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  December 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            No    X
                                   -------       -------

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 December 31, 2004, the registrant had outstanding  4,562,429 shares of Common
Stock, $.01 par value.


                                       -1-




PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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

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

                                           12/31/04               12/31/03
                                           --------               --------

Net sales                                $15,582,091            $14,337,736
Cost of sales                              9,713,864              8,491,185
                                         -----------            -----------
    Gross profit                           5,868,227              5,846,551

Operating expenses:
  Selling, general and
    administrative expense                 5,159,402              4,435,621
  Engineering & development expense        1,381,786              1,125,395
                                         -----------            -----------
                                           6,541,188              5,561,016

    Operating income (loss)                 (672,961)               285,535

Interest expense                              45,997                 51,391
Interest and other income                    (36,891)               (43,024)
Loss on sale of marketable securities         44,936                   -
                                         -----------            -----------

    Income (loss) before income taxes       (727,003)               277,168
Income tax expense                            13,000                155,000
                                         -----------            ------------

    Net income (loss)                    $  (740,003)           $   122,168
                                         ===========            ===========



Basic and diluted earnings
  (loss) per share                       $      (.16)           $       .03
                                         ===========            ===========


Shares used in computing earnings (loss) per share:

            Basic                          4,561,663              4,606,236
            Diluted                        4,561,663              4,790,995







See Accompanying Notes to Condensed Consolidated Financial Statements.



                                       -2-

<page>



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

ASSETS                                              12/31/04         9/30/04
- ------                                              --------         -------
                                                   (Unaudited)
CURRENT ASSETS
- --------------
Cash and cash equivalents                         $ 3,696,060     $ 6,063,198
Marketable securities                                  56,066       2,118,698
Accounts receivable, net                           11,959,622       9,661,563
Inventories:
  Parts, components, and materials                  3,022,180       3,239,461
  Work-in-process                                   3,794,519       3,675,122
  Finished products                                 6,760,830       5,758,990
                                                  -----------     -----------
                                                   13,577,529      12,673,573
Recoverable income taxes                              239,402         239,402
Prepaid expenses and other current assets             512,760         388,347
                                                  -----------     -----------
   TOTAL CURRENT ASSETS                            30,041,439      31,144,781

Property, plant and equipment                      18,771,201      18,324,603
Less accumulated depreciation and amortization    (11,581,923)    (11,234,174)
                                                 ------------     -----------
                                                    7,189,278       7,090,429
Other assets                                          637,518         631,807
                                                  -----------     -----------
   TOTAL ASSETS                                   $37,868,235     $38,867,017
                                                  ===========     ===========

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

CURRENT LIABILITIES
- -------------------
Current maturities of long-term debt                  351,839         348,615
Accounts payable                                    3,028,059       3,282,671
Accrued compensation and employee benefits          1,915,697       2,048,417
Accrued expenses                                    1,358,443       1,541,888
Unearned revenue                                      693,908         792,073
Income taxes payable                                  202,104         337,632
                                                  -----------     -----------
   TOTAL CURRENT LIABILITIES                        7,550,050       8,351,296

Long-term debt                                      2,332,656       2,410,190
Unearned revenue                                      445,106         401,352
Other long-term liabilities                           931,448         790,834

SHAREHOLDERS' EQUITY
- --------------------
Common stock, par value $.01                           48,502          48,490
Additional paid in capital                         22,507,788      22,505,100
Retained earnings                                   4,425,663       5,165,666
                                                  -----------     -----------
                                                   26,981,953      27,719,256
Less treasury stock, at cost                       (1,299,999)     (1,278,884)
Accumulated other comprehensive income              1,052,105         617,239
Deferred compensation                                (125,084)       (144,266)
                                                  -----------     -----------
   TOTAL SHAREHOLDERS' EQUITY                      26,608,975      26,913,345
                                                  -----------     -----------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $37,868,235     $38,867,017
                                                  ===========     ===========



See Accompanying Notes to Condensed Consolidated Financial Statements.



                                       -3-

<page>


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


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

                                                      12/31/04       12/31/03
                                                      --------       --------
Cash flows from operating activities:
  Net income (loss)                                $  (740,003)   $   122,168
  Adjustments to reconcile net income (loss)
   to net cash provided by (used in)
   operating activities:
    Depreciation and amortization                      271,776        250,296
    Amortization of deferred compensation               19,182         19,182
    Stock compensation expense                            -            24,306
    Loss on sale of marketable securities               44,936           -
  Change in assets and liabilities:
      Accounts receivable, net                      (1,341,399)        69,303
      Inventories                                     (678,340)       146,361
      Recoverable income taxes                            -         1,827,290
      Prepaid expenses and other current assets       (113,267)        64,290
      Other assets                                      (2,514)        (8,355)
      Accounts payable                                (302,052)      (264,069)
      Accrued compensation and employee benefits      (146,486)      (187,449)
      Accrued expenses                                (191,987)      (174,629)
      Unearned revenue                                 (56,936)      (289,530)
      Income taxes payable                            (151,350)        51,228
      Other liabilities                                 86,263        104,557
                                                   ------------   -----------
       Net cash provided by (used in)
         operating activities                       (3,302,177)     1,754,949

Cash flows from investing activities:
  Capital expenditures                                (277,823)      (102,695)
  Acquisition, net of cash acquired                   (868,000)          -
  Net decrease (increase) in marketable securities   2,065,214        (35,350)
                                                   ------------   -----------
       Net cash provided by (used in)
         investing activities                          919,391       (138,045)

Cash flows from financing activities:
  Repayments of bank mortgage debt                     (87,893)       (81,896)
  Proceeds from exercise of stock options                2,700          5,280
  Repurchases of common stock                          (21,115)       (73,050)
                                                   ------------   -----------
       Net cash used in financing activities          (106,308)      (149,666)
                                                   ------------   -----------
Effect of exchange rate changes on cash                121,956         50,764
                                                   ------------   -----------

Net increase (decrease) in cash                     (2,367,138)     1,518,002
Cash at beginning of year                            6,063,198      4,836,148
                                                   ------------   -----------
Cash at end of period                              $ 3,696,060    $ 6,354,150
                                                   ============   ===========





See Accompanying Notes to Condensed Consolidated Financial Statements.



                                       -4-

<page>


                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
        ----------------------------------------------------------------
                                December 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  three  months  ended  December  31,  2004  are not
necessarily  indicative  of the results that may be expected for the fiscal year
ended  September 30, 2005. 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, 2004.  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 December  31, 2004 was  $57,125,  with
$1,059 of cumulative unrealized losses reported at December 31, 2004.

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

Accounts receivable is stated net of an allowance for uncollectible  accounts of
$1,225,000  and  $1,162,000  as of December  31, 2004 and  September  30,  2004,
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
following   table   provides  the  components  of  the  basic  and  diluted  EPS
computations for the three month periods ended December 31, 2004 and 2003:

                                                         Three Months
                                                      Ended December 31,
                                                      ------------------
                                                      2004          2003
                                                      ----          ----

Basic EPS Computation
Net income (loss)...........................    $  (740,003)    $   122,168
Weighted average shares outstanding.........      4,561,663       4,606,236
Basic net income (loss) per share...........    $      (.16)    $       .03
                                                ===========     ===========


                                       -5-

<page>

                                                          Three Months
                                                       Ended December 31,
                                                       ------------------
                                                       2004          2003
                                                       ----          ----

Diluted EPS Computation
Net income (loss)...........................    $  (740,003)    $   122,168

  Weighted average shares outstanding.......      4,561,663       4,606,236
  Stock options.............................           -            136,476
  Stock compensation arrangements...........           -             48,283
                                                 -----------     ----------

Diluted shares outstanding..................      4,561,663       4,790,995

Diluted net income (loss) per share.........    $      (.16)    $       .03
                                                ===========     ===========

For the three months ended  December 31, 2004,  227,785 shares have been omitted
from  the   calculation   of  diluted  EPS  as  their  effect  would  have  been
antidilutive.

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

The  Company's  total  comprehensive  income  (loss) for the three month periods
ended December 31, 2004 and 2003 was as follows:

                                                          Three Months
                                                       Ended December 31,
                                                       ------------------
                                                       2004          2003
                                                       ----          ----


Net income (loss)                                $   (740,003)  $   122,168
Other comprehensive income (loss), net of tax:
  Change in net unrealized gain (loss)
    on securities                                      47,518       (21,182)
  Unrealized loss on derivatives                      (54,350)     (129,410)
  Foreign currency translation adjustment             441,698       479,212
                                                  ------------  -----------
Comprehensive income (loss)                       $  (305,137)  $   450,788
                                                   ============  ===========


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

                                                  December 31,   September 30,
                                                      2004           2004
                                                   ----------    ----------
Foreign currency translation adjustment            $1,216,462      $ 774,764
Unrealized loss on derivatives                       (163,298)      (108,948)
Unrealized loss on securities                          (1,059)       (48,577)
                                                   -----------     ---------
Accumulated other comprehensive income             $1,052,105      $ 617,239
                                                   ===========     ==========

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 and its
newly acquired Videotronic subsidiary, which market and distribute 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.

                                       -6-

<page>


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 periods ended December 31,
2004 and 2003 was as follows:

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

Net sales to
 external customers $10,752,000  $4,723,000 $  107,000  $    -     $15,582,000
Intersegment
 net sales            1,008,000       -      2,242,000  (3,250,000)      -
Net income (loss)      (534,000)   (152,000)    40,000     (94,000)   (740,000)
Total assets         26,355,000  10,360,000  3,451,000  (2,298,000) 37,868,000

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

Net sales to
 external customers $ 9,255,000  $4,969,000 $  114,000 $     -    $14,338,000
Intersegment
 net sales            1,027,000       -      1,830,000 (2,857,000)      -
Net income (loss)      (319,000)    320,000    118,000      3,000     122,000
Total assets         31,701,000  10,274,000  3,806,000 (4,037,000) 41,744,000


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

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

At December 31, 2004,  the Company had interest rate swaps and forward  exchange
contracts  outstanding with notional  amounts  aggregating $1.7 million and $2.4
million,   respectively,   whose   aggregate  fair  value  was  a  liability  of
approximately  $163,000.  The  change in the amount of the  liability  for these
instruments is shown as a component of accumulated other comprehensive income.

Note 8:   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.


                                       -7-

<page>


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
month periods ended December 31, 2004 and 2003 would have been:

                                                         Three Months
                                                      Ended December 31,
                                                      ------------------
                                                      2004          2003
                                                      ----          ----

Reported net income (loss)                      $  (740,003)    $   122,168
Stock-based compensation cost                       (34,048)        (36,303)
                                                -----------     -----------
Pro forma net income (loss)                     $  (774,051)    $    85,865
                                                ===========     ===========

Reported basic and diluted EPS                  $      (.16)    $       .03
Pro forma basic and diluted EPS                 $      (.17)    $       .02

Note 9:   Litigation
- -------   ----------

The Company is one of several defendants in a patent infringement suit commenced
by Lectrolarm  Custom  Systems,  Inc. in May 2003 in the United States  District
Court for the Western  District of Tennessee.  The alleged  infringement  by the
Company relates to its 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  against
the Company is without merit. The Company is vigorously  defending itself and it
plans to present a joint  defense  with  certain  other  named  defendants.  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.

In the normal course of business, the Company is a party to certain other claims
and  litigation.  Management  believes  that the  settlement  of such claims and
litigation, considered in the aggregate, will not have a material adverse effect
on the Company's financial position and results of operations.

Note 10:   Asset Purchase
- --------   --------------

On October 1, 2004, the Company entered into an agreement to purchase all of the
operating assets of Videotronic Infosystems GmbH ("Videotronic"), a German based
video  system  supplier  operating  under  insolvency  protection,  for  700,000
Eurodollars (approximately $868,000). The purchase was ratified by Videotronic's
Creditors  on  November  26,  2004.  The  Company is  presently  evaluating  the
allocation of its purchase  price among the assets  acquired and expects to have
such allocation completed by its second fiscal quarter ended March 31, 2005.



                                       -8-

<page>


Note 11:   Recent Accounting Pronouncement
- --------   -------------------------------

On December 16,  2004,  the FASB issued SFAS 123  (revised  2004),  "Share-Based
Payment",  which is a revision  of SFAS No.  123,  "Accounting  for  Stock-Based
Compensation".  SFAS 123(R) supersedes APB Opinion No. 25, "Accounting for Stock
Issued to  Employees",  and  amends  SFAS No.  95,  "Statement  of Cash  Flows".
Generally, the approach in Statement 123(R) is similar to the approach described
in  SFAS  123.  However,  SFAS  123(R)  requires  all  share-based  payments  to
employees,  including grants of employee stock options,  to be recognized in the
income  statement  based on their  fair  values at the date of grant.  Pro forma
disclosure  is no longer an  alternative.  SFAS 123(R) must be adopted in fiscal
periods  beginning  after June 15, 2005. The Company  expects to adopt Statement
123(R) on July 1, 2005, the commencement of its fourth quarter of fiscal 2005.

Statement 123(R) permits public companies to adopt its requirements using one of
two prescribed methods. The "modified  prospective" method requires compensation
cost to be  recognized  based on the  requirements  of Statement  123(R) for all
outstanding  vested stock option  grants and all  share-based  payments  granted
after the  effective  date.  Such method allows for the use of Statement 123 for
all awards granted to employees prior to the effective date of Statement  123(R)
that remain unvested on the effective date. The "modified  retrospective" method
includes the  requirements of the modified  prospective  method described above,
but also permits entities to restate based on the amounts previously  recognized
under Statement 123 for purposes of pro forma  disclosures  either (a) all prior
periods presented or (b) prior interim periods of the year of adoption.

As permitted by Statement 123, the Company  currently  accounts for  share-based
payments to employees  using APB Opinion No. 25's intrinsic value method and, as
such,  generally recognizes no compensation cost for employee stock options. The
Company is currently  evaluating which method it will use in adopting  Statement
123(R) and the effect  that the  accounting  change  will have on its  financial
position and results of operations.


                                       -9-

<page>


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


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


Net sales for the quarter ended  December 31, 2004 increased 9% to $15.6 million
compared with $14.3 million in the year ago period.  Domestic sales decreased 3%
to $7.8 million compared with $8.0 million in the year ago period. International
sales for the quarter  increased $1.5 million to $7.8 million compared with $6.3
million in the year ago period due  principally  to sales by the  Company's  new
German based  subsidiary,  Videotronic,  whose operating assets were acquired on
October 1, 2004.  International  sales for the current quarter also included the
shipment of a $2.2 million system order to one foreign customer.  The backlog of
unfilled orders was $5.1 million at December 31, 2004 compared with $4.7 million
at September 30, 2004.

Gross  profit  margins for the first  quarter of fiscal 2005  decreased to 37.7%
compared with 40.8% in the year ago period due principally to reduced margins on
sales of the Company's digital video server/recorder product line.

Operating  expenses for the first quarter of fiscal 2005  increased  $980,000 to
$6.5 million  compared  with $5.6  million in the year ago period.  The increase
included $606,000 of operating  expenses  incurred by the Company's  Videotronic
subsidiary and $256,000 of additional  engineering and  development  expenses as
the Company continued to invest in new product development.

The Company  incurred an operating  loss of $673,000 in the first fiscal quarter
of 2005  compared  with an operating  profit of $286,000 in the year ago period.
The  current  quarter  results  included  a  $156,000  operating  loss  from the
Company's  Videotronic  subsidiary  as it  transitioned  from former  bankruptcy
protection.

Interest  expense  decreased  to $46,000  for the first  quarter of fiscal  2005
compared  with  $51,000  in the year ago period  principally  as a result of the
paydown of bank borrowings.

Income tax  expense for the first  quarter of fiscal  2005 was $13,000  compared
with $155,000 in the year ago period relating principally to profits reported by
the  Company's  European  operations.  The  Company has ceased  recognizing  tax
benefits  on its U.S.  operating  losses  due to the  uncertainty  of its future
realization.

As a result of the  foregoing,  the Company  incurred a net loss of $740,000 for
the first  quarter of fiscal 2005  compared with a net profit of $122,000 in the
year ago period.




                                      -10-

<page>

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

Liquidity and Capital Resources
- -------------------------------

Net cash used in operating  activities was $3.3 million for the first quarter of
fiscal 2005. In addition to the $740,000 net loss for the period,  the Company's
accounts  receivable  and  inventories  increased by $2 million,  which included
$746,000 from the Videotronic subsidiary.  The Company further paid down certain
prior year end accrued  liabilities.  Net cash provided by investing  activities
was $919,000 for the first quarter of fiscal 2005, which included a $2.1 million
liquidation of marketable  securities offset by the $868,000  acquisition of the
Company's  Videotronic  subsidiary  operating  assets  and  $278,000  of general
capital expenditures.  Net cash used in financing activities was $106,000, which
included  $88,000 of scheduled  repayments of bank mortgage loans and $21,000 of
treasury stock repurchases. As a result of the foregoing, cash decreased by $2.4
million for the first  quarter of fiscal 2005 after the effect of exchange  rate
changes on the cash position of the Company.

The Company's  European based subsidiary  maintains a bank overdraft facility of
one million  Pounds  Sterling  (approximately  $1,920,000)  to support its local
working capital  requirements.  This facility expires in March 2005. At December
31, 2004 and September 30, 2004, there were no outstanding borrowings under this
facility.

The following is a summary of the Company's  long-term  debt and material  lease
obligations as of December 31, 2004:

Fiscal         Debt                 Lease
 Year       Repayments           Commitments         Total
- ------      ----------           -----------         -----
 2005       $  265,000             $222,000       $  487,000
 2006          353,000              278,000          631,000
 2007          326,000              229,000          555,000
 2008        1,740,000               34,000        1,774,000

The  Company  presently  believes  that  it has  sufficient  cash  to  meet  its
anticipated operating, capital expenditures and debt service requirements for at
least the next  twelve  months.  The Company has  incurred  operating  losses in
recent periods which, if continued,  could limit the Company's ability to secure
additional bank financing if needed.

The Company does not have any off-balance  sheet  transactions,  arrangements or
obligations  (including  contingent  obligations)  that have, or are  reasonably
likely to have, a material effect on the Company's financial condition,  results
of operations, liquidity, capital expenditures or capital resources.

The Company is one of several defendants in a patent infringement suit commenced
by Lectrolarm  Custom  Systems,  Inc. in May 2003 in the United States  District
Court for the Western  District of Tennessee.  The alleged  infringement  by the
Company relates to its 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  against
the Company is without merit. The Company is vigorously  defending itself and it
plans to present a joint  defense  with  certain  other  named  defendants.  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.


                                      -11-

<page>


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,
2004 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
equipment  maintenance  agreements  are deferred and recognized as revenues on a
pro rata basis over the term of the service  agreements.  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.

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.



                                      -12-

<page>


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

On December 16,  2004,  the FASB issued SFAS 123  (revised  2004),  "Share-Based
Payment",  which is a revision  of SFAS No.  123,  "Accounting  for  Stock-Based
Compensation".  SFAS 123(R) supersedes APB Opinion No. 25, "Accounting for Stock
Issued to  Employees",  and  amends  SFAS No.  95,  "Statement  of Cash  Flows".
Generally, the approach in Statement 123(R) is similar to the approach described
in  SFAS  123.  However,  SFAS  123(R)  requires  all  share-based  payments  to
employees,  including grants of employee stock options,  to be recognized in the
income  statement  based on their  fair  values at the date of grant.  Pro forma
disclosure  is no longer an  alternative.  SFAS 123(R) must be adopted in fiscal
periods  beginning  after June 15, 2005. The Company  expects to adopt Statement
123(R) on July 1, 2005, the commencement of its fourth quarter of fiscal 2005.

Statement 123(R) permits public companies to adopt its requirements using one of
two prescribed methods. The "modified  prospective" method requires compensation
cost to be  recognized  based on the  requirements  of Statement  123(R) for all
outstanding  vested stock option  grants and all  share-based  payments  granted
after the  effective  date.  Such method allows for the use of Statement 123 for
all awards granted to employees prior to the effective date of Statement  123(R)
that remain unvested on the effective date. The "modified  retrospective" method
includes the  requirements of the modified  prospective  method described above,
but also permits entities to restate based on the amounts previously  recognized
under Statement 123 for purposes of pro forma  disclosures  either (a) all prior
periods presented or (b) prior interim periods of the year of adoption.



                                      -13-

<page>


As permitted by Statement 123, the Company  currently  accounts for  share-based
payments to employees  using APB Opinion No. 25's intrinsic value method and, as
such,  generally recognizes no compensation cost for employee stock options. The
Company is currently  evaluating which method it will use in adopting  Statement
123(R) and the effect  that the  accounting  change  will have on its  financial
position and results of operations.

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  Capital  Resources"  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
December 31, 2004,  substantially all of such foreign currency transactions have
been hedged by forward exchange contracts.

At December 31, 2004, the Company had $1.7 million of outstanding  floating rate
bank debt which was covered by an interest rate swap agreement that  effectively
converts the  foregoing  floating rate debt to a stated fixed rate (see "Note 6.
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, 2004).
Thus,  the Company has  substantially  no net interest  rate  exposures on these
instruments.  However,  the Company had approximately  $748,000 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.



                                      -14-

<page>


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, as of the end
of the period  covered by this report,  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 changes in the Company's internal control over financial reporting
identified in  connection  with the  evaluation  referred to above that occurred
during the quarter that have materially  affected,  or are reasonably  likely to
materially affect, the registrant's internal control over financial reporting.

The Company's  size dictates that it conducts  business with a minimal number of
financial and  administrative  employees,  which inherently results in a lack of
documented  controls  and  segregation  of duties  within  the  Company  and its
operating  subsidiaries.  Management  will  continue to evaluate  the  employees
involved and the control  procedures in place,  the risks  associated  with such
lack of segregation  and whether the potential  benefits of adding  employees to
clearly  segregate  duties  justifies  the  expense  associated  with such added
personnel.  In addition,  management is aware that many of the internal controls
that are in place at the  Company  are  undocumented  controls.  The  Company is
working to document these  controls to be in compliance  with Section 404 of the
Sarbanes-Oxley Act of 2002.

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.




                                      -15-

<page>


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

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

The Company is one of several defendants in a patent infringement suit commenced
by Lectrolarm  Custom  Systems,  Inc. in May 2003 in the United States  District
Court for the Western  District of Tennessee.  The alleged  infringement  by the
Company relates to its 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  against
the Company is without merit. The Company is vigorously  defending itself and it
plans to present a joint  defense  with  certain  other  named  defendants.  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.

ITEM 2 - CHANGES IN SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
- --------------------------------------------------------------------------------
SECURITIES
- ----------

On April 26, 2001, the Company announced that its Board of Directors  authorized
the  repurchase  of up to $1 million of shares of the  Company's  common  stock,
which represented  approximately  9.8% of shares outstanding on the announcement
date. The following table  summarizes  repurchases of common stock for the three
month period ended December 31, 2004:

                        Total
                        Number       Average      Approximate Dollar Value
                      of Shares     Price Paid    of Shares that May Yet Be
     Period          Purchased (1)  per Share   Purchased Under the Program
     ------          -------------  ---------   ----------------------------

10/01/04-10/31/04        4,500        $4.65               $459,664
11/01/04-11/30/04          -          $ -                 $459,664
12/01/04-12/31/04          -          $ -                 $459,664
                        ------        -----
      Total              4,500        $4.65
                        ======        =====


(1) All repurchases were executed in open market transactions.



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

None

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

None

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

None




                                      -16-

<page>


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

a)      Exhibits
        --------

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

          On December 7, 2004,  the Company  filed a Current  Report on Form 8-K
          filing its press release  announcing the Company's  financial  results
          for its quarter and fiscal year ended September 30, 2004.








                                      -17-

<page>

                                   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.





February 22, 2005




/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



































                                      -18-