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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-QSB
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
 Commission File Number 000-27106
 VISEON, INC.
  Nevada
    
    41-1767211(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 8445 Freeport Parkway, Suite 245, Irving, Texas 75063
 (972) 906-6300
 þ o
 o þ
  Transitional Small Business Disclosure Format (Check one): Yes o No þ




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INDEX
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets  March 31, 2006 (unaudited) and June 30, 2005 (audited)
    
    
    3Consolidated Statements of Operations (unaudited)  Three months ended March 31, 2006 and 2005
    
    
    4Consolidated Statement of Operations (unaudited)  Nine months ended March 31, 2006 and 2005
    
    
    5Consolidated Statements of Cash Flows (unaudited)  Nine months ended March 31, 2006 and 2005
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Controls and Procedures
    
    
    17PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 3. Exhibits
    
    
    18Signatures
    
    
    18Certification 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




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PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 VISEON, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 March 31,
    
    
    June 30,2006
    
    
    2005(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    3,258,750
    
    
    $
    239,383Accounts receivable
    
    
    7,150
    
    
    
    16,541Inventories
    
    
    76,760
    
    
    
    3,758Prepaid expenses
    
    
    278,901
    
    
    
    379,291Total Current Assets
    
    
    3,621,561
    
    
    
    638,973PROPERTY AND EQUIPMENT, NET
    
    
    90,831
    
    
    
    26,428INTANGIBLE ASSETS, NET
    
    
    315,245
    
    
    
    266,358TOTAL ASSETS
    
    $
    4,027,637
    
    
    $
    931,759LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    483,121
    
    
    $
    1,230,041Accrued expenses
    
    
    377,664
    
    
    
    336,287Net liabilities of discontinued
operations
    
    
    204,976
    
    
    
    723,475Total Current Liabilities
    
    
    1,065,761
    
    
    
    2,289,803COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY (DEFICIT)Convertible preferred stock, $.01 par value per share
5,000,000 shares authorizedSeries A convertible preferred stock, 97 and 125 shares
issued and outstanding (liquidation preference of
$2,425,000 and $3,125,000)
    
    
    1
    
    
    
    1Series B convertible preferred stock, 376 and 0 shares
issued and outstanding (liquidation preference of
$9,400,000 and $0)
    
    
    4
    
    
    
    Common stock, $.01 par value per share
100,000,000 shares authorized
35,768,406 and 32,849,070 issued and outstanding
    
    
    357,684
    
    
    
    328,491Additional paid-in capital
    
    
    54,704,554
    
    
    
    40,056,336Accumulated deficit
    
    
    (52,100,367
    )
    
    
    (41,742,872
    )Total Stockholders Equity (Deficit)
    
    
    2,961,876
    
    
    
    (1,358,044
    )TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    4,027,637
    
    
    $
    931,759
  3




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VISEON, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 (Unaudited)
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)NET SALES
    
    $
    
    
    
    $
    619COST OF GOODS SOLD
    
    
    
    
    
    
    8,373Gross Profit (Loss)
    
    
    
    
    
    
    (7,754
    )RESEARCH AND DEVELOPMENT
    
    
    665,979
    
    
    
    1,348,087SELLING, GENERAL AND ADMINISTRATIVE
    
    
    705,022
    
    
    
    629,858Operating Loss
    
    
    (1,371,001
    )
    
    
    (1,985,699
    )OTHER INCOME (EXPENSE)Interest income
    
    
    30,339
    
    
    
    11,497Interest expense
    
    
    
    
    
    
    Other Income (Expense), net
    
    
    30,339
    
    
    
    11,497LOSS FROM CONTINUING OPERATIONS
    
    
    (1,340,662
    )
    
    
    (1,974,202
    )GAIN FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    NET LOSS
    
    
    (1,340,662
    )
    
    
    (1,974,202
    )Preferred Stock Dividends
    
    
    (295,624
    )
    
    
    (115,676
    )NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    (1,636,286
    )
    
    $
    (2,089,878
    )Basic and diluted loss per share:Loss from continuing operations
    
    $
    (0.04
    )
    
    $
    (0.07
    )Gain from discontinued operations
    
    $
    0.00
    
    
    $
    0.00Net loss attributable to common stockholders
    
    $
    (0.05
    )
    
    $
    (0.07
    )Weighted average common shares outstanding:Basic and diluted
    
    
    35,556,993
    
    
    
    30,311,060
  4




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VISEON, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 (Unaudited)
 Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)NET SALES
    
    $
    7,150
    
    
    $
    239,621COST OF GOODS SOLD
    
    
    26,226
    
    
    
    281,229Gross Profit (Loss)
    
    
    (19,076
    )
    
    
    (41,608
    )RESEARCH AND DEVELOPMENT
    
    
    2,605,535
    
    
    
    3,326,554SELLING, GENERAL AND ADMINISTRATIVE
    
    
    2,142,530
    
    
    
    1,925,451Operating Loss
    
    
    (4,767,141
    )
    
    
    (5,293,613
    )OTHER INCOME (EXPENSE)Interest income
    
    
    81,942
    
    
    
    41,813Interest expense
    
    
    (117,500
    )
    
    
    Other Income (Expense), net
    
    
    (35,558
    )
    
    
    41,813LOSS FROM CONTINUING OPERATIONS
    
    
    (4,802,699
    )
    
    
    (5,251,800
    )GAIN FROM DISCONTINUED OPERATIONS
    
    
    108,640
    
    
    
    6,107NET LOSS
    
    
    (4,694,059
    )
    
    
    (5,245,693
    )Preferred Stock Dividends
    
    
    (5,467,640
    )
    
    
    (466,951
    )NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    (10,161,699
    )
    
    $
    (5,712,644
    )Basic and diluted loss per share:Loss from continuing operations
    
    $
    (0.14
    )
    
    $
    (0.19
    )Gain from discontinued operations
    
    $
    0.00
    
    
    $
    0.00Net loss attributable to common stockholders
    
    $
    (0.29
    )
    
    $
    (0.20
    )Weighted average common shares outstanding:Basic and diluted
    
    
    34,663,705
    
    
    
    27,968,163
  5




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VISEON, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net loss
    
    $
    (4,694,058
    )
    
    $
    (5,245,693
    )Adjustments to reconcile net loss to net
cash flows from operating activities:Depreciation and amortization
    
    
    49,269
    
    
    
    41,593Amortization of original issue discount
    
    
    117,500
    
    
    
    Common stock issued for services rendered
    
    
    28,121
    
    
    
    78,048Common stock warrants issued for services
rendered
    
    
    155,361
    
    
    
    Gain from discontinued operations
    
    
    (108,640
    )
    
    
    (6,107
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    9,392
    
    
    
    17,753Inventories, net
    
    
    (73,002
    )
    
    
    10,492Prepaid expenses
    
    
    100,390
    
    
    
    132,955Accounts payable
    
    
    (746,922
    )
    
    
    118,674Accrued expenses
    
    
    (103,639
    )
    
    
    119,354Net cash flows used in operating
activities
    
    
    (5,266,228
    )
    
    
    (4,732,931
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (94,439
    )
    
    
    (2,370
    )Payments for intangible assets
    
    
    (68,120
    )
    
    
    (85,707
    )Net cash flows used in investing activities
    
    
    (162,559
    )
    
    
    (88,077
    )Cash flows from financing activities:Payments on short-term notes payable
    
    
    (250,000
    )
    
    
    Proceeds from short-term notes payable
    
    
    250,000
    
    
    
    Proceeds from exercise of common stock warrants
    
    
    240,000
    
    
    
    1,450,225Proceeds from exercise of common stock options
    
    
    
    
    
    
    33,500Proceeds from issuance of convertible
preferred stock and warrants
    
    
    9,400,000
    
    
    
    Payments of convertible preferred stock and
warrant issuance costs
    
    
    (1,191,846
    )
    
    
    (26,863
    )Dividends on convertible preferred stock
    
    
    
    
    
    
    (3,492
    )Net cash flows from financing activities
    
    
    8,448,154
    
    
    
    1,453,370Change in cash and cash equivalents from
discontinued operations
    
    
    
    
    
    
    (14,000
    )Increase (decrease) in cash and cash
equivalents
    
    
    3,019,367
    
    
    
    (3,381,638
    )Cash and cash equivalents, beginning of period
    
    
    239,383
    
    
    
    5,339,393Cash and cash equivalents, end of period
    
    $
    3,258,750
    
    
    $
    1,957,755
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Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Supplemental cash flow information:Cash paid for interest
    
    $
    
    
    
    $
    Noncash investing and financing activities:Net liabilities of discontinued operations converted into
common stock and warrants
    
    
    409,860
    
    
    
    Accrued preferred stock dividends converted to common stock
    
    
    397,250
    
    
    
    344,122Common stock issued for preferred stock dividends
    
    
    229,149
    
    
    
    141,458Conversion of preferred stock to common stock
    
    
    7,000
    
    
    
    44,750Cashless exercise of warrants
    
    
    2,619
    
    
    
    3,498Warrants issued to induce exercise of warrants
    
    
    195,795
    
    
    
    Accretion of beneficial conversion option
    
    
    4,696,240
    
    
    
    
 7




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VISEON, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2006 and 2005
 1. DESCRIPTION OF THE BUSINESS:
 TM
  2. BASIS OF PRESENTATION:
   3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 Intangible Assets.
 Revenue Recognition.
 8




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Accounts Receivable.
 Inventory Valuation.
 Loss Per Common Share.
 Stock Based Compensation.
  For the three months ended
    
    For the nine months endedMarch 31,
    

March 31,2006
    
    2005
    
    2006
    
    2005Loss attributable to common
stockholders:As reported
    
    $
    (1,636,286
    )
    
    $
    (2,089,878
    )
    
    $
    (10,161,699
    )
    
    $
    (5,712,644
    )Pro forma
    
    
    (2,082,792
    )
    
    
    (2,171,808
    )
    
    
    (11,609,378
    )
    
    
    (5,973,184
    )Basic and diluted loss per share:As reported
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    (0.29
    )
    
    
    (0.19
    )Pro forma
    
    
    (0.06
    )
    
    
    (0.07
    )
    
    
    (0.33
    )
    
    
    (0.21
    )Stock based compensation:As reported
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pro forma
    
    
    446,506
    
    
    
    81,930
    
    
    
    1,447,679
    
    
    
    260,540
  9




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For the three months ended
    
    For the nine months endedMarch 31,
    
    March 31,2006
    
    2005
    
    2006
    
    2005Risk-free interest rate
    
    
    4.43
    %
    
    
    4.00
    %
    
    
    4.27
    %
    
    
    4.00
    %Expected life of options granted
    
    8.6 years
    
    10 years
    
    9.8 years
    
    10 yearsExpected volatility
    
    
    111.98
    %
    
    
    42.04
    %
    
    
    111.98
    %
    
    
    42.04
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 4. RECENT ACCOUNTING PRONOUNCEMENTS:
  5. CONVERTIBLE PREFERRED STOCK AND WARRANTS:
 Series A Convertible Preferred Stock with Warrants
    10




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Series B Convertible Preferred Stock with Warrants
     11




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6. COMMITMENTS AND CONTINGENCIES:
 Manufacturing Agreement
 ®
  Legal Proceedings
  7. STOCKHOLDERS EQUITY (DEFICIT):
   8. DISCONTINUED OPERATIONS:
  12




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9. SUBSEQUENT EVENTS:
   13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    Overview
 TM
    14




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Results Of Operations
 Three Months ended March 31, 2006 Compared to Three Months ended March 31, 2005.
 Net Sales.
 Gross Profit (Loss).
 Research and Development Expenses.
 Selling, General and Administrative Expenses.
 Other Income (Expense).
 Preferred Stock Dividends.
 Nine Months ended March 31, 2006 Compared to Nine Months ended March 31, 2005.
 Net Sales.
 Gross Profit (Loss).
 15




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Research and Development Expenses.
 Selling, General and Administrative Expenses.
 Other Income (Expense).
 Gain from Discontinued Operations.
 Preferred Stock Dividends.
 Liquidity And Capital Resources
    16




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Critical Accounting Policies And Estimates
   Revenue Recognition
   Allowance for Doubtful Accounts
  Accounting for Income Taxes
  
 Item 3. Controls and Procedures
  17




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PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 3. Exhibits
 (a) Exhibits
 31.01
    
    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 200232.02
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
  VISEON, INC.Dated: May 15, 2006
    
    By:
    
    /s/  Sean E. BelangerSean E. BelangerPresident and Chief Executive OfficerDated: May 15, 2006
    
    By:
    
    /s/  Brian R. DayBrian R. DayChief Financial Officer
 18