e424b3

Filed Under Rule 424(b)(3)
Registration No. 333-128756

PROSPECTUS SUPPLEMENT DATED MAY 25, 2006
to prospectus dated November 14, 2005

VISEON, INC.

23,896,827 Shares
Common Stock

This prospectus supplement supplements the prospectus dated November 14, 2005, relating to the offer and sale by the selling shareholders identified in the prospectus of up to 23,896,827 shares of our common stock. This prospectus supplement includes our Quarterly Report on Form 10-QSB, which was filed with the Securities and Exchange Commission on May 15, 2006.

The information contained in such report is dated as of the date of such report. This prospectus supplement should be read in conjunction with the prospectus dated November 14, 2005, which is to be delivered with this prospectus supplement. This prospectus supplement is qualified by reference to the prospectus except to the extent that the information in this prospectus supplement updated and supercedes the information contained in the prospectus dated November 14, 2005, including any supplements or amendments thereto.

Investing in the shares involves risks. See “Risk Factors” beginning on page 3 of the prospectus dated November 14, 2005 and the risk factors included in our Annual Report on Form 10-KSB for the year ended June 30, 2005.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is May 25, 2006.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

Commission File Number 000-27106

VISEON, INC.

(Exact name of small business issuer as specified in its charter)


Nevada		41-1767211
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

8445 Freeport Parkway, Suite 245, Irving, Texas 75063
(Address of principal executive offices)

(972) 906-6300
(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was Required to file such report), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No þ

The Company had 36,706,400 shares of Common Stock, $ 0.01 par value per share, outstanding as of May 11, 2006.

Transitional Small Business Disclosure Format (Check one): Yes o No þ

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

VISEON, INC. AND SUBSIDIARIES

Consolidated Balance Sheets


	March 31,			June 30,
	2006			2005
	(Unaudited)			(Audited)

*ASSETS*
CURRENT ASSETS
Cash and cash equivalents	$	3,258,750		$	239,383
Accounts receivable		7,150			16,541
Inventories		76,760			3,758
Prepaid expenses		278,901			379,291

Total Current Assets		3,621,561			638,973
PROPERTY AND EQUIPMENT, NET		90,831			26,428
INTANGIBLE ASSETS, NET		315,245			266,358

TOTAL ASSETS	$	4,027,637		$	931,759


*LIABILITIES AND STOCKHOLDERS’ EQUITY*
CURRENT LIABILITIES
Accounts payable	$	483,121		$	1,230,041
Accrued expenses		377,664			336,287
Net liabilities of discontinued operations		204,976			723,475

Total Current Liabilities		1,065,761			2,289,803

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIT)
Convertible preferred stock, $.01 par value per share 5,000,000 shares authorized
Series A convertible preferred stock, 97 and 125 shares issued and outstanding (liquidation preference of $2,425,000 and $3,125,000)		1			1
Series B convertible preferred stock, 376 and 0 shares issued and outstanding (liquidation preference of $9,400,000 and $0)		4			—
Common stock, $.01 par value per share 100,000,000 shares authorized 35,768,406 and 32,849,070 issued and outstanding		357,684			328,491
Additional paid-in capital		54,704,554			40,056,336
Accumulated deficit		(52,100,367	)		(41,742,872	)

Total Stockholders’ Equity (Deficit)		2,961,876			(1,358,044	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,027,637		$	931,759

See accompanying notes to consolidated financial statements.

VISEON, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2006			2005
	(Unaudited)			(Unaudited)

NET SALES	$	—		$	619
COST OF GOODS SOLD		—			8,373

Gross Profit (Loss)		—			(7,754	)
RESEARCH AND DEVELOPMENT		665,979			1,348,087
SELLING, GENERAL AND ADMINISTRATIVE		705,022			629,858

Operating Loss		(1,371,001	)		(1,985,699	)

OTHER INCOME (EXPENSE)
Interest income		30,339			11,497
Interest expense		—			—

Other Income (Expense), net		30,339			11,497

LOSS FROM CONTINUING OPERATIONS		(1,340,662	)		(1,974,202	)
GAIN FROM DISCONTINUED OPERATIONS		—			—

NET LOSS		(1,340,662	)		(1,974,202	)
Preferred Stock Dividends		(295,624	)		(115,676	)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(1,636,286	)	$	(2,089,878	)

Basic and diluted loss per share:
Loss from continuing operations	$	(0.04	)	$	(0.07	)
Gain from discontinued operations	$	0.00		$	0.00
Net loss attributable to common stockholders	$	(0.05	)	$	(0.07	)
Weighted average common shares outstanding:
Basic and diluted		35,556,993			30,311,060

See accompanying notes to consolidated financial statements.

VISEON, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)


	Nine Months			Nine Months
	Ended			Ended
	March 31,			March 31,
	2006			2005
	(Unaudited)			(Unaudited)

NET SALES	$	7,150		$	239,621
COST OF GOODS SOLD		26,226			281,229

Gross Profit (Loss)		(19,076	)		(41,608	)
RESEARCH AND DEVELOPMENT		2,605,535			3,326,554
SELLING, GENERAL AND ADMINISTRATIVE		2,142,530			1,925,451

Operating Loss		(4,767,141	)		(5,293,613	)

OTHER INCOME (EXPENSE)
Interest income		81,942			41,813
Interest expense		(117,500	)		—

Other Income (Expense), net		(35,558	)		41,813

LOSS FROM CONTINUING OPERATIONS		(4,802,699	)		(5,251,800	)
GAIN FROM DISCONTINUED OPERATIONS		108,640			6,107

NET LOSS		(4,694,059	)		(5,245,693	)
Preferred Stock Dividends		(5,467,640	)		(466,951	)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(10,161,699	)	$	(5,712,644	)

Basic and diluted loss per share:
Loss from continuing operations	$	(0.14	)	$	(0.19	)
Gain from discontinued operations	$	0.00		$	0.00
Net loss attributable to common stockholders	$	(0.29	)	$	(0.20	)
Weighted average common shares outstanding:
Basic and diluted		34,663,705			27,968,163

See accompanying notes to consolidated financial statements.

VISEON, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months			Nine Months
	Ended			Ended
	March 31,			March 31,
	2006			2005
	(Unaudited)			(Unaudited)
*Cash flows from operating activities:*
Net loss	$	(4,694,058	)	$	(5,245,693	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization		49,269			41,593
Amortization of original issue discount		117,500			—
Common stock issued for services rendered		28,121			78,048
Common stock warrants issued for services rendered		155,361			—
Gain from discontinued operations		(108,640	)		(6,107	)
Changes in operating assets and liabilities:
Accounts receivable, net		9,392			17,753
Inventories, net		(73,002	)		10,492
Prepaid expenses		100,390			132,955
Accounts payable		(746,922	)		118,674
Accrued expenses		(103,639	)		119,354

Net cash flows used in operating activities		(5,266,228	)		(4,732,931	)

*Cash flows from investing activities:*
Purchases of property and equipment		(94,439	)		(2,370	)
Payments for intangible assets		(68,120	)		(85,707	)

Net cash flows used in investing activities		(162,559	)		(88,077	)

*Cash flows from financing activities:*
Payments on short-term notes payable		(250,000	)		—
Proceeds from short-term notes payable		250,000			—
Proceeds from exercise of common stock warrants		240,000			1,450,225
Proceeds from exercise of common stock options		—			33,500
Proceeds from issuance of convertible preferred stock and warrants		9,400,000			—
Payments of convertible preferred stock and warrant issuance costs		(1,191,846	)		(26,863	)
Dividends on convertible preferred stock		—			(3,492	)

Net cash flows from financing activities		8,448,154			1,453,370


Change in cash and cash equivalents from discontinued operations		—			(14,000	)

Increase (decrease) in cash and cash equivalents		3,019,367			(3,381,638	)

Cash and cash equivalents, beginning of period		239,383			5,339,393


Cash and cash equivalents, end of period	$	3,258,750		$	1,957,755

VISEON, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2006 and 2005

1. DESCRIPTION OF THE BUSINESS:

Since 2003 we have focused on developing next generation digital broadband telephones for use with Voice over Internet Protocol (“VoIP”) services. These multi-media telephones are currently marketed under the VisiFone^TM name. The VisiFone has been designed to provide consumers, and corporate and government users of high speed internet connections with new features and functions not previously possible on low speed analog telephone networks commonly referred to as PSTN or Public Switched Telephone Network. In addition to providing two way live video communications, the VisiFone provides users with a new level of digital audio quality, on-screen VoIP feature controls and enables network based services such as video mail and the ability to receive streamed content. In essence, the VisiFone was designed to deliver many of the same features found on a current generation cellular telephone but not possible on today’s analog home telephones.

We have incurred losses from operations and negative cash flows from operations for the years ended June 30, 2005 and 2004 and the quarter and nine months ended March 31, 2006. Management plans to try to increase sales and improve operations through: 1) continued initiatives to gain acceptance of our product by broadband carriers for sale to their subscribers, 2) continued measures to minimize overhead, and 3) continued initiatives to monetize our intellectual property rights. Management believes that current cash funds and funds generated from operations will be sufficient to cover cash needs for the 2006 fiscal year and into the 2007 fiscal year, although there can be no assurance in this regard. In the event sales do not materialize at the expected rates or we do not achieve planned gross margins, management would seek additional financing or would conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives or becoming profitable.

2. BASIS OF PRESENTATION:

The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements have been omitted or condensed pursuant to such rules and regulations. The accompanying unaudited consolidated financial statements should be read in conjunction with our June 30, 2005 consolidated financial statements and related footnotes included in our most recent annual report on Form 10-KSB.

The consolidated financial statements include the accounts of Viseon, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements reflect all adjustments, of a normal recurring nature, necessary to fairly present the results of operations and financial position of the Company for the interim periods. Operating results for the three months and nine months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the full year.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Intangible Assets. We amortize patents over their estimated useful lives of ten years using the straight-line method. Accumulated amortization of intangible assets was $95,179 and $75,946 at March 31, 2006 and June 30, 2005, respectively. Amortization expense of intangible assets was $6,411 and $7,958 for the three months ended March 31, 2006 and 2005 and was $19,233 and $23,518 for the nine months ended March 31, 2006 and 2005. Amortization expense is estimated to approximate $26,000 for each of the years ending June 30, 2006, 2007, 2008, 2009 and 2010.

Revenue Recognition. In November 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition.” SAB No. 101, as amended by SAB No. 104, sets forth the SEC staff’s position regarding the point at which it is appropriate for a registrant to recognize revenue. We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured.

We offer an unconditional 30-day right of return on the sale of our VisiFone products. We recognize revenue on shipment and record a reserve for potential returns. We believe we meet all of the requirements for revenue recognition under Statement of Financial Accounting Standards (SFAS) 48 and SAB 104.

Our warranty policy during the first year after the sale includes an obligation to replace during the first 30 days and to repair during the next 11 months. We have a one-year warranty with our manufacturers, so there is little, if any, cost to us for warranty claims. No warranty reserve has been recorded to date, although we will record a reserve if warranty activity increases and there are unrecoverable costs to us.

Accounts Receivable. We review our customers’ credit history before extending unsecured credit and establish an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers and other information. Invoices are due 30 days after presentation. Accounts receivable over 30 days are considered past due. We do not accrue interest on past due accounts receivable. Receivables are written off only after all collection attempts have failed and are based on individual credit evaluation and specific circumstances of the customer.

Inventory Valuation. We write down excess and obsolete inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about product life cycles, demand for our products, market conditions and other pertinent factors. If actual product life cycles, product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required in future periods.

Loss Per Common Share. Basic loss attributable to common stockholders per common share is computed by dividing the loss by the weighted average number of common shares outstanding for the reporting period. Diluted loss attributable to common stockholders per common share is computed by dividing the loss by the sum of the weighted average number of common shares outstanding plus the number of common share equivalents that represent all additional shares of our Common Stock, $0.01 par value (“Common Stock”) that would have been outstanding if all potentially dilutive securities (primarily stock options, stock warrants and convertible debt) had been exercised. All options, warrants and convertible preferred stock outstanding during the three months and nine months ended March 31, 2006 and 2005 were anti-dilutive to our loss per share.

Stock Based Compensation. In accordance with Accounting Principles Board (APB) Opinion No. 25 and related interpretations, we use the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of quoted market price of our common stock at the grant date over the amount the employees must pay for the stock. Our general policy is to grant stock options at fair value at the date of grant. Options and warrants issued to non-employees are recorded at fair value, as required by SFAS No. 123, “Accounting for Stock-Based Compensation”, using the Black Scholes pricing method.

We have adopted the disclosure only provisions of SFAS No. 148, “Accounting for Stock-Based Compensation.” Had compensation cost been recognized based on the fair values of options at the grant dates consistent with the provisions of SFAS No. 123, our net loss and basic diluted net loss per common share would have been changed to the following pro forma amounts:


	For the three months ended						For the nine months ended
	March 31,						March 31,
	2006			2005			2006			2005

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

In determining the compensation cost of options granted during the three months and nine months ended March 31, 2006 and 2005, as specified by SFAS No. 123, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes option

pricing model. During the quarter, the Company noted an error in its Expected volatility calculations. The revised pro forma assumptions for the three months and nine months ended March 31, 2006 are displayed below. The pro forma results of the corrected volatility calculation are displayed in the table above. The impact of the corrected volatility calculation on results for periods ended prior to June 30, 2005 are immaterial. The volatility percentage and the weighted average assumptions used in these calculations are summarized as follows:


	For the three months ended						For the nine months ended
	March 31,						March 31,
	2006			2005			2006			2005
Risk-free interest rate		4.43	%		4.00	%		4.27	%		4.00	%
Expected life of options granted	8.6 years			10 years			9.8 years			10 years
Expected volatility		111.98	%		42.04	%		111.98	%		42.04	%
Expected dividend yield		0	%		0	%		0	%		0	%

4. RECENT ACCOUNTING PRONOUNCEMENTS:

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”, that focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This statement replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Beginning July 1, 2006, we will be required to expense the fair value of employee stock options and similar awards. As a public company, we are allowed to select from two alternative transition methods, each having different reporting implications. The impact of SFAS No. 123R has not been determined at this time.

5. CONVERTIBLE PREFERRED STOCK AND WARRANTS:

Series A Convertible Preferred Stock with Warrants In the months of March and April 2004, we sold, in private placement transactions, a total of 338 shares of Series A Convertible Preferred Stock, $0.01 par value (“Series A Preferred”) in prepackaged units which included one Series A-1 Warrant and one Series A-2 Warrant for each share of Series A Preferred (collectively referred to as the “Securities”). The private placement of the Securities resulted in gross proceeds to us of $8,450,000, prior to offering expenses. In total, holders of the 338 shares of Series A Preferred were granted the right to acquire 16,900,000 shares of our Common Stock (8,450,000 shares of Common Stock upon conversion and 8,450,000 shares upon exercise of warrants).

Each share of Series A Preferred is convertible, at the initial conversion price of $1.00, into 25,000 shares of Common Stock, subject to adjustment under certain conditions. Holders of the Series A Preferred are entitled to dividends at the rate of 10% per annum payable quarterly in either cash or, at our option, registered shares of Common Stock valued at fair market value. Shares of Series A Preferred are convertible into shares of Common Stock at the holders’ option at any time and will automatically convert to shares of Common Stock if certain trading volume and closing price targets on our Common Stock are met at various intervals. The closing price targets are $2.00 per share through August 16, 2006 and $3.00 per share thereafter. The trading volume target is an average of 125,000 shares per day over a consecutive 20-day period during which the applicable closing price target has been met or exceeded. In addition, shares of the Series A Preferred participate on an as-if converted basis in any dividends paid on Common Stock. Holders of shares of Series A Preferred are entitled to voting rights together with the Common Stock, on an as-if converted basis.

The conversion price of the Series A Preferred is subject to appropriate adjustment in the event of stock splits, stock dividends, reverse stock splits, capital reorganizations, recapitalizations, reclassifications, and similar occurrences as well as the issuance of Common Stock in consideration of an amount less than the then-effective conversion price.

The holder of each Series A-1 Warrant is entitled to purchase 12,500 shares of Common Stock at an exercise price of $1.08 per share for a term of five years from the date of issuance. The holder of each Series A-2 Warrant is entitled to purchase 12,500 shares of Common Stock at an exercise price of $1.26 per share for a term of five years from the date of issuance. The exercise price of the Series A-1 and Series A-2 Warrants is subject to adjustment for the issuance of Common Stock in consideration of an amount less than the then effective exercise price.

The shares of Common Stock underlying the Securities are currently subject to an effective registration statement on Form SB-2 under the Securities Act of 1933, as amended. We have agreed to cause this registration statement to continuously remain effective until all such Common Stock may be sold without regard to an effective registration statement. If we fail to maintain a continuously effective registration statement, we will be subject to liability to certain holders of shares of Series A Preferred in the form of liquidated damages totaling as high as $253,500 per month. Liquidated damages are payable only to the then current holders of issued and outstanding shares of Series A Preferred (or Common Stock received by such holders upon the conversion of such Series A Preferred) at the time of the occurrence giving rise to our obligation to pay such liquidated damages and shall be payable thereon until such time as, with respect to any such share, we are not required to (i) file a registration statement or (ii) cause an effective registration statement to remain continuously effective.

Our placement agent received an aggregate placement fee of $845,000 and warrants to purchase 1,267,500 shares of Common Stock at a purchase price of $1.00 per share for a term of five years from the date of issuance (the “Series A-1-AGENT Warrants”). The exercise price of the Series A-1-AGENT Warrants is subject to adjustment for the issuance of Common Stock in consideration of an amount less than the then effective exercise price.

The Series A-1 Warrants, Series A-2 Warrants and Series A-1-Agent Warrants each contain provisions allowing us to repurchase the warrants from the holders upon 15 days notice at $0.10 per warrant share if certain trading volume and closing price targets on our Common Stock are met at various intervals. The closing price targets are $2.50 per share through August 16, 2006 and $3.50 per share thereafter. The trading volume target is an average of 125,000 shares per day over a consecutive 20-day period during which the applicable closing price target has been met or exceeded.

For the nine months ended March 31, 2006, holders of 28 shares of the Series A Preferred elected to convert their shares to Common Stock, resulting in the issuance of 700,000 shares of Common Stock.

Series B Convertible Preferred Stock with Warrants In August, 2005, we completed the private placement of an aggregate 376 shares of our Series B Convertible Preferred Stock, $0.01 par value (“Series B Preferred”), and five year common stock purchase warrants (“Series B Warrants”) exercisable for an aggregate 9,400,000 shares of our Common Stock. The sale of the preferred stock units was made pursuant to a series of Securities Purchase Agreements that were entered into by us and certain accredited investors on or about August 22, 2005. We issued 376 units in the offering at a purchase price equal to $25,000 per unit, resulting in gross proceeds of $9,400,000 prior to offering expenses. The private placement proceeds are being used for general corporate purposes.

Each share of Series B Preferred is convertible, at the initial conversion price of $1.00, into 25,000 shares of Common Stock, subject to adjustment under certain conditions. Holders of the Series B Preferred are entitled to dividends at the rate of 10% per annum payable quarterly in either cash or, at our option, registered shares of Common Stock valued at fair market value. Shares of Series B Preferred Stock are convertible into shares of Common Stock at the holders’ option at any time and will automatically convert to shares of Common Stock if certain trading volume and a closing price target on our Common Stock are met after February 16, 2006. The closing price target is $3.00 per share and the trading volume target is an average of 100,000 shares per day over a consecutive 20-day period during which the applicable closing price target has been met or exceeded. In addition, shares of the Series B Preferred participate on an as-if converted basis in any dividends paid on Common Stock. Holders of shares of Series B Preferred are entitled to voting rights together with the Common Stock, on an as-if converted basis.

The conversion price of the Series B Preferred is subject to appropriate adjustment in the event of stock splits, stock dividends, reverse stock splits, capital reorganizations, recapitalizations, reclassifications, and similar occurrences as well as the issuance of Common Stock in consideration of an amount less than the then-effective conversion price.

The holder of each Series B Warrant is entitled to purchase 25,000 shares of Common Stock at an exercise price of $1.15 per share for a term of five years from the date of issuance. The exercise price of the Series B Warrants is subject to adjustment for the issuance of Common Stock in consideration of an amount less than the then effective exercise price.

The shares of Common Stock underlying the Securities are currently subject to an effective registration statement on Form SB-2 under the Securities Act of 1933, as amended. We have agreed to cause this registration statement to continuously remain effective until the earlier of (i) the sale pursuant to a registration statement of all of the Common Stock receivable as dividends or upon conversion or exercise of all of the Series B Preferred and the Series B Warrants, or (ii) August 21, 2012. If we fail to maintain a continuously effective registration statement, we will be subject to liability to certain holders of shares of Series B Preferred in the form of liquidated damages totaling as high as $282,000 per month. Liquidated damages are payable only to the then current holders of issued and outstanding shares of Series B Preferred (or Common Stock received by such holders upon the conversion of such Series B

Preferred) at the time of the occurrence giving rise to our obligation to pay such liquidated damages and shall be payable thereon until such time as, with respect to any such share, we are not required to (i) file a registration statement or (ii) cause an effective registration statement to remain continuously effective.

In connection with the offering, we issued our placement agent a warrant to purchase 282,000 shares of Common Stock at an exercise price of $1.15 per share with a term of five years from the date of issuance (the “Series B-AGENT Warrants”) and paid it a placement fee equal to $658,000, plus the reimbursement of certain expenses. The exercise price of the Series B-AGENT Warrants is subject to adjustment for the issuance of Common Stock in consideration of an amount less than the then effective exercise price.

The Series B Warrants and Series B-AGENT Warrants each contain provisions allowing us to repurchase the warrants from the holders upon 15 days notice at $0.10 per warrant share if certain trading volume and closing price targets on our Common Stock are met. The closing price targets are $3.00 per share and the trading volume target is an average of 100,000 shares per day over a consecutive 20-day period during which the applicable closing price target has been met or exceeded.

6. COMMITMENTS AND CONTINGENCIES:

Manufacturing Agreement

On August 28, 1996, we entered into a manufacturing agreement with a third party custom manufacturer (the “Manufacturer”). Pursuant to this agreement, the Manufacturer agreed to produce our MediaPro384^® group videoconferencing product. The agreement was terminable by either party upon failure of the other party to comply with any material term of the agreement after a 30 day written notice and cure period. In the event of such termination, we would be obligated to pay for any goods accepted under the terms of the agreement. We also had the right to terminate the agreement upon 30 days written notice for any reason or for no reason. In such case, we would be obligated to pay for material and work in progress for products ordered.

As of June 30, 2003, both parties agreed that we would no longer place orders for our MediaPro384 group videoconferencing product line from the Manufacturer. The agreement has been terminated. On September 30, 2005, we entered into a settlement agreement with the Manufacturer in order to settle the dispute regarding amounts alleged to be owed to the Manufacturer by us. The terms of the settlement included our agreement to issue 350,000 shares of common stock and a four year warrant to purchase 600,000 shares at $1.26 per share to the order of the Manufacturer in full and final settlement of the disputed debt. As a result of the settlement, we recognized a gain from discontinued operations of $108,640.

Legal Proceedings

We are involved in legal actions in the ordinary course of business.

7. STOCKHOLDERS’ EQUITY (DEFICIT):

For the nine months ended March 31, 2006, we issued 299,840 shares of Common Stock valued at $211,216 and 765,537 shares of Common Stock valued at $415,167 for payment of dividends on our Series A Preferred and our Series B Preferred, respectively.

For the nine months ended March 31, 2006, 28 shares of Series A Preferred with a liquidation preference of $700,000 were converted into 700,000 shares of Common Stock.

8. DISCONTINUED OPERATIONS:

In January 2003, we changed our focus from being a group videoconferencing manufacturer and reseller to a desktop and consumer video communications manufacturer and reseller. This was accomplished by the transfer to a third party of our group videoconferencing services contract portfolio and the liquidation of our remaining group videoconferencing assets. The only measurable revenues we are now receiving result from the sales of the VisiFone. Therefore, we classified the net assets and operations related to the group videoconferencing business as discontinued operations in the accompanying consolidated financial statements.

9. SUBSEQUENT EVENTS:

On May 1, 2006, we entered into an employment agreement with Sean Belanger, pursuant to which he will act as our President and Chief Executive Officer. The employment agreement provides for Mr. Belanger to receive an annualized base salary of $300,000, which is subject to review and a minimum cost of living increase on an annual basis. Mr. Belanger and his dependents will also be eligible to participate in health insurance and other employee benefit plans that are in effect from time to time for our employees, including any applicable bonus plans. Mr. Belanger will be eligible to participate in a new Management Incentive Plan, which will pay him a bonus of $150,000 in his first year of employment upon achievement of certain agreed upon goals to be established within the first 90 days of his employment. The initial term of the employment agreement will continue until it is terminated in accordance with its terms. Mr. Belanger succeeded Mr. Harris, who will continue to serve as the Chairman of the Board of Directors and Chief Technical Officer, effective as of May 1, 2006. Prior to joining Viseon, Mr. Belanger was Chief Executive Officer of Paradyne Corporation from 2000 until its merger with Zhone Technologies in July 2005.

On May 1, 2006, Viseon granted Mr. Belanger options to purchase 2,861,472 shares of Viseon common stock at an exercise price of $0.32 per share as partial compensation for his services under the employment agreement. The terms of the stock options are subject to the provisions of a stock option agreement and will vest quarterly over a three year period, in equal increments.

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

CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “intend,” “anticipate,” “believe,” “estimate,” “plan” and “expect” and variations of these words and similar expressions are intended to identify these forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are considered to be forward-looking statements. We express our expectations, beliefs and projections in good faith and believe our expectations reflected in these forward-looking statements are based on reasonable assumptions; however, we cannot assure you that these expectations, beliefs or projections will prove to have been correct. Risks, uncertainties and assumptions that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among other things: (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of our company or our management or Board of Directors, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about our company or its business.

Readers are referred to the caption “Risk Factors” appearing at the end of Item 1 of our latest Annual Report on Form 10-KSB for additional factors that may affect our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. We undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Viseon was founded in 1993, and changed its name from RSI Systems, Inc. to Viseon, Inc. on May 23, 2001. Historically, we had been a developer of our own group videoconferencing systems primarily sold to corporate end users and OEM customers. In 2003, we recognized the need to modify our business model to achieve higher margins and benefit from our portfolio of U.S. patents. In January 2003, we completed our change in focus from being a group videoconferencing manufacturer and reseller to a desktop and consumer video communications manufacturer and reseller. This was accomplished by transferring our group videoconferencing services contract portfolio with its associated liabilities and obligations to Comlink Video and liquidating our remaining group videoconferencing assets. The only measurable revenues we are now receiving result from the sales of VisiFones^TM to corporations and consumers.

Our current marketing strategies target two diverse market segments: (i) corporations and government entities which have widespread operations across regional, national and international boundaries and (ii) residential consumers who have historically not purchased video communication products. Distribution may include the utilization of arrangements with providers of broadband Internet access, such as cable Multi System Operators, or “MSO’s,” telephone companies that provide DSL services and independent marketers of consumer VoIP services. In addition, we may sell the VisiFone directly to consumers. All of these developments have affected and will continue to affect our financial model in terms of margins, cash flow requirements, and other areas. We have a limited history with respect to the direction our business is now taking. There can be no assurance that we will be able to succeed in implementing our strategy or that we will be able to achieve positive cash flow or profitable operations as a result of these changes in our business.

We estimate that as of September 30, 2005 there are 40 million U.S. homes with broadband access. The migration of voice traffic to the internet is growing rapidly and VoIP is projected by various analysts to be adopted by over 27 million U.S. homes by 2009. This projection represents considerable growth from the estimated 2 million U.S. VoIP users in 2004. Similar growth is forecast for other developed regions of the world.

We are targeting the sale of VisiFones to and through broadband and VoIP providers such as cable companies and RBOCs for use by consumers. Carriers offering the VisiFone will most likely be in the U.S. and Europe. We also believe that there is a potentially significant market for sales of the VisiFone into various branches of the U.S. Government as well as the commercial marketplace. The current generation VisiFone began shipping to carriers in July of 2005 for testing and customization. We believe that a certain portion of the 280 million analog telephones in U.S. homes will be replaced by digital home telephones just as digital cell phones have replaced analog handsets. A digital home telephone will enable consumers to more easily access and benefit from digital telephony features including, but not limited to CD quality audio calls and live, TV quality, two-way video communications.

The availability of low cost broadband access at home, new more powerful chipsets and the VisiFone’s technology allow consumers to experience quality video calls with friends, family or business associates across the street or around the world. We expect carriers to offer the VisiFone in a variety of packages with various term commitments and options. We estimate that over time, end user price levels will fall between $199 and $399 per unit for the basic consumer only model.

Results Of Operations

Three Months ended March 31, 2006 Compared to Three Months ended March 31, 2005.

Net Sales. Net sales for the third quarter of fiscal year 2006 were $0 compared with $619 in the third quarter of fiscal year 2005. We are focusing our efforts on final design and marketing of the next generation VisiFone unit and, accordingly, sales of the earlier VisiFone, which was our principal product offering, have ceased. As a result, our sales volumes and revenues have dropped significantly from the prior year period. Minimal revenue has been recorded on the deployment of units of next generation VisiFones to carriers as these deployments continue to be for trials only to-date.

Gross Profit (Loss). Gross profit was $0 in the third quarter of fiscal year 2006 compared to a gross loss of ($7,754) during the third quarter of fiscal year 2005. The lack of a gross profit in the third quarter of fiscal year 2006 was attributable to the lack of revenue unit shipments. For the next fiscal quarter, we expect to sell limited quantities of the existing model VisiFone at low or negative margins to service providers, corporate, government and educational customers for demonstration and evaluation purposes and to promote adoption of the technology in the marketplace.

Research and Development Expenses. Research and development expenses were $665,979 for the third quarter of fiscal year 2006 compared to $1,348,087 for the third quarter of fiscal year 2005. The decrease was attributable to decreased expenditures toward the development and carrier customization of the next generation unit in the VisiFone product line. We expect to incur approximately $600,000 of research and development expenses during the next fiscal quarter and approximately $3,200,000 during the fiscal year ending June 30, 2006 for future project enhancements and carrier customization, subject to available cash flows.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $705,022 for the third quarter of fiscal year 2006 compared to $629,858 for the third quarter of fiscal year 2005. The increase in selling, general and administrative expenses was attributable to higher spending on product marketing and promotion, as well as recruiting expenses incurred during the quarter relating to our search for a new CEO.

Other Income (Expense). Other income was $30,339 in the third quarter of fiscal year 2006, compared to other income of $11,497 in the second quarter of fiscal year 2005. Other income consisted solely of interest earned on our cash funds.

Preferred Stock Dividends. The results of operations for the third quarter of fiscal 2006 reflect a charge of $295,624 compared to $115,676 in the third quarter of fiscal 2005 for dividends on our convertible preferred stock. Dividends on both our Series A Preferred and Series B Preferred accrue at a rate of 10% per annum. Substantially all dividends have been paid by the issuance of Common Stock. Dividends in the third quarter of fiscal 2006 were comprised of dividends on our Series A Preferred of $60,624 and dividends on our Series B Preferred of $235,000. Dividends in the third quarter of fiscal 2005 were comprised solely of dividends on our Series A Preferred.

Nine Months ended March 31, 2006 Compared to Nine Months ended March 31, 2005.

Net Sales. Net sales for the first nine months of fiscal year 2006 were $7,150 compared with $239,621 in the first nine months of fiscal year 2005. The sales in the first three quarters of fiscal year 2005 represented sales of our first generation VisiFone unit to two customers in the amount of $218,371. We are focusing our efforts on final design and marketing of the next generation VisiFone unit and, accordingly, sales of the earlier VisiFone have ceased. Minimal revenue has been recorded on the deployment of units of next generation VisiFones to carriers as these deployments continue to be for trials only to-date.

Gross Profit (Loss). Gross loss was ($19,076) in the first nine months of fiscal year 2006 compared to a gross loss of ($41,608) during the first nine months of fiscal year 2005. The gross loss in the first nine months of fiscal year 2006 was attributable to the sale of units below our cost for the purpose of testing adoption of the VisiFone by carriers. For the next fiscal quarter, we expect to continue to sell limited quantities of the existing model VisiFone at low or negative margins to service providers, corporate, government and educational customers for demonstration and evaluation purposes and to promote adoption of the technology in the marketplace.

Research and Development Expenses. Research and development expenses were $2,605,535 in the first nine months of fiscal year 2006 compared to $3,326,554 for the first nine months of fiscal year 2005. The decrease was attributable to decreased expenditures toward the development and carrier customization of the next generation unit in the VisiFone product line. We expect to incur approximately $600,000 of research and development expenses during the next fiscal quarter and approximately $3,200,000 during the fiscal year ending June 30, 2006 for future project enhancements and carrier customization, subject to available cash flows.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2,142,530 for the first nine months of fiscal year 2006 compared to $1,925,451 for the first nine months of fiscal year 2005. Included within selling, general and administrative costs during the first nine months of fiscal year 2006 were legal expenses totaling $124,207. These expenses were paid with a five year warrant to purchase 344,827 shares of our Common Stock at $1.00 per share. Excluding this item, selling, general and administrative expenses remained relatively constant between periods, reflecting a consistent level of expenditures in our administrative operations.

Other Income (Expense). Other expense was ($35,558) in the first nine months of fiscal year 2006, compared to other income of $41,813 in the first nine months of fiscal year 2005. Other income consisted solely of interest earned on our cash funds. We recorded interest expense of $117,500 during the first quarter of 2006. This interest expense related to the issuance of a five year warrant to purchase 250,000 shares of our common stock at $1.26 as consideration for the granting of a short term loan in the amount of $250,000 during the quarter. The loan was repaid during the quarter and the entire amount of the original issue discount was charged to interest expense as a result.

Gain from Discontinued Operations. On September 30, 2005 we entered into a settlement agreement with a former supplier in order to settle a dispute regarding amounts that we allegedly owed to that entity. The terms of the settlement included our agreement to issue 350,000 shares of our common stock and a four year warrant to purchase 600,000 shares of our common stock at $1.26 per share in full and final settlement of the disputed debt. The value of the settlement, valuing the common stock at the September 29 closing price of $0.87 and valuing the warrant using the Black-Scholes pricing method was 409,860. Our previously accrued liability for this matter was $518,500. As a result of the settlement, we recognized a gain from discontinued operations of $108,640. During the first three quarters of fiscal 2005, we negotiated discounted repayments related to amounts owed to certain creditors. Based on these discounts, we recorded a gain from discontinued operations of $6,107 during the first nine months of fiscal year 2005.

Preferred Stock Dividends. The results of operations for the first three quarters of fiscal 2006 reflect a charge of $5,467,640 compared to $466,951 in the first three quarters of fiscal 2005 for dividends on our convertible preferred stock. Dividends on both our Series A Preferred and Series B Preferred accrue at a rate of 10% per annum. Substantially all dividends have been paid by the issuance of Common Stock. Dividends in the first three quarters of fiscal 2006 were comprised of dividends on our Series A Preferred of $199,567 and dividends on our Series B Preferred of $5,268,073. Series B Preferred dividends include a charge of $4,696,240 in the first quarter of 2006 attributable to the beneficial conversion option on our Series B Preferred.

Liquidity And Capital Resources

We raised $9,400,000 (prior to offering expenses) from the sale of our Series B Preferred with warrants in a series of private placement transactions in August 2005. In addition, we raised an additional $240,000 during the quarter ended September 30, 2005 from the exercise by a holder of certain of our common stock purchase warrants. Management believes that the funds generated from the recent private placement and warrant exercises will be sufficient to cover our cash needs for the current fiscal year. Proceeds from remaining outstanding warrants could generate an additional $25,000,000, although certain warrants have cashless exercise provisions. There can be no assurance that any additional warrants will be exercised.

Historically, we have generated losses from operations and negative cash flows. For the nine months ended March 31, 2006, we incurred a net loss attributable to common stockholders of $10,161,699 including the beneficial conversion option of $4,696,240, without which the net loss attributable to common stockholders would have been $5,465,459. For the same period, we used $5,266,228 in operating activities, used $162,559 in investing activities primarily for payment of costs related to our intellectual property, and generated $8,448,154 from financing activities, primarily due to closing and funding of our Series B Preferred private placement and warrant exercises.

We plan to increase sales and improve operating results through (i) increased marketing and direct sales activities to corporate customers, (ii) continued initiatives to gain acceptance of our product by consumer broadband providers for sale to their subscribers and (iii) continued initiatives to monetize our intellectual property rights. There can be no assurance that we will be successful in achieving these objectives and becoming profitable.

Critical Accounting Policies And Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. We regularly evaluate our estimates and assumptions related to net revenues, allowance for doubtful accounts, sales returns and allowances and accounting for income taxes. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements:

Revenue Recognition

We record sales revenue at the time merchandise is delivered. In November 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition”, SAB No. 101, as amended by SAB No. 104, which sets forth the SEC Staff’s position regarding the point at which it is appropriate for a registrant to recognize revenue. The staff believes that revenue is realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. We use the above criteria to determine whether revenue can be recognized.

When product sales revenue is recognized, we establish and estimate an allowance for future product returns based on historical returns experience; when price reductions are approved, we establish an estimate liability for price protection payable on inventories owned by product resellers. Should actual product returns or pricing adjustments exceed our estimates, additional reductions to revenue would result. Revenue from the licensing of patents is recognized at the time a patent agreement is executed and the goods, services and/or cash are received. Our product typically carries a one-year warranty. Our warranty obligation is affected by product failure rates, use of materials or service delivery cost that differs from our estimates. As a result, additional warranty reserves could be required, which could reduce gross margins.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Our allowance for doubtful accounts is based on our assessment of the collectibility of specific customer accounts, the aging of accounts receivable, our history of bad debts and the general condition of the industry. If a major customer’s credit worthiness deteriorates, or our customers’ actual defaults exceed our historical experience, our estimates could change and impact our reported results.

Accounting for Income Taxes

We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized at the enacted rates for the future tax consequences attributable to differences between the financial statement carrying amounts of existing tax assets and liabilities and their respective tax basis. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Item 3. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of such date, to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time period, including to ensure that information required to be disclosed is accumulated and

communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting during the quarter ended March 31, 2006.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to certain litigation and claims arising in the ordinary course of business. We do not expect costs related to these claims to have a material adverse effect on our consolidated financial position or our results of operations.

Item 3. Exhibits

(a) Exhibits


31.01		Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.02		Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.01		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	VISEON, INC.

Dated: May 15, 2006	By:	/s/ Sean E. Belanger

		Sean E. Belanger
		President and Chief Executive Officer

Dated: May 15, 2006	By:	/s/ Brian R. Day

		Brian R. Day
		Chief Financial Officer

Exhibit 31.01

CERTIFICATIONS

I, Sean E. Belanger, Chief Executive Officer, certify that:

1.		I have reviewed this quarterly report on Form 10-QSB of Viseon, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.		The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: May 15, 2006
/s/ Sean E. Belanger
Sean E. Belanger
Chief Executive Officer

Exhibit 31.02

CERTIFICATIONS

I, Brian R. Day, Chief Financial Officer, certify that:

1.		I have reviewed this quarterly report on Form 10-QSB of Viseon, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.		The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: May 15, 2006
/s/ Brian R. Day
Brian R. Day
Chief Financial Officer


	Nine Months		Nine Months
	Ended		Ended
	March 31,		March 31,
	2006		2005
	(Unaudited)		(Unaudited)
*Supplemental cash flow information:*

Cash paid for interest	$	—	$	—
Noncash investing and financing activities:
Net liabilities of discontinued operations converted into common stock and warrants		409,860		—
Accrued preferred stock dividends converted to common stock		397,250		344,122
Common stock issued for preferred stock dividends		229,149		141,458
Conversion of preferred stock to common stock		7,000		44,750
Cashless exercise of warrants		2,619		3,498
Warrants issued to induce exercise of warrants		195,795		—
Accretion of beneficial conversion option		4,696,240		—

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets — March 31, 2006 (unaudited) and June 30, 2005 (audited)			3
Consolidated Statements of Operations (unaudited) — Three months ended March 31, 2006 and 2005			4
Consolidated Statement of Operations (unaudited) — Nine months ended March 31, 2006 and 2005			5
Consolidated Statements of Cash Flows (unaudited) — Nine months ended March 31, 2006 and 2005			6
Notes to Unaudited Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3. Controls and Procedures			17

PART II OTHER INFORMATION
Item 1. Legal Proceedings			18
Item 3. Exhibits			18
Signatures			18