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U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-QSB
 (Mark One) þ
    
    QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 FOR THE TRANSITION
PERIOD
FROM 
TO
 .
 Commission File Number 0-27106 Viseon, Inc.  Nevada
    
    41-1767211(State or other jurisdiction
Of incorporation or organization)
    
    (IRS Employer
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 þ NO o The
Company had 32,849,070 shares of Common Stock, $ 0.01 par value per share, outstanding as of
May 12, 2005. Transitional Small Business Disclosure Format (Check one): Yes o No þ   1




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Viseon, Inc.  
 INDEX PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets  March 31, 2005 (unaudited) and June 30, 2004 (audited)
    
    
    3Consolidated Statements of Operations (unaudited)  Three months ended March 31, 2005 and 2004
    
    
    4Consolidated Statements of Operations (unaudited)  Nine months ended March 31, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows (unaudited)  Nine months ended March 31, 2005 and 2004
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    14Item 3. Controls and Procedures
    
    
    17PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    18SignaturesCertification Pursuant to Rule 13a-14(a)Certification Pursuant to Rule 13a-14(a)Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350
  2




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##### Table of Contents



PART I
FINANCIAL INFORMATION 
 Item 1. Financial Statements VISEON, INC. AND SUBSIDIARIES 
 Consolidated Balance Sheets March 31,
    
    
    June 30,2005
    
    
    2004(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    1,957,755
    
    
    $
    5,339,393Accounts receivable, net of allowance for doubtful accounts of
$3,739 as of March 31, 2005 and June 30, 2004
    
    
    25,636
    
    
    
    43,389Inventories
    
    
    4,108
    
    
    
    14,600Prepaid expenses
    
    
    336,834
    
    
    
    469,789Total Current Assets
    
    
    2,324,333
    
    
    
    5,867,171PROPERTY AND EQUIPMENT, NET
    
    
    27,510
    
    
    
    35,659INTANGIBLE ASSETS, NET
    
    
    264,790
    
    
    
    210,157TOTAL ASSETS
    
    $
    2,616,633
    
    
    $
    6,112,987LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    532,348
    
    
    $
    413,674Accrued expenses
    
    
    288,195
    
    
    
    226,269Net liabilities of discontinued operations
    
    
    723,475
    
    
    
    743,582Total Current Liabilities
    
    
    1,544,018
    
    
    
    1,383,525COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYSeries A convertible preferred stock, $.01 par value per share 5,000,000 shares authorized, 159 and 338
shares issued and outstanding (liquidation preference of $3,975,000 and $8,450,000)
    
    
    2
    
    
    
    3Common
stock, $.01 par value per share 100,000,000 shares authorized
31,706,061 and 24,682,907 issued and outstanding
    
    
    317,061
    
    
    
    246,829Additional paid-in capital
    
    
    39,718,129
    
    
    
    37,732,562Accumulated deficit
    
    
    (38,962,577
    )
    
    
    (33,249,932
    )Total Stockholders Equity
    
    
    1,072,615
    
    
    
    4,729,462TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,616,633
    
    
    $
    6,112,987
 See accompanying notes to consolidated financial statements. 3




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VISEON, INC. AND SUBSIDIARIES 
 Consolidated Statements of Operations  Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004NET SALES
    
    $
    619
    
    
    $
    88,916COST OF GOODS SOLD
    
    
    8,373
    
    
    
    87,316Gross Profit (Loss)
    
    
    (7,754
    )
    
    
    1,600RESEARCH AND DEVELOPMENT
    
    
    1,348,087
    
    
    
    46,718SELLING, GENERAL AND ADMINISTRATIVE
    
    
    629,858
    
    
    
    689,386Operating Loss
    
    
    (1,985,699
    )
    
    
    (734,504
    )OTHER INCOME (EXPENSE)Interest income
    
    
    11,497
    
    
    
    Interest expense
    
    
    
    
    
    
    (563,750
    )Other Income (Expense), net
    
    
    11,497
    
    
    
    (563,750
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (1,974,202
    )
    
    
    (1,298,254
    )GAIN FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    26,563NET LOSS
    
    
    (1,974,202
    )
    
    
    (1,271,691
    )Preferred Stock Dividends
    
    
    (115,676
    )
    
    
    (2,270,875
    )NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS
    
    $
    (2,089,878
    )
    
    $
    (3,542,566
    )Basic and diluted loss per share:Loss from continuing operations
    
    $
    (0.07
    )
    
    $
    (0.06
    )Net loss
    
    $
    (0.07
    )
    
    $
    (0.06
    )Net loss attributable to common stockholders
    
    $
    (0.07
    )
    
    $
    (0.17
    )Weighted average common shares outstanding:Basic and diluted
    
    
    30,311,060
    
    
    
    20,727,838
 See accompanying notes to consolidated financial statements. 4




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VISEON, INC. AND SUBSIDIARIES 
 Consolidated Statements of Operations  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004NET SALES
    
    $
    239,621
    
    
    $
    156,776COST OF GOODS SOLD
    
    
    281,229
    
    
    
    153,788RESERVE FOR INVENTORIES
    
    
    
    
    
    
    (66,830
    )Gross Profit (Loss)
    
    
    (41,608
    )
    
    
    69,818RESEARCH AND DEVELOPMENT
    
    
    3,326,554
    
    
    
    76,485SELLING, GENERAL AND ADMINISTRATIVE
    
    
    1,925,451
    
    
    
    1,762,318Operating Loss
    
    
    (5,293,613
    )
    
    
    (1,768,985
    )OTHER INCOME (EXPENSE)Interest income
    
    
    41,813
    
    
    
    Interest expense
    
    
    
    
    
    
    (982,223
    )Other Income (Expense), net
    
    
    41,813
    
    
    
    (982,223
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (5,251,800
    )
    
    
    (2,751,208
    )GAIN FROM DISCONTINUED OPERATIONS
    
    
    6,107
    
    
    
    377,311NET LOSS
    
    
    (5,245,693
    )
    
    
    (2,373,897
    )Preferred Stock Dividends
    
    
    (466,951
    )
    
    
    (2,270,875
    )NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS
    
    $
    (5,712,644
    )
    
    $
    (4,644,772
    )Basic and diluted loss per share:Loss from continuing operations
    
    $
    (0.19
    )
    
    $
    (0.14
    )Gain from discontinued operations
    
    $
    
    
    
    $
    0.02Net loss
    
    $
    (0.19
    )
    
    $
    (0.12
    )Net loss attributable to common stockholders
    
    $
    (0.20
    )
    
    $
    (0.24
    )Weighted average common shares outstanding:Basic and diluted
    
    
    27,968,163
    
    
    
    19,354,080
 See accompanying notes to consolidated financial statements. 5




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VISEON, INC. AND SUBSIDIARIES 
 Consolidated Statements of Cash Flows  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (5,245,693
    )
    
    $
    (2,373,897
    )Adjustments to reconcile net loss to net
cash flows from operating activities:Depreciation and amortization
    
    
    41,593
    
    
    
    22,268Amortization of original issue discount
    
    
    
    
    
    
    855,076Compensation related to stock options
    
    
    
    
    
    
    40,660Common stock issued for services rendered
    
    
    78,048
    
    
    
    514,043Common stock warrants issued for services rendered
    
    
    
    
    
    
    39,871Loss on retirement of equipment
    
    
    
    
    
    
    152Gain from discontinued operations
    
    
    (6,107
    )
    
    
    (377,311
    )Reserve for inventories
    
    
    
    
    
    
    (66,830
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    17,753
    
    
    
    16,466Inventories, net
    
    
    10,492
    
    
    
    20,950Prepaid expenses
    
    
    132,955
    
    
    
    (79,807
    )Accounts payable
    
    
    118,674
    
    
    
    70,127Accrued expenses
    
    
    119,354
    
    
    
    358,400Net cash flows used in operating activities
    
    
    (4,732,931
    )
    
    
    (959,832
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (2,370
    )
    
    
    (2,896
    )Proceeds from sale of equipment
    
    
    
    
    
    
    1,000Payments for intangible assets
    
    
    (85,707
    )
    
    
    (118,469
    )Net cash flows from investing activities
    
    
    (88,077
    )
    
    
    (120,365
    )Cash flows from financing activities:Payments of notes payable
    
    
    
    
    
    
    (202,936
    )Proceeds from subordinated note payable
    
    
    
    
    
    
    110,000Proceeds from short-term notes payable
    
    
    
    
    
    
    155,000Proceeds from exercise of common stock options
    
    
    33,500
    
    
    
    212,495
 Continued
See accompanying notes to consolidated financial statements. 6




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Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004Proceeds from exercise of common stock warrants
    
    
    1,450,225
    
    
    
    350,000Proceeds from sales of common stock warrants
    
    
    
    
    
    
    5,000Proceeds from issuance of convertible preferred stock and warrants
    
    
    
    
    
    
    5,725,000Payments of convertible preferred stock and warrant issuance costs
    
    
    (26,863
    )
    
    
    (666,400
    )Dividends on convertible preferred stock
    
    
    (3,492
    )
    
    
    Net cash flows from financing activities
    
    
    1,453,370
    
    
    
    5,688,159Change in cash and cash equivalents from discontinued operations
    
    
    (14,000
    )
    
    
    (107,950
    )Increase (decrease) in cash and cash equivalents
    
    
    (3,381,638
    )
    
    
    4,500,012Cash and cash equivalents, beginning of period
    
    
    5,339,393
    
    
    
    7,784Cash and cash equivalents, end of period
    
    $
    1,957,755
    
    
    $
    4,507,796See accompanying notes to consolidated financial statements.Supplemental cash flow information:Cash paid for interest, net of original issue discount
    
    
    
    
    
    
    71,817Noncash investing and financing activitiesAccounts payable converted to common stock
    
    
    
    
    
    
    130,246Short-term notes converted into common stock warrants
    
    
    
    
    
    
    65,000Convertible notes converted into common stock
    
    
    
    
    
    
    1,254,726Accrued preferred stock dividends converted to common stock
    
    
    344,122
    
    
    
    Common stock issued for preferred stock dividends
    
    
    141,458
    
    
    
    Conversion of preferred stock to common stock
    
    
    44,750
    
    
    
    Cashless exercise of warrants
    
    
    3,498
    
    
    
    
 7




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VISEON, INC. AND SUBSIDIARIES 
   1. DESCRIPTION OF THE BUSINESS: Viseon, Inc. (the Company), a Nevada corporation, was incorporated on December 21, 1993 and
historically had been a developer of its own group videoconferencing systems sold primarily to
corporate end users and OEM customers. 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 broadband communications systems developer and
reseller. The only measurable revenues that the Company is currently realizing are as 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 videoconferencing
business as discontinued operations in the accompanying consolidated financial statements. The VisiFone products are low-cost broadband communication devices, which can be used by both
consumers and businesses for both audio and audio/ video calling over high speed internet
connections. The VisiFone is a self-contained system that does not require a PC or any external
equipment for its operation. It will utilize virtually any broadband connection and home or office
network including high-speed Internet connections via DSL or cable modem. The first generation of VisiFone has been available to customers, primarily for testing, since
2003. It 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, government and educational 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. The second generation of VisiFone has been developed by the Company based on input from various
broadband carriers and VoIP marketers. Shipments are expected to begin during the first quarter of
fiscal 2006. The Company has incurred losses from operations and negative cash flows from operations for the
quarters ended March 31, 2005 and 2004. Management plans to try to increase sales and improve
operations through 1) continued initiatives to gain acceptance of our product by broadband carriers
for sale to their subscribers, 2) continued measures to minimize overhead and 3) initiatives to
monetize our intellectual property rights. Management believes that current cash funds and funds
generated from operations will be sufficient to cover cash needs for the remainder of the 2005 fiscal year,
although there can be no assurance in this regard. In the event sales do not materialize at the
expected rates or the Company does not achieve planned gross margins, management would seek
additional financing or would conserve cash by further reducing expenses. There can be no
assurance that the Company will be successful in achieving these objectives or becoming profitable. 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, 2004 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. 8




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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 months and nine months ended March 31, 2005 are
not necessarily indicative of the results that may be expected for the full year. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Intangible Assets. The Company amortizes patents over their estimated useful lives of ten years
using the straight-line method. Accumulated amortization of intangible assets was $72,961 and
$49,442 at March 31, 2005 and June 30, 2004, respectively. Amortization expense of intangible
assets was $7,958 and $3,679 for the three months ended March 31, 2005 and 2004, and was $23,518
and $9,810 for the nine months ended March 31, 2005 and 2004. Amortization expense is estimated to
approximate $27,000 for each of the years ending June 30, 2005, 2006, 2007, 2008 and 2009. Revenue Recognition. The Company records sales revenue at the time merchandise is shipped and
records a reserve for potential returns based upon historical experience rates. In November 1999,
the SEC issued Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition. SAB No. 101, as
amended by SAB No. 104, 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 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 believes it meets all of the requirements for
revenue recognition under SFAS 48 and SAB 104. 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. 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. Loss Per Common Share. Basic loss attributable to common stockholders per common share is computed
by dividing the loss by the weighted average number of common shares outstanding for the reporting
period. Diluted loss attributable to common stockholders per common share is computed by dividing
the 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 nine months ended March 31, 2005 and 2004 were anti-dilutive to earnings per share. 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. 123, 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: 9




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For the three months ended
    
    
    For the nine months endedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Loss attributable to common stockholdersAs reported
    
    $
    (2,089,878
    )
    
    $
    (3,542,566
    )
    
    $
    (5,712,644
    )
    
    $
    (4,644,772
    )Pro forma
    
    
    (2,171,808
    )
    
    
    (3,592,838
    )
    
    
    (5,973,184
    )
    
    
    (4,727,494
    )Basic and diluted loss per share:As reported
    
    
    (0.07
    )
    
    
    (0.17
    )
    
    
    (0.19
    )
    
    
    (0.24
    )Pro forma
    
    
    (0.07
    )
    
    
    (0.17
    )
    
    
    (0.21
    )
    
    
    (0.24
    )Stock based compensation:As reported
    
    
    
    
    
    
    (12,731
    )
    
    
    
    
    
    
    40,660Pro forma
    
    
    81,930
    
    
    
    50,272
    
    
    
    260,540
    
    
    
    82,722
 The Company did not grant any options during the three months or
the nine months ended March 31, 2004.In determining the compensation cost of options granted during the three months and nine
months ended March 31, 2005 and 2004, 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: For the Three Months Ended
    
    
    For the Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Risk-free interest rate
    
    
    4.00
    %
    
    
    N/A
    
    
    
    4.00
    %
    
    
    N/AExpected life of options granted
    
    10 Years
    
    
    N/A
    
    
    10 Years
    
    
    N/AExpected volatility
    
    
    42.04
    %
    
    
    N/A
    
    
    
    42.04
    %
    
    
    N/AExpected dividend yield
    
    
    0
    %
    
    
    N/A
    
    
    
    0
    %
    
    
    N/A
 4. RECENT ACCOUNTING PRONOUNCEMENTS: In November 2004, the FASB issued SFAS No. 151 Inventory Costs which amends the guidance in ARB
No. 43, Chapter 4 Inventory Pricing, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
Chapter 4, previously stated that under some circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment
as current period charges. SFAS No. 151 requires that those items be recognized as current-period
charges regardless of whether they meet the criterion of so abnormal. In addition, SFAS No, 151
requires that allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS No. 151 shall be effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for
inventory costs incurred during fiscal years beginning after the date SFAS No. 151 was issued. SFAS
No. 151 shall be applied prospectively. The Company does not expect the adoption of SFAS No. 151
to have a material effect on its consolidated financial statements. In December 2004, the FASB issued SFAS No. 153 Exchanges of Nonmonetary Assets which amends APB
Opinion No. 29, Accounting for Nonmonetary Transactions. APB No. 29 is based on the principle
that exchanges of nonmonetary assets should be measured based on the fair value of the assets
exchanged. The guidance in that opinion, however, included certain exceptions to that principle.
SFAS No. 153 amends APB No. 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of nonmonetary assets that
do not have commercial substance. A nonmonetary exchange has commercial substance if the future
cash flows of the entity are expected to change significantly as a result of the exchange. SFAS
No. 153 shall be effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. Earlier application is 10




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permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date SFAS
No. 153 was issued. SFAS No. 153 shall be applied prospectively. The Company does not expect the
adoption of SFAS No. 153 to have a material effect on its consolidated financial statements. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, that focuses
primarily on accounting for transactions in which an entity obtains employee services in
share-based payment transactions. This statement replaces SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees. Beginning July 1, 2006, we will be required to expense the fair value of employee
stock options and similar awards. As a public company, we are allowed to select from two
alternative transition methods, each having different reporting implications. The impact of SFAS
No. 123R has not been determined at this time. 5. CONVERTIBLE PREFERRED STOCK AND WARRANTS: In the months of March and April 2004, the Company sold, in private placement transactions, a total
of 338 shares of Series A Convertible Preferred Stock in prepackaged units which included one
Series A-1 Warrant and one Series A-2 Warrant for each share of Series A Convertible Preferred
Stock (collectively referred to as the Securities). The private placement of the Securities
resulted in gross proceeds to the Company of $8,450,000, prior to offering expenses. In total,
holders of the 338 shares of Series A Convertible Preferred Stock may acquire 16,900,000 shares of
our Common Stock (8,450,000 shares of Common Stock upon conversion and 8,450,000 shares upon
exercise of warrants). Each share of Series A Convertible Preferred Stock is convertible, at the initial conversion price
of $1.00, into 25,000 shares of Common Stock, subject to adjustment under certain conditions.
Holders of the Series A Convertible Preferred Stock are entitled to dividends at the rate of 10%
per annum payable quarterly in either cash or, at the option of the Company, registered shares of
Common Stock valued at fair market value. Shares of Series A Convertible Preferred Stock are
convertible into shares of Common Stock at the holders option at any time and will automatically
convert to shares of Common Stock if certain trading volume and closing price targets on the
Companys Common Stock are met at various intervals. The closing price targets are $2.00 per share
through August 16, 2006 and $3.00 per share thereafter. The trading volume target is an average of
125,000 shares per day over a consecutive 20-day period during which the applicable closing price
target has been met or exceeded. In addition, shares of the Series A Convertible Preferred Stock
participate on an as-if converted basis in any dividends paid on Common Stock. Holders of shares of
Series A Convertible Preferred Stock are entitled to voting rights together with the Common Stock,
on an as-if converted basis. The conversion price of the Series A Convertible Preferred Stock is subject to appropriate
adjustment in the event of stock splits, stock dividends, reverse stock splits, capital
reorganizations, recapitalizations, reclassifications, and similar occurrences as well as the
issuance of Common Stock in consideration of an amount less than the then-effective conversion
price. The holder of each Series A-1 Warrant is entitled to purchase 12,500 shares of Common Stock at an
exercise price of $1.08 per share for a term of five years from the date of issuance. The holder of
each Series A-2 Warrant is entitled to purchase 12,500 shares of Common Stock at an exercise price
of $1.26 per share for a term of five years from the date of issuance. The exercise price of the
Series A-1 and Series A-2 Warrants is subject to adjustment for the issuance of Common Stock in
consideration of an amount less than the then effective exercise price. The shares of Common Stock underlying the Securities are currently subject to an effective
registration statement on Form SB-2 under the Securities Act of 1933, as amended. The Company has
agreed to cause this registration statement to continuously remain effective until all such Common
Stock may be sold without regard to an effective registration statement. Failure to maintain a
continuously effective registration statement will subject the Company to liability to certain
holders of shares of Series A Convertible Preferred Stock in the form of liquidated damages
totaling as high as $253,500 per month. The Company has recorded a charge of $147,875 during
the quarter ended September 30, 2004 in Selling,
General & Administrative Expenses for the estimated penalty due to certain of the Companys
preferred stockholders related to the effective date of the Companys registration statement
occurring twelve days later than the date required in an agreement between the Company and its
preferred stockholders. 11




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The Companys placement agent received an aggregate placement fee of
$845,000 and warrants to purchase 1,267,500 shares of Common Stock at a purchase price of $1.00 per share for a
term of five years from the date of issuance (the Series A-1-AGENT Warrants). The exercise price
of the Series A-1-AGENT Warrants is subject to adjustment for the issuance of Common Stock in
consideration of an amount less than the then effective exercise price. The Series A-1 Warrants, Series A-2 Warrants and Series A-1-Agent Warrants each contain provisions
allowing the Company to repurchase the warrants from the holders upon 15 days notice at $0.10 per
warrant share if certain trading volume and closing price targets on the Companys Common Stock are
met at various intervals. The closing price targets are $2.50 per share through August 16, 2006 and
$3.50 per share thereafter. The trading volume target is an average of 125,000 shares per day over
a consecutive 20-day period during which the applicable closing price target has been met or
exceeded. From August 2004 through March 2005, holders of 179 shares of the Series A Convertible Preferred
Stock elected to convert their shares to Common Stock, resulting in the issuance of 4,475,000
shares of Common Stock. 6. COMMITMENTS AND CONTINGENCIES: 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 agreed to produce
the Companys group videoconferencing products. 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. As of June 30, 2003, the Company and the Manufacturer agreed that the Company will 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. This amount is
classified on the balance sheet under net liabilities of discontinued operations. Distributor and Dealer Agreements 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 agreement expired in accordance
with its terms in May 2004 although the Company has continued purchasing VisiFones at the pricing
contained in the expired agreement. In most instances, 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 for the three month and nine month periods ended March 31,
2005 and 2004 were from sales of the VisiFone purchased from this supplier. Investor and Recruitment Agreement In February 2001, in connection with an agreement for seeking potential investors and recruiting
and hiring of senior management, the Company issued rights to purchase warrants for 500,000 shares
of its Common Stock at an exercise price of $0.45. The agreement also required the payment of
consulting fees. As of June 30, 2004, all warrants have vested and been expensed. This agreement
expired in February 2004. The warrants expire in February 2006. Legal Proceedings The Company is involved in legal actions in the ordinary course of its business. In February 2004, the Company was named as defendant in a lawsuit for approximately $31,000
allegedly owed for past-due accounts payable. The plaintiff was also seeking recovery of attorneys
fees of approximately $10,000. The Company 12




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has accrued $25,111 related to its estimated exposure with this lawsuit. In October 2004, the
Company paid $22,500 in full and final settlement of the plaintiffs claims and this lawsuit was
dismissed. The Company had been named as a defendant in several lawsuits during fiscal year 2004 and 2003
related to amounts allegedly owed for goods and services. During fiscal year 2004, the Company
settled several of these lawsuits for approximately $175,000, which amounts had been previously
included in cost of goods sold or selling, general and administrative expenses in the consolidated
statement of operations. 7. STOCKHOLDERS EQUITY (DEFICIT): During the quarter ended March 31, 2005, the Company issued 87,418 shares of Common Stock valued at
$138,567 for payment of dividends on its Series A Convertible Preferred Stock. During the quarter ended March 31, 2005, 55 shares of Series A Convertible Preferred Stock with a
liquidation preference of $1,375,000 were converted into 1,375,000 shares of Common Stock. During the quarter ended March 31, 2005, the Company issued 636,545 shares of Common Stock upon
exercise of warrants. One holder exercised a warrant to purchase 95,220 shares of Common Stock on a
cashless basis by exchanging the right to purchase 42,009 shares valued at $71,415 for the payment
otherwise due on exercise of the warrant. Several other holders exercised warrants to purchase
583,334 shares of Common Stock for cash proceeds of $370,000. 8. DISCONTINUED OPERATIONS: In January 2003, the Company decided to change its focus from being a group videoconferencing
manufacturer and reseller to a desktop and consumer video communications manufacturer and reseller.
This was accomplished by the transfer to a third party of its group videoconferencing services
contract portfolio and the liquidation of its remaining group videoconferencing assets. The only
measurable revenues we are now receiving result from the sales of the VisiFone. Therefore, the
Company classified the net assets and operations related to the group videoconferencing business as
discontinued operations in the accompanying consolidated financial statements. 9. SUBSEQUENT EVENTS: In April 2005, 34 shares of Series A Convertible Preferred Stock with a liquidation preference of
$850,000 were converted into 850,000 shares of Common Stock. In addition, the Company issued
110,000 shares of Common Stock and granted options to acquire 140,000 shares of Common Stock at an
exercise price of $1.62 per share to certain current and former members of its board directors for
services rendered. CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE COMPANYS ACTUAL RESULTS TO
DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as intend, anticipate, believe,
estimate, plan and expect and variations of these words and similar expressions are intended
to identify these forward-looking statements. All statements other than statements of historical
facts contained in this report, including statements regarding our future financial position,
business strategy, budgets, projected costs and plans and objectives of management for future
operations, are considered to be forward-looking statements. We express our expectations, beliefs
and projections in good faith and believe our expectations reflected in these forward-looking
statements are based on reasonable assumptions; however, we cannot assure you that these
expectations, beliefs or projections will prove to have been correct. Risks, uncertainties and
assumptions that could cause actual results to differ materially from the expectations reflected
in the forward-looking statements include, among other things: (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) 13




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statements of future economic performance, and (iv) statements of assumptions underlying other
statements and statements about the Company or its business. Readers are referred to the caption Risk Factors appearing at the end of Item 1 of the 2004
Annual Report on Form 10-KSB for additional factors that may affect our forward-looking statements.
In light of these risks, uncertainties and assumptions, the forward-looking events discussed in
this report might not occur. We undertake no obligation to update or revise our forward-looking
statements, whether as a result of new information, future events or otherwise. 
 Item 2. Managements Discussion and Analysis or Plan of Operation INTRODUCTION The VisiFone products are low-cost broadband communication devices, which can be used by both
consumers and businesses for both audio and audio/ video calling over high speed internet
connections. The VisiFone is a self-contained system that does not require a PC or any external
equipment for its operation. It will utilize virtually any broadband connection and home or office
network including high-speed Internet connections via DSL or cable modem. The first generation of VisiFone has been available to customers, primarily for testing, since
2003. It 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, government and educational 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. The second generation of VisiFone is being developed by the Company based on input from various
broadband carriers and VoIP marketers. Shipments to these Broadband Service Providers are expected
to begin during the first quarter of fiscal 2006. The new VisiFone is the first Digital Home Telephone designed for VoIP. It provides users with
several unique features including Digital Wideband audio, H.264 video communications capabilities,
integrated terminal adapter functionality. Multiple screen sizes and cordless handsets are planned
for introduction late this year. Viseon has filed a number of patent applications related to the
new VisiFone technology, design and functionality. The Company has licensed certain parts of its patents to other companies within the visual
communications industry. 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, some of which may be based on its
existing intellectual property. The Company plans to undertake the development of these products
and services jointly with one or more suitable, established manufacturers, which the Company is
currently in the process of identifying and selecting. To date the Company has retained independent
business enterprises to assist in the design of the general appearance and functionality of our
next generation broadband videophones as well as the design and development of the software,
electronics and acoustics that will be integrated therein which is the genesis of the next
generation VisiFone. The design and development assistance provided by each of these companies is a
cooperative effort with our technical support personnel, under the supervision of our technical
advisors and senior management to insure strict adherence to the specifications outlined to them by
the Company.

The Companys marketing strategy targets Broadband Telephone Service providers engaged in selling
to primarily residential consumers who have historically not purchased video communication devices
or Internet Telephony phones at all and, to a limited degree, business and government entities with
widespread operations across regional, national and international boundaries. Management identified
the challenges associated with marketing the Companys products to such a diverse market segment
prior to its decision to modify the Companys business model and has been evaluating various
marketing strategies for more than two years. Management recognized the advantages of developing a
marketing strategy that included a plan of sales and distribution of its products in tandem with
one or more major broadband providers and VoIP marketers. In this regard, the Company has been
actively discussing videotelephony and the merits of offering the VisiFone to their subscribers,
with cable television system operators, telephone companies and independent VoIP marketers in
search of potential partners with which such a relationship can be developed. 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 operational history with
respect to the current direction of its 14




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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 flows or profitable operations
as a result of such changes in its business. RESULTS OF OPERATIONS Three Months ended March 31, 2005 Compared to Three Months ended March 31, 2004. Net Sales. Net sales for the third quarter of fiscal year 2005 were $619, a decrease of 99.3% from
$88,916 in the third quarter of fiscal year 2004. The Company is focusing its efforts on final
design and marketing of the next generation VisiFone unit and, accordingly, sales of the existing
VisiFone model have declined significantly. Gross Profit (Loss). Gross loss was ($7,754) in the third quarter of fiscal year 2005 compared to a
gross profit of $1,600 during the third quarter of fiscal year 2004. The gross loss in the third
quarter of fiscal year 2005 was attributable to low unit sales and amortization of patent costs to
cost of good sold. For the next quarter, the Company expects to continue to sell limited
quantities of the existing model VisiFone at low or negative margins to corporate, government and
educational customers for demonstration and evaluation purposes and to promote adoption of the
technology in the marketplace. Research and Development Expenses. Research and development expenses were $1,348,087 for the third
quarter of fiscal year 2005 (217,784.7% of net sales) compared to $46,718 (52.5% of net sales) for
the third quarter of fiscal year 2004. The significant increase was attributable to increased
expenditures toward the development of the next generation unit in the VisiFone product line. The
Company expects to incur approximately $750,000 of research and development expenses during the next
fiscal quarter and approximately $2,000,000 during the fiscal year ending June 30, 2006 for future
project enhancements, subject to available cash flows. Selling, General and Administrative Expenses. Selling, general and administrative expenses were
$629,858 (101,754.1% of net sales) for the third quarter of fiscal year 2005 compared to $689,386
(775.3% of net sales) for the third quarter of fiscal year 2004. Selling, general and
administrative expenses were relatively constant between periods, reflecting a consistent level of
expenditures in the Companys administrative operations. Other Income (Expense). Other income was $11,497 in the third quarter of fiscal year 2005, compared
to other expense of ($563,750) in the third quarter of fiscal year 2004. The net increase in other
income was attributable to interest earned on the Companys cash funds in fiscal 2005 and the
reduction in interest expense as the Company repaid or converted its interest-bearing debt to
equity in fiscal 2004. Gain from Discontinued Operations. During the third quarter of fiscal 2004, the Company negotiated
discounted repayments related to amounts owed to certain creditors. Based on these discounts, the
Company recorded a gain from discontinued operations of $26,563 in the third quarter of fiscal
2004. There were no such discounted repayments during the third quarter of fiscal 2005. Preferred Stock Dividends. The results of operations for the third quarter of fiscal 2005 reflect a
charge of $115,676 compared to $2,270,875 in the third quarter of fiscal 2004 for dividends on the
Companys Series A Convertible Preferred Stock which bears dividends at the rate of 10% per annum.
Substantially all such dividends in fiscal 2005 were paid by the issuance of Common Stock.
Dividends have decreased substantially from the same period in fiscal 2004 due to a charge of
$2,248,410 in the third quarter of fiscal 2004 attributable to the beneficial conversion option on
the Series A Convertible Preferred Stock. Nine Months ended March 31, 2005 Compared to Nine Months ended March 31, 2004. Net Sales. Net sales for the first nine months of fiscal year 2005 were $239,621, an increase of
152.8% from $156,776 in the first nine months of fiscal year 2004. The increase in sales in the
first nine months of fiscal year 2005 was primarily attributable to sales of the Companys VisiFone
unit to two customers in the amount of $218,371. The Company expects sales to remain low as it
focuses its efforts on final design and marketing of the next generation VisiFone unit. 15




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Gross Profit (Loss). Gross loss was ($41,608) in the first nine months of fiscal year 2005 compared
to a gross profit of $69,818 during the first nine months of fiscal year 2004. The gross loss in
the first nine months of fiscal 2005 was attributable to the sale of units below the Companys cost
to a major broadband carrier for the purpose of testing the adoption of the VisiFone by consumers.
This gross loss was partially offset by low margin sales to other customers during the first nine
months of fiscal year 2005. For the next quarter, the Company expects to continue to sell the
VisiFone at low or negative margins to corporate, government and educational customers for
demonstration and evaluation purposes and to promote adoption of the technology in the marketplace. Research and Development Expenses. Research and development expenses were $3,326,554 for the first
nine months of fiscal year 2005 (1,388.3% of net sales) compared to $76,485 (48.8% of net sales)
for the first nine months of fiscal year 2004. The significant increase was attributable to
increased expenditures toward the development of the next generation unit in the VisiFone product
line. The Company expects to incur approximately $750,000 of research and development expenses during
the next fiscal quarter and approximately $2,000,000 during the fiscal year ending June 30, 2006 for
future product enhancements, subject to available cash flows. Selling, General and Administrative Expenses. Selling, general and administrative expenses were
$1,925,451 (803.5% of net sales) for the first nine months of fiscal year 2005 compared to
$1,762,318 (1,124.1% of net sales) for the first nine months of fiscal year 2004. The increase in
selling, general and administrative expenses was primarily due to an accrual of $147,875 for the
estimated penalty due to certain of the Companys preferred stockholders related to the effective
date of the Companys registration statement occurring twelve days later than the date required in
an agreement between the Company and its preferred stockholders. Other Income (Expense). Other income was $41,813 in the first nine months of fiscal year 2005,
compared to other expense of $982,223 in the first half of fiscal year 2004. The net increase in
other income was attributable to interest earned on the Companys cash funds in fiscal 2005 and the
reduction in interest expense as the Company repaid or converted its interest-bearing debt to
equity in fiscal 2004. Gain from Discontinued Operations. During the first nine months of fiscal 2005 and 2004, the
Company negotiated discounted repayments related to amounts owed to certain creditors. Based on
these discounts, the Company recorded a gain from discontinued operations of $6,107 for the first
nine months of fiscal 2005 and $377,311 for the first nine months of fiscal 2004. Preferred Stock Dividends. The results of operations for the first nine months of fiscal 2005
reflect a charge of $466,951 compared to $2,270,875 in the first nine months of fiscal 2004 for
dividends on the Companys Series A Convertible Preferred Stock which bears dividends at the rate
of 10%. Substantially all such dividends in fiscal 2005 were paid by the issuance of Common Stock.
Dividends have decreased substantially from the same period in fiscal 2004 due to a charge of
$2,248,410 in the third quarter of fiscal 2004 attributable to the beneficial conversion option on
the Series A Convertible Preferred Stock. LIQUIDITY AND CAPITAL RESOURCES The Company raised $8,450,000 (prior to offering expenses) from the sale of its Series A
Convertible Preferred Stock with warrants in a series of private placement transactions in March
and April 2004. In addition, the Company raised an additional $1,450,225 through March 31, 2005
from the exercise by holders of certain of the Companys common stock purchase warrants.
Management believes that the funds generated from the recent private placement financing activities
and warrant exercises will be sufficient to cover the cash needs of the Company for the current
fiscal year. Proceeds from remaining outstanding warrants could generate an additional $14.5
million, although certain warrants have cashless exercise provisions. However, there can be no
assurance that any additional warrants will be exercised. Historically, the Company has generated losses from operations and negative cash flows. For the
nine months ended March 31, 2005, the Company incurred a net loss attributable to common
stockholders of $5,712,644. For the same period, the Company used $4,732,931 in operating
activities, used $88,077 in investing activities primarily for payment of costs related to its
intellectual property, and generated $1,453,370 from financing activities, primarily due to the
warrant exercises. 16




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Management plans to try to increase sales and improve operating results through (i) increased
marketing and direct sales activities to corporate customers, (ii) continued initiatives to gain
acceptance of our product by consumer broadband providers for sale to their subscribers and (iii)
initiatives to monetize our intellectual property rights. There can be no assurance that we will be
successful in achieving these objectives and becoming profitable. 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
and accounting for income taxes. 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. We believe the following critical accounting policies require us to make significant judgments and
estimates in the preparation of our consolidated financial statements: Revenue Recognition The Company records sales revenue at the time merchandise is delivered. In November 1999, the SEC
issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition, SAB No. 101, as amended by SAB
No. 104, which 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 uses the above criteria to determine whether
revenue can be recognized. When product sales revenue is recognized, we establish and estimate allowance for future product
returns based on historical returns experience; when price reductions are approved, we establish an
estimate 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 differs 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. Accounting for Income Taxes The Company accounts for income taxes using the asset and liability method. Under the asset and
liability method, deferred tax assets and liabilities are recognized at the enacted rates for the
future tax consequences attributable to differences between the financial statement carrying
amounts of existing tax assets and liabilities and their respective tax basis. The effect on
deferred tax assets and liabilities of a change in tax rate is recognized in income in the period
that includes the enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized. 
 Item 3. Controls and Procedures 17




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Within 90 days prior to the date of filing this Quarterly Report on Form 10-QSB, 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. 
 PART II
OTHER INFORMATION 
 Item 1. Legal Proceedings The Company is subject to certain litigation and claims arising in the ordinary course of
business. We do not expect costs related to these claims to have a material adverse effect on our
consolidated financial position or our results of operations. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. 
 Item 3. Defaults upon Senior Securities None 
 Item 4. Submission of Matters to a Vote of Security Holders None 
 Item 5. Other Information None 
 Item 6. Exhibits (a) Exhibits ExhibitNumber
    
    Description31.01
    
    Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.31.02
    
    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 2002.32.02
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
 18




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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: May 16, 2005
    
    By:
    
    /s/ John C HarrisJohn C. Harris
Its President & Chief Executive OfficerDated: May 16, 2005
    
    By:
    
    /s/ Robert A. WolfRobert A. Wolf
Its Chief Financial Officer
 19