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


                                   FORM 10-QSB


             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                       For the quarter ended June 30, 2004
                                       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 Ave, Suite 1509, La Jolla, CA 92037
                    (Address of principal executive offices)

         Registrant's telephone no., including area code: (858) 456-6608

                                       N/A
              Former name, former address, and former fiscal year,
                         if changed since last report.

    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 X
No ____ (2) Yes X No____.

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in rule 12b-2 of the Exchange Act). Yes___ No X.

Common Stock outstanding at August 4, 2004, 10,601,150 shares of $.001 par value
Common Stock.


                    DOCUMENTS INCORPORATED BY REFERENCE: NONE


<PAGE>


                                   FORM 10-QSB

                       FINANCIAL STATEMENTS AND SCHEDULES
                              VIKING SYSTEMS, INC.

                       For the Quarter ended June 30, 2004

      The following financial statements and schedules of the registrant are
      submitted herewith:

                        PART I - FINANCIAL INFORMATION
                                                                       Page of
                                                                     Form 10-QSB
                                                                     -----------
Item 1. Financial Statements:

            Unaudited Balance Sheet at June 30, 2004                           1
            Unaudited Statement of Operations for the Six Months
              Ended June 30, 2004 and 2003                                     2
            Unaudited Statement of Cash Flows for the Six Months
              Ended June 30, 2004 and 2003                                     3
            Notes to Financial Statements                                  4 - 9

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations                                              9

Item 3. Controls and Procedures, Evaluation of Disclosure Controls and
        Procedures                                                            20


                          PART II - OTHER INFORMATION

                                                                            Page
                                                                            ----

Item 1.     Legal Proceedings                                                 21
Item 2.     Changes in the Rights of the Company's Security Holders           21
Item 3.     Defaults by the Company on its Senior Securities                  21
Item 4.     Submission of Matters to Vote of Security Holders                 21
Item 5.     Other Information                                                 21
Item 6(a).  Exhibits                                                          21
Item 6(b).  Reports on Form 8-K                                               21



<PAGE>


                         PART I - FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS

                              VIKING SYSTEMS, INC.
                             Unaudited Balance Sheet
                                  June 30, 2004
        Assets

Current assets:
  Cash and cash equivalents                                          $   19,632
  Accounts receivable, net                                              530,520
  Inventories                                                           276,508
  Prepaids and other current assets                                      75,366
                                                                     ----------

          Total current assets                                          902,026

Property and equipment, net                                              44,809
                                                                     ----------

                                                                     $  946,835
                                                                     ==========

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

        Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                                                   $  677,518
  Capital lease obligations                                               3,282
  Related-party note payable                                            100,548
  Accrued compensation                                                  124,074
  Other accrued expenses                                                 31,889
  Deferred revenue                                                        4,000
                                                                     ----------

          Total current liabilities                                     941,311

Commitment and contingencies                                                  -

Stockholders' equity:
  Preferred stock, $.001 par value, 25,000,000 shares
    authorized, 5,000,000 shares issued and outstanding                   5,000
  Common stock, $.001 par value, 100,000,000 shares
    authorized;  9,348,650 shares issued and outstanding                  9,349
  Additional paid-in capital                                            791,731
  Accumulated deficit                                                  (800,556)
                                                                     ----------


          Total stockholders' equity                                      5,524
                                                                     ----------

                                                                     $  946,835
                                                                     ==========

                                       1

<PAGE>


                              VIKING SYSTEMS, INC.
                        Unaudited Statement of Operations
                 Three and Six Months Ended June 30, 2004 and 2003
<TABLE>
<CAPTION>

                                       Three Months Ended        Six Months Ended
                                            June 30,                 June 30,
                                     -----------------------------------------------
                                        2004        2003        2004        2003
                                     -----------------------------------------------
<S>                                  <C>         <C>         <C>         <C>
Sales, net                           $1,030,962  $        -  $1,030,962  $        -
Cost of sales                           777,435           -     777,435           -
                                     -----------------------------------------------

          Gross profit                  253,527           -     253,527           -
                                     -----------------------------------------------
Operating expenses:
  General and administrative            300,734           -     412,410           -
  Selling and marketing                 173,901           -     173,901           -
  Research and development              136,328           -     136,328           -
                                     -----------------------------------------------

          Total operating expenses      610,963           -     722,639           -
                                     -----------------------------------------------

          Operating loss               (357,436)          -    (469,112)          -
                                     -----------------------------------------------
Other income (expense):
  Interest expense                         (751)          -        (751)          -
                                     -----------------------------------------------
          Total other income
            (expense)                      (751)          -        (751)          -
                                     -----------------------------------------------
Loss from continuing operations
  before benefit from income taxes     (358,187)          -    (469,863)          -

Income tax benefit                            -           -           -           -
                                     -----------------------------------------------

Loss from continuing operations        (358,187)          -    (469,863)          -

Loss from discontinued operations,
  net of income taxes                         -      (3,407)          -      (7,125)
                                     -----------------------------------------------

Net loss                             $ (358,187) $   (3,407) $ (469,863) $   (7,125)
                                     ===============================================

Net loss per share from continuing
  operations                         $    (0.04) $        -  $    (0.06) $        -
Net loss per share from
  discontinued operations            $        -  $        -  $        -  $        -
                                     ===============================================

Net loss per share - basic and
  diluted                            $    (0.04) $        -  $    (0.06) $        -
                                     ===============================================

Weighted average shares - basic and
  diluted                             8,874,000   2,691,000   7,577,000   2,691,000
                                     ===============================================
</TABLE>

                                       2

<PAGE>


                              VIKING SYSTEMS, INC.
                        Unaudited Statement of Cash Flows
                            Six Months Ended June 30,
                                                              2004       2003
                                                          ---------------------
Cash flows from operating activities:
  Net loss                                                $(469,863)   $(7,125)
  Adjustment to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                             3,627          -
    Change in operating assets and liabilities:
      Accounts receivable, net                             (156,493)     1,262
      Inventories, net                                      (10,164)         -
      Prepaids and other current assets                     (75,366)         -
      Accounts payable                                      308,991      4,450
      Accrued compensation                                   46,886          -
      Other accrued expenses                                 17,122          -
      Deferred revenue                                       (5,250)         -
                                                          ---------------------

          Net cash used in operating activities            (340,510)    (1,413)
                                                          ---------------------
Cash flows from investing activities:
  Net cash paid in acquisition                             (158,718)         -
  Purchase of property and equipment                        (15,127)         -
                                                          ---------------------

          Net cash used in investing activities            (173,845)         -
                                                          ---------------------
Cash flows from financing activities:
  Proceeds from issuance of preferred stock                 400,000          -
  Proceeds from related-party note payable                  100,548      1,165
  Payments on capital lease obligations                      (2,086)         -
                                                          ---------------------

          Net cash provided by financing activities         498,462      1,165
                                                          ---------------------

          Net decrease in cash and cash equivalents         (15,893)      (248)

Cash and cash equivalents at beginning of period             35,525        358
                                                          ---------------------

Cash and cash equivalents at end of period                $  19,632    $   110
                                                          =====================

Supplemental disclosure of cash flow information:
Cash paid during the year for:

      Interest                                            $       -    $     -
                                                          =====================

      Income taxes                                        $       -    $     -
                                                          =====================

                                       3

<PAGE>



                                 VIKING SYSTEMS
                          Notes to Financial Statements
                     Six Months Ended June 30, 2004 and 2003


1.   Interim Financial Statements

     The financial  statements  for the three and six months ended June 30, 2004
and  2003 are  unaudited.  However,  management,  in its  opinion,  has made all
adjustments  (consisting only of normal recurring accruals) necessary to present
fairly the  financial  position,  results of  operations  and cash flows for the
periods presented.  The financial statements and notes thereto should be read in
conjunction with the consolidated  financial  statements and notes for the years
ended December 31, 2003 and 2002,  included in the Company's Form 10KSB filed on
March 9, 2004 with the  Securities  and  Exchange  Commission.  The  results  of
operations  and cash flows for the three and six months ended June 30, 2004, are
not necessarily indicative of results for the year ending December 31, 2004.

2.   Stock-Based Compensation

     The Company accounts for stock-based compensation under the recognition and
measurement  principles  of APB Opinion No. 25,  Accounting  for Stock Issued to
Employees,  and related  interpretations.  The Company has adopted SFAS No. 123,
"Accounting for Stock-Based Compensation".  In accordance with the provisions of
SFAS 123,  the Company has  elected to continue to apply  Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees"  ("APB Opinion
No. 25"), and related  interpretations in accounting for its stock option plans.
In accordance with APB Opinion No. 25, no compensation  cost has been recognized
for these plans.  Had  compensation  cost for these plans been determined  based
upon the fair value at the grant date consistent with the methodology prescribed
under SFAS No. 123, the  Company's  net earnings  would have been changed by the
following as set forth in the table below:

                                       4

<PAGE>

2.  Stock-Based Compensation - Continued

                                      Three Months Ended     Six Months Ended
                                           June 30,              June 30,
                                     --------------------- ---------------------
                                        2004       2003       2004       2003
                                     --------------------- ---------------------

    Net loss, as reported            $(358,187) $  (3,407) $(469,863) $  (7,125)

    Deduct:  Total stock-
    based employee
    compensation expense
    determined under fair
    value based method for all
    awards, net of related tax
    effects                               (807)         -       (807)         -
                                     --------------------- ---------------------

    Pro forma net loss               $(358,994) $  (3,407) $(470,670) $  (7,125)
                                     ===================== =====================


    Earnings per share-

       Basic and diluted -
         as Reported                 $   (0.04) $   (0.00) $   (0.06) $   (0.00)
                                     ===================== =====================

       Basic and diluted  -
         pro forma                   $   (0.04) $   (0.00) $   (0.06) $   (0.00)
                                     ===================== =====================

2.  Stock-Based Compensation - Continued




The fair value of  each option grant is estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions:

                                               June 30,
                                         --------------------
                                           2004        2003
                                         --------------------

        Expected dividend yield          $     -      $     -
        Expected stock price volatility        0%           -
        Risk-free interest rate              2.0%           -
        Expected life of options          4 years           -
                                         --------------------

     The weighted  average fair value of options  granted  during the six months
ended June 30, 2004 is $.35.  There were no options issued during the six months
ended June 30, 2003.

                                       5

<PAGE>


3.   Liquidity

     As of March  31,  2004,  the  Company  had a  working  capital  deficit  of
approximately  $39,000.  In  addition,  the  Company  has  incurred  losses from
operations  and has been unable to generate  positive cash flows from  operating
activities.  Subsequent  to March 31,  2004,  the  Company  completed  a private
placement  sale of  common  stock in which  $450,000  in cash was  received  and
$50,000 of note payable was converted to common stock. The Company believes that
the receipt of these funds will be sufficient to sustain  operations through the
end of 2004,  however,  if operations do not improve or if the Company is unable
to obtain additional financing, it may be required to reduce operations,  reduce
or discontinue  further research and  development,  and/or reduce or discontinue
further  acquisition  activities.  The  Company  believes  that it will  require
additional  financing to complete further  acquisitions.  The Company intends to
attempt to raise an additional $3.9 million through a private placement offering
of common  stock in the next four  months  and has  engaged a  broker-dealer  to
assist in this endeavor. There can be no assurance that the Company will be able
to raise all or any of this amount or that the $500,000  financing received will
be sufficient to sustain operations through the end of 2004.

4.   Discontinued Operations

     On December  31,  2002,  the  Company's  management  and board of directors
decided to  discontinue  all of it's  operations  related to the  development of
software applications, hardware sales and leasing, and training and support, due
to the Company's insufficient cash flows to support operations.

     All  operations  related  to  the  development  of  software  applications,
hardware  sales and  leasing,  and  training  and  support is  reflected  in the
financial statements as discontinued operations.

     Income statement presentation of discontinued  operations is as follows for
the respective periods:

                         Three Months Ended    Six Months Ended
                              June 30,              June 30,
                        -------------------- --------------------
                           2004      2003       2004      2003
                        -------------------- --------------------

   Revenue              $       -  $    380  $       -  $  4,941
   Costs & expenses             -    (3,787)         -   (12,066)
                        -------------------- --------------------

                        $       -  $ (3,407) $       -  $ (7,125)
                        ==================== ====================

                                       6

<PAGE>


5.   Loss Per Share

     The  computation  of basic  earnings per common share is computed using the
weighted average number of common shares outstanding during each year.

     The  computation  of diluted loss per common share is based on the weighted
average  number of shares  outstanding  during  the  period  plus  common  stock
equivalents  which would arise from the  exercise of stock  options  outstanding
using the treasury  stock  method and the average  market price per share during
the year, and the conversion of the series A preferred  stock to common stock at
an exchange rate of 4 to 1, or  20,000,000  common  shares.  Options to purchase
1,770,000 and 0 shares of common stock at prices  ranging from $.02 to $.35 were
outstanding at June 30, 2004 and 2003,  respectively.  Common stock  equivalents
were not included in the diluted loss per share  calculation  because the effect
would have been antidilutive.

6.   Acquisition

     On April 15, 2004, the Company  acquired all of the assets of visualization
business  segment (the Segment) of Vista  Medical  Technologies,  Inc.  (Vista).
Pursuant to the terms of the Asset Purchase Agreement, the Company purchased all
assets  related to the Segment in exchange  for a  combination  of cash,  common
stock,  and  assumed  liabilities.  Specifically,  at  closing,  the Company was
required  to pay Vista  cash of the sum of  $158,718,  and  issue  shares of its
common stock equal to ten percent  (10%) of the  fully-diluted  common shares of
Viking stock (3,054,000 shares).  Additionally, at closing, Vista entered into a
License  Agreement  with  intellectual  property and product  rights used in the
operation of the Segment.  In exchange for this license grant,  the Company will
pay Vista  royalties over the next five (5) years based on sales of the products
of the  Segment by the  Company.  The License  Agreement  will  contain  minimum
royalties  of  $150,000 in year one,  $300,000  in each of years two,  three and
four, and $375,000 in year five. The royalties  payable by the Company under the
License Agreement are capped at $4,500,000 in the aggregate,  over the five-year
period.  Vista will retain  ownership of all  intellectual  property and product
rights under the License  Agreement  until these royalty  obligations  have been
satisfied,  at which time Vista will  transfer  ownership  of such  intellectual
property  and product  rights to the  Company.  Lastly,  Vista  consigned to the
Company at closing its current inventory of products and parts. The Company will
reimburse Vista the value of that  inventory,  if and when sold, over the course
of the next year.


                                       7

<PAGE>


7.   Supplemental Disclosure of Cash Flow Information

     On April 15, 2004 the Company acquired certain assets of the  visualization
technologies business of Vista Medical Technologies,  Inc. in exchange for cash,
stock and the assumption of certain  liabilities.  Assets acquired,  liabilities
assumed,  common stock issued,  and cash paid in the  acquisition is detailed as
follows:

              Accounts receivable                $ 374,027
              Inventory                            266,344
              Property and equipment                33,309
              Accounts payable                    (347,309)
              Accrued compensation                 (77,188)
              Other accrued expenses               (14,767)
              Deferred revenue                      (9,250)
              Capital lease                         (5,368)
              Common stock issued                  (61,080)
                                                 ----------

              Net cash paid in acquisition       $ 158,718
                                                 ----------

8.   Subsequent Events

     Subsequent  to the end of the  quarter,  the  Company  commenced  a private
placement  offering with the intent to sell 1,250,000 shares of common stock for
$.40 per share.  As of the date of this filing,  1,250,000  shares had been sold
with proceeds of $500,000.

     On August 6, 2004,  Viking  entered into an Asset  Purchase  Agreement with
Lighthouse Imaging Corporation ("Lighthouse") regarding the possible acquisition
of the assets of Lighthouse. Lighthouse is a provider of optical engineering and
design  services  for the  medical  device  industry.  Founded in 1984 by Dennis
Leiner,  Lighthouse  specializes in miniature medical optics design and assembly
as an FDA registered medical device manufacturer.

     If the acquisition  transaction is closed,  which we anticipate will occur,
the general terms of the transaction will be as follows:

     o    Viking  will  acquire  substantially  all of the assets of  Lighthouse
          except for certain excluded assets.

     o    Viking will pay Lighthouse $270,000 at closing.

     o    Viking will issue  Lighthouse  750,000  shares of its common  stock at
          closing.

     o    Viking will assume certain liabilities of Lighthouse.

                                       8

<PAGE>

     o    Viking will hire  substantially  all of the  employees  of  Lighthouse
          including Lighthouse's current CEO and principal owner, Dennis Leiner.

     On July 19, 2004, Viking entered into a consulting  agreement with Hyacinth
Resources,  Inc. The agreement  provides that Hyacinth will provide a variety of
services  to  Viking in an effort to  increase  the scope of our  business.  The
agreement  expires on December 31, 2004.  In exchange for the  services,  Viking
will grant one million stock options with an exercise price of $.50 per share to
Hyacinth.  The options vest upon specified  increases in Viking's net worth. The
options expire three years after vesting.


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

In this report  references  to  "Viking,"  "we," "us," and "our" refer to Viking
Systems, Inc.

Introduction

     Viking  was  incorporated  in  Nevada  on May 28,  1998,  discontinued  its
previous operations,  and in 2003, changed its business plan and management. Our
business  plan is to complete a series of  acquisitions  in the  medical  device
market,  initially focusing on companies with vision,  optics, laser, sensor and
other  medical  technology.  On  December  22,  2003,  we entered  into an Asset
Purchase  Agreement  for our first  acquisition.  On April 15,  2004,  the Asset
Purchase  agreement  was  closed  and the  asset  purchase  agreed  to  therein,
consummated.

Viking Business Strategy

     Viking is  strategically  focused  on  developing  a  portfolio  of medical
products,  technologies  and  services  that  serve  the  needs of the  surgical
environment.  Through our development  capabilities,  targeted  acquisitions and
business  alliances,  we intend  to  position  Viking as a leader in  integrated
information (Infomatix(TM)), visualization and surgical control solutions.

     Early  Stage  Ventures.  We are  interested  in early  stage  ventures  and
research  programs (private or public) with technologies that are either focused
on  clinical/surgical  information  (Infomatix(TM))  or leading edge imaging and
optics appropriate to minimally invasive or complex surgical procedures. We seek
investment  opportunities  and  licensing  agreements  with  those that meet our
standards of commercial potential,  portfolio alignment and patents of strategic
value.

     Mergers and Acquisitions.  We are actively seeking  businesses,  operations
and   product-lines   that  are   focused   on   clinical/surgical   information
(Infomatix(TM)),  digital imaging, 3D visioning,  surgical robotics,  endoscopic

                                       9

<PAGE>

and laparoscopic  solutions and single-use  surgical products.  We believe there
are a substantial number of businesses in both North America and Europe that are
complementary  to  our  technologies,   portfolio   requirements  and  strategic
direction.  Given the continuing  downturn in provider capital spending,  a weak
IPO market and the need for  alternative  exit  strategies  for the many venture
capital  firms  holding a portfolio of small medical  technology  companies,  we
believe  we offer a  pathway  for  growth  and  success.  We  intend  to play an
increasing role in the medical  technology  market,  with the goal of generating
revenues, profitability and increased market value.

      Small and midsize companies, operations or products that we acquire will
likely meet some or all of the following criteria:

     o    Demonstrated revenue growth
     o    Strategic patents and/or technology leadership
     o    Strong  relationships in the surgical community
     o    Regulatory approval (FDA and/or CE)
     o    Solid technical management and skills
     o    Distribution and/or Service capability

     Business  Alliances  and  Partnerships.  We will seek out  businesses  that
require  expanded  distribution  and have products and services within the scope
and intent of our  business.  We are  particularly  interested  in alliances and
partnerships   with   organizations   having    clinical/surgical    information
(Infomatix(TM)) capabilities, a systems integration and engineering focus and/or
have  software  and  imaging  products  currently  recognized  and in-use in the
surgical environment.  We believe the Vista acquisition gives us a good platform
for strategic acquisitions and alliances in our markets.

Acquisition Agreement with Vista Medical Technologies, Inc.

     On December  22, 2003,  Viking  entered  into an Asset  Purchase  Agreement
("Purchase  Agreement")  with Vista  Medical  Technologies,  Inc.  ("Vista"),  a
Delaware  corporation.  Pursuant to the  Purchase  Agreement,  Viking  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").  The  closing  of  the  Purchase  Agreement  ("Closing")
occurred on April 15, 2004. In addition to the purchase of assets from Vista, at
Closing Viking entered into a "License  Agreement" with Vista whereby Viking now
has the  exclusive,  worldwide  license to  commercialize  certain  intellectual
property owned by Vista which is used in the Medical Technology Business.

Description of Vision Systems Group

     As the  result  of the  acquisition  of  assets  and the  licensing  of the
technologies from Vista, we now operate the Medical  Technology  Business as the
Vision  Systems  Group (VSG) of Viking.  The Vision  Systems  Group,  located in
Westborough,  Massachusetts,  develops,  manufactures and markets products which

                                       10

<PAGE>

provide surgeons and  interventional  physicians  performing  complex  minimally
invasive procedures with a more effective,  ergonomic method of visualization of
anatomical  structures.  3-D  Visualization is generally  regarded as a critical
enabler to the broader  adoption of complex  minimally  invasive  procedures  in
numerous  clinical  specialties.  Viking  aims to increase  surgeons'  access to
critical  operative data. The surgeon's access to operative data, on demand,  in
real time and  integrated  with the  anatomical  image,  can  enhance  procedure
performance.  Until recently,  visualization products have failed to capture the
quality and realism  necessary to be  differentiated  from standard flat imaging
modalities.  With  products  introduced  in 2004,  VSG has  achieved the quality
breakthroughs  that the Company  believes will meet this much  recognized  need,
accelerate  adoption and further clinical advances in orthopedic,  laparascopic,
cardiac, neurosurgical, ENT and other rapidly evolving specialties.

     VSG's principal product line is the EndoSite  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
additional  information  in a  voice-controlled,  picture-in-picture  format  to
facilitate  decision-making.  The VSG Head Mounted Display (HMD),  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.

     The trend governing the development of surgical procedures in most surgical
disciplines is consistently towards a less invasive approach. In the last twenty
years,  the majority of non-complex  procedures  (cholecystectomy,  arthroscopy)
have converted to minimally  invasive  technique.  The  conversion  rate in more
complex,  usually reconstructive,  procedures has inevitably been slower, either
because  the  procedure  protocol  is not yet well  worked  out or  because  the
contributing  technologies are not sufficiently  developed to the required level
of sophistication (endoscopic cardiac surgery, in its first iteration, is a good
example.)  However,  the trend  towards  conversion  of complex  procedures to a
minimally  invasive  approach is reaching an  inflection  point,  as  applicable
technologies move from first to second generation,  and companies and physicians
learn how to combine their utilization to enable effective procedure protocols.

     More complex  procedures  usually  involve both resection and dissection of
small  and  delicate  neural  and  circulatory  structures,  as well as  precise
reconstructive  suturing.  It is in this  environment  that the benefits of true
three-dimensional  vision become apparent.  As other technologies,  particularly
robotics, also advance, the necessity of "natural" 3-D visualization is becoming
accepted  as a  standard.  The most  significant  rewards,  in terms of  patient
benefit,  will be received when the most invasive and complex procedures convert
to a  minimally  invasive  approach.  The Company  believes  that that a natural
ergonomic  3-D  visualization  capability  is an  essential  component  of  this
inevitable  progression.  These  trends are  evident in the data for the general
laparoscopy market which is projected to grow to over $1.2 billion by 2006.

                                       11

<PAGE>

Vision System Group Products

     Our technology provides a 3-D visualization solution to the inherent vision
restrictions  and demands of minimally  invasive  microsurgery.  Our  technology
provides  the surgeon  with a clear view of the anatomy with the ability to view
additional information in a voice-controlled,  picture-in-picture  format, which
facilitates  real-time  decision making during the procedure.  Our technology is
based on the  following  principles  which we believe are essential in advancing
the techniques of minimally invasive  microsurgery.  We believe these principles
offer several key advantages over other visualization approaches:

          3-D View.  The surgeon's  ability to view the  principal  image of the
     anatomy in 3-D  provides the accurate  depth  perception  necessary so that
     vital  anatomical  structures are accurately  identified and located.  This
     improves  safety,  precision and speed of the procedure.  Also, a secondary
     video image is available in  picture-in-picture  format, when the procedure
     will benefit from two different views of the anatomy.

          High Resolution  Images.  The  availability of a high resolution image
     which can be electronically  managed by the surgeon significantly  enhances
     the  surgeon's  ability  to  differentiate  critical  tissues in a confined
     setting and perform intricate dissection, reconstruction and removal.

          Access.  The surgeon  benefits  from  technology  which allows for the
     direct  insertion of a camera into the body cavities or organs and provides
     high quality images that are easy to see and understand.

          Ergonomics.  Due to the complex and time consuming nature of minimally
     invasive microsurgery procedures, the surgeon requires an ergonomic display
     system which allows  comfortable  operating posture and maximizes  hand-eye
     coordination without strain.

          Information  Integration.  The surgeon's access to critical monitoring
     and  diagnostic  data,  on  demand,  in real time and  integrated  with the
     anatomical  image within the  surgeon's  visual field,  enhances  procedure
     performance.

     These  principles form the basis of our EndoSite  Vision System  components
and our OEM camera systems.  All necessary 510(k)  clearances and CE marks which
are required to market the components of the EndoSite System have been received.

     The  Vision  Systems  Group is  operating  from  its  current  facility  in
Westborough MA with 22 employees.

                                       12

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Net cash flows from operating  activities were a negative  $340,510 for the
six-month  period  ended  June 30,  2004,  compared  to net cash  flows  used in
operating activities of a negative$1,413 for the comparable period in 2003. This
increase was the result of our change of business  plan and the  acquisition  of
the Vista assets.

     Net cash  flows  provided  by  financing  activities  of  $498,462  for the
six-month  period  ended June 30, 2004  consisted  of $400,000  from the sale of
shares of our Series A  Preferred  Stock and  $100,000  from the  issuance  of a
convertible note.

     In addition to the assets we purchased from Vista, we also licensed 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  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  technology  included  in  the  Intellectual  Property.  The  License
Agreement  provides  for  minimum  annual  royalties  ranging  from  $150,000 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"). At the end of the fifth year or
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.

     As of June 30, 2004, we had total assets of $946,835,  of which $19,632 was
cash  and  $530,520  was  accounts  receivable.  As of  June  30,  2004,  we had
liabilities  of  $941,311.  As of December  31,  2003,  we had total assets of $
35,525 and liabilities of $21,218. The increase in assets from December 31, 2003
to June 30, 2004 was the result of
      _
     |_|  our sale of  5,000,000  shares  of our  Series A  Preferred  Stock for
          $400,000.  Each share of Series A Preferred Stock is convertible  into
          four shares of common stock.

                                       13

<PAGE>

      _
     |_|  our completion of the acquisition of the medical  technology  business
          of Vista Medical Technologies, Inc.

     In pursuing our current business plan we intend to attempt to acquire other
businesses or business  operations.  With the  exception of  Lighthouse  Imaging
Corporation,  we have not yet selected any additional  acquisition  targets, but
are continuing our search for suitable acquisitions.  We anticipate that we will
be required to raise  additional  capital to fund future  acquisitions.  We will
likely  attempt  to  raise  some  additional  capital  through  the  sale of our
securities in private and/or public offerings.

     Subsequent to June 30, 2004, we raised  $500,000 from the sale of 1,250,000
of shares of our common stock in a non-public  offering  ($.40 per share).  This
included the  conversion of $50,000 of  convertible  debt into 125,000 shares of
our common stock and $450,000 in cash proceeds from the sale of common stock. We
will use this  amount  to fund  negative  cash  flow  from  operations,  product
development and for working capital.

     We believe  that the  financing of $500,000 in cash will be  sufficient  to
sustain our  operations  through  the end of our fiscal  year,  however,  if our
operations do not improve or if we are unable to obtain additional financing, we
may be required to reduce operations, reduce or discontinue further research and
development,  and/or reduce or discontinue  further acquisition  activities.  We
believe  that  we  will  require   additional   financing  to  complete  further
acquisitions.  There can be no assurance  that we will be able to obtain further
financing or that the $500,000  financing received will be sufficient to sustain
our operations through the end of 2004.

     We  intend  to  attempt  to raise an  additional  $3,900,000  in a  private
financing in the next four months and have engaged a broker-dealer  to assist us
in this endeavor. There can be no assurance that we will be able to raise all or
any of this amount.  The net offering  proceeds will be used for working capital
including the acquisition of additional business operations.

     We have entered into an Asset  Purchase  Agreement to acquire the assets of
Lighthouse Imaging Corporation. If this acquisition is completed, of which there
can be no  assurance,  we will be  required  to pay  $270,000  in cash and issue
750,000 shares of our common stock at closing

RESULTS OF OPERATIONS

     In 2002 we discontinued our previous operations. As described above, we are
now engaged in the medical device market.  Our first  acquisition  was completed
during the quarter ended June 30, 2004.

Three-Month  Period Ended June 30, 2004 Compared to the Three-Month Period Ended
June 30, 2003

                                       14

<PAGE>

     Revenues.  We had of $1,030,962 for the  three-month  period ended June 30,
2004  compared to no revenues for the three  months  ended June 30,  2003.  This
increase was the result of the change of our business plan and the completion of
the Vista  acquisition  in April 2004.  All of the revenues were  generated from
Vision Systems Group operations.

     Gross Profit.  The cost of goods sold was $777,435 or  approximately  75.41
percent of total  sales.  Our gross profit was  $253,527.  We had no revenues or
gross profits for the three month period ended June 30, 2003.

     Operating Expenses.  Our operating expenses for the three months ended June
30, 2004 were $610,963 and were substantially as follows:

      Research and development expenses   -     $136,328
      General and administrative expenses -     $300,734
      Selling and Marketing Expenses      -     $173,901

     We had no stock-based compensation expense for the three-month period ended
June 30, 2004.

     We had no active  operations  during the  quarter  ended June 30,  2003 but
recorded a $3,407 loss for  discontinued  operations  for the quarter ended June
30, 2003.

     Net  Loss.  Our net loss  for the  three  months  ended  June 30,  2004 was
$358,187  compared to $3,407 for the quarter ended June 30, 2003.  Our six month
loss for 2004 was $469,863  compared to $7,125 in 2003. The increased loss was a
result of the acquisition of the Vision Systems Group.  We incurred  acquisition
costs of $612,599 to Vista Medical Technologies,  Inc. for the asset purchase of
the medical technology  business.  We incurred $40,000 in audit fees for the two
year audit of the medical  technology  business.  We also  incurred  development
costs of $80,000 for the EndoSite 3Di product, which will be released in August.

     Revenues.  We had revenue of $1,030,962 for the six month period ended June
30, 2004  compared to no revenues for the six months  ended June 30, 2003.  This
increase was the result of the change of our business plan and the completion of
the Vista acquisition in April 2004. All of the revenues were generated from our
Vision  Systems  Group  operations  and all revenues were  generated  during the
quarter ended June 30, 2004.

     Gross Profit.  The cost of goods sold was $777,435 or  approximately  75.41
percent of total  sales.  Our gross profit was  $253,527.  We had no revenues or
gross profits for the six months period ended June 30, 2003.

     Operating Expenses.  Our operating expenses for the three months ended June
30, 2004 were $722,639 and were substantially as follows:

                                       15

<PAGE>

      Research and development expenses   -     $136,328
      General and administrative expenses -     $412,410
      Selling and Marketing Expenses      -     $173,901

     We had no stock-based  compensation  expense for the six-month period ended
June 30, 2004.

     We had no active  operations  during the six months ended June 30, 2003 but
recorded a $7,125 loss for discontinued operations for the six months ended June
30, 2003.

     Net Loss.  Our net loss for the six months ended June 30, 2004 was $469,863
compared to $7,125 for the quartered ended June 30, 2003.

Forward Outlook and Risks

     This  Form  10-QSB   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-QSB,  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 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-QSB. These forward-looking  statements represent our judgment as of
the date of this Form 10-QSB.  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.

     Operating History;  No Assets; No Present Source of Revenues.  We have been
inactive since 2002. We just recently  commenced active  operations by acquiring
assets from Vista and intend to acquire 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.

                                       16

<PAGE>

     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.  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.  There can be no assurance that a trading
market for our securities will ever develop.

     Auditor's  Opinion  has a Going  Concern  Qualification.  While  the  going
concern  qualification  was  eliminated  by our  auditor  in  this  10-QSB,  our
auditor's  report  dated  March 1, 2004 for the year  ended  December  31,  2003
included  a going  concern  qualification  which  stated  that  our  significant
operating  losses  raise  substantial  doubt at that time  about our  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 acquired  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.
We  hired  substantially  all of  the  employees  involved  in  Vista's  Medical
Technology  Business.  Our  future  success  will  depend  to a large  extent on

                                       17

<PAGE>

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 are selling medical devices and intend to sell additional  medical devices in
the future.  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,  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 surgery.

     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.  We  market  the  products  previously
marketed by Vista in its  Medical  Technology  Business.  Our  profitability  is
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

                                       18

<PAGE>

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
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 have obtained liability insurance coverage,
however,  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.  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.

                                       19

<PAGE>


                         ITEM 3. CONTROLS AND PROCEDURES
                EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     (a)   Evaluation of Disclosure Controls and Procedures

     Based on their  evaluations  as of June 30, 2004,  the principal  executive
officer and principal  financial  officer of the Company have concluded that the
Company's  disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e)  under the  Securities  Exchange  Act) are  effective  to ensure  that
information  required to be disclosed by the Company in reports that the Company
files or submits  under the  Securities  Exchange  Act is  recorded,  processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC.

      (b)   Changes in Internal Controls

     There were no significant  changes in the Company's  internal controls over
financial  reporting or in other factors that could  significantly  affect these
internal  controls  subsequent  to the date of  their  most  recent  evaluation,
including any  corrective  actions with regard to significant  deficiencies  and
material weaknesses.


                                       20

<PAGE>


                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.  We are not a party to any legal proceeding.

Item 2.  Changes in the Rights of the Company's Security Holders.  None.

Item 3.  Defaults by the Company on its Senior Securities.  None

Item 4.  Submission of Matters to Vote of Security Holders.  None

Item 5.  Other Information.

Item 6(a). Exhibits. 31.1 Certification  by  the  Chief  Executive   Officer
                     pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

                     31.2 Certification by the Chief Financial Officer pursuant
                     to Section 302 of the Sarbanes-Oxley Act of 2002.

                     32.1 Certification by the Chief Executive Officer pursuant
                     to Section 906 of the Sarbanes-Oxley Act of 2002.

                     32.2 Certification by the Chief Financial Officer pursuant
                     to Section 906 of the Sarbanes-Oxley Act of 2002.

Item 6(b).  Reports on Form 8-K.  Form 8-K's were filed by the  Company on April
19, 2004, May 10, 2004, June 9, 2004 and June 30, 2004.



                                    SIGNATURE

        In accordance with the requirements of the Exchange Act, the Company has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.

Dated:    August 10, 2004          VIKING SYSTEMS, INC.

                                  By    /s/ Thomas B. Marsh
                                        Chief Executive Officer, President

                                  By    /s/ Joseph Warrino
                                        Chief Financial Officer

                                       21