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 quarterly period ended September 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 November 5, 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 September 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 September 30, 2004                        1
          Unaudited Statement of Operations for the Three and
            Nine Months Ended September 30, 2004 and 2003                      2
          Unaudited Statement of Cash Flows for the Nine Months
            Ended September 30, 2004 and 2003                                  3
          Notes to Financial Statements                                    4 - 8

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                                                        27


                          PART II - OTHER INFORMATION

                                                                            Page

Item 1. Legal Proceedings                                                     28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.          28
Item 3. Defaults Upon Senior Securities                                       28
Item 4. Submission of Matters to a Vote of Security Holders                   28
Item 5. Other Information                                                     28
Item 6. Exhibits                                                              28



<PAGE>



                         PART I - FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS

                              VIKING SYSTEMS, INC.
                             Unaudited Balance Sheet
                               September 30, 2004


       Assets
       ------

Current assets:
  Cash and cash equivalents                                          $   95,377
  Accounts receivable, net                                              354,903
  Inventories                                                           427,464
  Prepaids and other current assets                                     134,973
                                                                     -----------

         Total current assets                                         1,012,717

Property and equipment, net                                             144,130
                                                                     -----------

                                                                     $1,156,847
                                                                     ===========
--------------------------------------------------------------------------------

       Liabilities and Stockholders' Equity
       ------------------------------------

Current liabilities:
  Accounts payable                                                   $  819,925
  Capital lease obligations                                               1,336
  Accrued compensation                                                  158,174
  Other accrued expenses                                                109,265
  Deferred revenue                                                        1,000
                                                                     -----------

         Total current liabilities                                    1,089,700

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; 10,598,650 shares issued and outstanding                 10,599
  Additional paid-in capital                                          1,290,481
  Accumulated deficit                                                (1,238,933)
                                                                     -----------

         Total stockholders' equity                                      67,147
                                                                     -----------

                                                                     $1,156,847
                                                                     ===========

                                       1

<PAGE>


                              VIKING SYSTEMS, INC.
                        Unaudited Statement of Operations
                  Three and Nine Months Ended September 30, 2004 and 2003

                                    Three Months Ended       Nine Months Ended
                                       September 30,           September 30,
                                  ----------------------------------------------
                                     2004        2003         2004        2003
                                  ----------------------------------------------
Sales, net                        $1,094,096  $       -   $2,125,058  $       -
Cost of sales                        760,348          -    1,537,783          -
                                  ----------------------------------------------

         Gross profit                333,748          -      587,275          -
                                  ----------------------------------------------
Operating expenses:
  General and administrative         414,026          -      826,436          -
  Selling and marketing              204,765          -      378,666          -
  Research and development           152,378          -      288,706          -
                                  ----------------------------------------------

         Total operating expenses    771,169          -    1,493,808          -
                                  ----------------------------------------------

         Operating loss             (437,421)         -     (906,533)         -
                                  ----------------------------------------------
Other income (expense):
  Interest expense                      (956)         -       (1,707)         -
                                  ----------------------------------------------
         Total other income
           (expense)                    (956)         -       (1,707)         -
                                  ----------------------------------------------
Loss from continuing operations
  before benefit from income
  taxes                             (438,377)         -     (908,240)         -

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

Loss from continuing operations     (438,377)         -     (908,240)         -

Loss from discontinued operations,
  net of income taxes                      -     (8,998)           -    (16,123)
                                  ----------------------------------------------

Net loss                          $ (438,377) $  (8,998)  $ (908,240) $ (16,123)
                                  ----------------------------------------------

Net loss per share from
  continuing operations           $    (0.05)         -        (0.11)        -
Net loss per share from
  discontinued operations         $        -          -            -         -
                                  ----------------------------------------------
Net loss per share - basic and
  diluted                         $    (0.05)         -        (0.11)        -
                                  ----------------------------------------------

Weighted average shares - basic
  and diluted                      9,720,000  2,707,000    8,298,000  2,697,000
                                  ----------------------------------------------

                                       2

<PAGE>


                              VIKING SYSTEMS, INC.
                        Unaudited Statement of Cash Flows
                         Nine Months Ended September 30,

                                                               2004      2003
                                                            --------------------

Cash flows from operating activities:
  Net loss                                                  $(908,240) $(16,123)
  Adjustment to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                              12,752         -
    Change in operating assets and liabilities:
     Accounts receivable, net                                  19,124     1,312
     Inventories, net                                        (161,120)        -
     Prepaids and other current assets                       (134,973)        -
     Accounts payable                                         451,398     9,407
     Accrued compensation                                      80,986         -
     Other accrued expenses                                    94,498         -
     Deferred revenue                                          (8,250)        -
                                                            --------------------

         Net cash used in operating activities               (553,825)   (5,404)
                                                            --------------------
Cash flows from investing activities:
  Net cash paid in acquisition                               (158,718)        -
  Purchase of property and equipment                         (123,573)        -
                                                            --------------------

         Net cash used in investing activities               (282,291)        -
                                                            --------------------
Cash flows from financing activities:
  Proceeds from issuance of preferred stock                   400,000         -
  Proceeds from issuance of common stock                      450,000         -
  Proceeds from related-party note payable                    100,000     5,085
  Payments on related-party note payable                      (50,000)        -
  Payments on capital lease obligations                        (4,032)        -
                                                            --------------------

         Net cash provided by financing activities            895,968     5,085
                                                            --------------------
         Net increase (decrease) in cash and cash
           equivalents                                         59,852      (319)

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

Cash and cash equivalents at end of period                  $  95,377  $     39
                                                            --------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
     Interest                                               $   1,707  $      -
                                                            --------------------

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

                                       3

<PAGE>



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


1.   Interim Financial Statements

     The financial  statements for the three and nine months ended September 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 nine  months  ended  September  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     Nine Months Ended
                                          September 30,         September 30,
                                    ---------------------  ---------------------
                                        2004      2003         2004      2003
                                    ---------------------  ---------------------

        Net loss, as reported       $(438,377) $  (8,998)  $(908,240) $ (16,123)

        Deduct:  Total
        stock-based employee
        compensation expense
        determined under
        fair value based
        method for all
        awards, net of
        related tax effects            (1,488)         -      (4,464)         -
                                    ---------------------  ---------------------

        Pro forma net loss          $(439,865) $  (8,998)  $(912,704) $ (16,123)
                                    =====================  =====================

        Earnings per share-

          Basic and diluted -
            as Reported             $   (0.05) $   (0.00)  $   (0.11) $   (0.01)
                                    =====================  =====================
          Basic and diluted -
            pro forma               $   (0.05) $   (0.00)  $   (0.11) $   (0.01)
                                    =====================  =====================


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:

                                                    September 30,
                                             -------------------------
                                                  2004        2003
                                             -------------------------

           Expected dividend yield           $         -    $        -
           Expected stock price volatility         33.85%            -
           Risk-free interest rate                   2.0%            -
           Expected life of options               4 years            -
                                             =========================

     The weighted  average fair value of options  granted during the nine months
ended  September 30, 2004 is $.12.  There were no options issued during the nine
months ended September 30, 2003.

                                       5

<PAGE>




3.   Liquidity

     As of September  30,  2004,  the Company had a working  capital  deficit of
approximately  $77,000.  In  addition,  the  Company  has  incurred  losses from
operations  and has been unable to generate  positive cash flows from  operating
activities.  During the quarter ended  September 30, 2004, the Company  received
$450,000  from the sale of  1,125,000  shares of  common  stock.  Subsequent  to
September  3,  2004,  the  Company  received  $200,000  from the  issuance  of a
convertible note payable and entered into an Accounts  Receivable Line of Credit
with Silicon  Valley  Bank,  that will allow us to finance up to $400,000 of our
accounts receivable.  Management believes that the funds raised during the third
quarter and  subsequent  to  September  30,  2004,  together  with the  Accounts
Receivable Line of Credit,  will be sufficient to sustain operations through the
end of the year. Management also believes that sufficient additional cash can be
generated to continue as a going concern by (1) raising capital through issuance
of equity and debt, (2)  continuing to increase  revenue  through  obtaining new
customers and (3)  minimizing  operating  costs.  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 is in the process of attempting to raise an additional
$3.9 million  through a private  placement  offering of common stock in the next
two 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 management's plans will be successful.

4.   Discontinued Operations

     On December  31,  2002,  the  Company's  management  and board of directors
decided to  discontinue  all of its  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      Nine Months Ended
                              September 30,           September 30,
                         ----------------------  ----------------------
                             2004      2003          2004       2003
                         ----------------------  ----------------------

       Revenue           $        - $        0   $        - $        0
       Costs & expenses           -     (8,998)           -    (16,123)
                         ----------------------  ----------------------

                         $        - $   (8,998)  $        - $  (16,123)
                         ======================  ======================

                                       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
2,990,000  shares  of  common  stock at  prices  ranging  from $.02 to $.50 were
outstanding  at  September  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

     During the nine months ended September 30, 2004 the Company paid $50,000 of
a note  payable  through  the  issuance of common  stock.  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.   Letter of Intent

     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.

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

                                       8

<PAGE>

                 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.

Overview

     Viking  Systems,  Inc.  is  positioning  to be a market  leader in bringing
integrated solutions to the digital surgical environment. We intend to develop a
portfolio of targeted  medical  technologies and services that serve the current
and emerging needs of the digital  healthcare  network.  Our focus is to deliver
integrated  information,  visualization,  and control  solutions to the surgical
team,  enhancing their capability and performance in minimally  invasive surgery
(MIS) and complex surgical procedures.  We intend to build our medical solutions
portfolio  through  product  development,  targeted  acquisitions,  and a global
network of  business  alliances.  Viking was  incorporated  in Nevada on May 28,
1998,  discontinued our previous  operations,  and in 2003, changed our business
plan and management. In April 2004, we completed our first acquisition.  We have
entered into an Asset Purchase Agreement in connection with a second acquisition
and we are currently  discussing  acquisition  possibilities  with other medical
device companies.

     We  established  our  Vision  Systems  Group  in  Westborough,  MA with the
acquisition  of Vista Medical  Technologies,  Inc.'s  proprietary  3-Dimensional
surgical  visualization  business and digital platform for surgical  information
delivery  (Infomatix*).  Other  acquisition  targets  currently  include optics,
digital imaging,  sensors,  surgical robotics,  and image management products or
companies.

     We intend to take full  advantage of the  fragmented  nature of the medical
products industry,  the pace of advancement in both technological and scientific
applications, and the emerging macro changes associated with national healthcare
initiatives. Viking Systems is initially focused on delivering digital solutions
for the surgeon and the surgical suite.

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.

                                       9

<PAGE>

     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
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.

                                       10

<PAGE>

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
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  3Di  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

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<PAGE>


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.

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  3Di  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 26 employees.

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Net cash flows from operating  activities were a negative  $553,825 for the
nine-month  period ended September 30, 2004,  compared to net cash flows used in
operating  activities of a negative  $5,404 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  $895,968  for the
nine-month  period ended  September 30, 2004 consisted of $400,000 from the sale
of shares of our Series A Preferred  Stock in the first  quarter.  $100,000 from
the issuance of a convertible note, $50,000 payment of the convertible note, and
$450,000 from the sale of shares of our common stock in the second  quarter.  We
are  currently  raising  $3,900,000  from the sale of our  common  shares and we
received  $200,000  from  a  convertible  note.  We  entered  into  an  Accounts
Receivable  Line of Credit with Silicon Valley Bank that will allow us to borrow
up to $400,000 against our accounts receivable.

     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,  and  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 September  30,  2004,  we had total  assets of  $1,156,847,  of which
$95,377 was cash and $354,902 was accounts receivable. As of September 30, 2004,
we had  liabilities of $1,089,700.  As of December 31, 2003, we had total assets

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<PAGE>

of $ 35,525 and liabilities of $21,218. The increase in assets from December 31,
2003 to September 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.
         _
        |_|  our completion of the acquisition of the medical technology
             business of Vista Medical Technologies, Inc.
         _
        |_|  our completion of a private placement of common stock for $450,000.

     In pursuing our current business plan we intend to attempt to acquire other
businesses or business  operations.  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.

     We believe that the financing of $450,000 in cash that we raised during the
third quarter through a private  placement,  together with the $200,000 received
from the issuance of a  convertible  note payable  subsequent  to September  30,
2004,  and the Accounts  Receivable  Line of Credit  agreement that allows us to
borrow up to $400,000 of our accounts receivable,  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 two months and have engaged a  broker-dealer  to assist us
in this  endeavor.  To date,  no  shares  have been sold  through  this  private
placement. 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.

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<PAGE>

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

     Revenues.  We had of $1,094,096 for the three-month  period ended September
30, 2004 compared to no revenues for the three months ended  September 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 $760,348 or  approximately  69.50
percent of total  sales.  Our gross profit was  $333,748.  We had no revenues or
gross profits for the three month period ended September 30, 2003.

     Operating  Expenses.  Our  operating  expenses  for the three  months ended
September 30, 2004 were $771,169 and were substantially as follows:

     Research and development expenses    -     $152,378
     General and administrative expenses  -     $414,026
     Selling and Marketing Expenses       -     $204,765

     We had no active operations during the quarter ended September 30, 2003 but
recorded  a $8,998  loss  for  discontinued  operations  for the  quarter  ended
September 30, 2003.

     Net Loss.  Our net loss for the three months ended  September  30, 2004 was
$438,377  compared  to $8,998 for the  quarter  ended  September  30,  2003.  We
incurred $40,000 in audit fees for the two year audit of the medical  technology
business.  We also incurred development costs of $111,200 and marketing costs of
$130,600 for the EndoSite 3Di product, which was released in October, 2004.

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

     Revenues.  We had revenue of  $2,125,058  for the nine month  period  ended
September 30, 2004  compared to no revenues for the nine months ended  September
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.

     Gross Profit. The cost of goods sold was $1,537,783 or approximately  72.36
percent of total  sales.  Our gross profit was  $587,275.  We had no revenues or
gross profits for the nine months period ended September 30, 2003.

     Operating  Expenses.  Our  operating  expenses  for the nine  months  ended
September 30, 2004 were $1,493,808 and were substantially as follows:

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<PAGE>

     Research and development expenses    -     $288,706
     General and administrative expenses  -     $826,436
     Selling and Marketing Expenses       -     $378,666

     We had no active operations during the nine months ended September 30, 2003
but  recorded a $16,123  loss for  discontinued  operations  for the nine months
ended September 30, 2003.

     Net Loss.  Our net loss for the nine months  ended  September  30, 2004 was
$908,240 compared to $16,123 for the nine months ended September 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.

     Limited  operating  history and continued  losses.  We adopted our business
plan in  November  2003.  We  acquired  the Vista  assets on April 15,  2004 and
therefore  we have  limited  experience  operating  in the  medical  device  and
technology business. We do employ most of the employees that worked for Vista in
the medical technology business prior to our acquisition of the Vista assets. We
intend to attempt 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. As of September 30, 2004, we had
been in medical  device  operations  for less than six  months.  For the quarter
ended  September  30,  2004,  we had net sales of  $2,125,058  and a net loss of
$908,240.  We anticipate that for at least the next two quarters we will operate
at loss while we attempt to reduce  operational  costs,  increase  our  revenues
through  acquisitions  and internal growth and consolidate  acquired  operations
with existing operations.

                                       16

<PAGE>


     Our future financial results will fluctuate  significantly.  As a result of
our  limited  operating  history,  we cannot  predict  our  future  revenues  or
operating  results.  We do,  however,  expect our future  revenues and operating
results to fluctuate  due to a  combination  of factors,  including the costs of
marketing  our products,  developing  additional  products and  acquiring  other
operations,  products and businesses.  In addition,  our operating  expenses are
based on our  expectations of future  revenues,  and are relatively fixed in the
short term.  We may be unable to adjust  spending  quickly  enough to offset any
unexpected revenue shortfall.  If we have a shortfall in revenues in relation to
our  expenses,  or if our  expenses  increase  before our  revenues do, then our
business for a particular period would be materially adversely affected. Because
of all of these  factors  and the other  risks  discussed  in this  section,  we
believe that our quarterly and annual revenues,  expenses and operating  results
likely will vary significantly in the future.

     Our  liquidity  and  capital  requirements  will be  difficult  to predict.
Moreover, our liquidity and capital requirements will depend upon other numerous
factors, including the following:

     o    The extent to which our products and services gain market acceptance;
     o    The progress and scope of product evaluations;
     o    The timing and costs of filing future regulatory submissions;
     o    The  timing  and  costs   required  to  receive   both   domestic  and
          international governmental approvals;
     o    The  timing  and  costs  of  acquisitions  and  product  and  services
          introductions;
     o    The extent of our ongoing research and development programs;
     o    The  costs  of  sponsorship  training  of  the  physicians  to  become
          proficient in the use of our products and procedures;
     o    The costs of developing marketing and distribution capabilities.

     Even if we are  successful  in  raising  additional  funds,  circumstances,
including  slow rate of market  acceptance  of our products or our  inability to
scale up  manufacturing,  would accelerate our use of proceeds from any offering
we might do and require us to seek  additional  funds to support  our  operating
requirements.

     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 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.

                                       17

<PAGE>

     No active  public market for  securities.  There is no active 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.  Our  common  stock  is
currently  quoted on the OTC  Electronic  Bulletin  Board  but there is  limited
trading  activity.  You  may not be able to  liquidate  your  investment  in the
Company should you need or desire to do so.

     Insiders  have  substantial  control and could delay or prevent a change in
corporate control.  One of our stockholders,  Donald E. Tucker, owns over 76% of
our  outstanding  common  stock.  Mr.  Tucker  will  have the  ability  to exert
significant  influence  and control over matters  requiring  the approval of our
stockholders.  His interests may be different from yours. Matters that typically
require stockholder approval include:  (i) election of directors;  (ii) approval
of  a  merger  or  consolidation;  and  (iii)  approval  of a  sale  of  all  or
substantially all of our assets.  Accordingly,  you may not be able to influence
any action we take or consider taking, even if it requires a stockholder vote.

     Auditor's opinion has a going concern  qualification.  Our auditor's report
dated  March 1, 2004 for the year  ended  December  31,  2003  included  a going
concern  qualification  that stated that our significant  operating losses raise
substantial  doubt about its ability to continue as a going concern.  Subsequent
to that  date,  we have  raised  additional  capital  and  completed  the  Vista
acquisition.  We do not  anticipate  that the  auditor's  report for the current
fiscal year will include a going concern qualification.

     No appraisal of acquired assets. We did not obtain an independent appraisal
or valuation of the assets and  operations we acquired  from Vista.  In general,
for most of our future  acquisitions of smaller companies and operations,  we do
not anticipate  that we will obtain a formal  appraisal from  independent  third
parties. We intend to consider revenues,  EBITDA,  intellectual property, market
position,  management and other factors applicable to future acquisition targets
when deciding  whether to make an offer to acquire such assets or operations and
in deciding what we are willing to pay for such assets or operations.  If we are
incorrect in our internally prepared valuations of acquisition targets, it could
result in our overpayment for assets or acquisitions acquired.


     We will need to  effectively  manage  our  growth in order to  achieve  and
sustain profitability. Our failure to manage growth effectively could reduce our
sales  growth  and result in  continued  net  losses.  If we are able to achieve
significant  growth  in  our  future  sales  and  to  expand  the  scope  of our
operations,  our management,  financial,  manufacturing and other  capabilities,
procedures  and  controls  could be  strained.  We  cannot  assure  you that our
existing or any additional capabilities, procedures, systems or controls will be
adequate to support our operations.  We may not be able to design,  implement or
improve  our  capabilities,  procedures,  systems  or  controls  in a timely and
cost-effective   manner.   Failure  to   implement,   improve   and  expand  our
capabilities, procedures, systems and controls in an efficient and timely manner
could reduce our sales growth and result in continued net losses.

     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

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<PAGE>

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.

     No assurance  of future  acquisitions.  Our  business  plan calls for us to
expand  through  acquisitions  of other assets and  operations.  Although we are
currently  discussing  acquisition  possibilities  with several other companies,
there  can  be no  assurance  that  we  will  be  able  to  finalize  additional
acquisitions,  or if we do that such acquisitions will be made on terms that are
advantageous to us or that the acquired operations will result in profits.

Medical Operations Risks

     We are now  operating  the assets and  business  segment we  acquired  from
Vista.  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 that include,
but are not limited, to the following:

     We have a limited  sales  force to sell our  products.  Currently  our only
products are those product  lines we acquired  from Vista.  We only have a small
direct  sales force to sell our  products.  There can be no  assurance  that our
marketing  efforts  will be adequate to increase  our  revenues in a  meaningful
amount.  Since April 15, 2004,  the date we acquired the Vista  assets,  we have
increased our direct sales force from one person to five persons.  We anticipate
that we will continue to increase our sales force on an as needed basis both for
the visualization business and other operations and products we acquire.

     There are significant  risks  associated with any scale-up of manufacturing
which may be required to meet market demand and become profitable. We have never
established high-volume manufacturing operations and if we are required to do so
to meet market demand or to become  profitable,  we may not be able to establish
or maintain  reliable  operations at commercially  reasonable costs. We may also
require  additional  manufacturing  facilities if production  volumes  increase.
Acquisition  of  new   manufacturing   facilities   would  also  likely  involve
relocation.  Difficulties in scaling up  manufacturing  of products could result
from problems involving:

     o    quality control and assurance,
     o    component and service availability,
     o    adequacy of control policies and procedures,
     o    lack of qualified personnel,
     o    compliance  with FDA regulations and the need for further FDA approval
          of new manufacturing processes and facilities and
     o    other production constraints.

     We have  considered  and will  continue  to consider  as  appropriate,  the
internal  manufacture  of  sub-assemblies   currently  provided  by  third-party
subcontractors,  as well as the implementation of new production processes.  Our
manufacturing  yields or costs may  increase  as a result of the  transition  to


                                       19

<PAGE>

in-house  production  or to new  production  processes  when  such  efforts  are
undertaken.  In addition,  costs to comply with FDA good manufacturing practices
or changes in such practices may exceed our expectations.

     We may face  component  shortages  and are  dependent in some  instances on
single sources of supply.  Any  significant  supply  interruption,  or inventory
shortage or overage,  would  negatively  impact our ability to  manufacture  our
products.  We use and  rely on  specific  components  and  services  used in our
systems for which we have only a single source of supply. The manufacture of our
products in larger commercial  quantities will require a substantial increase in
component  supplies  and will  likely  necessitate  the  replacement  of current
suppliers or the addition of new suppliers. The qualification of additional or a
replacement vendor for specified components or services is a lengthy process. In
addition, the substitution of replacement vendors may entail re-engineering time
and cost and could delay the supply of our  products.  We expect to  manufacture
our  products  based  on  forecasted  product  orders  and  intend  to  purchase
subassemblies and components prior to receipt of purchase orders from customers.
Lead times for ordered materials and components vary significantly and depend on
factors such as the business practices of the specific supplier,  contract terms
and general demand for a component at a given time.  Some components used in our
products  have  long  lead  times.  As a  result,  there is a risk of  excess or
inadequate inventory if orders do not match forecasts.

     We operate in a  consolidating  industry,  which  creates  barriers  to our
market   penetration.   The  healthcare   industry  in  recent  years  has  been
characterized by  consolidation.  Large hospital chains and groups of affiliated
hospitals  prefer to negotiate  comprehensive  supply contracts for all of their
supply  needs at once.  Large  suppliers  can often equip a surgical  center and
offer  these  hospital  chains  and groups  "one-stop  shopping"  for  specialty
equipment,  instruments,  supplies and services. Larger suppliers also typically
offer  flexible  financial  programs to their  customers to  encourage  sourcing
decisions. The conveniences offered by these larger suppliers are administrative
and financial  incentives  that we are  developing  and plan to  implement.  The
success of our future  plans will  depend in part on our  ability to continue to
competitively  respond to these and any new barriers  resulting  from  continued
consolidation in the healthcare industry.

     We are subject to significant domestic and international regulation and may
not be able to obtain necessary regulatory clearances to sell our products.  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.  The FDA regulates design,  testing,

                                       20

<PAGE>

manufacturing,  labeling,  distribution,  marketing,  sales and  service  of our
products.  Our  products  are  marketed  in  the  U.S.  according  to  premarket
notifications  to the FDA  under  Section  510(k)  of the  U.S.  Food,  Drug and
Cosmetic Act.

     Unless an exemption applies, each medical product that we wish to market in
the U.S. must first receive either 510(k)  clearance or premarket  approval from
the FDA.  The FDA's  510(k)  clearance  process  usually  takes from three to 12
months, but may take longer. The premarket approval process generally takes from
one to  three  years  from the time FDA  files  the  application,  but it can be
significantly  longer and can be significantly  more expensive.  Although we may
have  obtained the necessary  510(k)  clearance  for our current  products,  our
510(k) clearance can be revoked if safety or effectiveness problems develop.

     We may need to seek  additional  regulatory  approval for  clearances if we
modify  existing  products or intend to market other products under  development
and  cannot be  certain  that we would  obtain  510(k)  clearance  or  premarket
approval  in a timely  manner or at all.  If the FDA  requires us to seek 510(k)
clearance or premarket  approval for any  modification  to a previously  cleared
product,  we also may be  required  to cease  marketing  or recall the  modified
device  until  we  obtain  such  clearance  or  approval.  Delays  in  obtaining
clearances or approvals will adversely affect our ability to market and sell our
products and may subject us to significant regulatory fines or penalties,  which
would  result in a decline in revenue  and  profitability.  We may in the future
receive,  warning  letters  from the FDA  related to  improper  promotion  of an
unapproved  use of our products.  As a result of such warning  letters,  the FDA
could  request that we modify our  promotional  materials or could subject us to
regulatory  enforcement actions,  including injunction,  seizure, civil fine and
criminal penalty.

     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.

     If we fail to comply with Quality  System  Regulations,  our  manufacturing
operations  could be delayed,  and our  product  sales and  profitability  could
suffer.  Our manufacturing  processes and those of our suppliers are required to
comply  with the FDA's  Quality  System  Regulation,  or QSR,  which  covers the
procedures  and  documentation  of the  design,  testing,  production,  control,
quality assurance,  labeling,  packaging,  storage and shipping of our products.

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The FDA enforces the QSR through inspections.  If we fail a QSR inspection,  our
operations  could be disrupted and our  manufacturing  delayed.  Failure to take
adequate  corrective  action  in  response  to a QSR  inspection  could  force a
shutdown of our  manufacturing  operations  and a recall of our products,  which
would cause our product sales and profitability to suffer.

     Our  profitability  in our  visualization  technology  business is directly
related  to the  level of  reimbursements  for  surgical  procedures  using  our
products. Our profitability is directly related to the level of payments for the
surgical procedures,  in which our products are involved,  either by Medicare or
private  insurance  companies.  We could be  adversely  affected  by  changes in
payment  policies of government or private health care payers,  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  payers, such as governmental
programs and private  insurance plans, for the health care services  provided to
their patients.  Third-party payers 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  payer,  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 payers
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 payers.

     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 have limited experience directly marketing our products overseas and may
not be successful in expanding into  international  markets without  experienced
partners. We have limited experience in marketing our products overseas. Changes

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in overseas economic  conditions,  currency exchange rates,  foreign tax laws or
tariffs or other trade  regulations  could negatively  impact our business.  The
anticipated international nature of our business is also expected to subject our
representatives,  agents and distributors to laws and regulations of the foreign
jurisdictions in which they operate or in which our products are sold, including
laws regulating  manufacture and sale of medical devices. In addition,  the laws
of some foreign countries do not protect our intellectual property rights to the
same extent as do the laws of the United States.

     If we are unable to protect our intellectual  property, we may be unable to
prevent other companies from using our technology in competitive  products.  Our
future  success  will  depend,  in part,  on our ability to continue  developing
patentable  products,  enforcing our patents and obtaining patent protection for
our  products  both in the  United  States  and in other  countries.  The patent
positions of medical  device  companies,  however,  are generally  uncertain and
involve  complex legal and factual  questions.  Patents may never issue from any
patent  applications  owned by or licensed to us. Even if patents do issue,  the
claims  allowed  may not be  sufficiently  broad to protect our  technology.  In
addition,  issued  patents  owned  by or  licensed  to  us  may  be  challenged,
invalidated or  circumvented,  or the rights granted there under may not provide
us with competitive advantages.

     The medical device industry has been characterized by extensive  litigation
regarding  patents and other  intellectual  property rights.  Litigation,  which
would  result in  substantial  expense,  may be necessary to enforce any patents
issued or  licensed  to us  and/or  to  determine  the  scope  and  validity  of
proprietary  rights of third  parties  or whether  our  products,  processes  or
procedures infringe any such third-party proprietary rights. We may also have to
participate in interference proceedings declared by the United States Patent and
Trademark Office,  which could result in substantial  expense,  to determine the
priority of inventions  covered by our issued  United States  patents or pending
patent applications. Furthermore, we may have to participate at substantial cost
in International Trade Commission  proceedings to enjoin importation of products
which would  compete  unfairly  with our  products.  Any adverse  outcome of any
patent  litigation,  including  interference  proceedings,  could  subject us to
significant liabilities to third parties, require disputed rights to be licensed
from or to third parties or require us to cease using the technology in dispute.
Any  such  licenses  may  not be  available  on  acceptable  terms,  if at  all.
Furthermore,  parties  making  such claims may be able to obtain  injunctive  or
other equitable  relief that could  effectively  block our ability to make, use,
sell or otherwise practice our intellectual property, whether or not patented or
described in pending patent applications, or to further develop or commercialize
our  products in the United  States and abroad and could  result in the award of
substantial  damages.  Defense  of any  lawsuit  or  failure  to obtain any such
license could damage our business.

     In addition to patents,  we rely on unpatented trade secrets to protect our
proprietary  technology.  Others may independently  develop or otherwise acquire
the same or  substantially  equivalent  technologies or otherwise gain access to
our  proprietary  technology  or disclose  this  technology.  It is difficult to
protect rights to unpatented  proprietary  technology.  Third parties may obtain
patent rights to these  unpatented  trade secrets,  which patent rights could be
used to assert  infringement  claims against us. We also rely on confidentiality
agreements with our collaborators,  employees, advisors, vendors and consultants

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<PAGE>

to protect our proprietary technology.  These agreements may be breached, we may
not have  adequate  remedies for any breach and our trade  secrets may otherwise
become known or be  independently  developed by  competitors.  In addition,  our
agreements  with  employees  and  consultants   require   disclosure  of  ideas,
developments,   discoveries  or  inventions   conceived  during   employment  or
consulting,  as the case may be, and assignment to us of  proprietary  rights to
such matters related to our business and technology. The extent to which efforts
by others will  result in patents  and the effect on us of the  issuance of such
patents is unknown.

     We operate in a  competitive  market.  The  medical  equipment  industry is
highly  competitive  and  competition  is likely to  intensify.  Certain  of our
competitors  have greater  financial and technical  resources and production and
marketing capabilities than us. We cannot assure you that these competitors will
not succeed in developing  technologies  and products  that are more  effective,
easier to use or less expensive than those which are currently  offered or being
developed by us or that would render our  technology  and products  obsolete and
noncompetitive.  In addition, some of our competitors have significantly greater
experience than we have in conducting  clinical  investigations  of new products
and in obtaining FDA and other regulatory  clearances and approvals of products.
Accordingly,  our competitors may succeed in developing and obtaining regulatory
approvals for such products more rapidly than us.

     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
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.

     New product  development in the medical device  industry is both costly and
labor  intensive with very low success rates for  successful  commercialization.
Our  long-term  success is  dependent  in part on the  design,  development  and
commercialization  of new products in the medical device  industry.  The product
development  process is time-consuming and costly, and there can be no assurance
that  product  development  will  be  successfully  completed,   that  necessary
regulatory clearances or approvals will be granted by the FDA on a timely basis,
or at all,  or that the  potential  products  will  achieve  market  acceptance.
Failure to develop,  obtain necessary regulatory clearances or approvals for, or
successfully  market potential new products could have a material adverse effect
on our financial  condition and results of operations.  If we are not successful
in developing enhancements or new generations of products, we may not be able to
recover the costs of these  investments or may incur  significant  losses. If we
were not able to develop new products  that meet the needs of our  markets,  our
competitive  position in our industries may be diminished and our  relationships
with our customers may be impaired.

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<PAGE>

     If we choose to  acquire  new and  complementary  businesses,  products  or
technologies instead of developing them ourselves,  we may be unable to complete
these  acquisitions or to successfully  integrate them in a  cost-effective  and
non-disruptive manner. Our success depends on our ability to continually enhance
and broaden  our product  offerings  in response to changing  customer  demands,
competitive pressures and technologies. Accordingly, we may in the future pursue
the acquisition of complementary businesses, products or technologies instead of
developing them ourselves.  We have no current  commitments  with respect to any
acquisition  or  investment.  We do not know if we will be able to  successfully
complete any acquisitions,  or whether we will be able to successfully integrate
any  acquired  business,  product or  technology  or retain  any key  employees.
Integrating  any  business,  product or technology we acquire could be expensive
and time consuming, disrupt our ongoing business and distract our management. If
we are unable to integrate  any acquired  businesses,  products or  technologies
effectively,  our business will suffer. In addition, any amortization or charges
resulting from the costs of acquisitions could increase our expenses.

     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.

     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.

     Our use of hazardous  materials  may result in unexpected  and  substantial
claims against us for which we do not have sufficient financial  resources.  Our
business  operations  research and development  activities in the  Visualization
Technology  business and other medical operations may involve the controlled use
of hazardous  materials and chemicals.  The risk of accidental  contamination or
injury from these  materials  cannot be completely  eliminated.  In the event of
such an accident,  we could be held liable for any  resultant  damages,  and any
such liability  could exceed our  resources.  We may incur  substantial  cost to
comply with environmental regulations.

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<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  September  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.


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<PAGE>


                           PART II - OTHER INFORMATION


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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     We issued shares of our common stock in unregistered transactions from 1998
through 2003.  Except for the shares issued in 2000, all of the following shares
of common  stock  issued  were 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:

Per Share

Name                    Date            Shares Issued     Consideration Paid
Lovejoy, Evellyn V.     9/3/2004         50,000           $20,000
Duncan, Family          9/3/2004        100,000           $40,000
Frisina, Robert         9/3/2004         50,000           $20,000
Ryan, James&Sharon      9/3/2004         50,000           $20,000
Tucker, Donald          9/3/2004        125,000           $50,000
Laudon, Pauline         9/3/2004         25,000           $10,000
Miller, B&J Trust       9/3/2004        200,000           $80,000
Forseth, J&A Trust      9/3/2004        100,000           $40,000
Maywood,Sam,Dawn        9/3/2004        100,000           $40,000
Pershing LLC            9/3/2004         50,000           $20,000
Sellers, T & L          9/3/2004         50,000           $20,000
Gradyan, Stephen        9/3/2004         25,000           $10,000
Harrison, Nathan        9/3/2004         50,000           $20,000
Dunhill Mkt & Ins       9/3/2004        100,000           $40,000
Dunhill Mkt & Ins.      9/3/2004         50,000           $20,000
Debrowski, Thomas       9/3/2004        125,000           $50,000
Cede & Co.             9/13/2004          1,000           $0
R.A. Walrod Assoc      9/28/2004          2,500           Director Compensation
Lyon, John             9/28/2004          2,500           Director Compensation
Crowlet, Daniel        9/28/2004          2,500           Director Compensation

All  purchasers  represented  in  writing  or  orally  that  they  acquired  the
securities  for their own  accounts.  A resale  legend has been provided for the
stock  certificates  stating that the securities have not been registered  under
the Securities Act of 1933 and cannot be resold or otherwise transferred without
registration or an exemption (such as that provided by rule 144).

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<PAGE>


No sales of securities,  registered or unregistered, have been undertaken by the
company other than the issuances described above.

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. 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.




                                    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:   November 12, 2004        VIKING SYSTEMS, INC.

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

                                 By     /s/ Joseph Warrino
                                        Chief Financial Officer

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