<PAGE>
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                 FORM 10-QSB/A




(Mark One)

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003.

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE TRANSITION PERIOD FROM_____TO_____.


                         Commission File Number 0-27106


                                  Viseon, Inc.

        (Exact name of small business issuer as specified in its charter)


             Nevada                                          41-1767211
            --------                                        ----------
  (State or other jurisdiction                            (IRS Employer
 Of incorporation or organization)                      Identification No.)

8445 Freeport Parkway, Suite 245, Irving, Texas                75063
------------------------------------------------               -----
  (Address of principal executive offices)                   (Zip Code)

                                 (972) 906-6300
                           (Issuer's Telephone Number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was Required to file such report), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO __

The Company had 20,168,639 shares of Common Stock, $ 0.01 par value per share,
outstanding as of February 12, 2004.

Transitional Small Business Disclosure Format (Check one): Yes __ No X
                                                                     -


                                     Page 1
<PAGE>
                                  Viseon, Inc.

                                      INDEX


PART I.  FINANCIAL INFORMATION

   Item 1.  Financial Statements

            Consolidated Balance Sheets - December 31, 2003
            (unaudited) and June 30, 2003 .................................. 3

            Consolidated Statements of Operations (unaudited) -
            Three months ended December 31, 2003 and 2002....................4

            Consolidated Statements of Operations (unaudited) -
            Six months ended December 31, 2003 and 2002......................5

            Consolidated Statements of Cash Flows (unaudited) - Six
            Months ended December 31, 2003 and 2002. ....................... 6

            Notes to unaudited Consolidated Financial Statements.............7

   Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations........................................8

   Item 3.  Controls and Procedures.........................................17



PART II  OTHER INFORMATION..................................................18

   Item 1.  Legal Proceedings...............................................18

   Item 2.  Changes in Securities and Use of Proceeds.......................19


   Item 3.  Defaults Upon Senior Securities

   Item 4.  Submission of Matters to a Vote of Security Holders

   Item 5.  Other Information

   Item 6.  Exhibits and Reports on Form 8-K


Signatures..................................................................20

Exhibit Index ..............................................................21



                                     Page 2
<PAGE>
                           VISEON, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets



<TABLE>
<CAPTION>
                                                       December 31,   June 30,
                                                          2003         2003
                                                       (Unaudited)   (Audited)
                           Assets                      (Restated)    (Restated)
--------------------------------------------------------------------------------
<S>                                                    <C>          <C>
Current assets:
  Cash                                                 $      377   $     7,784
  Accounts receivable, net of allowance for doubtful
     accounts of $1,000 and $0                             39,946         4,109
  Inventories, net                                         35,379         7,079
  Prepaid expenses                                         49,086        46,573
                                                       -------------------------
        Total current assets                              124,788        65,545

Net property and equipment                                 61,266        71,882

Intangible assets, net                                    196,389       110,898
                                                       -------------------------

                        Total assets                   $  382,443    $  248,325
                                                       =========================


                  Liabilities and Stockholders' Deficit
--------------------------------------------------------------------------------

Current liabilities:
  Subordinated notes payable                           $  463,334    $  228,296
  Short-term notes payable                                219,044          -
  Accounts payable                                        545,140       553,299
  Net liabilities of discontinued operations              840,954     1,244,452
  Accrued expenses                                        158,605       104,692
                                                       -------------------------
        Total current liabilities                       2,227,077     2,130,739

Long-term liabilities
  Subordinated notes payable, net                             -          23,333
                                                       -------------------------

        Total liabilities                               2,227,077     2,196,918
                                                       -------------------------

Stockholders' deficit:
  Common stock ($.01 par value per share, 50,000,000
     shares authorized, 19,874,286 and 17,829,829
     issued and outstanding)                              198,743       178,298
  Additional paid-in capital                           25,322,343    24,179,469
  Accumulated deficit                                 (27,365,720)  (26,263,514)
                                                      --------------------------
        Total stockholders' deficit                    (1,844,634)   (1,905,747)
                                                      --------------------------

    Total liabilities and stockholders' deficit       $   382,443   $   248,325
                                                      ==========================
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     Page 3
<PAGE>
                           VISEON, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                         Three Months Ended   Three Months Ended
                                             December 31,        December 31,
                                                 2003                2002
                                             (Unaudited)          (Unaudited)
                                             (Restated)           (Restated)
--------------------------------------------------------------------------------
<S>                                           <C>                   <C>
Net sales                                     $  37,161             $    5,168
Cost of goods sold                               30,479                  4,735
Reserve for inventories                         (66,830)                    --
                                        ----------------------------------------
     Gross profit (loss)                         73,512                    433

Research and development                         28,221                 20,017
Selling, general, and administrative            612,065                405,803
                                        ----------------------------------------
     Operating loss                            (566,774)              (425,387)

Other income (expense):
   Interest expense                            (214,939)              (152,882)
   Gain on sale of deferred revenue contracts        -                       -
   Other income (expense), net                       -                   1,081
                                        ----------------------------------------
     Other income (expense), net               (214,939)               151,801
                                        ----------------------------------------

Loss from continuing operations                (781,713)              (577,188)

Gain (loss) from discontinued operations        350,748               (362,800)
                                        ----------------------------------------

     Net loss                           $      (430,965)            $ (939,988)
                                        ========================================


Basic and diluted loss per share:
     Loss from continuing operations per
       common share                     $         (0.04)            $    (0.04)
                                        ========================================
     Gain (Loss) from discontinued
       operations per common share      $          0.02             $    (0.02)
                                        ========================================
     Net loss                           $         (0.02)            $    (0.06)
                                        ========================================

Weighted average shares outstanding
   - basic                                   19,377,972              14,849,137
Weighted average shares outstanding
  - diluted                                  19,377,972              14,849,137
--------------------------------------------------------------------------------
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     Page 4
<PAGE>
                           VISEON, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                              Six Months Ended  Six Months Ended
                                                December 31,        December 31,
                                                    2003                2002
                                                 (Unaudited)        (Unaudited)
                                                 (Restated)         (Restated)
--------------------------------------------------------------------------------
<S>                                              <C>                <C>
Net sales                                        $  67,860           $    5,168
Cost of goods sold                                  66,472                4,735
Reserve for inventories                            (66,830)                  -
                                              ----------------------------------
     Gross profit (loss)                            68,218                  433

Research and development                            29,767               45,206
Selling, general, and administrative             1,072,932            1,122,289
                                              ----------------------------------
     Operating loss                             (1,034,481)          (1,167,062)

Other income (expense):
   Interest expense                               (418,473)            (238,902)
   Other income (expense), net                          -                (2,796)
                                              ----------------------------------
     Net Other Income (Expense)                   (418,473)            (241,698)
                                              ----------------------------------

Loss from continuing operations                 (1,452,954)          (1,408,760)

Gain (loss) from discontinued operations           350,748             (619,546)
                                             -----------------------------------
     Net loss                                $  (1,102,206)      $   (2,028,306)
                                             ===================================

Basic and diluted loss per share:
     Loss from continuing operations per
       common share                          $       (0.08)      $        (0.10)
                                             ===================================
     Gain (loss) from discontinued operations
       per common share                      $        0.02       $        (0.04)
                                             ===================================
     Net loss                                $       (0.06)      $        (0.14)
                                             ===================================

Weighted average shares outstanding
    - basic                                     19,674,689           14,581,520
Weighted average shares outstanding
    - diluted                                   19,674,689           14,581,520
--------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     Page 5
<PAGE>
                           VISEON, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                               Six Months Ended Six Months Ended
                                                 December 31,      December 31,
                                                     2003              2002
                                                 (Unaudited)       (Unaudited)
                                                 (Restated)        (Restated)
--------------------------------------------------------------------------------
<S>                                              <C>             <C>
Cash flows from operating activities:
  Net loss                                       $  (1,102,206)  $  (2,028,306)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                       15,596         194,039
    Amortization of original issue discount            340,607         176,558
    Compensation related to stock options               53,391              -
    Compensation related to issuance of stock          440,436              -
    Warrants issued for services                           -           269,677
    Loss on sale of equipment                              152              -
    Reserve for inventories                            (66,830)             -
    Changes in operating assets and liabilities:
     Accounts receivable, net                          (35,837)             -
     Inventories, net                                   38,530              -
     Prepaid expenses                                   (2,513)          4,846
     Checks issued in excess of cash in bank               -           (51,919)
     Accounts payable                                 (178,660)         26,469
     Accrued expenses                                   54,055          (1,792)
     Deferred revenue                                      -                -
                                                --------------------------------
Net cash provided by (used in)
   operating activities                               (443,279)     (1,496,444)
                                                --------------------------------

Cash flows from investing activities:
   Proceeds from sale of equipment                       1,000              -
   Payments for patent costs                           (91,623)             -
   Purchases of software, property and equipment           -            (5,283)
                                                --------------------------------
      Net cash used in investing activities            (90,623)         (5,283)
                                                --------------------------------

Cash flows from financing activities:
   Net repayments on revolving credit facility             -          (683,021)
   Payments of capital lease obligations                   -            (4,017)
   Payments of subordinated notes payable             (110,000)             -
   Proceeds from subordinated notes payable            110,000          66,000
   Proceeds from short term notes payable              155,000
   Proceeds from exercise of common stock warrants     350,000
   Proceeds from sale of common stock warrants           5,000
   Proceeds from issuance of common stock                   -          350,000
   Proceeds from exercise of common stock options      119,245          40,512
                                                --------------------------------
  Net cash provided by (used in)
    financing activities                               629,245        (230,526)
                                                --------------------------------
                                                --------------------------------
  Net change in cash attributable
    to discontinued operations                        (102,750)      1,734,916
                                                --------------------------------

       Net change in cash                               (7,407)          2,663


Cash at beginning of period                     $        7,784      $        -
                                                --------------------------------


Cash at end of period                           $          377      $    2,663
                                                ================================

Supplemental cash flow information:
  Cash paid for interest, net of original
     issue discount                            $        44,665      $   88,902
                                               =================================

Noncash investing and financing activities
   Accounts payable converted to common stock  $       130,246      $      -
   Short-term notes converted into common stock
      and warrants                                      65,000             -
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     Page 6
<PAGE>
                                  VISEON, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002

1. DESCRIPTION OF THE BUSINESS:

Viseon, Inc. (the "Company"), a Nevada corporation formerly known as "RSI
Systems, Inc.", historically has been a developer of its own video conferencing
systems primarily sold to corporate end users and OEM customers such as Philips
Electronics, N.V. In May 2001, the former RSI Systems, Inc. was merged into its
wholly owned subsidiary Viseon, Inc. in order to change the domicile of the
Company to Nevada from Minnesota and to effect a simultaneous name change to
Viseon, Inc. The shareholders of RSI Systems, Inc. approved the Plan of Merger
between RSI Systems, Inc. and Viseon, Inc. on May 23, 2001. RSI Systems, Inc.
was incorporated under the laws of Minnesota on December 21, 1993. On July 25,
1995, it completed its initial public offering of its common stock, par value
$0.01 per share (the "Common Stock").

 In January 2003, the Company changed its focus from being a group
videoconferencing systems manufacturer and reseller to a desktop and consumer
video communications systems developer, manufacturer and reseller. The only
measurable revenues that the Company is currently realizing are a result of
sales of the VisiFone(TM), the Company's personal videophone which operates on
broadband networks. Therefore, we have classified the net assets and operations
related to the group video conferencing business as discontinued operations in
the accompanying consolidated financial statements.

 The VisiFone products are low-cost broadband videophone communication devices
which can be used by both consumers and businesses. The VisiFone is a
self-contained system that does not require a PC or any external equipment for
its operation and the VisiFoneTV model utilizes a standard television monitor
for display. Both VisiFone models operate on any broadband connection and home
or office network including high-speed Internet connections via DSL or cable
modem. The VisiFone is available as either an ITU Standard, H.323 compliant
system which is compatible with most corporate video conferencing systems or as
a Session-Initiation-Protocol (SIP) compliant device which is compatible with
many of the emerging Voice Over Internet Protocol (VoIP) telephony networks.
The VisiFone can be used in corporate applications and is priced such that it
also has significant potential to be sold to residential consumers who have
subscribed to broadband Internet access via cable modem or DSL of which there
are currently over 24,000,000 subscribers in the U.S.

In addition to the sales of video communication devices , the Company has
generated revenues in prior years from its intellectual property portfolio which
includes U.S. and foreign patents related to video communications. The Company
intends to enter into additional agreements whereby it may grant a license of
its intellectual property to third parties in furtherance of developing
proprietary consumer broadband videophone products and services.

The Company plans on undertaking the continued development of VisiFone products
and related services jointly with suitable, established developers and
manufacturers. The Company is currently in the process of identifying and
selecting prospective partners for the completion of its next generation of
VisiFone products and services. The Company has also become a distributor in the
U.S. of a broadband videophone manufactured by Leadtek, an Asian partner. The
Company also plans on continuing to form new relationships with other companies
to distribute their products and services along with its own products.

The Company is now selling VisiFone's in a variety of test markets in small
quantities. The current marketing strategy targets corporations with widespread
operations across regional, national and international boundaries as well as
residential consumers who have historically not purchased video communication

                                     Page 7
<PAGE>
devices in the past. The Company has also provided VisiFone's for trials by a
number of providers of consumer broadband services via DSL or cable modem. The
Company's objective is to have these providers offer the VisiFone to their
broadband consumers either as a stand-alone service or in conjunction with their
Voice Over Internet Protocol (VOIP) offerings. These broadband providers include
the major U.S. cable television multi-system operators and telephone companies,
both of which are actively marketing their high-speed internet access offerings
to consumers and businesses.

All of these developments have affected and will continue to affect the
Company's financial model in terms of margins, cash flow requirements and
capital needs. The Company has a limited operational history with respect to the
sales of broadband videophones. There can be no assurance that the Company will
be able to succeed in implementing its strategy or that the Company will be able
to achieve positive cash flow or profitable operations as a result of these
changes in its business.

2. BASIS OF PRESENTATION:

The unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America, pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in the consolidated financial statements have been omitted or condensed
pursuant to such rules and regulations. The accompanying unaudited consolidated
financial statements should be read in conjunction with the Company's June 30,
2003 consolidated financial statements and related footnotes included in the
Company's Annual Report on Form 10-KSB.

The consolidated financial statements include the accounts of Viseon, Inc. and
its wholly owned subsidiaries, RSI Systems Ltd. a subsidiary in the United
Kingdom and Viseon PVT, Inc., a Nevada Corporation.

The consolidated financial statements reflect all adjustments, of a normal
recurring nature, necessary to fairly present the results of operations and
financial position of the Company for the interim periods. Operating results for
the three and six months ended December 31, 2003 are not necessarily indicative
of the results that may be expected for the full year.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Capitalized Software Costs. Software costs have been accounted for in accordance
with Statement of Financial Accounting Standards (SFAS) No. 86 "Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed". Costs
associated with the planning and design phase of software development, including
coding and testing activities necessary to establish technological feasibility,
are classified as research and development and expensed as incurred. Once
technological feasibility has been determined, additional costs incurred in
development, including coding, testing and product quality assurance are
capitalized, when material. At December 31, 2003 and June 30, 2003, the Company
had $1,998 and $2,758 respectively of unamortized computer software costs,
including software acquired.

Liquidity. The Company has incurred losses from operations and negative cash
flows for the six months ended December 31, 2003. In addition, the Company was
unable to repay interest and principal on its debt when due (see Note 4).
Together with a  working capital deficit at December 31, 2003, these conditions
raise concerns about the Company's ability to generate positive cash flows and
fund operations on an ongoing basis.

Management plans to try to increase sales and improve operating results through
(i) increased marketing and direct sales activities to corporate customers and
consumers; (ii) continued initiatives to gain acceptance of our product by



                                     Page 8
<PAGE>
consumer broadband providers for sale to their subscribers; (iii) continued
measures to minimize overhead and (iv) initiatives to monetize our intellectual
property rights. Management believes that funds generated from operations will
not be sufficient to cover cash needs in the foreseeable future and the Company
will continue to rely on short term loans, private equity placements and/or
funds generated from the exercise of outstanding warrants and options to provide
funds for operating activities. There can be no assurance that the Company will
be able to continue to fund its operations. Management will continue to seek
additional financing in addition to expanding its efforts to conserve cash
through further expense reductions. There can be no assurance that the Company
will be successful in achieving these objectives, becoming profitable, or
continuing its business without interruption. Our failure to achieve the
objectives outlined above or execute an alternative plan may ultimately result
in the permanent cessation of our business.

Intangible Assets. The Company amortizes patents over their estimated useful
lives of ten years using the straight-line method. Covenants not to compete were
amortized using the straight-line method over the term of the covenants. At June
30, 2003, these covenants were considered impaired and were written off.
Accumulated amortization of intangible assets was $36,365 and $30,234 at
December 31, 2003 and June 30, 2003 respectively.


REVENUE RECOGNITION



The Company records sales revenue at the time merchandise is shipped. In
November 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition." SAB No. 101, as amended, sets forth the SEC staff's position
regarding the point at which it is appropriate for a registrant to recognize
revenue. The staff believes that revenue is realizable and earned when all of
the following criteria are met: persuasive evidence of an arrangement exists,
delivery has occurred or service has been rendered, the seller's price to the
buyer is fixed or determinable and collectibility is reasonably assured.



The Company believes it meets all of the requirements for revenue recognition
under SFAS 48 and SAB 101. The Company recognizes revenue on shipment and
records a reserve for potential returns based upon historical experience rates.



The Company offers an unconditional 30-day right of return on the sale of its
Visifone products. The Company recognizes revenue on shipment and records a
reserve for potential returns. The Company's warranty policy during the first
year after the sale includes an obligation to replace during the first 30 days
and to repair during the next 11 months. The Company has a one-year warranty
with the manufacturer, so there is little, if any, cost to the Company for
warranty claims. No warranty reserve has been recorded to date, although the
Company will record a reserve if warranty activity increases and there are
unrecoverable costs to the Company.



In May 2003, the Company entered into an agreement with a supplier pursuant to
which the supplier manufactures and private labels the VisiFone for the Company.
The Company assumes the risks and rewards of ownership of the inventory
purchased from the supplier and, accordingly, records revenue on a gross basis.
Substantially all revenues in fiscal 2004 were from sales of the VisiFone
purchased from this supplier.


Accounts Receivable Reserves. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability or unwillingness of
its customers to make required payments. If the financial condition of the
Company's customers declines resulting in an impairment of their ability to make
payments, additional allowances may be required.


Inventory Valuation. The Company writes down excess and obsolete inventory equal
to the difference between the cost of inventory and the estimated market value
based upon assumptions about product life cycles, demand for the Company's
products, market conditions and other pertinent factors. If actual product life
cycles, product demand and market conditions are less favorable than those
projected by management, additional inventory write-downs may be required in
future periods.





Net Loss Per Common Share. Basic net loss per common share is computed by



                                     Page 9
<PAGE>
dividing the net loss by the weighted average number of common shares
outstanding for the reporting period. Diluted net loss per common share is
computed by dividing net loss by the sum of the weighted average number of
common shares outstanding plus the number of common share equivalents that
represent all additional shares of common stock that would have been outstanding
if all potentially dilutive securities (primarily stock options, stock warrants
and convertible debt) had been exercised. All options and warrants outstanding
during the three months and six months ended December 31, 2003 and 2002 were
anti-dilutive.


STOCK-BASED COMPENSATION.



In accordance with Accounting Principles Board (APB) Opinion No. 25 and related
interpretations, the Company uses the intrinsic value-based method for measuring
stock-based compensation cost which measures compensation cost as the excess, if
any, of quoted market price of the Company's common stock at the grant date over
the amount the employee must pay for the stock. The Company's general policy is
to grant stock options at fair value at the date of grant. The Company has
adopted the disclosure only provision of SFAS No. 148, "Accounting for
Stock-Based Compensation."



Had compensation cost been recognized based on the fair values of options at the
grant dates consistent with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," the
Company's net loss and basic and diluted net loss per common share would have
been changed to the following pro forma amounts:



<Table>
<Caption>
                                          For the three months ended          For the six months ended
                                                  December 31,                      December 31,
                                        ------------------------------      ------------------------------
                                            2003              2002              2003              2002
                                        ------------      ------------      ------------      ------------
<S>                                     <C>               <C>               <C>               <C>
Net Loss:
   As reported                          $   (430,965)         (939,988)       (1,102,206)       (2,028,305)
   Pro forma                                (447,190)         (969,899)       (1,134,656)       (2,074,441)

Basic net loss per Common share:
   As reported                                 (0.02)            (0.06)            (0.06)            (0.14)
   Pro forma                                   (0.02)            (0.07)            (0.06)            (0.14)

Diluted net loss per Common share:
   As reported                                 (0.02)            (0.06)            (0.06)            (0.14)
   Pro forma                                   (0.02)            (0.07)            (0.06)            (0.14)

Stock based compensation:
   As reported                                 6,945          (148,960)           53,391           (89,040)
   Pro forma                                  16,225            29,911            32,450            46,136
</Table>



In determining the compensation cost of options granted during the three and six
months ended December 31, 2003 and 2002, as specified by SFAS No. 123, the fair
value of each option grant has been estimated on the date of grant using the
Black-Scholes option pricing model and the weighted average assumptions used in
these calculations are summarized as follows:



<Table>
<Caption>
                                      For the Three Months Ended           For the Six Months Ended
                                             December 31,                       December 31,
                                     -----------------------------      -----------------------------
                                         2003             2002              2003             2002
                                     ------------     ------------      ------------     ------------
<S>                                  <C>              <C>               <C>              <C>
Risk-free interest rate                       N/A             4.38%              N/A             4.38%
Expected life of options granted              N/A          5 years               N/A          5 years
Expected volatility                           N/A             68.9%              N/A             68.9%
Expected dividend yield                       N/A                0%              N/A                0%
</Table>


4.       DEBT:

Senior Notes. Prior to June 2003, the Company maintained a line of credit
facility with a bank. In June 2003, two qualified investors purchased the
remaining balance of the indebtedness owed by the Company to its previous lender
in the amount of $386,706, which had matured. Following the consummation of that
transaction, the Company issued two new notes, convertible into common stock of
the Company, in the amount of $193,353 each, in exchange for the debt purchased
by the investors. These notes become due and payable in full on December 31,
2004. The Company also issued five-year warrants to these lenders to purchase
1,289,020 common shares at $0.30 per share and requiring 90-day notice by the
holder of the notes prior to exercise. The notes require payment of interest
quarterly at an annual interest rate of 12% and are secured by substantially all
assets of the Company. These notes are convertible into common stock of the
Company, at the lenders' option, at a conversion rate of one common share for
each $0.30 of principal and interest outstanding upon 90-day notice from the
holder to the Company. The approximate trading price of the Company's common
stock at the time of the issuance of the notes and warrants was $.30 per share.
Proceeds of $386,706 were allocated between the notes and warrants, which were
valued using the Black-Scholes pricing model. The resulting original issue
discount of $386,706 (the fair value of the warrants) is being amortized over
the life of the notes using the straight-line method, which approximates the
interest method. The Company has not made any required quarterly interest
payments on the notes.

Subordinated Notes.  In June 2002, the Company sold to two private investors its
convertible secured subordinated notes in an aggregate principal amount of
$300,000 due in June 2003. The notes are secured by substantially all of the
Company's assets and are subordinated to the Company's senior lenders. The notes
provide for interest payments quarterly at an annual rate of 12%. These notes
provide for conversion, at the lenders' option, into shares of the Company's
common stock at a conversion rate of one share for each $.55 of principal
outstanding. Each purchaser of these notes also received a five-year warrant to
purchase one share of common stock of the Company at a per-share exercise price
of $.55 for each $.55 in original principal amount of these notes, for an
aggregate number of 545,454 warrant shares. In connection with the sale of these
notes, the Company also issued a five-year warrant to purchase 38,182 common
shares at a purchase price of $0.55 per share. This warrant was issued to one of
the private investors for services provided. During June 2003, upon the maturity
of the original notes, the Company and the lenders' agreed to extend the due
date to December 31, 2003, adjusted the conversion rate under the original note
agreements and cancelled the existing warrants. The Company issued a new five-
year warrant to the two lenders to purchase 999,999 common shares at $0.30 per
share, the approximate market price of the Company's common stock during the
time of the extension negotiations. The warrants may be exercised upon 90-day
notice from the warrant holder to the Company. The conversion rate was adjusted
to one common share for each $0.30 of principal and interest outstanding with
conversion requiring 90-day notice to the Company from the holder. The
approximate trading price of the Company's common stock at the time of the
issuance of the new notes and warrants was $.30 per common share. The new
warrants were valued using the Black-Scholes pricing model. The resulting
original issue discount of $71,704 (the fair value of the warrants) is being
amortized over the life of the notes using the straight-line method, which



                                    Page 10
<PAGE>

approximates the interest method. The Company has not made the required
quarterly interest payments on the notes in September and December 2003 and did
not repay the notes upon maturity in December 2003.

During May 2003, the Company converted a past-due account payable to a vendor in
the amount of $300,000 into its convertible secured subordinated note in the
principal amount of $300,000. This note provides for conversion, at the note
holder's option, into shares of the Company's common stock at a conversion rate
of one share for each $.30 of outstanding principal and interest due on the
note. The note holder also received a five-year warrant to purchase one share of
common stock of the Company at a per-share exercise price of $.30 for each $.30
in original principal amount of this note, for an aggregate number of 1,000,000
warrant shares. The conversion of the note and the exercise of the warrant
require a 90 day notice to the Company. The note is secured by substantially
all of the Company's assets and is subordinated to the senior notes, matures
November 2004, and requires semi-annual interest payments at annual rate of 12%.
The approximate trading price of the Company's common stock at the time of the
issuance of the new notes and warrants was $.30 per common share The conversion
of the account payable of $300,000 was allocated between the note and the
warrants, which were valued using the Black-Scholes pricing model. The resulting
original issue discount of $300,000 (the fair value of the warrants) is being
amortized over the life of the notes using the straight-line method, which
approximates the interest method. The Company has not made the required semi-
annual interest payment in November 2003.

During May 2003, the Company also converted a past-due account payable to a
vendor in the amount of $120,000 into its convertible secured subordinated note
in the principal amount of $120,000. This note provides for conversion, at the
note holder's option, into shares of the Company's common stock at a conversion
rate of one share for each $.30 of outstanding principal and interest due on the
note. The note holder also received a five-year warrant to purchase one share of
common stock of the Company at a per-share exercise price of $.30 for each $.30
in original principal amount of this note, for an aggregate number of 400,000
warrant shares. The conversion of the note and the exercise of the warrant
require a 90 day notice to the Company. The holder may also elect to convert
accrued interest at the same rate. The note is secured by substantially all of
the Company's assets and is subordinated to the senior notes, matures November
2004 and requires semi-annual interest payments at an annual rate of 12%. The
approximate trading price of the Company's common stock at the time of the
issuance of the new notes and warrants was $.30 per common share. The conversion
of the account payable of $120,000 was allocated between the note and the
warrants, which were valued using the Black-Scholes pricing model. The resulting
original issue discount of $120,000 (the fair value of the warrants) is being
amortized over the life of the notes using the straight-line method, which
approximates the interest method. The Company has not made the required semi-
annual interest payment in November, 2003.

As of December 31, 2003, the Company obtained a waiver from each of its senior
and subordinated convertible note holders for its failure to make quarterly
interest payments when due, and where applicable, to repay the notes on
maturity. The terms of the waiver require the Company to repay all accrued
interest and past-due principal balances no later than March 31, 2004. The
waiver also clarified the Company's obligation to include all of the underlying
common shares for both the convertible note and warrants associated with the
indebtedness in the Company's next registration statement filing. The cumulative
past-due interest owed by the Company to its convertible debt holders was
approximately $113,400 at December 31, 2003. The cumulative past due principal
balance owed by the Company to its convertible debt holders was approximately
$1,100,000 at December 31, 2003. The Company received unsecured short term loans
from different sources in the amount of $155,000 during the quarter ended
December 31, 2003. The outstanding balances of these notes become due and
payable February 29, 2004.


                                    Page 11
<PAGE>
5. COMMITMENTS AND CONTINGENCIES:

a)   Manufacturing Agreement

     On August 28, 1996, the Company entered into a manufacturing agreement with
     a third party custom manufacturer (the "Manufacturer"). Pursuant to this
     agreement, the Manufacturer agrees to produce the Company's
     videoconferencing products including the MediaPro (R) and warrants that all
     products will be free from defects in material and workmanship for twelve
     months from the date the Company ships any such product to the customer or
     fifteen months from the date the Manufacturer ships to the Company,
     whichever comes first. The agreement may be terminated by either party upon
     failure of the other party to comply with any material term of the
     agreement after a 30 day written notice and cure period. In the event of
     such termination, the Company would be obligated to pay for any goods
     accepted under the terms of the agreement. The Company may also terminate
     the agreement upon 30 days written notice. In such case, the Company would
     be obligated to pay for material and work in progress for products ordered.


     On June 30, 2003, the Company and the Manufacturer agreed that the Company
     would no longer place orders for its MediaPro384(R) group videoconferencing
     product line from the manufacturer. The agreement has not yet been
     terminated; however, the Company and the Manufacturer have entered into
     discussions regarding the potential obligation that may arise from the
     termination of the agreement and the Company has accrued an estimate of
     that potential liability of $518,500.


b)   Investor and Recruitment Agreement

     In February 2001, in connection with an agreement for seeking potential
     investors and recruiting and hiring senior management, the Company issued
     warrants to purchase 500,000 shares of its common stock at a price of $.45
     per share, above the then current market price of Viseon Common Shares. Of
     these, 50,000 warrants were issued and vested immediately and were valued
     at $10,315 using the Black-Scholes pricing model. In addition, 450,000
     warrants vest at a rate of 37,500 quarterly and may vest earlier based on
     the achievement of earnings criteria as defined in the agreement, which to
     date have not been met. In connection with the agreement, 37,500 warrants
     vested and were valued at $7,735 using the Black-Scholes pricing model
     during the second quarter of fiscal year 2004. As of December 31, 2003,
     412,500 warrants vested and were valued at $85,094 using The Black-Scholes
     pricing model. The warrants expire in February 2006.

c)   The Company is subject to certain litigation and claims arising in the
     ordinary course of business related to overdue accounts payable.

6.   Stockholders  Deficit

     For the three months ended December 31, 2003, 279,248 shares were issued
     pursuant to the 2003 Consultant Compensation Plan in payment of
     approximately $312,473 in services rendered.

     During October 2003, a warrant holder exercised an existing warrant to
     purchase 1,000,000 shares of common stock at $0.25 per share, generating
     proceeds of $250,000 and another existing warrant holder exercised a
     warrant to purchase 166,666 of common stock at $0.60 per share generating
     proceeds of $100,000.

     During October 2003, the Company sold a five-year warrant to an accredited
     investor for the purchase of 166,666 shares of common stock at $1.62 per



                                    Page 12
<PAGE>

     share for $5,000. The Company also exchanged two five year warrants to
     purchase 250,000 shares (each) of common stock at $1.10 per share in
     satisfaction of short-term notes payable of $65,000.


NOTE 7. Discontinued Operations



In January 2003, we decided to change our focus from being a group
videoconferencing manufacturer and reseller to a desktop and consumer video
communications manufacturer and reseller. This has been accomplished by the
transfer to a third party of our group videoconferencing services contract
portfolio and the liquidation of our remaining group videoconferencing assets.
The only measurable revenues we are now receiving result from the sales of the
VisiFone. Therefore, we have classified the net assets and operations related to
the group videoconferencing business as discontinued operations in the
accompanying consolidated financial statements.


CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE
COMPANY'S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING
STATEMENTS

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this document and any document
incorporated by reference herein, are advised that this document and documents
incorporated by reference into this document contain both statements of
historical facts and forward looking statements. The forward-looking statements
subject to certain risks and uncertainties, which could cause actual results to
differ materially from those, indicate forward-looking statements. Examples of
forward looking statements include, but are not limited to (i) projections of
revenues, income or loss, earnings or loss per share, capital expenditures,
dividends, capital structure and other financial items, (ii) statements of the
plans and objectives of the Company or its management or Board of Directors,
including the introduction of new products, or estimates or predictions of
actions by customers, suppliers, competitors or regulatory authorities, (iii)
statements of future economic performance, and (iv) statements of assumptions
underlying other statements and statements about the Company or its business.

This document and any documents incorporated by reference herein also identify
important factors which could cause actual results to differ materially from
those indicated by the forward looking statements. These risks and uncertainties
include price competition, the decisions of customers, the actions of
competitors, the effects of government regulation, possible delays in the
introduction of new products, customer acceptance of products and services, and
other factors which are described herein and/or in documents incorporated by
reference herein. The cautionary statements made pursuant to the Private
Litigation Securities Reform Act of 1995 above and elsewhere by the Company
should not be construed as exhaustive or as any admission regarding the adequacy
of disclosures made by the Company prior to the effective date of such Act.
Forward looking statements are beyond the ability of the Company to control and
in many cases the Company cannot predict what factors would cause results to
differ materially from those indicated by the forward looking statements.



                                    Page 13
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


         Viseon, Inc. (the "Company"), a Nevada corporation formerly known as
"RSI Systems, Inc.," historically has been a developer of its own video
conferencing systems primarily sold to corporate end users and OEM customers
such as Philips Electronics, N.V. In May 2001, the former RSI Systems, Inc. was
merged into its wholly owned subsidiary Viseon, Inc. in order to change the
domicile of the Company to Nevada from Minnesota and to effect a simultaneous
name change to Viseon, Inc. The shareholders of RSI Systems, Inc. approved the
Plan of Merger between RSI Systems, Inc. and Viseon, Inc. on May 23, 2001. RSI
Systems, Inc. was incorporated under the laws of Minnesota on December 21, 1993.
On July 25, 1995, it completed its initial public offering of its common stock,
par value $0.01 per share (the "Common Stock").

Beginning with the third quarter of the Company's fiscal 2002, the
Company's profit margins were eroded by intense competition from other group
video conferencing product manufacturers and resellers. The Company recognized



                                    Page 14
<PAGE>

the need to modify its business model to achieve higher margins and benefit from
its portfolio of U.S. and foreign patents.


In January 2003, the Company completed its change in focus from being a group
videoconferencing manufacturer and reseller to a desktop and consumer video
communications developer, manufacturer and reseller. The group
videoconferencing business qualified for accounting treatment as discontinued
operations.  As a result, all historical financial information of this business
(sales, costs and expenses, assets and liabilities, and cash flows) has been
reported separately as discontinued operations.  Prior to January 2003, the
group videoconferencing business was the source for substantially all revenue.


In February 2003, the Company received notice of allowance for all of its
pending patent applications from the European Patent Office in the following
countries: Austria, Belgium, Denmark, France, Germany, Great Britain, Greece,
Ireland, Italy, Lichtenstein, Luxembourg, Monaco, Netherlands, Portugal, Spain,
Sweden, and Switzerland. To date, the Company has received confirmation of
issuance in Austria, Denmark, Germany, Greece, Spain, and Sweden. The Company is
exploring ways to license these patents in the various countries. However, no
assurance can be made as to the future value of these patents.

The VisiFone(TM) is a low-cost (currently under $600 MSRP) broadband videophone
available in 3 separate models. The VisiFone is a self-contained system that
does not require a PC or any external equipment. The VisiFone operates on any
broadband connection and home or office network including high-speed Internet
connections via DSL or cable modem. The VisiFone is available in either the ITU
Standard H.323 or SIP protocol. The H.323 version provides for compatibility
with most corporate video conferencing systems while the SIP protocol allows the
VisiFone to connect to many of the existing Voice Over Internet Protocol (VoIP)
service providers. All of the VisiFone models can be used by both corporations
and consumers.

The VisiFoneTV(TM) is the third model of the VisiFone family and
contains all of the features present in the H.323 model of the VisiFone, but
does not have an integrated display. The VisiFoneTV is operated by a handheld
remote, has a full-duplex speakerphone and requires a connection to a standard
television monitor to display the video images and provide audio.

The VisiFone provides users with video communications capabilities over
broadband networks, to any compatible device anywhere in the world. The VisiFone
utilizes between 128k and 768k of bandwidth and delivers up to 30 frames per
second video quality and full duplex audio. The VisiFone resembles a corporate
desktop telephone with an embedded 5.6" color TFT/LCD screen and CCD camera. The
VisiFone TV model utilizes any standard television monitor for display and audio
and is operated via a hand-held remote control. No PC is required for any
VisiFone model.

Either VisiFone enables a user to connect the VisiFone to a television for a
larger display such as in a conference room in a corporate application or to a
family room television in a consumer application. The user may also attach a
variety of video capture and playback devices to the VisiFone to transmit still
or moving images to a compatible device at the remote end. Examples of devices
which may be connected to a VisiFone include a camcorder, VCR, DVD, document
camera, digital camera and white board or PC via a scan converter.

The Company owns five U.S. and eighteen foreign patents relating to
interactive audio and video communications. The first of these patents was filed
in 1994 and issued in 1998. The company has licensed certain patents to one
company and has entered into agreements not to sue with another. It intends to
achieve additional licensing of its intellectual property to third parties and
plans to continue to seek protection on additional intellectual property assets.

The Company plans on undertaking the development of new products and
services jointly with suitable, well established development partners and
manufacturers. The Company is currently in the process of identifying and
selecting these partners and vendors for its next generation VisiFone products
and services. The Company has also become a distributor in the U.S. of a
broadband videophone manufactured by Leadtek, an Asian partner. The Company also



                                    Page 15
<PAGE>

plans on continuing to form new relationships with other companies to distribute
their products and services along with its own products.

The Company's marketing strategy is to focus on corporations who have
wide-spread operations across regional, national and international boundaries
as well as residential consumers who have historically not purchased video
communications devices. Distribution may include the utilization of arrangements
with providers of broadband internet access, such as cable Multi System
Operators (MSOs) and telephone companies which provide Digital Subscriber Line
(DSL) services. All of these developments have affected and will continue to
affect the Company's financial model in terms of margins, cash flow
requirements, and other areas. The Company has a limited history with respect to
the new product focus and direction of its business. There can be no assurance
that the Company will be able to succeed in implementing its strategy, or that
the Company will be able to achieve positive cash flow or profitable operations
as a result of these changes in its business.


RESULTS OF OPERATIONS

Three Months ended December 31, 2003 Compared to Three Months ended December 31,
2002.

Net Sales. Net sales for the second quarter of fiscal year 2004 were $37,161 an
increase of 691.1% from $5,168, in the second quarter of fiscal year 2003. The
increase in sales in the second quarter of fiscal year 2004 was a result of a
reduction in the number of personal videophones that the Company gave to
potential customers and distributors coupled with increased sales to consumers.

Gross Profit (Loss). Gross profit was $73,512 in the second quarter of fiscal
year 2004 compared to a gross profit of ($433) during the second quarter of
fiscal year 2003. The gross profit in the second quarter of fiscal 2004 includes
($66,830) reduction in the Company's inventory reserve. Cost of goods sold as a
percentage of net sales in the second quarter of fiscal year 2004 was 82%
compared to 91.6% in the second quarter of fiscal year 2003. During the second
quarter of fiscal year 2004, the Company continued to sell its new VisiFone
products to both corporate and consumer customers.

Research and Development Expenses. Research and development expenses were
$28,221 for the second quarter of fiscal year 2004, or 75.9% of net sales,
compared to research and development expenses of $20,017 or 387.3% of net sales
for the second quarter of fiscal year 2003. Actual expenses increased
approximately $8,204 as a result of an increase in resources dedicated to the
development of the Company's VisiFone.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $612,065 or 1,647.1% of net sales for the second
quarter of fiscal year 2004 compared to $405,803 or 7,852.2% of net sales for
the second quarter of fiscal year 2003. Overall expenses increased by $206,262
compared to fiscal year 2003. The primary increase in expenses was associated
with the launching of the Company's new VisiFone product line. These expenses
included approximately $7,765 non-cash expense related to depreciation and
amortization, $6,945 non-cash expenses related to variable stock option
accounting rules, $312,473 in non-cash stock compensation expenses related to
services rendered by consultants, who provided, among other things development,
marketing and sales services to the Company. Total non-cash expenses were
$327,183 for the second quarter of fiscal 2004. The Company anticipates that, in
the remaining two quarters of fiscal 2004, Selling, General and Administrative
expenses will be greater than the same quarter in fiscal 2003 due to the
Company's focus of its efforts on developing its new product.

Other Income (Expense). Other expense was ($214,939) in the second quarter of
fiscal year 2004, compared to other income of ($152,882) in the second quarter
of fiscal year 2003.


                                    Page 16
<PAGE>

Gain (Loss) from discontinued operations.  Gain from discontinued operations was
$350,748 in the second quarter of fiscal year 2004, compared to a loss of
($362,800).  The gain was attributable to extinguishment of debt from
discontinued operations.

As a result of the foregoing, net loss for the second quarter of fiscal year
2004 was ($430,965), or ($.02) per common share compared to a net loss of
($939,988) or ($.06) per common share in the second quarter of fiscal year 2003.
The net loss in fiscal 2004 includes a gain from discontinued operations  in the
amount of $350,748.

Six Months ended December 31, 2003 Compared to Six Months ended December 31,
2002.

Net Sales. Net sales for the six-month period ended December 31, 2003 were
$67,860, up 1,213.1% from $5,168 for the six-month period ended December 31,
2002. The increase in sales in the second quarter of fiscal year 2004 was a
result of a reduction in the number of personal videophones that the Company
gave to potential customers and distributors coupled with an increase of sales
to consumers.

Gross Profit (Loss). Gross profit was $68,830 for the six-month period ended
December 31, 2003, compared to a gross profit  of $433 during the six-month
period ended December 31, 2002. Cost of goods sold as a percentage of net sales
for the six-month period ended December 31, 2003 was 98.0% compared to 91.6%)
during the six-month period ended December 31, 2002. Gross profit increased
$61,737 due to an adjustments of ($66,830) (reduction in inventory valuation
reserve).

Research and Development Expenses. Research and development expenses were
$29,767, or 43.9% of sales for the six-month period ended December 31, 2003,
compared to research and development expenses of $45,206, or 874.7% of sales for
the six-month period ended December 31, 2002. Actual expenses decreased
approximately $15,439 during the six-month period ended December 31, 2003 as a
result of lower head count associated with the Company's change of focus to the
new VisiFone product line. The Company anticipates significantly increasing its
research and development expenses over the final two quarters of fiscal 2004 and
through fiscal 2005.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses were $1,072,932 for the six-month period ended December
31, 2003 or 1581.1% of sales, compared to $1,122,289 or 21,716.1% of sales for
the six-month period ended December 31, 2002. The decrease in selling, general
and administrative expenses during the six-month period ended December 31, 2003
was primarily a result of lower amortization costs associated with continuing
operations.


LIQUIDITY, CAPITAL RESOURCES AND MATERIAL CHANGES IN FINANCIAL CONDITION


Net cash used in operating activities was $443,279 for the six months ending
December 31, 2003, compared to $1,496,444 used in operating activities in the
six months ending December 31, 2002. The substantial reduction in cash used is
due to reduced employees and related operating expenses as the Company realigns
its strategy toward sales of the Visifone.


In addition, the Company has past due interest of approximately $113,400 and
$300,000 of past due principal.



                                    Page 17
<PAGE>

For the past couple of years, we have been obtaining funds in comparatively
small amounts on an "as needed" basis from various sources primarily through
short term loans, the private placement of small amounts of equity securities,
sale of convertible notes payable with warrant coverage and the exercise by
warrant and option holders of their rights to purchase the Company's common
stock. Once received, these funds have sustained us financially only for a
limited time, after which they become exhausted and additional funds are
required. We have also attempted to minimize our cash outlays by reducing
headcount and paying certain obligations in shares of the  Company's common
stock. Because of this manner of financing, we have had varying amounts of cash
on hand at any particular time. As of December 31, 2003, we had cash on hand in
the amount of $377. We believe that we will require funding in the amount of
$600,000 for us to continue to operate our business at our current level over
the next 12 months. Although we are reasonably confident that we will be able to
obtain funds to continue our business pursuits at this level, there can be no
assurances that we will be able to do so. To achieve our goals of growing our
business and developing and launching a next generation VisiFone we must obtain
a significant financing commitment. The amount of investment required will
depend on the targets that we eventually set and the time frame in which we plan
to execute our plan. Currently, we believe that we are making meaningful
progress in procuring the capital necessary to execute our plan. However, there
can be no assurance that we will be able to obtain the necessary financing to
move our business pursuits beyond a minimal level. Overall, there can be no
assurance that adequate funds will be available to us on reasonable terms or at
all. If adequate funds are not available on acceptable terms, we may be
prevented from pursuing future opportunities, and responding to competitive
pressures. In addition, we may be required to reduce our level of operations or
cease operations altogether and not remain a viable entity.

We have been unable to make required payments of principal and interest
on our debt obligations. Through December 31, 2003, lenders have been
cooperating with us by extending due dates on payment obligations and
not exercising other rights available to them such as foreclosure on our assets.
We have also been unable to pay certain trade payables as they became due.

We do not anticipate that our operations will generate adequate cash
flow to fund our operations for at least the next twelve months, so we
will be dependent on securing additional funds from investors or lenders. If we
are unable to secure additional funds, we may be unable to remain in
business.


                                    Page 18
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of net revenues and
expenses during the reporting period. We regularly evaluate our estimates and
assumptions related to net revenues, allowance for doubtful accounts, sales
returns and allowances, inventory reserves, goodwill and purchased intangible
asset valuations, warranty reserves, restructuring cost, litigation and other
contingencies. We base our estimates and assumptions on historical experience
and on various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. To the extent there are material differences between our
estimates and the actual results, our future results of operations will be
affected.

Revenue Recognition
We believe the following critical accounting policies required us to make
significant judgments and estimates in the preparation of our consolidated
financial statements:

We do not recognize revenue until all of the following criteria are met:
persuasive evidence of an arrangement exists; delivery has occurred or services
have been rendered; our price to buyer is fixed or determinable; and
collectibility is reasonably assured.

When product sales revenue is recognized, we establish and estimated allowance
for future product returns based on historical returns experience; when price
reductions are approved, we establish an estimated liability for price
protection payable on inventories owned by product resellers. Should actual
product returns or pricing adjustments exceed our estimates, additional
reductions to revenue would result. Revenue from the licensing of patents is
recognized at the time a patent agreement is executed and the goods, services
and/or cash are received. Our product typically carries a ninety-day to
five-year warranty. Although we engage in extensive product quality programs and
processes, our warranty obligation is affected by product failure rates, use of
materials or service delivery cost that differ from our estimates. As a result,
additional warranty reserves could be required, which could reduce gross
margins.

Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. Our allowance for
doubtful accounts is based on our assessment of the collectibility of specific
customer accounts, the aging of accounts receivable, our history of bad debts
and the general condition of the industry. If a major customer's credit
worthiness deteriorates, or our customers' actual defaults exceed our historical
experience, our estimates could change and impact our reported results.

Inventory Valuation
Our policy is to value inventories at the lower of cost market on a part-by-part
basis. This policy requires us to make estimates regarding the market value of
our inventories, including an assessment of excess and obsolete inventories. We
determine excess and obsolete based on an estimate of the future sales demand
for our product within a specified time horizon, generally 24 months. The
estimates we use for demand are also used for near-term capacity planning and
inventory purchasing is consistent with our revenue forecast.

If our sales forecast is less than the inventory we have on hand at the end of
an accounting period, we may be required to take excess and obsolete inventory
charges, which will decrease gross margin and net operating results for that
period.


                                    Page 19
<PAGE>
Item 3.           CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 as amended (the "Exchange
Act")). Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures as of the end of the fiscal quarter covered by this Quarterly Report
on Form 10-QSB are effective to ensure that information required to be disclosed
by the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. Management of the Company
has also evaluated, with the participation of the Chief Executive Officer and
Chief Financial Officer of the Company, any change in the Company's internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) that occurred during the fiscal quarter covered by this
Quarterly Report on Form 10-QSB. There was no change in the Company's internal
control over financial reporting during the Company's most recently completed
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
However, due to the limited number of Company employees engaged in the
authorization, recording, processing and reporting of transactions, there is
inherently a lack of segregation of duties. The Company periodically assesses
the cost versus benefit of adding the resources that would remedy or mitigate
this situation and currently, does not consider the benefits to outweigh the
costs of adding additional staff in light of the limited number of transactions
related to the Company's operations.




                                    Page 20
<PAGE>
                                     PART II
                                OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

     On June 22, 2001, the Company initiated a suit in the United States
     District Court for the District of Minnesota, Hennepin County, Minnesota
     against Forgent Networks, Inc. seeking damages for reasonable royalties and
     lost profits associated with the alleged infringement of the intellectual
     property rights associated with two of the Company's U.S. patents, being
     patents numbered 6,073,192 and 5,802,281 respectively. The United States
     District Court granted a partial summary judgment in favor of Forgent,
     which resolved certain claims advanced. Forgent and the Company thereafter
     submitted briefs on the remaining issues which included the payment of
     attorneys' fees and the dismissal of the litigation. On November 24th,
     2003, the Court dismissed the action finding that said Court lacked subject
     matter jurisdiction over the action and ruled that each party bear its own
     attorney's fees and costs. Subsequent to such ruling, on December 23, 2003,
     Forgent filed a brief in support of its motion for reimbursement of legal
     fees and costs. The Company timely filed a reply brief in response thereto
     in support of its position that the motion was moot as the issue raised
     therein had been previously ruled on and resolved by November 24th, 2003
     order. This matter remains subject to review and the Company intends to
     vigorously defend against the claims asserted.

     On February 17, 2003, Avanstar Communications, Inc. instituted suit against
     the Company in the District Court of Dallas County, Texas, 192nd Judicial
     District, (Cause No. CC03-01851-C) seeking the recovery of damages totaling
     $21,469 for goods and services which the Plaintiff claims were allegedly
     purchased by the Company. The Plaintiff seeks damages allegedly suffered as
     a result of a breach by the Company of a contract theoretically existing
     between it and with the Plaintiff as well as the recovery of attorneys'
     fees expended in connection with the prosecution of such action. The
     Company filed its answer in response to Plaintiff's claims in this lawsuit
     denying all of the material allegations advanced therein, setting forth
     certain defenses the Company has thereto and intends to vigorously defend
     against the allegations thereof.

     On May 5, 2003, Dow Jones, Inc. instituted a suit against the Company in
     the District Court of Dallas County, Texas, 192nd Judicial District (Cause
     No. CC03-04578-A) seeking the recovery of $31,029 allegedly owed for goods
     and services purchased by the Company from this plaintiff. The damages were
     based upon an alleged breach of contract and the recovery of attorneys'



                                    Page 21
<PAGE>

     fees. On January 28, 2004, the Company settled this matter in full, for the
     sum of $5,200, which has been paid to Plaintiff Dow Jones, Inc, in exchange
     for a full and complete release and an order dismissing the case with
     prejudice.

     On June 9, 2003, the Company received service of notice regarding a suit
     initiated by Polycom, Inc. in the County Court at Law Number 4, Dallas
     County, Texas (Cause No. cc-03-01742-d) against the Company seeking
     $426,471 allegedly owed for videoconferencing products purchased by the
     Company from Polycom. In the month of October, 2003, the Company entered
     into an agreement with the Plaintiff in full and final settlement of this
     matter for the amount of $80,000. Pursuant to the terms of the settlement
     agreement, an Order of Dismissal With Prejudice will be entered by the
     court in final resolution of this litigation. The Company paid the entire
     settlement amount in two installments of $40,000, the first of which was
     paid on October 31, 2003 and the last of which was paid on November 30,
     2003.

     On June 12, 2003, Mike Prell d/b/a/ Dallas Computer Recovery instituted a
     suit against the Company in the District Court of Dallas County, Texas,
     192nd Judicial District, (Cause No. 03-05996-K) seeking recovery of
     $169,766 allegedly owed for goods and services which the Plaintiff claimed
     were purchased by the Company and liquidated damages for the Company's
     alleged failure to purchase goods which Plaintiff asserted the Company was
     obligated to purchase. This damage amount includes amounts claimed to be
     the result of an alleged breach of contract and recovery of attorneys'
     fees. In January 2004, the Company entered into a settlement agreement
     pursuant to Rule 11 of the Texas Rules of Civil Procedure, pursuant to
     which the Company has agreed to pay the plaintiff the sum of $25,000 and to
     sell the Company's intellectual property related solely to the Automatic
     Line Routing Switch product line for which the Company had previously
     discontinued sales activities in consideration of the Plaintiff paying the
     Company a perpetual royalty on each Automatic Line Routing Switch sold by
     the Plaintiff following the sale or disposition of the 500th unit. In
     exchange for the foregoing, the lawsuit advanced by the Plaintiff will be
     dismissed with prejudice to the refiling of the same claims advanced
     therein and any other claims that could have been advanced therein. Final
     documentation is pending review by counsel to the Company.

     On October 15, 2003, Sony Electronics, Inc. instituted suit against the
     Company in the District Court of Dallas County, Texas, 192nd Judicial
     District (Cause No. CC03-9448-A) seeking the recovery of $17,475 allegedly
     owed for goods and services purchased by the Company from this plaintiff.
     The amount sought includes damages for an alleged breach of contract and
     the recovery of attorneys' fees. The Company has answered the allegations
     advanced therein in its sworn denial filed in response thereto setting
     forth certain affirmative defenses to the plaintiff's claims.The Company
     intends to vigorously defend against the claims asserted against it and has
     engaged legal counsel to review the factual matters pertaining thereto for
     the purpose of evaluating the merits of significant counter-claims which
     the Company may advance against the plaintiff.

     On November 17, 2003, Menlo Worldwide Forwarding, Inc. instituted suit
     against the Company in the County Court at Law Number 5, Dallas County,
     Texas (Cause No. CC-03-12252-E) seeking the recovery of $25,006.44 in
     actual damages allegedly resulting from a breach of contract caused by the
     failure to pay amounts owed for goods and services which the Plaintiff
     claims were purchased by the Company and the recovery of an additional sum
     of $8,335 for attorneys' fees. The Company timely filed its answer to the
     allegations advanced by the Plaintiff therein in a sworn denial, denying
     all of the material allegations advanced therein under oath and in addition
     thereto filed certain affirmative defenses to the Plaintiff's claims. The
     Company intends to vigorously defend against the claims asserted against it



                                    Page 22
<PAGE>

     by the Plaintiff.


     The Company is subject to certain other litigation and claims arising in
     the ordinary course of business.


Item 2. CHANGES IN SECURITIES

     For the three months ended December 31, 2003, 279,248 shares had been
     issued pursuant to the 2003 Consultant Compensation Plan in payment of
     approximately $312,473 in services rendered.

     During October 2003, a warrant holder exercised a warrant to purchase
     1,000,000 shares of common stock at $0.25 per share generating proceeds of
     $250,000 and another warrant holder exercised a warrant to purchase 166,666
     of common stock at $0.60 per share generating proceeds of $100,000. The
     issuances of the common stock are claimed to be exempt pursuant to Sections
     4(2) and 4(6) of, and Regulation D under, the Securities Act of 1933, as
     amended (the "Act").

     During October, 2003, the Company also sold a new warrant to an accredited
     investor for the purchase of 166,666 shares of common stock at $1.62 per
     share for $5,000. The Company also exchanged warrants with accredited
     investors to purchase 500,000 shares of common stock at $1.10 in exchange
     for $65,000 of short-term notes payable. The issuances of the warrants are
     claimed to be exempt, and the issuances of the common stock underlying the
     warrants will be claimed to be exempt, pursuant to Sections 4(2) and 4(6)
     of, and Regulation D under, the Act.

     During December 2003, the Company granted an individual a five-year warrant
     for the purchase of 100,000 shares of common stock at $0.84 per share in
     exchange for consulting services. Exercise of this warrant requires the
     holder to provide the Company with 90 days notice prior to exercise. The
     issuances of the warrants is claimed to be exempt, and the issuances of the
     common stock underlying the warrants will be claimed to be exempt, pursuant
     to Sections 4(2) and 4(6) of, and Regulation D under, the Act.


Item 3. DEFAULTS UPON SENIOR SECURITIES

     As of December 31, 2003, the Company obtained a waiver from each of its
     senior and subordinated convertible note holders for its failure to make
     interest payments when due and, where applicable, repay the notes on
     maturity. The terms of the waiver require the Company to repay all accrued
     interest and past-due principal balances no later than March 31, 2004. The
     waiver also clarified the Company's obligation to include all of the
     underlying common shares for both the convertible notes and warrants
     associated with the indebtedness in the Company's next registration
     statement filing. The cumulative past-due interest owed by the Company to
     its convertible debt holders was approximately $113,400 at December 31,
     2003. The cumulative past due principal balance owed by the Company to its
     convertible debt holders was approximately $1,100,000 at December 31, 2003.

     At March 31, 2004, we will have to pay the outstanding balance owed and
     accrued but unpaid interest or modify the terms of the notes again, or else
     face the possible assertion of creditor's rights and remedies.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

             None

                                    Page 23
<PAGE>

Item 5. OTHER INFORMATION

             None

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

            (a)  Exhibits

    Exhibit
     Number             Description

      31.01      Certification pursuant to Rule 13a-14(a) of the Securities
                 Exchange Act of 1934.
      32.01      Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

            (b)  Reports on Form 8-K

                 During the quarter ended December 31, 2003, the Company filed
                 no reports on Form 8-K.


                                    Page 24
<PAGE>
                                   SIGNATURES

Pursuant to the requirements 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.


                                  VISEON, Inc.

Dated:    August 13, 2004         By:   /s/ John C Harris
                                  -----------------------
                                  John C. Harris
                                  It's President & Chief Executive Officer


                                  By:  /s/ John C Harris
                                  -----------------------
                                  John C. Harris
                                  It's Chief Financial Officer