SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


QUARTERLY  REPORT UNDER  SECTION 13 or 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
1934



For Quarter Ended  March 31, 2004                  Commission File No.  1-7939
                  -------------------------------                      --------




                            Vicon Industries, Inc.
- --------------------------------------------------------------------------------
       New York State                                           11-2160665
- --------------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                             identification No.)



            89 Arkay Drive, Hauppauge, New York                     11788
- --------------------------------------------------------------------------------
          (Address of principal executive offices)                (Zip Code)



Registrant's telephone number, including area code:      (631) 952-2288
                                                    ----------------------------



  (Former name, address, and fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.

                               Yes    X       No
                                   -------       -------


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934)

                               Yes            No    X
                                   -------       -------

At March 31, 2004,  the registrant had  outstanding  4,605,524  shares of Common
Stock, $.01 par value.





PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1.  FINANCIAL STATEMENTS
- -----------------------------

                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                                   (UNAUDITED)

                                                 Three Months Ended
                                                 ------------------

                                            3/31/04                3/31/03
                                            -------                -------

Net sales                                $12,234,953            $13,081,881
Cost of sales                              7,710,157              8,440,887
                                         -----------            -----------
    Gross profit                           4,524,796              4,640,994

Operating expenses:
  Selling, general and
    administrative expense                 4,155,268              3,822,634
  Engineering & development expense        1,207,735              1,341,116
                                         -----------            -----------
                                           5,363,003              5,163,750

    Operating loss                          (838,207)              (522,756)

Interest expense                              45,322                 64,439
Interest and other income                    (61,389)               (40,380)
                                         -----------            -----------

    Loss before income taxes                (822,140)              (546,815)
Income tax expense                            79,000              2,187,957
                                         -----------            -----------

    Net loss                             $  (901,140)           $(2,734,772)
                                         ===========            ===========




Basic and diluted loss per share         $      (.20)           $      (.59)
                                         ===========            ===========


Shares used in computing basic
 and diluted loss per share                4,604,853              4,641,213








See Accompanying Notes to Condensed Consolidated Financial Statements.









                                       -2-






                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                                   (UNAUDITED)

                                                   Six Months Ended
                                                   ----------------

                                            3/31/04                3/31/03
                                            -------                -------

Net sales                                $26,572,688            $25,099,895
Cost of sales                             16,201,341             16,558,346
                                         -----------            -----------
    Gross profit                          10,371,347              8,541,549

Operating expenses:
  Selling, general and
    administrative expense                 8,590,889              7,718,138
  Engineering & development expense        2,333,131              2,416,562
                                         -----------            -----------
                                          10,924,020             10,134,700

    Operating loss                          (552,673)            (1,593,151)

Interest expense                              96,713                131,918
Interest and other income                   (104,413)              (101,275)
                                         -----------            -----------

    Loss before income taxes                (544,973)            (1,623,794)
Income tax expense                           234,000              1,809,957
                                         -----------            -----------

    Loss before cumulative effect of a
      change in accounting principle        (778,973)            (3,433,751)

Cumulative effect of a change in
  accounting principle                          -                (1,372,606)
                                         -----------            -----------

    Net loss                             $  (778,973)           $(4,806,357)
                                         ===========            ===========


Basic and diluted loss per share:

 Loss before cumulative effect of a
   change in accounting principle        $      (.17)           $      (.74)
 Cumulative effect of a change in
   accounting principle                           -                    (.30)
                                         -----------            -----------
    Net loss                             $      (.17)           $     (1.04)
                                         ===========            ===========

Shares used in computing basic
 and diluted loss per share                4,605,548              4,641,993








See Accompanying Notes to Condensed Consolidated Financial Statements.




                                       -3-







                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------

ASSETS                                               3/31/04         9/30/03
- ------                                               -------         -------
                                                   (Unaudited)
CURRENT ASSETS
- --------------
Cash and cash equivalents                         $ 5,876,622     $ 4,836,148
Marketable securities                               3,390,856       3,325,773
Accounts receivable, net                           10,586,047      11,056,300
Inventories:
  Parts, components, and materials                  2,563,170       2,071,092
  Work-in-process                                   3,405,627       2,881,592
  Finished products                                 6,539,034       7,141,470
                                                  -----------     -----------
                                                   12,507,831      12,094,154
Recoverable income taxes                              225,372       2,052,662
Prepaid expenses and other current assets             694,551         701,779
                                                  -----------     -----------
   TOTAL CURRENT ASSETS                            33,281,279      34,066,816

Property, plant and equipment                      18,310,554      17,672,247
Less accumulated depreciation and amortization    (11,044,869)    (10,386,406)
                                                 ------------     -----------
                                                    7,265,685       7,285,841
Other assets                                          614,810         540,407
                                                  -----------     -----------
   TOTAL ASSETS                                   $41,161,774     $41,893,064
                                                  ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------

CURRENT LIABILITIES
- -------------------
Current maturities of long-term debt                  332,793         325,294
Accounts payable                                    2,432,348       2,527,946
Accrued compensation and employee benefits          1,922,064       2,023,087
Accrued expenses                                    2,405,479       2,524,858
Unearned revenue                                      937,938       1,238,944
Income taxes payable                                  293,406          94,174
                                                  -----------     -----------
   TOTAL CURRENT LIABILITIES                        8,324,028       8,734,303

Long-term debt                                      2,589,949       2,732,275
Unearned revenue                                      393,857         547,871
Other long-term liabilities                           817,730         643,884

SHAREHOLDERS' EQUITY
- --------------------
Common stock, par value $.01                           48,418          48,326
Capital in excess of par value                     22,486,977      22,439,637
Retained earnings                                   7,077,287       7,856,260
                                                  -----------     -----------
                                                   29,612,682      30,344,223
Less treasury stock, at cost                       (1,053,249)       (980,199)
Accumulated other comprehensive income                659,406          91,700
Deferred compensation                                (182,629)       (220,993)
                                                  -----------     -----------
   TOTAL SHAREHOLDERS' EQUITY                      29,036,210      29,234,731
                                                  -----------     -----------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $41,161,774     $41,893,064
                                                  ===========     ===========



See Accompanying Notes to Condensed Consolidated Financial Statements.




                                       -4-




                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                   (UNAUDITED)




                                                          Six Months Ended
                                                          ----------------

                                                      3/31/04        3/31/03
                                                      -------        -------
Cash flows from operating activities:
  Net loss                                         $  (778,973)   $(4,806,357)
  Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
    Depreciation and amortization                      529,086        532,677
    Stock compensation expense                          25,428           -
    Deferred income taxes                                -          1,853,957
    Cumulative effect of a change in
      accounting principle                               -          1,372,606
  Change in assets and liabilities:
      Accounts receivable                              967,699        287,717
      Inventories                                     (225,785)       759,938
      Recoverable income taxes                       1,827,290       (225,000)
      Prepaid expenses and other current assets         28,414        (88,585)
      Other assets                                     (72,189)        21,980
      Accounts payable                                (172,784)      (512,686)
      Accrued compensation and employee benefits      (127,240)       225,242
      Accrued expenses                                (172,197)       184,398
      Unearned revenue                                (455,020)        33,367
      Income taxes payable                             182,945         46,805
      Other liabilities                                175,324         45,466
                                                   ------------   -----------
       Net cash provided by (used in)
         operating activities                        1,731,998       (268,475)

Cash flows from investing activities:
  Capital expenditures                                (353,355)      (325,651)
  Purchases of marketable securities                   (69,911)    (1,539,708)
                                                   ------------   -----------
       Net cash used in investing activities          (423,266)    (1,865,359)

Cash flows from financing activities:
  Repayments of bank mortgage debt                    (165,327)      (316,198)
  Proceeds from exercise of stock options               22,006         16,169
  Repurchases of common stock                          (73,050)       (53,057)
  Repayments of U.S. term loan                           -           (450,000)
                                                   ------------   -----------
       Net cash used in financing activities          (216,371)      (803,086)
                                                   ------------   -----------
Effect of exchange rate changes on cash                (51,887)       (59,924)
                                                   ------------   -----------

Net increase (decrease) in cash                      1,040,474     (2,996,844)
Cash at beginning of year                            4,836,148      9,771,804
                                                   ------------   -----------
Cash at end of period                              $ 5,876,622    $ 6,774,960
                                                   ============   ===========




See Accompanying Notes to Condensed Consolidated Financial Statements.





                                       -5-




                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
        ----------------------------------------------------------------
                                 March 31, 2004
                                 --------------


Note 1:  Basis of Presentation
- ------------------------------

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America for interim financial  information and the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,  they do not include
all the information and footnotes  required by accounting  principles  generally
accepted in the United States of America for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the six months  ended March 31, 2004 are not  necessarily
indicative  of the  results  that may be  expected  for the  fiscal  year  ended
September 30, 2004. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the fiscal year ended  September  30, 2003.  Certain prior year amounts
have been reclassified to conform to the current period presentation.

Note 2:  Marketable Securities
- ------------------------------

Marketable securities consist of mutual fund investments in U.S. government debt
securities.  Such  securities  are stated at market value and are  classified as
available-for-sale  under Financial  Accounting Standards Board (FASB) Statement
of Financial  Accounting  Standards  (SFAS) No. 115, with  unrealized  gains and
losses reported in other  comprehensive  income as a component of  shareholders'
equity.  The cost of such  securities  at March 31,  2004 was  $3,402,239,  with
$11,383 of cumulative unrealized losses reported at March 31, 2004.

Note 3:  Accounts Receivable
- ----------------------------

Accounts receivable is stated net of an allowance for uncollectible  accounts of
$1,193,000  and  $1,135,000  as of  March  31,  2004  and  September  30,  2003,
respectively.

Note 4:  Earnings per Share
- ---------------------------

Basic earnings (loss) per share (EPS) is computed based on the weighted  average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
maximum dilution that would have resulted from the exercise of stock options and
incremental common shares issuable under deferred compensation  agreements.  The
weighted average number of shares of common stock used in determining  basic and
diluted EPS was  4,604,853  and  4,641,213  for the three months ended March 31,
2004 and 2003,  respectively.  The weighted  average  number of shares of common
stock used in determining  basic and diluted EPS was 4,605,548 and 4,641,993 for
the six months ended March 31, 2004 and 2003, respectively.

For the three months ended March 31, 2004 and 2003,  249,585 and 46,063  shares,
respectively,  have been  omitted from the  calculation  of diluted EPS as their
effect would have been antidilutive. For the six months ended March 31, 2004 and
2003,  217,172  and 47,169  shares,  respectively,  have been  omitted  from the
calculation of diluted EPS as their effect would have been antidilutive.





                                       -6-





Note 5:   Comprehensive Income (Loss)
- -------------------------------------

The Company's total comprehensive loss for the three month and six month periods
ended March 31, 2004 and 2003 was as follows:

                                  Three Months               Six Months
                                Ended March 31,            Ended March 31,
                            ----------------------      ---------------------
                               2004         2003          2004         2003
                              ------       ------        ------       ------

Net loss                  $  (901,140)  $(2,734,772)   $ (778,973) $(4,806,357)
Other comprehensive income
 (loss), net of tax:
  Net unrealized (gain)
   loss on securities          16,354            32        (4,828)       3,748
  Unrealized gain (loss)
   on derivatives              92,524        13,519       (36,886)      (4,065)
  Foreign currency
   translation adjustment     130,208      (176,166)      609,420      (19,156)
                          -----------    ----------   ------------ -----------
Comprehensive loss        $  (662,054)  $(2,897,387)  $  (211,267) $(4,825,830)
                          ===========   ============  ============ ============

The accumulated other comprehensive income balances at March 31, 2004 and
September 30, 2003 consisted of the following:

                                                    March 31,    September 30,
                                                      2004           2003
                                                  -----------    -------------
Foreign currency translation adjustment            $ 924,405      $ 314,985
Unrealized loss on derivatives                      (253,616)      (216,730)
Unrealized loss on securities                        (11,383)        (6,555)
                                                   ----------     ---------
Accumulated other comprehensive income             $ 659,406      $  91,700
                                                   ==========     ==========

Note 6:   Segment and Related Information
- -----------------------------------------

The Company operates in one industry which encompasses the design,  manufacture,
assembly and marketing of video  surveillance  systems and system components for
the electronic protection segment of the security industry.  The Company manages
its business segments  primarily on a geographic basis. The Company's  principal
reportable segments are comprised of its United States (U.S.) and United Kingdom
(Europe)  based  operations.   Its  U.S.  based  operations  consists  of  Vicon
Industries,  Inc., the Company's corporate  headquarters and principal operating
entity.  Its Europe based  operations  consist of Vicon  Industries  Limited,  a
wholly owned  subsidiary  which markets and distributes  the Company's  products
principally  within Europe and the Middle East.  The other segment  includes the
operations of TeleSite  U.S.A.,  Inc. and subsidiary,  an Israeli based designer
and producer of digital video products.

The Company evaluates  performance and allocates resources based on, among other
things,  the net profit or loss for each segment,  excluding  intersegment sales
and profits. Segment information for the three month and six month periods ended
March 31, 2004 and 2003 was as follows:

Three Months Ended
March 31, 2004          U.S.       Europe      Other     Consolid.    Totals
- -----------------    ----------  ----------  ---------  ----------   -------

Net sales to
 external customers $ 7,864,000  $4,226,000 $  145,000  $    -     $12,235,000
Intersegment
 net sales            1,155,000       -      2,086,000  (3,241,000)      -
Net income (loss)    (1,065,000)    325,000   (109,000)    (52,000)   (901,000)
Total assets         30,182,000  10,234,000  4,729,000  (3,983,000) 41,162,000


                                       -7-





Three Months Ended
March 31, 2003          U.S.       Europe      Other     Consolid.    Totals
- -----------------    ----------  ----------  ---------  ----------   -------

Net sales to
 external customers $ 8,459,000  $4,268,000 $  355,000 $     -    $13,082,000
Intersegment
 net sales            1,653,000       -        707,000 (2,360,000)      -
Net income (loss)    (2,558,000)    140,000   (254,000)   (63,000) (2,735,000)
Total assets         33,683,000   8,978,000  3,542,000 (4,481,000) 41,722,000

Six Months Ended
March 31, 2004          U.S.       Europe      Other     Consolid.    Totals
- -----------------    ----------  ----------  ---------  ----------   -------

Net sales to
 external customers $17,119,000  $9,195,000 $  259,000 $     -    $26,573,000
Intersegment
 net sales            2,182,000       -      3,916,000 (6,098,000)      -
Net income (loss)    (1,384,000)    645,000      8,000    (48,000)   (779,000)
Total assets         30,182,000  10,234,000  4,729,000 (3,983,000) 41,162,000

Six Months Ended
March 31, 2003          U.S.       Europe      Other     Consolid.    Totals
- -----------------    ----------  ----------  ---------  ----------   -------

Net sales to
 external customers $16,215,000  $8,093,000 $  792,000 $     -    $25,100,000
Intersegment
 net sales            3,056,000       -      1,267,000 (4,323,000)      -
Net income (loss)    (3,401,000)    361,000   (319,000)(1,447,000) (4,806,000)
Total assets         33,683,000   8,978,000  3,542,000 (4,481,000) 41,722,000

The  consolidating  segment  information  above  includes  the  elimination  and
consolidation of intersegment transactions.

Note 7:   Derivative Instruments
- --------------------------------

At March 31,  2004,  the Company had  interest  rate swaps and forward  exchange
contracts  outstanding with notional  amounts  aggregating $1.8 million and $3.6
million,   respectively,   whose   aggregate  fair  value  was  a  liability  of
approximately  $254,000.  The  change in the amount of the  liability  for these
instruments is shown as a component of accumulated other comprehensive income.

Note 8:   Goodwill
- ------------------

The  Company  adopted  SFAS  No.  142  on  October  1,  2002,  and  accordingly,
discontinued amortization of goodwill as of that date. The Company performed the
transitional  goodwill  impairment  testing  required  under SFAS No. 142, which
included a comparison of the fair value of each of the Company's reporting units
to the carrying  amounts of each unit's net assets to determine the implied fair
value of each reporting unit's goodwill.

Based upon an  independent  valuation  conducted as of October 1, 2002,  and the
results of the  transitional  impairment  testing,  the  Company  recognized  an
impairment  charge of  approximately  $1.4 million  (primarily  resulting from a
change  in  measurement  from  undiscounted  to  discounted  cash  flows),  as a
cumulative  effect of a change in accounting  principle for the six months ended
March 31, 2003.


                                       -8-




Note 9:   Stock-Based Compensation
- ----------------------------------

The Company follows Accounting  Principles Board Opinion No. 25, "Accounting for
Stock  Issued  to  Employees"  ("APB No.  25") and  related  interpretations  in
accounting  for  its  employee  stock-based  compensation.  Under  APB  No.  25,
compensation  expense  would be  recorded  if, on the date of grant,  the market
price of the underlying  stock exceeded its exercise price. As permitted by SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") and SFAS No.
148 "Accounting  for  Stock-Based  Compensation - Transition and Disclosure - An
Amendment of FASB Statement No. 123" ("SFAS No. 148"),  the Company has retained
the  accounting  prescribed  by APB No.  25 and  has  presented  the  disclosure
information prescribed by SFAS No. 123 and SFAS No. 148 below.

Pro forma information  regarding net income (loss) and earnings (loss) per share
is required by SFAS 123, and has been determined as if the Company had accounted
for its employee  stock options  under the fair value method of this  Statement.
The fair  value  for  options  was  estimated  at the date of  grant  using  the
Black-Scholes option pricing model.

In the Company's condensed  consolidated  financial statements,  no compensation
expense has been  recognized  for stock  option  grants  issued under any of the
Company's fixed stock option plans.  Had  compensation  expense for stock option
grants issued been  determined  under the fair value method of SFAS No. 123, the
Company's  net income  (loss) and earnings  (loss) per share (EPS) for the three
and six month periods ended March 31, 2004 and 2003 would have been:


                                    Three Months              Six Months
                                   Ended March 31,          Ended March 31,
                                ----------------------    -------------------
                                   2004        2003         2004       2003
                                 --------   --------      --------   --------

Reported net loss             $  (901,140) $(2,734,772) $(778,973) $(4,806,357)
Stock-based compensation cost     (27,479)     (51,210)   (63,782)     (91,698)
                              -----------  -----------  ---------  -----------
Pro forma net loss            $  (928,619) $(2,785,982) $(842,755) $(4,898,055)
                              ===========  ===========  =========  ===========

Reported basic and diluted EPS   $ (.20)       $(.59)    $ (.17)      $(1.04)
Pro forma basic and diluted EPS  $ (.20)       $(.60)    $ (.18)      $(1.06)


Note 10:   Recent Accounting Pronouncement
- ------------------------------------------

In August 2003, the Emerging  Issues Task Force reached  consensus on EITF Issue
No. 03-5 ("EITF  03-5"),  "Applicability  of AICPA  Statement of Position  97-2,
"Software Revenue  Recognition," to Non-Software  Deliverables in an Arrangement
Containing More-than-Incidental Software". EITF 03-5, which became effective for
the  Company on  October  1, 2003,  provides  guidance  on  determining  whether
non-software  deliverables  are  included  within  the  scope of SOP  97-2  and,
accordingly,  whether multiple  element  arrangements are to be accounted for in
accordance  with EITF Issue No. 00-21 or SOP 97-2.  The  provisions of EITF 03-5
did not have an impact on the  Company's  results  of  operations  or  financial
position.









                                       -9-




Note 11:   Income Taxes
- -----------------------

The components of income tax expense  (benefit) for the periods indicated are as
follows:

                               Three Months                 Six Months
                              Ended March 31,             Ended March 31,
                              ---------------             ---------------
                             2004        2003            2004         2003
                             ----        ----            ----         ----
Federal:
 Current                  $    -     $    -           $    -      $ (225,000)
 Deferred                      -      2,106,957            -       1,853,957
                          ---------  ----------       ----------   ---------
                               -      2,106,957            -       1,628,957

State                          -          -               10,000       -
Foreign                      79,000      81,000          224,000     181,000
                          ---------  ----------       ----------   ---------

Total income tax expense  $  79,000  $2,187,957       $  234,000  $1,809,957
                          =========  ==========       ==========  ==========

In the quarter  ended March 31,  2003,  the Company  recognized  a $2.1  million
charge to provide a valuation  allowance  against its deferred tax assets due to
the  uncertainty  of future  realization.  The  establishment  of such valuation
allowance  was  determined to be  appropriate  during that period due to updated
judgments of future results in light of the Company's operating losses in recent
years and the inherent  uncertainties of predicting  future operating results in
periods  over  which  such net tax  differences  become  deductible.  Income tax
expense for the six months ended March 31, 2003 includes the  recognition  of an
available tax effected net operating loss carryback of $225,000.


Note 12:   Contingencies
- ------------------------

In May 2003,  the Company was served  with a summons and  complaint  in a patent
infringement  suit that named the Company and  thirteen  other  defendants.  The
alleged  infringement  relates to the Company's camera dome systems,  which is a
significant  product line. Among other things,  the suit seeks injunctive relief
and unspecified damages. The Company and its outside patent counsel believe that
the  complaint is without  merit and the Company  intends to  vigorously  defend
itself in this matter.  The Company is unable to reasonably  estimate a range of
possible loss, if any, at this time.  Although the Company  believes that it has
meritorious  defenses to such claims, there is a possibility that an unfavorable
outcome could ultimately occur that could result in a liability that is material
to the Company's results of operations and financial position. The Company plans
to present a joint  defense  with  certain  other named  defendants  and also is
willing to explore the possibility of settlement.












                                      -10-




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
- ---------------------------------------------


Results of Operations
- ---------------------
Three Months Ended March 31, 2004 Compared with March 31, 2003
- --------------------------------------------------------------


Net sales for the quarter  ended March 31, 2004  decreased  $.9 million or 6% to
$12.2 million compared with $13.1 million in the year ago period. Domestic sales
decreased  $.7 million or 9% to $7.0 million  compared  with $7.7 million in the
year ago  period.  International  sales  for the  quarter  decreased  3% to $5.2
million  compared  with $5.4  million  in the year ago  period.  The  backlog of
unfilled orders was $6.1 million at March 31, 2004 compared with $7.4 million at
September 30, 2003.

Gross profit  margins for the second  quarter of fiscal 2004  increased to 37.0%
compared with 35.5% in the year ago period.  The margin increase was principally
due to sales of the Company's  new digital  video  product  line,  which carries
higher margins.  The Company also experienced  increased profit margins from its
European based operations due to the effects of favorable  exchange rate changes
as the  cost of  their  U.S.  dollar  sourced  products  declined.  Such  margin
increases were offset,  in part, by a $182,000  provision for the writedown of a
discontinued product line in the second quarter of fiscal 2004.

Operating  expenses  for the second  quarter of fiscal  2004  increased  to $5.4
million  compared  with $5.2  million  in the year ago period  principally  as a
result  of  increased  legal  fees  associated  with  the  defense  of a  patent
infringement suit. The Company continued to invest in new product development in
the current  quarter,  incurring  $1.2 million of  engineering  and  development
expenses compared with $1.3 million in the year ago period.

The Company  incurred an operating loss of $838,000 in the second fiscal quarter
of 2004 compared with an operating loss of $523,000 in the year ago period.

Interest  expense  decreased  to $45,000  for the second  quarter of fiscal 2004
compared  with  $64,000  in the year ago period  principally  as a result of the
paydown of bank borrowings.

Income tax  expense for the second  quarter of fiscal 2004 was $79,000  compared
with $2.2 million in the year ago period.  In the quarter  ended March 31, 2003,
the Company  recognized a $2.1 million  income tax charge to provide a valuation
allowance  against  its  deferred  tax assets due to the  uncertainty  of future
realization.  The establishment of such valuation allowance was determined to be
appropriate  as a result of the Company's  operating  losses in recent years and
the inherent  uncertainties of predicting  future  operating  results in periods
over which such net tax differences become deductible.  As a result, the Company
has since  ceased  providing  a deferred  tax  benefit  on its U.S.  operation's
losses.

As a result of the  foregoing,  the Company  incurred a net loss of $901,000 for
the second  quarter of fiscal 2004  compared  with a net loss of $2.7 million in
the year ago period.



                                      -11-





Results of Operations
- ---------------------
Six Months Ended March 31, 2004 Compared with March 31, 2003
- ------------------------------------------------------------


Net sales for the six months ended March 31, 2004  increased  $1.5 million or 6%
to $26.6 million  compared  with $25.1 million in the year ago period.  Domestic
sales  increased $.6 million or 4% to $15.1 million  compared with $14.5 million
in the year ago period. International sales increased $.9 million or 8% to $11.5
million compared with $10.6 million in the year ago period.

Gross profit  margins for the first six months of fiscal 2004 increased to 39.0%
compared with 34.0% in the year ago period.  The margin increase was principally
due to sales of the Company's  new digital  video  product  line,  which carries
higher margins.  The Company also experienced  increased profit margins from its
European based operations due to the effects of favorable  exchange rate changes
as the cost of their U.S. dollar sourced products declined.

Operating  expenses  for the first six months of fiscal 2004  increased to $10.9
million  compared  with $10.1  million in the year ago period  principally  as a
result of increased  selling costs and legal fees associated with the defense of
a patent  infringement  suit.  The  Company  continued  to invest in new product
development  in the current year period,  incurring  $2.3 million of engineering
and development expenses compared with $2.4 million in the year ago period.

The Company  incurred an operating  loss of $553,000 for the first six months of
2004 compared with an operating loss of $1.6 million in the year ago period.

Interest  expense  decreased  to $97,000 for the first six months of fiscal 2004
compared  with  $132,000 in the year ago period  principally  as a result of the
paydown of bank borrowings.

Income tax expense for the first six months of fiscal 2004 was $234,000 compared
with $1.8  million in the year ago period.  In the six month  period ended March
31, 2003,  the Company  recognized a $1.9 million income tax charge to provide a
valuation  allowance  against its deferred tax assets due to the  uncertainty of
future realization. The establishment of such valuation allowance was determined
to be appropriate as a result of the Company's  operating losses in recent years
and the inherent uncertainties of predicting future operating results in periods
over which such net tax differences  become  deductible.  Income tax expense for
the six months ended March 31, 2003 includes the recognition of an available tax
effected net operating loss carryback of $225,000.

During fiscal 2003, the Company completed its required goodwill impairment tests
as of October 1, 2002 and  determined  that the carrying  amount of its goodwill
was impaired when tested pursuant to the requirements of the new standard.  As a
result, a goodwill  impairment  charge of $1.4 million was recognized  effective
October 1, 2002 as the  cumulative  effect of a change in  accounting  principle
reflected in the six months ended March 31, 2003.

As a result of the  foregoing,  the Company  incurred a net loss of $779,000 for
the first six months of fiscal 2004  compared with a net loss of $4.8 million in
the year ago period.







                                      -12-




                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                      ------------------------------------

Liquidity and Financial Condition
- ---------------------------------

Net cash  provided by  operating  activities  was $1.7 million for the first six
months of fiscal 2004 due  primarily  to the receipt of a $1.8  million  federal
income tax refund.  Net cash used in investing  activities  was $423,000 for the
first six  months  of fiscal  2004  relating  to  $353,000  of  general  capital
expenditures and the purchase of $70,000 of marketable securities. Net cash used
in financing  activities  was  $216,000,  which  included  $165,000 of scheduled
repayments of bank mortgage loans and $73,000 of treasury stock repurchases.  As
a result of the  foregoing,  cash  increased  by $1.0  million for the first six
months of fiscal 2004 after the nominal  effect of exchange  rate changes on the
cash position of the Company.

The Company has a $5 million secured  revolving credit facility with a bank that
expires in July 2004. Borrowings under this facility bear interest at the bank's
prime rate or, at the Company's  option,  LIBOR plus 190 basis points (4.00% and
3.01%,  respectively,  at March 31,  2004).  At March 31, 2004 and September 30,
2003, there were no outstanding borrowings under this facility. The Company does
not anticipate the need to draw on such facility  through its expiration in July
2004.

The Company  also  maintains  a bank  overdraft  facility of one million  Pounds
Sterling (approximately $1,840,000) in the U.K. to support local working capital
requirements of Vicon Industries  Limited.  This facility expires in March 2005.
At March 31, 2004 and September 30, 2003,  there were no outstanding  borrowings
under this facility.

Current and long-term debt maturing in the remaining six months ended  September
30, 2004 and in each of the subsequent  fiscal years  approximates  $167,000 for
the remaining six months ended September 30, 2004, $343,000 in 2005, $349,000 in
2006, $324,000 in 2007 and $1,740,000 in 2008.

The Company  occupies  certain  facilities,  or is  contingently  liable,  under
operating  leases that expire at various dates through 2008.  The leases,  which
cover periods from three to eight years,  generally  provide for renewal options
at specified rental amounts.  The aggregate  operating lease commitment at March
31,  2004 was  $444,000  with  minimum  rentals  for the fiscal  years  shown as
follows: for the remaining six months ended September 30, 2004 - $173,000;  2005
- - $153,000;  2006 - $38,000; 2007 - $31,000; 2008 - $28,000; 2009 and thereafter
- - $21,000.

The  Company  believes  that it has  sufficient  cash to  meet  its  anticipated
operating,  capital  expenditures and debt service requirements for at least the
next twelve months.









                                      -13-



In May 2003,  the Company was served  with a summons and  complaint  in a patent
infringement  suit that named the Company and  thirteen  other  defendants.  The
alleged  infringement  relates to the Company's camera dome systems,  which is a
significant  product line. Among other things,  the suit seeks injunctive relief
and unspecified damages. The Company and its outside patent counsel believe that
the  complaint is without  merit and the Company  intends to  vigorously  defend
itself in this matter.  The Company is unable to reasonably  estimate a range of
possible loss, if any, at this time.  Although the Company  believes that it has
meritorious  defenses to such claims, there is a possibility that an unfavorable
outcome could ultimately occur that could result in a liability that is material
to the Company's results of operations and financial position. The Company plans
to present a joint  defense  with  certain  other named  defendants  and also is
willing to explore the possibility of settlement.

Critical Accounting Policies
- ----------------------------

The Company's  significant  accounting policies are fully described in Note 1 to
the Company's  consolidated  financial  statements included in its September 30,
2003 Annual  Report on Form 10-K.  Management  believes the  following  critical
accounting  policies,  among others,  affect its more significant  judgments and
estimates used in the preparation of its consolidated financial statements.

The Company  recognizes  revenue  when  persuasive  evidence  of an  arrangement
exists,  delivery has occurred or services have been rendered, the selling price
is fixed or  determinable,  and  collectibility  of the resulting  receivable is
reasonably  assured.  As it  relates  to product  sales,  revenue  is  generally
recognized when products are sold and title is passed to the customer.  Shipping
and handling costs are included in cost of sales. Advance service billings under
a national  supply  contract  with one customer are deferred and  recognized  as
revenues on a pro rata basis over the term of the service agreement. The Company
evaluates multiple-element revenue arrangements for separate units of accounting
pursuant  to  EITF  Issue  No.  00-21,   "Revenue   Arrangements  with  Multiple
Deliverables",  and follows appropriate  revenue  recognition  policies for each
separate  unit.  Elements are considered  separate units of accounting  provided
that (i) the delivered item has stand-alone value to the customer, (ii) there is
objective  and reliable  evidence of the fair value of the delivered  item,  and
(iii) if a general  right of  return  exists  relative  to the  delivered  item,
delivery or  performance  of the  undelivered  item is  considered  probable and
substantially  within the  control of the  Company.  As applied to the  Company,
under arrangements  involving the sale of product and the provision of services,
product sales are  recognized as revenue when the products are sold and title is
passed to the  customer,  and service  revenue is  recognized  as  services  are
performed.  For products  that include more than  incidental  software,  and for
separate licenses of the Company's  software  products,  the Company  recognizes
revenue in  accordance  with the  provisions  of  Statement  of  Position  97-2,
"Software Revenue Recognition", as amended.

The Company  maintains  allowances  for doubtful  accounts for estimated  losses
resulting from the inability of its customers to make required payments.  If the
financial  condition  of its  customers  were to  deteriorate,  resulting  in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.







                                      -14-





The Company  provides for the estimated  cost of product  warranties at the time
revenue is recognized. While the Company engages in product quality programs and
processes,  including  monitoring  and  evaluating  the quality of its component
suppliers,  its  warranty  obligation  is  affected  by product  failure  rates,
material  usage and service  delivery  costs  incurred in  correcting  a product
failure. Should actual product failure rates, material usage or service delivery
costs differ from its estimates,  revisions to the estimated  warranty liability
may be required.

The Company writes down its inventory for estimated obsolescence and slow moving
inventory  equal  to the  difference  between  the  cost  of  inventory  and the
estimated net realizable market value based upon assumptions about future demand
and market conditions.  Technology changes and market conditions may render some
of the Company's products obsolete and additional  inventory  write-downs may be
required.  If actual future demand or market  conditions are less favorable than
those projected by management, additional inventory write-downs may be required.

The Company assesses the  recoverability of the carrying value of its long-lived
assets,  including  identifiable  intangible  assets with finite  useful  lives,
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable.  The Company evaluates the  recoverability of
such assets based upon the  expectations  of  undiscounted  cash flows from such
assets. If the sum of the expected future undiscounted cash flows were less than
the carrying  amount of the asset, a loss would be recognized for the difference
between the fair value and the carrying amount.

The  Company's  ability to recover the reported  amounts of deferred  income tax
assets is  dependent  upon its ability to  generate  sufficient  taxable  income
during the periods over which net temporary tax differences  become  deductible.
In fiscal  2003,  the  Company  recognized  a $1.9  million  charge to provide a
valuation  allowance  against its deferred tax assets due to the  uncertainty of
future realization. The establishment of such valuation allowance was determined
to be  appropriate  during that period due to updated  judgments in light of the
Company's  operating  losses  in  current  and  recent  years  and the  inherent
uncertainties of predicting  future operating results in periods over which such
net tax  differences  become  deductible.  The  Company  plans to provide a full
valuation  allowance against its deferred tax assets until such time that it can
achieve a sustained  level of  profitability  or other positive  evidence arises
that would demonstrate an ability to recover such assets.

The Company is subject to  proceedings,  lawsuits  and other  claims  related to
labor,  product and other  matters.  The Company  assesses the  likelihood of an
adverse  judgment  or  outcomes  for  these  matters,  as well as the  range  of
potential  losses.  A determination  of the reserves  required,  if any, is made
after careful  analysis.  The required  reserves may change in the future due to
new developments.

Recent Accounting Pronouncement
- -------------------------------

In August 2003, the Emerging  Issues Task Force reached  consensus on EITF Issue
No. 03-5 ("EITF  03-5"),  "Applicability  of AICPA  Statement of Position  97-2,
"Software Revenue  Recognition," to Non-Software  Deliverables in an Arrangement
Containing More-than-Incidental Software". EITF 03-5, which became effective for
the  Company on  October  1, 2003,  provides  guidance  on  determining  whether
non-software  deliverables  are  included  within  the  scope of SOP  97-2  and,
accordingly,  whether multiple  element  arrangements are to be accounted for in
accordance  with EITF Issue No. 00-21 or SOP 97-2.  The  provisions of EITF 03-5
did not have an impact on the  Company's  results  of  operations  or  financial
position.

                                      -15-




Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------

Statements in this Report on Form 10-Q and other  statements made by the Company
or its representatives that are not strictly historical facts including, without
limitation,   statements   included  herein  under  the  captions   "Results  of
Operations",  "Liquidity  and  Financial  Condition"  and  "Critical  Accounting
Policies"  are  "forward-looking"  statements  within the meaning of the Private
Securities Litigation Reform Act of 1995 that should be considered as subject to
the many risks and  uncertainties  that exist in the  Company's  operations  and
business  environment.  The  forward-looking  statements  are  based on  current
expectations  and involve a number of known and unknown risks and  uncertainties
that could cause the actual  results,  performance  and/or  achievements  of the
Company  to  differ   materially  from  any  future   results,   performance  or
achievements, express or implied, by the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking  statements,  and
that in light  of the  significant  uncertainties  inherent  in  forward-looking
statements,  the  inclusion  of such  statements  should  not be  regarded  as a
representation  by the Company or any other person that the  objectives or plans
of the Company will be  achieved.  The Company  also  assumes no  obligation  to
update its forward-looking statements or to advise of changes in the assumptions
and factors on which they are based.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------

The Company is exposed to various  market  risks,  including  changes in foreign
currency  exchange  rates and  interest  rates.  The  Company  has a policy that
prohibits the use of currency  derivatives or other  financial  instruments  for
trading or speculative purposes.

The Company  enters into forward  exchange  contracts to hedge  certain  foreign
currency  exposures  and  minimize the effect of such  fluctuations  on reported
earnings and cash flow (see Note 7 "Derivative  Instruments" to the accompanying
condensed  consolidated  financial  statements).  The Company's  ongoing foreign
currency  exchange  risks  include  intercompany  sales of product and  services
between subsidiary  companies operating in differing functional  currencies.  At
March 31, 2004,  substantially  all of such foreign currency  transactions  have
been hedged by forward exchange contracts.

At March 31, 2004,  the Company had $1.8 million of  outstanding  floating  rate
bank debt which was covered by interest rate swap  agreements  that  effectively
convert the  foregoing  floating  rate debt to stated  fixed rates (see "Note 7.
Long-Term  Debt"  to  the  consolidated  financial  statements  included  in the
Company's  Annual  Report on Form 10-K for the year ended  September  30, 2003).
Thus,  the Company has  substantially  no net interest  rate  exposures on these
instruments.  However,  the Company had approximately  $817,000 of floating rate
bank  debt that is  subject  to  interest  rate  risk as it was not  covered  by
interest  rate  swap  agreements.  The  Company  does  not  believe  that  a 10%
fluctuation in interest rates would have a material  effect on its  consolidated
financial position and results of operations.











                                      -16-




ITEM 4.  CONTROLS AND PROCEDURES
- --------------------------------

Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------

The Company's management,  with the participation of its Chief Executive Officer
and Chief Financial Officer, conducted an evaluation of the effectiveness of the
design and operation of the Company's  disclosure  controls and  procedures,  as
required  by  Exchange  Act Rule  13a-15.  Based on that  evaluation,  the Chief
Executive  Officer and Chief Financial Officer have concluded that the Company's
disclosure  controls and procedures  were  effective to ensure that  information
required to be  disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified by the Securities and Exchange Commission's rules and
forms.

Changes in Internal Controls
- ----------------------------

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.

Limitations on the Effectiveness of Controls
- --------------------------------------------

The Company  believes  that a control  system,  no matter how well  designed and
operated,  cannot provide absolute  assurance that the objectives of the control
system are met, and no  evaluation  of controls can provide  absolute  assurance
that all control  issues and instances of fraud,  if any,  within a company have
been detected.


PART II - OTHER INFORMATION
- ---------------------------

ITEM 1 -  LEGAL PROCEEDINGS
- ------    -----------------

          In May 2003,  the Company was served with a summons and complaint in a
          patent  infringement  suit that named the Company and  thirteen  other
          defendants.  The alleged  infringement relates to the Company's camera
          dome systems, which is a significant product line. Among other things,
          the suit seeks injunctive relief and unspecified  damages. The Company
          and its outside patent  counsel  believe that the complaint is without
          merit and the  Company  intends to  vigorously  defend  itself in this
          matter.  The  Company  is unable  to  reasonably  estimate  a range of
          possible  loss,  if any, at this time.  Although the Company  believes
          that  it  has  meritorious   defenses  to  such  claims,  there  is  a
          possibility  that an unfavorable  outcome could  ultimately occur that
          could result in a liability that is material to the Company's  results
          of operations and financial  position.  The Company plans to present a
          joint defense with certain other named  defendants and also is willing
          to explore the possibility of settlement.


ITEM 2 -  CHANGES IN SECURITIES
- ------    ---------------------

          None

ITEM 3 -  DEFAULTS UPON SENIOR SECURITIES
- ------    -------------------------------

          None



                                      -17-




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

          None

ITEM 5 -  OTHER INFORMATION
- ------    -----------------

          None

ITEM 6 -  EXHIBITS AND REPORTS ON FORM 8-K
- ------    --------------------------------

a)        Exhibits
          --------

          10        Material Contracts

                    (.1) Advice of Borrowing Terms between the Registrant and
                         National Westminster Bank PLC dated April 15, 2004.

          31.1      Certification of Chief Executive Officer pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.

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

          32.1      Certification of Chief Executive Officer pursuant to
                    18 U.S.C. Section 1350, as adopted pursuant to Section 906
                    of the Sarbanes-Oxley Act of 2002.

          32.2      Certification of Chief Financial Officer pursuant to
                    18 U.S.C. Section 1350, as adopted pursuant to Section 906
                    of the Sarbanes-Oxley Act of 2002.



b)        Reports on Form 8-K
          -------------------

          (i)  On January 6, 2004,  the Company  filed a Current  Report on Form
               8-K filing its press release  announcing the Company's  financial
               results for its fiscal year ended September 30, 2003.

          (ii) On January 14, 2004,  the Company filed a Current  Report on Form
               8-K disclosing the Company's  inability to file its Annual Report
               on Form 10-K for the year ended  September  30,  2003  within the
               prescribed time period.

          (iii)On February 10, 2004,  the Company filed a Current Report on Form
               8-K  announcing  the  dismissal  of  KPMG  LLP as its  certifying
               accountants  and  the  engaging  of  BDO  Seidman,   LLP  as  its
               certifying  accountants for its fiscal year ending  September 30,
               2004.

          (iv) On February 19, 2004,  the Company filed a Current Report on Form
               8-K filing its press release  announcing the Company's  financial
               results for the quarter ended December 31, 2003.






                                      -18-




                                   Signatures
                                   ----------

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



VICON INDUSTRIES, INC.





May 17, 2004




/s/ Kenneth M. Darby                       /s/ John M. Badke
- --------------------                       --------------------
Kenneth M. Darby                           John M. Badke
Chairman and                               Senior Vice President, Finance
Chief Executive Officer                    Chief Financial Officer




















                                      -19-