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

                                     FORM 10-KSB


            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        Commission file number 000-49636

                              VIKING SYSTEMS, INC.
           (Name of Small Business Issuer as specified in its charter)

                   Nevada                                  86-0913802
        (State or other jurisdiction of                (I.R.S. employer
         incorporation or organization)                identification No.)

                         7514 Girard Avenue, Suite 1509
                               La Jolla, CA 92037
                    (Address of principal executive offices)

         Issuer's telephone number, including area code: (858) 456-6608

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                          $.001 Par Value Common Stock

     Check whether the Issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing  requirements  for the past 90 days. (1) Yes
XX No __ ; (1) Yes X No _

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K __.

     The Issuer's revenues for the fiscal year ended December 31, 2002 were $-0-

     As of January 14, 2004,  there was 6,294,650  shares of the Issuer's common
stock  were   issued  and   outstanding   of  which   2,244,650   were  held  by
non-affiliates.  As of  January  15,  2004,  there was no active  market for the
Issuer's common stock.



                    DOCUMENTS INCORPORATED BY REFERENCE: NONE




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                                TABLE OF CONTENTS


                                                                            Page

PART I.........................................................................2

    Item 1.  Description of Business...........................................2

    Item 2.  Properties........................................................9

    Item 3.  Legal Proceedings.................................................9

    Item 4.  Submission of Matters to a Vote of Security Holders...............9

PART II........................................................................9

    Item 5.  Market for Common Equity and Related Stockholder Matters..........9

    Item 6.  Management's Discussion and Analysis of Financial Condition
             and Results of Operation.........................................13

    Item 7.  Financial Statements.............................................20

    Item 8.  Changes In and Disagreements with Accountants on Accounting
             and Financial Disclosure ........................................36

    Item 8A. Controls and Procedures .........................................36


PART III......................................................................36

    Item 9.  Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act................36

    Item 10. Executive Compensation...........................................38

    Item 11. Security Ownership of Certain Beneficial Owners and Management...40

    Item 12. Certain Relationships and Related Transactions...................41

    Item 13. Exhibits Financial Statements, Schedules and Reports on Form 8-K.41

    Item 14. Principal Accountant Fees and Services...........................42

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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General

     Viking  Systems,  Inc.  ("Viking,"  "we," "us," "our" or "the Company") was
incorporated in Nevada on May 28, 1998. We have recently  adopted a new business
plan which will result in the Company  engaging in the business of acquiring and
operating medical device companies.

     We were originally  engaged in the computer  training and services business
but were  unsuccessful  in our  operations and  terminated  those  operations in
December 2002. (See "Item 1, Description of Business- Previous Operations"). Our
previous business  operations were limited and did not result in (i) significant
revenues,  (ii) the  accumulation of a significant  dollar amount of assets,  or
(iii) in earnings.  Because of a lack of funds, we were unable to fund the costs
of complying  with our filing  requirements  under Section 13 of the  Securities
Exchange Act of 1934, as amended.  In November 2003, our Board of Directors,  as
then constituted, considered and approved a proposal from a third party relating
to a change of Viking's business plan and an infusion of capital. Since November
2003, a new Board of Directors and new officers have been  appointed,  a limited
amount of capital has been raised and a commitment  for  additional  capital has
been obtained.  Our new Board of Directors has adopted a new business plan which
calls for Viking to engage in the  business of  development,  manufacturing  and
marketing of medical  devices.  Our plan is to complete a series of acquisitions
in the medical  device  market,  initially  focusing on  companies  with vision,
optics, laser, sensor and related medical technology for the surgeon.

     On December 22, 2003, we entered into an Asset  Purchase  Agreement for our
first acquisition.  (See "Item 1. Description of Business-Acquisition  Agreement
with Vista Medical Technologies, Inc.")

     As a result of the recent changes in our business plan, the  termination of
our previous  operations,  and the issuance of  additional  shares of our common
stock, the financial statements and other financial information contained herein
do not provide meaningful  information as to our future operations and financial
position.

Acquisition Strategy

     As we implement  our business  plan, we anticipate  that  acquisitions  and
mergers will be a  significant  factor in our growth.  We are  concentrating  on
merger and  acquisition  activity  primarily  with firms  engaged in the medical
device  market in North  America and Europe.  This  strategy  will focus  around
consolidating  key resources,  financial and physical  assets,  brand names, and
human resources. We intend to pay attention to integration strategies as well as
to core  competencies,  including best practices,  skills,  knowledge bases, and
routines.

     These  acquisitions will be small to medium sized firms with  complementary
technology  that are  generally  too small to attract  larger  equity  funds and
strategic  buyers.  The  Company  believes  there  are a  substantial  number of
businesses  meeting these  criteria due to recent  weakness in hospital  capital

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spending,  the poor IPO market, and the need for alternative exit strategies for
the many  venture  capital  firms  holding a portfolio of small  medical  device
companies.  The Company plans to develop a strong direct sales  organization for
capital  equipment  sales in North  America and Europe and will look to leverage
that asset with the strategic acquisition of new products.

     Companies or operations  that we hope to acquire,  will likely meet some or
all of the following criteria:

     o    stable cash flow and revenue;
     o    position as market technology leader;
     o    strong relationships in the surgery community; and
     o    good technical management.

     By building on the success of already successful  businesses,  we intend to
play  an  increasing  role  in the  medical  device  market,  with  the  goal of
generating revenues, achieving profitability and increasing market value.

Acquisition Agreement with Vista Medical Technologies, Inc.

     On  December  22,  2003,  we  entered  into  an  Asset  Purchase  Agreement
("Purchase  Agreement")  with Vista  Medical  Technologies,  Inc.  ("Vista"),  a
Delaware corporation. Pursuant to the Purchase Agreement, we agreed to purchase,
subject to the terms and  conditions of the Purchase  Agreement,  certain assets
used by Vista in its  medical  device  and  technology  business  (the  "Medical
Technology  Business").  In  addition to the  purchase of assets from Vista,  we
will, at the closing of the acquisition,  enter into a "License  Agreement" with
Vista whereby we will have the  exclusive,  worldwide  license to  commercialize
certain  intellectual  property  owned  by Vista  which  is used in the  Medical
Technology Business. The closing of the Purchase Agreement is subject to several
conditions,  including but not limited to, approval by Vista's  stockholders and
accordingly,  there can be no assurance that the agreed upon acquisition will be
completed.  If all conditions of the Purchase Agreement are fulfilled or waived,
we anticipate  that the Purchase  Agreement will close at the end of February or
the first part of March 2004.

     Description  of Medical  Technology  Business.  We have  agreed to purchase
assets and licenses technologies from Vista that will, upon closing, allow us to
operate the Medical Technology  Business.  We intend,  through our operations of
the Medical  Technology  Business,  to develop,  manufacture and market products
which  provide  surgeons  and  interventional   physicians   performing  complex
minimally  invasive  procedures  with  a more  effective,  ergonomic  method  of
visualization   of  anatomical   structures.   Our  products  will  involve  3-D
Visualization  which is generally  regarded as a critical enabler to the broader
adoption  of  complex  minimally   invasive   procedures  in  numerous  clinical
specialties.

     We  anticipate  that our  principal  product  line  related to the  Medical
Technology Business will be the Endosite Advanced  Visualization and Information
System for general  surgery,  which combines a stereo head mounted  display with
3-D  video  cameras  to  provide  critical  visual  information  during  complex
minimally invasive  procedures,  combined with the real-time ability to view new

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additional  information  in a  voice-controlled,  picture-in-picture  format  to
facilitate  decision-making.  The  Vista  head  mounted  display,  incorporating
picture-in-picture capability and voice control, is designed to give the surgeon
ergonomic  real-time  access to such critical  information,  integrated with the
anatomical images generated by the endoscopic camera systems.

     All necessary  510(k)  clearances and CE marks which are required to market
the components of the EndoSite System have been received.

     General Terms of the Purchase  Agreement.  The Purchase  Agreement provides
that we will acquire from Vista,  the assets relating to the Medical  Technology
Business for the following  considerations:  (i) cash in an amount not exceeding
$400,000;  (ii) the  issuance of  approximately  3,054,000  shares of our common
stock to Vista; and (iii) the assumption of certain liabilities  relating to the
Medical  Technology  Business  and the  assets  purchased.  The  closing  of the
purchase  is  subject  to  several  conditions  including  the  approval  of the
transaction by the stockholders of Vista.  Vista anticipates that it will hold a
Special Meeting of Stockholders during the last week of February to consider and
vote upon the sale of assets pursuant to the Purchase Agreement.

     The acquisition agreement contains customary representations and warranties
relating to each company's corporate status, corporate authority to complete the
acquisition,  capital structure and corporate conduct prior to the closing. Each
company  provided  corporate  documentation  to  the  other  for  due  diligence
purposes.  Also, Vista agreed to conduct its business in the normal course,  and
not to sell,  pledge, or assign any assets,  amend its articles of incorporation
or bylaws prior to the closing of the transaction.

     Currently  27  employees  of Vista are  employed in the Medical  Technology
Business.  One of these employees will retain  employment with Vista and we will
offer  the  remaining  employees  employment  in our  operation  of the  Medical
Technology Business.

     We have  agreed to appoint  John Lyons,  the CEO of Vista,  to our board of
directors at the time of the closing of the purchase transaction.

     License Agreement.  In addition to the assets we are purchasing from Vista,
we  are  also  licensing  certain   "Intellectual   Property"  from  Vista.  The
Intellectual  Property we are  licensing  includes any and all  patents,  patent
registrations,  patent  applications,  data  rights,  utility  models,  business
processes,  trademarks,  trade  secrets,  know how,  trade names,  registered or
unregistered designs, mask works, copyrights, moral rights and any other form of
proprietary  protection  afforded  by  law  to  intellectual  property,  or  any
applications  therefore,  which arises or is  enforceable  under the laws of the
United States, any other jurisdiction or any bi-lateral or multi-lateral  treaty
regime which relate to the Medical Technology Business.

     The License  Agreement,  which will be  effective on the date of closing of
Purchase  Agreement,  requires us to pay a royalty of 5% of gross  revenues  (as
defined in the License Agreement) for certain product sales transactions and 10%
of gross revenues for other product sales  transactions.  The License  Agreement
grants us the worldwide,  exclusive license to use the Intellectual  Property to
manufacture,  market,  sublicense or otherwise  commercialize products using the

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technology included in the Intellectual Property. The License Agreement provides
for minimum annual royalties ranging from $175,000 to $375,000 per year.

     The royalties  agreed to in the License  Agreement are to be paid until the
earlier of the date on which we have paid  Vista an  aggregate  of Four  Million
Five Hundred Thousand Dollars ($4,500,000) or the fifth anniversary of effective
date of the  License  Agreement.  ("Total  Royalty").  If we pay Vista the Total
Royalty,  Vista is required to assign and transfer to us all of Vista's  rights,
title  and  interests  in and to the  Intellectual  Property  for no  additional
consideration.

     If we fail to pay the required  minimum  royalties are otherwise breach the
License Agreement, Vista may terminate the license.

     Consideration  for the Acquisition.  The  consideration we are to pay Vista
pursuant to the  Purchase  Agreement  was  negotiated  at "arms  length" and our
management  relied  on  representations  made by  Vista's  management  and other
documents and information provided to us. Our management considered factors used
in similar  proposals to determine the amount of  consideration  appropriate for
the acquisition of the assets.  These factors included the relative value of the
assets, the present and past operations of the Medical Technology Business,  the
future potential of the Medical Technology Business, the continued employment of
employees of the Medical Technology  Business,  and the potential benefit of the
transaction to the stockholders of Viking.

     Our board of directors  determined that the terms of the Purchase Agreement
and License Agreement are reasonable based upon the above factors. Our board did
not seek a third party  fairness  opinion or any  valuation  or appraisal of the
terms of the transaction.  Thus, our stockholders will not have the benefit of a
third  party  opinion  that the  terms of the  Purchase  Agreement  and  License
Agreement  are fair from a  financial  point of view.  In order to fund the cash
portion of the purchase price of the assets,  we will sell  5,000,000  shares of
our Series A Convertible Preferred Stock to Donald Tucker for $400,000.

Governmental Regulation: Medical Devices

     Our  business  plan  calls for us to engage in the  business  of  marketing
medical devices. As described elsewhere in this Form10-KSB, we have entered into
an agreement with Vista relating to our first  acquisition.  The manufacture and
sale of medical  devices  intended for  commercial  distribution  are subject to
extensive  governmental  regulation in the United  States.  Medical  devices are
regulated in the United States primarily by the FDA and, to a lesser extent,  by
certain state agencies.  Generally, medical devices require pre-market clearance
or pre-market approval prior to commercial  distribution.  In addition,  certain
material  changes or  modifications  to, and changes in intended use of, medical
devices  also are  subject to FDA  review and  clearance  or  approval.  The FDA
regulates the research, testing, manufacture,  safety, effectiveness,  labeling,
storage,  record keeping,  promotion and  distribution of medical devices in the
United  States  and the export of  unapproved  medical  devices  from the United
States to other  countries.  Non-compliance  with  applicable  requirements  can
result in failure of the  government to grant  pre-market  clearance or approval
for devices,  withdrawal or suspension of approval,  total or partial suspension
of production,  fines, injunctions,  civil penalties, refunds, recall or seizure
of products and criminal prosecution.

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     Device Classes.  In the United States,  medical devices are classified into
one of three classes, Class I, II or III, on the basis of the controls deemed by
the FDA to be necessary to reasonably ensure their safety and effectiveness. The
products  we intend to market as a result of the Vista  acquisition  have either
been classified as Class I or Class II devices.

     Class I devices  are  subject to general  controls,  such as  establishment
registration  and  product  listing,  labeling,   adulteration  and  misbranding
provisions and medical device  reporting  requirements  and,  unless exempt,  to
pre-market   notification  and  adherence  to  "good   manufacturing   practice"
standards.  Class II  devices  are  subject  to  general  controls  and  special
controls,  such as  performance  standards,  post-market  surveillance,  patient
registries and FDA guidelines.  Generally, Class III devices are those that must
receive pre-market approval by the FDA to ensure their safety and effectiveness.
Examples of Class III products  include,  life-sustaining,  life-supporting  and
implantable  or new  devices  which  have  not been  found  to be  substantially
equivalent to legally marketed  devices.  Class III devices  ordinarily  require
clinical testing to ensure safety and  effectiveness  and FDA clearance prior to
marketing and  distribution.  The FDA also has the authority to require clinical
testing of Class I and Class II devices. A pre-market approval  application must
be filed if a  proposed  device  is not  substantially  equivalent  to a legally
marketed  predicate  device or if it is a Class III device for which the FDA has
called for such application.  A pre-market approval application  typically takes
several years to be approved by the FDA.

     Device Approval.  Generally, before a new device can be introduced into the
market in the United States,  the  manufacturer  or distributor  must obtain FDA
clearance of a 510(k)  notification  or submission  and approval of a pre-market
approval  application.  If a medical  device  manufacturer  or  distributor  can
establish  that a device is  "substantially  equivalent"  to a legally  marketed
Class I or Class II  device,  or to a Class III device for which the FDA has not
called for a pre-market approval, the manufacturer or distributor may market the
device  upon  receipt of an FDA order  determining  such a device  substantially
equivalent  to a  predicate  device.  The  510(k)  notification  may  need to be
supported by appropriate performance,  clinical or testing data establishing the
claim of substantial  equivalence.  The FDA requires a rigorous demonstration of
substantial equivalence.

     Following  submission  of the  510(k)  notification,  the  manufacturer  or
distributor may not place the device into commercial  distribution  until an FDA
substantial  equivalence  order permitting the marketing of a device is received
by the  person who  submitted  the 510(k)  notification.  At this time,  the FDA
typically responds to the submission of a 510(k)  notification  within 90 to 200
days. An FDA letter may declare that the device is substantially equivalent to a
legally  marketed  device and allow the  proposed  device to be  marketed in the
United States.  The FDA, however,  may determine that the proposed device is not
substantially  equivalent or require  further  information,  including  clinical
data,  to  make  a  determination   regarding  substantial   equivalence.   Such
determination   or  request  for  additional   information   will  delay  market
introduction of the product that is the subject of the 510(k) notification.

     Investigational Device Exemption Application.  All clinical  investigations
involving the use of an  unapproved  or uncleared  device on humans to determine
the safety or  effectiveness  of the device must be conducted in accordance with
the FDA's investigational device exemption regulations. If the device presents a

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"significant risk," the manufacturer or distributor of the device is required to
file an  investigational  device  exemption  application  with the FDA  prior to
commencing  human clinical  trials.  This application must be supported by data,
typically the result of animal and bench testing. If the application is approved
by  the  FDA,  human  clinical   trials  may  begin  at  a  specific  number  of
investigational sites with a maximum number of patients, as approved by the FDA.
If the device presents a  "non-significant  risk," approval by an  institutional
review board prior to commencing  human clinical trials is required,  as well as
compliance  with labeling,  record keeping,  monitoring and other  requirements.
However, the FDA can disagree with a non-significant risk device finding.

     Any products  which we  manufacture or distribute are subject to continuing
regulation by the FDA, which includes record keeping requirements,  reporting of
adverse experience with the use of the device, "good manufacturing" requirements
and post-market  surveillance,  and may include  post-market  registry and other
actions  deemed  necessary  by the FDA. A new  510(k),  pre-market  approval  or
pre-market   approval   supplement  is  also  required  when  a  medical  device
manufacturer  makes a change or modification  to a legally  marketed device that
could  significantly  affect the safety or effectiveness of the device, or where
there is a major change or  modification  in the intended use of the device or a
new indication for use of the device. When any change or modification is made to
a device or its intended use, the  manufacturer  is expected to make the initial
determination  as to whether the change or  modification is of a kind that would
necessitate  the  filing of a new  510(k),  pre-market  approval  or  pre-market
approval supplement.

     Foreign  Requirements.  Sales of medical device products outside the United
States are subject to foreign regulatory  requirements that vary from country to
country. The time required to obtain approvals required by foreign countries may
be longer or shorter than that required for FDA clearance,  and requirements for
licensing  may  differ  from  FDA  requirements.  Our  failure  to  comply  with
regulatory requirements would jeopardize our ability to market our products. The
current   regulatory   environment  in  Europe  for  medical   devices   differs
significantly  from that in the United  States.  Since June  1998,  all  medical
devices  sold in the  European  Union  must  bear the CE mark.  Devices  are now
classified  by  manufacturers  according  to the  risks  they  represent  with a
classification  system  giving Class III as the highest risk devices and Class I
as the lowest. Once the device has been classified,  the manufacturer can follow
one of a series of conformity assessment routes,  typically through a registered
quality system, and demonstrate  compliance to a "European Notified Body." After
that,  the CE mark may be applied to the  device.  Maintenance  of the system is
ensured  through  annual  on-site  audits by the notified body and a post-market
surveillance  system requiring the manufacturer to submit serious  complaints to
the appropriate governmental authority.

Change of Management

     As a result of our change of business plan, new directors and officers have
been  appointed.  Our current Board of Directors  and executive  officers are as
follows:

      Thomas B. Marsh         President/CEO/Secretary/
                              Chairman of the Board of Directors

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      Dennis Blomquist*       Chief Financial Officer/Director

      Daniel F. Crowley       Director, Audit Committee Chairman

      * Mr. Blomquist was previously the president and a director of Viking.

Change of Voting Control

     Prior to November 24, 2003,  there were  2,528,500  shares of Viking common
stock  issued and  outstanding.  On November  24,  2003,  we entered  into Stock
Purchase  Agreements  with  Donald E.  Tucker  and  Troika  Capital  Investment.
Pursuant to the Stock  Purchase  Agreement  with Mr.  Tucker,  we sold 3,200,000
shares of our common stock to Mr. Tucker for $64,000 or $.02 per share. Pursuant
to the Stock Purchase Agreement with Troika Capital Investment,  we sold 250,000
shares of our common stock to Troika  Capital for $5,000 or $.02 per share.  Mr.
Tucker owns 3,200,000 or 53.5 per cent of the shares of common stock issued.  He
also has been  granted an option to  purchase  5,000,000  shares of our Series A
Preferred  Stock.  Troika Capital  Investments and its affiliates own 600,300 or
9.5 per cent of the shares of common stock issued.  For  additional  information
about Donald E. Tucker, see "Item 9. Directors,  Executive  Officers,  Promoters
and Control Persons; Compliance With Section 16(A) Of The Exchange Act".

Previous Operations

     Viking was  initially  formed for the  purpose of  providing  training  and
curriculum  for the  information  technology  industry on "Open Source"  topics.
"Open  Source"  refers to software  which has its source code open and available
for anyone to see,  utilize or alter.  The cornerstone of "Open Source" software
is the Linux operating system. After its formation Viking established a training
center in Phoenix,  Arizona and developed  and taught three  courses  including:
"Linux  New  User",   "Linux  Install  and   Configuration"  and  "Linux  System
Administration".  Viking  developed and taught  various  instructional  courses,
which gave participants a basic  understanding of Linux. In conjunction with the
training  program,  Viking  developed  three  publications  for classroom  based
instruction.  The costs of  maintaining  the training  center and the support to
develop new curriculum  exceeded the revenues we generated.  Viking's management
discontinued  the training and curriculum  business at the beginning of 2002 and
focused on  web-hosting,  web  designing,  small  computer  systems and computer
networking.  Viking's  management  determined  that  it  would  be in  the  best
interests  of the Company  and its  shareholders  to  discontinue  its  computer
related  operations  which it did in December  2002.  The Company  conducted  no
operations in 2003 and in November  2003,  new  management was appointed and the
current business plan of the Company was adopted.

Employees

     As of the date of this Form 10-KSB,  we have no full time employees.  If we
complete the acquisition of the Medical Technology  Business from Vista, we will
retain  approximately  27 Vista  employees  that  currently  work in the Medical
Technology Business.

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ITEM 2.  PROPERTIES

     We have only recently changed our business plan and management. Our offices
are currently  located at the personal offices of our CEO and we pay nothing for
the use of these  facilities.  We anticipate  that we will obtain new facilities
when required by our operations.  We have entered into a Purchase Agreement with
Vista  and will,  if such  transaction  is  completed;  assume  the lease of the
facilities  related to the assets and  operations we will  purchase  pursuant to
such agreement.  These facilities  consist of  approximately  17,850 square feet
located in Westborough,  Massachusetts.  If the Purchase Agreement is closed, we
will  utilize  these  facilities  in our  operations  of the Medical  Technology
Business we acquire from Vista. The lease expires in October 2004.

ITEM 3.  LEGAL PROCEEDINGS

None

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

     No matters were  submitted to Viking's  shareholders  for a vote during the
last quarter of the year ended December 31, 2002.

                                     PART II

ITEM 5. MARKET FOR THE  REGISTRANT'S  COMMON STOCK AND RELATED  SECURITY  HOLDER
MATTERS

     Our  common  stock is  quoted  on the OTC "Pink  Sheets"  under the  symbol
"VKSY".  During the last two years,  there has only been limited  trading in our
common stock.  The prices  reported  below reflect  inter-dealer  prices and are
without  adjustments for retail markups,  markdowns or commissions,  and may not
necessarily represent actual transactions.

                                                     High Bid    Low Bid
      Fiscal Year Ended  December 31, 2001

                        First Quarter                 $2.00       $1.00
                        Second Quarter                 1.15        1.00
                        Third Quarter                  1.20        1.00
                        Fourth Quarter                 1.05         .75

      Fiscal Year Ended December 31, 2002

                        First Quarter                 $ .75       $ .75
                        Second Quarter                  .75         .75
                        Third Quarter                   .75         .75
                        Fourth Quarter                  .75         .75

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      Fiscal Year Ended December 31, 2003

                        First Quarter                 $ .75       $ .75
                        Second Quarter                  .75         .75
                        Third Quarter                   .75         .75
                        Fourth Quarter                  .75         .75

Shares Issued in Unregistered Transactions

     We issued shares of our common stock in unregistered transactions from 1998
through 2003.  Except for shares issued in 2000, all of the following  shares of
common stock issued were issued in non  registered  transactions  in reliance on
Section 4(2) of the Securities Act of 1933, as amended (the  "Securities  Act").
The shares  issued in 2000 were  issued  pursuant  to Rule 504 of  Regulation  D
promulgated  under the Securities Act of 1933, as amended.  The shares of common
stock issued were as follows:

1998

     In May 1998,  we issued an aggregate  of  1,000,000  shares to our founders
Evan  Blomquist  and  Dennis  Blomquist  for  services  in  connection  with our
formation,  and the contribution of proprietary  technology and services for our
initial operations.

     In May  1998,  we  sold  200,000  shares  of  restricted  common  stock  to
accredited  investors,  at a price of $.10 per share for an aggregate of $20,000
cash.

     In May 1998, we issued 50,000 shares of restricted  common stock as payment
for legal  services in  connection  with our  organization.  The legal  services
provided were valued at $.10 per share, for total consideration of $5,000.

2000

     During the year ended  December 31, 2000, we sold 106,150  shares of common
stock at a purchase price of $1.00 per share for aggregate  offering proceeds of
$106,150.  The offering was made under the  qualification  provisions of Section
61-1-10 of the Uniform  Securities  Act of the state of Utah, and is believed by
us to be exempt from registration  under federal law pursuant to Section 3(b) of
the Securities  Act of 1933, as amended (the "Act"),  and Rule 504 of Regulation
D, promulgated under the Act.

2001

     In March 2001,  we sold  350,000  shares of  restricted  common stock to an
accredited  investor  at a price of $.10 per share  for  aggregate  proceeds  of
$35,000.  In April  2001,  we  issued  an  aggregate  of  765,000  shares of our
restricted  common stock for the conversion of $76,500 in  outstanding  debt. Of

                                       10

<PAGE>

these shares,  350,000 were issued to Dennis  Blomquist,  our president,  50,000
were  issued to Evan  Blomquist,  a director,  and  150,000  were issued to Leon
Hauck,  our  vice-president.  The remaining  shares were issued to  shareholders
Richard Wallace (135,000  shares),  Mark Scharmann  (30,000 shares) and employee
Adelina Musina (50,000).

2002

     In August 2002, we issued an aggregate of 205,000  shares of our restricted
common stock for the conversion of $20,500 in outstanding debt. Of these shares,
30,000 were issued to Dennis  Blomquist,  our president,  175,000 were issued to
Mark Scharmann.

     In  October  2002,  we  authorized  the  issuance  of 20,000  shares of our
restricted common stock for the conversion of $2,000 of debt to Mark Scharmann.

     In December, 2002, we issued 15,000 shares of our common stock 7,000 shares
to Ken Bowley,  and 8,000 to Brian Drake for  services  rendered.  The  services
provided were valued at $.10 per share, for total consideration of $1,500.

2003

     In August, 2003, we issued 26,000 shares of our restricted common stock for
the conversion of $2,600 in outstanding debt to Mark Scharmann.

     In October,  2003, we issued 45,000 shares of our  restricted  common stock
for the conversion of $4,500 in outstanding debt to Mark Scharmann.

     In  November,  2003,  we  issued  30,000  shares  of  common  stock to Mark
Scharmann in lieu of Bill Marky as Mark Scharmann acquired the note in a private
transaction.  Bill Marky was originally  offered a choice of converting the debt
at $.10 per share or repayment at 10% interest annually. Mark Scharmann opted to
convert the note to equity.

     In December 2003, we sold 3,200,000 shares of our common stock to Donald E.
Tucker for $64,000  ($.02 per share) and 250,000  shares of our common  stock to
Troika Capital Investment for $5,000 ($.02 per share).

     In  December  2003,  we  issued  50,000  shares  of  our  common  stock  to
Northcliffe  Consulting,  LLC. For consulting  services  rendered.  The services
provided were valued at $.02 per share, for total consideration of $1,000.

Series "A" Convertible Preferred Stock

     Donald E. Tucker has provided us with funds to be used to pay  professional
fees  related  to  various  corporate  filings  and to pay for  other  corporate
expenses.  In exchange for such funds, we issued Mr. Tucker  3,200,000 shares of
our common stock at a price of $.02 per share. In order to fund the cash portion
of the  purchase  price of the assets we are  purchasing  from Vista (See Item 1

                                       11

<PAGE>

Description of Business - Acquisition Agreement with Vista Medical Technologies,
Inc."),  we need to raise an additional  $400,000.  We have  requested  that Mr.
Tucker purchase additional shares of our capital stock in the amount of $400,000
to provide us with the funds necessary to make such cash payment. Mr. Tucker has
agreed  to make such  additional  investment  in  Viking  on the same  terms and
conditions as his initial purchase of 3,200,000 shares of our common stock.

     We do not  currently  have a  sufficient  number of shares of common  stock
authorized  for issuance to Mr. Tucker to fund the $400,000  requirement  of the
acquisition of assets. We do have 5,000,000 shares of preferred stock authorized
which may be  designated  in one or more  series  with such  characteristics  as
determined  appropriate  by our board of  directors.  Our Board of Directors has
determined  that it is in the best  interests of Viking and it  shareholders  to
designate and establish a Series A Preferred  Stock.  We have granted Mr. Tucker
an option to  purchase  5,000,000  shares of our Series A Preferred  Stock.  The
Series A Preferred Stock consists of 5,000,000 shares of Preferred  Stock.  Each
share of Series A Preferred Stock is convertible into shares of our common stock
the basis of one share of Series A Preferred Stock  convertible into 4 shares of
common  stock.  Each  share of Series A  Preferred  Stock has four  votes in all
matters  submitted to  shareholders  for a vote.  Dividends do not accrue on the
Series A  Preferred  Stock.  In order to have a  sufficient  number of shares of
common stock  authorized  for issuance in  conversion  of the Series A Preferred
Stock,  and  for  use in  future  financing  transactions,  we  intend  to  seek
shareholder  consent to amend our  Articles of  Incorporation  to  increase  the
number of shares of our  common  stock,  and the  number of shares of  preferred
stock, authorized.

Equity Compensation Plan Information

     No equity compensation  programs were in place as of December 31, 2002. The
following table summarizes  information about the Company's equity  compensation
plans as of December 31, 2003.
<TABLE>
<CAPTION>
                                                                              Number of Securities
                                        Number of                             Remaining Available
                                     Securities to be                         for Future Issuance
                                        Issued Upon      Weighted-Average        Under Equity
                                        Exercise of      Exercise Price of    Compensation Plans
                                        Outstanding         Outstanding      (Excluding Securities
                                     Options, Warrants   Options, Warrants    Reflected in Column
Plan Category                          and Rights (a)      and Rights (b)           (a)) (c)
--------------------------------------------------------------------------------------------------

<S>                                       <C>                  <C>                 <C>
Equity Compensation plans                       -0-              NA                 -0-
  approved by security holders

Equity compensation plans not
  approved by security holders (*)        1,200,000            $ .02                NA
                                          ---------                                 --

Total                                     1,200,000            $ .02               -0-
                                          =========                                ===
</TABLE>

     (*)  Represents  stock options  granted in 2003 to our CEO, Thomas B. Marsh
          and to  director  Daniel F.  Crowley.  Such stock  options  were fully
          vested and  transferable  at the grant date and  expire  December  31,
          2008.

                                       12

<PAGE>

Holders

     As of  January  15,  2004,  there  were  6,294,650  shares of common  stock
outstanding and approximately 81 stockholders of record of common stock.

Dividends

     We have  not  paid  any  cash  dividends  since  our  inception  and do not
anticipate or contemplate paying dividends in the foreseeable future.

Limitation on Directors' Liability, Charter Provisions and Other Matters

     Nevada law  authorizes  corporations  to limit or  eliminate  the  personal
liability of  directors  to  corporations  and their  stockholders  for monetary
damages  for  breach  of  directors'  fiduciary  duty of care.  The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed  business  judgment  based on all  material  information  reasonably
available to them.  Absent the limitations  authorized by Nevada law,  directors
are accountable to corporations and their  stockholders for monetary damages for
conduct  constituting  gross  negligence  in the exercise of their duty of care.
Nevada law enables  corporations to limit available relief to equitable remedies
such as injunction or rescission.  Our Certificate of  Incorporation  limits the
liability of our directors to us or to our  stockholders  (in their  capacity as
directors but not in their capacity as officers) to the fullest extent permitted
by Nevada law.

     The inclusion of this  provision in the  Certificate of  Incorporation  may
have the effect of reducing the  likelihood  of  derivative  litigation  against
directors and may discourage or deter stockholders or management from bringing a
lawsuit against  directors for breach of their duty of care, even though such an
action,  if  successful,  might  otherwise  have  benefited  the Company and its
stockholders.

     Our Bylaws  provide  indemnification  to our  officers  and  directors  and
certain   other   persons   with   respect  to  certain   matters.   Insofar  as
indemnification  for liabilities  arising under the 1933 Act may be permitted to
our  directors  and  officers,  we have been  advised that in the opinion of the
Securities  and Exchange  Commission,  such  indemnification  is against  public
policy as expressed in the 1933 Act and is, therefore, unenforceable.

Transfer Agent and Registrar

     Our transfer agent is Fidelity  Transfer  Company,  1800 South West Temple,
Suite 301, Salt Lake City, UT 84115; telephone (801) 484-7222.

                                       13

<PAGE>

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

     Viking is currently an inactive  company.  In December  2002,  our previous
operations were terminated.  We currently have no operations and limited assets.
We do intend to commence operations in 2004 through  acquisitions.  As described
in Item 1 of this Form 10-KSB, we have entered into an Asset Purchase  Agreement
with Vista Medical  Technologies,  Inc.,  which,  if closed,  will result in our
conducting certain business operations now conducted by Vista. Accordingly,  any
comparison  between the current  financial  position  and  business  plan of the
Company and our historical financial condition and operations is not meaningful.

Liquidity and Capital Resources

     As of December 31, 2002,  we had total assets of $1,691  consisting of cash
and assets from discontinued  operations.  As of December 31, 2002, we had total
liabilities  of  $26,088   consisting  of  accounts  payable  from  discontinued
operations.  In December 2003, we raised approximately  $69,000 from the sale of
our common stock to fund professional fees and related costs necessary to become
current in our filings with the Securities and Exchange  Commission and to other
administrative  matters.  In order to complete  the  acquisition  of assets from
Vista,  we need to raise a minimum of $400,000  which we intend to do by selling
shares of our Series A Preferred Stock to Donald E. Tucker.

     It is likely that in order to continue to carry out our business  plan,  we
will  be  required  to  raise   additional   capital  in  order  to  fund  other
acquisitions.  We will also issue  3,054,000  shares of our common  stock in the
Vista  transaction  and anticipate that we will issue  additional  securities in
other acquisitions.  There can be no assurance that we will be able to raise any
additional  capital  necessary to fund our business plan. We will continue to be
an  inactive  company  until we acquire  the Vista  assets or effect  some other
acquisition.

Results of Operations

     We had no revenues from  continuing  operation in the years ended  December
2002 and 2001. In 2002 and 2001, we had a net loss from discontinued  operations
of $12,887 and $45,804 respectively. We anticipate that we will not generate any
revenues until close the Vista acquisition or effect some other acquisition.

Plan of Operation

     Our  current  business  plan  is  described  in  "Item 1 -  Description  of
Business."

Critical Accounting Policies

     This  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations  discuss the Company's  Financial  Statements,  which have
been prepared in accordance with accounting principles generally accepted in the
United States.  We have  terminated our previous  operations and such operations
are treated as discontinued operations for financial statement purposes.

                                       14

<PAGE>

     We  anticipate  that we will  commence  operations  in the  medical  device
business during 2004. We anticipate  that in the future,  the preparation of our
financial  statements will require  management to make estimates and assumptions
that will affect  reported  amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management will evaluate its estimates and assumptions, including
those related to inventory,  income taxes, revenue recognition and restructuring
initiatives. We anticipate that management will base its estimates and judgments
on historical  experience of the  operations we may acquire and on various other
factors that are believed to be reasonable under the circumstances,  the results
of which form the basis for making  judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

     Management  believes the  following  critical  accounting  policies,  among
others,  will affect its more  significant  judgments and estimates  used in the
preparation of our Consolidated Financial Statements.

     Inventory.  The  Company  reduces  the stated  value of its  inventory  for
obsolescence or impairment in an amount equal to the difference between the cost
of the inventory and the estimated market value,  based upon  assumptions  about
future  demand  and  market  conditions.  If  actual  future  demand  or  market
conditions  are less favorable  than those  projected by management,  additional
reductions in stated value may be required.

     Income  Taxes.  In  determining  the carrying  value of the  Company's  net
deferred tax assets, the Company must assess the likelihood of sufficient future
taxable income in certain tax jurisdictions, based on estimates and assumptions,
to realize the  benefit of these  assets.  If these  estimates  and  assumptions
change in the  future,  the  Company  may record a  reduction  in the  valuation
allowance,  resulting  in an income tax  benefit in the  Company's  Consolidated
Statements of Operations. Management evaluates the realizability of the deferred
tax assets and assesses the valuation allowance quarterly.

     Goodwill and Other  Long-Lived  Asset  Valuations.  In June 2001,  the FASB
issued SFAS 141,  "Business  Combinations",  and SFAS 142,  "Goodwill  and Other
Intangible Assets", effective for fiscal years beginning after December 15, 2001
with early adoption  permitted for companies with fiscal years  beginning  after
March 15, 2001. We will adopt the new rules on accounting for goodwill and other
intangible  assets  beginning in the first quarter of fiscal 2004. Under the new
rules,  goodwill and intangible  assets deemed to have indefinite  lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the statements.  Other intangible assets will continue to be amortized over
their useful lives.

     In  accordance  with SFAS  142,  we will  initiate  a  goodwill  impairment
assessment during the first quarter of fiscal 2003. The results of this analysis
concluded that there was no impairment charge.

     Revenue Recognition.  Systems will be developed to test, prior to shipment,
and revenue related to orders shipped under standard  performance  conditions is
recognized when systems are shipped. We anticipate that products shipped subject
to non-standard contractual performance conditions,  such as financing approval,

                                       15

<PAGE>

are  recognized  as revenue  upon  completion  or  attainment  of the  specified
condition. We anticipate that service revenue will be recognized when rendered.

     Stock-Based  Compensation.  In  December  2002,  the FASB  issued SFAS 148,
"Accounting for Stock-Based  Compensation"  -- Transition and Disclosure,  which
amends SFAS 123.  SFAS 148  provides  alternative  methods of  transition  for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation.  SFAS 148 also requires  prominent  disclosures  in both
annual and  interim  financial  statements  about the method of  accounting  for
stock-based employee  compensation and the effect of the method used on reported
results.  As permitted  by SFAS 123, we have elected to account for  stock-based
compensation   using  the  intrinsic  value  method   prescribed  in  Accounting
Principles  Board  ("APB")  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees," and related interpretations including Financial Accounting Standards
Board  ("FASB")  Interpretation  No. 44,  "Accounting  for Certain  Transactions
Involving Stock  Compensation -- an  Interpretation  of APB Opinion No. 25," and
have  adopted  the  disclosure-only  provisions  of SFAS 123.  Accordingly,  for
financial  reporting  purposes,  compensation  cost for stock options granted to
employees is measured as the excess,  if any, of the estimated fair market value
of our stock at the date of the grant  over the amount an  employee  must pay to
acquire the stock.  Equity  instruments issued to nonemployees are accounted for
in accordance with FAS 123 and Emerging Issues Task Force ("EITF")  Abstract No.
96-18,  "Accounting  for  Equity  Instruments  That Are  Issued  to  Other  Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."

Recent Accounting Pronouncements

     See footnote 8 to the financial  statements included as Item 7 of this Form
10-KSB.

Interest Rate Risk

     We currently have no significant  debt but will  undoubtedly  incur debt to
finance our operations.  We anticipate  that a substantial  amount of our future
debt and the associated interest expense will be subject to changes in the level
of interest  rates.  Increases  in interest  rates would  result in  incremental
interest expense.

Inflation

     The Company  does not believe that  inflation  will  negatively  impact its
business plans.

Forward Outlook and Risks

     This  Form  10-KSB   contains  and   incorporates   by  reference   certain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act  and  Section  21E of the  Exchange  Act  with  respect  to  results  of our
operations and businesses.  All statements,  other than statements of historical
facts,  included in this Form 10-K, including those regarding market trends, our
financial position, business strategy, projected costs, and plans and objectives
of management for future operations, are forward-looking statements. In general,
such  statements are identified by the use of forward-  looking words or phrases
including,  but not limited to, "intended,"  "will," "should," "may," "expects,"
"expected,"   "anticipates,"  and  "anticipated"  or  the  negative  thereof  or

                                       16

<PAGE>

variations thereon or similar terminology.  These forward-looking statements are
based on our current  expectations.  Although we believe  that the  expectations
reflected in such  forward-looking  statements are  reasonable,  there can be no
assurance   that  such   expectations   will  prove  to  be   correct.   Because
forward-looking  statements involve risks and uncertainties,  our actual results
could differ  materially.  Important  factors that could cause actual results to
differ materially from our expectations are disclosed hereunder and elsewhere in
this Form 10-KSB. These forward-looking  statements represent our judgment as of
the date of this Form 10-KSB.  All subsequent  written and oral  forward-looking
statements  attributable to Viking are expressly  qualified in their entirety by
the Cautionary  Statements.  We disclaim,  however,  any intent or obligation to
update our forward-looking statements.

     No Assurance the Vista  Transaction  Will Be Consummated.  Although we have
entered into an agreement to acquire assets from Vista as described elsewhere in
this Form 10-KSB, the proposed transaction is subject to a number of conditions.
There can be no assurance  that these  conditions  will be fulfilled or that the
proposed acquisition will be consummated. No person should invest in the Company
in reliance that such proposed acquisition will be completed.

     Operating History;  No Assets; No Present Source of Revenues.  We have been
inactive since 2002. We intend to attempt to commence  active  operations in the
future by  acquiring  assets  from  Vista  and by  acquiring  other  operations.
Potential  investors  should be aware  that  there is only a limited  basis upon
which to evaluate our prospects for achieving our intended business  objectives.
We have no  resources  and have had limited  revenues  since our  formation.  In
addition,  we will not  generate  any revenues  (other than  investment  income)
until, at the earliest,  the  consummation of the acquisition of the assets from
Vista or some other operation.

     Possibility of Total Loss of Investment.  An investment in the Company,  is
an extremely  high risk  investment,  and should not be made unless the investor
has no need for current  income from the invested  funds and unless the investor
can afford a total loss of his or her investment.

     Additional  Financing  Requirements.  We will  likely be  required  to seek
additional  financing in order to fund our operations and carry out our business
plan. We anticipate  that cash  necessary to complete the  acquisition of assets
from Vista will be  obtained  through  the sale of our  securities  to Donald E.
Tucker.  However,  in  order  to  fund  our  operations  and  effect  additional
acquisitions,  we will be required to obtained additional capital.  There can be
no assurance that such financing  will be available on acceptable  terms,  or at
all. We do not have any arrangements  with any bank or financial  institution to
secure  additional  financing  and  there  can be no  assurance  that  any  such
arrangement, if required or otherwise sought, would be available on terms deemed
to be commercially acceptable and in our best interests.

     No public market for  Securities.  There is no public market for our common
stock and we can give no assurance  that an active  market will  develop,  or if
developed,  that it will be  sustained.  It is  unlikely  that any  market  will
develop prior to the consummation of the Acquisition. Even if the Acquisition is
completed,  there can be no assurance  that a trading  market for our securities
will ever develop.

                                       17

<PAGE>

     Auditor's Opinion has a Going Concern  Qualification.  Our auditor's report
dated  December 19, 2003 for the year ended  December 31, 2002  included a going
concern  qualification which stated that our significant  operating losses raise
substantial doubt about its ability to continue as a going concern.

     No Appraisal of Vista Assets. We did not obtain an independent appraisal or
valuation of the assets and operations we intend to acquire from Vista.

      We do not anticipate paying any dividends and any gains from your
investment in our stock will have to come from increases in the price of such
stock. We currently intend to retain any future earnings for use in our business
and do not anticipate paying any cash dividends in the foreseeable future.

Medical Operations Risks

     We intend to acquire assets and operations  from Vista as described  above.
We also intend to attempt to acquire  additional medical products and operations
from time to time as  opportunities  become  available.  Our  operations  in the
medical product industry will subject us to various risks which include, but are
not limited, to the following:

     We Will Operate in a Competitive  Market.  The market for medical  products
and services is  competitive  and new  offerings and  technologies  are becoming
available  regularly.  We cannot  guarantee  that we will  compete  successfully
against our potential  competitors,  especially those with significantly greater
financial resources or brand name recognition.

     If We Fail to Retain Key  Personnel and Hire,  Train and Retain  Additional
Qualified and Experienced Employees,  We May Not Be Able to Compete Effectively.
If the Vista asset purchase transaction is completed, we will hire substantially
all of the employees involved in Vista's Medical Technology Business. Our future
success will depend to a large extent on retaining such employees and recruiting
sufficient  qualified  employees  to fill  vacancies  created  by  attrition  or
expansion of our  operations.  There is likely to be a competitive  labor market
for such staff and there is no  assurance  that we will be able to  attract  and
retain an adequate number of suitable employees.

     We Will Be Subject To Significant Domestic and International Regulation and
May Not Be Able To Obtain Necessary Regulatory  Clearances to Sell Our Products.
We intend to sell medical  devices.  The manufacture and sale of medical devices
intended  for  commercial  distribution  are subject to  extensive  governmental
regulation.  Our failure to comply with regulatory requirements would jeopardize
our ability to market our products.  Noncompliance with applicable  requirements
can result in failure of the regulatory agency to grant pre-market  clearance or
approval for devices,  withdrawal or  suspension  of approval,  total or partial
suspension of production,  fines, injunctions,  civil penalties, refunds, recall
or seizure of products and criminal  prosecution.  Medical devices are regulated
in the United  States  primarily  by the FDA and, to a lesser  extent,  by state
agencies. Sales of medical device products outside the United States are subject
to foreign regulatory requirements that vary from country to country. Generally,

                                       18

<PAGE>

medical devices  require  pre-market  clearance or pre-market  approval prior to
commercial  distribution.  A  determination  that  information  available on the
medical device is not sufficient to grant the needed  clearance or approval will
delay market  introduction  of the product.  In  addition,  material  changes or
modifications  to, and  changes in intended  use of,  medical  devices  also are
subject to FDA review and clearance or approval. The FDA regulates the research,
testing, manufacture, safety, effectiveness,  labeling, storage, record keeping,
promotion  and  distribution  of medical  devices  in the United  States and the
export of unapproved  medical devices from the United States to other countries.
The time  required  to obtain  approvals  required by foreign  countries  may be
longer or shorter than that required for FDA  clearance,  and  requirements  for
licensing may differ from FDA requirements.  The current regulatory  environment
in Europe for  medical  devices  differs  significantly  from that in the United
States.

     We  Expect  to  Encounter  Rapid   Technological   Change  and  Significant
Competition.  The  medical  device  market  in which we  intend  to  compete  is
characterized by intensive development efforts and rapidly advancing technology.
Our future  success will depend,  in large part,  upon our ability to anticipate
and keep pace with advancing technology and competing innovations. We may not be
successful in  identifying,  developing  and marketing new products or enhancing
our  existing  products.  We  believe  that a number  of large  companies,  with
significantly  greater  financial,  manufacturing,  marketing,  distribution and
technical resources and experience than ours, are focusing on the development of
visualization products for minimally invasive microsurgery.

     Our Profitability in the Visualization  Technology  Business to be Acquired
From Vista is  Directly  Related  to the Level Of  Reimbursements  for  Surgical
Procedures Using the Offered Products.  If the Vista asset purchase  transaction
is  approved,  we intend to market the  products  now  marketed  by Vista in its
Medical Technology  Business.  Our profitability will be directly related to the
level of payments for the  surgical  procedures,  in which our products  will be
involved,  either  by  Medicare  or  private  insurance  companies.  We could be
adversely  affected  by changes in payment  policies  of  government  or private
health care payors,  particularly  to the extent any such changes affect payment
for the  procedure  in which  our  products  are  intended  to be used.  It is a
continuing  trend in U.S.  health care for such  payments to be under  continual
scrutiny and downward pressure. We believe that reimbursement in the future will
be subject to increased  restrictions,  both in the United States and in foreign
markets and that the overall  escalating  cost of medical  products and services
has led to and will  continue to lead to increased  pressures on the health care
industry,  both  foreign  and  domestic,  to  reduce  the cost of  products  and
services, including products which we offer.

     We  expect  that  our  products  typically  will be used by  hospitals  and
surgical centers,  which bill various  third-party  payors, such as governmental
programs and private  insurance plans, for the health care services  provided to
their patients.  Third-party payors carefully review and increasingly  challenge
the prices  charged for medical  products  and services or negotiate a flat rate
fee in advance.  Payment rates from private companies also vary depending on the
procedure  performed,  the  third-party  payor,  the  insurance  plan and  other
factors.  Medicare compensates hospitals at a predetermined fixed amount for the
costs  associated  with an  in-patient  hospitalization  based on the  patient's
discharge diagnosis and compensates  physicians at a pre-determined fixed amount
based on the procedure performed, regardless of the actual costs incurred by the
hospital or  physician  in  furnishing  the care and  unrelated  to the specific
devices or systems used in that procedure. Medicare and other third-party payors
are  increasingly  scrutinizing  whether to cover new  products and the level of

                                       19

<PAGE>

payment  for new  procedures.  The  flat  fee  reimbursement  trend  is  causing
hospitals to control  costs  strictly in the context of a managed care system in
which health care providers contract to provide  comprehensive health care for a
fixed cost per person. We are unable to predict what changes will be made in the
reimbursement methods utilized by such third-party payors.

     If we obtain the necessary foreign  regulatory  registrations or approvals,
market  acceptance of our products in international  markets would be dependent,
in part, upon the acceptance by the prevailing  health care financing  system in
each  country.  Health care  financing  systems in  international  markets  vary
significantly  by country  and include  both  government  sponsored  health care
programs  and  private  insurance.  We cannot  assure you that  these  financing
systems will endorse the use of our products.

     We May Be Subject To Product  Liability  Claims And Have Limited  Insurance
Coverage.  By engaging in the medical devices business, we will face an inherent
and  significant  business risk of exposure to product  liability  claims in the
event that the use of our products results in personal injury or death. Also, in
the event that any of our products proves to be defective, we may be required to
recall or redesign  such  products.  We will need to attempt to obtain  adequate
product liability  insurance  coverage.  If we are able to obtain insurance,  of
which  there can be no  assurance,  our  coverage  limits may not be adequate to
protect  us  from  any  liabilities  we  might  incur  in  connection  with  the
development,  manufacture and sale of our products.  Product liability insurance
is expensive and in the future may not be available to us on  acceptable  terms,
if at all. A  successful  product  liability  claim or series of claims  brought
against  us in excess  of our  insurance  coverage  or a  product  recall  would
negatively impact our business.

ITEM 7.     FINANCIAL STATEMENTS

                                                   Index to Financial Statements
--------------------------------------------------------------------------------

                                                                            Page
                                                                            ----
Independent Auditor's Report                                                  21

Balance Sheet                                                                 22

Statement of Operations                                                       23

Statement of Stockholders' Deficit                                            24

Statement of Cash Flows                                                  25 - 26

Notes to Financial Statements                                            27 - 35

                                       20

<PAGE>




                                                    INDEPENDENT AUDITORS' REPORT



To the Board of Directors of
Viking Systems, Inc.


We have  audited the  accompanying  balance  sheet of Viking  Systems Inc. as of
December 31,  2002,  and the related  statements  of  operations,  stockholders'
deficit,  and cash flows for the years ended  December 31, 2002 and 2001.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Viking  Systems,  Inc. as of
December 31, 2002,  and the results of its operations and its cash flows for the
years ended December 31, 2002 and 2001 in conformity with accounting  principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the Company has continual  losses and cash outflows from
operations  and has a  stockholders'  deficit.  These factors raise  substantial
doubt  about its  ability to  continue  as a going  concern.  Management's  plan
regarding  those matters also are described in Note 2. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


                                                      Tanner & Co.


Salt Lake City, Utah
December 19, 2003, except Note 8 which is dated December 22, 2003

                                       21

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                                   Balance Sheet

                                                               December 31, 2002
--------------------------------------------------------------------------------


         Assets

Current assets:
  Cash                                                                  $   358
  Assets from discontinued operations                                     1,333
                                                                        --------


          Total current assets                                            1,691

Property and equipment, net of accumulated depreciation of $5,777             -
                                                                        --------

                                                                       $  1,691
                                                                        --------

--------------------------------------------------------------------------------

         Liabilities and Stockholders' Deficit

Current liabilities:
  Liabilities from discontinued operations                             $ 26,088
                                                                        --------

Stockholders' deficit:
  Preferred stock, $.001 par value, 5,000,000 shares
    authorized, no shares issued and outstanding                              -
  Common stock, $.001 par value, 25,000,000 shares
    authorized;  2,691,150 shares issued and outstanding                  2,691
  Additional paid-in capital                                            261,959
  Accumulated deficit                                                  (289,047)
                                                                        --------

          Total stockholders' deficit:                                  (24,397)
                                                                        --------

                                                                        $ 1,691
                                                                        --------

--------------------------------------------------------------------------------
See accompanying notes to financial statements.

                                       22

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                         Statement of Operations

                                                        Years Ended December 31,
--------------------------------------------------------------------------------


                                                         2002           2001
                                                     ---------------------------


Net loss from discontinued operations, net of tax    $  (12,887)     $  (45,804)
                                                     ---------------------------

Net loss from disposal of discontinued assets                 -               -
                                                    ---------------------------

Net loss                                             $  (12,887)     $  (45,804)
                                                    ----------------------------

Net loss per common share -
   basic and diluted                                 $    (0.01)     $    (0.02)
                                                     ---------------------------

Weighted average number of common shares -
  basic and diluted                                   2,548,082       2,197,208
                                                     ---------------------------


--------------------------------------------------------------------------------
See accompanying notes to financial statements.

                                       23

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                              Statement of Stockholders' Deficit

                                          Years Ended December 31, 2002 and 2001
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                            Preferred Stock    Common Stock    Additional   Accumu-
                            ---------------------------------    Paid-in     lated
                            Shares  Amount   Shares    Amount    Capital    Deficit     Total
                            -------------------------------------------------------------------

<S>                         <C>     <C>     <C>        <C>     <C>         <C>        <C>
Balance, December 31, 2000       -  $    -  1,356,150  $1,356  $  129,794  $(230,356) $(99,206)

Issuance of common
stock for cash                   -       -    350,000     350      34,650          -    35,000

Issuance of common stock
For the conversion of debt       -       -    765,000     765      75,735          -    76,500


Net loss                         -       -          -       -           -    (45,804)  (45,804)
                            -------------------------------------------------------------------

Balance, December 31, 2001       -       -  2,471,150   2,471     240,179   (276,160)  (33,510)

Issuance of common stock
For the conversion of debt       -       -    205,000     205      20,295          -    20,500

Issuance of common stock
For services                     -       -     15,000      15       1,485          -     1,500


Net loss                         -       -          -       -           -    (12,887)  (12,887)
                            -------------------------------------------------------------------

Balance, December 31, 2002       -  $    -  2,691,150  $2,691  $  261,959  $(289,047) $(24,397)
                            -------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
See accompanying notes to financial statements.

                                       24

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                         Statement of Cash Flows

                                                        Years Ended December 31,
--------------------------------------------------------------------------------

                                                               2002       2001
                                                            --------------------

Cash flows from operating activities:
  Net loss                                                  $(12,887)  $(45,804)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation expense                                     3,321      6,214
      Stock issued for services                                1,500          -
      Gain on settlement of payables                         (17,633)         -
      Decrease (increase) in:
        Accounts receivable                                     (203)     5,287
        Other current assets                                     702       (227)
      Increase (decrease) in:
        Cash overdraft                                             -     (2,630)
        Accounts payable                                       9,352     (6,770)
                                                            --------------------

          Net cash used in operating activities              (15,848)   (43,930)
                                                            --------------------

Cash flows from investing activities-
  purchase of property and equipment                             (67)      (129)
                                                            --------------------

Cash flows from financing activities:
  Issuance of common stock                                         -     35,000
  Proceeds on related party notes payable                     15,057     10,275
                                                            --------------------

          Net cash provided by
          financing activities                                15,057     45,275
                                                            --------------------

          Net change in cash and cash equivalents               (858)     1,216


Cash and cash equivalents at beginning of year                 1,216          -
                                                            --------------------


Cash and cash equivalents at end of year                    $    358    $ 1,216
                                                            --------------------

--------------------------------------------------------------------------------
See accompanying notes to financial statements.

                                       25

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                         Statement of Cash Flows
                                                                       Continued

--------------------------------------------------------------------------------


Supplemental cash flow information:

     During the year ended  December 31, 2002 the Company  issued 205,000 shares
     of common stock to retire related party notes payable of $20,500.

     During the year ended  December 31, 2001 the Company  issued 765,000 shares
     of common stock to retire related party notes payable of $76,500.

     No amounts  were paid for  interest or income  taxes during the years ended
     December 31, 2002 and 2001.

--------------------------------------------------------------------------------
See accompanying notes to financial statements.

                                       26

<PAGE>

                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements

                                                      December 31, 2002 and 2001
--------------------------------------------------------------------------------

1. Organization     Organization and Business
   and Summary      Viking  Systems,  Inc.,  (the  Company)  was  organized as a
   of               corporation  in the state of Nevada on May 28, 1998, for the
   Significant      purpose  of  providing   training  and  curriculum  for  the
   Accounting       information  technology  industry.  During  2001 the Company
   Policies         changed its business  focus to the  development  of software
                    applications, hardware sales and  leasing, and  training and
                    support. As of December 31, 2002,  the Company  discontinued
                    its current  operations. The officers of  the Company are in
                    the process of searching for other business opportunities.

                    Concentration of Credit Risk
                    The  Company  maintains  its cash in bank  deposit  accounts
                    which, at times,  may exceed federally  insured limits.  The
                    Company has not  experienced  any losses in such account and
                    believes it is not exposed to any significant credit risk on
                    cash and cash equivalents.

                    Financial  instruments which potentially subject the Company
                    to concentration  of credit risk consist  primarily of trade
                    receivables.  In the normal course of business,  the Company
                    provides credit terms to its customers.  When necessary, the
                    Company performs ongoing credit evaluations of its customers
                    and maintains  allowances  for possible  losses which,  when
                    realized,   have  been  within  the  range  of  management's
                    expectations.

                    Cash and Cash Equivalents
                    The Company  considers  all highly  liquid debt  instruments
                    with  a  maturity  of  three  months  or  less  to  be  cash
                    equivalents.

                    Property and Equipment
                    Property  and   equipment   are   recorded  at  cost,   less
                    accumulated  depreciation.  Depreciation is calculated using
                    the  straight-line  method  over  the  useful  lives  of the
                    equipment.  Expenditures  for  maintenance  and  repairs are
                    expensed  when  incurred and  betterments  are  capitalized.
                    Gains  and  losses on sale of  property  and  equipment  are
                    reflected in operations.

--------------------------------------------------------------------------------

                                       27

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


1. Organization     Revenue Recognition
   and Summary      Revenues  are  generated   from  services   related  to  web
   of               hosting,   computer   technical   assistance   and  training
   Significant      services.  Revenues are  recognized  when the following four
   Accounting       revenue   recognition   criteria  are  met:  (1)  persuasive
   Policies         evidence of an  arrangement  exists;  (2) services have been
   Continued        rendered and the customer  approves final  product;  (3) the
                    selling price is  fixed or  determinable;  and (4) collecti-
                    bility  is  reasonable  assured. Amounts  received prior  to
                    completion of services are recorded as deferred revenue.

                    As noted in the  concentration of credit  footnote,  payment
                    terms are  extended  to  customers  and there is no right of
                    cancellation or refund.

                    Cost of Revenue
                    Cost of revenues  consists  primarily  of product  costs and
                    labor related to revenues.

                    Income Taxes
                    Deferred income taxes are provided, in amounts sufficient to
                    give effect to timing differences  between financial and tax
                    reporting.

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

                    Earnings Per Common and Common Equivalent Share
                    The  computation  of  basic  earnings  per  common  share is
                    computed using the weighted  average number of common shares
                    outstanding during the year.


--------------------------------------------------------------------------------

                                       28

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


1. Organization     Earnings Per  Common and Common Equivalent Share - Continued
   and Summary      The  computation of  diluted earnings  per  common  share is
   of               based  on  weighted  average  number  of  shares outstanding
   Significant      during  the year  plus common stock  equivalents which would
   Accounting       arise  from  the exercise of  stock options  and/or warrants
   Policies         outstanding  using the treasury stock method and the average
   Continued        market  price  per  share  during  the  year.  Common  stock
                    equivalents  are not  included in  the diluted  earnings per
                    share calculation when their effect is antidilutive.

                    Reclassifications
                    Certain reclassifications have been made to the December 31,
                    2001  financial  statements  to conform to the  December 31,
                    2002 financial statement presentation.

2. Going            The  accompanying  financial  statements have  been prepared
   Concern          under  the assumption  that the  Company will  continue as a
                    going concern. Such assumption  contemplates the realization
                    of assets  and  satisfaction  of  liabilities  in the normal
                    course of business. As shown in the financial statements for
                    the years ended  December 31, 2002 and 2001, the Company has
                    incurred   losses  and  net  cash  outflows  from  operating
                    activities   and  as  of  December  31,  2002,  the  Company
                    discontinued  all ongoing  operations.  The Company also has
                    negative  working capital and a stockholders'  deficit as of
                    December 31, 2002.  These  factors raise  substantial  doubt
                    about the Company's ability to continue as a going concern.

                    The financial statements do not include any adjustments that
                    might be necessary  should the Company be unable to continue
                    as a going concern.  The Company's  continuation  as a going
                    concern is dependent upon its ability to generate sufficient
                    cash  flow to meet its  obligations  on a timely  basis,  to
                    obtain  additional   financing  as  may  be  required,   and
                    ultimately  to attain  profitability.  Potential  sources of
                    cash include continued contributions of services by officers
                    of the Company,  loans from officers,  sale of the Company's
                    stock, profitable operations,  external debt, or alternative
                    methods such as mergers or sale  transactions.  As disclosed
                    in  Note  8, in  December  2003  the  Company  entered  into
                    agreements  to sell  3,450,000  shares of common  stock at a
                    price of $69,000. There can be no assurance that these funds
                    will be  sufficient  to meet all  current  obligations  in a
                    timely manner.

--------------------------------------------------------------------------------

                                       29

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


3. Discontinued     On December 31, 2002, the  Company's management and board of
   Operations       directors decided  to discontinue  current operations due to
                    the Company's insufficient cash flows to support operations.

                    For the year ended December 31, 2002 assets and  liabilities
                    from discontinued operations consist of the following:

                     Assets from discontinued operations:
                        Accounts receivable                             $ 1,333
                                                                        ========

                     Liabilities from discontinued operations:
                        Accounts payable                                 18,843
                        Related party notes payable                       7,245
                                                                        --------

                           Total current liabilities                    $26,088
                                                                        ========

                    Discontinued  operations were as follows for the years ended
                    December 31:


                                                               2002       2001
                                                            --------------------

                     Revenue                                $ 32,919   $ 13,059
                     Cost and expenses                       (45,806)   (58,863)
                                                            --------------------

                     Loss before income taxes                (12,887)   (45,804)
                     Income tax benefit                            -          -
                                                            --------------------
                     Loss from discontinued operations      $(12,887)  $(45,804)
                                                            ====================


--------------------------------------------------------------------------------

                                       30

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


4. Income Taxes     The difference  between income taxes at statutory  rates and
                    the amount presented in the financial statements is a result
                    of the following:


                                                               2002       2001
                                                            --------------------

                    Income tax benefit at statutory rate    $  3,000   $  9,000
                    Change in valuation allowance             (3,000)    (9,000)
                                                            --------------------
                                                            $      -   $      -
                                                            ====================

                    Deferred tax assets are as follows:

                                                               2002       2001
                                                            --------------------

                    Operating loss from discontinued
                     operations carryforward                $  58,000  $ 55,000
                    Valuation allowance                       (58,000)  (55,000)

                                                            $       -  $      -
                                                            ====================

                    The  Company  has  a net  operating  loss  of  approximately
                    $289,000  which begins to expire in 2019.  The amount of net
                    operating loss carryforward that can be used in any one year
                    will be limited by  significant  changes in ownership of the
                    Company and by the  applicable  tax laws which are in effect
                    at the time such carryforwards can be utilized.

5. Related Party    The  Company   has  periodically   received  financing  from
   Transactions     officers/shareholders.  As  of  December 31,  2002 and 2001,
                    the Company owed $7,245 and $12,688, respectively related to
                    this financing with no specific terms for repayment.

                    During the year ended  December 31, 2002 the Company  issued
                    205,000 shares of common stock to retire related party notes
                    payable of $20,500.  The notes did not originally  contain a
                    conversion feature.

                    During  the  year  ended  December  31,  2002,  the  Company
                    transferred propriety technology with a net book value of $0
                    to an officer of the  Company as  consideration  for accrued
                    wages.


--------------------------------------------------------------------------------

                                       31

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


5. Related Party    During  the year ended December 31,  2001 the Company issued
   Transactions     765,000  shares of  common  stock to  retire  related  party
   Continued        notes payable of $76,500.

                    During  the  year  ended   December  31,  2001  the  company
                    subleased  office  space to an  officer /  shareholder  on a
                    month  to  month  basis.  Total  revenues  related  to  this
                    agreement  during  the  year  ended  December  31,  2001 was
                    $3,900.

6. Contingencies    The Company entered into an agreement with an officer of the
                    Company  wherein the officer  would work on projects for the
                    Company  for which he would be paid only if the  products he
                    produced  generated revenue for the Company.  The amounts to
                    be paid to the officer  were  computed at $60 per hour up to
                    60 hours per month  commencing  October 1, 2001. The Company
                    would  pay to the  officer  25% of  its  income  from  these
                    projects.

                    As of December 31, 2002 no revenue had been  generated  from
                    these products and nothing had been paid to the officer.  As
                    of December  31,  2002 the  officer and the company  entered
                    into a release agreement for any possible contingency, which
                    effectively nullified the original agreement.

7. Recent           In  April 2002, the  Financial  Accounting  Standards  Board
   Accounting       (FASB) issued  Statement  of Financial  Accounting Standards
   Pronounce-       (SFAS) No. 145, "Rescission  of  FASB  Statements No. 4, 44,
   ments            and 64,  Amendment of FASB  Statement  No. 13, and Technical
                    Corrections."  This statement requires the classification of
                    gains or losses from the extinguishments of debt to meet the
                    criteria  of  Accounting  Principles  Board  Opinion  No. 30
                    before they can be classified as extraordinary in the income
                    statement.   As  a   result,   companies   that   use   debt
                    extinguishment  as  part of  their  risk  management  cannot
                    classify  the  gain  or loss  from  that  extinguishment  as
                    extraordinary.  The statement  also requires  sale-leaseback
                    accounting  for  certain  lease   modifications   that  have
                    economic effects similar to sale-leaseback transactions. The
                    Company does not expect the adoption of SFAS No. 145 to have
                    a  material  impact  on its  financial  position  or  future
                    operations.


--------------------------------------------------------------------------------

                                       32

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


7. Recent           In  June  2002, the  FASB issued  SFAS No. 146,  "Accounting
   Accounting       for Costs  Associated  with  Exit or  Disposal  Activities."
   Pronounce-       This  standard, which  is  effective  for  exit or  disposal
   ments            activities  initiated after December 31,  2002, provides new
   Continued        guidance on the  recognition,  measurement  and reporting of
                    costs  associated  with  these   activities.   The  standard
                    requires companies to recognize cost associated with exit or
                    disposal  activities  when they are incurred  rather than at
                    the date the company  commits to an exit or  disposal  plan.
                    The  adoption of SFAS No. 146 by the Company is not expected
                    to  have  a  material  impact  on  the  Company's  financial
                    position or future operations.

                    In December 2002, the Financial  Accounting  Standards Board
                    issued   SFAS   No.   148    "Accounting   for   Stock-Based
                    Compensation--Transition  and  Disclosure--an  amendment  of
                    FASB  Statement  No. 123," which is effective for all fiscal
                    years ending after December 15, 2002.  SFAS No. 148 provides
                    alternative  methods of transition for a voluntary change to
                    the fair value based method of  accounting  for  stock-based
                    employee  compensation under SFAS No. 123 from the intrinsic
                    value based method of  accounting  prescribed  by Accounting
                    Principles  Board  Opinion No. 25. SFAS 128 also changes the
                    disclosure  requirements  of  SFAS  123,  requiring  a  more
                    prominent  disclosure  of the  pro-forma  effect of the fair
                    value   based   method   of   accounting   for   stock-based
                    compensation.  The  adoption  of SFAS No. 148 by the Company
                    did not have a material  impact on the  Company's  financial
                    position or operations.


--------------------------------------------------------------------------------

                                       33

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


7. Recent           In  November 2002,  the FASB  issued  Interpretation No. 45,
   Accounting       Guarantor's  Accounting  and   Disclosure  Requirements  for
   Pronounce-       Guarantees,   Including   Guarantees   of   Indebtedness  to
   ments            Others,  an  Interpretation  of  FASB Statements  No. 5, 57,
   Continued        107 and a  rescission  of FASB  Interpretation  No. 34. This
                    Interpretation elaborates on the disclosures to be made by a
                    guarantor  in its  interim and annual  financial  statements
                    about  its  obligations   under   guarantees   issued.   The
                    Interpretation  also  clarifies that a guarantor is required
                    to recognize,  at inception of a guarantee,  a liability for
                    the fair value of the  obligation  undertaken.  The  initial
                    recognition and measurement provisions of the Interpretation
                    are  applicable  to  guarantees  issued  or  modified  after
                    December 31, 2002. The disclosure requirements are effective
                    for financial statements of interim or annual periods ending
                    after December 15, 2002. The Company is currently evaluating
                    the impact this  interpretation  will have on the  Company's
                    results of operations and financial position.

                    In January  2003,  the FASB  issued  Interpretation  No. 46,
                    Consolidation   of   Variable    Interest    Entities,    an
                    Interpretation of ARB No. 51. This Interpretation  addresses
                    the  consolidation  by  business   enterprises  of  variable
                    interest  entities  as  defined in the  Interpretation.  The
                    Interpretation  applies immediately to variable interests in
                    variable  interest  entities created after January 31, 2003,
                    and to  variable  interest  in  variable  interest  entities
                    obtained  after  January 31, 2003.  The Company is currently
                    evaluating the impact this  interpretation  will have on the
                    Company's result of operations and financial positions.

8. Subsequent       In  August  2003, the  Company  agreed  to convert $1,000 of
   Events           related  party  notes  payable  to  10,000  shares of common
                    stock. In  addition,  the  Company  obtained  an  additional
                    $1,600 in  related party notes  payable that it converted to
                    16,000 shares of common stock.

                    In October 2003,  the Company issued 47,500 shares of common
                    stock in satisfaction of services  received  totaling $4,250
                    incurred  in 2003 as well as  another  note  payable  from a
                    related party in the amount of $500.


--------------------------------------------------------------------------------

                                       34

<PAGE>


                                                            VIKING SYSTEMS, INC.
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


8. Subsequent       In November 2003,  the Company  entered into  stock purchase
   Events           agreements  with  an individual  and a  company whereby they
   Continued        have  agreed to  purchase 3,450,000  shares of  common stock
                    at a purchase price of $69,000.

                    In December  2003,  the Company  agreed to convert $3,000 of
                    related  party  notes  payable  to  30,000  shares of common
                    stock.

                    In December 2003, the Company entered into an asset purchase
                    agreement where the Company will acquire  certain  operating
                    assets from a company for the following considerations:  (i)
                    cash in the amount not to exceed $400,000; (ii) the issuance
                    of approximately 3,054,000 shares of common stock; and (iii)
                    the assumption of certain liabilities.

                    In December  2003,  the Company  granted an  individual  the
                    option to purchase  5,000,000 shares of the Company's Series
                    A  Preferred  Stock.  Each share of the  Series A  Preferred
                    Stock is  convertible  into 4 shares of common  stock.  Each
                    share of Series A Preferred Stock will have four votes.

                    In order to have sufficient number of shares of common stock
                    authorized  for  issuance  at  conversion  of the  Series  A
                    Preferred   Stock   and  to  allow  for   future   financing
                    transactions,   the  board  of  directors   intend  to  seek
                    shareholder  consent  to amend  the  Company's  Articles  of
                    Incorporation  to  increase  the  number of shares of common
                    stock  and  the  number  of  shares  of   preferred   stock,
                    authorized.

                    In December 2003, the Company's  board of directors  granted
                    1,200,000 stock options to certain officers and directors of
                    the Company.  Each option is  exercisable at $0.02 per share
                    and expires December 31, 2008.


--------------------------------------------------------------------------------

                                       35

<PAGE>

ITEM 8. CHANGES AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

      NONE.

ITEM 8A.  CONTROLS AND PROCEEDURES

     (a) Evaluation of disclosure  controls and  procedures.  Within the 90 days
prior to the date of this  report,  we  carried  out an  evaluation,  under  the
supervision  and with  participation  of our  management,  including  the  Chief
Executive  Officer,  of the  effectiveness  of the design and  operation  of our
disclosure controls and procedures  pursuant to Exchange Act Rule 13a-14.  Based
upon that evaluation,  the Chief Executive  Officer concluded that the Company's
disclosure  controls and procedures are effective in timely alerting  members of
the management to material  information  relating to the Company  required to be
included in our periodic SEC filings.

     (b) Changes in internal controls.  No significant  changes were made in our
internal  controls or in other  factors  that could  significantly  affect these
controls subsequent to the date of their evaluation.

                                   PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

Identification of Directors and Executive Officers

     The current  directors and officers of Viking who will serve until the next
annual  meeting  of  shareholders  or until  their  successors  are  elected  or
appointed and qualified, are set forth below:

      Name                        Age         Position
      ----                        ---         --------

      Thomas B. Marsh             50          CEO/President/Director
      Daniel F. Crowley           54          Director, Audit Committee Chairman
      Dennis Blomquist            50          Chief Financial Officer/Director

     Background  information  about the  Company's  officers and directors is as
follows:

     Thomas B. Marsh.  Mr. Marsh was appointed  President and Director of Viking
in November  2003. He has also served as secretary,  treasurer and a director of
PurchaseSoft, Inc. since August 5th, 2002. Mr. Marsh is a Partner and co-founder
of  Marsh+Flagg.  Marsh+Flagg  is a merger and  acquisition  advisory  firm with
offices in La Jolla & Newport Beach,  California and Stuttgart Germany. Prior to
PurchaseSoft and Marsh+Flagg,  Marsh was COO at Co-Mack Technology, CEO of Emark
Corporation and President of Spectrum  Companies  International.  Marsh attended
Williams College with a major in economics.

                                       36

<PAGE>

     Daniel F Crowley.  Mr.  Crowley has been a private  investor  and  business
consultant  since 2002. Mr. Crowley is a principal in and co-founder of Spectrum
Partners LLC, a business strategy and development advisory firm, specializing in
the transportation and logistics industry, with offices in Scottsdale,  Arizona.
Prior to Spectrum Partners LLC, Mr. Crowley was Executive VP & CFO at BAX Global
from 1998 through 2002.  Previous positions include senior management  positions
with Frito-Lay International, and Grand Metropolitan PLC companies including The
Pillsbury Company and Pearle Vision. Mr. Crowley has a CPA from the State of New
York, a MBA in Finance from Columbia University G

     Dennis Blomquist. Mr. Blomquist was a founder of the Company, and served as
Vice-  president  from  inception  in May 1998  until  March  2001,  when he was
appointed as President  and  Treasurer.  He resigned as president in  connection
with  the  change  of our  business  plan  but  continues  to serve as CFO and a
director. In addition to his work for us, he has been self employed for the past
eight  years  as a  business  consultant  providing  data  base  administration,
development and computer related services to a variety of businesses.  From June
1996 to December 1997, Mr. Blomquist worked for Parami Productions, Inc., Studio
City,  California,  a film and  television  development  company as  director of
development.

Control Persons

     Our change of business  plan was  proposed to our  previous  management  by
Donald E. Tucker.  In connection  with our change of business  plan,  Mr. Tucker
acquired voting control of the Company. Information about Donald E. Tucker is as
follows:

     Donald E. Tucker. Donald E. Tucker, age 49, is a Senior Partner with one of
the world's largest  consulting and technology  company and has over 24 years of
consulting  experience across a number of industry segments. He has held several
management and leadership  positions  during his career and currently has global
responsibility  for the Medical  Technology,  Diagnostics  and Devices  industry
segment, as well as the west coast biotech/pharmaceutical market. He has primary
responsibility  for  establishing  global market and  operational  leadership in
these  industry  segments and is an advisor to a number of  associations  in the
life sciences  industry.  Mr. Tucker has experience and has been involved in the
strategy,  planning and  implementation  of large-scale  complex change programs
with extensive  experience in new product  development,  supply chain management
and  commercial  operations.  He has served  numerous  Fortune 100  companies in
planning and executing global mergers, consolidating operations and implementing
new strategic  capabilities.  He has worked extensively throughout the America's
and Europe.  From 1997 to 2000, Mr. Tucker led the development and operations of
a west  coast  Business  Launch  Center,  where  over 16 new  technology-centric
businesses  were formed,  funded and launched.  Mr. Tucker  graduated  Magna Cum
Laude with a BS degree in business management from Northern Michigan University.

Significant Employees

      None

                                       37

<PAGE>

Family Relationships

     There are no family relationships among our officers and directors.

Other Involvement in Certain Legal Proceedings

     There have been no events under any bankruptcy act, no criminal proceedings
and any judgments or  injunctions  material to the evaluation of the ability and
integrity of any director or executive officer during the last five years.

Compliance with Section 16(a)

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's directors and executive officers, and persons who beneficially own
more than 10% of a registered class of the Company's equity securities,  to file
reports of  beneficial  ownership  and changes in  beneficial  ownership  of the
Company's  securities  with the SEC on Forms 3 (Initial  Statement of Beneficial
Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5
(Annual Statement of Beneficial Ownership of Securities).  Directors,  executive
officers and  beneficial  owners of more than 10% of the Company's  Common Stock
are  required  by SEC  regulations  to furnish  the  Company  with copies of all
Section 16(a) forms that they file. The Company's previous  management failed to
file required  reports  under  Section 16.  However,  in December  2003,  Dennis
Blomquist  filed a Form 3 relating to his shares of the Company's  common stock.
In December 2003, new directors  Thomas B Marsh and Daniel Crowley,  and control
shareholder Donald E. Tucker each filed a Form 3.

Code of Ethics

     We have  adopted a code of ethics that applies to all  executive  officers,
directors and  employees of the Company,  a copy of which is filed as Exhibit 14
to this Form 10-KSB.

Committees of the Board of Directors

     We have recently changed are business plan and appointed new management. We
intend  to  increase  the size of our  Board  of  Directors  during  2004 and in
connection  therewith,  we  intend  to  establish  committees  of the  Board  of
Directors.  We anticipate that these committees will include an audit committee,
a  compensation  committee and  nominating  committee.  Daniel  Crowley has been
appointed head of the audit committee.  We are currently unable to determine the
timing of when these committees will be established.

ITEM 10.  EXECUTIVE COMPENSATION

     No  current   officer  or  director  of  the  Company  was  paid  any  cash
compensation during the fiscal years ended December 31, 2000, 2001, or 2002.

                                       38

<PAGE>

Summary Compensation Table

     The following table sets forth certain information concerning  compensation
for services  rendered for the past three years to the Company's Chief Executive
Officer and to the Company's most highly  compensated  executive  officers other
than the CEO, whose annual salary and bonus exceeded $100,000:

<TABLE>
<CAPTION>
                             Annual Compensation                 Long-Term Compensation
                       ---------------------------------  ------------------------------------
                                                                    Awards           Payouts         All
Name and Other Annual                       Options/      -----------------------  -----------      Other
Principal Position     Year  Salary  Bonus  Compensation  Stock Awards  SAR's (#)  LTIP Payouts  Compensation
------------------     ----  ------  -----  ------------  ------------  ---------  ------------  ------------
<S>                    <C>    <C>     <C>      <C>             <C>         <C>         <C>            <C>
Dennis Blomquist (1)   2002   $-0-    -0-      $5,000          -0-         -0-         -0-            -0-
 President             2001   $-0-    -0-         -0-          -0-         -0-         -0-            -0-
                       2000   $-0-    -0-         -0-          -0-         -0-         -0-            -0-
</TABLE>

     (1) Mr.  Blomquist  resigned as  president in 2003 in  connection  with the
change of our business plan. He is currently a director and the chief  financial
officer of the Company.  In 2002,  Mr.  Blomquist  acquired from the Company the
assets  related to our previous  operations  as payment for  services  rendered.
These services were valued at $5,000.

Stock Options Granted in the Last Fiscal Year

     No stock options were granted to management during 2000, 2001 or 2002.

Compensation of Directors

     We have not adopted a compensation plan for our Board of Directors. We have
granted  Director Daniel F. Crowley an option to purchase  200,000 shares of our
common  stock.  We have  also  granted  our CEO,  Thomas  B.  Marsh an option to
purchase 1,000,000 shares of our common stock.

Employment Agreements

     The Company is currently not a party to any  employment  agreement with any
officer,  director  or other  person.  We  anticipate  that we will  enter  into
employment agreements with our chief executive officer and other key employees.

Equity Compensation Plan Information

     Currently the only equity  compensation plans we have adopted are grants of
options to Thomas B. Marsh and Daniel F. Crowley. On December 18, 2003, Viking's
board of directors granted stock options to Thomas B. Marsh, our CEO,  president
and a director of Viking,  and Daniel F.  Crowley,  a director  of Viking.  Each
option is  exercisable  at $.02 per share and expires  December  31,  2008.  Mr.
Marsh's  option  is for  1,000,000  shares  of  Viking's  common  stock  and Mr.
Crowley's  option is for 200,000  shares of Viking'  common  stock.  Each option
agreement provides for registration rights on Form S-8 for the shares underlying
such options.

                                       39

<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

     The following table sets forth  information  regarding shares of our Common
Stock beneficially owned as of January 14, 2004 by: (1) each of our officers and
directors;  (ii) all  officers and  directors as a group;  and (iii) each person
known by us to beneficially  own five percent or more of the outstanding  shares
of its common stock.

                                           Common
Shareholder                                Stock                  Percentage
-----------                                ------                 ----------

Thomas B. Marsh (1) (2)                      -0-                     -0-
Daniel F. Crowley (1) (3)                    -0-                     -0-
Dennis Blomquist (1)                        850,000                 13.5 %
Donald E. Tucker (4)                      3,200,000                 50.8 %

All officers and directors as a
group 3 persons                             850,000                 13.5 %

TOTAL                                     6,294,650                  100 %

     (1)  These are the officers and directors of the Company.

     (2)  Does not include 1,000,000 shares which are issuable under a currently
          exercisable stock option.

     (3)  Does not include  200,000  shares which are issuable under a currently
          exercisable stock option.

     (4)  Does not  include  20,000,000  shares  which  may be issued if (i) Mr.
          Tucker exercises an option to purchase  5,000,000 shares of our Series
          A Preferred  Stock, and (ii) he converts such Series A Preferred Stock
          into shares of our common stock.

Outstanding Options and Warrants

     The only outstanding options to purchase shares of our common stock are the
options granted to Thomas B. Marsh for 1,000,000 shares and to Daniel F. Crowley
for 200,000  shares which are described in Item 10 of this Form 10-KSB.  We have
also  granted  Donald E.  Tucker an option to purchase  5,000,000  shares of our
Series A  Preferred  Stock  which is  further  described  in Item 1 of this Form
10-KSB.  Each share of Series A Preferred Stock is convertible  into 4 shares of
our common stock.

                                       40

<PAGE>


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     We have issued  shares to our  previous  management  for  services  and for
repayment  of debt.  These  transactions  are  described  in Item 5 of this Form
10-KSB.  We also  transferred  certain  assets to our  former  president  Dennis
Blomquist as payment for services  rendered.  The assets  transferred were those
related to our discontinued  operations.  The value of such assets and the value
of the services rendered were estimated to be $5,000.

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

      A.  Exhibits

      Exhibit
      Number    Exhibit
      -------   -------
      3.1       Article of Incorporation (1)
      3.2       Designation of Series A Preferred Stock (2)
      3.3       Bylaws (1)
      10.1      Option Agreement - Donald B. Tucker (3)
      10.2      Option Agreement - Thomas B. Marsh (3)
      10.3      Option Agreement - Daniel F Crowley (3)
      10.4      Asset Purchase Agreement - Vista Medical Technologies, Inc.(3)
      10.5      Patent and Technology License Agreement (3)
      14        Code of Ethics (2)
      31.1      Certification of Chief Executive Officer in accordance with 18
                U.S.C. Section 1350, as adopted by Section 302 of the  Sarbanes-
                Oxley Act of 2002 (2)
      31.2      Certification of Principal Financial Officer in accordance with
                18 U.S.C. Section 1350, as adopted by Section 302 of the
                Sarbanes- Oxley Act of 2002 (2)
      32.1      Certification of Chief Executive Officer in accordance with 18
                U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-
                Oxley Act of 2002 (2)
      32.2      Certification of Chief Financial Officer in accordance with 18
                U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-
                Oxley Act of 2002 (2)

(1) Incorporated herein by reference from Registrant's Form 10-SB dated February
2, 2002.

(2) Attached hereto as an Exhibit.

(3)  Incorporated  herein by Reference from the  Registrant's  Current Report on
Form 8-K dated December 22, 2003.

                                       41

<PAGE>


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

     Audit Fees.  The  aggregate  fees  billed by Tanner & Co. for  professional
services rendered for the audit of our annual financial  statements  included in
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 and
for the review of  quarterly  financial  statements  included  in our  Quarterly
Reports on Form  10-QSB  for the  quarters  ending  March 31,  2002,  June 2002,
September 30, 2002 and March 31, June 30 and September 30, 2003 were $16,500.

     Audit  Related  Fees.  For the fiscal year ended  December  31,  2002,  the
aggregate  fees  billed  for  assurance  and  related  services  by Tanner & Co.
relating to the  resolution  of SEC comments  which are not  reported  under the
caption "Audit Fees" above, was $2,800.

     Tax Fees.  For the fiscal year ended  December 31, 2002, the aggregate fees
billed by Tanner & Co. for other  non-audit  professional  services,  other than
those services listed above, totaled $400

     We do not use  Tanner & Co. for  financial  information  system  design and
implementation. These services, which include designing or implementing a system
that  aggregates  source data  underlying the financial  statements or generates
information  that is  significant  to our  financial  statements,  are  provided
internally  or by other  service  providers.  We do not  engage  Tanner & Co. to
provide compliance outsourcing services.

     Effective May 6, 2003, the Securities and Exchange Commission adopted rules
that require that before Tanner & Co. is engaged by us to render any auditing or
permitted non-audit related service, the engagement be:

     o    approved by our audit committee (which consists of our entire board of
          directors); or

     o    entered  into  pursuant  to   pre-approval   policies  and  procedures
          established  by  the  audit  committee,   provided  the  policies  and
          procedures  are  detailed  as to the  particular  service,  the  audit
          committee  is  informed  of  each  service,   and  such  policies  and
          procedures  do  not  include   delegation  of  the  audit  committee's
          responsibilities to management.

     Under the  direction of Audit  Committee  Chairman Dan Crowley,  our entire
Board of Directors currently acts as our audit committee. Our Board of Directors
pre-approves all services provided by our independent auditors. The pre-approval
process has just been  implemented in response to the new rules,  and therefore,
the audit  committee does not have records of what  percentage of the above fees
were pre-approved. However, all of the above services and fees were reviewed and
approved by the audit committee  either before or after the respective  services
were  rendered.  The Board of Directors has  considered the nature and amount of
fees billed by Tanner & Co. and  believes  that the  provision  of services  for
activities  unrelated to the audit is compatible with  maintaining  Tanner & Co.
independence.

                                       42

<PAGE>


                                  SIGNATURES

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

                                             Viking Systems, Inc.


      Date: January 27, 2004                 By /s/ Thomas B. Marsh
                                                --------------------
                                                CEO/President
                                                Principal Executive Officer
                                                Chairman of the Board

      Dated: January 28, 2004                By /s/ Dennis Blomquist
                                                --------------------
                                                Chief Financial Officer/Director

     In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of Millennium and in the capacities and
on the dates indicated.

Signature                                Capacity                Date

/s/ Thomas B. Marsh              CEO/President/Director      January 27, 2004


/s/ Daniel F. Crowley                    Director            January 28, 2004


/s/ Dennis Blomquist                   CFO/Director          January 28, 2004

                                       43