Prospectus Summary
You should read the following summary together with the entire prospectus, including the more detailed information in our consolidated financial statements and related notes appearing elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed under the caption “Risk Factors.”
Our Business
Broadcast International, Inc. is a communications services and technology company headquartered in Salt Lake City, Utah. The Company operates two divisions – BI Networks and CodecSys.
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 Bank of America (“BofA”) 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 has grown to approximately 2,500 retail banking sites and BofA continues to expand its network by adding additional sites to the network. In addition, BofA has selected us to be its vendor for certain additional audio visual services under the terms of which we manage a total of approximately 33,000 digital signage and other video screens placed throughout the banking and brokerage divisions of BofA. A factor in securing BofA as a customer was our CodecSys® technology utilized in delivering our services.
We are in the process of testing our digital signage product offering with another regional bank through the installation of six test sites at different banking locations for this potential customer. This customer and its affiliated banks have approximately 550 total banking locations. Because of our success with our flagship financial services customer, we have begun making presentations and tests with multiple customers in the financial services industry and expect growth in that portion of our business during 2012.
CodecSys
We own proprietary video compression technology that we have trademarked “CodecSys.” 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. 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 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 our CodecSys technology that operates on multiple hardware platforms and is easily upgradable. In September 2009, our CodecSys video encoding technology was certified by Microsoft as an approved software encoding system for use by IPTV providers that use Microsoft operating platforms. Our CodecSys technology is the only software video encoding system certified by Microsoft. Microsoft is a leading provider of network control software to the IPTV market.
In July 2010, we released CodecSys version 2.0, which has been installed in more than 30 large telecoms and labs for evaluation by potential customers. We continue to make sales presentations and respond to requests for proposals at other large telecoms, cable companies and broadcasting companies. These presentations have been made with our technology and sales channel partners, which include IBM, HP, Fujitsu and Microsoft, and others which are suppliers of hardware and software for video transmission applications. Because CodecSys is a software encoding and transcoding system, it is also ideal for “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. Since that selection, we have trained sales and marketing personnel and sales engineers to sell, install, and service installations that include CodecSys.
During 2011 many large purveyors of video content have added an additional delivery channel directly to consumers through the Internet bypassing traditional video distributions channels such as over the air broadcast, cable, satellite and IPTV networks. This new distribution channel is referred to as “Over the Top” (OTT). Many of the large purveyors of video content, including owners of video content, have commenced OTT initiatives. To provide encoding services effectively for OTT applications and other “cloud based” services the encoding function must be in software form compatible with “cloud based” distribution platforms. Since CodecSys is a software product and the majority of its competitors are not, CodecSys has an increased competitive advantage in this new, rapidly expanding market segment.
Broadcast International
We were incorporated in Utah in 1983. We did not commence our current business, however, until 2000. Our principal executive offices are located at 7050 Union Park Avenue, Suite 600, Salt Lake City, Utah 84047, and our telephone number is (801) 562-2252. We maintain an internet site at www.brin.com, which contains information concerning us. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this prospectus and should not be considered a part of this prospectus.
Our common stock is considered “penny stock” under the Securities Exchange Act of 1934, which means that securities broker-dealers cannot recommend the common stock which may make trading the common stock difficult.
Risk Factors
Investing in our securities involves significant risks. You should carefully read the section entitled “Risk Factors” beginning on page 5 for an explanation of these risks before investing in our securities.
Summary Consolidated Financial Data
The following summary consolidated financial data are derived from our consolidated financial statements. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2011 and 2010 and the summary consolidated statement of operations data for the years ended December 31, 2011, 2010, and 2009 have been derived from our consolidated financial statements audited by HJ & Associates, LLC, independent registered public accounting firm, included elsewhere herein. The summary consolidated balance sheet data as of December 31, 2009 has been derived from our audited consolidated financial statements not included herein. Historical results are not necessarily indicative of the results to be expected in the future.