 years.  We have filed patent applications in the United States and foreign countries. As of December 31, 2013, the U.S. Patent and Trademark Office or PTO had approved six patents and a seventh has been approved awaiting a patent number.  Additionally, eleven foreign countries had issued patents and we had 20 pending patent applications, including U.S. and foreign counterpart applications.  While we have been unable to develop the technology in order to obtain the full benefits of the issued patents, we believe the patents themselves hold value and could be sold to companies with more resources to complete the development. On-going legal expenses incurred for patent follow-up have been expensed from July 2005 forward and in 2011 Broadcast abandoned two foreign patent applications and incurred a charge of $26,180.

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.

After our review at December 31, 2013, it was determined that no adjustment was required.

Stock-based Compensation

Stock-based compensation cost is estimated at the grant date, based on the estimated fair value of the awards, and recognized as expense ratably over the requisite service period of the award for awards expected to vest.

Income Taxes

We account for income taxes in accordance with the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled.

Revenue Recognition

We recognize revenue when evidence exists that there is an arrangement between us and our customers, delivery of equipment sold or service has occurred, the selling price to our customers is fixed and determinable with required documentation, and collectability is reasonably assured. We recognize as deferred revenue, payments made in advance by customers for services not yet provided.

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When we enter into a multi-year contract with a customer to provide installation, network management, satellite transponder and help desk, or combination of these services, we recognize this revenue as services are performed and as equipment is sold.  These agreements typically provide for additional fees, as needed, to be charged if on-site visits are required by the customer in order to ensure that each customer location is able to receive network communication. As these on-site visits are performed the associated revenue and cost are recognized in the period the work is completed. If we install, for an additional fee, new or replacement equipment to an immaterial number of new customer locations, and the equipment immediately becomes the property of the customer, the associated revenue and cost are recorded in the period in which the work is completed.

In instances where we have entered into license agreements with a third parties to use our technology within their product offering, we recognize any base or prepaid revenues over the term of the agreement and any per occurrence or periodic usage revenues in the period they are earned.

Research and Development

Research and development costs are expensed when incurred.  We expensed $546,953 in 2013 and $1,754,163 in 2012 of research and development costs.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of trade accounts receivable. In the normal course of business, we provide credit terms to our customers. Accordingly, we perform ongoing credit evaluations of our customers and maintain allowances for possible losses which, when realized, have been within the range of management’s expectations.

In 2013 and 2012, we had one customer that individually constituted 83% and 85%, respectively, of our total revenues, with no other single customer representing more than 5% of total revenues.  Our largest customer signed a three year contract which we began servicing in the second half of 2009, which expired May 31, 2013 after which time we no longer provided any significant services for the customer.

Weighted Average Shares

Basic earnings per common share is computed by dividing net income or loss applicable to common shareholders by 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 shares outstanding during the year, plus the dilutive common stock equivalents that would rise from the exercise of stock options, warrants and restricted stock units outstanding during the period, using the treasury stock method and the average market price per share during the period, plus the effect of assuming conversion of the convertible debt. The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on earnings.

Potentially dilutive securities representing 18,568,963 shares of common stock were excluded from the computation of diluted earnings per common share for the year ended December 31, 2012, because their effect would have been anti-dilutive.

Options and warrants to purchase 43,068,136 shares of common stock and 3,093,247 restricted stock units were outstanding at December 31, 2013 and our convertible notes were convertible into 20,900,000 shares of common stock. As we experienced a net loss during the year ended December 31, 2013, no common stock equivalents were included in the diluted earnings per common share calculation as the effect of such common stock equivalents would be anti-dilutive.

Advertising Expenses

We follow the policy of charging the costs of advertising to expense as incurred.  Advertising expense for the years ended December 31, 2013 and 2012 were $ 0 and $35,168, respectively.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Executive Overview

The current recession and market conditions have had substantial impacts on the global and national economies and financial markets.  These factors, together with soft credit markets, have slowed business growth and generally made potential funding sources more difficult to access.  We continue to be affected by prevailing economic and market conditions, which present considerable risks and challenges to it.

Our audited consolidated financial statements for the year ended December 31, 2013 contain a “going concern” qualification.  As discussed in Note 3 of the Notes to Consolidated Financial Statements, we have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  Because of these conditions, our independent auditors have raised substantial doubt about our ability to continue as a going concern.

Because we have not been successful in deploying our CodecSys technology with customers and are finding it difficult to raise additional investment capital, we determined that we should seek an alternative to continuing to commercialize CodecSys by ourselves.  In that connection we sought a merger partner that had compatible video broadcasting products and services, with which we could integrate our CodecSys encoding system.  On January 7, 2013, we entered into an Agreement of Merger and Reorganization with All Digital, Inc., a Nevada corporation.  On November 4, 2013, the Board determined that the merger was unlikely to be consummated in a timely manner, if at all, and terminated the proposed merger with AllDigital. Subsequent to the termination of the January 7 merger agreement, through our investment banker, we engaged in merger discussions with Wireless Ronin Technologies, Inc., a Minnesota corporation, which have resulted in the execution of an agreement of merger and reorganization on March 6, 2014.  Pursuant to this merger agreement, if the merger is consummated, we will become a wholly owned subsidiary of Wireless Ronin.  The merger is subject to necessary approvals, due diligence, the effectiveness of a registration statement, the satisfaction of all but $250,000 of our outstanding liabilities and a vote of our shareholders as well as other conditions common to transactions of this nature.

We were able to complete our video encoding system utilizing an Intel chip, prepare our CodecSys technology for installation on various equipment platforms, and become certified by Microsoft as an approved software video encoding system for use by IPTV providers using Microsoft operating platforms.  We installed CodecSys in various large telecoms and labs for evaluation by potential customers.  In spite of the acceptance our technology appeared to receive, neither we nor any of our channel partners ever made any significant sales of CodecSys to any end users. We have discontinued making sales presentations and responding to requests for proposals at potential customers because we no longer have the funding necessary to pursue this business and have not been able to raise additional investment capital to fund the sales or further development. We believe we have made significant progress and continue to believe that our CodecSys technology holds substantial value, but we have been unable to bring it to market successfully.

On July 31, 2009, we entered into a $10.1 million, three-year contract with a national banking institution, to provide technology and digital signage services to approximately 2,100 of its more than 6,000 retail and administrative locations throughout North America. The contract terminated on May 1, 2013.  For the year ended December 31, 2013, we realized approximately $2,522,629 from this contract, which constituted approximately 83 % of our revenues for the period.  For the year ended December 31, 2012, we realized approximately $6,386,903 in revenue from this contract, which contributed approximately 85% of our revenues for the year.  Our revenues have been substantially less after the contract terminated.

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Our revenues for the year ended December 31, 2013 decreased by $4,482,267 compared to the year ended December 31, 2012. We continued to deplete our available cash even after we significantly reduced our expenditures through reduction of staff and termination of all development activities and do not believe that we can continue as an independent entity.  See Note 3 of the Notes to Consolidated Financial Statements appearing elsewhere herein.

To fund operations, we engaged our investment banker to raise funds through the issuance of convertible promissory notes.  We anticipated issuing promissory notes with a principal amount of up to $5,000,000 (“2012 Convertible Debt Offering”) due and payable on or before July 13, 2013.  As of December 31, 2013, we had issued notes with an aggregate principal value of $4,225,000 as explained below.  The notes bear interest at 12% per annum and may be convertible to common stock at a $.25 per share conversion price.  We also granted holders of the notes warrants with a five year life to acquire up to 200,000 shares of our common stock for each $100,000 of principal amount of the convertible notes.  On July 13, 2012, we entered into a note and warrant purchase and security agreement with individual investors and broke escrow on the initial funding under the 2012 Convertible Debt Offering, the principal amount of which was $1,900,000, which included the conversion of $900,000 of previously issued short term debt (See Bridge Loan described below) to the 2012 Convertible Debt Offering, which extinguished the Bridge Loan.  We realized $923,175 of cash in the initial closing, issued warrants to acquire 3,800,000 shares of our common stock and paid $76,825 in investment banking fees and costs of the offering.  We have continued sales of convertible debt under the 2012 Convertible Debt Offering and as of January 31, 2013 have issued additional short term debt with a principal amount of $1,225,000, from which we realized cash of $1,176,624 after payment of investment banking fees of $48,376.  We have, however, paid no investment banking fees on sales of our 2012 Convertible Debt Offering since August 2012 and do not anticipate paying additional investment banking fees for the 2012 Convertible Debt Offering. We have issued warrants to acquire an additional 6,950,000 shares of our common stock.

On March 16, 2012, we closed on an equity financing (the “2012 Equity Financing”) as well as a restructuring of our outstanding senior convertible indebtedness (the “2012 Debt Restructuring”) resulting in complete satisfaction our senior indebtedness.

We entered in to an Engagement Agreement, dated October 28, 2011, with MDB Capital Group, LLC(“MDB”), pursuant to which MDB agreed to act as our exclusive agent on a “best efforts” basis with respect to the sale of up to a maximum gross consideration of $6,000,000, subsequently verbally increased to $10,000,000, of our securities, subject to a minimum gross consideration of $3,000,000.  We agreed to pay to MDB a commission of 10% of the gross offering proceeds received by us, to grant to MDB warrants to acquire up to 10% of the shares of our common stock issued in the financing, and to pay the reasonable costs and expenses of MDB related to the offering.

Pursuant to the Engagement Agreement, we entered into a Securities Purchase Agreement (“SPA”) dated March 13, 2012 with select institutional and other accredited investors for the private placement of 27,800,000 units of our securities.  The SPA included a purchase price of $0.25 per unit, with each unit consisting of one share of common stock and two forms of Warrant: (1) The “A” Warrant grants the investors the right to purchase an additional share of common stock for each two shares of common stock purchased, for a term of six years and at an exercise price of $.35 per share; and (2) The “B” Warrant, which has now been extinguished as described below, would not have been exercisable unless and until the occurrence of a future issuance of stock at less than $0.25 per share, but, in the event of such issuance, granted the investors the right to acquire additional shares at a price of $0.05 to reduce the impact of the dilution caused by such issuance, but in no event were the number of shares to be issued under the B Warrant to cause us to exceed the number of authorized shares of our common stock.  A majority of the holders of the B Warrants agreed in December 2012 to amend the terms of the B Warrant to reduce the amount of subsequent financing required to extinguish the B Warrants, which have since been extinguished.

Proceeds from the 2012 Equity Financing, before deducting the commissions and the legal, printing and other costs and expenses related to the financing, were approximately $6,950,000.  Coincident to the closing of the 2012 Equity Financing, we also closed on the 2012 Debt Restructuring.  In connection therewith, we paid $2.75 million to Castlerigg Master Investment Ltd. (“Castlerigg”), and issued to Castlerigg 2,000,000 shares of common stock valued at $760,000 in full and complete satisfaction of the $5.5 million senior convertible note and all accrued interest then owing.  In accepting the cash and stock tendered, Castlerigg forgave $2,670,712, which included $680,816 in accrued but unpaid interest. In consideration of negotiating the 2012 Debt Restructuring, we paid to one of our placement agents compensation equal to 10% of the savings realized through the 2012 Debt Restructuring, which consisted of paying cash of $275,041 and issuing 586,164 shares of Broadcast common stock valued at $222,742. As a result of the forgoing we recognized a gain on settlement of debt of $2,173,032.

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In December 2011, we entered into a loan with 7 accredited individuals and entities under the terms of which we borrowed $1,300,000 to be used as working capital (“Bridge Loan”).  The Bridge Loan bears an interest rate of 18% per annum and had a maturity date of February 28, 2012, which was subsequently extended to the earlier of the date nine months from the original maturity date or the date we closed on an additional sale of its securities that resulted in gross proceeds to us of $12 million.  In consideration of the Bridge Loan, we granted to lenders of the Bridge Loan warrants with a five year term to purchase 357,500 shares of our common stock at an exercise price of $0.65 per share.  In consideration of the extension of the maturity date of the Bridge Loan, we granted the lenders Bridge Loan warrants with a six year term to purchase 247,500 shares of our common stock at an exercise price of $.35 per share.

In connection with the 2012 Equity Financing and under the terms of the SPA, two of the above described bridge lenders converted the principal balance of their portion of the bridge loan in the amount of $400,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing.  In addition, one other entity converted the amount owed by us for equipment purchases in the amount of $500,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing. The proceeds from these conversions were treated as funds raised with respect to the financing.

In connection with the 2012 Equity Financing and under the terms of the SPA, we agreed to prepare and file, within 60 days following the issuance of the securities, a registration statement covering the resale of the shares of common stock sold in the financing and the shares of common stock underlying certain warrants.  We filed as required and the registration statement was declared effective within 120 days following the date of the filing of the registration statement, with the result that we were not obligated to pay any penalties in connection with the registration statement.

During 2010 Broadcast sold 1,601,666 shares of its common stock to 19 separate investors at a purchase price of $1.00 per share together with a warrant to purchase additional shares of our common stock for $1.50 per share. The warrant expires at the end of three years. The net proceeds from the sale of these shares were used for general working capital purposes. Each of the investors was given the right to adjust their purchase in the event we sold additional equity at a price and on terms different from the terms on which their equity was purchased.  Upon completion of the 2010 Equity Financing described below, each of the investors converted their purchase to the terms contained in the 2010 Equity Financing.  This resulted in the issuance of an additional 2,083,374 shares of common stock and the cancellation of 2,495,075 warrants with an exercise price of $1.50 and the issuance of 2,079,222 warrants with an exercise price of $1.00 and an expiration date of five years from the conversion.

On December 24, 2010, we closed on an equity financing (the “2010 Equity Financing”) as well as a restructuring of its outstanding convertible indebtedness (the “2010 Debt Restructuring”).  The 2010 Equity Financing and the 2010 Debt Restructuring are described as follows.

We entered into a Placement Agency Agreement, dated December 17, 2010, with Philadelphia Brokerage Corporation (“PBC”), pursuant to which PBC agreed to act as our exclusive agent on a “best efforts” basis with respect to the sale of up to a maximum gross consideration of $15,000,000 of units of our securities, subject to a minimum gross consideration of $10,000,000.  The Units consisted of two shares of our common stock and one warrant to purchase a share of our common stock. We agreed to pay PBC a commission of 8% of the gross offering proceeds received by us, to issue PBC 40,000 shares of our common stock for each $1,000,000 raised, and to pay the reasonable costs and expenses of PBC related to the offering. We also agreed to pay PBC a restructuring fee in the amount of approximately $180,000 upon the closing of the 2010 Equity Financing and the simultaneous 2010 Debt Restructuring.

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Pursuant to the Placement Agency Agreement, we entered into Subscription Agreements dated December 23, 2010 with select institutional and other accredited investors for the private placement of 12,500,000 units of its securities.  The Subscription Agreements included a purchase price of $1.20 per unit, with each unit consisting of two shares of common stock and one warrant to purchase an additional share of common stock.  The warrants have a term of five years and an exercise price of $1.00 per share.

Net proceeds from the 2010 Equity Financing, after deducting the commissions and debt restructuring fees payable to PBC and the estimated legal, printing and other costs and expenses related to the financing, were approximately $13.5 million.  We used a portion of the net proceeds of the 2010 Equity Financing to pay down debt and the remainder was used for working capital.

On November 29, 2010, we entered into a bridge loan transaction with three accredited investors pursuant to which we issued unsecured notes in the aggregate principal amount of $1.0 million.  Upon the closing of the 2010 Equity Financing, the lenders converted the entire principal amount plus accrued interest into the same units offered in the 2010 Equity Financing and the proceeds from the bridge loan transaction were treated as funds raised with respect to the financing.

In connection with the 2010 Equity Financing and under the terms of the Subscription Agreements, we agreed to prepare and file and did file, within 60 days following the issuance of the securities, a registration statement covering the resale of the shares of common stock sold in the financing and the shares of common stock underlying the certain of the warrants.  The registration statement continues to be effective.

On December 24, 2010, we also closed on the 2010 Debt Restructuring.  In connection therewith, we (i) issued an Amended and Restated Senior Convertible Note in the principal amount of $5.5 million (the “Amended and Restated Note”) to Castlerigg Master Investment Ltd. (“Castlerigg”), (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the loan restructuring agreement under which the Amended and Restated Note and other documents were issued (the “Loan Restructuring Agreement”), and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest.

The Amended and Restated Note, dated December 23, 2010, was a senior, unsecured note that matured in three years from the closing and bore interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year’s interest of approximately $344,000 at the closing.

In connection with the 2010 Debt Restructuring, we amended the note with the holder of a $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013.  We also issued 150,000 shares to the holder of this note and a warrant to acquire up to 75,000 shares of our common stock as consideration to extend the term of the note. The warrant is exercisable for $0.90 per share and has a five year life.

Results of Operations for the Years Ended December 31, 2013 and December 31, 2012

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Net Sales

We realized net sales of $3,041,357 for the year ended December 31, 2013 compared to net sales of $7,523,624 for the year ended December 31, 2012 which represents a decrease of approximately 60% for the year.  The net decrease in revenues of $4,482,267 was primarily the result of a decrease of $2,358,225 in license fees and $1,806,823 in system sales and installation revenue, of which total $3,864,275 was a decrease in revenue from our largest customer.

Cost of Sales

The cost of revenues for the year ended December 31, 2013 aggregated $1,743,342 as compared to the cost of sales of $4,819,624 for the year ended December 31, 2012, which represents a decrease in cost of sales of 64%.  The decrease in cost of sales of $3,076,282 was primarily a result of our decreased activity in sales and installation resulting from the loss of our largest customer.  Costs of sales related to installation activity decreased by $1,916,683 and costs of employee expenses and other operations costs related to the reduction of staff and related expenses accounted for $694,202.  In addition, our depreciation expense decreased by $465,397, which resulted from the digital signage equipment used by our largest customer being fully depreciated.

Operating Expenses

We incurred total operating expenses of $3,612,259 for the year ended December 31, 2013 compared to total operating expenses of $8,767,686 for the year ended December 31, 2012.  The decrease of $5,155,427 was primarily due the loss of our largest customer and the discontinuance of our sales and marketing of our CodecSys product which resulted in a decrease in general and administrative expenses of $1,969,620, a decrease of $1,640,742 in our sales and marketing expenses, and a decrease of $1,207,210 in research and development expenses.

Our general and administrative expenses decreased $1,969,620 from $4,546,612 for the year ended December 31, 2012 to $2,576,992 for the year ended December 31, 2013.  The decrease of $936,115 in employee and related expenses from the reduction of staff accounted for the largest single decrease in expenses.  In addition, the loss of our largest customer and curtailing sales efforts of our CodecSys product directly resulted in temporary help expense decreasing by $360,546,consulting fees decreasing by $350,994, travel and tradeshow expenses decreasing by $286,566, and options and warrant expense decreasing by $160,088.  These decreases were partially offset by increased expenses for legal and other professional services of $307,582.

Our research and development expenses decreased by $1,207,210 primarily due to a reduction in staff and severely curtailing our development activities related to CodecSys.  Our employee and related costs decreased $489,941, outside consulting expenses decreased $136,446, travel and tradeshow expenses decreased  $194,503 , temporary help decreased  $153,318 for, and expenses related to the issuance of options and warrants decreased $98,213.

Our sales and marketing expenses for the year ended December 31, 2013 were $268,021 compared to sales and marketing expenses of $1,908,763 for the year ended December 31, 2012.  The decrease of $1,640,742 is due primarily to the termination of sales efforts for our CodecSys product.  The decrease of $875,776 in employee and related expenses reflected the reduction of staff, which along with a decrease of $456,559 in advertising, promotion and tradeshow expenses and a decrease of $207,795 in consulting fees reflected the decreased sales activity.

Interest Expense

We recorded a small increase in interest expense of $8,575 from interest of $1,642,922 in 2012 to $1,634,347 in 2013. The increase in interest expense resulted primarily from issuance of additional secured convertible promissory notes during 2013.  The principal balance increased from $3,050,000 at December 31, 2012 to $4,225,000 at December 31, 2013.  Of the total amount of interest expense incurred in 2013, $1,010,920 was for non cash expenses related to accretion on our unsecured convertible note that was extended in December 2010 to December 31, 2013 and for the secured convertible notes issued in 2012 and other related expenses incident to the notes.

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Net Income

We had a net loss of $2,288,390 for the year ended December 31, 2013 compared to net income of $1,602,824 for the year ended December 31, 2012.  The net decrease in net income of $3,891,214 resulted primarily from a decrease of $7,587,289 in the amount of derivative valuation gain recorded related to our convertible notes and investor warrants and that income from the extinguishment of debt of $1,578,914 in 2012 was not repeated in 2013.  These factors increased our net loss, but were partially offset by a reduction of $3,749,442 in loss from operations as explained above, a decrease in the issuance cost of warrants of $1,095,309 and a gain on the extinguishment of liabilities of $481,590.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2013:

	Payments Due
	Within  One Year		One Year to Three Years		Three Years to  Five Years		After Five Years		Total
Long-term debt obligations	$	--	$	--	$	--	$	--	$	--
Capital lease obligations		--		--		--		--		--
Operating lease obligations		1,965		--		--		--		1,965
Purchase obligations		--		--		--		--		--
Other obligations		5,245,000		--		--		--		5,245,000
Total contractual obligations	$	5,246,965	$	--	$	--	$	--	$	5,246,965

Liquidity and Capital Resources

At December 31, 2013, we had cash of $215,371, total current assets of $300,709, total current liabilities of $7,197,395 and total stockholders' deficit of $6,655,301.  Included in current liabilities is $5,245,000 related to the current portion of notes payable and other debt obligations.

Broadcast experienced negative cash flow used in operations during the year of $1,447,385 compared to negative cash flow used in operations for the year ended December 31, 2012 of $3,362,785.  Although that represents a decrease in cash used for operations of $1,915,400, the cash used decreased only because we had lost approximately 90% of our business.  During 2013 the decrease in negative cash flow was realized primarily through a reduction in the number of employees from 24 to 8, as well as additional expense reduction actions including reducing sales and general and administrative expenses incident to losing our largest customer and curtailing all sales and marketing and development expenditures for our CodecSys product.

Our audited consolidated financial statements for the year ended December 31, 2013 contain a “going concern” qualification.  As discussed in Note 3 of the Notes to Consolidated Financial Statements, we have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  Because of these conditions, our independent auditors have raised substantial doubt about our ability to continue as a going concern.

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The negative cash flow was met by cash reserves from additional proceeds of the issuance of the 2012 Convertible Debt in the total amount of $1,175,000, which included $750,000 of accounts receivable financing that was converted to the 2012 Convertible Debt. Because we expect to continue to experience negative operating cash flow as long as we continue our current limited operations, we need to secure additional funding or complete the proposed merger with Wireless Ronin.  We are actively only pursuing one potential digital signage customer to replace lost revenues.

The current recession and market conditions have had substantial impacts on the global and national economies and financial markets.  These factors, together with soft credit markets, have slowed business growth and generally made potential funding sources more difficult to access.  We continue to be affected by prevailing economic and market conditions, which present considerable risks and challenges to it.

Because we have not been successful in deploying our CodecSys technology with customers sufficient to achieve material revenues and are finding it difficult to raise additional investment capital, we determined that we should seek an alternative to continuing to commercialize CodecSys by ourselves.  In that connection we sought a merger partner that has compatible video broadcasting products and services, with which we could integrate our CodecSys encoding system.  In January 2013 we entered into an Agreement of Merger and Reorganization with All Digital, Inc., a Nevada corporation.  In November of 2013, the Board determined that the merger was unlikely to be consummated in a timely manner, if at all, and terminated the proposed merger agreement.  Subsequent to the termination of the January 2013 merger agreement, through our investment banker, we pursued opportunities to merge with a company that services the enterprise market with products that are compatible with our digital signage media management software and our CodecSys technology.  In that connection, on March 6, 2014 we entered into an Agreement of Merger and Reorganization with Wireless Ronin Technologies, Inc. (“Ronin”).  The agreement is subject to various terms and conditions customary in this type of a transaction, including approval of our shareholders, the conversion of all of our note indebtedness to common stock and not having more than $250,000 of our outstanding liabilities on the date of merger and the effectiveness of a registration statement to be filed by Wireless Ronin registering the securities to be issued in the transaction.  All our secured and unsecured notes are convertible to common stock at $.25 per share, but there is no assurance that the noteholders would agree to a conversion at such a rate given our current trading price or that they would convert at all.  If the merger is completed, we would be a wholly owned subsidiary of Wireless Ronin and all the equity securities of Broadcast would be converted to securities of Wireless Ronin.  All of our convertible notes, both secured and unsecured, are currently due and payable.  We are in discussions with the debt holders concerning an extension agreement allowing us to complete the proposed merger.

To fund operations, we engaged our investment banker to raise funds through the issuance of convertible promissory notes.  We anticipated issuing promissory notes with a principal amount of up to $5,000,000 (“2012 Convertible Debt Offering”) which were originally due and payable on or before July 13, 2013, but which was extended to December 31, 2013.  As of December 31, 2013, we had issued notes with an aggregate principal value of $4,225,000 as explained below.  The notes bear interest at 12% per annum and may be convertible to common stock at a $.25 per share conversion price.  We also granted holders of the notes warrants with a five year life to acquire up to 200,000 shares of our common stock for each $100,000 of principal amount of the convertible notes.  The notes are secured by all of our assets with the exception of the equipment and receivables secured by the equipment lessor for equipment used in providing services for our largest customer’s digital signage network.  On July 13, 2012, we entered into a note and warrant purchase and security agreement with individual investors and broke escrow on the initial funding under the 2012 Convertible Debt Offering, the principal amount of which was $1,900,000, which included the conversion of $900,000 of previously issued short term debt (See Bridge Loan described below) to the 2012 Convertible Debt Offering, which extinguished the Bridge Loan.  We realized $923,175 of cash in the initial closing, issued warrants to acquire 3,800,000 shares of our common stock and paid $76,825 in investment banking fees and costs of the offering.  We have continued sales of convertible debt under the 2012 Convertible Debt Offering and as of January 31, 2013 have issued additional short term debt with a principal amount of $1,575,000, from which we realized cash of $1,526,624 after payment of investment banking fees of $48,376.  We have, however, paid no investment banking fees on sales of our 2012 Convertible Debt Offering since August 2012 and do not anticipate paying additional investment banking fees for the 2012 Convertible Debt Offering. We have issued warrants to acquire an additional 6,950,000 shares of our common stock.

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On March 16, 2012, we closed on an equity financing (the “2012 Equity Financing”) as well as a restructuring of our outstanding senior convertible indebtedness (the “2012 Debt Restructuring”) resulting in complete satisfaction our senior indebtedness.

We entered in to an Engagement Agreement, dated October 28, 2011, with MDB Capital Group, LLC(“MDB”), pursuant to which MDB agreed to act as our exclusive agent on a “best efforts” basis with respect to the sale of up to a maximum gross consideration of $6,000,000, subsequently verbally increased to $10,000,000, of our securities, subject to a minimum gross consideration of $3,000,000.  We agreed to pay to MDB a commission of 10% of the gross offering proceeds received by us, to grant to MDB warrants to acquire up to 10% of the shares of ours common stock issued in the financing, and to pay the reasonable costs and expenses of MDB related to the offering.

Pursuant to the Engagement Agreement, we entered into a Securities Purchase Agreement (“SPA”) dated March 13, 2012 with select institutional and other accredited investors for the private placement of 27,800,000 units of its securities.  The SPA included a purchase price of $0.25 per unit, with each unit consisting of one share of common stock and two forms of Warrant: (1) The “A” Warrant grants the investors the right to purchase an additional share of common stock for each two shares of common stock purchased, for a term of six years and at an exercise price of $.35 per share; and (2) The “B” Warrant, which has now been extinguished as described below, would not have been exercisable unless and until the occurrence of a future issuance of stock at less than $0.25 per share, but, in the event of such issuance, granted the investors the right to acquire additional shares at a price of $0.05 to reduce the impact of the dilution caused by such issuance, but in no event were the number of shares to be issued under the B Warrant to cause us to exceed the number of authorized shares of our common stock.  The holders of the B Warrants agreed in December 2012 to amend the terms of the B Warrant to reduce the amount of subsequent financing required to extinguish the B Warrants with the result that the B Warrants have now been extinguished.

Proceeds from the 2012 Equity Financing, before deducting the commissions and the legal, printing and other costs and expenses related to the financing, were approximately $6,950,000.  Coincident to the closing of the 2012 Equity Financing, we also closed on the 2012 Debt Restructuring.  In connection therewith, we paid $2.75 million to Castlerigg Master Investment Ltd. (“Castlerigg”), and issued to Castlerigg 2,000,000 shares of common stock valued at $760,000 in full and complete satisfaction of the $5.5 million senior convertible note and all accrued interest then owing.  In accepting the cash and stock tendered, Castlerigg forgave $2,670,712, which included $680,816 in accrued but unpaid interest. In consideration of negotiating the 2012 Debt Restructuring, we paid to one of our placement agents compensation equal to 10% of the savings realized through the 2012 Debt Restructuring, which consisted of paying cash of $275,041 and issuing 586,164 shares of Broadcast common stock valued at $222,742. As a result of the forgoing we recognized a gain on settlement of debt of $2,173,032.

In December 2011, we entered into a loan with 7 accredited individuals and entities under the terms of which we borrowed $1,300,000 to be used as working capital (“Bridge Loan”).  The Bridge Loan bears an interest rate of 18% per annum and had a maturity date of February 28, 2012, which was subsequently extended to the earlier of the date nine months from the original maturity date or the date we closed on an additional sale of its securities that resulted in gross proceeds to us of $12 million.  In consideration of the Bridge Loan, we granted to lenders of the Bridge Loan warrants with a five year term to purchase 357,500 shares of our common stock at an exercise price of $0.65 per share.  In consideration of the extension of the maturity date of the Bridge Loan, we granted the lenders Bridge Loan warrants with a six year term to purchase 247,500 shares of our common stock at an exercise price of $.35 per share.

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In connection with the 2012 Equity Financing and under the terms of the SPA, two of the above described bridge lenders converted the principal balance of their portion of the bridge loan in the amount of $400,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing.  In addition, one other entity converted the amount owed by us for equipment purchases in the amount of $500,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing. The proceeds from these conversions were treated as funds raised with respect to the financing.

During 2010 we sold 1,601,666 shares of its common stock to 19 separate investors at a purchase price of $1.00 per share together with a warrant to purchase additional shares of our common stock for $1.50 per share. The warrant expires at the end of three years. The net proceeds from the sale of these shares were used for general working capital purposes. Each of the investors was given the right to adjust their purchase in the event we sold additional equity at a price and on terms different from the terms on which their equity was purchased.  Upon completion of the 2010 Equity Financing described below, each of the investors converted their purchase to the terms contained in the 2010 Equity Financing.  This resulted in the issuance of an additional 2,083,374 shares of common stock and the cancellation of 2,495,075 warrants with an exercise price of $1.50 and the issuance of 2,079,222 warrants with an exercise price of $1.00 and an expiration date of five years from the conversion.

On December 24, 2010, we closed on an equity financing (the “2010 Equity Financing”) as well as a restructuring of its outstanding convertible indebtedness (the “2010 Debt Restructuring”).  The 2010 Equity Financing and the 2010 Debt Restructuring are described as follows.

We entered into a Placement Agency Agreement, dated December 17, 2010, with Philadelphia Brokerage Corporation (“PBC”), pursuant to which PBC agreed to act as our exclusive agent on a “best efforts” basis with respect to the sale of up to a maximum gross consideration of $15,000,000 of units of our securities, subject to a minimum gross consideration of $10,000,000.  The Units consisted of two shares of our common stock and one warrant to purchase a share of our common stock. We agreed to pay PBC a commission of 8% of the gross offering proceeds received by us, to issue PBC 40,000 shares of our common stock for each $1,000,000 raised, and to pay the reasonable costs and expenses of PBC related to the offering. We also agreed to pay PBC a restructuring fee in the amount of approximately $180,000 upon the closing of the 2010 Equity Financing and the simultaneous 2010 Debt Restructuring.

Pursuant to the Placement Agency Agreement, we entered into Subscription Agreements dated December 23, 2010 with select institutional and other accredited investors for the private placement of 12,500,000 units of its securities.  The Subscription Agreements included a purchase price of $1.20 per unit, with each unit consisting of two shares of common stock and one warrant to purchase an additional share of common stock.  The warrants have a term of five years and an exercise price of $1.00 per share.

Net proceeds from the 2010 Equity Financing, after deducting the commissions and debt restructuring fees payable to PBC and the estimated legal, printing and other costs and expenses related to the financing, were approximately $13.5 million.  We used a portion of the net proceeds of the 2010 Equity Financing to pay down debt and the remainder was used for working capital.

On November 29, 2010, we entered into a bridge loan transaction with three accredited investors pursuant to which we issued unsecured notes in the aggregate principal amount of $1.0 million.  Upon the closing of the 2010 Equity Financing, the lenders converted the entire principal amount plus accrued interest into the same units offered in the 2010 Equity Financing and the proceeds from the bridge loan transaction were treated as funds raised with respect to the financing.

On December 24, 2010, we also closed on the 2010 Debt Restructuring.  In connection therewith, we (i) issued an Amended and Restated Senior Convertible Note in the principal amount of $5.5 million (the “Amended and Restated Note”) to Castlerigg Master Investment Ltd. (“Castlerigg”), (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the loan restructuring agreement under which the Amended and Restated Note and other documents were issued (the “Loan Restructuring Agreement”), and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest.

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The Amended and Restated Note, dated December 23, 2010, was a senior, unsecured note that matured in three years from the closing and bore interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year’s interest of approximately $344,000 at the closing.

In connection with the 2010 Debt Restructuring, we amended the note with the holder of a $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013.  We also issued 150,000 shares to the holder of this note and a warrant to acquire up to 75,000 shares of our common stock as consideration to extend the term of the note. The warrant is exercisable for $0.90 per share and has a five year life.

During 2010, we entered into two Accounts Receivable Purchase Agreements with one individual for an aggregate amount of $775,000. In these agreements, we pledged certain outstanding accounts receivable in exchange for an advance payment and a commitment to remit to the purchaser the amount advanced upon collection from Broadcast’s customer.  Terms of the first agreement under which we were advanced $275,000 include a 3% discount with a 3% interest fee for every 30 days the advances remain outstanding.  Terms of the second agreement under which we were advanced $500,000 include a 10% discount with a 0.5% interest fee for every 30 days the advances remain outstanding.

During 2010, we entered into a $500,000 line of credit for equipment financing to purchase equipment for our largest customer’s digital signage network.  The terms of the line of credit include a 3% interest fee for every 30 days the advances on the line of credit remain outstanding.  We received total advances on the line of credit of $500,000 and subsequent to the completion of the Equity Financing repaid the line of credit.  We used the proceeds to purchase and install the equipment at our customer’s locations.

In August 2009, we entered into a sale and leaseback agreement which financed the purchase and installation of equipment to retrofit our new customer’s approximately 2,100 retail sites with our digital signage product offering.  We received approximately $4,100,000 from the sale of the equipment in exchange for making lease payments over a 36 month period of approximately $144,000 per month.

On December 24, 2007, we entered into a securities purchase agreement in connection with its senior secured convertible note financing in which it raised $15,000,000 (less $937,000 of prepaid interest).  We used the proceeds from this financing to support its CodecSys commercialization and development and for general working capital purposes.  The senior secured convertible note has been retired as described above.  During 2010, we capitalized interest of $1,491,161 related to the senior secured convertible note.

On November 2, 2006, we closed on a convertible note securities agreement dated October 28, 2006 with an individual that provided we issue to the convertible note holder (i) an unsecured convertible note in the principal amount of $1,000,000 representing the funding received by us from an affiliate of the convertible note holder on September 29, 2006, and (ii) four classes of warrants (A warrants, B warrants, C warrants and D warrants) which gave the convertible note holder the right to purchase a total of 5,500,000 shares of our common stock.  The holder of the note no longer has any warrants to purchase any of our stock.  The unsecured convertible note was due October 16, 2009 and was extended to December 22, 2010 and the annual interest rate was increased to 8%, payable semi-annually in cash or in shares of our common stock if certain conditions are satisfied  The unsecured convertible note was convertible into shares of common stock originally at a conversion price of $1.50 per share, convertible any time during the term of the note, and is subject to standard anti-dilution rights, pursuant to which the note is now convertible at a conversion price of $.25 per share.  The term of the convertible note has been extended and now is due December 31, 2013.  In connection with the extension of the note, Broadcast issued to the holder of the note 150,000 shares of common stock and a five year warrant to acquire up to 75,000 shares of our common stock at an exercise price of $.90 per share to extend the term of the note.  In addition, we committed to pay accrued interest due on the convertible note through the issuance of common stock and warrants on the same terms as the Equity Financing.

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The conversion feature and the prepayment provision of our $5.5 million Amended and Restated Note and its $1.0 million unsecured convertible note have been accounted for as embedded derivatives and valued on the respective transaction dates using a Black-Scholes pricing model.  The warrants related to the $1.0 million unsecured convertible notes have been accounted for as derivatives and were valued on the respective transaction dates using a Black-Scholes pricing model as well.  At the end of each quarterly reporting date, the values of the embedded derivatives and the warrants are evaluated and adjusted to current market value.  The conversion features of the convertible notes and the warrants may be exercised at any time and, therefore, have been reported as current liabilities.  Prepayment provisions contained in the convertible notes limit Broadcast’s ability to prepay the notes in certain circumstances.  For all periods since the issuance of the senior secured convertible note and the unsecured convertible note, the derivative values of the respective prepayment provisions have been nominal and have not had any offsetting effect on the valuation of the conversion features of the notes.  For a description of the accounting treatment of the senior secured convertible note financing, see Note 7 to the Notes to Condensed Consolidated Financial Statements (Unaudited) included elsewhere herein.

On March 21, 2011, we converted $784,292 of our short-term debt into equity through the issuance of common stock and warrants to two lenders at the same unit pricing as the 2010 Equity Financing. In consideration of converting the short- term loans on the basis of $1.20 for two shares of common stock plus one warrant at an exercise price of $1.00, we issued 1,307,153 shares of common stock and warrants to acquire up to 653,576 shares of common stock, which warrants have a five year term and are exercisable at $1.00 per share.  Our objective for converting the short-term debt into equity was to conserve cash.

Our monthly operating expenses exceed our monthly net sales by approximately $50,000 per month at December 31, 2013.  The foregoing estimates, expectations and forward-looking statements are subject to change as we make strategic operating decisions from time to time and as our expenses and sales fluctuate from period to period.

The amount of our operating deficit could decrease or increase significantly depending on strategic and other operating decisions, thereby affecting our need for additional capital. We expect that our operating expenses will continue to outpace our net sales until we are able to generate additional revenue.  Our business model contemplates that sources of additional revenue include (i) sales from private communication network services, (ii) sales resulting from new customer contracts, and (iii) sales, licensing fees and/or royalties related to commercial applications of CodecSys technology, and (iv) operational efficiencies to be obtained through the merger with Wireless Ronin.

Our long-term liquidity is dependent upon execution of our business model and the realization of additional revenue and working capital as described above, and upon capital needed for continued commercialization and development of the CodecSys technology.  Commercialization and future applications of the CodecSys technology are expected to require additional capital for the foreseeable future.  The amount required will be determined based on specific opportunities and available funding.

To date, we have met our working capital needs primarily through funds received from sales of common stock and from convertible debt financings.  Until our operations become profitable, we will continue to rely on proceeds received from external funding.  We expect additional investment capital may come from (i) additional private placements of common stock with existing and new investors; and (ii) the private placement of other securities with institutional investors similar to those institutions that have provided funding in the past.

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Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  This Update indicates that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset except in circumstances where a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction. This Update is effective for years beginning after December 15, 2013 for public companies and after December 15, 2014 for private companies. This Update didn’t have a significant impact on its financials.

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815) – Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.  This Update permits the use of the Fed Funds Effective Swap Rate (OIS) to be used as a US benchmark interest rate for hedge accounting purposes. Furthermore, the Update eliminates the restriction on using different benchmark rate for similar hedges. This Update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company doesn’t expect this Update to have a significant impact on its financials.  However, if any new hedges are entered into, the update will be considered when determining which benchmark rate to use.

In July 2013, the FASB issued ASU 2013-09, Fair Value Measurement (Topic 820) – Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04.  This Update defers indefinitely required disclosures about significant unobservable inputs used in Level 3 measurements for investments held by a nonpublic employee benefit plan in its plan sponsor’s own nonpublic entity equity securities. This Update is effective upon issuance. The Company doesn’t expect this Update to impact its financials since it does not issue a financial statement for nonpublic employee benefit plans.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements required by this Item 8 begin on Page F-1 and are located following the signature page.  All information which has been omitted is either inapplicable or not required.

Report of Independent Registered Public Accounting Firm for the years ended December 31, 2013 and 2012	F-1
Consolidated Balance Sheets as of December 31, 2013 and December 31, 2012	F-2
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012	F-3
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2012	F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-5
Notes to Consolidated Financial Statements	F-6

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining effective disclosure controls and procedures,  as  defined  under  Rules  13a-15(e)  and  15d-15(e)  of  the  Exchange  Act.  As of December 31, 2013, an evaluation was performed, under the supervision and with the participation of management, including our president and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our president officer and chief financial officer concluded that our disclosure controls and procedures, as of December 31, 2013, were effective in ensuring that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and in ensuring that such information is accumulated and communicated to our management, including our president and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our system of internal control over financial reporting within the meaning of Rules 13a-15(f) and 15d-15(f) of the Exchange Act is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of our published financial statements in accordance with U.S. generally accepted accounting principles.

Our management, including the president and the chief financial officer, assessed the effectiveness of our system of internal control over financial reporting as of December 31, 2013.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.  Based on our assessment, we believe that, as of December 31, 2013, our system of internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in our procedures related to internal control over financial reporting for the year ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, such control.  However, the accounting staff has been reduced to a staff of two persons, which has impacted our ability to maintain the same level of segregation of duties as employed in the past.

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Limitations on Controls and Procedures

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, any system of disclosure controls and procedures or internal control over financial reporting may not 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.

The foregoing limitations do not qualify the conclusions set forth above by our president and our chief financial officer regarding the effectiveness of our disclosure controls and procedures and our internal control over financial reporting as of December 31, 2013.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the names, ages and positions of our executive officers and directors:

Name	Age	Position
William Boyd	73	Chairman of the Board
Rodney M. Tiede	54	President and Director
James E. Solomon	64	Chief Financial Officer and Secretary
Donald Harris	62	Director
Steven Ledger	55	Director

William Boyd has been a director since November 2007.  Mr. Boyd has served as the Chairman of the Board of Agility Recovery Solutions, a privately held disaster recovery and business continuity company since 2006.  He was CEO of Muzak Corporation from 1996 to 2000 and continued with Muzak in an advisory executive position and on the Board until August 2006.  He became associated with Muzak Corporation in 1968 as a sales representative and continued as a manager and franchise owner until he became CEO in 1996.  Mr. Boyd received a Bachelor of Arts degree in political science in 1963 from Beloit College in Wisconsin.  Mr. Boyd’s CEO level experience with Muzak and his overall experience in satellite networks, management, operations and financing matters are qualities and expertise that were determined to be particularly useful as a member of our Board.

Rodney M. Tiede has been our chief executive officer, president and a director since the acquisition of Broadcast International, or BI, in October 2003 until July 16, 2012, at which time he ceased to serve as our chief executive officer.  From August 2000 to July 2012, Mr. Tiede was the president, chief executive officer and a director of BI, a wholly-owned subsidiary and since July 2012 he has continued to serve as the president and a director of BI.  From April 2003 to the present, Mr. Tiede has also been the chief executive officer and a director of Interact Devices, Inc., or IDI, a consolidated subsidiary.  From November 1987 to August 2000, Mr. Tiede was employed as director of sales, vice president and general manager of Broadcast International, Inc., the predecessor of BI.  Mr. Tiede received a Bachelor of Science Degree in Industrial Engineering from the University of Washington in 1983.  Mr. Tiede has been a part of our operations for more than 20 years and as a result has significant knowledge, insight and understanding that he provides as a director.

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James E. Solomon has served as Chief Financial Officer and Secretary since September 2008.  From 1995 to January 2002, Mr. Solomon was a business consultant primarily for emerging growth companies.  In January 2002, he formed Corporate Development Services, Inc., a business consulting firm, and has served as President since its formation.  From June 1993 to the present, Mr. Solomon has been an adjunct professor at the Graduate School of Business at the University of Utah.  Mr. Solomon served on the Board of Directors of Nevada Chemicals, Inc., a public company, until October 2008, as well as several privately-held companies. Mr. Solomon received a Bachelor of Science Degree in Finance from the University of Utah in 1972.  Mr. Solomon became a Certified Public Accountant in 1974.  Mr. Solomon’s experience in finance, accounting and business consulting, together with his role as our CFO and prior public company directorship, provide Mr. Solomon with expertise enabling critical input to our Board decision-making process.

Donald A. Harris was appointed to Broadcast’s board of directors in June 2012.  He has been President of 1162 Management, the General Partner of 5 Star Partnership, a private equity firm, since June 2006.  Mr. Harris has been President and Chief Executive Officer of UbiquiTel Inc., a telecommunications company organized by Mr. Harris and other investors, since its inception in September, 1999 and also its Chairman since May 2000. Mr. Harris served as the President of Comcast Cellular Communications Inc. from March 1992 to March 1997.  Mr. Harris received a Bachelor of Science degree from the United States Military Academy and an MBA from Columbia University in. Mr. Harris’s experience in the telecommunications industry and his association with private equity funding will be valuable to us.

Steven Ledger has been a director since May 2011.  He is the founder and from September 2002 to the present has been the Managing Partner at Tamalpais Partners LLC, a privately held company that acts as a principal investor in, and advisor to, emerging growth companies.  From August 1999 to December 2002 he served as co-founder and managing partner of eCompanies Venture Group, a privately held company that managed an Internet focused, strategic venture capital fund whose investors included Sprint, Disney, Earthlink and Sun America. From January 1994 to December 1999, Mr. Ledger served as the co-founder and managing partner of Storie Partners, L.P., a technology focused investment fund that provided early lead investment capital to Earthlink Networks and SeeBeyond Technologies Corporation (acquired by Sun Microsystems). From September 1989 to October 1993 Mr. Ledger was a managing partner with Kayne Anderson Investment Management. Mr. Ledger graduated from the University of Connecticut in 1982 with a BA in Economics.  Mr. Ledger’s experience with technology companies and their financing was deemed valuable to us.

Our directors generally serve until the next annual or special meeting of shareholders held for the purpose of electing directors.  Our officers generally serve at the discretion of the board of directors.  One of our directors, Mr. Tiede, is an employee who serves as our president.  The employment service of Mr. Tiede and Mr. Solomon are governed by the terms of their respective employment contracts.  See “Employment Contracts” in Item 11 below.

As noted above, Mr. Tiede has served as an officer and director of BI since August 2000 and as an officer and director of Interact Devices, Inc. (“IDI”) since April 2003.  During 2001 and 2002, BI entered into various licensing agreements with IDI and purchased shares of convertible preferred stock of IDI.  Management of BI determined that the CodecSys technology being developed by IDI represented a significant opportunity for BI and its future business prospects.  By April 2003, the financial condition of IDI had deteriorated significantly and BI provided a line of credit to IDI to sustain its operations.  At such time, BI also assumed operational control of IDI.  By October 2003, management of BI realized that IDI could not survive on its own notwithstanding the financial support provided by BI.  Accordingly, IDI filed for bankruptcy protection under chapter 11 of the federal bankruptcy code on October 23, 2003.  Over the next seven months, IDI continued its limited operations and designed a bankruptcy plan of reorganization which was confirmed on May 18, 2004.  Under the plan of reorganization, we issued shares of our common stock to creditors of IDI and assumed certain liabilities of IDI in exchange for shares of the common stock of IDI representing majority ownership of IDI.  Since confirmation of the plan of reorganization, the operations of IDI have been consolidated with ours.

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Board and Committee Matters

We maintain an audit committee of the board and a compensation committee of the board, each of which is discussed below.  We have not established a nominating committee of the board.  Our entire board of directors participates in the selection and nomination of candidates to serve as directors.  Our board has determined that three of our current directors are “independent” under the definition of independence in the Marketplace Rules of the NASDAQ listing standards, but that Mr. Tiede, our chief executive officer and president is not independent and Mr. Ledger, who serves as a consultant to the Company, is also not independent.

We do not have a formal policy concerning shareholder recommendations of candidates for board of director membership.  Our board views that such a formal policy is not necessary at the present time given the board’s willingness to consider candidates recommended by shareholders.  Shareholders may recommend candidates by writing to our Secretary at our principal offices: 7050 Union Park Avenue, Suite 600, Salt Lake City, Utah 84047, giving the candidate’s name, contact information, biographical data and qualifications.  A written statement from the candidate consenting to be named as a candidate and, if nominated and elected, to serve as a director should accompany any such recommendation.  Shareholders who wish to nominate a director for election are generally advised to submit a shareholder proposal no later than December 31 for the next year’s annual meeting of shareholders.

Audit Committee and Financial Expert

Our audit committee currently includes only Mr. Boyd.  Mr. Boyd serves as chairman of the audit committee.  The functions of the audit committee include engaging an independent registered public accounting firm to audit our annual financial statements, reviewing the independence of our auditors, the financial statements and the auditors’ report, and reviewing management’s administration of our system of internal control over financial reporting and disclosure controls and procedures.  The board of directors has adopted a written audit committee charter.  A current copy of the audit committee charter is available to security holders on our website at www.brin.com.  Our board has determined that each of the members of the audit committee is “independent” under the definition of independence in the Marketplace Rules of the NASDAQ listing standards.

Our board of directors has determined that Mr. Boyd meets the requirements of an “audit committee financial expert” as defined in applicable SEC regulations.

Compensation Committee

Our compensation committee currently includes only Mr. Boyd.  Mr. Boyd serves as chairman of the compensation committee.  The functions of the compensation committee include reviewing and approving corporate goals relevant to compensation for executive officers, evaluating the effectiveness of our compensation practices, evaluating and approving the compensation of our chief executive officer and other executives, recommending compensation for board members, and reviewing and making recommendations regarding incentive compensation and other employee benefit plans.  The board of directors has adopted a written compensation committee charter.  A current copy of the compensation committee charter is available to security holders on our website at www.brin.com.  Our board has determined that each of the members of the compensation committee is “independent” under the definition of independence in the Marketplace Rules of the NASDAQ listing standards.

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Communication with the Board

We have not, to date, developed a formal process for shareholder communications with the board of directors.  We believe our current informal process, in which any communication sent to the board of directors, either generally or in care of the chief executive officer, secretary or other corporate officer or director, is forwarded to all members of the board of directors, has served the board’s and the shareholders’ needs.

Conflicts of Interests

On an annual basis, each director and executive officer is obligated to complete a director and officer questionnaire  that requires disclosure of any transactions with our company, including related person transactions reportable under SEC rules, in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest.  Under our company’s standards of conduct for employees, all employees, including the executive officers, are expected to avoid conflicts of interest.  Pursuant to our code of ethics for the chief executive officer and senior finance officers (as discussed below), such officers are prohibited from engaging in any conflict of interest unless a specific exception has been granted by the board.  All of our directors are subject to general fiduciary standards to act in the best interests of our company and our shareholders.  Conflicts of interest involving an executive officer or a director are generally resolved by the board.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities.  Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, during the year ended December 31, 2013, our directors, executive officers and greater than 10% shareholders complied with all Section 16(a) filing requirements, although on two occasions filings for all of our directors’ filings were late.

Code of Ethics

We have adopted a code of ethics for our principal executive officer, principal financial officer, controller, or persons performing similar functions.  A copy of the code of ethics is included on our website at www.brin.com.

ITEM 11.  EXECUTIVE COMPENSATION

Overview of Compensation Program

Throughout this section, the individuals who served as our chief executive officer and/or president and chief financial officer during 2013 are collectively referred to as the “named executive officers.”

Our compensation committee has overall responsibility to review and approve our compensation structure, policy and programs and to assess whether the compensation structure establishes appropriate incentives for management and employees.  The compensation committee annually reviews and determines the salary and any bonus and equity compensation that may be awarded to our chief executive officer and/or president, or CEO/President and its chief financial officer, or CFO.  The compensation committee oversees the administration of our long-term incentive plan and employee benefit plans.

The compensation committee’s chairman regularly reports to our board on compensation committee actions and recommendations.  The compensation committee has authority to retain, at its expense, outside counsel, experts, compensation consultants and other advisors as needed.

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2013 and 2021 Company Performance.  Because of the stage of our development, the compensation committee looks at various factors in evaluating the progress we have made and the services provided by the named executive officers.  In considering executive compensation, the compensation committee noted certain aspects of our financial performance in 2013 and 2012 including the following:

· Operations.  Our revenues decreased approximately 60% from $7,523,624 in 2012 to $3,041,357in 2013, which was principally the result of losing our largest customer in May 2013.  This customer had more retail locations than all of our other existing customers combined.  We were not able to replace the revenues lost from this customer.

· CodecSys Milestones.   Because of our inability to sell the CodecSys technology, sales and development activities on the CodecSys product line was terminated.

· Our Executive officers were involved in trying to complete all of the conditions of the AllDigital merger as a merger was deemed essential for the continued existence of the Company going forward.

Compensation Philosophy. Our general compensation philosophy is designed to link an employee’s total cash compensation with our performance, the employee’s department goals and individual performance.  Given our stage of operations and limited capital resources, it is subject to various financial restraints in its compensation practices.  As an employee’s level of responsibility increases, there is a more significant level of variability and compensation at risk.  The compensation committee believes linking incentive compensation to our performance creates an environment in which employees are stakeholders in our success and, thus, benefits all stockholders.

Executive Compensation Policy.  Our executive compensation policy is designed to establish an appropriate relationship between executive pay and annual performance, long-term growth objectives, individual performance of the executive officer and ability to attract and retain qualified executive officers.  The compensation committee attempts to achieve these goals by integrating competitive annual base salaries with bonuses based on corporate performance and on the achievement of specified performance objectives, and to a lesser extent, awards through our long-term incentive plan.  The compensation committee believes that cash compensation in the form of salary and bonus provides executives with short-term rewards for success in operations.  The compensation committee also believes our executive compensation policy and programs do not promote inappropriate risk-taking behavior by executive officers that could threaten the value of the company.

Role of Executive Officers in Compensation Decisions

The compensation committee makes all compensation decisions for the named executive officers and approves recommendations regarding equity awards to all other senior management personnel. The CEO/President annually reviews the performance of the CFO and other senior management.  The conclusions reached and recommendations based on these reviews, including with respect to salary adjustments and annual award amounts, are presented to the compensation committee.  The compensation committee is charged with the responsibility of ensuring a consistent compensation plan throughout the company and providing an independent evaluation of the proposed adjustments or awards at all levels of management.  As such, the compensation committee has determined that it have the discretion to modify or adjust any proposed awards and changes to management compensation to be able to satisfy these responsibilities.

2013 Executive Compensation Components

For the fiscal year ended December 31, 2013, the principal component of compensation for the named executive officers were:

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· base salary

Base Salary.  The compensation committee determined that the executive officers had been compensated fairly relative to similarly situated executives, and due to the changes in the Company’s business segments during the year mandated decreases in 2013 to the base salary of the CEO/President and CFO.  In determining the base salary of each executive officer, the compensation committee relied on publicly available information gathered by the compensation committee related to salaries paid to executive officers of similarly situated small public companies.

Performance-based Incentive Compensation.  None

Long-term Equity Incentive Compensation.  None

All awards made under our equity incentive plan are made at the market price at the time of the award.  Annual awards of stock options to executives are made at the discretion of the compensation committee at such times throughout the year at it deems most desirable.  Newly hired or promoted executives, other than executive officers, generally receive their award of stock options on the first business day of the month following their hire or promotion.  Grants of stock options to newly hired executive officers who are eligible to receive them are made at the next regularly scheduled compensation committee meeting following their hire date.

Perquisites and Other Personal Benefits.  We provide no perquisites to its named executive officers other than matching 401(k) contributions described below and other group benefits offered generally to all salaried employees.

Retirement and Related Plans.  We maintain a 401(k) profit sharing plan for all non-temporary employees.  Employee contributions are matched by the Company in an amount of 100% of employee contributions up to 3% of employee salaries and 50% of employee contributions up to an additional 2% of their salaries. Participants vest immediately in the company matching contributions.

Compensation of Chief Executive Officer/President.  For the fiscal year ended December 31, 2013, we paid Rodney M. Tiede, CEO/President, a salary of $141,538, representing a decrease from a salary of $225,690 paid to Mr. Tiede in the fiscal year ended December 31, 2012. The compensation committee met with Mr. Tiede twice during 2013 to review his performance and individual objectives and goals versus results achieved.  The compensation committee reviewed all components of the CEO’s compensation, including salary, bonus, and equity incentive compensation, and under potential severance and change-in-control scenarios.  Mr. Tiede’s compensation was determined to be reasonable and not excessive by the compensation committee based on compensation surveys for chief executive officers of small public companies.  The compensation committee also considered the continuing economic recession and market conditions in determining the compensation of the CEO/President or other management personnel.

In April 2004, the Company and Mr. Tiede entered into an employment agreement covering Mr. Tiede’s employment for a term commencing upon the execution thereof and continuing until December 31, 2006.  The contract continues for additional terms of one year each until terminated by us.  The agreement calls for payment of a gross annual salary of not less than $120,000, payable in equal bi-weekly installments for the year ended December 31, 2004, subject to such increases as the board of directors may approve.  The employment agreement further provides that Mr. Tiede shall receive a performance bonus on an annual basis equal to up to 100% of his base salary for the fiscal year then ended, the exact percentage to be determined in the sole discretion of the board of directors (or the compensation committee thereof) based upon an evaluation of the performance of Mr. Tiede during the previous fiscal year.  The agreement also provides for participation in our stock option plan, the payment of severance pay, and other standard benefits such as vacation, participation in our other benefit plans and reimbursement for necessary and reasonable business expenses.  In the event of a change in control of the company, defined as the purchase of shares of Broadcast capital stock enabling any person or persons to cast 20% or more of the votes entitled to be voted at any meeting to elect directors, Mr. Tiede shall have the right to terminate the employment agreement and receive severance pay equal to the base salary and a bonus equal to 50% of the salary for the remainder of the employment term or two years, whichever is longer.  In addition, if the change of control event results in our shareholders exchanging their shares for stock or other consideration, Mr. Tiede shall receive an amount equal to the per share price paid to the shareholders less the pre-announcement price multiplied by 50,000.

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In September 2008, the Company and Mr. Solomon entered into an employment agreement covering Mr. Solomon’s employment for a term commencing upon the execution thereof and continuing until December 31, 2011.  The contract continues for additional terms of one year each until terminated by us.  The agreement calls for payment of a gross annual salary of not less than $225,000, payable in equal bi-weekly installments for the year ended December 31, 2008, subject to such increases as the board of directors may approve.  The employment agreement further provides that Mr. Solomon shall receive a performance bonus on an annual basis equal to up to 100% of his base salary for the fiscal year then ended, the exact percentage to be determined in the sole discretion of the board of directors (or the compensation committee thereof) based upon an evaluation of the performance of Mr. Solomon during the previous fiscal year.  The agreement also provides for participation in our stock option plan, the payment of severance pay, and other standard benefits such as vacation, participation in our other benefit plans and reimbursement for necessary and reasonable business expenses.  In the event of a change in control of the company, defined as the purchase of shares of Broadcast capital stock enabling any person or persons to cast 20% or more of the votes entitled to be voted at any meeting to elect directors, Mr. Solomon shall have the right to terminate the employment agreement and receive severance pay equal to the base salary and a bonus equal to 50% of the salary for the remainder of the employment term or two years, whichever is longer.  In addition, if the change of control event results in our shareholders exchanging their shares for stock or other consideration, Mr. Solomon shall receive an amount equal to the per share price paid to the shareholders less the pre-announcement price multiplied by 50,000.

On January 6, 2013, we entered into an Amendment and Settlement Agreement with each of Mr. Tiede and Mr. Solomon, modifying their respective existing employment agreements described above as follows:  the salary of each officer is reduced to $180,000 per year, each officer’s employment is terminable at will, each officer is to report to the executive committee of the board of directors, each officer’s termination and change of control benefits are terminated, each officer waives his accrued vacation benefits, each officer and Broadcast grant each other mutual releases, and we agreed to issue to each officer 529,100 shares of Common Stock if such officer remained employed by us for 60 days following January 6, 2013 or if such officer is terminated by at any time following January 6, 2013.

Stock Option Plans

Under our 2004 Long-term Incentive Plan (the “2004 Plan”), the board of directors may issue incentive stock options to employees and directors and non-qualified stock options to consultants of the company.  Options generally may not be exercised until twelve months after the date granted and expire ten years after being granted. Options granted vest in accordance with the vesting schedule determined by the board of directors, usually ratably over a three-year vesting schedule upon the anniversary date of the grant.  Should an employee’s director’s or consultant’s relationship with the company terminate before the vesting period is completed, the unvested portion of each grant is forfeited.  We continue to maintain and grant awards under the 2004 Plan which will remain in effect until the earlier of its expiration by its terms or its termination as required by the merger agreement. The number of unissued stock options authorized under the 2004 Plan at December 31, 2013 was 4,319,411.

The Broadcast International, Inc. 2008 Equity Incentive Plan (the “2008 Plan”) has become our primary plan for providing stock-based incentive compensation to its eligible employees and non-employee directors and consultants of the Company. The provisions of the 2008 Plan are similar to the 2004 Plan except that the 2008 Plan allows for the grant of share equivalents such as restricted stock awards, stock bonus awards, performance shares and restricted stock units in addition to non-qualified and incentive stock options. The number of unissued shares of common stock reserved for issuance under the 2008 Plan was 363,200 at December 31, 2013.

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The purpose of our incentive plans is to advance the interests of our stockholders by enhancing our ability to attract, retain and motivate persons who are expected to make important contributions to the company by providing them with both equity ownership opportunities and performance-based incentives intended to align their interests with those of our stockholders.  These plans are designed to provide us with flexibility to select from among various equity-based compensation methods, and to be able to address changing accounting and tax rules and corporate governance practices by optimally utilizing stock options and shares of common stock.

Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the named executive officers in their respective capacities for the fiscal years ended December 31, 2013, 2012 and 2011.  When setting total compensation for each of the named executive officers, the compensation committee reviewed tally sheets which show the executive’s current compensation, including equity and non-equity based compensation.  We have omitted in this report certain tables and columns otherwise required to be included because there was no compensation made with respect to such tables and columns, as permitted by applicable SEC regulations.

(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)
Name and Principal Position	Year	Salary ($)	Bonus ($)	Option Awards ($)	Restricted  Stock  Unit Awards ($)	All Other Compensation ($)(1)	Total ($)
Rodney M. Tiede President & Chief Executive Officer*	2013 2012 2011	$141,539   225,690   250,690	-- -- --	-- -- --	-- -- $555,000	$5,231   4,841   7,333	$146,770   230,531   813,023
James E. Solomon Chief Financial Officer and Secretary	2013 2012 2011	$103,385   256,980   256,980	-- -- --	-- -- --	-- -- $333,000	$3,951     9,494    10,200	$107,336     266,474 600,180

 (1) The amounts shown in column (g) reflect for each named executive officer matching contributions made by Broadcast to its 401(k) employee retirement plan.  The amounts shown in column (g) do not reflect premiums paid by us for any group health or other insurance policies that apply generally to all salaried employees on a nondiscriminatory basis.

* From and after July 16, 2012, Mr. Tiede served as our president and no officer held the title of chief executive officer.

Other Compensation

We do not have any non-qualified deferred compensation plan.

Outstanding Equity Awards at Fiscal Year-End

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	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock that have not Vested (#)	Market Value of shares or Units of Stock that have not Vested ($)	Number of Unearned shares, units or other rights that have not vested (#)	Market or payout value of unearned shares, units or other rights that have not vested ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)
Rodney M. Tiede	50,000	--	2.25	04/28/2014	--	--	--	--
James E. Solomon	75,000 25,000	-- --	2.25 1.17	09/15/2015 12/27/2016	--	--	--	--

Potential Payments Upon Termination or Change of Control

The amount of compensation payable to the named executive officers upon voluntary termination, retirement, involuntary not-for-cause termination, termination following a change of control and in the event of disability or death of the executive of prior employment agreements is summarized below. The amounts shown assume that such termination was effective as of December 31, 2013, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination if it were to occur as of such date. The actual amounts to be paid out can only be determined at the time of such executive’s separation.

As discussed above, we entered into an Amendment and Settlement Agreement with each of the named executive officers on January 6, 2013 that terminated each officer’s change of control benefits as of such date.

Payments Made Upon Termination

Regardless of the manner in which a named executive officer’s employment is terminated, he is entitled to receive amounts earned during his term of employment.  Such amounts include:

· salary;

· grants under Broadcast’s stock option and equity plans, subject to the vesting and other terms applicable to such grants;

· amounts contributed and vested under Broadcast’s 401(k) plan; and

· unused vacation pay.

· In addition to the amounts above, pursuant to the January 6, 2013 Amendment and Settlement Agreement with each of Mr. Tiede and Mr. Solomon, modifying their respective employment agreements, Broadcast agreed to issue each of Mr. Tiede and Mr. Solomon 529,100 shares of common stock at the earlier of such officer’s  termination  at any time following January 6, 2013 or the expiration of 60 days.  All other termination benefits and severance benefits for Mr. Tiede and Mr. Solomon, except for those set forth in this section, were terminated as of January 6, 2013.

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Payments Made Upon Death or Disability

In the event of the death or disability of a named executive officer, in addition to the benefits listed under the heading “Payments Made Upon Termination,” the named executive officers will receive benefits under any group life or disability insurance plan, as appropriate, that we may have in effect from time to time.  Broadcast currently maintains a group term life insurance plan that generally pays a death benefit equal to two times base salary up to a maximum of $300,000.

Payments Made Upon a Change of Control

As discussed above, Broadcast entered into an Amendment and Settlement Agreement with each of the named executive officers on January 6, 2013 that terminated each such officer’s termination and change of control benefits as of such date.  As a result, neither Mr. Tiede nor Mr. Solomon will receive any payment upon consummation of a change of control.

Non-compete Agreement

Included in Mr. Tiede’s and Mr. Solomon’s employment agreements is a two year non-compete agreement, which is no longer effective due to the amendment described above.

Compensation Committee Interlocks and Insider Participation in Compensation Decisions

None of our executive officers served as a member of the compensation committee or as a director of any other company, one of whose executive officers served as a member of our compensation committee of the board or as one of our directors during 2013.

Director Compensation

We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on its board of directors.  In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties as well as the skill-level required by our members of the board.

Our non-employee directors generally receive fees of $48,000 per year, paid quarterly, and an initial grant of stock options to purchase 100,000 shares (thereafter annual grants of 25,000 options or restricted stock units) of our common stock with an exercise price equal to the fair market value of the stock on the date of grant.  Given our financial condition in 2012, the board approved and the non-employee directors accepted the 2012 compensation set forth in the director summary compensation table below.  In addition, non-employee directors may be entitled to receive special awards of stock options from time to time as determined by the board.  The chairman of the board and the chairman of each of the audit and compensation committees receive no additional fees for serving in such capacities. There is no additional compensation for meeting attendance.  Directors who are employees of Broadcast receive no additional compensation for serving as directors. All stock options granted to outside directors are immediately exercisable and expire ten years from the date of grant.  All restricted stock units granted to outside directors are immediately vested and are settled by the issuance of our common stock upon their respective retirements from the board of directors.  Directors are reimbursed for ordinary expenses incurred in connection with attending board and committee meetings.  The directors voluntarily deferred a all of their 2013 cash compensation.

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Director Summary Compensation Table

The table below summarizes the compensation paid by Broadcast to its directors for the fiscal year ended December 31, 2013.

(a)	(b)	(c)	(d)	(e)
Name	Fees Earned or Paid in Cash ($) (1)	Options/Awards ($)	Restricted Stock Units ($) (2)	Total ($)
William Boyd		--	200,000	$15,000
Rodney M. Tiede (3)		--	--	--
R. Phil Zobrist		--	200,000	15,000
Steven Ledger			200,000	15,000
Donald A. Harris (4)		--	86,667	6,500

(1) All of the fees earned was accrued and remains unpaid to each of the directors.

(2) Each of Messrs. Boyd, Zobrist and Ledger were granted a total of 200,000 restricted stock units with an estimated value of $15,000.  Mr. Harris was granted a total of 86,667 restricted stock units with an estimated value of $6,500.

(3) Mr. Tiede receives no compensation for serving as a director, but is compensated in his capacity as Broadcast’s President.

(4) Mr. Harris was appointed to Broadcast’s board of directors in June 2012.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the beneficial ownership of our common stock at March 20, 2014 by each of our directors or executive officer, each person known by us to own beneficially more than 5% of our common stock, and all of our directors and executive officers as a group.

Beneficial Owner	Beneficial Ownership	Percent of Class
Gem Asset Management LC (1) 100 State Str. #2b Teaneck, New Jersey 07666	11,199,999	9.7%
Rodney M. Tiede (2) c/o Broadcast International, Inc. 7050 Union Park Avenue, Suite 600 Salt Lake City, UT  84047	3,518,541	3.1%
Leon Frenkel (3) 401 City Avenue, Suite 802 Bala Cynwyd, PA  19004	6,982,276	6.0%
Donald Harris (4)	1,955,921	1.7%
James E. Solomon (5)	662,500	*
William Boyd (6)	641,553	*
Steven Ledger (7)	374,553	*
All directors and executive officers as a group (5 persons) (8)	7,153,068	8.5%

* Represents less than 1% of Broadcast’s common stock outstanding.

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(1) Includes 7,466,666 shares of common stock and warrants to purchase 3,733,333 shares of common stock. The control person of Gem Asset Management, LC is Daniel Lewis.

(2) Includes 500,000 restricted stock units, which are settled by the issuance of one share of common stock for each unit upon Mr. Tiede’s retirement from Broadcast and presently exercisable options to acquire 50,000 shares of common stock.

(3) Includes 2,643,517 shares of common stock, presently exercisable warrants to purchase a total of 338,759 shares of common stock and an unsecured convertible note that is convertible into 4,000,000 shares of common stock.

(4) Includes 155,921 restricted stock units, which are settled by the issuance of one share of common stock for each unit upon Mr. Harris’s retirement from the Board of Directors, a secured convertible note convertible into 1,200,000 shares of common stock and warrants to purchase 600,000 shares of common stock.

 (5) Includes 12,500 shares of common stock, presently exercisable options to acquire a total of 100,000 shares of common stock and 550,000 restricted stock units, which are settled by the issuance of one share of common stock for each unit upon Mr. Solomon’s retirement from Broadcast.

(6) 147,000 shares of common stock, presently exercisable options to acquire a total of 100,000 shares of common stock, warrants to acquire 36,000 shares of common stock and 358,553 restricted stock units, which are settled by the issuance of one share of common stock for each unit upon Mr. Boyd’s retirement from the board of directors.

(7) Includes 144,000 shares of common stock, warrants to acquire 72,000 shares of common stock and 158,553 restricted stock units, which are settled by the issuance of one share of common stock for each unit upon Mr. Ledger’s retirement from the board of directors.

(8) Includes warrants, presently exercisable options and vested restricted stock units to acquire a total of 3,881,027 shares of common stock held by all of our directors and executive officers.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth, as of December 31, 2013, information regarding our equity compensation plans under which shares of common stock are authorized for issuance.

	Number of securities to  be issued upon exercise of  outstanding options,  warrants and rights	Weighted-average  exercise price of  outstanding options,  warrants and rights	Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  outstanding securities)
Equity compensation plans approved by security holders(1)	3,093,247	$.88	363,200
Equity compensation plans not approved by security holders (2)	1,393,200	$1.34	4,319,411
Total	4,486,447	$1.05	4,682,611

(1) Our 2008 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, and restricted stock units to our employees, directors and consultants.  The plan covers a total of 4,000,000 shares of Broadcast common stock.  As of December 31, 2013, restricted stock units covering 543,553 units had been settled through the issuance of common stock and 3,093,247 were outstanding.  The plan is administered by our board of directors or compensation committee of the board.  Awards may be vested on such schedules determined by the plan administrator.  We anticipate that a significant number of the options outstanding under the 2008 Plan will be terminated in exchange for shares of Broadcast common stock in the exchange offers if the All Digital merger is consummated.

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(2) Our 2004 Plan provides for the grant of stock options, stock appreciation rights and restricted stock to our employees, directors and consultants.  The plan covers a total of 6,000,000 shares of Broadcast common stock.  As of December 31, 2013, options to purchase 287,389 shares of common stock had been exercised.  All awards must be granted at fair market value on the date of grant.  The plan is administered by our board of directors or compensation committee of the board.  Awards may be vested on such schedules determined by the plan administrator.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

In January 2011, we granted options to the holder of our $1.0 million unsecured convertible note to acquire up to 500,000 shares of our common stock for services performed pursuant to a consulting agreement with the holder.  The options were exercisable at $1.00 per share and were exercisable for five years.

In April 2011, we issued 293,517 shares of our common stock and granted a warrant to acquire an additional 146,758 shares of our common stock in payment of accrued interest to the holder of our $1.0 million unsecured convertible note.  The warrant was exercisable at $.90 per share and had a life of five years.

On November 15, 2010 we entered into an amendment dated November 15, 2010 with the holder of our $1,000,000 unsecured convertible note due December 22, 2010, pursuant to which the maturity date of such note was extended to January 1, 2011.

In connection with the Debt Restructuring, the Company amended its note with the holder of its $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013. We issued to the holder of the note 150,000 shares of our common stock and issued a warrant to acquire up to 75,000 shares of common stock at an exercise price of $.90.

On March 26, 2010, we entered into an amendment and extension agreement with Castlerigg, the holder of our senior secured convertible note in the principal amount of $15.0 million.  Castlerigg was an affiliate of ours due to its beneficial ownership of 9.9% of our outstanding common stock.  Pursuant to the amendment and extension agreement, we extended the maturity date of the senior secured convertible note from December 21, 2010 to December 21, 2011.  This extension of the maturity date was conditioned upon us raising at least $6,000,000 of gross proceeds from the sale of our equity securities by September 30, 2010.  If the additional funding were not completed, the maturity date reverted back to December 21, 2010.  In exchange for extending the maturity date, we issued to Castlerigg 1,000,000 shares of our common stock.  In addition, we agreed to the inclusion of three additional terms and conditions in the note: (i) from and after the additional funding, we would be required to maintain a cash balance of at least $1,250,000 and provide monthly certifications of the cash balance to Castlerigg; (ii) we would not make principal payments on our $1.0 million unsecured convertible note without the written permission of Castlerigg; and (iii) we grant board observation rights to Castlerigg.

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On July 30, 2010, we amended our 6.25% senior secured convertible promissory note (“Note”) and related warrants. The amendment provided for (i) the change of the maturity date from December 21, 2011 to June 21, 2012; (ii) the requirement to maintain a balance of cash and marketable securities equal to or greater than $950,000 was added as an additional condition of default in the event we completed the required capital raise described below; (iii) in the event of the completion of the required capital raise, the conversion price of the Note would be reduced to $1.80 per share instead of the price at which the new equity is sold; (iv) in the event of the completion of the required capital raise, the exercise price of the Warrants would be reduced to $1.80 per share instead of the price at which new equity were sold; (v) in the event of the completion of the required capital raise the number of warrants were to be increased from 1,875,000 to 5,208,333. The amendment was conditioned upon the Company raising at least $6,000,000 of gross proceeds from the sale of its equity securities by September 30, 2010. If the additional funding were not completed by September 30, 2010, certain provisions of the amendment agreement would have been void in that the maturity date would have reverted back to December 21, 2010, the conversion price would have become the lowest price at which equity securities had been sold, the exercise price would have become the lowest price at which equity securities have been sold, and the number of warrants then outstanding would have be determined by the original purchase documents and the Company would not have had an obligation to maintain a balance of cash and marketable securities equal to $950,000. In exchange for the amendments, the Company issued to the holder 2,000,000 shares of the Company’s common stock, par value $0.05 per share, and committed to issue another 800,000 shares upon completion of the equity financing.

On September 24, 2010, the holder of the Note extended the due date for the equity financing required by the July 30, 2010 amendment to the Note to October 31, 2010. If the additional funding were not completed by October 31, 2010, certain provisions of the amendment agreement would have been void in that the maturity date would have reverted back to December 21, 2010, the conversion price of the Note would become the lowest price at which equity securities had been sold, the exercise price of the holder’s warrants would have become the lowest price at which equity securities had been sold, and the number of warrants then outstanding would have been determined by the original purchase documents and we would not have an obligation to maintain a balance of cash and marketable securities equal to $950,000.

On October 29, 2010, we entered into an extension and amendment agreement with the holder of the Note, which provided; (i) the definition of a “Qualified Financing Transaction” was amended to mean a capital raise of $8,000,000; (ii) in the event of the completion of the required capital raise, the conversion price of the Note would be reduced to an amount equal to 150% of the lowest price at which Company common stock were sold during calendar year 2010; (iii) paragraph 9 of the 6.25% senior secured convertible promissory note entitled “Company Redemption Right” was deleted in its entirety; (iv) in the event of the completion of the required capital raise, the exercise price of the Warrants was to be reduced to an amount equal to 150% of the lowest price at which Company common stock was sold during calendar year 2010; (v) in the event of the completion of the required capital raise the number of warrants was to be increased as provided in the 6.25% senior secured convertible promissory note; and (vi) the Expiration Date of the warrants was to be amended to December 30, 2013. The amendment was conditioned upon the Company raising at least $8,000,000 of gross proceeds from the sale of its equity securities by December 3, 2010. If the additional funding was not completed by October 31, 2010, certain provisions of the amendment agreement would have been void in that the maturity date would revert back to December 21, 2010, the conversion price of the Note would become the lowest price at which equity securities had been sold in 2010, the exercise price of the holder’s warrants would have become the lowest price at which equity securities had been sold, and the number of warrants then outstanding would have been determined by the original purchase documents and we would not have an obligation to maintain a balance of cash and marketable securities equal to $950,000.

On November 15, 2010, we entered into a Fifth Amendment and Extension Agreement dated as of November 15, 2010 (the “Fifth Amendment”) with the holder of the Note. The Fifth Amendment provided that the date by which the Company must consummate a Qualified Financing Transaction (as defined in prior amendments to the Note) was extended from December 3, 2010 to December 31, 2010. If a Qualified Financing Transaction occurred by December 31, 2010, the maturity date of the Note was to be extended to June 21, 2012 (as set forth in prior amendments). If a Qualified Financing Transaction was not completed by December 31, 2010, certain provisions of the amendment agreement would have been void in that the maturity date would revert back to December 21, 2010, the conversion price of the Note would become the lowest price at which equity securities had been sold in 2010, the exercise price of the holder’s warrants would have become the lowest price at which equity securities had been sold in 2010, and the number of warrants then outstanding would have been determined by the original purchase documents and we would not have an obligation to maintain a balance of cash and marketable securities equal to $950,000.

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On December 24, 2010, we closed the Debt Restructuring.  In connection therewith, we (i) issued the Amended and Restated Note in the principal amount of $5.5 million to Castlerigg, (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the Loan Restructuring Agreement, and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010 under the terms of which we agreed to register up to 2,500,000 of Castlerigg’s shares of our common stock.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest.

The Amended and Restated Note, dated December 23, 2010, is a senior, unsecured note that matures in three years from the closing and bears interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year’s interest of approximately $344,000 at the closing.  The Amended and Restated Note is convertible into shares of common stock at a conversion price of $1.35 per share, subject to adjustment.  The Amended and Restated Note is convertible in whole or in part at any time upon notice by Castlerigg to us.  The Amended and Restated Note also contains various restrictions, acceleration provisions and other standard and customary terms and conditions.  Two of our consolidated subsidiaries guaranteed our obligations under the Amended and Restated Note.

The Investor Rights Agreement provides Castlerigg with certain registration rights with respect to the Company’s securities held by Castlerigg.  These registration rights include an obligation of the Company to issue additional warrants to Castlerigg if certain registration deadlines or conditions are not satisfied.  The agreement also contains full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above.

In January 2011, we granted options to Leon Frankel, the holder of its $1.0 million unsecured convertible note and a greater-than-5% stockholder of Broadcast, to acquire up to 500,000 shares of our common stock for services performed pursuant to a consulting agreement with Mr. Frankel.  The options were exercisable at $1.00 per share and were exercisable for five years.  These options were converted to 250,000 shares of our common stock in January 2012.

In April 2011, we issued 293,517 shares of our common stock and granted a warrant to acquire an additional 146,758 shares of its common stock in payment of accrued interest to Leon Frankel, the holder of our $1.0 million unsecured convertible note and a greater-than 5% stockholder of Broadcast.  The warrant is exercisable at $.90 per share and has a life of five years.

In March and April, 2012, R. Phillip Zobrist, a Broadcast director, invested a total of $50,000 in Broadcast as a part of the 2012 Equity Funding.  In exchange for his investment he received 200,000 shares of common stock and warrants to acquire an additional 100,000 shares of common stock at an exercise price of $.35 per share.  The warrant is currently exercisable and expires six years from the date of issuance.

In December, 2012, and January 2013 Donald A. Harris, a Broadcast director, loaned a total of $300,000 to Broadcast pursuant to a written securities purchase agreement and promissory note.  The notes bear interest at the rate of 12% per annum and are due and payable on July 13, 2013.  The notes are convertible to common stock at the rate of $.25 per share.  In addition, the Mr. Harris received warrants to acquire an additional 600,000 shares of common stock at an exercise price of $.25 per share.  The warrant is currently exercisable and expires six years after issuance.

On February 21, 2013, we issued restricted stock units that may be settled by the issuance of 200,000 shares of our common stock to each of three of our directors and 86,667 shares to one of our directors for a total of 686,667 shares in consideration of unpaid director fees, which aggregated $51,500 or $.075 per share.

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On March 10, 2014, Donald A. Harris, a director, loaned a total of $83,700 to us.  The terms and conditions of this loan have not been specified and no written promissory note has been executed.

  For a description of our policies and procedures related to the review, approval or ratification of related person transactions, see “Conflict of Interest Policy” under Item 10, “Directors, Executive Officers and Corporate Governance.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees for professional services provided by our current independent auditors for each of the last two fiscal years, in each of the following categories, are as follows:

	2013		2012
Audit fees	$	67,000	$	86,500
Audit-related fees		--		--
Tax fees		4,400		6,800
All other fees		12,000		8,800
Total	$	83,400	$	102,100

Audit fees included fees associated with the annual audit and reviews of our annual and quarterly reports for 2013 and 2012.  All audit fees incurred during 2013 and 2012 were pre-approved by the audit committee. Tax fees included fees associated with tax compliance and tax consultations.  All tax fees incurred during 2013 and 2012 were pre-approved by the audit committee.

All other fees related to reviews of registration statements during each respective year and were pre-approved by the audit committee.

Tax fees included fees associated with tax compliance and tax consultations.

The audit committee has adopted a policy that requires advance approval of all services performed by the independent auditor when fees are expected to exceed $15,000.  The audit committee has delegated to the audit committee chairman, Mr. Boyd, authority to approve services, subject to ratification by the audit committee at its next committee meeting.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)  Financial Statements.  See the financial statements included in Item 8 of this report.

     (2)  Financial Statement Schedules.  All applicable schedule information is included in our financial statements included in Item 8 of this report. (a)Exhibits

50

Exhibit Number	Description of Document
2.1	Agreement and Plan of Merger and Reorganization, dated as of January 6, 2012, by and among Broadcast International, Inc., AllDigital, Inc., and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013.
2.2	First Amendment to Agreement and Plan of Merger, dated as of April 10, 2013, by and among Broadcast International, Inc., AllDigital Holdings, Inc. and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed with the SEC on April 10, 2013.
2.3	Second Amendment to Agreement and Plan of Merger, dated as of June 30, 2013, by and among Broadcast International, Inc., AllDigital Holdings, Inc. and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 30, 2013.
2.4	First Amendment to Agreement and Plan of Merger, dated as of August 26, 2013, by and among Broadcast International, Inc., AllDigital Holdings, Inc. and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 28, 2013.
2.5	Agreement and Plan of Merger and Reorganization, dated as of March 6, 2013, by and among Broadcast International, Inc., Wireless Ronin Technologies, Inc, and Broadcast Acquisition Co.  (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 7, 2013.
3.1	Amended and Restated Articles of Incorporation of Broadcast International.   (Incorporated by reference to Exhibit No. 3.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed with the SEC on November 14, 2006.)
3.2	Amended and Restated Bylaws of Broadcast International.  (Incorporated by reference to Exhibit No. 3.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed with the SEC on November 14, 2006.)
4.1	Specimen Stock Certificate of Common Stock of Broadcast International.  (Incorporated by reference to Exhibit No. 4.1 of the Company's Registration Statement on Form SB-2, filed under cover of Form S-3, pre-effective Amendment No. 3 filed with the SEC on October 11, 2005.)
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 James E Solomon dated September 19, 2008.  (Incorporated by reference to Exhibit No. 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on Mach 31, 2010.)
10.3*	Broadcast International 2004 Long-Term Incentive Plan.  (Incorporated by reference to Exhibit No. 10.4 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003 filed with the SEC on March 30, 2004.)
10.4*	Broadcast International 2008 Long-Term Incentive Plan.  (Incorporated by reference to the Company’s  definitive Proxy Statement on Schedule 14A filed with the SEC on April 17, 2009)
10.5	Securities Purchase Agreement dated October 28, 2006 between Broadcast International and Leon Frenkel.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2006.)

51

10.6	5% Convertible Note dated October 16, 2006 issued by Broadcast International to Leon Frenkel.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2006.)
10.7	Registration Rights Agreement dated October 28, 2006 between Broadcast International and Leon Frenkel.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2006.)
10.8	Securities Purchase Agreement dated as of December 21, 2007, by and among Broadcast International and the investors listed on the Schedule of Buyers attached thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.9	Registration Rights Agreement dated as of December 21, 2007, by and among Broadcast International and the buyers listed therein.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.10	6.25% Senior Secured Convertible Promissory Note dated December 21, 2007 issued to the holder listed therein.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.11	Warrant to Purchase Common Stock dated December 21, 2007 issued to the holder listed therein.  (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.12	Loan Restructuring Agreement between the Company and Castlerigg Master Investments Ltd., dated December 16, 2010 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2010.)
10.13	Amendment to 8% Convertible Note Due 2010 between the Company and Leon Frenkel, dated December 22, 2010 (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2010.)
10.14	Placement Agency Agreement between the Company and Philadelphia Brokerage Corporation, dated December 17, 2010 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.15	Form of Subscription Agreement (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.16	Form of Warrant (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.17	Amended and Restated Senior Convertible Note issued by the Company to Castlerigg master Investments Ltd., dated December 23, 2010 (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.18	Investor Rights Agreement between the Company and Castlerigg Master Investments Ltd., dated December 23, 2010 (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)

52

10.19	Letter between the Company and Castlerigg Master Investments Ltd., dated December 23, 2010 (Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.20	Form of Securities Purchase Agreement dated March 13, 2012.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.21	Form of A Warrant.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.22	Form of B Warrant.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.23	Loan Satisfaction Agreement between the Company and Castlerigg Master Investments Ltd. dated March 13, 2012.  (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.24	Registration Rights Agreement dated March 13, 2012.  (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.25	Form of Placement Agent Warrant.  (Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.26	Form of Note and Warrant Purchase and Security Agreement dated July 16, 2012.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012.)
10.27	Form of Promissory Note dated July 16, 2012.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012.)
10.28	Form of Warrant.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012.)
10.29	Form of Voting Agreement, dated January 6, 2013, by and among AllDigital, Inc. and certain stockholders of Broadcast International, Inc. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.30	Form of Voting Agreement, dated January 6, 2013, by and among Broadcast International, Inc. and certain stockholders of AllDigital, Inc. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.31	Professional Services Agreement, dated January 6, 2013, by and between AllDigital, Inc. and Broadcast International, Inc. (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.32*	Amendment and Settlement Agreement, dated January 6, 2013, by and between Broadcast International, Inc. and Rodney Tiede.  (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.33*	Amendment and Settlement Agreement, dated January 6, 2013, by and between Broadcast International, Inc. and James E. Solomon. (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).

53

10.34*	Amendment and Settlement Agreement, dated January 6, 2013, by and between Broadcast International, Inc. and Steve Jones. (Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.35	Amendment to Note and Warrant Purchase and Security Agreement and Senior Secured Convertible Promissory Notes, effective as of July 13, 2013, by and among Broadcast International, Inc., Interact Devices, Inc., Amir L. Ecker and the Purchasers indicated on the signature pages thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
10.36	Consent to Convert Accounts Receivable Agreement dated August 8, 2013, by and between Broadcast International, Inc. and Don Harris. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
10.37	Senior Secured Convertible Promissory Note, dated August 8, 2013. (Incorporated  by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
10.38	Form of Convertible Promissory Note issued by AllDigital Holdings, Inc. and countersigned by Broadcast International, Inc. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on August 28, 2013)
14.1	Code of Ethics. (Incorporated by reference to Exhibit No. 14 of the Company’s Annual Report on Form 10-KSB filed with the SEC on March 30, 2004.)
21.1	Subsidiaries.  (Incorporated by reference to Exhibit No. 21.1 of the Company’s Annual Report on Form 10-KSB filed with the SEC on April 1, 2005.)
24.1	Power of Attorney. (Included on page II-15).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Principal Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	Taxonomy Extension Calculation Linkbase Document.
101.DEF	Taxonomy Extension Definition Linkbase Document.
101.LAB	Extension Labels Linkbase Document.
101.PRE	Taxonomy Extension Presentation Linkbase Document.

* Management contract or compensatory plan or arrangement.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Broadcast International, Inc.
Date: March 31, 2014	/s/ Rodney M. Tiede
	By:  Rodney M. Tiede
	Its:  President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date: March 31, 2014	/s/ Rodney M. Tiede
	By:  Rodney M. Tiede
	Its:  President and Director
	(Principal Executive Officer)
Date: March 31, 2014	/s/ James E. Solomon
	Its:  Chief Financial Officer
	(Principal Financial and Accounting Officer)
Date: March 31, 2014	/s/ R. Phil Zobrist
	By: R. Phil Zobrist
	Its: Director
Date: March 31, 2014	/s/ William Boyd
	By:  William Boyd
	Its:  Director
Date: March 31, 2014	/s/ Steven Ledger
	By:  Steven Ledger
	Its:  Director
Date: March 31, 2014	/s/ Donald A. Harris
	By:  Donald A. Harris
	Its:  Director

55

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Broadcast International, Inc.

Salt Lake City, Utah

We have audited the accompanying consolidated balance sheets of Broadcast International, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Broadcast International, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy their liabilities and sustain operations. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/  HJ & Associates, LLC                                                                       

HJ & Associates, LLC

Salt Lake City, Utah

March 31, 2014

F-1

             BROADCAST INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

	DEC 31, 2012			DEC 31, 2013
ASSETS:
Current Assets
Cash and cash equivalents	$	394,342		$	215,371
Restricted cash		140,700			--
Trade accounts receivable, net		821,608			50,745
Inventory		306,296			19,457
Prepaid expenses		90,067			15,136
Total current assets		1,753,013			300,709
Property and equipment, net		572,107			64,282
Other Assets, non current
Debt offering costs		42,176			--
Patents, net		120,928			66,081
Deposits and other assets		196,292			111,022
Total other assets, non current		359,396			177,103
Total assets	$	2,684,516		$	542,094
LIABILITIES AND STOCKHOLDERS DEFICT
LIABILITIES:
Current Liabilities
Accounts payable	$	2,293,470		$	1,034,053
Payroll and related expenses		363,568			98,962
Other accrued expenses		299,728			802,364
Unearned revenue		51,335			5,280
Current portion of notes payable (net of discount of $947,994 and      $0, respectively)		3,102,006			5,245,000
Derivative valuation		1,191,269			11,736
Total current liabilities		7,301,376			7,197,395
Total liabilities		7,301,376			7,197,395
Commitments and contingencies		--			--
STOCKHOLDERS’ DEFICIT:
Preferred stock, no par value, 20,000,000 shares authorized; none issued		--			--
Common stock, $.05 par value, 180,000,000 shares authorized;      107,473,820 and 110,233,225 shares issued as of December 31,      2012 and December 31, 2013, respectively		5,373,691			5,511,661
Additional paid-in capital		99,594,490			99,706,469
Accumulated deficit		(109,585,041	)		(111,873,431	)
Total stockholders’ deficit		(4,616,860	)		(6,655,301	)
Total liabilities and stockholders’ deficit	$	2,684,516		$	542,094

See accompanying notes to consolidated financial statements

F-2

BROADCAST INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year Ended Dec 31, 2012			For the Year Ended Dec 31, 2013
Net sales	$	7,523,624		$	3,041,357
Cost of sales		4,819,624			1,743,342
Gross profit		2,704,000			1,298,015
Operating expenses:
Administrative and general		4,546,612			2,576,992
Selling and marketing		1,908,763			268,021
Research and development		1,754,163			546,953
Impairment of assets		--			9,781
Depreciation and amortization		558,148			210,512
Total operating expenses		8,767,686			3,612,259
Total operating loss		(6,063,686	)		(2,314,244	)
Other income (expense):
Interest expense		(1,542,424	)		(1,634,347	)
Gain on derivative valuation		8,829,748			1,242,459
Note conversion offering expense		(47,348	)		--
Retirement of debt offering costs		(53,150	)		--
Debt conversion costs		(1,095,309	)		--
Gain on extinguishment of debt		1,578,914			--
Gain on extinguishment of liabilities		--			481,590
(Loss) gain on sale of assets		512			(68,214	)
Other income, net		(4,433	)		4,366
Total other income		7,666,510			25,854
Income (loss) before income taxes		1,602,824			(2,288,390	)
Provision for income taxes		--			--
Net income (loss)	$	1,602,824		$	(2,288,390	)
Income (loss) per share basic	$	0.02		$	(0.02	)
Income (loss) per share diluted	$	0.02		$	(0.02	)
Weighted average shares basic		100,798,223			109,107,238
Weighted average shares diluted		106,533,844			109,107,238

See accompanying notes to consolidated financial statements

F-3

BROADCAST INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

YEARS ENDED DECEMBER 31, 2013 AND 2012

					Additional		Retained
	Common Stock				Paid-in		Earnings			Equity
	Shares		Amount		Capital		(Deficit)			(Deficit)
Balance, December 31, 2011		75,975,656	$	3,798,783	$	96,859,058	$	(111,187,865	)	$	(10,530,024	)
Common stock issued for 2012 equity financing and debt restructuring, net of issuance costs		25,402,164		1,270,108		837,726		--			2,107,834
Common stock issued on debt conversion		5,600,000		280,000		1,380,000		--			1,660,000
Common stock issued for services rendered		496,000		24,800		152,513		--			177,313
Amended and restated 6.25% note conversion feature		--		--		81,500		--			81,500
Current year stock based compensation		--		--		2,262,540		--			2,262,540
Net Income		--		--		--		1,304,446			1,304,446
Balance, December 31, 2012		107,473,820		5,373,691		99,594,490		(109,585,041	)		(4,616,860	)

Common stock issued for extinguishment of liabilities	2,240,852		112,043		41,817			--			153,860
Common stock issued to a director for prior years services rendered	200,000		10,000		5,000			--			15,000
Common stock issued for services rendered	60,000		3,000		1,200			--			4,200
Common stock issued for restricted stock settlements	258,553		12,927		(12,927	)		--			--
Issuance of restricted stock options to board members for prior years service	--		--		51,500			--			51,500
Current year stock based compensation	--		--		25,389			--			25,389
Net Loss	--		--		--			(2,288,390	)		(2,288,390	)
Balance, December 31, 2013	110,233,225	$	5,511,661	$	99,706,469		$	(111,873,431	)	$	(6,655,301	)

See accompanying notes to consolidated financial statements

F-4

BROADCAST INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year Ended Dec 31, 2012			For the Year Ended Dec 31, 2013
Cash flows from operating activities:
Net (loss) Income	$	1,602,824		$	(2,288,390	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		1,024,754			211,721
Common stock issued for services		177,313			4,200
Accretion of discount on convertible notes payable		941,225			1,010,920
Stock based compensation		283,693			25,389
Warrants issued and expensed for issuance costs		1,095,309			--
Loss on extinguishment of debt		(1,578,914	)		--
Gain on extinguishment of liabilities		--			(481,590	)
Expensed note conversion costs		47,348			--
Gain on derivative liability valuation		(8,829,748	)		(1,242,459	)
Loss (gain) on sale of assets		(512	)		68,214
Retirement of debt offering costs		53,150			--
Loss on impairment of assets		--			9,781
Allowance for doubtful accounts		31,982			(35,396	)
Changes in assets
Decrease in accounts receivable		386,313			806,259
Increase (decrease) in inventories		(245,445	)		14,947
Decrease in debt offering costs		105,805			42,176
Decrease in prepaid and other assets		323,618			205,142
Changes in liabilities
Decrease in accounts payable		1,040,932			9,726
Increase in accrued expenses		136,682			238,030
Increase (decrease) in deferred revenues		40,886			(46,055	)
Net cash (used) provided in operating activities		(3,362,785	)		(1,447,385	)
Cash flows from investing activities:
Purchase of equipment		(172,825	)		--
Proceeds from sale of assets		3,761			139,014
Net cash (used) provided by investing activities		(169,064	)		139,014
Cash flows from financing activities:
Proceeds from equity financing		6,150,000			--
Payments on principal on debt		(4,017,649	)		--
Equity issuance costs		(776,483	)		--
Proceeds from equipment financing		--			--
Payments for debt extinguishment costs		(275,041	)		--
Payments for extinguishment of liabilities		--			(206,300	)
Increase (decrease) in restricted cash		(140,700	)		140,700
Proceeds from notes payable		2,024,799			1,195,000
Net cash provided by financing activities		2,964,926			1,129,400
Net decrease in cash and cash equivalents		(566,923	)		(178,971	)
Cash and cash equivalents, beginning of period		961,265			394,342
Cash and cash equivalents, end of period	$	394,342		$	215,371
Supplemental disclosure of cash flow information:
Interest paid	$	347,902		$	66,700
Income taxes paid	$	--		$	--

See accompanying notes to consolidated financial statements

F-5

BROADCAST INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 AND 2012

Note 1 – Organization and Basis of Presentation

Broadcast International, Inc. (the Company) is the consolidated parent company of BI Acquisitions, Inc. (BI), a wholly-owned subsidiary, and Interact Devices, Inc. (IDI), a 94% owned subsidiary.

BI was incorporated in Utah in December 1999 and began operations in January 2000.  It is a communications services and technology company headquartered in Salt Lake City, Utah.  The Company operates two divisions – BI Networks and CodecSys.

On October 1, 2003, the Company (formerly known as Laser Corporation) acquired BI by issuing shares of its common stock representing 98% of the total equity ownership in exchange for all of the issued and outstanding BI common stock.  The transaction was accounted for as a reverse acquisition, or recapitalization of BI, with BI being treated as the accounting acquirer. Effective January 13, 2004, the company changed its name from Laser Corporation to Broadcast International, Inc.

On May 18, 2004, the Debtor-in-Possession’s Plan of Reorganization for IDI was confirmed by the United States Bankruptcy Court. As a result of this confirmation and subsequent share acquisitions, for the years ended December 31, 2013 and 2012, the Company owned, on a fully diluted basis, approximately 55,897,169 common share equivalents of IDI, representing approximately 94% of the equity of IDI.

The audited consolidated financial statements herein include operations from January 1, 2012 to December 31, 2013. IDI produced losses from operations during the period; therefore, 100% of the results from operations have been included in the Company’s consolidated statements.

Note 2 - Significant Accounting Policies

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

We consider all cash on hand and in banks, and highly liquid investments with maturities of three months or less, to be cash equivalents. At December 31, 2013 and 2012, we had no bank balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Current financial market conditions have had the effect of restricting liquidity of cash management investments and have increased the risk of even the most liquid investments and the viability of some financial institutions.  We do not believe, however, that these conditions will materially affect our business or our ability to meet our obligations or pursue our business plans.

Account Receivables

Trade account receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

F-6

A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days. After the receivable becomes past due, it is on non-accrual status and accrual of interest is suspended.

Inventories

Inventories consisting of electrical and computer parts are stated at the lower of cost or market determined using the first-in, first-out method. We review the value of our inventory, whenever events or changes in circumstances indicate. With our review at December 31, 2013, we recorded a $9,781 impairment for obsolete or overvalued items.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the property, generally from three to five years.  Repairs and maintenance costs are expensed as incurred except when such repairs significantly add to the useful life or productive capacity of the asset, in which case the repairs are capitalized.

Patents and Intangibles

Patents represent initial legal costs incurred to apply for United States and international patents on the CodecSys technology, and are amortized on a straight-line basis over their useful life of approximately 20 years.  We have filed several patents in the United States and foreign countries. As of December 31, 2013, the United States Patent and Trademark Office had approved four patents.  Additionally, eleven foreign countries had approved patent rights.  While we are unsure whether we can develop the technology in order to obtain the full benefits, the patents themselves hold value and could be sold to companies with more resources to complete the development. On-going legal expenses incurred for patent follow-up have been expensed from July 2005 forward.

Amortization expense recognized on issued patents totaled $9,906 and $10,151 for the years ended December 31, 2013 and 2012, respectively.

Our estimated future annual amortization expense, if all patents were issued at the beginning of 2013, would be $10,121 for each of the next five years.

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. After our review at December 31, 2013 it was determined that no adjustment was required.

Stock-based Compensation

In accordance with ASC Topic 718, stock-based compensation cost is estimated at the grant date, based on the estimated fair value of the awards, and recognized as expense ratably over the requisite service period of the award for awards expected to vest.

F-7

Income Taxes

We account for income taxes in accordance with the asset and liability method of accounting for income taxes prescribed by ASC Topic 740.  Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled.

Revenue Recognition

We recognize revenue when evidence exists that there is an arrangement between us and our customers, delivery of equipment sold or service has occurred, the selling price to our customers is fixed and determinable with required documentation, and collectability is reasonably assured. We recognize as deferred revenue, payments made in advance by customers for services not yet provided.

When we enter into a multi-year contract with a customer to provide installation, network management, and satellite transponder and help desk, or combination of these services, we recognize this revenue as services are performed and as equipment is sold.  These agreements typically provide for additional fees, as needed, to be charged if on-site visits are required by the customer in order to ensure that each customer location is able to receive network communication. As these on-site visits are performed the associated revenue and cost are recognized in the period the work is completed. If we install, for an additional fee, new or replacement equipment to an immaterial number of new customer locations, and the equipment immediately becomes the property of the customer, the associated revenue and cost are recorded in the period in which the work is completed.

In instances where we have entered into license agreements with a third parties to use our technology within their product offering, we recognize any base or prepaid revenues over the term of the agreement and any per occurrence or periodic usage revenues in the period they are earned.

Research and Development

Research and development costs are expensed when incurred.  We expensed $546,953 and $1,754,163 of research and development costs for the years ended December 31, 2013 and 2012, respectively.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of trade accounts receivable. In the normal course of business, we provide credit terms to our customers. Accordingly, we perform ongoing credit evaluations of our customers and maintain allowances for possible losses which, when realized, have been within the range of management’s expectations.

For the years ended December 31, 2013 and 2012, we had the same customer that individually constituted 83% and 85%, of our total revenues, respectively.  The contract with this customer expired in May 2013.  Unless we can replace that customer with another similarly large customer or customers, revenues will be declined substantially from comparative periods, which will harm our business.

Weighted Average Shares

Basic earnings per common share is computed by dividing net income or loss applicable to common shareholders by 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 shares outstanding during the year, plus the dilutive common stock equivalents that would rise from the exercise of stock options, warrants and restricted stock units outstanding during the period, using the treasury stock method and the average market price per share during the period, plus the effect of assuming conversion of the convertible debt. The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on earnings.

F-8

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2012 and 2013:

	For the Year Ended 2012		For the year Ended 2013
Numerator
Net income (loss)	$	1,602,824	$	(2,288,390	)
Denominator
Basic weighted average shares outstanding		100,798,223		109,107,238
Effect of dilutive securities:
Stock options and warrants		2,510,488		--
Restricted stock units		3,225,133		--
Diluted weighted average shares outstanding		106,533,844		109,107,238
Net income (loss) per common share
Basic	$	0.02	$	(0.02	)
Diluted	$	0.02	$	(0.02	)

Potentially dilutive securities representing 18,568,963 shares of common stock were excluded from the computation of diluted earnings per common share for the year ended December 31, 2012, because their effect would have been anti-dilutive.

As we experienced a net loss during the year ended December 31, 2013, potentially dilutive securities representing; (i) 43,068,136 options and warrants to purchase shares of common stock, (ii) 3,093,247 unsettled restricted stock units and (iii) 20,900,000 shares for the conversion feature of our $5,225,000 convertible notes, were not included in the diluted earnings per common share calculation as the effect of such common stock equivalents would be anti-dilutive.

Advertising Expenses

We follow the policy of charging the costs of advertising to expense as incurred.  Advertising expense for the years ended December 31, 2013 and 2012 were $0 and $35,168, respectively.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  This Update indicates that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset except in circumstances where a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction. This Update is effective for years beginning after December 15, 2013 for public companies and after December 15, 2014 for private companies. This Update didn’t have a significant impact on its financials.

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815) – Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.  This Update permits the use of the Fed Funds Effective Swap Rate (OIS) to be used as a US benchmark interest rate for hedge accounting purposes. Furthermore, the Update eliminates the restriction on using different benchmark rate for similar hedges. This Update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company doesn’t expect this Update to have a significant impact on its financials.  However, if any new hedges are entered into, the update will be considered when determining which benchmark rate to use.

F-9

In July 2013, the FASB issued ASU 2013-09, Fair Value Measurement (Topic 820) – Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04.  This Update defers indefinitely required disclosures about significant unobservable inputs used in Level 3 measurements for investments held by a nonpublic employee benefit plan in its plan sponsor’s own nonpublic entity equity securities. This Update is effective upon issuance. The Company doesn’t expect this Update to impact its financials since it does not issue a financial statement for nonpublic employee benefit plans.

In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements  (Topic 205) – Liquidation Basis of Accounting. This Update requires an entity to use the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent if the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved or (b) a plan for liquidation is being imposed by other forces. The Update also indicates that asset should be measured and presented at the expected amount of cash proceeds to be received upon liquidation.  The entity should also present any assets not previously recognized but expects to sell in liquidation or use in settling liabilities (i.e. trademarks, etc.). This Update is effective for periods beginning after December 15, 2013. This Update did not impact our financials since it does not expect liquidation to be imminent in the near future.

In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The main purpose of this Update is to clarify that the disclosures regarding offsetting assets and liabilities per ASU 2011-11 apply to derivatives including embedded derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and lending transactions that are offset or subject to a master netting agreement. Other types of transactions are not impacted. This Update is effective for fiscal years beginning on or after January 1, 2013 and for all interim periods within that fiscal year. The Company doesn’t expect this Update to impact the Company’s financials since it does not have instruments noted in the Update that are offset.

Note 3- Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  We have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  These factors raise substantial doubt about our ability to continue as a going concern.

Our continuation as a going concern is dependent on our ability to generate sufficient income and cash flow to meet our obligations on a timely basis and to obtain additional financing as may be required.  There is no assurance we will be successful in efforts to raise additional funds.  The accompanying statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Note 4 – Accounts Receivable

Included in our $50,745 and $821,608 net accounts receivable for the years ending December 2013 and 2012, respectively, were (i) $57,655 and $856,462 for billed trade receivables, respectively; (ii) $1,380 and $44,478 of unbilled trade receivables, respectively; (iii) $0 and $1,808 for employee travel advances and other receivables, respectively; less (iv) $8,290 and $81,140 for allowance for uncollectible accounts, respectively.

Included in the numbers above was our single largest customer for each year ended December 31, 2013 and, 2012, which provided 83% and 85% of total revenue and represented 18% and 71% of our trade receivables on December 31, 2013 and 2012, respectively.

F-10

Our largest customer initially signed a three-year agreement which has now expired.  Unless we can replace that customer with another similarly large customer or customers, revenues will continue to decline substantially from comparative periods, which has harmed our business.

Note 5 – Equity Financing and the Debt Restructuring

2012 Equity Financing and the Debt Restructuring

On March 26, 2012, we closed on an equity financing (the “2012 Equity Financing”) as well as a restructuring of our outstanding senior convertible indebtedness (the “2012 Debt Restructuring”) resulting in complete satisfaction of our senior indebtedness.

We entered into an Engagement Agreement, dated October 28, 2011, with MDB Capital Group, LLC (“MDB”), pursuant to which MDB agreed to act as the exclusive agent of the Company on a “best efforts” basis with respect to the sale of up to a maximum gross consideration of $6,000,000, subsequently verbally increased to $10,000,000, of the Company’s securities, subject to a minimum gross consideration of $3,000,000.  The Company agreed to pay to MDB a commission of 10% of the gross offering proceeds received by the Company, to grant to MDB warrants to acquire up to 10% of the shares of our common stock and warrants issued in the financing, and to pay the reasonable costs and expenses of MDB related to the offering.

Pursuant to the Engagement Agreement, we entered into a Securities Purchase Agreement (“SPA”) dated March 23, 2012 with select institutional and other accredited investors for the private placement of 27,800,000 units of our securities.  The SPA included a purchase price of $0.25 per unit, with each unit consisting of one share of common stock and two forms of Warrant: (1) The “A” Warrant grants the investors the right to purchase an additional share of common stock for each two shares of common stock purchased, for a term of six years and at an exercise price of $0.35 per share; and (2) The “B” Warrant will not be exercisable unless and until the occurrence of a future issuance of stock at less than $0.25 per share, but, in the event of such issuance, grants the investors the right to acquire additional shares at a price of $0.05 to reduce the impact of the dilution caused by such issuance, but in no event shall the number of shares to be issued under the B Warrant cause us to exceed the number of authorized shares of common stock. The shares in excess of our authorized shares that would have been issuable under the B Warrant shall be “net settled” by payment of cash in an amount equal to the number of shares in excess of the authorized common shares multiplied by the closing price of our common stock as of the trading day immediately prior to the applicable date of the exercise of such B Warrant. The holders of the B Warrants agreed in December 2013 to amend the terms of the B Warrant to reduce the amount of subsequent financing required to extinguish the B Warrants with the result that the B Warrants have now been extinguished.

Net proceeds from the 2012 Equity Financing, after deducting the commissions and the estimated legal, printing and other costs and expenses related to the financing, were approximately $6.1 million.  Coincident to the closing of the 2012 Equity Financing, we also closed on the 2012 Debt Restructuring.  In connection therewith, the Company paid $2,750,000 to Castlerigg Master Investment Ltd. (“Castlerigg”), and issued to Castlerigg 2,000,000 shares of common stock in full and complete satisfaction of the senior convertible note and all accrued interest. In consideration of negotiating the 2012 Debt Restructuring, we issued to one of our placement agents 586,164 shares of our common stock and paid them $275,041.

In December 2011, we entered into a loan with 7 accredited individuals and entities under the terms of which we borrowed $1,300,000 to be used as working capital (“Bridge Loan”).  The Bridge Loan bears an interest rate of 18% per annum and had a maturity date of February 28, 2012, which was subsequently extended to the earlier of the date nine months from the original maturity date or the date we close on an additional sale of our securities that results in gross proceeds to us of $12 million.  In consideration of the Bridge Loan we granted to the holders of the Bridge Loan warrants with a five year term to purchase 357,500 shares of our common stock at an exercise price of $0.65 per share.  In consideration of the extension of the maturity date of the Bridge Loan, we granted the holders of the Bridge Loan warrants with a six year term to purchase 247,500 shares of our common stock at an exercise price of $0.35 per share.

F-11

In connection with the 2012 Equity Financing and under the terms of the SPA, two of the above described bridge lenders converted the principal balance of their portion of the bridge loan in the amount of $400,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing.  In addition, one other entity converted the amount owed by us for equipment purchases in the amount of $500,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing. The proceeds from these conversions were treated as funds raised with respect to the financing.

In connection with the 2012 Equity Financing and under the terms of the SPA, the Company agreed to prepare and file, within 60 days following the issuance of the securities, a registration statement covering the resale of the shares of common stock sold in the financing and the shares of common stock underlying the Warrants.  The Company filed the registration statement on April 9, 2012 and it was declared effective on August 1, 2012.

On April 5, 2012 we secured an additional $154,000 from 1 company and 4 individuals (three of which are members of our Board of Directors) on the same terms and conditions as the investors of the 2012 Equity Financing. As a result of this funding we issued 616,000 shares of our common stock and A warrants totaling 400,400 of which 308,000 were issued to investors and 92,400 were issued to our investment banker.

All warrants listed below were issued with price protection provisions and were accounted for as derivative liabilities. The Warrants were valued using the Black Scholes pricing model.

	Common Shares Issued		Number of Warrants		Value of Warrants
Investors		24,816,000		12,408,000	$	5,677
Bridge Loan Conversion		1,600,000		800,000		366
Equipment Finance Conversion		2,000,000		1,000,000		458
Agency		--		4,262,400		1,951
Total		28,416,000		18,470,400	$	8,452

We recorded an aggregate derivative liability of $8,452 and $757,469 as of December 31, 2013 and 2012, respectively related to the reset feature of the warrants mentioned above. A derivative valuation gain of $749,017 and $4,365,323 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and the time the warrants issued, respectively.  The aggregate derivative liability of $8,452 was calculated using a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.27%, (ii) expected life (in years) of 4.2; (iii) expected volatility of 96.77%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

2010 Equity Financing and the Debt Restructuring

On December 24, 2010, we closed on an equity financing (the “Equity Financing”) as well as a restructuring of our then outstanding convertible indebtedness (the “Debt Restructuring”).  The Equity Financing and the Debt Restructuring are described as follows.

We entered into a Placement Agency Agreement, dated December 17, 2010, with Philadelphia Brokerage Corporation (“PBC”), pursuant to which PBC agreed to act as the exclusive agent of the Company on a “best efforts” basis with respect to the sale of up to a maximum gross consideration of $15,000,000 of units of the Company’s securities, subject to a minimum gross consideration of $10,000,000.  The units consisted of two shares of our common stock and one warrant to purchase a share of our common stock.  The Company agreed to pay PBC a commission of 8% of the gross offering proceeds received by the Company, to issue PBC 40,000 shares of its common stock for each $1,000,000 raised, and to pay the reasonable costs and expenses of PBC related to the offering.  The Company also agreed to pay PBC a restructuring fee in the amount of approximately $180,000 upon the closing of the Equity Financing and the simultaneous Debt Restructuring.

Pursuant to the Placement Agency Agreement, we entered into Subscription Agreements dated December 23, 2010 with select institutional and other accredited investors for the private placement of 12,500,000 units of our securities.  The Subscription Agreements included a purchase price of $1.20 per unit, with each unit consisting of two shares of common stock and one warrant to purchase an additional share of common stock.  The warrants have a term of five years and had an exercise price of $1.00 per share which was reset to $0.78 pursuant to the 2012 Equity Financing.

F-12

Net proceeds from the Equity Financing, after deducting the commissions and debt restructuring fees payable to PBC and the estimated legal, printing and other costs and expenses related to the financing, were approximately $13.5 million.  We used a portion of the net proceeds of the Equity Financing to pay down debt and the remainder was used for working capital.

On November 29, 2010, we entered into a bridge loan transaction with three accredited investors pursuant to which we issued unsecured notes in the aggregate principal amount of $1.0 million.  Upon the closing of the Equity Financing, the lenders converted the entire principal amount plus accrued interest into the same units offered in the Equity Financing and the proceeds from the bridge loan transaction were treated as funds raised with respect to the financing.

In connection with the Equity Financing and under the terms of the Subscription Agreements, the Company agreed to prepare and file, and did file, within 60 days following the issuance of the securities, a registration statement covering the resale of the shares of common stock sold in the financing and the shares of common stock underlying the warrants.  The registration statement was declared effective June 16, 2011 satisfying the obligation contained in the Subscription Agreements.

On December 24, 2010, we also closed on the Debt Restructuring.  In connection therewith, we (i) issued an Amended and Restated Senior Convertible Note in the principal amount of $5.5 million (the “Amended and Restated Note”) to Castlerigg Master Investment Ltd. (“Castlerigg”), (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the loan restructuring agreement under which the Amended and Restated Note and other documents were issued (the “Loan Restructuring Agreement”), and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest.

The Amended and Restated Note, dated December 23, 2010, was a senior, unsecured note that matured in three years from the closing and bore interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year’s interest of $350,434 at the closing.  The Amended and Restated Note was convertible into shares of common stock at a conversion price of $1.35 per share, subject to adjustment.  The Amended and Restated Note was convertible in whole or in part at any time upon notice by Castlerigg to us.  The Amended and Restated Note also contained various restrictions, acceleration provisions and other standard and customary terms and conditions.  Two of our consolidated subsidiaries guaranteed our obligations under the Amended and Restated Note.

The Investor Rights Agreement provides Castlerigg with certain registration rights with respect to the Company’s securities held by Castlerigg.  These registration rights include an obligation of the Company to issue additional warrants to Castlerigg if certain registration deadlines or conditions are not satisfied.  The agreement also contains full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above.

F-13

During the three months ended March 31, 2011, we issued Castlerigg 400,000 warrants pursuant to a waiver agreement dated March 10, 2011 allowing the issuance of shares and warrants for the conversion of the AR Note Payable without adjusting the conversion price of the Amended and Restated Senior 6.25% Convertible Note.  These warrants contain full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above and were accounted for as embedded derivatives and valued on the transaction date using a Black Scholes pricing model. During the three and six months ended June 30 ,2011 the warrant holder exercised these warrants using a cashless provision resulting in the company issuing 372,272 shares of our common stock. A valuation gain of $144,000 was recorded to reflect the change in value of the aggregate derivative from the time of issue to the date of conversion.

In connection with the Debt Restructuring, the Company amended the note with the holder of a $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013. We also issued 150,000 shares and 75,000 warrants to acquire our common stock at $.90 per share to the holder of this note as consideration to extend the term of the note.

On March 26, 2012, we closed on an equity financing (the “2012 Equity Financing”) as well as a restructuring of our outstanding senior convertible indebtedness (the “2012 Debt Restructuring”) resulting in complete satisfaction our senior indebtedness.

A portion of the net proceeds from the 2012 Equity Financing was used to close on the 2012 Debt Restructuring therewith. The Company paid $2,750,000 and issued 2,000,000 shares of common stock valued at $760,000 to Castlerigg in satisfaction of the $5,500,000 senior convertible note and $680,816 of accrued interest.

Investor warrants totaling 12,499,980 issued under the Subscription  Agreements contain price protection adjustments in the event we issue new common stock or common stock equivalents in certain transactions at a price less than $1.00 per share and were accounted for as embedded derivatives and valued on the transaction date using a Black Scholes pricing model. The exercise price has been reset to $0.7312 per share due to subsequent financings.

We recorded an aggregate derivative liability of $499 and $109,400 as of December 31, 2013 and 2012 respectively, related to the reset feature of the warrants issued under the Placement agency Agreement. A derivative valuation gain of $108,901 and $2,765,600, respectively, were recorded to reflect the change in value of the aggregate derivative liability since December 31, 2012 and December 31, 2011, respectively.  The aggregate derivative liability of $499 for the conversion feature of the note was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.38%, (ii) expected life (in years) of 2.0; (iii) expected volatility of 120.96%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

Note 6 – Notes Payable

The recorded value of our notes payable (net of debt discount) for the years ending December 31, 2013 and 2012 was as follows:

	December 31, 2012			December 31, 2013
2012 Secured Convertible Notes	$	2,428,166		$	4,225,000
Unsecured Convertible Note		673,840			1,000,000
Unsecured Interest Note		--			20,000
Total		3,102,006			5,245,000
Less Current Portion		(3,102,006	)		(5,245,000	)
Total Long-term	$	--		$	--

F-14

2012 Secured Convertible Notes

We engaged Philadelphia Brokerage Corporation to raise funds through the issuance of convertible promissory notes.  We anticipated issuing promissory notes with an aggregate principal amount of up to $5,000,000 (“2012 Convertible Debt Offering”). As of December 31, 2013 we have issued notes having an aggregate principal value of $4,225,000 as explained below.  The notes are due and payable on or before December 31, 2013 and remain unsatisfied at the current date.   The notes bear interest at 12% per annum and may convertible to common stock at a $.25 per share conversion price.  We also granted holders of the notes warrants with a five year life to acquire up to 200,000 shares of our common stock for each $100,000 of principal amount of the convertible notes.  The notes are secured by all of our assets with the exception of the equipment and receivables secured by the equipment lessor for equipment used in providing services for our largest customer’s digital signage network.

In July 2012, we entered into a note and warrant purchase and security agreement with individual investors and broke escrow on the initial funding under the 2012 Convertible Debt Offering, the principal amount of which was $1,900,000, which included the conversion of $900,000 of previously issued short term debt (See Bridge Loan described above) to the 2012 convertible Debt Offering, which extinguished the Bridge Loan.  Of the $1,000,000 non-converted principal amount, we realized $923,175 of cash in the initial closing and issued warrants to acquire 3,800,000 shares of our common stock.  We paid $76,825 in investment banking fees and costs of the offering.

In August 2012, we continued sales of convertible debt under the 2012 Convertible Debt Offering by issuing short term debt with a principal amount of $900,000, issued warrants to acquire 1,800,000 shares of our common stock, from which we realized cash of $851,624 after payment of investment banking fees of $48,376.

In December 2012, we continued sales of convertible debt under the 2012 Convertible Debt Offering by issuing short term debt with a principal amount of $250,000, issued warrants to acquire 500,000 shares of our common stock to one member of our Board of Directors.

In January 2013, we continued sales of convertible debt under the 2012 Convertible Debt Offering by issuing short term debt with a principal amount of $425,000, issued warrants to acquire 850,000 shares of our common stock to; (i) one member of our Board of Directors, (ii) three individuals and (iii) two companies.

In August 2013, we converted the $750,000 principal balance of 2013 Accounts Receivable Purchase Agreement into our 2012 Convertible Debt Offering through the issuance of short term debt. No warrants were issued with respect to this transaction.

The notes and warrants mentioned above were issued with price protection provisions and were accounted for as derivative liabilities and valued on the dates issued using a Black-Scholes pricing model.

We recorded an aggregate derivative liability of $74,500 as of December 31, 2012, related to the conversion feature of the note. A derivative valuation gain of $423,500 was recorded to reflect the change in value of the aggregate derivative liability from the time the notes were issued.  The aggregate derivative liability of $74,500 was calculated as follows using a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.11%, (ii) expected life (in years) of 0.50; (iii) expected volatility of 129.08%, (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.08.

Additionally, we recorded an aggregate derivative liability of $2,654 and $183,000 as of December 31, 2013 and 2012, respectively related to the warrant reset provision. A derivative valuation gain of $180,346 and $442,000 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and the time the warrants were issued, respectively.  The aggregate derivative liability of $2,654 was calculated as follows using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.02%, (ii) expected life (in years) of 3.60; (iii) expected volatility of 101.48%, (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

F-15

The principal value of $4,225,000 of the secured convertible note is being accreted over the amended term of the obligation, for which $684,760 and $501,166 was included in interest expense for each the years ended December 31, 2013 and 2012, respectively. The note bears a 12% annual interest rate and for the years ended December 31, 2013 and 2012, $448,792 and $149,227, respectively were included in interest expense.

Unsecured Convertible Note

On September 29, 2006, we entered into a letter of understanding with Triage Capital Management, or Triage, dated September 25, 2006.  The letter of understanding provided that Triage loan $1,000,000 to us in exchange for us entering into, on or prior to October 30, 2006, a convertible note securities agreement.  It was intended that the funding provided by Triage be replaced by a convertible note and accompanying warrants, as described below.  Effective November 2, 2006, we entered into securities purchase agreement, a 5% convertible note, a registration rights agreement, and four classes of warrants to purchase our common stock, all of which were with an individual note holder, the controlling owner of Triage, who caused our agreement with Triage to be assigned to him, which satisfied our agreement with Triage.

Pursuant to the securities purchase agreement, (i) we sold to the convertible note holder a three-year convertible note in the principal amount of $1,000,000 representing the funding received by us on September 29, 2006; (ii) the convertible note bears an annual interest rate of 5%, payable semi-annually in cash or shares of our common stock; (iii) the convertible note is convertible into shares of our common stock at a conversion price of $1.50 per share subject to full-ratchet anti-dilution price protection provisions ; and (iv) we issued to the convertible note holder four classes of warrants (A Warrants, B Warrants, C Warrants and D Warrants), which give the convertible note holder the right to purchase a total of 5,500,000 shares of our common stock as described below.  The A and B Warrants originally expired one year after the effective date of a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), to register the subsequent sale of shares received from exercise of the A and B Warrants. The C Warrants and D Warrants originally expired eighteen months and twenty four months, respectively, after the effective date of a registration statement to be filed under the Securities Act.  The A Warrants grant the convertible note holder the right to purchase up to 750,000 shares of common stock at an exercise price of $1.60 per share, the B Warrants grant the convertible note holder the right to purchase up to 750,000 shares of common stock at an exercise price of $1.75 per share, the C Warrants grant the convertible note holder the right to purchase up to 2,000,000 shares of common stock at an exercise price of $2.10 per share, and the D Warrants grant the convertible note holder the right to purchase up to 2,000,000 shares of common stock at an exercise price of $3.00 per share.

During the year ended December 31, 2007, the convertible note holder exercised 454,000 A Warrants. We entered into an exchange agreement dated October 31, 2007 in which the convertible note holder received 650,000 shares of our common stock in exchange for cancellation of the C and the D Warrants.  The expiration date of the A Warrants and the B Warrants was extended from January 11, 2008 to December 3, 2008. During the year ended December 31, 2008, the convertible note holder exercised 64,400 A Warrants. On December 3, 2008, the remaining 231,600 A Warrants and 750,000 B Warrants were unexercised and expired.

On December 23, 2009 we entered into an amendment with the holder of our unsecured convertible note in the principal amount of $1.0 million which (i) extended the note maturity date to December 22, 2010 and (ii) increased the annual rate of interest from 5% to 8% commencing October 16, 2009. All other terms and conditions of the note remain unchanged.

On December 24, 2010 we closed on a Debt Restructuring as mentioned above, In connection with that Debt Restructuring the Company amended the note with the holder of a $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013 and remains currently unsatisfied.  We issued 150,000 shares to the holder of this note as consideration to extend the term of the note.

F-16

During March 2011, we issued 135,369 shares of common stock to the holder of our unsecured convertible note in satisfaction of $81,221 of accrued interest on the unsecured convertible note.  Also in connection with the satisfaction of the accrued interest we granted to the holder a warrant to acquire up to 221,758 additional shares of our common stock at an exercise price of $0.96 per share.  The warrant is exercisable at any time for a five-year period. For the year ended December 31, 2011, the $157,400 value of the warrant was included in interest expense.

We recorded an aggregate derivative liability of $46,400 of December 31, 2012 related to the conversion feature of the note. A derivative valuation gain of $253,600 was recorded to reflect the change in value of the aggregate derivative liability since December 31, 2011.  The aggregate derivative liability of $46,400 for the conversion feature of the note was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.16%, (ii) expected life (in years) of 1.0; (iii) expected volatility of 112.04%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.08.

In connection with the amendment mentioned above, the principal value of the note is being accreted due to the difference in the value of the conversion feature before and after the amendment. The principal value of $1,000,000 of the unsecured convertible note was accreted over the amended term of the obligation, for which $326,160 and $333,336 was included in interest expense for each the years ended December 31, 2013 and 2012, respectively.

The note bears an 8% annual interest rate payable semi-annually, and for each the years ended December 31, 2013 and 2012, $80,000, was included in interest expense.

Unsecured Interest Note

On April 17, 2013, we entered into a promissory note with the holder of our Unsecured Convertible Note in the amount of $20,000. The note was to satisfy unremitted interest due the holder on the Unsecured Convertible Note at that time. The note bears a 12 % per annum interest rate and was due on December 31, 2013. The principal and accrued interest due remain unsatisfied at the current date.

Senior Unsecured 6.25% Convertible Note

On December 24, 2007, we entered into a securities purchase agreement in which we raised $15,000,000 (less $937,000 of prepaid interest).  We used the proceeds from this financing to support our CodecSys commercialization and development and for general working capital purposes.  Pursuant to the financing, we issued a senior secured convertible note in the principal amount of $15,000,000 (which principal amount has been increased as discussed below).The senior secured convertible note was originally due December 21, 2010, but was extended to December 21, 2013 and has been subsequently retired. The senior secured convertible note bore interest at 6.25% per annum (which rate has been changed as discussed below) if paid in cash.  Interest for the first year was prepaid at closing.  Interest-only payments thereafter in the amount of $234,375 are due quarterly and commenced in April 2009.  Interest payments may be made through issuance of common stock in certain circumstances or may be capitalized and added to the principal.  The original principal of the note was convertible into 2,752,294 shares of our common stock at a conversion price of $5.45 per share, convertible any time during the term of the note.  We granted a first priority security interest in all of our property and assets and of our subsidiaries to secure our obligations under the note and related transaction agreements. In August 2009 we received a waiver from the note holder releasing their security interest for the equipment purchased under our sale lease back financing.

In connection with the 2007 financing, the senior secured convertible note holder received warrants to acquire 1,875,000 shares of our common stock exercisable at $5.00 per share.  We also issued to the convertible note holder 1,000,000 shares of our common stock valued at $3,750,000 and incurred an additional $1,377,000 for commissions, finder’s fees and other transaction expenses, including the grant of a three-year warrant to purchase 112,500 shares of our common stock to a third party at an exercise price of $3.75 per share, valued at $252,000.  A total of $1,377,000 was included in debt offering costs and is being amortized over the term of the note.

F-17

From March 26, 2010 through October 29, 2010, we entered into a series of amendments to the senior secured convertible note.  Each of these amendments is described below.

On March 26, 2010, we entered into an amendment and extension agreement with the holder of the senior secured convertible note.  The agreement conditionally amended the maturity date of the note to December 21, 2011.  If we are unsuccessful in raising at least $6.0 million in equity financing before September 30, 2010, the maturity date of the note will automatically be restored to its original date of December 21, 2010.  In consideration of entering into the agreement, the note holder was issued 1,000,000 shares of our restricted common stock valued at $990,000.  In addition, we agreed to the inclusion of three additional terms and conditions in the note: (i) from and after the additional funding, we will be required to maintain a cash balance of at least $1,250,000 and provide monthly certifications of the cash balance to the note holder; (ii) we will not make principal payments on our outstanding $1.0 million unsecured convertible note without the written consent of the holder of the senior secured convertible note; and (iii) we will grant board observation rights to the note holder.  Given these additional terms, unless the senior secured convertible note holder provides consent, of which there can be no assurance, we will be precluded from repaying the $1.0 million unsecured convertible note when it becomes due on December 22, 2010.

On July 30, 2010, we entered into a further amendment agreement with the holder of the senior secured convertible note regarding the note and warrant reset provisions.  The July 30, 2010 amendment conditionally amended the maturity date of the note to June 21, 2012.  If we are unsuccessful in raising the $6.0 million in equity financing referenced above, the maturity date of the note will automatically be restored to its original date of December 21, 2010.  The holder of the note agreed to a conversion price of the note of $1.80 per share instead of the price at which we sell equity between now and September 30, 2010 and reduced the required cash balance referenced in the March 26, 2010 amendment above from $1,250,000 to $950,000.  In addition, the number of warrants originally granted to the holder pursuant to the 2007 financing increased from 1,875,000 to 5,208,333 and were exercisable at $1.80 per share instead of $5.00 per share.  The warrants continued to be exercisable any time for the five years from the original date of grant.  In consideration of entering into the July 30, 2010 amendment the note holder was issued 2,000,000 shares of common stock and would be issued an additional 800,000 shares of our common stock contingent upon completion of the required equity raise.

On September 27, 2010, we entered into a further amendment agreement with the holder of the senior secured convertible note regarding the note.  Pursuant to this amendment, the due date for the required equity financing was extended to October 31, 2010.

On October 29, 2010, we entered into a fourth amendment agreement with the holder of the senior secured convertible note regarding the note and warrant provisions.  The fourth amendment (i) increased the amount of the required equity raise to $8.0 million, approximately $2.5 million of which had been raised or committed by investors at the time of the amendment; (ii) extended the time in which we can complete the equity financing to December 3, 2010; (iii) deleted the provision of the senior secured convertible note that granted the Company the option to redeem the note prior to its maturity date; (iv) changed the conversion price of the note upon successful completion of the required capital raise to an amount equal to 150% of the lowest price at which Company common stock is sold during calendar year 2010; (v) changed the exercised price of the warrants to an amount equal to 150% of the lowest price at which Company common stock is sold during calendar year 2010; (vi) provides that if we are successful in completing the required capital raise the number of warrants will be increased as currently provided in the 6.25% senior secured convertible promissory note; and (vii) extended the expiration date of the warrants to December 31, 2013.

If the additional funding was not completed by December 3, 2010, certain provisions of the prior amendments became void in that the maturity date will revert back to December 21, 2010, the conversion price became the lowest price at which equity securities had been sold, the exercise price became the lowest price at which equity securities have been sold, the number of warrants then outstanding would be determined by the original purchase documents, and the Company would not have an obligation to maintain a balance of cash and marketable securities equal to $950,000.

F-18

On December 24, 2010, we closed on the Debt Restructuring.  In connection therewith, we (i) issued an Amended and Restated Senior Convertible Note in the principal amount of $5.5 million (the “Amended and Restated Note”) to Castlerigg Master Investment Ltd. (“Castlerigg”), (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the loan restructuring agreement under which the Amended and Restated Note and other documents was issued (the “Loan Restructuring Agreement”), and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest. The Debt Restructuring was considered a troubled-debt restructuring and a gain on debt restructuring of $3,062,457 was recorded during the year ended December 31, 2010, which was the difference between the adjusted carrying value of the original note and the carrying value of the Amended and Restated Note.

The Amended and Restated Note, dated December 23, 2010, is a senior, unsecured note that matures in three years from the closing and bore interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year’s interest of approximately $344,000 at the closing.  The Amended and Restated Note is convertible into shares of common stock at a conversion price of $1.35 per share, subject to adjustment.  The Amended and Restated Note is convertible in whole or in part at any time upon notice by Castlerigg to us.  The Amended and Restated Note also contains various restrictions, acceleration provisions and other standard and customary terms and conditions.  Two of our consolidated subsidiaries guaranteed our obligations under the Amended and Restated Note.

The Investor Rights Agreement provides Castlerigg with certain registration rights with respect to the Company’s securities held by Castlerigg.  These registration rights include an obligation of the Company to issue additional warrants to Castlerigg if certain registration deadlines or conditions were not satisfied.  The agreement also contains full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above.

On March 26, 2012, we closed on an equity financing (the “2012 Equity Financing”), as well as a restructuring of our outstanding senior convertible indebtedness (the “2012 Debt Restructuring”), resulting in complete satisfaction of our senior indebtedness under the Amended and Restated Note.

A portion of the net proceeds from the 2012 Equity Financing was used to close on the 2012 Debt Restructuring. The Company paid $2,750,000 and issued 2,000,000 shares of common stock valued at $760,000 in satisfaction of the Amended and Restated Note and remaining interest value of $680,816. In consideration of negotiating the 2012 Debt Restructuring and amending our agreement with our placement agent, we paid $275,041 and issued 586,164 shares of our common stock valued at $222,742 to our placement agent, and recognized a $2,173,033 gain on extinguishment of debt as a result of this retirement.

With the retirement of the Amended and Restated Note we recorded no aggregate derivative liability at December 31, 2013 or 3012. However for the year ended December 31, 2012, (at the date of retirement) we recorded a derivative valuation gain of $203,700, related to the conversion feature of the Amended and Restated Note to reflect the change in value of the aggregate derivative from December 31, 2011 to the date of retirement. The derivative value of $81,500 at the date of retirement was recorded as additional paid in capital.

Accounts Receivable Purchase Agreements

During the year ended December 31, 2010 we entered into two Accounts Receivable Purchase Agreements with one individual for an aggregate amount of $775,000. During the year ended December 31, 2011 we remitted $100,000 of the principal balance plus accrued interest of $8,360 and converted the remaining $675,000 of principal balance plus $109,292 of accrued and unpaid interest into 1,307,153 shares of our common stock and warrants to purchase an additional 653,576 shares of our common stock. The warrants contain anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than $1.00 per share.  The current exercise price has been reset to $0.725 per share due to subsequent financings.

F-19

We recorded an aggregate derivative liability of $28 and $5,900 as of December 31, 2013 and 2012, respectively, related to the warrant reset provision of the warrants. A derivative valuation gain of $5,872 and $253,600, respectively, was recorded to reflect the change in value of the aggregate derivative liability since December 31, 2012 and December 31, 2011, respectively.  The aggregate derivative liability of $28 for the warrant reset provision of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.48%, (ii) expected life (in years) of 2.20; (iii) expected volatility of 119.11%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

Bridge Loan

On December 28, 2011 we entered into a Note and Warrant Purchase and Security Agreement with seven individuals for an aggregate of $1,300,000 (“Bridge Loan”) to be used as working capital. The note bears an annual interest rate of 18%, payable monthly in cash.  Additionally, we granted to the holders of the Bridge Loan warrants with a five year term to purchase an aggregate of 357,500 shares of our common stock at an exercise price of $0.65.  The note was due on February 28, 2012, but the term was subsequently extended to the earlier of the date nine months from the original maturity date or the date we closed on an additional sale of our securities that resulted in gross proceeds to us of $12 million.  In consideration of the extension of the maturity date of the Bridge Loan, we granted the holders of the Bridge Loan warrants with a six year term to purchase 247,500 shares of our common stock at an exercise price of $0.35 per share. This note is collateralized by a security interest in all of our accounts receivable

In connection with the Bridge Loan, we paid an $84,500 placement fee and issued warrants to purchase 65,000 shares of our common stock at an exercise price of $0.65 per share and subsequently reset to $0.53, to our investment banker for services in completing the above transaction and paid a $3,000 escrow fee to the Escrow Agent in exchange for holding the funds prior to their disbursement to us.

On March 26, 2012, we closed on the 2012 Equity Financing and under the terms of the associated securities purchase agreement, two of the above described bridge lenders converted the principal balance of their portion of the bridge loan in the amount of $400,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing, reducing the outstanding principal balance to $900,000. The warrants issued had a total value of $222,426 which resulted in a loss on extinguishment of debt of $222,426. The aggregate derivative liability and valuation gain or loss for the warrants issued for the converted portion of the principal balance are included in the aggregate of 2012 Equity Financing information.

All warrants mentioned above were issued with price protection provisions and were accounted for as derivative liabilities and valued using a Black Scholes pricing model.

On July 13, 2012 the $900,000 principal balance was retired and was included as part of the 2012 Convertible Note (as described below) and recorded a (i) $93,661 loss on extinguishment of debt related to the remaining un-accreted portion of the note and (ii) $53,160 expense related to unrecognized offering costs, at the time of retirement.

At December 31, 2013 and 2012 we recorded an aggregate derivative liability of $44 and $7,400, respectively related to the reset provision for the original and placement warrants issued. A derivative valuation gain of $7,356 and $136,300 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and 2011, respectively.  The aggregate derivative liability of $44 for the reset provision of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.78%, (ii) expected life (in years) of 3.0; (iii) expected volatility of 103.27%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

F-20

At December 31, 2013 and 2012 we recorded an aggregate derivative liability of $59 and $7,200, respectively related to the reset provision for the warrants issued for an extension of the maturity date.  A derivative valuation gain of $7,141 and $89,325 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and the time the warrants were issued, respectively.  The aggregate derivative liability of $59 for the reset provision of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.78%, (ii) expected life (in years) of 3.0; (iii) expected volatility of 103.27%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

The principal value of the note was being accreted over the amended term of the obligation, for which $106,723 was included in interest expense for the year ended December 31, 2012.  The note bore an 18% annual interest rate, and for the year ended December 31, 2012, $100,899 was included in interest expense.

Equipment Purchase and Sale Agreement

In October 2011, we entered into an Equipment Purchase and Sale Agreement with a Utah corporation whereby we used the funds advanced to purchase certain electronic receiving and digital signage equipment along with installation costs.  A 3% fee was due each month the amount remained outstanding.  At December 31, 2011 we had an outstanding funded amount of $700,000.

On March 26, 2012, we closed on the 2012 Equity Financing and under the terms of the associated securities purchase agreement the above described lender converted the principal balance of its portion of the loan in the amount of $500,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing, the remaining $200,000 principal balance plus $105,000 of interest due was paid in cash. The warrants issued had a total value of $278,032 which resulted in a loss on extinguishment of debt of $278,032. The aggregate derivative liability and valuation gain or loss for the warrants issued for the converted portion of the principal balance are included in the aggregate of 2012 Equity Financing information.

The 3% fee mention above totaling $63,000 was recorded as interest expense for year ended December 31, 2012.

Note 7 – Investment in Interact Devices, Inc (IDI)

We began investing in and advancing monies to IDI in 2001.  IDI was developing technology which became an initial part of the CodecSys technology.

On October 23, 2003, IDI filed for Chapter 11 Federal Bankruptcy protection. We desired that the underlying patent process proceed and that the development of CodecSys technology continue. Therefore, we participated in IDI’s plan of reorganization, whereby we would satisfy the debts of the creditors and obtained certain licensing rights.  On May 18, 2004, the debtor-in-possession’s plan of reorganization for IDI was confirmed by the United States Bankruptcy Court. As a result of this confirmation, we issued to the creditors of IDI shares of our common stock and cash in exchange for approximately 50,127,218 shares of the common stock of IDI. Since May 18, 2004, we have acquired additional common share equivalents IDI. As of December 31, 2013, we owned 55,897,169 IDI common share equivalents, representing approximately 94% of the total outstanding IDI share equivalents

Since May 18, 2004, we have advanced additional cash to IDI for the payment of operating expenses, which continues development and marketing of the CodecSys technology. As of December 31, 2013 and 2012, we have advanced an aggregate amount of $3,393,149 and $3,347,255 respectively, pursuant to a promissory note that is secured by assets and technology of IDI.

Note 8 – Operating Leases

We currently lease our executive office and warehouse space located at 6952 South 185 West, Unit C, Salt Lake City, Utah 84047, which consists of approximately 2,500 square feet on a month to month basis, at the rate of $3,955 per month plus utilities. We have no other properties.  We recognized rent expense of approximately $234,392 and $352,789, in 2013 and 2012, respectively.

F-21

We also lease copy machines on multi-year leases that expire in March 2014 at a minimum rate of $655 per month.

The total future minimum payments under non-cancelable operating leases at December 31, 2013 are $1,965 related to the copy machines mentioned above.

Note 9 – Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax liabilities consist of the following components as of December 31, 2012 and 2013:

	2012			2013
Deferred tax assets
NOL carry-forward	$	25,881,900		$	27,003,600
General business credit carry-forwards		1,158,900			1,118,400
Deferred compensation		78,500			22,700
Allowance for doubtful accounts		31,600			3,200
Deferred tax liabilities
Depreciation		61,700			(13,300	)
Valuation allowance		(27,212,600	)		(28,134,600	)
Net deferred tax asset	$	-		$	-

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2012 and 2013 due to the following:

	2012			2013
Federal income tax (expense) benefit at statutory rates	$	1,831,600		$	958,300
State income tax (expense) benefit at statutory rates		269,300			140,900
Change in valuation allowance		(2,100,900	)		(1,099,200	)
	$	-		$	-

At December 31, 2013, the Company had net operating loss carry-forwards of approximately $69,240,000 that may be offset against future taxable income from the year 2014 through 2033.  No tax benefit has been reported in the December 31, 2012 and 2013 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

F-22

Note 10 – Preferred and Common Stock

We have authorized two classes of stock, 20,000,000 shares of preferred stock with no par value and 180,000,000 shares of common stock with a $0.05 par value. No preferred stock has been issued, while 110,233,225 shares of common stock were issued and outstanding at December 31, 2013. Holders of shares of common stock are entitled to receive dividends if and when declared and are entitled to one vote for each share on all matters submitted to a vote of the shareholders.

During the year ended December 31, 2013, we issued 2,759,405 shares of our common stock as follows: (i) 2,240,852for extinguishment of company liabilities, (ii) 258,553 for settlement of restricted stock options, (iii) 200,000 for common stock issued to a former director for prior years services rendered, (iv) 60,000 to six non-employees for services rendered.

During the year ended December 31, 2012, we issued 31,498,164 shares of our common stock as follows: (i) 24,816,000related to our 2012 Equity Financing and Debt Restructuring, (ii) 5,600,000 for debt conversions and (iii) 1,082,164 for services rendered by consultants.

Note 11 – Stock-based Compensation

In accordance with ASC Topic 718, stock-based compensation cost is estimated at the grant date, based on the estimated fair value of the awards, and recognized as expense ratably over the requisite service period of the award for awards expected to vest.

Stock Incentive Plans

Under the Broadcast International, Inc. 2004 Long-term Incentive Plan (the “2004 Plan”), the board of directors may issue incentive stock options to employees and directors and non-qualified stock options to consultants of the company.  Options generally may not be exercised until twelve months after the date granted and expire ten years after being granted. Options granted vest in accordance with the vesting schedule determined by the board of directors, usually ratably over a three-year vesting schedule upon anniversary date of the grant.  Should an employee terminate before the vesting period is completed, the unvested portion of each grant is forfeited. We have used the Black-Scholes valuation model to estimate fair value of our stock-based awards, which requires various judgmental assumptions including estimated stock price volatility, forfeiture rates, and expected life.  Our computation of expected volatility is based on a combination of historical and market-based implied volatility.  The number of unissued stock options authorized under the 2004 Plan at December 31, 2013 was 4,319,411.

The Broadcast International, Inc. 2008 Equity Incentive Plan (the “2008 Plan”) has become our primary plan for providing stock-based incentive compensation to our eligible employees and non-employee directors and consultants of the company. The provisions of the 2008 Plan are similar to the 2004 Plan except that the 2008 Plan allows for the grant of share equivalents such as restricted stock awards, stock bonus awards, performance shares and restricted stock units in addition to non-qualified and incentive stock options. We continue to maintain and grant awards under our 2004 Plan which will remain in effect until it expires by its terms. The number of unissued shares of common stock reserved for issuance under the 2008 Plan was 363,200 at December 31, 2013.

Stock Options

We estimate the fair value of stock option awards granted beginning January 1, 2006 using the Black-Scholes option-pricing model. We then amortize the fair value of awards expected to vest on a straight-line basis over the requisite service periods of the awards, which is generally the period from the grant date to the end of the vesting period. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected option term.  Our computation of expected volatility is based on a combination of historical and market-based implied volatility.  The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award was granted with a maturity equal to the expected term of the stock option award. The expected option term is derived from an analysis of historical experience of similar awards combined with expected future exercise patterns based on several factors including the strike price in relation to the current and expected stock price, the minimum vest period and the remaining contractual period.

F-23

There were no options issued during the year ending December 31, 2013.  The fair values for the options granted in 2012 were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,2012
Risk free interest rate	1.65%
Expected life (in years)	10.0
Expected volatility	78.97%
Expected dividend yield	0.00%

The weighted average fair value of options granted during the year ended December 31, 2012 was $0.27.

Warrants

We estimate the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model. We amortize the fair value of issued warrants using a vesting schedule based on the terms and conditions of each associated underling contract, as earned. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and warrant expected exercise term.  Our computation of expected volatility is based on a combination of historical and market-based implied volatility.  The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the warrant was issued with a maturity equal to the expected term of the warrant.

The fair values for the warrants granted in 2013 and 2012 were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,
	2013	2012
Risk free interest rate	0.65%	1.16%
Expected life (in years)	4.42	5.7
Expected volatility	90.68%	82.79%
Expected dividend yield	0.00%	0.00%

The weighted average fair value of warrants granted during the years ended December 31, 2013 and 2012, was $0.05 and $0.23, respectively.

Results of operations for the years ended December 31, 2013 and 2012 includes $25,388 and $283,693, respectively, of non-cash stock-based compensation expense. Restricted stock units and options issued to directors vest immediately. All other restricted stock units, options and warrants are subject to applicable vesting schedules. Expense is recognized proportionally as each award or grant vests.

The $25,388 non-cash stock-based compensation expense for the year ended December 31, 2013 was a result of the vesting of unexpired options and warrants issued prior to January 1, 2013.

For the year ended December 31, 2012 we recognized $283,692 of stock based compensation as follows: (i) $65,500 for 390,133 restricted stock units issued to 5 members of the board of directors, (ii) $833 for 50,000 options granted to 4 employees and (iii) $217,359 resulting from the vesting of unexpired options and warrants issued prior to January 1, 2012.

F-24

The following table summarizes option and warrant activity during the years ended December 31, 2013 and 2012.

	Options and Warrants Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2011		20,440,551		$	1.10
Options granted		50,000			0.37
Warrants issued		24,817,900			0.33
Expired		(252,669	)		1.31
Forfeited		(1,658,919	)		1.31
Exercised		--			--
Outstanding at December 31, 2012		43,396,863		$	0.54
Options granted		--			--
Warrants issued		850,000			0.25
Expired		(643,094	)		0.55
Forfeited		(535,633	)		1.42
Exercised		--			--
Outstanding at December 31, 2013		43,068,136		$	0.47

The following table summarizes information about stock options and warrants outstanding at December 31, 2013.

		Outstanding						Exercisable
				Weighted Average Remaining		Weighted Average				Weighted Average
	Range of Exercise Prices	Number Outstanding		Contractual Life (years)		Exercise Price		Number Exercisable		Exercise Price
$	0.17-0.95		40,024,414		3.34	$	0.42		39,941,081	$	0.42
	1.00-1.59		2,709,222		2.69		1.04		2,694,555		1.04
	2.25-4.00		334,500		1.94		2.52		334,500		2.52
$	0.17-4.00		43,068,136		3.29	$	0.48		42,970,136	$	0.47

There were no options exercised for the years ended December 31, 2013 and 2012. There was no intrinsic value of options and warrants available and exercisable for the years ended December 31, 2013 or 2012.

Restricted Stock Units

For the years ended December 31, 2013 and 2012, 686,667 and 390,133 restricted stock units were awarded, respectively. The cost of restricted stock units is determined using the fair value of our common stock on the date of the grant and compensation expense is recognized in accordance with the vesting schedule.  All of the restricted stock units vested during the year they were awarded.

F-25

The following is a summary of restricted stock unit activity for the years ended December 31, 2013 and 2012:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2011		2,550,000			1.25
Awarded at fair value		390,133			0.17
Canceled/Forfeited		--			--
Settled by issuance of stock		--			--
Outstanding at December 31, 2012		2,940,133		$	1.11
Awarded at fair value		686,667			0.08
Canceled/Forfeited		(275,000	)		1.36
Settled by issuance of stock		(258,553	)		0.82
Outstanding at December 31, 2013		3,093,247		$	0.88
Vested at December 31, 2013		3,093,247		$	0.88

The 686,667 restricted stock units valued at $51,500 awarded in the year ended December 31, 2013, were issued to 5 members of the board of directors for services rendered prior to 2013 and had been included as director fee expenses in the year ended December 31, 2012.

The impact on our results of operations for recording stock-based compensation for the years ended December 31, 2013 and 2012 is as follows:

	For the years ended
	December 31,
	2013		2012
General and administrative	$	25,388	$	185,478
Research and development		--		98,214
Total	$	25,388	$	283,692

Total unrecognized stock-based compensation was $29,294 at December 31, 2013, which we expect to recognize during the year ended December 31, 2014, in accordance with vesting provisions.

Note 12 – Equipment Financing

On August 27, 2009, we completed an equipment lease financing transaction with a financial institution.  Pursuant to the financing, we entered into various material agreements with the financial institution. These agreements are identified and summarized below.

We entered into a Master Lease Agreement dated as of July 28, 2009 with the financial institution pursuant to which we sold to the financing institution certain telecommunications equipment to be installed at 1,981 (subsequent additional locations have increased the customer’s network to an aggregate of approximately 2,100 locations) of our customer’s retail locations in exchange for a one-time payment of $4,100,670 by the financial institution. We paid to the financial institution 36 monthly lease payments of approximately $144,000 plus applicable sales taxes. We had the right to terminate the lease after making 33 payments for a termination fee of the higher of approximately 10% of the original equipment value (approximately $410,000) or the then “in-place fair market value” after which payment we would own all of the equipment. We gave timely notice of exercise of this option. We were a party to a lawsuit to determine if the “in-place fair market value” exceeded 10% of the original lease value and by what amount.  We contended that the three payments made subsequent to the notice exercising our right to purchase constitute full payment for the equipment. The equipment broker contended that we owed an additional amount.  Our accounting records reflected that the capital lease had been retired and the equipment was fully depreciated.

F-26

During the year ended December 31, 2012 we included in our lease payments approximately $422,100 toward the in place fair market value. Additionally during the year ended December 31, 2012 and the five months ended May 31, 2013 we made payments of $140,700 and $284,400, respectively, into an escrow account held by the court pending resolution of our dispute.

During 2012 we had made lease payments totaling approximately $1,125,588 of which $1,067,649 was applied toward the outstanding lease and $57,939 was included in interest expense. Included in the $1,125,588 is approximately $422,100 paid toward the in place fair market value. Additionally during the year ended December 31, 2012 we made payments of $140,700 into an escrow account held by the court pending resolution of our dispute. For the year ending December 31, 2012, we expensed the final $33,512 of our lease acquisition fee of $150,792 which was being recognized over the life of the lease included in interest expense.

During the five months ended May 31, 2013 we made additional payments totaling $284,400 into the escrow account. On June 13, 2013 this matter was settled resulting in a $370,000 payment to the plaintiff, which had previously been deposited in escrow with the Court. The $55,100 balance remaining in the escrow account was paid towards accrued litigation fees.  For the year ended December 31, 2013 we recorded the $370,000 expense as part of our cost of sales as it was related to the equipment used by one of our customers.

Note 13 – Fair Value Measurements

We adopted ASC Topic 820 as of January 1, 2008 for financial instruments measured at fair value on a recurring basis.  ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  These tiers include:

· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2013:

					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
None		--		--		--		--
Total assets measured at fair value	$	--	$	--	$	--	$	--
Liabilities
Derivative valuation (1)	$	11,736	$	--	$	--	$	11,736
Total liabilities measured at fair value	$	11,736	$	--	$	--	$	11,736

(1) See Notes 4 & 5 for additional discussion.

F-27

The table below presents our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2013.  We classify financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model.

	Derivative
	Valuation
	Liability
Balance at December 31, 2012	$	(1,191,269	)
Total gains or losses (realized and unrealized)
Included in net income		1,242,459
Valuation adjustment		--
Purchases, issuances, and settlements, net		(62,926	)
Transfers to Level 3		--
Balance at December 31, 2013	$	(11,736	)

Money Market Funds and Treasury Securities

The money market funds and treasury cash reserve securities balances are classified as cash and cash equivalents on our consolidated balance sheet.

Fair Value of Other Financial Instruments

The carrying amounts of our accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their immediate or short-term maturities.  The aggregate carrying amount of the notes payable approximates fair value as the individual notes bear interest at market interest rates and there hasn’t been a significant change in our operations and risk profile.

Note 14 – Retirement Plan

We had implemented a 401(k) employee retirement plan. Under the terms of the plan, participants may elect to contribute a portion of their compensation, generally up to 60%, to the plan, subject to IRS Code Section 415 limitations. We match contributions up to 100% of the first 3% of a participant’s compensation contributed to the plan and 50% of the next 2%. Employees are eligible to participate in the plan after three months of service as defined by the plan. For the years ended December 31, 2013 and 2012, we made matching contributions totaling $47,691 and $99,761, respectively.  On October 31, 2013 plan participation was discontinued with all plan assets distributed to the participants by our plan fiduciary on or before January 31, 2014.

F-28

Note 15 – Legal Proceedings

We are a defendant in a lawsuit filed in Los Angeles Superior court seeking payment for services rendered by the Plaintiff, Audio Visual Plus, Inc.  The total amount in dispute is $29,235.  We have paid the plaintiff approximately one half of the amount claimed and the action is not proceeding at the present time.

In May 2013, we were named as defendant in a lawsuit filed in the Small Claims Court in the Third Judicial District, State of Utah, seeking payment for services rendered by the plaintiff, Performance Audio.  The total amount in dispute is approximately $9,663.  We have paid approximately one half of the amount claimed and the action is not proceeding at the present time.

In September 2013, we were named as defendant in a lawsuit filed in the Third Judicial District court, Salt Lake County, State of Utah, seeking judgment for damages related to a breach of a termination agreement we entered into with our former landlord when we vacated our former offices.  A default judgment was entered in the matter in the amount of $91,666.66 plus attorneys fees.

On November 4, 2013, we notified AllDigital that we terminated the Merger Agreement pursuant to Section 8.1(b), which permits termination of the Agreement by either party if the Merger is not consummated by October 31, 2013, provided that such failure is not attributable to the terminating party’s failure to perform its obligations under the Merger Agreement. Following delivery of our notice of termination, AllDigital responded by asserting that the Merger did not close because we failed to perform our obligations and that we were not entitled to terminate under Section 8.1(b).  AllDigital further notified us that it was terminating the Merger Agreement for cause based on our alleged breach of the non-solicitation covenants in the Merger Agreement, which AllDigital asserts triggers a termination fee of $100,000 and 4% of our equity on a non-diluted basis, and for various other alleged misrepresentations and breaches.  We disputes AllDigital’s allegations and assertions, deny that AllDigital is entitled to any termination fee and reserve the right to pursue damages from AllDigital arising from AllDigital’s actions in relation to the Merger Agreement.  No litigation has been filed in this matter.

Note 16 – Liquidity

At December 31, 2013, we had cash of $215,371, total current assets of $300,709, total current liabilities of $7,197,395 and total stockholders' deficit of $6,655,301.  Included in current liabilities is $5,245,000 related to the current portion of notes payable and other debt obligations.

Broadcast experienced negative cash flow used in operations during the year of $1,447,385 compared to negative cash flow used in operations for the year ended December 31, 2012 of $3,362,785.  Although that represents a decrease in cash used for operations of $1,915,400, the cash used decreased only because we had lost approximately 90% of our business.  During 2013 the decrease in negative cash flow was realized primarily through a reduction in the number of employees from 24 to 8, as well as additional expense reduction actions including reducing sales and general and administrative expenses incident to losing our largest customer and curtailing all sales and marketing and development expenditures for our CodecSys product.

Our audited consolidated financial statements for the year ended December 31, 2013 contain a “going concern” qualification.  As discussed in Note 3 of the Notes to Consolidated Financial Statements, we have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  Because of these conditions, our independent auditors have raised substantial doubt about our ability to continue as a going concern.

The negative cash flow was met by cash reserves from additional proceeds of the issuance of the 2012 Convertible Debt in the total amount of $1,175,000, which included $750,000 of accounts receivable financing that was converted to the 2012 Convertible Debt. Because we expect to continue to experience negative operating cash flow as long as we continue our current limited operations, we need to secure additional funding or complete the proposed merger with Wireless Ronin.  We are actively only pursuing one potential digital signage customer to replace lost revenues.

F-29

Note 17 – Supplemental Cash Flow Information

2013

· During the year ended December 31, 2013 we issued 458,553 shares of our common stock to one former member of our board of directors for services rendered of which (i) 258,553 was for the settlement of previously awarded restricted stock units and (ii) 200,000 valued at $15,000 for unpaid services rendered in 2012, which had been expensed as director fees during the year ended December 31, 2012

· For the year ended December 31, 2013 we issued an aggregate of 60,000 shares of our common stock valued at $4,200 to six individuals for services rendered.

· For the nine months ended September 30, 2013 we awarded 686,667 restricted stock units issued valued at $51,500 to four members of our board of directors for services rendered in 2012. The value of these awards had been expensed as directors fee during the year ended December 31, 2012.

· For the year ended December 31, 2013 we recorded a $68,214 loss on disposal of assets of which (i) $40,824 was for the abandonment of lease hold improvements related to our move from our 7050 Union Park location, (ii) $25,685 related to the retirement of furniture & fixtures, (iii) $1,705 (net of $139,014 of proceeds) related to equipment sold or no longer in use.

· For the year ended December 31, 2013 we reduced our accounts payable by $841,750 and recorded a $481,590 gain on extinguishment of liabilities resulting from the issuance of 2,240,852 shares of our common stock valued at $153,860 and cash payments totaling $206,300 to 21 of our accounts payable vendors.  As of December 31, 2013 we owe 6 of these vendors an additional aggregate amount of $55,317. Additionally we reduced our accounts payable by $335,701 by returning equipment to two vendors who accepted the returns for full credit against our payable.

· For year ended December 31, 2013 an aggregate non-cash expense of $1,010,920 was recorded for the accretion of notes payable as follows: (i) $326,100 for our unsecured convertible note and (ii) $684,760 for our 2012 secured convertible notes.

· During the year ended December 31, 2013, we recognized $211,721 in depreciation and amortization expense from the following: (i) $1,209 related to cost of sales for equipment used directly by or for customers, (ii) $200,606 related to equipment other property and equipment, and (iii) $9,906 for patent amortization.

2012

· During the year ended December 31, 2012 we issued 586,164 shares our common stock, valued at $222,742 to a placement agency for services rendered related to our 2012 Equity Financing and Debt Restructuring agreement

· During the year ended December 31, 2012, we issued 496,000 shares of our common stock valued at $177,313 to two consultants and one corporation of which (i) 250,000 shares was in consideration for cancellation of a warrant issued for consulting services rendered and (ii) 246,000 was for consulting services rendered.

· During the year ended December 31, 2012, we recognized $1,024,754 in depreciation and amortization expense from the following: (i) $466,606 related to cost of sales for equipment used directly by or for customers, (ii) $547,997 related to equipment other property and equipment, and (iii) $10,151 for patent amortization.

F-30

· For the year ended December 31, 2012, an aggregate non-cash expense of $941,225 was recorded for the accretion of our convertible notes of which (i) $501,166 was for the accretion of our 2012 Secured Convertible Note (ii) $333,336 was related to our unsecured convertible note and (iii) $106,723 was for our bridge loan.

We paid no cash for income taxes during the years ended December 31 2013 and 2012.

Note 18 – Subsequent Events

On March 6, 2014, we issued 729,100 shares of our common stock to one of our former managers in consideration of termination of his employment agreement and compensation.

On March 6, 2014, we issued 408,553 shares of our common stock to one of our former directors in settlement of restricted stock units he had been granted during his tenure as a member of our Board of Directors.

On March 6, 2014, we entered into a Merger Agreement and Plan of Reorganization with Wireless Ronin Technologies, Inc., a Minnesota corporation, (“Ronin”) pursuant to which we would become a wholly owned subsidiary of Ronin. The merger is subject to contingencies normal in this type of transaction, including, our shareholders’ consent, satisfaction or conversion of our indebtedness, and the effectiveness of a registration statement to be filed with the SEC.

F-31

Exhibit Index

(a)           Exhibits

Exhibit Number	Description of Document
2.1	Agreement and Plan of Merger and Reorganization, dated as of January 6, 2012, by and among Broadcast International, Inc., AllDigital, Inc., and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013.
2.2	First Amendment to Agreement and Plan of Merger, dated as of April 10, 2013, by and among Broadcast International, Inc., AllDigital Holdings, Inc. and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed with the SEC on April 10, 2013.
2.3	Second Amendment to Agreement and Plan of Merger, dated as of June 30, 2013, by and among Broadcast International, Inc., AllDigital Holdings, Inc. and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 30, 2013.
2.4	First Amendment to Agreement and Plan of Merger, dated as of August 26, 2013, by and among Broadcast International, Inc., AllDigital Holdings, Inc. and Alta Acquisition Corporation.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 28, 2013.
2.5	Agreement and Plan of Merger and Reorganization, dated as of March 6, 2013, by and among Broadcast International, Inc., Wireless Ronin Technologies, Inc, and Broadcast Acquisition Co.  (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 7, 2013.
3.1	Amended and Restated Articles of Incorporation of Broadcast International.   (Incorporated by reference to Exhibit No. 3.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed with the SEC on November 14, 2006.)
3.2	Amended and Restated Bylaws of Broadcast International.  (Incorporated by reference to Exhibit No. 3.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed with the SEC on November 14, 2006.)
4.1	Specimen Stock Certificate of Common Stock of Broadcast International.  (Incorporated by reference to Exhibit No. 4.1 of the Company's Registration Statement on Form SB-2, filed under cover of Form S-3, pre-effective Amendment No. 3 filed with the SEC on October 11, 2005.)
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 James E Solomon dated September 19, 2008.  (Incorporated by reference to Exhibit No. 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on Mach 31, 2010.)
10.3*	Broadcast International 2004 Long-Term Incentive Plan.  (Incorporated by reference to Exhibit No. 10.4 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003 filed with the SEC on March 30, 2004.)
10.4*	Broadcast International 2008 Long-Term Incentive Plan.  (Incorporated by reference to the Company’s  definitive Proxy Statement on Schedule 14A filed with the SEC on April 17, 2009)

10.5	Securities Purchase Agreement dated October 28, 2006 between Broadcast International and Leon Frenkel.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2006.)
10.6	5% Convertible Note dated October 16, 2006 issued by Broadcast International to Leon Frenkel.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2006.)
10.7	Registration Rights Agreement dated October 28, 2006 between Broadcast International and Leon Frenkel.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2006.)
10.8	Securities Purchase Agreement dated as of December 21, 2007, by and among Broadcast International and the investors listed on the Schedule of Buyers attached thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.9	Registration Rights Agreement dated as of December 21, 2007, by and among Broadcast International and the buyers listed therein.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.10	6.25% Senior Secured Convertible Promissory Note dated December 21, 2007 issued to the holder listed therein.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.11	Warrant to Purchase Common Stock dated December 21, 2007 issued to the holder listed therein.  (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2007.)
10.12	Loan Restructuring Agreement between the Company and Castlerigg Master Investments Ltd., dated December 16, 2010 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2010.)
10.13	Amendment to 8% Convertible Note Due 2010 between the Company and Leon Frenkel, dated December 22, 2010 (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2010.)
10.14	Placement Agency Agreement between the Company and Philadelphia Brokerage Corporation, dated December 17, 2010 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.15	Form of Subscription Agreement (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.16	Form of Warrant (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.17	Amended and Restated Senior Convertible Note issued by the Company to Castlerigg master Investments Ltd., dated December 23, 2010 (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)

10.18	Investor Rights Agreement between the Company and Castlerigg Master Investments Ltd., dated December 23, 2010 (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.19	Letter between the Company and Castlerigg Master Investments Ltd., dated December 23, 2010 (Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2010.)
10.20	Form of Securities Purchase Agreement dated March 13, 2012.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.21	Form of A Warrant.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.22	Form of B Warrant.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.23	Loan Satisfaction Agreement between the Company and Castlerigg Master Investments Ltd. dated March 13, 2012.  (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.24	Registration Rights Agreement dated March 13, 2012.  (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.25	Form of Placement Agent Warrant.  (Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2012.)
10.26	Form of Note and Warrant Purchase and Security Agreement dated July 16, 2012.  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012.)
10.27	Form of Promissory Note dated July 16, 2012.  (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012.)
10.28	Form of Warrant.  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012.)
10.29	Form of Voting Agreement, dated January 6, 2013, by and among AllDigital, Inc. and certain stockholders of Broadcast International, Inc. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.30	Form of Voting Agreement, dated January 6, 2013, by and among Broadcast International, Inc. and certain stockholders of AllDigital, Inc. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.31	Professional Services Agreement, dated January 6, 2013, by and between AllDigital, Inc. and Broadcast International, Inc. (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.32*	Amendment and Settlement Agreement, dated January 6, 2013, by and between Broadcast International, Inc. and Rodney Tiede.  (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).

10.33*	Amendment and Settlement Agreement, dated January 6, 2013, by and between Broadcast International, Inc. and James E. Solomon. (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.34*	Amendment and Settlement Agreement, dated January 6, 2013, by and between Broadcast International, Inc. and Steve Jones. (Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013).
10.35	Amendment to Note and Warrant Purchase and Security Agreement and Senior Secured Convertible Promissory Notes, effective as of July 13, 2013, by and among Broadcast International, Inc., Interact Devices, Inc., Amir L. Ecker and the Purchasers indicated on the signature pages thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
10.36	Consent to Convert Accounts Receivable Agreement dated August 8, 2013, by and between Broadcast International, Inc. and Don Harris. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
10.37	Senior Secured Convertible Promissory Note, dated August 8, 2013. (Incorporated  by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
10.38	Form of Convertible Promissory Note issued by AllDigital Holdings, Inc. and countersigned by Broadcast International, Inc. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on August 28, 2013)
14.1	Code of Ethics. (Incorporated by reference to Exhibit No. 14 of the Company’s Annual Report on Form 10-KSB filed with the SEC on March 30, 2004.)
21.1	Subsidiaries.  (Incorporated by reference to Exhibit No. 21.1 of the Company’s Annual Report on Form 10-KSB filed with the SEC on April 1, 2005.)
24.1	Power of Attorney. (Included on page II-15).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Principal Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	Taxonomy Extension Calculation Linkbase Document.
101.DEF	Taxonomy Extension Definition Linkbase Document.
101.LAB	Extension Labels Linkbase Document.
101.PRE	Taxonomy Extension Presentation Linkbase Document.

* Management contract or compensatory plan or arrangement.

EX-31.1

Exhibit 31.1

Broadcast International, Inc. & Subsidiaries

Certification Of Principal 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 M. Tiede, certify that:

1.  I have reviewed this annual report on Form 10-K 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 registrant as of, and for, the periods presented in this report;

4.  The registrant’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c.  Evaluated the effectiveness of the registrant’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

d.  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.  All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’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 registrant’s internal control over financial reporting.

Date:      March 31, 2014

 /s/  Rodney M. Tiede     

Rodney M. Tiede, President (Principal Executive Officer)

EX-31.2

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, James E. Solomon, certify that:

1.  I have reviewed this annual report on Form 10-K 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 registrant as of, and for, the periods presented in this report;

4.  The registrant’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c.  Evaluated the effectiveness of the registrant’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

d.  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.  All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’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 registrant’s internal control over financial reporting.

Date:      March 31, 2014

/s/  James E. Solomon                

James E. Solomon, Chief Financial Officer

EX-32.1

Chief Financial Officer Exhibit 32.1

Broadcast International, Inc. & Subsidiaries

Certification Of Principal 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 annual report of Broadcast International, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013, Rodney M. Tiede 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 annual report 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 annual report fairly presents, in all material respects, the financial condition and results  of operations of the Company for the periods presented therein.

Date:       March 31, 2014

 /s/  Rodney M. Tiede                   

Rodney M. Tiede, President (Principal Executive Officer)

EX-32.2

Exhibit 32.2

Broadcast International, Inc. & Subsidiaries

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

In connection with the annual report of Broadcast International, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013, James E. Solomon 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 annual report 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 annual report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date:       March 31, 2014

 /s/  James E. Solomon                    

James E. Solomon

Chief Financial Officer

XML

Equity Financing and the Debt Restructuring (2010 Equity Financing and the Debt Restructuring) (Details) (USD $)	12 Months Ended			0 Months Ended				1 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended					0 Months Ended	12 Months Ended				12 Months Ended	0 Months Ended					0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Mar. 31, 2011 Warrants Issued Pursuant to Waiver Agreement [Member]	Mar. 26, 2012 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 24, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]	Jul. 30, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]	Mar. 26, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 24, 2007 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 31, 2012 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 24, 2010 Unsecured Convertible Note [Member]	Dec. 31, 2012 Unsecured Convertible Note [Member]	Dec. 31, 2013 Unsecured Convertible Note [Member]	Dec. 23, 2009 Unsecured Convertible Note [Member]	Nov. 02, 2006 Unsecured Convertible Note [Member]	Nov. 29, 2010 2010 Bridge Loan [Member]	Dec. 24, 2010 2010 Plan [Member]	Dec. 31, 2013 2010 Plan [Member]	Dec. 31, 2012 2010 Plan [Member]	Dec. 31, 2011 2010 Plan [Member]	Mar. 26, 2012 2010 Plan [Member]	Dec. 31, 2011 2010 Plan [Member] Warrants Issued Pursuant to Waiver Agreement [Member]	Dec. 24, 2010 2010 Plan [Member] Minimum [Member]	Dec. 24, 2010 2010 Plan [Member] Maximum [Member]	Apr. 05, 2012 2012 Plan [Member]	Mar. 26, 2012 2012 Plan [Member]	Dec. 31, 2013 2012 Plan [Member]	Mar. 26, 2012 2012 Plan [Member] Minimum [Member]	Mar. 26, 2012 2012 Plan [Member] Maximum [Member]
Equity Financing and Debt Restructuring [Line Items]
Gross consideration in equity financing transaction																						$ 10,000,000	$ 15,000,000		$ 6,000,000		$ 3,000,000	$ 10,000,000
Shares of stock issued per warrant exercised																1									0.5
Commission fee percentage																8.00%									10.00%
Shares of common stock issued						2,000,000	1,000,000	1,000,000		150,000						40,000								616,000	2,000,000
Value of shares issued for agent fees, denominator																1,000,000
Payments for placement fees																180,000
Equity units subscribed but unissued																12,500,000
Per share subscription price of equity units																$ 1.20
Warrant term length																5 years
Exercise price of warrants										0.90						1.00	0.7312			0.78
Proceeds from equity financing		6,150,000														13,500,000								154,000
Principal issued					5,500,000			15,000,000						1,000,000	1,000,000
Repayments of convertible debt					2,500,000											2,750,000
Cash paid to settle debt				2,750,000	2,750,000											2,500,000									2,750,000
Number of warrants cancelled					5,208,333											5,208,333
Number of shares issued for debt restructuring				2,000,000	800,000											800,000
Value of shares issued for debt restructuring				760,000																					760,000
Shares of stock issuable, but forgone in lieu of cash payment					3,500,000											3,500,000
Debt forgiveness					7,200,000											7,200,000
Debt interest rate								6.25%				8.00%	8.00%	5.00%
Interest paid	66,700	347,902		680,816	350,434			937,000
Accrued interest payable									680,816																680,816
Conversion price					$ 1.35	$ 1.80		$ 5.45						$ 1.50
Warrants issued			400,000							75,000							12,499,980									18,470,400
Stock issued upon exercise of warrants																			372,272
Derivative valuation	11,736	1,191,269							81,500		46,400						499	109,400
Gain on derivative valuation	$ 1,242,459	$ 8,829,748							$ 203,700		$ 253,600						$ 108,901	$ 2,765,600			$ 144,000
Risk-free interest rate											0.16%						0.38%
Expected life											1 year						2 years
Expected volatility											112.04%						120.96%
Dividend yield											0.00%						0.00%
Stock trading price											$ 0.08						$ 0.005

XML

Stock-based Compensation (Schedule of Option and Warrant Activity) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Options and Warrants Outstanding
Outstanding, beginning balance	43,396,863	20,440,551
Expired	(643,094)	(252,669)
Forfeited	(535,633)	(1,658,919)
Exercised
Outstanding, ending balance	43,068,136	43,396,863
Weighted Average Exercise Price
Outstanding, beginning balance	$ 0.54	$ 1.1
Expired	$ 0.55	$ 1.31
Forfeited	$ 1.42	$ 1.31
Exercised
Outstanding, ending balance	$ 0.47	$ 0.54
Stock Options [Member]
Options and Warrants Outstanding
Granted/Issued		50,000
Weighted Average Exercise Price
Granted/Issued		$ 0.37
Warrant [Member]
Options and Warrants Outstanding
Granted/Issued	850,000	24,817,900
Weighted Average Exercise Price
Granted/Issued	$ 0.25	$ 0.33

XML

Operating Leases (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Operating Leased Assets [Line Items]
Rent expense	$ 234,392	$ 352,789
Executive Offices [Member]
Operating Leased Assets [Line Items]
Area of space	2,500
Monthly payment	3,955
Office Equipment [Member]
Operating Leased Assets [Line Items]
Monthly payment	655
Lease expiration date	Mar. 31, 2014
Future minimum payments under non-cancelable operating leases:
Total	$ 1,965

XML

Stock-based Compensation (Schedule of Information About Options and Warrants) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
$ 0.17-0.95 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, minimum	$ 0.17
Range of Exercise Prices, maximum	$ 0.95
Number Outstanding	40,024,414
Weighted Average Remaining Contractual Life (years)	3 years 4 months 2 days
Weighted Average Exercise Price	$ 0.42
Number Exercisable	39,941,081
Weighted Average Exercise Price	$ 0.42
$ 1.00-1.59 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, minimum	$ 1.00
Range of Exercise Prices, maximum	$ 1.59
Number Outstanding	2,709,222
Weighted Average Remaining Contractual Life (years)	2 years 8 months 9 days
Weighted Average Exercise Price	$ 1.04
Number Exercisable	2,694,555
Weighted Average Exercise Price	$ 1.04
$ 2.25-4.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, minimum	$ 2.25
Range of Exercise Prices, maximum	$ 4.00
Number Outstanding	334,500
Weighted Average Remaining Contractual Life (years)	1 year 11 months 9 days
Weighted Average Exercise Price	$ 2.52
Number Exercisable	334,500
Weighted Average Exercise Price	$ 2.52
$ 0.17-4.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, minimum	$ 0.17
Range of Exercise Prices, maximum	$ 4.00
Number Outstanding	43,068,136
Weighted Average Remaining Contractual Life (years)	3 years 3 months 15 days
Weighted Average Exercise Price	$ 0.48
Number Exercisable	42,970,136
Weighted Average Exercise Price	$ 0.47

XML

Notes Payable (Equipment Purchase and Sale Agreement) (Details) (USD $)	12 Months Ended		0 Months Ended	1 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Mar. 26, 2012 Equipment Purchase and Sale Agreement [Member]	Oct. 31, 2011 Equipment Purchase and Sale Agreement [Member]	Dec. 31, 2012 Equipment Purchase and Sale Agreement [Member]	Dec. 31, 2011 Equipment Purchase and Sale Agreement [Member]
Debt Instrument [Line Items]
Fee percent				3.00%
Amount of debt converted			$ 500,000
Accrued interest payable						700,000
Repayment of debt		4,017,649	200,000
Interest paid	66,700	347,902	105,000
Interest expense					63,000
Fair value of warrants			278,032
Gain on extinguishment of debt		$ 1,578,914	$ (278,032)

XML

Significant Accounting Policies (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Inventories
Impairment for obsolete or overvalue items	$ 9,781
Research and Development
Research and development	546,953	1,754,163
Advertising Expenses
Advertising expense	$ 0	$ 35,168
Customer One [Member] | Sales Revenue, Major Customer [Member]
Revenue, Major Customer [Line Items]
Percentage of revenues from major customer	83.00%	85.00%
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	5 years

XML

Stock-based Compensation (Schedule of Allocated Stock-Based Compensation) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Stock-based compensation
Total	$ 25,388	$ 283,692
General and Administrative Expense [Member]
Stock-based compensation
Total	25,388	185,478
Research and Development Expense [Member]
Stock-based compensation
Total		$ 98,214

XML

Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2013

Significant Accounting Policies [Abstract]

Management Estimates

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all cash on hand and in banks, and highly liquid investments with maturities of three months or less, to be cash equivalents. At December 31, 2013 and 2012, we had no bank balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Current financial market conditions have had the effect of restricting liquidity of cash management investments and have increased the risk of even the most liquid investments and the viability of some financial institutions.  We do not believe, however, that these conditions will materially affect our business or our ability to meet our obligations or pursue our business plans.

Accounts Receivable

Account Receivables

Trade account receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days. After the receivable becomes past due, it is on non-accrual status and accrual of interest is suspended.

Inventories

Inventories

Inventories consisting of electrical and computer parts are stated at the lower of cost or market determined using the first-in, first-out method. We review the value of our inventory, whenever events or changes in circumstances indicate. With our review at December 31, 2013, we recorded a $9,781 impairment for obsolete or overvalued items.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the property, generally from three to five years.  Repairs and maintenance costs are expensed as incurred except when such repairs significantly add to the useful life or productive capacity of the asset, in which case the repairs are capitalized.

Patents and Intangibles

Patents and Intangibles

Patents represent initial legal costs incurred to apply for United States and international patents on the CodecSys technology, and are amortized on a straight-line basis over their useful life of approximately 20 years.  We have filed several patents in the United States and foreign countries. As of December 31, 2013, the United States Patent and Trademark Office had approved four patents.  Additionally, eleven foreign countries had approved patent rights.  While we are unsure whether we can develop the technology in order to obtain the full benefits, the patents themselves hold value and could be sold to companies with more resources to complete the development. On-going legal expenses incurred for patent follow-up have been expensed from July 2005 forward.

Amortization expense recognized on issued patents totaled $9,906 and $10,151 for the years ended December 31, 2013 and 2012, respectively.

Our estimated future annual amortization expense, if all patents were issued at the beginning of 2013, would be $10,121 for each of the next five years.

Long-Lived Assets

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. After our review at December 31, 2013 it was determined that no adjustment was required.

Stock-based Compensation

Stock-based Compensation

In accordance with ASC Topic 718, stock-based compensation cost is estimated at the grant date, based on the estimated fair value of the awards, and recognized as expense ratably over the requisite service period of the award for awards expected to vest.

Income Taxes

Income Taxes

We account for income taxes in accordance with the asset and liability method of accounting for income taxes prescribed by ASC Topic 740.  Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled.

Revenue Recognition

Revenue Recognition

We recognize revenue when evidence exists that there is an arrangement between us and our customers, delivery of equipment sold or service has occurred, the selling price to our customers is fixed and determinable with required documentation, and collectability is reasonably assured. We recognize as deferred revenue, payments made in advance by customers for services not yet provided.

When we enter into a multi-year contract with a customer to provide installation, network management, and satellite transponder and help desk, or combination of these services, we recognize this revenue as services are performed and as equipment is sold.  These agreements typically provide for additional fees, as needed, to be charged if on-site visits are required by the customer in order to ensure that each customer location is able to receive network communication. As these on-site visits are performed the associated revenue and cost are recognized in the period the work is completed. If we install, for an additional fee, new or replacement equipment to an immaterial number of new customer locations, and the equipment immediately becomes the property of the customer, the associated revenue and cost are recorded in the period in which the work is completed.

In instances where we have entered into license agreements with a third parties to use our technology within their product offering, we recognize any base or prepaid revenues over the term of the agreement and any per occurrence or periodic usage revenues in the period they are earned.

Research and Development

Research and Development

Research and development costs are expensed when incurred.  We expensed $546,953 and $1,754,163 of research and development costs for the years ended December 31, 2013 and 2012, respectively.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of trade accounts receivable. In the normal course of business, we provide credit terms to our customers. Accordingly, we perform ongoing credit evaluations of our customers and maintain allowances for possible losses which, when realized, have been within the range of management's expectations.

For the years ended December 31, 2013 and 2012, we had the same customer that individually constituted 83% and 85%, of our total revenues, respectively.  The contract with this customer expired in May 2013.  Unless we can replace that customer with another similarly large customer or customers, revenues will be declined substantially from comparative periods, which will harm our business.

Weighted Average Shares

Weighted Average Shares

Basic earnings per common share is computed by dividing net income or loss applicable to common shareholders by 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 shares outstanding during the year, plus the dilutive common stock equivalents that would rise from the exercise of stock options, warrants and restricted stock units outstanding during the period, using the treasury stock method and the average market price per share during the period, plus the effect of assuming conversion of the convertible debt. The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on earnings.

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2012 and 2013:

	For the Year Ended 2012		For the year Ended 2013
Numerator
Net income (loss)	$	1,602,824	$	(2,288,390	)
Denominator
Basic weighted average shares outstanding		100,798,223		109,107,238
Effect of dilutive securities:
Stock options and warrants		2,510,488		--
Restricted stock units		3,225,133		--
Diluted weighted average shares outstanding		106,533,844		109,107,238
Net income (loss) per common share
Basic	$	0.02	$	(0.02	)
Diluted	$	0.02	$	(0.02	)

Potentially dilutive securities representing 18,568,963 shares of common stock were excluded from the computation of diluted earnings per common share for the year ended December 31, 2012, because their effect would have been anti-dilutive.

As we experienced a net loss during the year ended December 31, 2013, potentially dilutive securities representing; (i) 43,068,136 options and warrants to purchase shares of common stock, (ii) 3,093,247 unsettled restricted stock units and (iii) 20,900,000 shares for the conversion feature of our $5,225,000 convertible notes, were not included in the diluted earnings per common share calculation as the effect of such common stock equivalents would be anti-dilutive.

Advertising Expenses

Advertising Expenses

We follow the policy of charging the costs of advertising to expense as incurred.  Advertising expense for the years ended December 31, 2013 and 2012 were $0 and $35,168, respectively.

Off-Balance Sheet Arrangements

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recently Accounting Pronouncements

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  This Update indicates that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset except in circumstances where a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction. This Update is effective for years beginning after December 15, 2013 for public companies and after December 15, 2014 for private companies. This Update didn't have a significant impact on its financials.

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815) - Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.   This Update permits the use of the Fed Funds Effective Swap Rate (OIS) to be used as a US benchmark interest rate for hedge accounting purposes. Furthermore, the Update eliminates the restriction on using different benchmark rate for similar hedges. This Update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company doesn't expect this Update to have a significant impact on its financials.  However, if any new hedges are entered into, the update will be considered when determining which benchmark rate to use.

In July 2013, the FASB issued ASU 2013-09, Fair Value Measurement (Topic 820) - Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04.   This Update defers indefinitely required disclosures about significant unobservable inputs used in Level 3 measurements for investments held by a nonpublic employee benefit plan in its plan sponsor's own nonpublic entity equity securities. This Update is effective upon issuance. The Company doesn't expect this Update to impact its financials since it does not issue a financial statement for nonpublic employee benefit plans.

In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements  (Topic 205) - Liquidation Basis of Accounting. This Update requires an entity to use the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent if the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved or (b) a plan for liquidation is being imposed by other forces. The Update also indicates that asset should be measured and presented at the expected amount of cash proceeds to be received upon liquidation.  The entity should also present any assets not previously recognized but expects to sell in liquidation or use in settling liabilities (i.e. trademarks, etc.). This Update is effective for periods beginning after December 15, 2013. This Update did not impact our financials since it does not expect liquidation to be imminent in the near future.

In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210) - Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The main purpose of this Update is to clarify that the disclosures regarding offsetting assets and liabilities per ASU 2011-11 apply to derivatives including embedded derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and lending transactions that are offset or subject to a master netting agreement. Other types of transactions are not impacted. This Update is effective for fiscal years beginning on or after January 1, 2013 and for all interim periods within that fiscal year. The Company doesn't expect this Update to impact the Company's financials since it does not have instruments noted in the Update that are offset.

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Preferred and Common Stock (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Preferred and Common Stock [Abstract]
Preferred Stock, shares authorized	20,000,000	20,000,000
Common stock, shares authorized	180,000,000	180,000,000
Common stock, par value per share	$ 0.05	$ 0.05
Common stock, shares issued	110,233,225	107,473,820
Class of Stock [Line Items]
Common stock issued for extinguishment of liabilities, shares	2,240,852
Common stock issued for services rendered, shares		496,000
Common Stock [Member]
Class of Stock [Line Items]
Stock issued during period	2,759,405	31,498,164
Shares of common stock issued		24,816,000
Common stock issued for extinguishment of liabilities, shares	2,240,852
Common stock issued for restricted stock settlements, shares	258,553
Shares issued under employment agreement, shares	200,000
Common stock issued on debt conversion, shares		5,600,000
Common stock issued for services rendered, shares	60,000	1,082,164

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Notes Payable (Unsecured Convertible Note and Interest Note) (Details) (USD $)	12 Months Ended		0 Months Ended	12 Months Ended		0 Months Ended	1 Months Ended		0 Months Ended		1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended	0 Months Ended				1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 03, 2008 Class A Warrant [Member]	Dec. 31, 2008 Class A Warrant [Member]	Dec. 31, 2007 Class A Warrant [Member]	Dec. 03, 2008 Class B Warrant [Member]	Oct. 31, 2007 Class B Warrant [Member]	Sep. 25, 2006 Letter of Understanding [Member]	Dec. 24, 2010 Unsecured Convertible Note [Member]	Dec. 23, 2009 Unsecured Convertible Note [Member]	Mar. 31, 2011 Unsecured Convertible Note [Member]	Dec. 31, 2013 Unsecured Convertible Note [Member]	Dec. 31, 2012 Unsecured Convertible Note [Member]	Nov. 02, 2006 Unsecured Convertible Note [Member]	Mar. 31, 2011 Unsecured Convertible Note [Member] Warrant Issued for Interest on Convertible Note [Member]	Dec. 31, 2011 Unsecured Convertible Note [Member] Warrant Issued for Interest on Convertible Note [Member]	Nov. 02, 2006 Unsecured Convertible Note [Member] Class A Warrant [Member]	Nov. 02, 2006 Unsecured Convertible Note [Member] Class B Warrant [Member]	Nov. 02, 2006 Unsecured Convertible Note [Member] Class C Warrant [Member]	Nov. 02, 2006 Unsecured Convertible Note [Member] Class D Warrant [Member]	Apr. 17, 2013 Unsecured Interest Note [Member]
Convertible notes
Amount of credit facility								$ 1,000,000
Principal issued														1,000,000							20,000
Debt interest rate										8.00%		8.00%		5.00%							12.00%
Debt maturity date									Dec. 31, 2013	Dec. 22, 2010											Dec. 31, 2013
Conversion price														$ 1.50
Number of shares of common stock warrants can be exercised for														5,500,000	221,758		750,000	750,000	2,000,000	2,000,000
Warrant term length															5 years		1 year	1 year	18 months	24 months
Exercise price of warrants									0.90						0.96		1.60	1.75	2.10	3.00
Warrants exercised				64,400	454,000
Warrants expired	643,094	252,669	231,600			750,000
Shares of common stock issued							650,000		150,000
Number of shares issued for interest											135,369
Common stock issued for interest											81,221					157,400
Derivative valuation	11,736	1,191,269											46,400
Gain on derivative valuation	1,242,459	8,829,748											253,600
Risk-free interest rate													0.16%
Expected life													1 year
Expected volatility													112.04%
Dividend yield													0.00%
Stock trading price													$ 0.08
Accretion of discount on convertible notes payable	1,010,920	941,225										326,160	333,336
Interest expense												$ 80,000	$ 80,000

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Equity Financing and the Debt Restructuring (2012 Equity Financing and the Debt Restructuring) (Details) (USD $)	12 Months Ended		0 Months Ended								1 Months Ended	12 Months Ended	0 Months Ended		12 Months Ended				1 Months Ended	0 Months Ended					12 Months Ended		0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 28, 2011 Warrants Issued to Reset Provision and Extend Maturity Date of Bridge Loan Warrants [Member]	Dec. 28, 2011 Original Warrants Issued for Bridge Loan [Member]	Mar. 26, 2012 Bridge Loan Conversion [Member]	Mar. 26, 2012 Equipment Purchase Agreement Conversion [Member]	Mar. 26, 2012 Amended and Restated Senior Convertible Note [Member]	Dec. 24, 2010 Amended and Restated Senior Convertible Note [Member]	Jul. 30, 2010 Amended and Restated Senior Convertible Note [Member]	Mar. 26, 2010 Amended and Restated Senior Convertible Note [Member]	Dec. 24, 2007 Amended and Restated Senior Convertible Note [Member]	Dec. 31, 2012 Amended and Restated Senior Convertible Note [Member]	Mar. 26, 2012 Bridge Loan Note Payable [Member]	Dec. 28, 2011 Bridge Loan Note Payable [Member]	Dec. 31, 2013 Bridge Loan Note Payable [Member] Warrants Issued to Reset Provision and Extend Maturity Date of Bridge Loan Warrants [Member]	Dec. 31, 2012 Bridge Loan Note Payable [Member] Warrants Issued to Reset Provision and Extend Maturity Date of Bridge Loan Warrants [Member]	Dec. 31, 2013 Bridge Loan Note Payable [Member] Original Warrants Issued for Bridge Loan [Member]	Dec. 31, 2012 Bridge Loan Note Payable [Member] Original Warrants Issued for Bridge Loan [Member]	Oct. 31, 2007 Class B Warrant [Member]	Apr. 05, 2012 2012 Plan [Member]	Mar. 26, 2012 2012 Plan [Member]	Apr. 05, 2012 2012 Plan [Member] Class A Warrant [Member]	Mar. 26, 2012 2012 Plan [Member] Class A Warrant [Member]	Mar. 26, 2012 2012 Plan [Member] Class B Warrant [Member]	Dec. 31, 2013 2012 Plan [Member] Class A and B Warrants [Member]	Dec. 31, 2012 2012 Plan [Member] Class A and B Warrants [Member]	Mar. 26, 2012 2012 Plan [Member] Maximum [Member]	Mar. 26, 2012 2012 Plan [Member] Minimum [Member]
Equity Financing and Debt Restructuring [Line Items]
Gross consideration in equity financing transaction																					$ 6,000,000						$ 10,000,000	$ 3,000,000
Commission fee percentage																					10.00%
Percent of issued common stock covered by warrants issued in transaction																					10.00%
Number of units to be issued in financing transaction																					27,800,000
Price per unit																					$ 0.25
Shares of stock issued per warrant exercised																					0.5
Warrant term length			6 years	5 years																			6 years
Exercise price of warrants			0.35	0.65																			0.35	0.05
Maximum share price triggering exercisability of warrant																					$ 0.25
Amount of financing proceeds triggering expiration of warrants														12,000,000
Number of shares of common stock warrants can be exercised for			247,500	357,500										357,500
Proceeds from issuance of stock and warrants																					6,100,000
Proceeds from equity financing		6,150,000																		154,000
Repayments of convertible debt								2,500,000
Shares of common stock issued									2,000,000	1,000,000	1,000,000								650,000	616,000	2,000,000
Value of shares issued for debt restructuring							760,000														760,000
Cash paid to settle debt							2,750,000	2,750,000													2,750,000
Amount of debt converted					400,000	500,000							400,000
Number of shares issued for agent fees							586,164
Payments for debt extinguishment costs		275,041					275,041
Number of warrants issued																						400,400
Number of warrants issued to investors																						308,000
Principal issued								5,500,000			15,000,000		900,000	1,300,000
Warrants issued to investment banker																						92,400
Debt interest rate											6.25%			18.00%
Debt maturity date											Dec. 21, 2013			Feb. 28, 2012
Derivative valuation	11,736	1,191,269										81,500			59	7,200	44	7,400							8,452	757,469
Gain on derivative valuation	$ 1,242,459	$ 8,829,748										$ 203,700			$ 7,141	$ 89,325	$ 7,356	$ 136,300							$ 749,017	$ 4,365,323
Risk-free interest rate															0.78%		0.78%								1.27%
Expected life															3 years		3 years								4 years 2 months 12 days
Expected volatility															103.27%		103.27%								96.77%
Dividend yield															0.00%		0.00%								0.00%
Stock trading price															$ 0.005		$ 0.005								$ 0.005

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Stock-based Compensation (Schedule of Assumptions Used to Value Options) (Details) (Stock Options [Member])	12 Months Ended
	Dec. 31, 2012
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	1.65%
Expected life (in years)	10 years
Expected volatility	78.97%
Expected dividend yield	0.00%

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Legal Proceedings (Details) (USD $)	12 Months Ended	1 Months Ended		0 Months Ended
	Dec. 31, 2013 Audio Visual Plus, Inc. [Member]	May 31, 2013 Performance Audio [Member]	Sep. 30, 2013 Former Landlord [Member]	Nov. 04, 2013 AllDigital, Inc. [Member]
Loss Contingencies [Line Items]
Damages sought	$ 29,235	$ 9,663		$ 100,000
Default judgment			$ 91,666.66
Termination fee, percent of equity sought				4.00%

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Interact Devices Inc. (IDI) (Details) (Interact Devices Inc. [Member], USD $)	1 Months Ended	12 Months Ended
	May 18, 2004	Dec. 31, 2013	Dec. 31, 2012
Interact Devices Inc. [Member]
Subsidiary or Equity Method Investee [Line Items]
Common stock issued in exchange for IDI shares, shares	50,127,218
Number of shares owned		55,897,169	55,897,169
Percent ownership		94.00%
Advances to subsidiary		$ 3,393,149	$ 3,347,255

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Going Concern

12 Months Ended

Dec. 31, 2013

Going Concern [Abstract]

Going Concern

Note 3- Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  We have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  These factors raise substantial doubt about our ability to continue as a going concern.

Our continuation as a going concern is dependent on our ability to generate sufficient income and cash flow to meet our obligations on a timely basis and to obtain additional financing as may be required.  There is no assurance we will be successful in efforts to raise additional funds.  The accompanying statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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Liquidity (Details) (USD $)	12 Months Ended			1 Months Ended					12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Aug. 31, 2013 2012 Convertible Notes [Member]	Jan. 31, 2013 2012 Convertible Notes [Member]	Dec. 31, 2012 2012 Convertible Notes [Member]	Aug. 31, 2012 2012 Convertible Notes [Member]	Jul. 31, 2012 2012 Convertible Notes [Member]	Dec. 31, 2013 2012 Convertible Notes [Member]
Liquidity [Abstract]
Cash and cash equivalents	$ 215,371	$ 394,342	$ 961,265
Current assets	300,709	1,753,013
Current liabilities	7,197,395	7,301,376
Stockholders' deficit	(6,655,301)	(4,616,860)	(10,530,024)
Current portion of notes payable	5,245,000	3,102,006
Cash flow used in operations	(1,447,385)	(3,362,785)
Decrease in cash used for operations	1,915,400
Debt Instrument [Line Items]
Continued sales of convertible debt					425,000	250,000	900,000	1,900,000	1,175,000
Proceeds from issuance of convertible note and warrants				$ 750,000			$ 851,624	$ 923,175

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Notes Payable (Senior 6.25% Convertible Note) (Details) (USD $)	12 Months Ended		1 Months Ended		1 Months Ended	0 Months Ended				1 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 24, 2007 Warrants Issued to Senior Secured Note Holder [Member]	Jul. 30, 2010 Warrants Issued to Senior Secured Note Holder [Member]	Dec. 24, 2007 Warrants Issued to Third Party For Financing Fees [Member]	Mar. 26, 2012 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 24, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]	Jul. 30, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]	Mar. 26, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 24, 2007 Amended and Restated Senior 6.25% Convertible Note [Member]	Dec. 31, 2012 Amended and Restated Senior 6.25% Convertible Note [Member]	Oct. 29, 2010 Amended and Restated Senior 6.25% Convertible Note [Member]
Convertible notes
Principal issued							$ 5,500,000			$ 15,000,000
Debt maturity date										Dec. 21, 2013
Debt interest rate										6.25%
Number of shares of common stock notes are convertible into										2,752,294
Conversion price							$ 1.35	$ 1.80		$ 5.45
Number of shares of common stock warrants can be exercised for			1,875,000	5,208,333	112,500
Exercise price of warrants			5.00	1.80	3.75
Shares of common stock issued								2,000,000	1,000,000	1,000,000
Value of shares of common stock issued		2,107,834							990,000	3,750,000
Payments for commissions, finders fees and other transaction expenses										1,377,000
Debt Instrument, periodic interest payment										234,375
Warrant term length			5 years		3 years
Fair value of warrants			3,750,000		252,000
Number of shares issuable, contingent to equity raised								800,000
Payments for debt extinguishment costs		275,041				275,041
Number of warrants cancelled							5,208,333
Value of shares issued for debt restructuring						760,000
Number of shares issued for debt restructuring						2,000,000	800,000
Shares of stock issuable, but forgone in lieu of cash payment							3,500,000
Funding threshold								6,000,000	6,000,000			8,000,000
Proceeds received from equity financing												2,500,000
Required cash balance								950,000	1,250,000
Cash paid to settle debt						2,750,000	2,750,000
Debt forgiveness							7,200,000
Gain on troubled debt restructuring							3,062,457
Interest paid	66,700	347,902				680,816	350,434			937,000
Repayments of convertible debt							2,500,000
Gain on extinguishment of debt		1,578,914				2,173,033
Number of shares issued for agent fees						586,164
Value of shares issued for agent fees						222,742
Gain on derivative valuation	1,242,459	8,829,748									203,700
Derivative valuation	11,736	1,191,269									81,500
Accrued interest payable											$ 680,816

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Schedule of Deferred Tax Assets

Net deferred tax liabilities consist of the following components as of December 31, 2012 and 2013:

	2012			2013
Deferred tax assets
NOL carry-forward	$	25,881,900		$	27,003,600
General business credit carry-forwards		1,158,900			1,118,400
Deferred compensation		78,500			22,700
Allowance for doubtful accounts		31,600			3,200
Deferred tax liabilities
Depreciation		61,700			(13,300	)
Valuation allowance		(27,212,600	)		(28,134,600	)
Net deferred tax asset	$	-		$	-

Schedule of Income Tax Provision

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2012 and 2013 due to the following:

	2012			2013
Federal income tax (expense) benefit at statutory rates	$	1,831,600		$	958,300
State income tax (expense) benefit at statutory rates		269,300			140,900
Change in valuation allowance		(2,100,900	)		(1,099,200	)
	$	-		$	-

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Notes Payable (Tables)

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

Schedule of Notes Payable

The recorded value of our notes payable (net of debt discount) for the years ending December 31, 2013 and 2012 was as follows:

	December 31, 2012			December 31, 2013
2012 Secured Convertible Notes	$	2,428,166		$	4,225,000
Unsecured Convertible Note		673,840			1,000,000
Unsecured Interest Note		--			20,000
Total		3,102,006			5,245,000
Less Current Portion		(3,102,006	)		(5,245,000	)
Total Long-term	$	--		$	--

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Stock-based Compensation (Schedule of Restricted Stock Unit Activity) (Details) (Restricted Stock Units [Member], USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Restricted Stock Units [Member]
Restricted Stock Units
Outstanding, beginning balance	2,940,133	2,550,000
Awarded at fair value	686,667	390,133
Canceled/Forfeited	275,000
Settled by issuance of stock	(258,553)
Outstanding, ending balance	3,093,247	2,940,133
Vested at December 31, 2013	3,093,247
Weighted Average Grant Date Fair Value
Outstanding, beginning balance	$ 1.11	$ 1.25
Awarded at fair value	$ 0.08	$ 0.17
Canceled/Forfeited	$ 1.36
Settled by issuance of stock	$ 0.82
Outstanding, ending balance	$ 0.88	$ 1.11
Vested at December 31, 2013	$ 0.88

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Notes Payable (Accounts Receivable Purchase Agreements) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest paid	$ 66,700	$ 347,902
Derivative valuation	11,736	1,191,269
Gain on derivative valuation	1,242,459	8,829,748
Conversion of Accounts Receivable Purchase Agreements [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amount of debt converted			675,000
Common stock issued for interest			109,292
Common stock issued in conversion			1,307,153
Number of warrants issued in conversion			653,576
Anti-dilution price protection provisions, stock price threshold			$ 1.00
Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable purchase agreement, amount				775,000
Repayment of advances			100,000
Interest paid			8,360
Exercise price of warrants	0.725
Derivative valuation	28	5,900
Gain on derivative valuation	$ 5,872	$ 253,600
Risk-free interest rate	0.48%
Expected life	2 years 2 months 12 days
Expected volatility	119.11%
Dividend yield	0.00%
Stock trading price	$ 0.005

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Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Option and Warrant Activity

The following table summarizes option and warrant activity during the years ended December 31, 2013 and 2012.

	Options and Warrants Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2011		20,440,551		$	1.10
Options granted		50,000			0.37
Warrants issued		24,817,900			0.33
Expired		(252,669	)		1.31
Forfeited		(1,658,919	)		1.31
Exercised		--			--
Outstanding at December 31, 2012		43,396,863		$	0.54
Options granted		--			--
Warrants issued		850,000			0.25
Expired		(643,094	)		0.55
Forfeited		(535,633	)		1.42
Exercised		--			--
Outstanding at December 31, 2013		43,068,136		$	0.47

Schedule of Information About Stock Options and Warrants

The following table summarizes information about stock options and warrants outstanding at December 31, 2013.

		Outstanding						Exercisable
				Weighted Average Remaining		Weighted Average				Weighted Average
	Range of Exercise Prices	Number Outstanding		Contractual Life (years)		Exercise Price		Number Exercisable		Exercise Price
$	0.17-0.95		40,024,414		3.34	$	0.42		39,941,081	$	0.42
	1.00-1.59		2,709,222		2.69		1.04		2,694,555		1.04
	2.25-4.00		334,500		1.94		2.52		334,500		2.52
$	0.17-4.00		43,068,136		3.29	$	0.48		42,970,136	$	0.47

Schedule of Restricted Stock Unit Activity

The following is a summary of restricted stock unit activity for the years ended December 31, 2013 and 2012:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2011		2,550,000			1.25
Awarded at fair value		390,133			0.17
Canceled/Forfeited		--			--
Settled by issuance of stock		--			--
Outstanding at December 31, 2012		2,940,133		$	1.11
Awarded at fair value		686,667			0.08
Canceled/Forfeited		(275,000	)		1.36
Settled by issuance of stock		(258,553	)		0.82
Outstanding at December 31, 2013		3,093,247		$	0.88
Vested at December 31, 2013		3,093,247		$	0.88

Schedule of Allocated Stock-based Compensation

The impact on our results of operations for recording stock-based compensation for the years ended December 31, 2013 and 2012 is as follows:

	For the years ended
	December 31,
	2013		2012
General and administrative	$	25,388	$	185,478
Research and development		--		98,214
Total	$	25,388	$	283,692

Stock Options [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Assumptions Used to Value Awards

The fair values for the options granted in 2012 were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,2012
Risk free interest rate	1.65%
Expected life (in years)	10.0
Expected volatility	78.97%
Expected dividend yield	0.00%

Warrant [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Assumptions Used to Value Awards

The fair values for the warrants granted in 2013 and 2012 were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,
	2013	2012
Risk free interest rate	0.65%	1.16%
Expected life (in years)	4.42	5.7
Expected volatility	90.68%	82.79%
Expected dividend yield	0.00%	0.00%

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Measurements [Abstract]

Schedule of Fair Value of Financial Instruments

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2013:

					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
None		--		--		--		--
Total assets measured at fair value	$	--	$	--	$	--	$	--
Liabilities
Derivative valuation (1)	$	11,736	$	--	$	--	$	11,736
Total liabilities measured at fair value	$	11,736	$	--	$	--	$	11,736

(1) See Notes 4 & 5 for additional discussion.

Schedule of Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs

The table below presents our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2013.  We classify financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model.

	Derivative
	Valuation
	Liability
Balance at December 31, 2012	$	(1,191,269	)
Total gains or losses (realized and unrealized)
Included in net income		1,242,459
Valuation adjustment		--
Purchases, issuances, and settlements, net		(62,926	)
Transfers to Level 3		--
Balance at December 31, 2013	$	(11,736	)

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Significant Accounting Policies [Abstract]

Significant Accounting Policies

Note 2 - Significant Accounting Policies

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

We consider all cash on hand and in banks, and highly liquid investments with maturities of three months or less, to be cash equivalents. At December 31, 2013 and 2012, we had no bank balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Current financial market conditions have had the effect of restricting liquidity of cash management investments and have increased the risk of even the most liquid investments and the viability of some financial institutions.  We do not believe, however, that these conditions will materially affect our business or our ability to meet our obligations or pursue our business plans.

Account Receivables

Trade account receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days. After the receivable becomes past due, it is on non-accrual status and accrual of interest is suspended.

Inventories

Inventories consisting of electrical and computer parts are stated at the lower of cost or market determined using the first-in, first-out method. We review the value of our inventory, whenever events or changes in circumstances indicate. With our review at December 31, 2013, we recorded a $9,781 impairment for obsolete or overvalued items.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the property, generally from three to five years.  Repairs and maintenance costs are expensed as incurred except when such repairs significantly add to the useful life or productive capacity of the asset, in which case the repairs are capitalized.

Patents and Intangibles

Patents represent initial legal costs incurred to apply for United States and international patents on the CodecSys technology, and are amortized on a straight-line basis over their useful life of approximately 20 years.  We have filed several patents in the United States and foreign countries. As of December 31, 2013, the United States Patent and Trademark Office had approved four patents.  Additionally, eleven foreign countries had approved patent rights.  While we are unsure whether we can develop the technology in order to obtain the full benefits, the patents themselves hold value and could be sold to companies with more resources to complete the development. On-going legal expenses incurred for patent follow-up have been expensed from July 2005 forward.

Amortization expense recognized on issued patents totaled $9,906 and $10,151 for the years ended December 31, 2013 and 2012, respectively.

Our estimated future annual amortization expense, if all patents were issued at the beginning of 2013, would be $10,121 for each of the next five years.

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. After our review at December 31, 2013 it was determined that no adjustment was required.

Stock-based Compensation

In accordance with ASC Topic 718, stock-based compensation cost is estimated at the grant date, based on the estimated fair value of the awards, and recognized as expense ratably over the requisite service period of the award for awards expected to vest.

Income Taxes

We account for income taxes in accordance with the asset and liability method of accounting for income taxes prescribed by ASC Topic 740.  Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled.

Revenue Recognition

We recognize revenue when evidence exists that there is an arrangement between us and our customers, delivery of equipment sold or service has occurred, the selling price to our customers is fixed and determinable with required documentation, and collectability is reasonably assured. We recognize as deferred revenue, payments made in advance by customers for services not yet provided.

When we enter into a multi-year contract with a customer to provide installation, network management, and satellite transponder and help desk, or combination of these services, we recognize this revenue as services are performed and as equipment is sold.  These agreements typically provide for additional fees, as needed, to be charged if on-site visits are required by the customer in order to ensure that each customer location is able to receive network communication. As these on-site visits are performed the associated revenue and cost are recognized in the period the work is completed. If we install, for an additional fee, new or replacement equipment to an immaterial number of new customer locations, and the equipment immediately becomes the property of the customer, the associated revenue and cost are recorded in the period in which the work is completed.

In instances where we have entered into license agreements with a third parties to use our technology within their product offering, we recognize any base or prepaid revenues over the term of the agreement and any per occurrence or periodic usage revenues in the period they are earned.

Research and Development

Research and development costs are expensed when incurred.  We expensed $546,953 and $1,754,163 of research and development costs for the years ended December 31, 2013 and 2012, respectively.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of trade accounts receivable. In the normal course of business, we provide credit terms to our customers. Accordingly, we perform ongoing credit evaluations of our customers and maintain allowances for possible losses which, when realized, have been within the range of management's expectations.

For the years ended December 31, 2013 and 2012, we had the same customer that individually constituted 83% and 85%, of our total revenues, respectively.  The contract with this customer expired in May 2013.  Unless we can replace that customer with another similarly large customer or customers, revenues will be declined substantially from comparative periods, which will harm our business.

Weighted Average Shares

Basic earnings per common share is computed by dividing net income or loss applicable to common shareholders by 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 shares outstanding during the year, plus the dilutive common stock equivalents that would rise from the exercise of stock options, warrants and restricted stock units outstanding during the period, using the treasury stock method and the average market price per share during the period, plus the effect of assuming conversion of the convertible debt. The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on earnings.

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2012 and 2013:

	For the Year Ended 2012		For the year Ended 2013
Numerator
Net income (loss)	$	1,602,824	$	(2,288,390	)
Denominator
Basic weighted average shares outstanding		100,798,223		109,107,238
Effect of dilutive securities:
Stock options and warrants		2,510,488		--
Restricted stock units		3,225,133		--
Diluted weighted average shares outstanding		106,533,844		109,107,238
Net income (loss) per common share
Basic	$	0.02	$	(0.02	)
Diluted	$	0.02	$	(0.02	)

Potentially dilutive securities representing 18,568,963 shares of common stock were excluded from the computation of diluted earnings per common share for the year ended December 31, 2012, because their effect would have been anti-dilutive.

As we experienced a net loss during the year ended December 31, 2013, potentially dilutive securities representing; (i) 43,068,136 options and warrants to purchase shares of common stock, (ii) 3,093,247 unsettled restricted stock units and (iii) 20,900,000 shares for the conversion feature of our $5,225,000 convertible notes, were not included in the diluted earnings per common share calculation as the effect of such common stock equivalents would be anti-dilutive.

Advertising Expenses

We follow the policy of charging the costs of advertising to expense as incurred.  Advertising expense for the years ended December 31, 2013 and 2012 were $0 and $35,168, respectively.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  This Update indicates that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset except in circumstances where a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction. This Update is effective for years beginning after December 15, 2013 for public companies and after December 15, 2014 for private companies. This Update didn't have a significant impact on its financials.

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815) - Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.   This Update permits the use of the Fed Funds Effective Swap Rate (OIS) to be used as a US benchmark interest rate for hedge accounting purposes. Furthermore, the Update eliminates the restriction on using different benchmark rate for similar hedges. This Update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company doesn't expect this Update to have a significant impact on its financials.  However, if any new hedges are entered into, the update will be considered when determining which benchmark rate to use.

In July 2013, the FASB issued ASU 2013-09, Fair Value Measurement (Topic 820) - Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04.   This Update defers indefinitely required disclosures about significant unobservable inputs used in Level 3 measurements for investments held by a nonpublic employee benefit plan in its plan sponsor's own nonpublic entity equity securities. This Update is effective upon issuance. The Company doesn't expect this Update to impact its financials since it does not issue a financial statement for nonpublic employee benefit plans.

In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements  (Topic 205) - Liquidation Basis of Accounting. This Update requires an entity to use the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent if the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved or (b) a plan for liquidation is being imposed by other forces. The Update also indicates that asset should be measured and presented at the expected amount of cash proceeds to be received upon liquidation.  The entity should also present any assets not previously recognized but expects to sell in liquidation or use in settling liabilities (i.e. trademarks, etc.). This Update is effective for periods beginning after December 15, 2013. This Update did not impact our financials since it does not expect liquidation to be imminent in the near future.

In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210) - Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The main purpose of this Update is to clarify that the disclosures regarding offsetting assets and liabilities per ASU 2011-11 apply to derivatives including embedded derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and lending transactions that are offset or subject to a master netting agreement. Other types of transactions are not impacted. This Update is effective for fiscal years beginning on or after January 1, 2013 and for all interim periods within that fiscal year. The Company doesn't expect this Update to impact the Company's financials since it does not have instruments noted in the Update that are offset.

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Organization and Basis of Presentation (Details)		12 Months Ended
	Oct. 01, 2003 BI Networks [Member]	Dec. 31, 2013 Interact Devices Inc [Member]	Dec. 31, 2012 Interact Devices Inc [Member]
Noncontrolling Interest [Line Items]
Percent ownership		94.00%	94.00%
Number of shares owned		55,897,169	55,897,169
Business Acquisition [Line Items]
Percentage of equity interests exchanged	98.00%

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Notes Payable (Schedule of Notes Payable) (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Total	$ 5,245,000	$ 3,102,006
Less Current Portion	(5,245,000)	(3,102,006)
Total Long-term
2012 Convertible Notes [Member]
Debt Instrument [Line Items]
Total	4,225,000	2,428,166
Unsecured Convertible Note [Member]
Debt Instrument [Line Items]
Total	1,000,000	673,840
Unsecured Interest Note [Member]
Debt Instrument [Line Items]
Total	$ 20,000

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Stock-based Compensation (Schedule of Assumptions Used to Value Warrants) (Details) (Warrant [Member])	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	0.65%	1.16%
Expected life (in years)	4 years 5 months 1 day	5 years 8 months 12 days
Expected volatility	90.68%	82.79%
Expected dividend yield	0.00%	0.00%

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Dec. 31, 2012
Current Assets
Cash and cash equivalents	$ 215,371	$ 394,342
Restricted cash		140,700
Trade accounts receivable, net	50,745	821,608
Inventory	19,457	306,296
Prepaid expenses	15,136	90,067
Total current assets	300,709	1,753,013
Property and equipment, net	64,282	572,107
Other Assets, non current
Debt offering costs		42,176
Patents, net	66,081	120,928
Deposits and other assets	111,022	196,292
Total other assets, non current	177,103	359,396
Total assets	542,094	2,684,516
Current Liabilities
Accounts payable	1,034,053	2,293,470
Payroll and related expenses	98,962	363,568
Other accrued expenses	802,364	299,728
Unearned revenue	5,280	51,335
Current portion of notes payable (net of discount of $947,994 and $0, respectively)	5,245,000	3,102,006
Derivative valuation	11,736	1,191,269
Total current liabilities	7,197,395	7,301,376
Total liabilities	7,197,395	7,301,376
Commitments and contingencies
STOCKHOLDERS' DEFICIT:
Preferred stock, no par value, 20,000,000 shares authorized; none issued
Common stock, $.05 par value, 180,000,000 shares authorized; 107,473,820 and 110,233,225 shares issued as of December 31, 2012 and December 31, 2013, respectively	5,511,661	5,373,691
Additional paid-in capital	99,706,469	99,594,490
Accumulated deficit	(111,873,431)	(109,585,041)
Total stockholders' deficit	(6,655,301)	(4,616,860)
Total liabilities and stockholders' deficit	$ 542,094	$ 2,684,516

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Notes Payable (Bridge Loan) (Details) (USD $)	12 Months Ended		0 Months Ended						12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 28, 2011 Original Warrants Issued for Bridge Loan [Member]	Dec. 28, 2011 Warrants Issued to Reset Provision and Extend Maturity Date of Bridge Loan Warrants [Member]	Dec. 28, 2011 Warrants Issued to Investment Banker for Payment [Member]	Jul. 13, 2012 Bridge Loan Note Payable [Member]	Mar. 26, 2012 Bridge Loan Note Payable [Member]	Dec. 28, 2011 Bridge Loan Note Payable [Member]	Dec. 31, 2012 Bridge Loan Note Payable [Member]	Dec. 31, 2013 Bridge Loan Note Payable [Member] Original Warrants Issued for Bridge Loan [Member]	Dec. 31, 2012 Bridge Loan Note Payable [Member] Original Warrants Issued for Bridge Loan [Member]	Dec. 31, 2013 Bridge Loan Note Payable [Member] Warrants Issued to Reset Provision and Extend Maturity Date of Bridge Loan Warrants [Member]	Dec. 31, 2012 Bridge Loan Note Payable [Member] Warrants Issued to Reset Provision and Extend Maturity Date of Bridge Loan Warrants [Member]
Debt
Principal issued							$ 900,000	$ 1,300,000
Number of warrants issued					65,000
Debt interest rate								18.00%
Warrant term length			5 years	6 years
Number of shares of common stock warrants can be exercised for			357,500	247,500				357,500
Exercise price of warrants			0.65	0.35	0.65
Debt maturity date								Feb. 28, 2012
Amount of financing proceeds triggering expiration of warrants								12,000,000
Payments for placement fees								84,500
Payments of escrow fees								3,000
Amount of debt converted							400,000
Fair value of warrants							222,426
Total cash payment to extinguish debt						900,000
Gain on extinguishment of debt		1,578,914				(93,661)	(222,426)
Loss on retirement of debt offering costs		53,150				53,160
Derivative valuation	11,736	1,191,269								44	7,400	59	7,200
Gain on derivative valuation	1,242,459	8,829,748								7,356	136,300	7,141	89,325
Risk-free interest rate										0.78%		0.78%
Expected life										3 years		3 years
Expected volatility										103.27%		103.27%
Dividend yield										0.00%		0.00%
Stock trading price										$ 0.005		$ 0.005
Accretion of discount on convertible notes payable	1,010,920	941,225							106,723
Interest expense									$ 100,899

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net (loss) Income	$ (2,288,390)	$ 1,602,824
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	211,721	1,024,754
Common stock issued for services	4,200	177,313
Accretion of discount on convertible notes payable	1,010,920	941,225
Stock based compensation	25,389	283,693
Warrants issued and expensed for issuance costs		1,095,309
Loss on extinguishment of debt		(1,578,914)
Gain on extinguishment of liabilities	(481,590)
Expensed note conversion costs		47,348
Gain on derivative liability valuation	(1,242,459)	(8,829,748)
Loss (gain) on sale of assets	68,214	(512)
Retirement of debt offering costs		53,150
Loss on impairment of assets	9,781
Allowance for doubtful accounts	(35,396)	31,982
Changes in assets
Decrease in accounts receivable	806,259	386,313
Increase (decrease) in inventories	14,947	(245,445)
Decrease in debt offering costs	42,176	105,805
Decrease in prepaid and other assets	205,142	323,618
Changes in liabilities
Decrease in accounts payable	9,726	1,040,932
Increase in accrued expenses	238,030	136,682
Increase (decrease) in deferred revenues	(46,055)	40,886
Net cash (used) provided in operating activities	(1,447,385)	(3,362,785)
Cash flows from investing activities:
Purchase of equipment		(172,825)
Proceeds from sale of assets	139,014	3,761
Net cash (used) provided by investing activities	139,014	(169,064)
Cash flows from financing activities:
Proceeds from equity financing		6,150,000
Principal payments on debt		(4,017,649)
Equity issuance costs		(776,483)
Proceeds from equipment financing
Payments for debt extinguishment costs		(275,041)
Payments for extinguishment of liabilities	(206,300)
Increase (decrease) in restricted cash	140,700	(140,700)
Proceeds from notes payable	1,195,000	2,024,799
Net cash provided by financing activities	1,129,400	2,964,926
Net decrease in cash and cash equivalents	(178,971)	(566,923)
Cash and cash equivalents, beginning of period	394,342	961,265
Cash and cash equivalents, end of period	215,371	394,342
Supplemental disclosure of cash flow information:
Interest paid	66,700	347,902
Income taxes paid

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Fair Value Measurements (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Derivative Valuation Liability [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance	$ (1,191,269)
Included in net loss	1,242,459
Valuation adjustment
Purchases, issuances, and settlements, net	(62,926)
Transfers to Level 3
Balance	(11,736)
Fair Value, Measurements, Recurring [Member]
Assets
Total assets measured at fair value
Liabilities
Derivative valuation	11,736
Total liabilities measured at fair value	11,736
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets
Total assets measured at fair value
Liabilities
Derivative valuation
Total liabilities measured at fair value
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets
Total assets measured at fair value
Liabilities
Derivative valuation
Total liabilities measured at fair value
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets
Total assets measured at fair value
Liabilities
Derivative valuation	11,736
Total liabilities measured at fair value	$ 11,736

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Significant Accounting Policies (Weighted Average Shares) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Numerator
Net income (loss)	$ (2,288,390)	$ 1,602,824
Denominator
Basic weighted average shares outstanding	109,107,238	100,798,223
Stock options and warrants		2,510,488
Restricted stock units		3,225,133
Diluted weighted average shares outstanding	109,107,238	106,533,844
Basic	$ (0.02)	$ 0.02
Diluted	$ (0.02)	$ 0.02
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities		18,568,963
Options and Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	43,068,136
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	3,093,247
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	20,900,000

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Liquidity

12 Months Ended

Dec. 31, 2013

Liquidity [Abstract]

Liquidity

Note 16 - Liquidity

At December 31, 2013, we had cash of $215,371, total current assets of $300,709, total current liabilities of $7,197,395 and total stockholders' deficit of $6,655,301.  Included in current liabilities is $5,245,000 related to the current portion of notes payable and other debt obligations.

Broadcast experienced negative cash flow used in operations during the year of $1,447,385 compared to negative cash flow used in operations for the year ended December 31, 2012 of $3,362,785.  Although that represents a decrease in cash used for operations of $1,915,400, the cash used decreased only because we had lost approximately 90% of our business.  During 2013 the decrease in negative cash flow was realized primarily through a reduction in the number of employees from 24 to 8, as well as additional expense reduction actions including reducing sales and general and administrative expenses incident to losing our largest customer and curtailing all sales and marketing and development expenditures for our CodecSys product.

Our audited consolidated financial statements for the year ended December 31, 2013 contain a "going concern" qualification.  As discussed in Note 3 of the Notes to Consolidated Financial Statements, we have incurred losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy our liabilities and sustain operations.  Because of these conditions, our independent auditors have raised substantial doubt about our ability to continue as a going concern.

The negative cash flow was met by cash reserves from additional proceeds of the issuance of the 2012 Convertible Debt in the total amount of $1,175,000, which included $750,000 of accounts receivable financing that was converted to the 2012 Convertible Debt. Because we expect to continue to experience negative operating cash flow as long as we continue our current limited operations, we need to secure additional funding or complete the proposed merger with Wireless Ronin.  We are actively only pursuing one potential digital signage customer to replace lost revenues.

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Accounts Receivable (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Accounts Receivable [Abstract]
Net accounts receivable	$ 50,745	$ 821,608
Billed trade receivables	57,655	856,462
Unbilled trade receivables	1,380	44,478
Employee travel advances and other receivables	0	1,808
Allowance for uncollectible accounts	$ 8,290	$ 81,140
Revenue [Member] | Customer One [Member]
Concentration Risk [Line Items]
Percentage	83.00%	85.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Customer One [Member]
Concentration Risk [Line Items]
Percentage	18.00%	71.00%

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Subsequent Events

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

Subsequent Events

Note 18 - Subsequent Events

On March 6, 2014, we issued 729,100 shares of our common stock to one of our former managers in consideration of termination of his employment agreement and compensation.

On March 6, 2014, we issued 408,553 shares of our common stock to one of our former directors in settlement of restricted stock units he had been granted during his tenure as a member of our Board of Directors.

On March 6, 2014, we entered into a Merger Agreement and Plan of Reorganization with Wireless Ronin Technologies, Inc., a Minnesota corporation, ("Ronin") pursuant to which we would become a wholly owned subsidiary of Ronin. The merger is subject to contingencies normal in this type of transaction, including, our shareholders' consent, satisfaction or conversion of our indebtedness, and the effectiveness of a registration statement to be filed with the SEC.

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Organization and Basis of Presentation

12 Months Ended

Dec. 31, 2013

Organization and Basis of Presentation [Abstract]

Organization and Basis of Presentation

Note 1 - Organization and Basis of Presentation

Broadcast International, Inc. (the Company) is the consolidated parent company of BI Acquisitions, Inc. (BI), a wholly-owned subsidiary, and Interact Devices, Inc. (IDI), a 94% owned subsidiary.

BI was incorporated in Utah in December 1999 and began operations in January 2000.  It is a communications services and technology company headquartered in Salt Lake City, Utah.  The Company operates two divisions - BI Networks and CodecSys.

On October 1, 2003, the Company (formerly known as Laser Corporation) acquired BI by issuing shares of its common stock representing 98% of the total equity ownership in exchange for all of the issued and outstanding BI common stock.  The transaction was accounted for as a reverse acquisition, or recapitalization of BI, with BI being treated as the accounting acquirer. Effective January 13, 2004, the company changed its name from Laser Corporation to Broadcast International, Inc.

On May 18, 2004, the Debtor-in-Possession's Plan of Reorganization for IDI was confirmed by the United States Bankruptcy Court. As a result of this confirmation and subsequent share acquisitions, for the years ended December 31, 2013 and 2012, the Company owned, on a fully diluted basis, approximately 55,897,169 common share equivalents of IDI, representing approximately 94% of the equity of IDI.

The audited consolidated financial statements herein include operations from January 1, 2012 to December 31, 2013. IDI produced losses from operations during the period; therefore, 100% of the results from operations have been included in the Company's consolidated statements.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
CONSOLIDATED BALANCE SHEETS [Abstract]
Unamortized discount on notes payable	$ 0	$ 947,994
Preferred stock, no par value	$ 0	$ 0
Preferred Stock, shares authorized	20,000,000	20,000,000
Preferred Stock, shares issued	0	0
Common stock, par value per share	$ 0.05	$ 0.05
Common stock, shares authorized	180,000,000	180,000,000
Common stock, shares issued	110,233,225	107,473,820

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Stock-based Compensation

12 Months Ended

Dec. 31, 2013

Stock-based Compensation [Abstract]

Stock-based Compensation

Note 11 - Stock-based Compensation

In accordance with ASC Topic 718, stock-based compensation cost is estimated at the grant date, based on the estimated fair value of the awards, and recognized as expense ratably over the requisite service period of the award for awards expected to vest.

Stock Incentive Plans

Under the Broadcast International, Inc. 2004 Long-term Incentive Plan (the "2004 Plan"), the board of directors may issue incentive stock options to employees and directors and non-qualified stock options to consultants of the company.   Options generally may not be exercised until twelve months after the date granted and expire ten years after being granted. Options granted vest in accordance with the vesting schedule determined by the board of directors, usually ratably over a three-year vesting schedule upon anniversary date of the grant.  Should an employee terminate before the vesting period is completed, the unvested portion of each grant is forfeited. We have used the Black-Scholes valuation model to estimate fair value of our stock-based awards, which requires various judgmental assumptions including estimated stock price volatility, forfeiture rates, and expected life.  Our computation of expected volatility is based on a combination of historical and market-based implied volatility.  The number of unissued stock options authorized under the 2004 Plan at December 31, 2013 was 4,319,411.

The Broadcast International, Inc. 2008 Equity Incentive Plan (the "2008 Plan") has become our primary plan for providing stock-based incentive compensation to our eligible employees and non-employee directors and consultants of the company. The provisions of the 2008 Plan are similar to the 2004 Plan except that the 2008 Plan allows for the grant of share equivalents such as restricted stock awards, stock bonus awards, performance shares and restricted stock units in addition to non-qualified and incentive stock options. We continue to maintain and grant awards under our 2004 Plan which will remain in effect until it expires by its terms. The number of unissued shares of common stock reserved for issuance under the 2008 Plan was 363,200 at December 31, 2013.

Stock Options

We estimate the fair value of stock option awards granted beginning January 1, 2006 using the Black-Scholes option-pricing model. We then amortize the fair value of awards expected to vest on a straight-line basis over the requisite service periods of the awards, which is generally the period from the grant date to the end of the vesting period. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected option term.  Our computation of expected volatility is based on a combination of historical and market-based implied volatility.  The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award was granted with a maturity equal to the expected term of the stock option award. The expected option term is derived from an analysis of historical experience of similar awards combined with expected future exercise patterns based on several factors including the strike price in relation to the current and expected stock price, the minimum vest period and the remaining contractual period.

There were no options issued during the year ending December 31, 2013.  The fair values for the options granted in 2012 were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,2012
Risk free interest rate	1.65%
Expected life (in years)	10.0
Expected volatility	78.97%
Expected dividend yield	0.00%

The weighted average fair value of options granted during the year ended December 31, 2012 was $0.27.

Warrants

We estimate the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model. We amortize the fair value of issued warrants using a vesting schedule based on the terms and conditions of each associated underling contract, as earned. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and warrant expected exercise term.  Our computation of expected volatility is based on a combination of historical and market-based implied volatility.  The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the warrant was issued with a maturity equal to the expected term of the warrant.

The fair values for the warrants granted in 2013 and 2012 were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,
	2013	2012
Risk free interest rate	0.65%	1.16%
Expected life (in years)	4.42	5.7
Expected volatility	90.68%	82.79%
Expected dividend yield	0.00%	0.00%

The weighted average fair value of warrants granted during the years ended December 31, 2013 and 2012, was $0.05 and $0.23, respectively.

Results of operations for the years ended December 31, 2013 and 2012 includes $25,388 and $283,693, respectively, of non-cash stock-based compensation expense. Restricted stock units and options issued to directors vest immediately. All other restricted stock units, options and warrants are subject to applicable vesting schedules. Expense is recognized proportionally as each award or grant vests.

The $25,388 non-cash stock-based compensation expense for the year ended December 31, 2013 was a result of the vesting of unexpired options and warrants issued prior to January 1, 2013.

For the year ended December 31, 2012 we recognized $283,692 of stock based compensation as follows: (i) $65,500 for 390,133 restricted stock units issued to 5 members of the board of directors, (ii) $833 for 50,000 options granted to 4 employees and (iii) $217,359 resulting from the vesting of unexpired options and warrants issued prior to January 1, 2012.

The following table summarizes option and warrant activity during the years ended December 31, 2013 and 2012.

	Options and Warrants Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2011		20,440,551		$	1.10
Options granted		50,000			0.37
Warrants issued		24,817,900			0.33
Expired		(252,669	)		1.31
Forfeited		(1,658,919	)		1.31
Exercised		--			--
Outstanding at December 31, 2012		43,396,863		$	0.54
Options granted		--			--
Warrants issued		850,000			0.25
Expired		(643,094	)		0.55
Forfeited		(535,633	)		1.42
Exercised		--			--
Outstanding at December 31, 2013		43,068,136		$	0.47

The following table summarizes information about stock options and warrants outstanding at December 31, 2013.

		Outstanding						Exercisable
				Weighted Average Remaining		Weighted Average				Weighted Average
	Range of Exercise Prices	Number Outstanding		Contractual Life (years)		Exercise Price		Number Exercisable		Exercise Price
$	0.17-0.95		40,024,414		3.34	$	0.42		39,941,081	$	0.42
	1.00-1.59		2,709,222		2.69		1.04		2,694,555		1.04
	2.25-4.00		334,500		1.94		2.52		334,500		2.52
$	0.17-4.00		43,068,136		3.29	$	0.48		42,970,136	$	0.47

There were no options exercised for the years ended December 31, 2013 and 2012. There was no intrinsic value of options and warrants available and exercisable for the years ended December 31, 2013 or 2012.

Restricted Stock Units

For the years ended December 31, 2013 and 2012, 686,667 and 390,133 restricted stock units were awarded, respectively. The cost of restricted stock units is determined using the fair value of our common stock on the date of the grant and compensation expense is recognized in accordance with the vesting schedule.  All of the restricted stock units vested during the year they were awarded.

The following is a summary of restricted stock unit activity for the years ended December 31, 2013 and 2012:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2011		2,550,000			1.25
Awarded at fair value		390,133			0.17
Canceled/Forfeited		--			--
Settled by issuance of stock		--			--
Outstanding at December 31, 2012		2,940,133		$	1.11
Awarded at fair value		686,667			0.08
Canceled/Forfeited		(275,000	)		1.36
Settled by issuance of stock		(258,553	)		0.82
Outstanding at December 31, 2013		3,093,247		$	0.88
Vested at December 31, 2013		3,093,247		$	0.88

The 686,667 restricted stock units valued at $51,500 awarded in the year ended December 31, 2013, were issued to 5 members of the board of directors for services rendered prior to 2013 and had been included as director fee expenses in the year ended December 31, 2012.

The impact on our results of operations for recording stock-based compensation for the years ended December 31, 2013 and 2012 is as follows:

	For the years ended
	December 31,
	2013		2012
General and administrative	$	25,388	$	185,478
Research and development		--		98,214
Total	$	25,388	$	283,692

Total unrecognized stock-based compensation was $29,294 at December 31, 2013, which we expect to recognize during the year ended December 31, 2014, in accordance with vesting provisions.

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 28, 2014	Jun. 28, 2013
Document and Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Entity Registrant Name	BROADCAST INTERNATIONAL INC
Entity Central Index Key	0000740726
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		111,370,878
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Public Float			$ 7,737,563

XML

Equipment Financing

12 Months Ended

Dec. 31, 2013

Equipment Financing [Abstract]

Equipment Financing

Note 12 - Equipment Financing

On August 27, 2009, we completed an equipment lease financing transaction with a financial institution.  Pursuant to the financing, we entered into various material agreements with the financial institution. These agreements are identified and summarized below.

We entered into a Master Lease Agreement dated as of July 28, 2009 with the financial institution pursuant to which we sold to the financing institution certain telecommunications equipment to be installed at 1,981 (subsequent additional locations have increased the customer's network to an aggregate of approximately 2,100 locations) of our customer's retail locations in exchange for a one-time payment of $4,100,670 by the financial institution. We paid to the financial institution 36 monthly lease payments of approximately $144,000 plus applicable sales taxes. We had the right to terminate the lease after making 33 payments for a termination fee of the higher of approximately 10% of the original equipment value (approximately $410,000) or the then "in-place fair market value" after which payment we would own all of the equipment. We gave timely notice of exercise of this option. We were a party to a lawsuit to determine if the "in-place fair market value" exceeded 10% of the original lease value and by what amount.  We contended that the three payments made subsequent to the notice exercising our right to purchase constitute full payment for the equipment. The equipment broker contended that we owed an additional amount.  Our accounting records reflected that the capital lease had been retired and the equipment was fully depreciated.

During the year ended December 31, 2012 we included in our lease payments approximately $422,100 toward the in place fair market value. Additionally during the year ended December 31, 2012 and the five months ended May 31, 2013 we made payments of $140,700 and $284,400, respectively, into an escrow account held by the court pending resolution of our dispute.

During 2012 we had made lease payments totaling approximately $1,125,588 of which $1,067,649 was applied toward the outstanding lease and $57,939 was included in interest expense. Included in the $1,125,588 is approximately $422,100 paid toward the in place fair market value. Additionally during the year ended December 31, 2012 we made payments of $140,700 into an escrow account held by the court pending resolution of our dispute. For the year ending December 31, 2012, we expensed the final $33,512 of our lease acquisition fee of $150,792 which was being recognized over the life of the lease included in interest expense.

During the five months ended May 31, 2013 we made additional payments totaling $284,400 into the escrow account. On June 13, 2013 this matter was settled resulting in a $370,000 payment to the plaintiff, which had previously been deposited in escrow with the Court. The $55,100 balance remaining in the escrow account was paid towards accrued litigation fees.  For the year ended December 31, 2013 we recorded the $370,000 expense as part of our cost of sales as it was related to the equipment used by one of our customers.

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Net sales	$ 3,041,357	$ 7,523,624
Cost of sales	1,743,342	4,819,624
Gross profit	1,298,015	2,704,000
Operating expenses:
Administrative and general	2,576,992	4,546,612
Selling and marketing	268,021	1,908,763
Research and development	546,953	1,754,163
Impairment of assets	9,781
Depreciation and amortization	210,512	558,148
Total operating expenses	3,612,259	8,767,686
Total operating loss	(2,314,244)	(6,063,686)
Other income (expense):
Interest expense	(1,634,347)	(1,542,424)
Gain on derivative valuation	1,242,459	8,829,748
Note conversion offering expense		(47,348)
Retirement of debt offering costs		(53,150)
Debt conversion costs		(1,095,309)
Gain on extinguishment of debt		1,578,914
Gain on extinguishment of liabilities	481,590
(Loss) gain on sale of assets	(68,214)	512
Other income, net	4,366	(4,433)
Total other income	25,854	7,666,510
Income (loss) before income taxes	(2,288,390)	1,602,824
Provision for income taxes
Net income (loss)	$ (2,288,390)	$ 1,602,824
Income (loss) per share basic	$ (0.02)	$ 0.02
Income (loss) per share diluted	$ (0.02)	$ 0.02
Weighted average shares basic	109,107,238	100,798,223
Weighted average shares diluted	109,107,238	106,533,844

XML

Notes Payable

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

Notes Payable

Note 6 - Notes Payable

The recorded value of our notes payable (net of debt discount) for the years ending December 31, 2013 and 2012 was as follows:

	December 31, 2012			December 31, 2013
2012 Secured Convertible Notes	$	2,428,166		$	4,225,000
Unsecured Convertible Note		673,840			1,000,000
Unsecured Interest Note		--			20,000
Total		3,102,006			5,245,000
Less Current Portion		(3,102,006	)		(5,245,000	)
Total Long-term	$	--		$	--

2012 Secured Convertible Notes

We engaged Philadelphia Brokerage Corporation to raise funds through the issuance of convertible promissory notes.  We anticipated issuing promissory notes with an aggregate principal amount of up to $5,000,000 ("2012 Convertible Debt Offering"). As of December 31, 2013 we have issued notes having an aggregate principal value of $4,225,000 as explained below.  The notes are due and payable on or before December 31, 2013 and remain unsatisfied at the current date.   The notes bear interest at 12% per annum and may convertible to common stock at a $.25 per share conversion price.  We also granted holders of the notes warrants with a five year life to acquire up to 200,000 shares of our common stock for each $100,000 of principal amount of the convertible notes.  The notes are secured by all of our assets with the exception of the equipment and receivables secured by the equipment lessor for equipment used in providing services for our largest customer's digital signage network.

In July 2012, we entered into a note and warrant purchase and security agreement with individual investors and broke escrow on the initial funding under the 2012 Convertible Debt Offering, the principal amount of which was $1,900,000, which included the conversion of $900,000 of previously issued short term debt (See Bridge Loan described above) to the 2012 convertible Debt Offering, which extinguished the Bridge Loan.  Of the $1,000,000 non-converted principal amount, we realized $923,175 of cash in the initial closing and issued warrants to acquire 3,800,000 shares of our common stock.  We paid $76,825 in investment banking fees and costs of the offering.

In August 2012, we continued sales of convertible debt under the 2012 Convertible Debt Offering by issuing short term debt with a principal amount of $900,000, issued warrants to acquire 1,800,000 shares of our common stock, from which we realized cash of $851,624 after payment of investment banking fees of $48,376.

In December 2012, we continued sales of convertible debt under the 2012 Convertible Debt Offering by issuing short term debt with a principal amount of $250,000, issued warrants to acquire 500,000 shares of our common stock to one member of our Board of Directors.

In January 2013, we continued sales of convertible debt under the 2012 Convertible Debt Offering by issuing short term debt with a principal amount of $425,000, issued warrants to acquire 850,000 shares of our common stock to; (i) one member of our Board of Directors, (ii) three individuals and (iii) two companies.

In August 2013, we converted the $750,000 principal balance of 2013 Accounts Receivable Purchase Agreement into our 2012 Convertible Debt Offering through the issuance of short term debt. No warrants were issued with respect to this transaction.

The notes and warrants mentioned above were issued with price protection provisions and were accounted for as derivative liabilities and valued on the dates issued using a Black-Scholes pricing model.

We recorded an aggregate derivative liability of $74,500 as of December 31, 2012, related to the conversion feature of the note. A derivative valuation gain of $423,500 was recorded to reflect the change in value of the aggregate derivative liability from the time the notes were issued.  The aggregate derivative liability of $74,500 was calculated as follows using a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.11%, (ii) expected life (in years) of 0.50; (iii) expected volatility of 129.08%, (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.08.

Additionally, we recorded an aggregate derivative liability of $2,654 and $183,000 as of December 31, 2013 and 2012, respectively related to the warrant reset provision. A derivative valuation gain of $180,346 and $442,000 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and the time the warrants were issued, respectively.  The aggregate derivative liability of $2,654 was calculated as follows using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.02%, (ii) expected life (in years) of 3.60; (iii) expected volatility of 101.48%, (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

The principal value of $4,225,000 of the secured convertible note is being accreted over the amended term of the obligation, for which $684,760 and $501,166 was included in interest expense for each the years ended December 31, 2013 and 2012, respectively. The note bears a 12% annual interest rate and for the years ended December 31, 2013 and 2012, $448,792 and $149,227, respectively were included in interest expense.

Unsecured Convertible Note

On September 29, 2006, we entered into a letter of understanding with Triage Capital Management, or Triage, dated September 25, 2006.  The letter of understanding provided that Triage loan $1,000,000 to us in exchange for us entering into, on or prior to October 30, 2006, a convertible note securities agreement.  It was intended that the funding provided by Triage be replaced by a convertible note and accompanying warrants, as described below.  Effective November 2, 2006, we entered into securities purchase agreement, a 5% convertible note, a registration rights agreement, and four classes of warrants to purchase our common stock, all of which were with an individual note holder, the controlling owner of Triage, who caused our agreement with Triage to be assigned to him, which satisfied our agreement with Triage.

Pursuant to the securities purchase agreement, (i) we sold to the convertible note holder a three-year convertible note in the principal amount of $1,000,000 representing the funding received by us on September 29, 2006; (ii) the convertible note bears an annual interest rate of 5%, payable semi-annually in cash or shares of our common stock; (iii) the convertible note is convertible into shares of our common stock at a conversion price of $1.50 per share subject to full-ratchet anti-dilution price protection provisions ; and (iv) we issued to the convertible note holder four classes of warrants (A Warrants, B Warrants, C Warrants and D Warrants), which give the convertible note holder the right to purchase a total of 5,500,000 shares of our common stock as described below.  The A and B Warrants originally expired one year after the effective date of a registration statement filed under the Securities Act of 1933, as amended (the "Securities Act"), to register the subsequent sale of shares received from exercise of the A and B Warrants. The C Warrants and D Warrants originally expired eighteen months and twenty four months, respectively, after the effective date of a registration statement to be filed under the Securities Act.  The A Warrants grant the convertible note holder the right to purchase up to 750,000 shares of common stock at an exercise price of $1.60 per share, the B Warrants grant the convertible note holder the right to purchase up to 750,000 shares of common stock at an exercise price of $1.75 per share, the C Warrants grant the convertible note holder the right to purchase up to 2,000,000 shares of common stock at an exercise price of $2.10 per share, and the D Warrants grant the convertible note holder the right to purchase up to 2,000,000 shares of common stock at an exercise price of $3.00 per share.

During the year ended December 31, 2007, the convertible note holder exercised 454,000 A Warrants. We entered into an exchange agreement dated October 31, 2007 in which the convertible note holder received 650,000 shares of our common stock in exchange for cancellation of the C and the D Warrants.  The expiration date of the A Warrants and the B Warrants was extended from January 11, 2008 to December 3, 2008. During the year ended December 31, 2008, the convertible note holder exercised 64,400 A Warrants. On December 3, 2008, the remaining 231,600 A Warrants and 750,000 B Warrants were unexercised and expired.

On December 23, 2009 we entered into an amendment with the holder of our unsecured convertible note in the principal amount of $1.0 million which (i) extended the note maturity date to December 22, 2010 and (ii) increased the annual rate of interest from 5% to 8% commencing October 16, 2009. All other terms and conditions of the note remain unchanged.

On December 24, 2010 we closed on a Debt Restructuring as mentioned above, In connection with that Debt Restructuring the Company amended the note with the holder of a $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013 and remains currently unsatisfied.  We issued 150,000 shares to the holder of this note as consideration to extend the term of the note.

During March 2011, we issued 135,369 shares of common stock to the holder of our unsecured convertible note in satisfaction of $81,221 of accrued interest on the unsecured convertible note.  Also in connection with the satisfaction of the accrued interest we granted to the holder a warrant to acquire up to 221,758 additional shares of our common stock at an exercise price of $0.96 per share.  The warrant is exercisable at any time for a five-year period. For the year ended December 31, 2011, the $157,400 value of the warrant was included in interest expense.

We recorded an aggregate derivative liability of $46,400 of December 31, 2012 related to the conversion feature of the note. A derivative valuation gain of $253,600 was recorded to reflect the change in value of the aggregate derivative liability since December 31, 2011.  The aggregate derivative liability of $46,400 for the conversion feature of the note was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.16%, (ii) expected life (in years) of 1.0; (iii) expected volatility of 112.04%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.08.

In connection with the amendment mentioned above, the principal value of the note is being accreted due to the difference in the value of the conversion feature before and after the amendment. The principal value of $1,000,000 of the unsecured convertible note was accreted over the amended term of the obligation, for which $326,160 and $333,336 was included in interest expense for each the years ended December 31, 2013 and 2012, respectively.

The note bears an 8% annual interest rate payable semi-annually, and for each the years ended December 31, 2013 and 2012, $80,000, was included in interest expense.

Unsecured Interest Note

On April 17, 2013, we entered into a promissory note with the holder of our Unsecured Convertible Note in the amount of $20,000. The note was to satisfy unremitted interest due the holder on the Unsecured Convertible Note at that time. The note bears a 12 % per annum interest rate and was due on December 31, 2013. The principal and accrued interest due remain unsatisfied at the current date.

Senior Unsecured 6.25% Convertible Note

On December 24, 2007, we entered into a securities purchase agreement in which we raised $15,000,000 (less $937,000 of prepaid interest).  We used the proceeds from this financing to support our CodecSys commercialization and development and for general working capital purposes.  Pursuant to the financing, we issued a senior secured convertible note in the principal amount of $15,000,000 (which principal amount has been increased as discussed below).The senior secured convertible note was originally due December 21, 2010, but was extended to December 21, 2013 and has been subsequently retired. The senior secured convertible note bore interest at 6.25% per annum (which rate has been changed as discussed below) if paid in cash.  Interest for the first year was prepaid at closing.  Interest-only payments thereafter in the amount of $234,375 are due quarterly and commenced in April 2009.  Interest payments may be made through issuance of common stock in certain circumstances or may be capitalized and added to the principal.  The original principal of the note was convertible into 2,752,294 shares of our common stock at a conversion price of $5.45 per share, convertible any time during the term of the note.  We granted a first priority security interest in all of our property and assets and of our subsidiaries to secure our obligations under the note and related transaction agreements. In August 2009 we received a waiver from the note holder releasing their security interest for the equipment purchased under our sale lease back financing.

In connection with the 2007 financing, the senior secured convertible note holder received warrants to acquire 1,875,000 shares of our common stock exercisable at $5.00 per share.  We also issued to the convertible note holder 1,000,000 shares of our common stock valued at $3,750,000 and incurred an additional $1,377,000 for commissions, finder's fees and other transaction expenses, including the grant of a three-year warrant to purchase 112,500 shares of our common stock to a third party at an exercise price of $3.75 per share, valued at $252,000.  A total of $1,377,000 was included in debt offering costs and is being amortized over the term of the note.

From March 26, 2010 through October 29, 2010, we entered into a series of amendments to the senior secured convertible note.  Each of these amendments is described below.

On March 26, 2010, we entered into an amendment and extension agreement with the holder of the senior secured convertible note.  The agreement conditionally amended the maturity date of the note to December 21, 2011.  If we are unsuccessful in raising at least $6.0 million in equity financing before September 30, 2010, the maturity date of the note will automatically be restored to its original date of December 21, 2010.  In consideration of entering into the agreement, the note holder was issued 1,000,000 shares of our restricted common stock valued at $990,000.  In addition, we agreed to the inclusion of three additional terms and conditions in the note: (i) from and after the additional funding, we will be required to maintain a cash balance of at least $1,250,000 and provide monthly certifications of the cash balance to the note holder; (ii) we will not make principal payments on our outstanding $1.0 million unsecured convertible note without the written consent of the holder of the senior secured convertible note; and (iii) we will grant board observation rights to the note holder.  Given these additional terms, unless the senior secured convertible note holder provides consent, of which there can be no assurance, we will be precluded from repaying the $1.0 million unsecured convertible note when it becomes due on December 22, 2010.

On July 30, 2010, we entered into a further amendment agreement with the holder of the senior secured convertible note regarding the note and warrant reset provisions.  The July 30, 2010 amendment conditionally amended the maturity date of the note to June 21, 2012.  If we are unsuccessful in raising the $6.0 million in equity financing referenced above, the maturity date of the note will automatically be restored to its original date of December 21, 2010.  The holder of the note agreed to a conversion price of the note of $1.80 per share instead of the price at which we sell equity between now and September 30, 2010 and reduced the required cash balance referenced in the March 26, 2010 amendment above from $1,250,000 to $950,000.  In addition, the number of warrants originally granted to the holder pursuant to the 2007 financing increased from 1,875,000 to 5,208,333 and were exercisable at $1.80 per share instead of $5.00 per share.  The warrants continued to be exercisable any time for the five years from the original date of grant.  In consideration of entering into the July 30, 2010 amendment the note holder was issued 2,000,000 shares of common stock and would be issued an additional 800,000 shares of our common stock contingent upon completion of the required equity raise.

On September 27, 2010, we entered into a further amendment agreement with the holder of the senior secured convertible note regarding the note.  Pursuant to this amendment, the due date for the required equity financing was extended to October 31, 2010.

On October 29, 2010, we entered into a fourth amendment agreement with the holder of the senior secured convertible note regarding the note and warrant provisions.  The fourth amendment (i) increased the amount of the required equity raise to $8.0 million, approximately $2.5 million of which had been raised or committed by investors at the time of the amendment; (ii) extended the time in which we can complete the equity financing to December 3, 2010; (iii) deleted the provision of the senior secured convertible note that granted the Company the option to redeem the note prior to its maturity date; (iv) changed the conversion price of the note upon successful completion of the required capital raise to an amount equal to 150% of the lowest price at which Company common stock is sold during calendar year 2010; (v) changed the exercised price of the warrants to an amount equal to 150% of the lowest price at which Company common stock is sold during calendar year 2010; (vi) provides that if we are successful in completing the required capital raise the number of warrants will be increased as currently provided in the 6.25% senior secured convertible promissory note; and (vii) extended the expiration date of the warrants to December 31, 2013.

If the additional funding was not completed by December 3, 2010, certain provisions of the prior amendments became void in that the maturity date will revert back to December 21, 2010, the conversion price became the lowest price at which equity securities had been sold, the exercise price became the lowest price at which equity securities have been sold, the number of warrants then outstanding would be determined by the original purchase documents, and the Company would not have an obligation to maintain a balance of cash and marketable securities equal to $950,000.

On December 24, 2010, we closed on the Debt Restructuring.  In connection therewith, we (i) issued an Amended and Restated Senior Convertible Note in the principal amount of $5.5 million (the "Amended and Restated Note") to Castlerigg Master Investment Ltd. ("Castlerigg"), (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the loan restructuring agreement under which the Amended and Restated Note and other documents was issued (the "Loan Restructuring Agreement"), and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest. The Debt Restructuring was considered a troubled-debt restructuring and a gain on debt restructuring of $3,062,457 was recorded during the year ended December 31, 2010, which was the difference between the adjusted carrying value of the original note and the carrying value of the Amended and Restated Note.

The Amended and Restated Note, dated December 23, 2010, is a senior, unsecured note that matures in three years from the closing and bore interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year's interest of approximately $344,000 at the closing.  The Amended and Restated Note is convertible into shares of common stock at a conversion price of $1.35 per share, subject to adjustment.  The Amended and Restated Note is convertible in whole or in part at any time upon notice by Castlerigg to us.  The Amended and Restated Note also contains various restrictions, acceleration provisions and other standard and customary terms and conditions.  Two of our consolidated subsidiaries guaranteed our obligations under the Amended and Restated Note.

The Investor Rights Agreement provides Castlerigg with certain registration rights with respect to the Company's securities held by Castlerigg.  These registration rights include an obligation of the Company to issue additional warrants to Castlerigg if certain registration deadlines or conditions were not satisfied.  The agreement also contains full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above.

On March 26, 2012, we closed on an equity financing (the "2012 Equity Financing"), as well as a restructuring of our outstanding senior convertible indebtedness (the "2012 Debt Restructuring"), resulting in complete satisfaction of our senior indebtedness under the Amended and Restated Note.

A portion of the net proceeds from the 2012 Equity Financing was used to close on the 2012 Debt Restructuring. The Company paid $2,750,000 and issued 2,000,000 shares of common stock valued at $760,000 in satisfaction of the Amended and Restated Note and remaining interest value of $680,816. In consideration of negotiating the 2012 Debt Restructuring and amending our agreement with our placement agent, we paid $275,041 and issued 586,164 shares of our common stock valued at $222,742 to our placement agent, and recognized a $2,173,033 gain on extinguishment of debt as a result of this retirement.

With the retirement of the Amended and Restated Note we recorded no aggregate derivative liability at December 31, 2013 or 3012. However for the year ended December 31, 2012, (at the date of retirement) we recorded a derivative valuation gain of $203,700, related to the conversion feature of the Amended and Restated Note to reflect the change in value of the aggregate derivative from December 31, 2011 to the date of retirement. The derivative value of $81,500 at the date of retirement was recorded as additional paid in capital.

Accounts Receivable Purchase Agreements

During the year ended December 31, 2010 we entered into two Accounts Receivable Purchase Agreements with one individual for an aggregate amount of $775,000. During the year ended December 31, 2011 we remitted $100,000 of the principal balance plus accrued interest of $8,360 and converted the remaining $675,000 of principal balance plus $109,292 of accrued and unpaid interest into 1,307,153 shares of our common stock and warrants to purchase an additional 653,576 shares of our common stock. The warrants contain anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than $1.00 per share.  The current exercise price has been reset to $0.725 per share due to subsequent financings.

We recorded an aggregate derivative liability of $28 and $5,900 as of December 31, 2013 and 2012, respectively, related to the warrant reset provision of the warrants. A derivative valuation gain of $5,872 and $253,600, respectively, was recorded to reflect the change in value of the aggregate derivative liability since December 31, 2012 and December 31, 2011, respectively.  The aggregate derivative liability of $28 for the warrant reset provision of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.48%, (ii) expected life (in years) of 2.20; (iii) expected volatility of 119.11%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

Bridge Loan

On December 28, 2011 we entered into a Note and Warrant Purchase and Security Agreement with seven individuals for an aggregate of $1,300,000 ("Bridge Loan") to be used as working capital. The note bears an annual interest rate of 18%, payable monthly in cash.  Additionally, we granted to the holders of the Bridge Loan warrants with a five year term to purchase an aggregate of 357,500 shares of our common stock at an exercise price of $0.65.  The note was due on February 28, 2012, but the term was subsequently extended to the earlier of the date nine months from the original maturity date or the date we closed on an additional sale of our securities that resulted in gross proceeds to us of $12 million.  In consideration of the extension of the maturity date of the Bridge Loan, we granted the holders of the Bridge Loan warrants with a six year term to purchase 247,500 shares of our common stock at an exercise price of $0.35 per share. This note is collateralized by a security interest in all of our accounts receivable

In connection with the Bridge Loan, we paid an $84,500 placement fee and issued warrants to purchase 65,000 shares of our common stock at an exercise price of $0.65 per share and subsequently reset to $0.53, to our investment banker for services in completing the above transaction and paid a $3,000 escrow fee to the Escrow Agent in exchange for holding the funds prior to their disbursement to us.

On March 26, 2012, we closed on the 2012 Equity Financing and under the terms of the associated securities purchase agreement, two of the above described bridge lenders converted the principal balance of their portion of the bridge loan in the amount of $400,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing, reducing the outstanding principal balance to $900,000. The warrants issued had a total value of $222,426 which resulted in a loss on extinguishment of debt of $222,426. The aggregate derivative liability and valuation gain or loss for the warrants issued for the converted portion of the principal balance are included in the aggregate of 2012 Equity Financing information.

All warrants mentioned above were issued with price protection provisions and were accounted for as derivative liabilities and valued using a Black Scholes pricing model.

On July 13, 2012 the $900,000 principal balance was retired and was included as part of the 2012 Convertible Note (as described below) and recorded a (i) $93,661 loss on extinguishment of debt related to the remaining un-accreted portion of the note and (ii) $53,160 expense related to unrecognized offering costs, at the time of retirement.

At December 31, 2013 and 2012 we recorded an aggregate derivative liability of $44 and $7,400, respectively related to the reset provision for the original and placement warrants issued. A derivative valuation gain of $7,356 and $136,300 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and 2011, respectively.  The aggregate derivative liability of $44 for the reset provision of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.78%, (ii) expected life (in years) of 3.0; (iii) expected volatility of 103.27%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

At December 31, 2013 and 2012 we recorded an aggregate derivative liability of $59 and $7,200, respectively related to the reset provision for the warrants issued for an extension of the maturity date.  A derivative valuation gain of $7,141 and $89,325 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and the time the warrants were issued, respectively.  The aggregate derivative liability of $59 for the reset provision of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.78%, (ii) expected life (in years) of 3.0; (iii) expected volatility of 103.27%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

The principal value of the note was being accreted over the amended term of the obligation, for which $106,723 was included in interest expense for the year ended December 31, 2012.  The note bore an 18% annual interest rate, and for the year ended December 31, 2012, $100,899 was included in interest expense.

Equipment Purchase and Sale Agreement

In October 2011, we entered into an Equipment Purchase and Sale Agreement with a Utah corporation whereby we used the funds advanced to purchase certain electronic receiving and digital signage equipment along with installation costs.  A 3% fee was due each month the amount remained outstanding.  At December 31, 2011 we had an outstanding funded amount of $700,000.

On March 26, 2012, we closed on the 2012 Equity Financing and under the terms of the associated securities purchase agreement the above described lender converted the principal balance of its portion of the loan in the amount of $500,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing, the remaining $200,000 principal balance plus $105,000 of interest due was paid in cash. The warrants issued had a total value of $278,032 which resulted in a loss on extinguishment of debt of $278,032. The aggregate derivative liability and valuation gain or loss for the warrants issued for the converted portion of the principal balance are included in the aggregate of 2012 Equity Financing information.

The 3% fee mention above totaling $63,000 was recorded as interest expense for year ended December 31, 2012.

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Equity Financing and the Debt Restructuring

12 Months Ended

Dec. 31, 2013

Equity Financing and the Debt Restructuring [Abstract]

Equity Financing and the Debt Restructuring

Note 5 - Equity Financing and the Debt Restructuring

2012 Equity Financing and the Debt Restructuring

On March 26, 2012, we closed on an equity financing (the "2012 Equity Financing") as well as a restructuring of our outstanding senior convertible indebtedness (the "2012 Debt Restructuring") resulting in complete satisfaction of our senior indebtedness.

We entered into an Engagement Agreement, dated October 28, 2011, with MDB Capital Group, LLC ("MDB"), pursuant to which MDB agreed to act as the exclusive agent of the Company on a "best efforts" basis with respect to the sale of up to a maximum gross consideration of $6,000,000, subsequently verbally increased to $10,000,000, of the Company's securities, subject to a minimum gross consideration of $3,000,000.  The Company agreed to pay to MDB a commission of 10% of the gross offering proceeds received by the Company, to grant to MDB warrants to acquire up to 10% of the shares of our common stock and warrants issued in the financing, and to pay the reasonable costs and expenses of MDB related to the offering.

Pursuant to the Engagement Agreement, we entered into a Securities Purchase Agreement ("SPA") dated March 23, 2012 with select institutional and other accredited investors for the private placement of 27,800,000 units of our securities.  The SPA included a purchase price of $0.25 per unit, with each unit consisting of one share of common stock and two forms of Warrant: (1) The "A" Warrant grants the investors the right to purchase an additional share of common stock for each two shares of common stock purchased, for a term of six years and at an exercise price of $0.35 per share; and (2) The "B" Warrant will not be exercisable unless and until the occurrence of a future issuance of stock at less than $0.25 per share, but, in the event of such issuance, grants the investors the right to acquire additional shares at a price of $0.05 to reduce the impact of the dilution caused by such issuance, but in no event shall the number of shares to be issued under the B Warrant cause us to exceed the number of authorized shares of common stock. The shares in excess of our authorized shares that would have been issuable under the B Warrant shall be "net settled" by payment of cash in an amount equal to the number of shares in excess of the authorized common shares multiplied by the closing price of our common stock as of the trading day immediately prior to the applicable date of the exercise of such B Warrant. The holders of the B Warrants agreed in December 2013 to amend the terms of the B Warrant to reduce the amount of subsequent financing required to extinguish the B Warrants with the result that the B Warrants have now been extinguished.

Net proceeds from the 2012 Equity Financing, after deducting the commissions and the estimated legal, printing and other costs and expenses related to the financing, were approximately $6.1 million.  Coincident to the closing of the 2012 Equity Financing, we also closed on the 2012 Debt Restructuring.  In connection therewith, the Company paid $2,750,000 to Castlerigg Master Investment Ltd. ("Castlerigg"), and issued to Castlerigg 2,000,000 shares of common stock in full and complete satisfaction of the senior convertible note and all accrued interest. In consideration of negotiating the 2012 Debt Restructuring, we issued to one of our placement agents 586,164 shares of our common stock and paid them $275,041.

In December 2011, we entered into a loan with 7 accredited individuals and entities under the terms of which we borrowed $1,300,000 to be used as working capital ("Bridge Loan").  The Bridge Loan bears an interest rate of 18% per annum and had a maturity date of February 28, 2012, which was subsequently extended to the earlier of the date nine months from the original maturity date or the date we close on an additional sale of our securities that results in gross proceeds to us of $12 million.  In consideration of the Bridge Loan we granted to the holders of the Bridge Loan warrants with a five year term to purchase 357,500 shares of our common stock at an exercise price of $0.65 per share.  In consideration of the extension of the maturity date of the Bridge Loan, we granted the holders of the Bridge Loan warrants with a six year term to purchase 247,500 shares of our common stock at an exercise price of $0.35 per share.

In connection with the 2012 Equity Financing and under the terms of the SPA, two of the above described bridge lenders converted the principal balance of their portion of the bridge loan in the amount of $400,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing.  In addition, one other entity converted the amount owed by us for equipment purchases in the amount of $500,000 to common stock and warrants as part of and on the same terms as the 2012 Equity Financing. The proceeds from these conversions were treated as funds raised with respect to the financing.

In connection with the 2012 Equity Financing and under the terms of the SPA, the Company agreed to prepare and file, within 60 days following the issuance of the securities, a registration statement covering the resale of the shares of common stock sold in the financing and the shares of common stock underlying the Warrants.  The Company filed the registration statement on April 9, 2012 and it was declared effective on August 1, 2012.

On April 5, 2012 we secured an additional $154,000 from 1 company and 4 individuals (three of which are members of our Board of Directors) on the same terms and conditions as the investors of the 2012 Equity Financing. As a result of this funding we issued 616,000 shares of our common stock and A warrants totaling 400,400 of which 308,000 were issued to investors and 92,400 were issued to our investment banker.

All warrants listed below were issued with price protection provisions and were accounted for as derivative liabilities. The Warrants were valued using the Black Scholes pricing model.

	Common Shares Issued		Number of Warrants		Value of Warrants
Investors		24,816,000		12,408,000	$	5,677
Bridge Loan Conversion		1,600,000		800,000		366
Equipment Finance Conversion		2,000,000		1,000,000		458
Agency		--		4,262,400		1,951
Total		28,416,000		18,470,400	$	8,452

We recorded an aggregate derivative liability of $8,452 and $757,469 as of December 31, 2013 and 2012, respectively related to the reset feature of the warrants mentioned above. A derivative valuation gain of $749,017 and $4,365,323 was recorded to reflect the change in value of the aggregate derivative liability from December 31, 2012 and the time the warrants issued, respectively.  The aggregate derivative liability of $8,452 was calculated using a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.27%, (ii) expected life (in years) of 4.2; (iii) expected volatility of 96.77%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

2010 Equity Financing and the Debt Restructuring

On December 24, 2010, we closed on an equity financing (the "Equity Financing") as well as a restructuring of our then outstanding convertible indebtedness (the "Debt Restructuring").  The Equity Financing and the Debt Restructuring are described as follows.

We entered into a Placement Agency Agreement, dated December 17, 2010, with Philadelphia Brokerage Corporation ("PBC"), pursuant to which PBC agreed to act as the exclusive agent of the Company on a "best efforts" basis with respect to the sale of up to a maximum gross consideration of $15,000,000 of units of the Company's securities, subject to a minimum gross consideration of $10,000,000.  The units consisted of two shares of our common stock and one warrant to purchase a share of our common stock.  The Company agreed to pay PBC a commission of 8% of the gross offering proceeds received by the Company, to issue PBC 40,000 shares of its common stock for each $1,000,000 raised, and to pay the reasonable costs and expenses of PBC related to the offering.  The Company also agreed to pay PBC a restructuring fee in the amount of approximately $180,000 upon the closing of the Equity Financing and the simultaneous Debt Restructuring.

Pursuant to the Placement Agency Agreement, we entered into Subscription Agreements dated December 23, 2010 with select institutional and other accredited investors for the private placement of 12,500,000 units of our securities.  The Subscription Agreements included a purchase price of $1.20 per unit, with each unit consisting of two shares of common stock and one warrant to purchase an additional share of common stock.  The warrants have a term of five years and had an exercise price of $1.00 per share which was reset to $0.78 pursuant to the 2012 Equity Financing.

Net proceeds from the Equity Financing, after deducting the commissions and debt restructuring fees payable to PBC and the estimated legal, printing and other costs and expenses related to the financing, were approximately $13.5 million.  We used a portion of the net proceeds of the Equity Financing to pay down debt and the remainder was used for working capital.

On November 29, 2010, we entered into a bridge loan transaction with three accredited investors pursuant to which we issued unsecured notes in the aggregate principal amount of $1.0 million.  Upon the closing of the Equity Financing, the lenders converted the entire principal amount plus accrued interest into the same units offered in the Equity Financing and the proceeds from the bridge loan transaction were treated as funds raised with respect to the financing.

In connection with the Equity Financing and under the terms of the Subscription Agreements, the Company agreed to prepare and file, and did file, within 60 days following the issuance of the securities, a registration statement covering the resale of the shares of common stock sold in the financing and the shares of common stock underlying the warrants.  The registration statement was declared effective June 16, 2011 satisfying the obligation contained in the Subscription Agreements.

On December 24, 2010, we also closed on the Debt Restructuring.  In connection therewith, we (i) issued an Amended and Restated Senior Convertible Note in the principal amount of $5.5 million (the "Amended and Restated Note") to Castlerigg Master Investment Ltd. ("Castlerigg"), (ii) paid $2.5 million in cash to Castlerigg, (iii) cancelled warrants previously issued to Castlerigg that were exercisable for a total of 5,208,333 shares of common stock, (iv) issued 800,000 shares of common stock to Castlerigg in satisfaction of an obligation under a prior loan amendment, (v) entered into the Letter Agreement pursuant to which we paid Castlerigg an additional $2.75 million in cash in lieu of the issuance of $3.5 million in stock and warrants as provided in the loan restructuring agreement under which the Amended and Restated Note and other documents were issued (the "Loan Restructuring Agreement"), and (vi) entered into an Investor Rights Agreement with Castlerigg dated December 23, 2010.  As a result of the foregoing, Castlerigg forgave approximately $7.2 million of principal and accrued but unpaid interest.

The Amended and Restated Note, dated December 23, 2010, was a senior, unsecured note that matured in three years from the closing and bore interest at an annual rate of 6.25%, payable semi-annually.  We paid the first year's interest of $350,434 at the closing.  The Amended and Restated Note was convertible into shares of common stock at a conversion price of $1.35 per share, subject to adjustment.  The Amended and Restated Note was convertible in whole or in part at any time upon notice by Castlerigg to us.  The Amended and Restated Note also contained various restrictions, acceleration provisions and other standard and customary terms and conditions.  Two of our consolidated subsidiaries guaranteed our obligations under the Amended and Restated Note.

The Investor Rights Agreement provides Castlerigg with certain registration rights with respect to the Company's securities held by Castlerigg.  These registration rights include an obligation of the Company to issue additional warrants to Castlerigg if certain registration deadlines or conditions are not satisfied.  The agreement also contains full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above.

During the three months ended March 31, 2011, we issued Castlerigg 400,000 warrants pursuant to a waiver agreement dated March 10, 2011 allowing the issuance of shares and warrants for the conversion of the AR Note Payable without adjusting the conversion price of the Amended and Restated Senior 6.25% Convertible Note.  These warrants contain full-ratchet anti-dilution price protection provisions in the event the Company issues stock or convertible debt with a purchase price or conversion price less than the conversion price described above and were accounted for as embedded derivatives and valued on the transaction date using a Black Scholes pricing model. During the three and six months ended June 30 ,2011 the warrant holder exercised these warrants using a cashless provision resulting in the company issuing 372,272 shares of our common stock. A valuation gain of $144,000 was recorded to reflect the change in value of the aggregate derivative from the time of issue to the date of conversion.

In connection with the Debt Restructuring, the Company amended the note with the holder of a $1.0 million unsecured convertible note, pursuant to which the maturity date of the note was extended to December 31, 2013. We also issued 150,000 shares and 75,000 warrants to acquire our common stock at $.90 per share to the holder of this note as consideration to extend the term of the note.

On March 26, 2012, we closed on an equity financing (the "2012 Equity Financing") as well as a restructuring of our outstanding senior convertible indebtedness (the "2012 Debt Restructuring") resulting in complete satisfaction our senior indebtedness.

A portion of the net proceeds from the 2012 Equity Financing was used to close on the 2012 Debt Restructuring therewith. The Company paid $2,750,000 and issued 2,000,000 shares of common stock valued at $760,000 to Castlerigg in satisfaction of the $5,500,000 senior convertible note and $680,816 of accrued interest.

Investor warrants totaling 12,499,980 issued under the Subscription  Agreements contain price protection adjustments in the event we issue new common stock or common stock equivalents in certain transactions at a price less than $1.00 per share and were accounted for as embedded derivatives and valued on the transaction date using a Black Scholes pricing model. The exercise price has been reset to $0.7312 per share due to subsequent financings.

We recorded an aggregate derivative liability of $499 and $109,400 as of December 31, 2013 and 2012 respectively, related to the reset feature of the warrants issued under the Placement agency Agreement. A derivative valuation gain of $108,901 and $2,765,600, respectively, were recorded to reflect the change in value of the aggregate derivative liability since December 31, 2012 and December 31, 2011, respectively.  The aggregate derivative liability of $499 for the conversion feature of the note was calculated using the Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 0.38%, (ii) expected life (in years) of 2.0; (iii) expected volatility of 120.96%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.005.

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Note 17 - Supplemental Cash Flow Information

2013

· During the year ended December 31, 2013 we issued 458,553 shares of our common stock to one former member of our board of directors for services rendered of which (i) 258,553 was for the settlement of previously awarded restricted stock units and (ii) 200,000 valued at $15,000 for unpaid services rendered in 2012, which had been expensed as director fees during the year ended December 31, 2012

· For the year ended December 31, 2013 we issued an aggregate of 60,000 shares of our common stock valued at $4,200 to six individuals for services rendered.

· For the nine months ended September 30, 2013 we awarded 686,667 restricted stock units issued valued at $51,500 to four members of our board of directors for services rendered in 2012. The value of these awards had been expensed as directors fee during the year ended December 31, 2012.

· For the year ended December 31, 2013 we recorded a $68,214 loss on disposal of assets of which (i) $40,824 was for the abandonment of lease hold improvements related to our move from our 7050 Union Park location, (ii) $25,685 related to the retirement of furniture & fixtures, (iii) $1,705 (net of $139,014 of proceeds) related to equipment sold or no longer in use.

· For the year ended December 31, 2013 we reduced our accounts payable by $841,750 and recorded a $481,590 gain on extinguishment of liabilities resulting from the issuance of 2,240,852 shares of our common stock valued at $153,860 and cash payments totaling $206,300 to 21 of our accounts payable vendors.  As of December 31, 2013 we owe 6 of these vendors an additional aggregate amount of $55,317. Additionally we reduced our accounts payable by $335,701 by returning equipment to two vendors who accepted the returns for full credit against our payable.

· For year ended December 31, 2013 an aggregate non-cash expense of $1,010,920 was recorded for the accretion of notes payable as follows: (i) $326,100 for our unsecured convertible note and (ii) $684,760 for our 2012 secured convertible notes.

· During the year ended December 31, 2013, we recognized $211,721 in depreciation and amortization expense from the following: (i) $1,209 related to cost of sales for equipment used directly by or for customers, (ii) $200,606 related to equipment other property and equipment, and (iii) $9,906 for patent amortization.

2012

· During the year ended December 31, 2012 we issued 586,164 shares our common stock, valued at $222,742 to a placement agency for services rendered related to our 2012 Equity Financing and Debt Restructuring agreement

· During the year ended December 31, 2012, we issued 496,000 shares of our common stock valued at $177,313 to two consultants and one corporation of which (i) 250,000 shares was in consideration for cancellation of a warrant issued for consulting services rendered and (ii) 246,000 was for consulting services rendered.

· During the year ended December 31, 2012, we recognized $1,024,754 in depreciation and amortization expense from the following: (i) $466,606 related to cost of sales for equipment used directly by or for customers, (ii) $547,997 related to equipment other property and equipment, and (iii) $10,151 for patent amortization.

· For the year ended December 31, 2012, an aggregate non-cash expense of $941,225 was recorded for the accretion of our convertible notes of which (i) $501,166 was for the accretion of our 2012 Secured Convertible Note (ii) $333,336 was related to our unsecured convertible note and (iii) $106,723 was for our bridge loan.

We paid no cash for income taxes during the years ended December 31 2013 and 2012.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 13 - Fair Value Measurements

We adopted ASC Topic 820 as of January 1, 2008 for financial instruments measured at fair value on a recurring basis.  ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  These tiers include:

· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2013:

					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
None		--		--		--		--
Total assets measured at fair value	$	--	$	--	$	--	$	--
Liabilities
Derivative valuation (1)	$	11,736	$	--	$	--	$	11,736
Total liabilities measured at fair value	$	11,736	$	--	$	--	$	11,736

(1) See Notes 4 & 5 for additional discussion.

The table below presents our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2013.  We classify financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model.

	Derivative
	Valuation
	Liability
Balance at December 31, 2012	$	(1,191,269	)
Total gains or losses (realized and unrealized)
Included in net income		1,242,459
Valuation adjustment		--
Purchases, issuances, and settlements, net		(62,926	)
Transfers to Level 3		--
Balance at December 31, 2013	$	(11,736	)

Money Market Funds and Treasury Securities

The money market funds and treasury cash reserve securities balances are classified as cash and cash equivalents on our consolidated balance sheet.

Fair Value of Other Financial Instruments

The carrying amounts of our accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their immediate or short-term maturities.  The aggregate carrying amount of the notes payable approximates fair value as the individual notes bear interest at market interest rates and there hasn't been a significant change in our operations and risk profile.

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Income Taxes

Note 9 - Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax liabilities consist of the following components as of December 31, 2012 and 2013:

	2012			2013
Deferred tax assets
NOL carry-forward	$	25,881,900		$	27,003,600
General business credit carry-forwards		1,158,900			1,118,400
Deferred compensation		78,500			22,700
Allowance for doubtful accounts		31,600			3,200
Deferred tax liabilities
Depreciation		61,700			(13,300	)
Valuation allowance		(27,212,600	)		(28,134,600	)
Net deferred tax asset	$	-		$	-

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2012 and 2013 due to the following:

	2012			2013
Federal income tax (expense) benefit at statutory rates	$	1,831,600		$	958,300
State income tax (expense) benefit at statutory rates		269,300			140,900
Change in valuation allowance		(2,100,900	)		(1,099,200	)
	$	-		$	-

At December 31, 2013, the Company had net operating loss carry-forwards of approximately $69,240,000 that may be offset against future taxable income from the year 2014 through 2033.  No tax benefit has been reported in the December 31, 2012 and 2013 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

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Retirement Plan (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Maximum percent of compensation which may be contributed to plan	60.00%
Contributions to defined contribution plans	$ 47,691	$ 99,761
Scenario One [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Percent of match	100.00%
Maximum percent of compensation matched	3.00%
Scenario Two [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Percent of match	50.00%
Maximum percent of compensation matched	2.00%

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Interact Devices Inc. (IDI)

12 Months Ended

Dec. 31, 2013

Interact Devices Inc. (IDI) [Abstract]

Interact Devices Inc. (IDI)

Note 7 - Investment in Interact Devices, Inc (IDI)

We began investing in and advancing monies to IDI in 2001.  IDI was developing technology which became an initial part of the CodecSys technology.

On October 23, 2003, IDI filed for Chapter 11 Federal Bankruptcy protection. We desired that the underlying patent process proceed and that the development of CodecSys technology continue. Therefore, we participated in IDI's plan of reorganization, whereby we would satisfy the debts of the creditors and obtained certain licensing rights.  On May 18, 2004, the debtor-in-possession's plan of reorganization for IDI was confirmed by the United States Bankruptcy Court. As a result of this confirmation, we issued to the creditors of IDI shares of our common stock and cash in exchange for approximately 50,127,218 shares of the common stock of IDI. Since May 18, 2004, we have acquired additional common share equivalents IDI. As of December 31, 2013, we owned 55,897,169 IDI common share equivalents, representing approximately 94% of the total outstanding IDI share equivalents

Since May 18, 2004, we have advanced additional cash to IDI for the payment of operating expenses, which continues development and marketing of the CodecSys technology. As of December 31, 2013 and 2012, we have advanced an aggregate amount of $3,393,149 and $3,347,255 respectively, pursuant to a promissory note that is secured by assets and technology of IDI.

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Operating Leases

12 Months Ended

Dec. 31, 2013

Operating Leases [Abstract]

Operating Leases

Note 8 - Operating Leases

We currently lease our executive office and warehouse space located at 6952 South 185 West, Unit C, Salt Lake City, Utah 84047, which consists of approximately 2,500 square feet on a month to month basis, at the rate of $3,955 per month plus utilities. We have no other properties.  We recognized rent expense of approximately $234,392 and $352,789, in 2013 and 2012, respectively.

We also lease copy machines on multi-year leases that expire in March 2014 at a minimum rate of $655 per month.

The total future minimum payments under non-cancelable operating leases at December 31, 2013 are $1,965 related to the copy machines mentioned above.

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Preferred and Common Stock

12 Months Ended

Dec. 31, 2013

Preferred and Common Stock [Abstract]

Preferred and Common Stock

Note 10 - Preferred and Common Stock

We have authorized two classes of stock, 20,000,000 shares of preferred stock with no par value and 180,000,000 shares of common stock with a $0.05 par value. No preferred stock has been issued, while 110,233,225 shares of common stock were issued and outstanding at December 31, 2013. Holders of shares of common stock are entitled to receive dividends if and when declared and are entitled to one vote for each share on all matters submitted to a vote of the shareholders.

During the year ended December 31, 2013, we issued 2,759,405 shares of our common stock as follows: (i) 2,240,852 for extinguishment of company liabilities, (ii) 258,553 for settlement of restricted stock options, (iii) 200,000 for common stock issued to a former director for prior years services rendered, (iv) 60,000 to six non-employees for services rendered.

During the year ended December 31, 2012, we issued 31,498,164 shares of our common stock as follows: (i) 24,816,000 related to our 2012 Equity Financing and Debt Restructuring, (ii) 5,600,000 for debt conversions and (iii) 1,082,164 for services rendered by consultants.

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Subsequent Events (Details)	0 Months Ended
	Mar. 06, 2014
Former Mananger [Member]
Subsequent Event [Line Items]
Share-based compensation, shares issued during period	729,100
Former Director [Member]
Subsequent Event [Line Items]
Common stock issued for restricted stock settlements, shares	408,553

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Supplemental Cash Flow Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued for services rendered, shares		496,000
Share-based Goods and Nonemployee Services Transaction [Line Items]
Common stock issued for services	$ 4,200	$ 177,313
Other Significant Noncash Transactions [Line Items]
Total stock issued to director for services rendered	458,553
Accretion of discount on convertible notes payable	1,010,920	941,225
Decrease in accounts payable	(841,750)
Gain on extinguishment of liabilities	481,590
Common stock issued for extinguishment of liabilities, shares	2,240,852
Common stock issued for extinguishment of liabilities	153,860
Payments for extinguishment of liabilities	206,300
Accounts payable to remaining vendors	55,317
Reduction in accounts payable by returning equipment	(335,701)
Total depreciation and amortization expense	211,721	1,024,754
Depreciation and amortization included in cost of sales	1,209	466,606
Depreciation related to equipment other property and equipment, and (iii) $2,538 for patent amortization.	200,606	547,997
Patent amortization	9,906	10,151
Property, Plant and Equipment [Line Items]
Loss on disposal of assets	(68,214)	512
Proceeds from sale of assets	139,014	3,761
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Loss on disposal of assets	(40,824)
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Loss on disposal of assets	(25,685)
Equipment [Member]
Property, Plant and Equipment [Line Items]
Loss on disposal of assets	(1,705)
2012 Convertible Notes [Member]
Other Significant Noncash Transactions [Line Items]
Accretion of discount on convertible notes payable	684,760	501,166
Unsecured Convertible Note [Member]
Other Significant Noncash Transactions [Line Items]
Accretion of discount on convertible notes payable	326,160	333,336
Bridge Loan Note Payable [Member]
Other Significant Noncash Transactions [Line Items]
Accretion of discount on convertible notes payable		106,723
Shares Issued to Consultant for Services [Member]
Other Significant Noncash Transactions [Line Items]
Common stock issued to a director for prior years services rendered, shares		246,000
Shares Issued to Consultant for Cancellation of Warrant [Member]
Other Significant Noncash Transactions [Line Items]
Common stock issued to a director for prior years services rendered, shares		250,000
Placement Agency [Member]
Share-based Goods and Nonemployee Services Transaction [Line Items]
Warrants issued to investment banker		586,164
Common stock issued for services		222,742
Six Individuals [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued for services	60,000
Value of shares issued for services	4,200
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Settled by issuance of stock	258,553
Value of shares issued for services	51,500
Restricted stock units awarded	686,667	390,133
Deferred Compensation, Share-based Payments [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued for services	200,000
Value of shares issued for services	$ 15,000

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Significant Accounting Policies (Patents and Intangibles) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Intangible Assets [Abstract]
Patent useful life	20 years
Patent amortization	$ 9,906	$ 10,151
Estimated future annual amortization expense related to intangible assets:
2014	10,121
2015	10,121
2016	10,121
2017	10,121
2018	$ 10,121

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Stock-based Compensation (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	$ 25,389	$ 283,693
Unrecognized compensation expense	29,294
Period over which compensation expense will be recognized	3 years
Warrants exercised
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of unissued stock options authorized	4,319,411
Number of unissued shares of common stock reserved for issuance	363,200
Maximum contractual term	10 years
Vesting period	3 years
Weighted average fair value of options granted		$ 0.27
Stock Options [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation		833
Options granted		50,000
Number of individuals		4
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value of options granted	$ 0.05	$ 0.23
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	51,500	65,500
Number of individuals	5	5
Restricted stock units awarded	686,667	390,133
Settled by issuance of stock	258,553
Restricted Stock Units [Member] | Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	51,500	65,500
Number of individuals	5	5
Restricted stock units awarded	686,667	390,133
Stock Options and Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation		$ 217,359

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Legal Proceedings

12 Months Ended

Dec. 31, 2013

Legal Proceedings [Abstract]

Legal Proceedings

Note 15 - Legal Proceedings

We are a defendant in a lawsuit filed in Los Angeles Superior court seeking payment for services rendered by the Plaintiff, Audio Visual Plus, Inc.  The total amount in dispute is $29,235.  We have paid the plaintiff approximately one half of the amount claimed and the action is not proceeding at the present time.

In May 2013, we were named as defendant in a lawsuit filed in the Small Claims Court in the Third Judicial District, State of Utah, seeking payment for services rendered by the plaintiff, Performance Audio.  The total amount in dispute is approximately $9,663.  We have paid approximately one half of the amount claimed and the action is not proceeding at the present time.

In September 2013, we were named as defendant in a lawsuit filed in the Third Judicial District court, Salt Lake County, State of Utah, seeking judgment for damages related to a breach of a termination agreement we entered into with our former landlord when we vacated our former offices.  A default judgment was entered in the matter in the amount of $91,666.66 plus attorneys fees.

On November 4, 2013, we notified AllDigital that we terminated the Merger Agreement pursuant to Section 8.1(b), which permits termination of the Agreement by either party if the Merger is not consummated by October 31, 2013, provided that such failure is not attributable to the terminating party's failure to perform its obligations under the Merger Agreement. Following delivery of our notice of termination, AllDigital responded by asserting that the Merger did not close because we failed to perform our obligations and that we were not entitled to terminate under Section 8.1(b).  AllDigital further notified us that it was terminating the Merger Agreement for cause based on our alleged breach of the non-solicitation covenants in the Merger Agreement, which AllDigital asserts triggers a termination fee of $100,000 and 4% of our equity on a non-diluted basis, and for various other alleged misrepresentations and breaches.  We disputes AllDigital's allegations and assertions, deny that AllDigital is entitled to any termination fee and reserve the right to pursue damages from AllDigital arising from AllDigital's actions in relation to the Merger Agreement.  No litigation has been filed in this matter.

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Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Significant Accounting Policies [Abstract]

Schedule of Computation of Basic and Diluted Earnings per Common Share

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2012 and 2013:

	For the Year Ended 2012		For the year Ended 2013
Numerator
Net income (loss)	$	1,602,824	$	(2,288,390	)
Denominator
Basic weighted average shares outstanding		100,798,223		109,107,238
Effect of dilutive securities:
Stock options and warrants		2,510,488		--
Restricted stock units		3,225,133		--
Diluted weighted average shares outstanding		106,533,844		109,107,238
Net income (loss) per common share
Basic	$	0.02	$	(0.02	)
Diluted	$	0.02	$	(0.02	)

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Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Deferred tax assets
NOL carry-forward	$ 27,003,600	$ 25,881,900
General business credit carry-forwards	1,118,400	1,158,900
Deferred compensation	22,700	78,500
Allowance for doubtful accounts	3,200	31,600
Deferred tax liabilities
Depreciation	(13,300)	61,700
Valuation allowance	(28,134,600)	(27,212,600)
Net deferred tax asset
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations:
Federal income tax (expense) benefit at statutory rates	958,300	1,831,600
State income tax (expense) benefit at statutory rates	140,900	269,300
Change in valuation allowance	(1,099,200)	(2,100,900)
Income tax provision
Net operating loss carry-forwards	$ 69,240,000
Expiration of net operating loss carry-forwards	Dec. 31, 2033

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Notes Payable (2012 Secured Convertible Notes) (Details) (USD $)	1 Months Ended					12 Months Ended
	Aug. 31, 2013	Jan. 31, 2013	Dec. 31, 2012	Aug. 31, 2012	Jul. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Derivative valuation			$ 1,191,269			$ 11,736	$ 1,191,269
Gain on derivative valuation						1,242,459	8,829,748
Accretion of discount on convertible notes payable						1,010,920	941,225
Conversion Feature of Debt [Member]
Debt Instrument [Line Items]
Derivative valuation			74,500				74,500
Gain on derivative valuation							423,500
Risk-free interest rate							0.11%
Expected life							6 months
Expected volatility							129.08%
Dividend yield							0.00%
Stock trading price			$ 0.08				$ 0.08
Warrant Reset Provision [Member]
Debt Instrument [Line Items]
Derivative valuation			183,000			2,654	183,000
Gain on derivative valuation						180,346	442,000
Risk-free interest rate						1.02%
Expected life						3 years 7 months 6 days
Expected volatility						101.48%
Dividend yield						0.00%
Stock trading price						$ 0.005
2012 Convertible Notes [Member]
Debt Instrument [Line Items]
Principal issued					5,000,000	4,225,000
Debt maturity date						Dec. 31, 2013
Debt interest rate			12.00%		12.00%	12.00%	12.00%
Conversion price					$ 0.25
Warrant term length					5 years
Number of shares of common stock warrants can be exercised for		850,000	500,000	1,800,000	200,000		500,000
Amount of debt converted					900,000
Continued sales of convertible debt		425,000	250,000	900,000	1,900,000	1,175,000
Proceeds from issuance of convertible note and warrants	750,000			851,624	923,175
Payment of investment banking fees				48,376	76,825
Accretion of discount on convertible notes payable						684,760	501,166
Interest expense						448,792	149,227
Newly Issued Debt [Member]
Debt Instrument [Line Items]
Number of shares of common stock warrants can be exercised for					3,800,000
Continued sales of convertible debt					1,000,000
Proceeds from issuance of convertible note and warrants					923,175
Payment of investment banking fees					$ 76,825

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (USD $)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings (Deficit) [Member]
Balance at Dec. 31, 2011	$ (10,530,024)	$ 3,798,783	$ 96,859,058	$ (111,187,865)
Balance, shares at Dec. 31, 2011		75,975,656
Common stock issued for 2012 equity financing and debt restructuring, net of issuance costs	2,107,834	1,270,108	837,726
Common stock issued for 2012 equity financing and debt restructuring, net of issuance costs, shares		25,402,164
Common stock issued on debt conversion	1,660,000	280,000	1,380,000
Common stock issued on debt conversion, shares		5,600,000
Common stock issued for services rendered	177,313	24,800	152,513
Common stock issued for services rendered, shares	496,000	496,000
Amended and restated 6.25% note conversion feature	81,500		81,500
Current year stock based compensation	283,693		283,693
Net (loss) Income	1,602,824			1,602,824
Balance at Dec. 31, 2012	(4,616,860)	5,373,691	99,594,490	(109,585,041)
Balance, shares at Dec. 31, 2012		107,473,820
Common stock issued for extinguishment of liabilities	153,860	112,043	41,817
Common stock issued for extinguishment of liabilities, shares	2,240,852	2,240,852
Common stock issued to a director for prior years services rendered	15,000	10,000	5,000
Common stock issued to a director for prior years services rendered, shares		200,000
Common stock issued for services rendered	4,200	3,000	12,000
Common stock issued for services rendered, shares		60,000
Common stock issued for restricted stock settlements		12,927	(12,927)
Common stock issued for restricted stock settlements, shares		258,553
Issuance of restricted stock options to board members for prior years service	51,500		51,500
Current year stock based compensation	25,389		25,389
Net (loss) Income	(2,288,390)			(2,288,390)
Balance at Dec. 31, 2013	$ (6,655,301)	$ 5,511,661	$ 99,706,469	$ (111,873,431)
Balance, shares at Dec. 31, 2013		110,233,225

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Accounts Receivable

12 Months Ended

Dec. 31, 2013

Accounts Receivable [Abstract]

Accounts Receivable

Note 4 - Accounts Receivable

Included in our $50,745 and $821,608 net accounts receivable for the years ending December 2013 and 2012, respectively, were (i) $57,655 and $856,462 for billed trade receivables, respectively; (ii) $1,380 and $44,478 of unbilled trade receivables, respectively; (iii) $0 and $1,808 for employee travel advances and other receivables, respectively; less (iv) $8,290 and $81,140 for allowance for uncollectible accounts, respectively.

Included in the numbers above was our single largest customer for each year ended December 31, 2013 and, 2012, which provided 83% and 85% of total revenue and represented 18% and 71% of our trade receivables on December 31, 2013 and 2012, respectively.

Our largest customer initially signed a three-year agreement which has now expired.  Unless we can replace that customer with another similarly large customer or customers, revenues will continue to decline substantially from comparative periods, which has harmed our business.

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Equipment Financing (Details) (USD $)	0 Months Ended	1 Months Ended	5 Months Ended	12 Months Ended
	Jun. 13, 2013	Jun. 28, 2009	May 31, 2013	Dec. 31, 2012	Dec. 31, 2013
Capital Leased Assets [Line Items]
Restricted cash				$ 140,700
Telecommunications Equipment [Member]
Capital Leased Assets [Line Items]
Number of customers locations where equipment is installed		1,981			2,100
Proceeds from sale of equipment to financing institution		4,100,670
Number of payments		36
Monthly rental payment		144,000
Number of payments until lease can be cancelled		33
One time fee for cancellation		410,000
Cancellation fee as a percentage of equipment value		10.00%
Payments toward in place fair market value				422,100
Increase in restricted cash			284,400	140,700
Restricted cash	55,100
Damages paid in settlement	370,000
Lease payments				1,125,588
Interest portion of lease payments				57,939
Capitalized lease acquisition fees				150,792
Amortization of the lease acquisition fee				33,512
Telecommunications Equipment [Member] | Capital Lease Obligations [Member]
Capital Leased Assets [Line Items]
Lease payments applied to principal				$ 1,067,649

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Equity Financing and the Debt Restructuring (Tables)

12 Months Ended

Dec. 31, 2013

Equity Financing and the Debt Restructuring [Abstract]

Schedule of Debt Conversion

All warrants listed below were issued with price protection provisions and were accounted for as derivative liabilities. The Warrants were valued using the Black Scholes pricing model.

	Common Shares Issued		Number of Warrants		Value of Warrants
Investors		24,816,000		12,408,000	$	5,677
Bridge Loan Conversion		1,600,000		800,000		366
Equipment Finance Conversion		2,000,000		1,000,000		458
Agency		--		4,262,400		1,951
Total		28,416,000		18,470,400	$	8,452

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Equity Financing and the Debt Restructuring (Schedule of Debt Conversion) (Details) (2012 Plan [Member], USD $)	12 Months Ended
	Dec. 31, 2013
Equity Financing and Debt Restructuring [Line Items]
Number of Warrants	18,470,400
Value of Warrants	$ 8,452
Common Stock [Member]
Equity Financing and Debt Restructuring [Line Items]
Common Shares Issued	28,416,000
Bridge Loan Conversion [Member]
Equity Financing and Debt Restructuring [Line Items]
Number of Warrants	800,000
Value of Warrants	366
Bridge Loan Conversion [Member] | Common Stock [Member]
Equity Financing and Debt Restructuring [Line Items]
Common Shares Issued	1,600,000
Equipment Finance Conversion [Member]
Equity Financing and Debt Restructuring [Line Items]
Number of Warrants	1,000,000
Value of Warrants	458
Equipment Finance Conversion [Member] | Common Stock [Member]
Equity Financing and Debt Restructuring [Line Items]
Common Shares Issued	2,000,000
Investors [Member]
Equity Financing and Debt Restructuring [Line Items]
Number of Warrants	12,408,000
Value of Warrants	5,677
Investors [Member] | Common Stock [Member]
Equity Financing and Debt Restructuring [Line Items]
Common Shares Issued	24,816,000
Agency [Member]
Equity Financing and Debt Restructuring [Line Items]
Number of Warrants	4,262,400
Value of Warrants	$ 1,951
Agency [Member] | Common Stock [Member]
Equity Financing and Debt Restructuring [Line Items]
Common Shares Issued

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Retirement Plan

12 Months Ended

Dec. 31, 2013

Retirement Plan [Abstract]

Retirement Plan

Note 14 - Retirement Plan

We had implemented a 401(k) employee retirement plan. Under the terms of the plan, participants may elect to contribute a portion of their compensation, generally up to 60%, to the plan, subject to IRS Code Section 415 limitations. We match contributions up to 100% of the first 3% of a participant's compensation contributed to the plan and 50% of the next 2%. Employees are eligible to participate in the plan after three months of service as defined by the plan. For the years ended December 31, 2013 and 2012, we made matching contributions totaling $47,691 and $99,761, respectively.  On October 31, 2013 plan participation was discontinued with all plan assets distributed to the participants by our plan fiduciary on or before January 31, 2014.