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,June 30, 2003               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,June 30 2003,  the  registrant  had  outstanding  4,637,6624,618,762  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

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

                                           3/31/6/30/03                3/31/6/30/02
                                            -------                -------
Net sales                                $13,081,881            $12,846,138$13,050,732            $14,274,490
Cost of sales                              8,440,887              8,610,879
                                           ---------              ---------7,793,890              9,212,820
                                         -----------            -----------
    Gross profit                           4,640,994              4,235,2595,256,842              5,061,670

Operating expenses:
  Selling expense                          2,832,963              2,877,7492,764,499              2,929,144
  General & administrative expense         989,671                996,4831,067,316                939,951
  Engineering & development expense        1,341,116              1,024,250
                                           ---------              ---------
                                           5,163,750              4,898,4821,342,116              1,095,889
                                         -----------            -----------
                                           5,173,931              4,964,984

    Operating loss                          (522,756)              (663,223)income                          82,911                 96,686

Interest expense                              64,439                 78,11852,424                 81,757
Interest income                              (40,380)               (45,955)
                                           ---------              ---------
    Loss(28,524)               (31,007)
                                         -----------            -----------

    Income before income taxes                (546,815)              (695,386)59,011                 45,936
Income tax expense                            (benefit) (Note 11)     2,187,957               (228,000)
                                           ---------              ---------29,000                 18,000
                                         -----------            -----------

    Net loss                             $(2,734,772)income                           $    (467,386)30,011            $    27,936
                                         ===========            ===========



LossEarnings per share:
            Basic                         $     (.59).01               $   (.10)
                                          =========               =======.01
                                                ===                   ===
            Diluted                       $     (.59).01               $   (.10)
                                          =========               =======.01
                                                ===                   ===

Shares used in computing lossearnings per share:
            Basic                          4,641,213              4,655,3344,626,546              4,669,526
            Diluted                        4,641,213              4,655,3344,666,371              4,733,552







     See Accompanying Notes to Condensed Consolidated Financial Statements.




                                       - 1 --1-



                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------

                                   (UNAUDITED)

                                                    SixNine Months Ended
                                                    ----------------

                                              3/31/-----------------

                                               6/30/03             3/31/6/30/02
                                               -------             -------

Net sales                                   $25,099,895         $26,396,971$38,150,627         $40,671,462
Cost of sales                                16,558,346          17,689,242
                                             ----------          ----------24,352,236          26,902,063
                                            -----------         -----------
      Gross profit                           8,541,549           8,707,72913,798,391          13,769,399

Operating expenses:
  Selling expense                             5,614,115           5,835,8788,378,614           8,765,022
  General & administrative expense            2,104,023           1,994,7533,171,339           2,934,704
  Engineering & development expense           2,416,562           2,021,337
                                             ----------          ----------
                                             10,134,700           9,851,9683,758,677           3,117,226
                                            -----------         -----------
                                             15,308,630          14,816,952

      Operating loss                         (1,593,151)         (1,144,239)(1,510,239)         (1,047,553)

Interest expense                                131,918             176,052184,343             257,808
Interest income                                (101,275)           (107,964)
                                             ----------          ----------(129,799)           (138,971)
                                            -----------         -----------

      Loss before income taxes               (1,623,794)         (1,212,327)(1,564,783)         (1,166,390)
Income tax expense (benefit) (Note 11)        1,809,957            (398,000)
                                             ----------          ----------1,838,957            (380,000)
                                            -----------         -----------
      Loss before cumulative effect of
        a change in accounting principle     (3,433,751)           (814,327)(3,403,740)           (786,390)
Cumulative effect of a change in
  accounting principle (Note 8)              (1,372,606)               -
                                            ----------          ---------------------         -----------

      Net loss                              $(4,806,357)$(4,776,346)        $  (814,327)(786,390)
                                            ===========         ===========




Basic and diluted loss per share:
  Loss before cumulative effect of
    a change in accounting principle        $     (.74)(.73)         $    (.18)(.17)
  Cumulative effect of a change in
    accounting principle                          (.30)                -
                                            ----------          --------------------         -----------
      Net loss                              $    (1.04)(1.03)         $    (.18)
                                            ==========          =========(.17)
                                            ===========         ===========



Shares used in computing loss per share:
            Basic                             4,641,993           4,651,8654,636,834           4,657,752
            Diluted                           4,641,993           4,651,8654,636,834           4,657,752






     See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       -2-





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

ASSETS                                               3/31/6/30/03         9/30/02
- ------                                               -------         -------
                                                   (Unaudited)
CURRENT ASSETS
Cash and cash equivalents                         $ 6,774,9606,267,406     $ 9,771,804
Marketable securities                               1,543,4561,558,756           -
Accounts receivable, net                           10,053,57210,115,345      10,127,526
Accounts receivable - related parties                  76,69943,039         273,464
Inventories:
  Parts, components, and materials                  1,862,0992,034,754       2,802,779
  Work-in-process                                   2,066,1082,133,309       1,275,057
  Finished products                                 8,876,5108,797,376       9,470,823
                                                  ---------       ---------
                                                   12,804,717-----------     -----------
                                                   12,965,439      13,548,659
Recoverable income taxes                            1,937,728       1,712,728
Deferred income taxes                                    -            673,574
Prepaid expenses                                      584,881610,008         496,399
                                                  ---------       --------------------     -----------
   TOTAL CURRENT ASSETS                            33,776,01333,497,721      36,604,154

Property, plant and equipment                      17,337,39617,553,809      16,997,129
Less accumulated depreciation and amortization    (9,869,262)(10,208,743)     (9,331,102)
                                                 ----------      ----------
                                                    7,468,134------------     -----------
                                                    7,345,066       7,666,027
Goodwill, net of accumulated amortization               -           1,372,606
Deferred income taxes                                   -           1,283,784
Other assets                                          477,939479,503         499,918
                                                  ---------       --------------------     -----------
   TOTAL ASSETS                                   $41,722,086$41,322,290     $47,426,489
                                                  ===========     ===========

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

CURRENT LIABILITIES
Current maturities of long-term debt                  702,330485,379       1,304,227
Accounts payable - trade                            1,842,5241,977,133       1,740,919
Accounts payable - related parties                     26,55854,855         643,093
Accrued compensation and employee benefits          2,062,7911,953,225       1,837,519
Accrued expenses                                    1,781,1542,123,797       1,596,288
Unearned revenue                                    1,893,6461,378,244       1,514,121
Income taxes payable                                  188,007142,236         140,741
                                                  ---------       --------------------     -----------
   TOTAL CURRENT LIABILITIES                        8,497,0108,114,869       8,776,908

Long-term debt                                      2,878,3022,803,998       3,040,061
Unearned revenue                                      921,179706,591       1,267,337
Other long-term liabilities                           749,606792,708         803,476

SHAREHOLDERS' EQUITY
Common stock, par value $.01                           48,290          48,239
Capital in excess of par value                     21,776,12021,778,012      21,760,002
Retained earnings                                   7,924,0577,954,068      12,730,414
                                                  ---------      ----------
                                                   29,748,467-----------     -----------
                                                   29,780,370      34,538,655
Less treasury stock, at cost                         (895,081)(950,591)       (842,024)
Accumulated other comprehensive loss                 (177,397)income (loss)          74,345        (157,924)
                                                  ----------      ---------------------     -----------
   TOTAL SHAREHOLDERS' EQUITY                      28,675,98928,904,124      33,538,707
                                                  ----------      ---------------------     -----------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $41,722,086$41,322,290     $47,426,489
                                                  ===========     ===========



     See Accompanying Notes to Condensed Consolidated Financial Statements.



                                       -3-



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




                                                        SixNine Months Ended
                                                        ----------------

                                                       3/31/-----------------

                                                       6/30/03        3/31/6/30/02
                                                       -------        -------
Cash flows from operating activities:
  Net loss                                         $(4,806,357)$(4,776,346)   $  (814,327)(786,390)
  Adjustments to reconcile net loss to
   net cash used in operating activities:
    Depreciation and amortization                      532,677        570,202826,169        835,848
    Goodwill amortization                                 -           99,226148,839
    Stock compensation expense                           -            61,4451,892         23,287
    Deferred income taxes                            1,853,957       (550,802)(534,788)
    Cumulative effect of a change in
      accounting principle                           1,372,606           -
  Change in assets and liabilities:
      Accounts receivable                              90,952      1,010,457183,649       (818,675)
      Accounts receivable - related parties            196,765        (47,221)230,425       (137,622)
      Inventories                                      759,938       (344,494)675,586        828,414
      Recoverable income taxes                        (225,000)          -
      Prepaid expenses                                (88,585)       (51,185)(106,108)        (4,506)
      Other assets                                      21,980         64,16920,415         84,501
      Accounts payable - trade                         103,849        145,365195,033         14,420
      Accounts payable - related parties              (616,535)      (202,744)(588,238)       (89,091)
      Accrued compensation and employee benefits       225,242       (293,113)107,029       (380,205)
      Accrued expenses                                 184,398       (665,868)502,480       (683,700)
      Unearned revenue                                33,367       (391,364)(696,623)      (543,873)
      Income taxes payable                              46,805       (211,252)(4,976)      (326,188)
      Other liabilities                                 45,466         24,070
                                                        ------         ------83,202         10,339
                                                   ------------   -----------
       Net cash used in operating activities          (268,475)    (1,597,436)(344,848)    (2,359,390)

Cash flows from investing activities:
  Capital expenditures                                (325,651)      (306,940)(436,170)      (455,991)
  Purchases of marketable securities                (1,539,708)(1,555,028)          -
                                                   ---------      ---------------------   -----------
       Net cash used in investing activities        (1,865,359)      (306,940)(1,991,198)      (455,991)

Cash flows from financing activities:
  Repayments of U.S. term loan                        (450,000)      (450,000)(675,000)      (675,000)
  Repayments of other long-term debt                  (316,198)      (223,537)(396,371)      (323,428)
  Proceeds from exercise of stock options               16,169         23,75042,890
  Repurchases of common stock                         (53,057)(108,567)          -  ---------      ---------_
                                                   ------------   -----------
       Net cash used in financing activities        (803,086)      (649,787)(1,163,769)      (955,538)
                                                   ------------   -----------
Effect of exchange rate changes on cash                 (59,924)        30,863(4,583)       (86,693)
                                                   ------------   -----------

Net decrease in cash                                (2,996,844)    (2,523,300)(3,504,398)    (3,857,612)
Cash at beginning of year                            9,771,804      9,795,148
                                                   ---------      ---------------------   -----------
Cash at end of period                              $ 6,774,9606,267,406    $ 7,271,848
                                                   ===========5,937,536
                                                   ============   ===========



     See Accompanying Notes to Condensed Consolidated Financial Statements.




                                       -4-



                     VICON INDUSTRIES, INC. AND SUBSIDIARIES
                     ---------------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
        March 31,----------------------------------------------------------------
                                  June 30, 2003
                                  -------------


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 sixnine months  ended March 31,June 30, 2003 are not  necessarily
indicative  of the  results  that may be  expected  for the  fiscal  year  ended
September 30, 2003. 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, 2002.  Certain prior year amounts
have been reclassified to conform to the current year 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,June 30, 2003 was $1,539,708,$1,555,028, with $5,623$4,166
of unrealized  gains and $1,875$438 of unrealized  losses  reported for the six-monthnine-month
period ended.

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

Accounts  receivable  is stated net of an  allowance  for  doubtful  accounts of
$1,281,000$1,379,000  and  $1,077,000  as  of  March  31,June  30,  2003  and  September  30,  2002,
respectively.




















                                       -5-



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 a deferred compensation agreement.  The
weighted average numberfollowing   table   provides  the  components  of  shares of common stock used in determiningthe  basic  and  diluted  EPS
was  4,641,213  and  4,655,334computations for the three and nine month periods ended June 30, 2003 and 2002:

                                     Three Months              Nine Months
                                    Ended June 30,            Ended June 30,
                                   2003         2002         2003        2002
                                   ----         ----         ----        ----
Basic EPS Computation
Net income (loss)...........  $   30,011   $   27,936  $(4,776,346) $ (786,390)

Weighted average
 shares outstanding.........   4,626,546    4,669,526    4,636,834   4,657,752

Basic earnings (loss)
 per share..................  $      .01   $      .01  $     (1.03) $     (.17)
                              ==========   ==========  ============ ===========
Diluted EPS Computation
Net income (loss)...........  $   30,011   $   27,936  $(4,776,346) $ (786,390)

  Weighted average
   shares outstanding.......   4,626,546    4,669,526    4,636,834   4,657,752
  Stock compensation
   arrangement..............      16,283       10,989        -           -
  Stock options.............      23,542       53,037        -           -
                              ----------   ----------   ----------  ----------

Diluted shares outstanding..   4,666,371    4,733,552    4,636,834   4,657,752

Diluted earnings (loss)
 per share..................  $      .01   $      .01  $     (1.03) $     (.17)
                              ==========   ==========  ============ ===========

For the nine  months  ended March 31,June 30,  2003 and 2002,  respectively.  The weighted  average  number of shares of common
stock used in determining  basic49,748 and diluted EPS was 4,641,993 and 4,651,865 for
the six months ended March 31, 2003 and 2002, respectively.

For the three  months ended March 31, 2003 and 2002,  46,063 and 83,78660,330  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, 2003 and
2002,  47,169  and  63,977  shares,  respectively,  have been  omitted  from the
calculation of diluted EPS as their effect would have been antidilutive.





                                       -5-

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

The  Company's  total  comprehensive  lossincome (loss) for the three month and sixnine month
periods ended March 31,June 30, 2003 and 2002 was as follows:

                                     Three Months             SixNine Months
                                    Ended March 31,June 30,           Ended March 31,
                                ---------------            ---------------June 30,
                                    --------------           --------------

                                   2003       2002          2003        2002
                                   ----       ----          ----        ----


Net loss                    $(2,734,772)income (loss)           $    (467,386)  $(4,806,357)  $(814,327)30,011  $   27,936   $(4,776,346)  $(786,390)
Other comprehensive income
 (loss), net of tax:
  Net unrealized gainsgain
   (loss) on securities             32(20)       -            3,7483,728        -
  Unrealized gain (loss)
   on derivatives                13,519      36,771        (4,065)     85,786(5,366)    (52,811)       (9,431)     32,975
  Foreign currency
   translation adjustment       (176,166)    (62,408)      (19,156)   (135,513)
                            -----------257,128     258,075       237,972     122,562
                            ------------ ----------   ------------  ---------
Comprehensive loss          $(2,897,387)income (loss) $   (493,023)  $(4,825,830)  $(864,054)
                            ===========281,753  $  233,200   $(4,544,077)  $(630,853)
                            ============ ==========   =======================  =========


                                       -6-



The accumulated other comprehensive  lossincome (loss) balances at March  31,June 30, 2003 and
September 30, 2002 consisted of the following:

                                                    March 31,June 30,     September 30,
                                                      2003           2002
                                                   ----           -------------      ---------
Foreign currency translation adjustment            $ 23,641280,769      $  42,797
Unrealized loss on derivatives                      net of tax          (204,786)(210,152)      (200,721)
Unrealized gain on securities                          net of tax              3,7483,728           -
                                                   -------------------     ---------
Accumulated other comprehensive loss               $(177,397)income (loss)      $  74,345      $(157,924)
                                                   ===================     =========

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.  Other  segments  include  the
operations of Vicon  Industries  (H.K.) Ltd., a Hong Kong based  majority  owned
subsidiary  which markets and  distributes  the Company's  products  principally
within Hong Kong and mainland China, and TeleSite U.S.A., Inc. and subsidiary, a
U.S. and Israeli based designer and producer of digital video products.

-6-
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 sixnine month periods ended March 31,June
30, 2003 and 2002 was as follows:

Three Months Ended
March 31,June 30, 2003          U.S.       Europe      Other     Consolid.    Totals
- --------------      ----       ------      ---------------  ----------  ---------  ----------------   --------

Net sales to
 external customers $ 8,459,000  $4,268,0009,358,000  $3,321,000 $  355,000372,000  $    -     $13,082,000$13,051,000
Intersegment
 net sales            1,653,0001,534,000       -        707,000  (2,360,000)928,000  (2,462,000)      -
Net income (loss)       (2,558,000)    140,000   (254,000)    (63,000) (2,735,000)204,000      48,000   (190,000)    (32,000)     30,000
Total assets         33,683,000   8,978,000  3,542,000  (4,481,000) 41,722,00032,441,000   9,169,000  3,725,000  (4,013,000) 41,322,000

Three Months Ended
March 31,June 30, 2002           U.S.       Europe      Other     Consolid.    Totals
- --------------          ----       ------      --------------------      ----------  ----------  ---------  ----------------   --------

Net sales to
 external customers $10,897,000  $2,853,000 $  8,624,000  $3,615,000 $  607,000524,000 $     -    $12,846,000$14,274,000
Intersegment
 net sales            2,133,0001,184,000       -         34,000 (2,167,000)10,000 (1,194,000)      -
Net income (loss)       (292,000)    183,000   (173,000)  (185,000)   (467,000)340,000     116,000   (387,000)   (41,000)     28,000
Total assets         42,079,000   8,191,000  3,546,000 (5,115,000) 48,701,000

Six41,726,000   7,795,000  3,518,000 (4,701,000) 48,338,000







                                       -7-



Nine Months Ended
March 31,June 30, 2003          U.S.       Europe      Other     Consolid.    Totals
- --------------          ----       ------      ----------------------   ----------  ----------  ---------  ----------------   -------

Net sales to
 external customers $16,215,000  $8,093,000 $  792,000$25,572,000 $11,413,000 $1,166,000  $    -     $25,100,000$38,151,000
Intersegment
 net sales            3,056,0004,590,000       -      1,267,000  (4,323,000)2,195,000  (6,785,000)      -
Net income (loss)    (3,401,000)    361,000   (319,000) (1,447,000) (4,806,000)(3,197,000)    408,000   (509,000) (1,478,000) (4,776,000)
Total assets         33,683,000   8,978,000  3,542,000  (4,481,000) 41,722,000

Six32,441,000   9,169,000  3,725,000  (4,013,000) 41,322,000

Nine Months Ended
March 31,June 30, 2002           U.S.       Europe      Other     Consolid.    Totals
- --------------          ----       ------      --------------------      ----------  ----------  ---------  ----------------   -------

Net sales to
 external customers $17,753,000  $7,097,000 $1,547,000$28,650,000  $9,950,000 $2,071,000 $     -    $26,397,000$40,671,000
Intersegment
 net sales            4,234,0005,530,000       -         178,000 (4,412,000)76,000 (5,606,000)      -
Net income (loss)      (725,000)    419,000   (265,000)  (243,000)   (814,000)(384,000)    535,000   (652,000)  (285,000)   (786,000)
Total assets         42,079,000   8,191,000  3,546,000 (5,115,000) 48,701,00041,726,000   7,795,000  3,518,000 (4,701,000) 48,338,000

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

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

At March 31,June 30,  2003,  the Company  had  interest  rate swaps and forward  exchange
contracts  outstanding with notional  amounts  aggregating $2.3$2.1 million and $2.8$3.8
million,   respectively,   whose   aggregate  fair  value  was  a  liability  of
approximately  $205,000.$210,000.  The  change in the amount of the  liability  for these
instruments is shown as a component of accumulated other comprehensive loss.





                                       -7-


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

The  Company  adopted  SFAS No. 142 on October 1,  2002,  and  accordingly,  has
discontinued  amortization  of goodwill as of that date.  DuringIn the six month
periodsecond  quarter
ended March 31, 2003, the Company completed the transitional goodwill impairment
testing  required  under SFAS No. 142.  In  accordance  with SFAS No. 142,  such
testing  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,  and a
determination of 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 sixnine months ended March 31,June 30, 2003.











                                       -8-




The following  table  presents pro forma lossincome  (loss) and lossearnings  (loss) per
share data,  before the cumulative  effect of a change in accounting  principle,
restated to include the retroactive impact of the adoption of SFAS No. 142:

                                  Three Months              SixNine Months
                                 Ended March 31,June 30,            Ended March 31,June 30,
                                ---------------          --------------------------------
                                2003       2002          2003        2002
                                ----       ----          ----        ----
Reported lossincome (loss)
  before cumulative
  effect of a change in
  accounting principle      $(2,734,772) $(467,386)  $(3,433,751) $(814,327)$    30,011  $  27,936   $(3,403,740) $(786,390)
Add back:
  goodwill amortization            -        49,613         -        99,226148,839
                            -----------  ---------   -----------  ---------
Pro forma lossincome (loss)
  before cumulative
  effect of a change in
  accounting principle      $(2,734,772) $(417,773)  $(3,433,751) $(715,101)
                            ===========  =========$    30,011  $  77,549   $(3,403,740) $(637,551)
                            ============ ==========  ===========  =========

Basic and diluted lossearnings (loss) per share:
- --------------------------------------------
Reported lossearnings (loss) per
  share before cumulative
  effect of a change in
  accounting principle         $    (.59).01    $   (.10).01     $    (.74)(.73) $    (.18)(.17)
Goodwill amortization                -         .01            -         .02.03
                               --------    -------     ---------  ---------
Pro forma lossearnings (loss)
  per share                    $    (.59).01    $   (.09).02     $    (.74)(.73) $    (.15)(.14)
                               =========   ========    =======     =========  =========


















                                       -8-


Note 9:   Accrued Warranty Obligation
- -------------------------------------

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness  of  Others"  ("FIN  45").  FIN  45  requires  that  the  guarantor
recognize,  at the  inception of certain  guarantees,  a liability  for the fair
value of the  obligation  undertaken  in  issuing  such  guarantee.  FIN 45 also
requires additional  disclosure  requirements about the guarantor's  obligations
under certain guarantees that it has issued.

The initial  recognition and measurement  provisions of this  interpretation are
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December  31, 2002.  The  disclosure  requirements  of this  interpretation  are
effective for financial  statement  periods  ending after December 15, 2002. The
Company adopted the disclosure  requirements of this interpretation in the priorfirst
quarter ended  December 31, 2002.  The adoption of this  interpretation  did not
have a material impact on the Company's consolidated financial position, results
of operations or cash flows.

The Company  recognizes the estimated cost associated with its standard warranty
on products at the time of sale.  The estimate is based on  historical  warranty
claim  cost  experience.  The  following  is a  summary  of the  changes  in the
Company's  accrued warranty  obligation  (which is included in accrued expenses)
for the reporting period:

Beginning Balancebalance as of September 30, 2002                $ 190,000
Deduct: Payments                                           (81,000)(122,000)
Add: Provision                                              141,000
                                                            -------212,000
                                                          ---------
Ending Balancebalance as of March 31,June 30, 2003                        $ 250,000280,000
                                                          =========

                                       -9-


Note 10:   Stock-Based Compensation
- -----------------------------------

The Company  applies  Accounting  Principles  Board  ("APB")  Opinion No. 25 and
related  interpretations in accounting for its stock-based  compensation  plans.
The Company follows Statement of Financial  Accounting  Standards (SFAS) No. 123
"Accounting  for  Stock-Based  Compensation"  and SFAS No. 148  "Accounting  for
Stock-Based  Compensation-TransitionCompensation  -  Transition  and  Disclosure-AnDisclosure - An Amendment of FASB
Statement No. 123" for  disclosure  purposes.  SFAS No. 148,  issued in December
2002,  provides  alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation.  In
addition,  SFAS No. 148 amends the  disclosure  requirements  of SFAS No. 123 to
require  disclosures in annual and interim  financial  statements  regarding the
method of accounting  used for  stock-based  compensation  and the effect of the
method used on reported  results.  The application of the disclosure  portion of
this  standard  will  have no  impact on the  Company's  consolidated  financial
position or results of operations.

-9-
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 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 lossincome  (loss) and lossearnings  (loss) per share (EPS) for the three
and sixnine month periods ended March 31,June 30, 2003 and 2002 would have been:

                                    Three Months              SixNine Months
                                   Ended March 31,June 30,            Ended March 31,June 30,
                                --------------------      --------------------
                                  2003        2002          2003        2002
                                  ----        ----          ----        ----

Reported lossincome (loss)
  before cumulative
  effect of a change in
  accounting principle       $(2,734,772) $    (467,386)  $(3,433,751)  $(814,327)30,011  $   27,936   $(3,403,740)  $(786,390)
Stock-based compensation
  cost, net of tax               (51,210)    (14,785)      (91,698)    (27,108)(44,640)    (13,670)     (123,367)    (42,865)
                             -----------  ----------   -----------   ---------
Pro forma lossincome (loss)
  before cumulative
  effect of a change in
  accounting principle       $(2,785,982) $   (482,171)  $(3,525,449)  $(841,435)(14,629) $   14,266   $(3,527,107)  $(829,255)
                             ===========  ==========   ===========  ============  =========

Reported basic and diluted
  EPS before cumulative
  effect of a change in
  accounting principle           $(.59)      $(.10)        $(.74)       $(.18)$ .01       $ .01       $(.73)       $(.17)
Pro forma basic and diluted
  EPS before cumulative
  effect of a change in
  accounting principle           $(.60)      $(.10)$  -        $  -        $(.76)       $(.18)


Reported net loss           $(2,734,772)income (loss)  $    (467,386)  $(4,806,357)  $(814,327)30,011  $   27,936   $(4,776,346)  $(786,390)
Stock-based compensation
  cost, net of tax              (51,210)    (14,785)      (91,698)    (27,108)(44,640)    (13,670)     (123,367)    (42,865)
                            -----------  ----------   -----------   ---------
Pro forma net loss          $(2,785,982)income (loss) $   (482,171)  $(4,898,055)  $(841,435)(14,629) $   14,266   $(4,899,713)  $(829,255)
                            ===========  ==========   ===========  ============  =========

Reported basic and
  diluted EPS                  $(.59)      $(.10)       $(1.04)       $(.18)$ .01       $ .01        $(1.03)       $(.17)
Pro forma basic and
  diluted EPS                  $(.60)      $(.10)$  -        $  -         $(1.06)       $(.18)


                                      -10-



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

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

                               Three Months                Nine Months
                              Ended June 30,              Ended June 30,
                          ----------------------      -----------------------
                             2003        2002            2003         2002
                          ---------   ----------      ----------   ----------
Federal:
 Current                  $    -      $(284,000)      $ (225,000)  $(880,000)
 Deferred                      -        276,000        1,853,957     310,000
                          ---------   ---------       ----------   ---------
                               -         (8,000)       1,628,957    (570,000)

State                          -          -                -         (40,000)
Foreign                      29,000      26,000          210,000     230,000
                          ---------   ---------       ----------   ---------
 Total income tax
  expense (benefit)       $  29,000   $  18,000       $1,838,957   $(380,000)
                          =========   =========       ==========   =========

In the quarternine month  period  ended March 31,June 30,  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 the currentthat period due to
updated  judgments of future results 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.  Income tax  expense for the sixnine month  period  ended March 31,June 30, 2003
includes the  recognition  of an  available  tax  effected  net  operating  loss
carryback of $225,000 and a net operating loss carryforward  benefit of $253,000
recorded in the prior quarter ended December 31, 2002.

Income tax expense for the three and six month periods ended March 31, 2003 also
included  a  provision   for  foreign  tax  expense  of  $81,000  and  $181,000,
respectively.$225,000.

For income tax  purposes,  the Company had  available  at March 31,June 30,  2003,  a tax
effected net operating loss carryback of approximately  $1.9 million included in
recoverable  income taxes, for which the Company plans to file a carryback claim
to obtain a refund of previously paid taxes.

Note 12:   New Accounting Standards
- -----------------------------------

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit and Disposal  Activities".  SFAS No. 146 requires  that a liability be
recognized for costs associated with an exit or disposal  activity only when the
liability is incurred. SFAS No. 146 also establishes fair value as the objective
for initial measurement of liabilities  related to exit or disposal  activities.
SFAS No. 146 is  effective  for exit and  disposal  activities  initiated  after
December  31,  2002.  The Company  adopted  SFAS No. 146,  which did not have an
impact on the Company's consolidated financial statements.

In November 2002, the Emerging Issues Task Force (EITF)  finalized its tentative
consensus   on  EITF  Issue   00-21,   "Revenue   Arrangements   with   Multiple
Deliverables",  which  provides  guidance  on the  timing  and method of revenue
recognition  for sales  arrangements  that include the delivery of more than one
product or service.  EITF is effective  prospectively  for arrangements  entered
into in fiscal periods  beginning  after June 15, 2003. The Company is currently
analyzing the impact of its adoption on its financial statements.







                                      -11-
Note 13:   Contingencies
- ------------------------

On May 15, 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. At this time, an assessment as to the likelihood of an
unfavorable  outcome can not be made as theThe Company and its outside patent counsel have not had
sufficient  time to evaluatebelieve that
the  complaint.  However,complaint is without  merit and the Company  intends to  vigorously  defend
itself in this matter.  -11-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 in the suit.

Note 14:   Related Party Transaction
- ------------------------------------

In the third quarter  ended June 30, 2003,  the Company  recognized  $360,000 of
revenues received from both a related and third party pursuant to the completion
of a contract to develop certain new product technology.






































                                      -12-




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


Results of Operations
- ---------------------
Three Months Ended March 31,June 30, 2003 Compared with March 31,June 30, 2002
- --------------------------------------------------------------------------------------------------------------------------


Net sales for the quarter  ended March 31,June 30, 2003  increased  $.2decreased  $1.2 million or 2%9% to
$13.1 million compared with $12.9$14.3 million in the year ago period. Domestic sales
decreased $.3$1.8 million or 3%18% to $7.7$8.4 million compared with $8.0$10.2 million in the
year ago period. Such decrease was due principallyThe year ago period sales included $1.6 million of shipments in
connection with a large system order for New York's JFK  International  Airport.
Current  period sales  included  $360,000 of revenues  received  pursuant to the
recent downturn in the
U.S. economy.completion   of  a  contract  to  develop   certain   new  product   technology.
International sales for the March 31, 2003 quarter increased $.5$.6 million or 10%14% to $5.4$4.7 million
compared  with $4.9$4.1  million in the year ago period  principally  as a result of
favorable exchange rate changes as the British pound and Eurodollar strengthened
against the U.S. dollar.

Gross  profit  margins for the secondthird  quarter of fiscal 2003  increased to 35.5%40.3%
compared with 33.0%35.5% in the year ago period.  The margin increase was principally
due to the introduction of the Company's new digital video product line and
lower fixed production costs.line.

Operating  expenses  for the secondthird  quarter of fiscal 2003 were $5.2  million or
39.5%39.6% of net sales  compared with $4.9$5.0 million or 38.1%34.8% of net sales in the year
ago period.  The Company  continued to invest in new product  development in the
current quarter,  incurring $1.3 million of engineering and development expenses
compared  with  $1.0$1.1  million  in the  year  ago  period.  The  current  quarter
engineering and development  expenses included a performance based  compensation
charge of $325,000$278,000 associated with the introduction of the Company's new digital
video product line.

The Company incurred an operating loss of $523,000Operating  income  decreased  to $83,000  for the secondthird  fiscal  quarter of 2003
compared with an  operating  loss of  $663,000$97,000 in the year ago period
principally as a result of increased operating expenses.period.

Interest  expense  decreased  to $64,000$52,000  for the secondthird  quarter of fiscal  2003
compared  with  $78,000$82,000  in the year ago period  principally  as a result of the
paydown of bank borrowings.

Income tax  expense for the secondthird  quarter of fiscal  2003 was $2.2  million$29,000  compared
with an income tax benefit of $228,000$18,000 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 current and recent years and the inherent  uncertainties of
predicting  future  operating  results  in  periods  over  which  such  net  tax
differences become deductible.

As a result of the foregoing, the Company incurred areported net lossincome of $2.7 million$30,000 for the
secondthird quarter of fiscal 2003 compared with a net lossincome of $467,000$28,000 in the year ago
period.












                                      -12--13-



Results of Operations
- ---------------------
SixNine Months Ended March 31,June 30, 2003 Compared with March 31,June 30, 2002
- -----------------------------------------------------------------------------------------------------------------------

Net sales for the sixnine months ended March 31,June 30, 2003  decreased  $1.3$2.5 million or 5%6%
to $25.1$38.2 million  compared  with $26.4$40.7 million in the year ago period.  Domestic
sales decreased $2.0$3.8 million or 12%14% to $14.5$22.9 million compared with $16.5$26.8 million
in the year ago period.  Such decrease was due principally to the recent downturncurrent period
slowdown in the U.S.  economy.economy and the  delivery of a large  system  order in the
year ago period.  International  sales for the sixnine  months  ended March 31,June 30, 2003
increased  $.7$1.3 million or 8%10% to $10.6$15.3  million  compared with $9.9$13.9 million in
the year ago period  principally as a result of favorable  exchange rate changes
as the British pound and Eurodollar strengthened against the U.S. dollar.

Gross profit margins for the first sixnine months of fiscal 2003 increased to 34.0%36.2%
compared with 33.0%33.9% in the year ago period.  The margin increase was principally
due to a more  favorable  sales mix of higher  margin  products  as the  Company
introduced  its new digital video product line in the second quarter ended March
31, 2003.

Operating  expenses for the first sixnine months of fiscal 2003 were $10.1$15.3  million
or 40.4%40.1% of net sales  compared  with $9.9$14.8 million or 37.3%36.4% of net sales in the
year ago period.  The Company continued to invest in new product  development in
the current year period,  incurring $2.4$3.8 million of engineering  and development
expenses  compared with $2.0$3.1 million in the year ago period.  The current period
engineering and development  expenses included a performance based  compensation
charge of $603,000 associated with the introduction of the Company's new digital
video product line.

The Company incurred an operating loss of $1.6$1.5 million for the first sixnine months
of 2003 compared  with an operating  loss of $1.1$1.0 million in the year ago period
principally as a result of lower sales and higher operating expenses.

Interest expense  decreased to $132,000$184,000 for the first sixnine months of fiscal 2003
compared  with  $176,000$258,000 in the year ago period  principally  as a result of the
paydown of bank borrowings.

Income tax expense  for the first sixnine  months of fiscal  2003 was $1.8  million
compared  with an income tax benefit of $398,000$380,000 in the year ago period.  In the
second  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.  Such charge was reduced by
the  recognition  of an available tax effected net operating  loss  carryback of
$225,000 and a net operating loss  carryforward  benefit of $253,000 recorded in
the first quarter ended December 31, 2002.

During the six months ended March 31, 2003,  the Company  completed its required
goodwill impairment tests as of October 1, 2002 and determined that the carrying
amount of 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 as the cumulative effect of a change in accounting  principle for the
sixnine month period.

As a result of the  foregoing,  the Company  incurred a net loss of $4.8 million
for the first sixnine months of fiscal 2003 compared with a net loss of $814,000$786,000 in
the year ago period.



                                      -13--14-



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

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

Net cash used in operating  activities was $268,000$345,000 for the first sixnine months of
fiscal  2003.  The net loss of $4.8  million  for the period  included  non-cash
charges of $1.9 million for  deferred  income  taxes,  and $1.4 million for goodwill
impairment.  Such net loss was further  reduced by a non-cash charge of $533,000impairment  and $826,000 for  depreciation  and  amortization and a $760,000  reduction in inventories.amortization.  Net cash used in
investing  activities  was $1.9$2.0 million for the first sixnine months of fiscal 2003
relating to the purchase of $1.5$1.6 million of marketable securities, which consist
of mutual  fund  investments  in U.S.  government  securities,  and  $326,000$436,000 of
general  capital  expenditures.  Net cash used in financing  activities was $803,000,$1.2
million,  which primarily  represented scheduled repayments of bank mortgage and
term loans. As a result of the foregoing, cash decreased by $3.0$3.5 million for the
first sixnine months of fiscal 2003 after the effect of  exchange  rate  changes on
the cash position of the Company. At March  31,June 30, 2003, the Company had an available
tax effected net operating loss  carryback of  approximately  $1.9 million,  for
which it plans to file a carryback  claim in the near term to obtain a refund of
previously paid taxes.

The Company has a $5 million secured  revolving credit facility with a bank that
expires  in July 2004 and a  $375,000$150,000  outstanding  term loan with the same bank
that matures in August 2003. Borrowings under the revolving credit facility bear
interest at the bank's prime rate or, at the  Company's  option,  LIBOR plus 190
basis  points  (4.25%(4.00% and 3.19%3.02%,  respectively,  at March 31,June 30,  2003).  The credit
agreement  includes a provision  that waives the Company's  obligation to comply
with all financial covenants contained in the agreements so long as there are no
outstanding  borrowings  under the  revolving  credit  facility  and the Company
maintains  certain  compensating  balances.  At this time,  the Company does not
anticipate that it will be obligated to comply with these financial covenants in
the  near  term.  At March  31,June  30,  2003  and  September  30,  2002,  there  were no
outstanding borrowings under this facility.

The Company  also  maintains  a bank  overdraft  facility of one million  Pounds
Sterling (approximately $1,580,000)$1,650,000) in the U.K. to support local working capital
requirements of Vicon Industries  Limited.  This facility expires in March 2004.
At March 31,June 30, 2003 and September 30, 2002,  there were no  outstanding  borrowings
under this facility.

Current  and  long-term  debt  maturing  in the  remaining  sixthree  months  ended
September  30,  2003 and in each of the  subsequent  fiscal  years  approximates
$539,000$232,000 for the remaining  sixthree months ended  September 30, 2003,  $321,000$334,000 in
2004,  $329,000$326,000  in 2005,  $336,000$339,000  in 2006,  $316,000$318,000  in 2007 and  $1,740,000
thereafter.

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,June
30,  2003 was  $591,000$521,000  with  minimum  rentals  for the fiscal  years  shown as
follows: for the remaining sixthree months ended September 30, 2003 - $157,000;$80,000; 2004
- - $272,000;$275,000;  2005 - $98,000;$99,000; 2006 - $24,000;$25,000; 2007 - $24,000;$25,000; 2008 and thereafter
- - $16,000.




                                      -14-$17,000.





                                      -15-



The  Company  entered  into  certain   consulting  and  incentive   compensation
agreements  that  provide  for  the  payout  of  up  to  $810,000  of  fees  and
compensation  upon the completion  and sale of a specified  number of units of a
newly developed product line. The Company incurred $325,000$603,000 of expenses relating
to these agreements in the secondfirst nine months of fiscal  quarter  ended  March 31, 2003 and believes that it
is likely that it will incur the majority of the  remaining  arrangement  overin the
last two quarters of thisnext fiscal year.

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.  The  Company  has  experienced  reduced  sales  levels and
incurred operating losses in past periods, which limits the Company's ability to
draw upon its bank credit facilities, if needed.

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,
2002 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 (including shipping
and handling fees) is generally  recognized  when products are sold and title is
passed to the  customer.  Under  arrangements  that  involve the sale of product
combined with the  provision of services,  revenue is generally  recognized  for
each element of the arrangement  upon delivery or performance  provided that (i)
the undelivered  element is not essential to the  functionality of the delivered
element  and  (ii)  there  is  objective  evidence  of  the  fair  value  of the
undelivered elements.  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. Shipping and handling costs are included
in cost of sales.

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.

                                      -15--16-


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 and estimated net asset  liquidation  values.  If the sum of the expected
future undiscounted cash flows, plus estimated asset liquidation values, is 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 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 the currentthat 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.

New Accounting Standard Not Yet Adopted
- ---------------------------------------

In November 2002, the Emerging Issues Task Force (EITF)  finalized its tentative
consensus   on  EITF  Issue   00-21,   "Revenue   Arrangements   with   Multiple
Deliverables",  which  provides  guidance  on the  timing  and method of revenue
recognition  for sales  arrangements  that include the delivery of more than one
product or service.  EITF is effective  prospectively  for arrangements  entered
into in fiscal periods  beginning  after June 15, 2003. The Company is currently
analyzing the impact of its adoption on its financial statements.

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.


                                      -16--17-


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).  At March 31, 2003, theThe Company's  ongoing foreign
currency  exchange  risks  included a $2.3 millioninclude  intercompany  accounts
receivable  balance due from the Company's U.K.  basedsales of product and  services
between subsidiary  and a nominal
Japanese Yen  denominated  trade  accounts  payable  liability  due to inventory
suppliers.  Such  assets and  liabilities  are short term and will be settledcompanies operating in fiscal 2003. The following  sensitivity  analysis assumes an  instantaneous  10%
change indiffering functional  currencies.  At
June 30, 2003, substantially all of such foreign currency exchange rates from  quarter-end  levels,  with all
other variables held constant.

At March 31, 2003, a 10%  strengthening  or weakening of the U.S.  dollar versus
the British Pound would result in a $230,000 decrease or increase, respectively,
in the intercompany  accounts receivable balance. Such foreign currency exchange
risk at March  31,  2003 hastransactions have been  substantially
hedged by forward exchange contracts.

At March 31,June 30, 2003, the Company had $2.3$2.1 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 5.  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, 2002).  Thus,  the Company
has substantially no net interest rate exposures on these instruments.  However,
the  Company  had  approximately  $925,000$899,000  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.


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

(a)      Evaluation of Disclosure Controls and Procedures
         ------------------------------------------------

Based on their evaluation as of a date within 90 days of the filing date of this
quarterly report on Form 10-Q, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act)
are effective to ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

(b)      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.










                                      -17--18-





                     Independent Accountants' Review Report
                     --------------------------------------

The Board of Directors and Shareholders
Vicon Industries, Inc.

We have reviewed the condensed  consolidated  balance sheet of Vicon Industries,
Inc.  and  subsidiaries  as  of  March  31,June  30,  2003,  and  the  related   condensed
consolidated  statements  of  operations  and  cash  flows  for  the  three  and
six-monthnine-month  periods ended March 31,June 30, 2003 and 2002.  These condensed  consolidated
financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting  principles  generally  accepted in the
United States of America.

As discussed in Note 8, the Company  adopted  Statement of Financial  Accounting
Standards No. 142, "Goodwill and Other Intangible Assets",  effective October 1,
2002.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  consolidated  balance  sheet of
Vicon  Industries,  Inc.  and  subsidiaries  as of September  30, 2002,  and the
related consolidated  statements of operations,  shareholders'  equity, and cash
flows for the year then ended (not  presented  herein);  and in our report dated
December 10, 2002,  we expressed an  unqualified  opinion on those  consolidated
financial  statements.  In  our  opinion,  the  information  set  forth  in  the
accompanying  condensed  consolidated  balance sheet as of September 30, 2002 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.


                                                          /s/ KPMG LLP

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

Melville, New York
May 15,August 14, 2003












                                      -18--19-





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

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

On May 15, 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. At
          this  time,  an  assessment  as to the  likelihood  of an  unfavorable
          outcome can not be made as theThe Company and its outside patent counsel have not had
          sufficient  time to  evaluatebelieve that
the  complaint.  However,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 in the suit.


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

         None

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

         None

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

         The Company's annual meeting was held on May 8, 2003.

         Proposal 1:  Election of Director

         The following director was elected by the votes indicated:

                                            For               Withheld
                                            ---               --------

         Peter F. Neumann                4,163,193             90,540

         The terms of the following directors continued after the meeting:

                               Kenneth M. Darby
                               Milton F. Gidge
                               W. Gregory Robertson
                               Arthur D. Roche


         Proposal 2:  Ratification of Appointment of Independent Auditors

         The selection of auditors was approved by the votes indicated:

                          For          Against       Abstain
                          ---          -------       -------

                       4,212,245        21,040        20,448None

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

         None


















                                      -19--20-



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

Exhibit
         Number     Description

           10       Material Contracts

                    (.1) Advice of Borrowing Terms between the Registrant and
                         National Westminster Bank PLC dated
                         April 22, 2003.a)       Exhibits
         --------

          15.1      Letter re: unaudited interim financial information.

          99.131.1      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.

          99.232.2      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.



Nob) Reports on Form 8-K
   was required to be-------------------

     On May 12, 2003, the Company filed duringa Current  Report on Form 8-K filing its
     May 7, 2003  press  release  announcing   the   current quarter.



































                                      -20-Company's   March 31,  2003
     financial results.































                                      -21-



                                   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 15,August 14, 2003




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



































                                      -21-





CERTIFICATION OF CHIEF EXECUTIVE OFFICER
- ----------------------------------------

I, Kenneth M. Darby, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Vicon Industries, Inc.;

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

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

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
         b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
         c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
         a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and
         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's  other certifying  officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective  actions with
regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ Kenneth M. Darby
- --------------------
Kenneth M. Darby
Chairman and
Chief Executive Officer




CERTIFICATION OF CHIEF FINANCIAL OFFICER
- ----------------------------------------

I, John M. Badke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Vicon Industries, Inc.;

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

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

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
         b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
         c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
         a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and
         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's  other certifying  officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ John M. Badke
- -----------------
John M. Badke
Vice President, Finance and
Chief Financial Officer-22-