SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q


(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--  ACT OF 1934 [NO FEE REQUIRED]

    For the quarterly period ended June 28, 1998

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--  ACT OF 1934 [NO FEE REQUIRED]

    For the transition period from ______ to ________


                         Commission File Number: 0-15930


                           SOUTHWALL TECHNOLOGIES INC.
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                 DELAWARE                                  94-2551470
             ---------------                          ----------------------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                 Identification Number)


   1029 Corporation Way, Palo Alto, California                94303
  ---------------------------------------------             ----------
    (Address of principal executive offices)                (Zip Code)


Registrant's telephone number, including area code: (415) 962-9111
                                                    --------------
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
                             -------          -------
As of June 28, 1998 there were 7,755,461 shares of the Registrant's Common Stock
outstanding.

This report, including all attachments, contains 13 pages.



                                       1
<PAGE>


                           SOUTHWALL TECHNOLOGIES INC.

                                      INDEX



                                                                     Page Number
                                                                     -----------

                          PART 1 FINANCIAL INFORMATION

Item 1   Financial Statements:

         Consolidated Balance Sheets - June 28, 1998
         and December 31, 1997................................................3

         Consolidated Statements of Operations -
         three month and six month periods ended
         June 28, 1998 and June 29, 1997......................................4

         Consolidated Statements of Cash Flows -
         six months ended June 28, 1998
         and June 29, 1997 ...................................................5

         Notes to Consolidated Financial Statements...........................6

Item 2   Management's Discussion and Analysis
         of Financial Condition and Results of Operations.....................7


                            PART II OTHER INFORMATION

Item 1   Legal Proceedings and Other Matters.................................10

Item 2   Changes in Securities...............................................10

Item 3   Defaults Upon Senior Securities.....................................10

Item 4   Submission of Matters to a Vote of Stockholders.....................11

Item 5   Other Information...................................................11

Item 6   Exhibits and Reports on Form 8-K....................................11

         Signatures..........................................................12



                                       2
<PAGE>




                          PART 1 FINANCIAL INFORMATION

Item 1  Financial Statements

                           SOUTHWALL TECHNOLOGIES INC.
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)

                                               June 28, 1998  December 31, 1997
                                               -------------  -----------------
                                                (Unaudited)
             ASSETS

  Current assets:
     Cash and cash equivalents                    $  8,255        $ 10,524
     Short-term investments                              7               7
     Accounts receivable, net of allowance                      
       for doubtful accounts of $1,005 and $834      9,797          11,926
     Inventories                                     8,619          10,118
     Other current assets                            1,067           1,118
                                                  --------        --------
          Total current assets                      27,745          33,693
                                                                
  Property and equipment, net                       26,630          26,272
  Other assets                                       1,515           1,504
                                                  --------        --------
                                                                
          Total assets                            $ 55,890        $ 61,469
                                                  ========        ========
                                                                
      LIABILITIES AND STOCKHOLDERS' EQUITY                      
                                                                
  Current liabilities:                                          
     Accounts payable                             $  3,817        $  4,835
     Accrued compensation                            1,703           2,009
     Other accrued liabilities                       1,127           1,546
     Current portion of long-term debt               1,468           1,304
                                                  --------        --------
                                                                
          Total current liabilities                  8,115           9,694
                                                                
  Long-term debt                                    14,935          15,539
  Deferred income taxes                                496             496
                                                  --------        --------
          Total liabilities                         23,546          25,729
                                                  --------        --------
                                                                
  Commitments (Note 4)                                          
                                                                
  Stockholders' equity:                                         
     Common stock, $.001 par value,                             
       20,000 shares authorized;                                
       issued and outstanding: 7,784 and 7,636           8               8
     Capital in excess of par value                 51,835          51,513
     Notes receivable                                 (906)           (656)
     Accumulated deficit                           (18,354)        (14,631)
     Less cost of treasury stock, 28                            
       and 123 shares outstanding                     (239)           (494)
                                                  --------        --------
                                                                
          Total stockholders' equity                32,344          35,740
                                                  --------        --------
          Total liabilities and                                 
            stockholders' equity                  $ 55,890        $ 61,469
                                                  ========        ========
                                                              

          See accompanying notes to consolidated financial statements.



                                      3
<PAGE>


<TABLE>
                                        SOUTHWALL TECHNOLOGIES INC.
                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (in thousands, except per share data)
                                                (Unaudited)

<CAPTION>
                                            Three Months Ended         Six Months Ended
                                           June 28,     June 29,    June 28,      June 29,
                                             1998         1997        1998          1997
                                           --------     --------    --------     --------
<S>                                        <C>          <C>         <C>          <C>
 Net revenues                              $ 14,057     $ 11,684    $ 24,473     $ 22,539
                                           --------     --------    --------     --------
 Costs and expenses:
    Cost of sales                            11,022        7,609      21,237       14,589
    Tempe start up costs                       --            370        --            548
    Research and development                    913          727       1,973        1,434
    Selling, general and administrative       2,264        2,384       4,672        4,545


                                           --------     --------    --------     --------
       Total costs and expenses              14,199       11,090      27,882       21,116
                                           --------     --------    --------     --------

 Income(loss) from operations                  (142)         594      (3,409)       1,423

 Interest income (expense), net                (182)          48        (290)          15
                                           --------     --------    --------     --------

 Income(loss) before income taxes              (324)         642      (3,699)       1,438

 Provision for income taxes                      24           40          24           70
                                           --------     --------    --------     --------

 Net income(loss)                          $   (348)    $    602    $ (3,723)    $  1,368
                                           ========     ========    ========     ========


 Net income(loss) per share:
    Basic                                  $  (0.05)    $    .09    $  (0.49)    $    .20
    Diluted                                $  (0.05)    $    .08    $  (0.49)    $    .18

 Weighted average shares of
   common stock and common
   stock equivalents:

     Basic                                    7,664        7,048       7,614        6,792
     Diluted                                  7,664        7,759       7,614        7,471
<FN>
               See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                            4
<PAGE>

<TABLE>

                               SOUTHWALL TECHNOLOGIES INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (in thousands)
                                       (Unaudited)

<CAPTION>
                                                                   Six Months Ended
                                                                   ----------------
                                                          June 28, 1998    June 29, 1997
                                                          -------------    -------------
<S>                                                           <C>              <C>
  Cash flows from operating activities:
       Net income (loss)                                      $ (3,723)        $  1,368
       Adjustments to reconcile net income (loss) to
         net cash provided by (used in) operating
         activities:
       Depreciation and amortization                             2,048            1,256
       Decrease (increase) in accounts receivable                2,129           (2,609)
       Decrease (increase) in inventories                        1,499             (958)
       Decrease (increase) in other current assets                  51             (132)
       (Decrease) in accounts payable and
         accrued liabilities                                    (1,650)             (25)
                                                              --------         --------
  Cash provided by (used in) operating activities                  354           (1,100)
                                                              --------         --------
  Cash flows from investing activities:
       Expenditures for property and equipment
       and other assets                                         (2,417)          (5,946)
                                                              --------         --------
  Cash (used in) investing activities                           (2,417)          (5,946)
                                                              --------         --------
  Cash flows from financing activities:
       Increase in (reduction of) long-term debt                  (440)           4,405
       Collection (issuance) of stock option loans, net           (250)             160
       Sale of common stock, net                                   154            4,931
       Issuance of treasury stock, net                             330              188
                                                              --------         --------
  Cash provided by (used in) financing activities                 (206)           9,684
                                                              --------         --------
  Increase (decrease) in cash and cash equivalents              (2,269)           2,638

  Cash and cash equivalents, beginning of year                  10,524            7,419
                                                              --------         --------

  Cash and cash equivalents, end of period                    $  8,255         $ 10,057
                                                              ========         ========



  Supplemental schedule of non-cash
       investing and financing activities:

       Treasury stock used for payment of interest            $     93         $     93
<FN>
               See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                            5
<PAGE>

                           SOUTHWALL TECHNOLOGIES INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (in thousands)
                                   (Unaudited)

         Note 1 - Interim Period Reporting

         While  the  information  presented  in  the  accompanying  consolidated
         financial   statements  is  unaudited,   it  includes  all  adjustments
         (consisting only of normal recurring adjustments) which, in the opinion
         of management,  are necessary to present fairly the Company's financial
         position and results of operations,  and changes in financial  position
         as of the dates and for the periods indicated.

         Certain  information  and footnote  disclosures  normally  contained in
         financial  statements  prepared in accordance  with generally  accepted
         accounting  principles have been condensed or omitted.  It is suggested
         that these  consolidated  financial  statements be read in  conjunction
         with the financial  statements contained in the Company's Form 10-K for
         the year ended  December 31, 1997.  The results of  operations  for the
         interim  periods  presented  are  not  necessarily  indicative  of  the
         operating results for the full year.

         Note 2 - Inventories

         Inventories  are  stated  at  the  lower  of  cost  (determined  by the
         first-in,  first-out  method) or market.  Inventories  consisted of the
         following:

                                   June 28, 1998     December 31, 1997
                                   -------------     -----------------

                Raw materials          $ 3,235            $ 4,502
                Work-in-process          2,893              2,551
                Finished goods           2,491              3,065
                                       -------            -------
                    Total              $ 8,619            $10,118
                                       =======            =======
                                                  
         Note 3 - Net Income (Loss) per Share

         Basic net  income  (loss)  per share is  computed  by  dividing  income
         available to common  shareholders  (numerator) by the weighted  average
         number of  common  shares  outstanding  (denominator)  for the  period.
         Diluted  net  income  (loss)  per share  gives  effect to all  dilutive
         potential common shares  outstanding during the period. The computation
         of diluted Earnings per Share uses the average market prices during the
         period.

         During each of the periods presented there were no differences  between
         the  numerators  used for the basic and diluted  net income  (loss) per
         share.  The total  amount of the  difference  in the basic and  diluted
         weighted average shares of common stock and common stock equivalents in
         the periods where there is net income is  attributable to the effect of
         diluted  stock  options.  In net loss  periods,  the basic and  diluted
         weighted  average  shares of common stock and common stock  equivalents
         are the same because inclusions of stock options would be antidilutive.

         Note 4 - Commitments

         During 1996, the Company  entered into an addendum to a previous supply
         agreement  with  a  major  customer  for  the  sale  of  the  Company's
         anti-reflective  film. Beginning July 1, 1997, the Company is committed
         to supply and the  customer  is  committed  to purchase  fixed  volumes
         thereafter  until December 31, 2000.  Should either the Company fail to
         supply or the customer  fail to purchase the  specified  quantities,  a
         penalty,  based on the  sales  price  to the  customer  from the  prior
         period, must be paid to the other.


                                        6
<PAGE>

         In  order to meet  the  supply  commitment,  the  Company  opened a new
         manufacturing  facility,  initially  dedicated  to  the  production  of
         anti-reflective film.

         Note 5 - Line of Credit Agreement

         The Company has secured a $6 million revolving line of credit which was
         extended  during the second quarter and now expires in June 1999.  This
         line of credit may be extended  further for  additional  one year terms
         with the  bank's  approval.  The amount of  borrowings  is based upon a
         percentage  of accounts  receivable,  which at June 28,  1998,  did not
         limit  available  borrowing  under the  line.  The line is  secured  by
         certain  assets of the Company and bears  interest at an annual rate of
         prime  plus .5%.  Under  the terms of the  agreement,  the  Company  is
         required to maintain  certain  financial  ratios.  As of June 28, 1998,
         there were no borrowings under this line of credit.

         Note 6 - Recent Accounting Pronouncements

         In June 1997, the Financial Accounting Standards Board issued Statement
         of Financial  Accounting Standards No. 131 (FAS 131) "Disclosures about
         Segments of an  Enterprise  and Related  Information."  FAS 131 revises
         information  regarding the reporting of certain operating  segments for
         periods   beginning   after  December  15,  1997.  The  Statement  also
         establishes  standards  for  related  disclosures  about  products  and
         services, geographic areas, and major customers. The Company will adopt
         FAS 131 in its 1998 annual  report.  The Company has not yet determined
         the impact, if any, of adopting this new standard.


         Item 2 - Management's  Discussion  and Analysis of Financial  Condition
         and Results of Operations

         Except for the historical  information  contained  herein,  the matters
         discussed in this Form 10-Q Report are forward-looking  statements that
         involve risks and uncertainties, including those discussed below and in
         the  Company's  Annual Report on Form 10-K.  Actual  results may differ
         materially  from  those  projected.  These  forward-looking  statements
         represent the  Company's  judgment as of the date of the filing of this
         Form  10-Q  Report.  The  Company  disclaims,  however,  any  intent or
         obligation to update these forward-looking statements.


         General

         The Company  has  experienced  significant  fluctuations  in  quarterly
         results of operations. Revenues have varied from quarter to quarter due
         to the seasonal  buying  patterns  for the  Company's  Heat  Mirror(TM)
         products,  which  typically have been strongest in the second and third
         quarters. Additionally, sales of these energy conservation products are
         significantly influenced by the residential and commercial construction
         industries,  and reduction in construction has generally  resulted in a
         reduction  in the  sales of the  Company's  Heat  Mirror  products.  In
         addition,  operating results have  historically  varied from quarter to
         quarter as a function of the  utilization  of the Company's  production
         machines  and  the  start  up of  manufacturing  operations  in  Tempe,
         Arizona.   Manufacturing   inefficiencies   have   resulted   from  the
         development  and  introduction  of new products and the changing mix of
         products  manufactured.  Primarily as a result of these  factors and in
         view of the Company's  strategy of developing  additional  applications
         for its thin-film technology, and its ongoing practice of upgrading its
         manufacturing   processes,  the  Company  may  continue  to  experience
         quarterly fluctuations in its results of operations.


                                       7
<PAGE>

         The Company is committed to increasing  revenues by expanding capacity,
         and introducing new applications and technologies. Although the Company
         has recently completed a major expansion of its capacity and is seeking
         to further expand existing  applications,  to develop new  applications
         and to continue to expand  international  marketing and sales  efforts,
         there can be no assurance  that the Company will be able to continue to
         increase revenues.  The Company has ordered a new production machine in
         July 1998 at an approximate cost of $5.7 million plus  installation and
         leasehold  improvement  costs to  accommodate  the system.  The Company
         believes that the additional  capacity will allow  continued  growth in
         its Heat Mirror XIR(R) films sold to OEM automotive glass manufacturers
         as well as to after market automotive and architectural customers.


         Year 2000

         In October 1996 the Company began reviewing year 2000 issues,  prepared
         a plan to  address  those  issues and began  systematically  modifying,
         upgrading  or  replacing  software as  necessary  and then  testing and
         implementing  those changes.  The Company has completed  major upgrades
         and modifications, which have made essentially all mainframe accounting
         and inventory control software year 2000 compliant. All systems not yet
         compliant are scheduled to be made  compliant by December 31, 1998. All
         projects  relating  to the year  2000  issue  have  been  handled  with
         existing staff, and the total expense is not expected to be material to
         the Company.  The year 2000 problem creates risk for the Company should
         any unforeseen problems arise, both in its own systems and those of key
         customers  and  suppliers.  The  greatest  risk  within the  Company is
         related  to custom  data  base  software.  Currently,  the  Company  is
         discussing with key customers and suppliers their plans to address year
         2000 issues  during 1998,  but  management  has not yet  assessed  this
         related potential effect on the Company's earnings, if any.


         Six Months Ended June 28, 1998 and June 29, 1997

         Net revenues  increased $2.0 million to $24.5 million for the first six
         months of 1998,  compared to $22.5  million  for the similar  period of
         1997.  The  increase  was  attributable  primarily  to a  $2.9  million
         increase in sales of Heat Mirror  XIR(R) film used  principally  by OEM
         automotive  glass  manufacturers  but partially offset by a decrease of
         $0.7  million  in sales of  electronic  products  compared  to the same
         period last year.  The  electronic  products  sales decrease was due to
         Silver  Reflector film shipments and  discontinued  products which were
         sold during the first half of 1997 only.

         Cost of  sales  for the  first  half of 1998  was 87% of net  revenues,
         compared to 65% for the similar period of 1997. The increase in cost of
         sales as a  percentage  of net  revenues  for 1998 from 1997 was due to
         process and mechanical problems,  primarily at the Company's new Tempe,
         Arizona facility,  which resulted in low yields on anti-reflective film
         for computer  monitors.  Production yields on the Company's Heat Mirror
         XIR  automotive  film produced in the Palo Alto,  California  were also
         lower than in the same period last year,  requiring  additional machine
         time and increased material to meet customer demands. Additionally, the
         Company experienced slightly higher overhead costs in the first half of
         1998  due  to the  renovation  of an  existing  production  machine  to
         increase capacity for Heat Mirror products.



                                       8
<PAGE>

         Research and development expenses,  as a percent of net revenues,  were
         8% for the first six  months of 1998,  compared  to 6% for the  similar
         period in 1997.  The absolute  dollars  increased  $0.6 million to $2.0
         million in 1998 from $1.4  million  in 1997.  The  increase  in 1998 is
         attributable  to higher new product  development  costs,  primarily  in
         development   of  product  for  the   electronic   display  market  and
         development of new deposition technology.

         Selling,  general  and  administrative  expense,  as a  percent  of net
         revenues,  decreased  to 19% in the first six months of 1998,  from 20%
         for the similar  period in 1997.  The absolute  dollars  increased $0.2
         million to $4.7 million in 1998 from $4.5 million in 1997. The increase
         in absolute dollars was due primarily to severance payments  associated
         with the realignment of organizations and to additional staffing.

         Net  interest  expense  increased  for the first six  months of 1998 to
         $300,000  from no interest  expense in the first six months of 1997 due
         primarily  to  interest   payments  on  long-term  debt  for  expansion
         projects.


         Three Months Ended June 28, 1998 and June 29, 1997

         Net  product  sales  increased  $2.4  million to $14.1  million for the
         second  quarter of 1998,  compared  to $11.7  million  for the  similar
         period of 1997.  The higher  1998 sales  were due  primarily  to a $1.2
         million  increase in sales of Heat Mirror XIR(R) film used primarily by
         OEM  automotive  glass  manufacturers  and a $1.1  million  increase in
         shipments of anti-reflective  film product to Sony compared to the same
         period last year.

         Cost of sales for the second  quarter of 1998 was 78% of net  revenues,
         compared to 65% for the similar  quarter of 1997.  The increase in cost
         of sales as a  percentage  of net  revenues  was due  primarily  to the
         Company's new Tempe, Arizona facility  experiencing process problems in
         April  1998  which   resulted  in  lower  yields  and   throughput   on
         anti-reflective film for computer monitors.

         Research and development expenses,  as a percent of net revenues,  were
         6% for the  second  quarters  of 1998 and 1997.  The  absolute  dollars
         increased  to $.9  million  in 1998  from  $.7  million  in  1997.  The
         increased  expenses were primarily  attributable  to higher new product
         development costs associated with film for electronic  display products
         and the development of new deposition technology.

         Selling,  general  and  administrative  expense,  as a  percent  of net
         revenues,  decreased to 16% in the second quarter of 1998, from 20% for
         the similar  period in 1997.  The absolute  dollar  decrease  from $2.4
         million in 1997 to $2.3  million in 1998 is  attributable  primarily to
         decreased advertising and promotional expenses.

         Net interest  expense  increased in the second quarter of 1998 compared
         to the similar  period in 1997 due to interest costs on long term debt.
         Long-term  debt was higher by  approximately  $3.9  million at June 28,
         1998  compared  to  June  29,  1997,  due to  borrowing  for  expansion
         projects.


         Liquidity and Capital Resources

         At June 28, 1998,  the Company's net working  capital was $19.6 million
         compared to $24.0 million at December 31, 1997.



                                       9
<PAGE>

         From  December  31,  1997,  to  June  28,  1998,  cash  and  short-term
         investments decreased by $2.3 million.  Major uses of cash were to fund
         the net loss  reduction of $3.7 million the first quarter of 1998 which
         was offset by $2.0 million of depreciation  and  amortization,  capital
         expenditures of $2.4 million and decreased accounts payable and accrued
         liabilities  of $1.7  million.  Major  sources  of cash  were  accounts
         receivable of $2.1 million and inventories of $1.5 million.

         Additions to property and  equipment  were  approximately  $1.4 million
         during  the second  quarter  of 1998,  including  $.8  million  for the
         renovation of an existing production  machine.  The Company anticipates
         total capital  expenditures of  approximately  $9.5 million during 1998
         for   improvements  in  Tempe  for  the  newly  ordered  PM6,   general
         replacements and discretionary  improvements of current facilities, and
         further renovation of existing production machines.

         At June 28, 1998,  the Company had $8.3 million of cash and  short-term
         investments.  Additionally,  in June 1998,  the  Company  extended a $6
         million revolving line of credit that expires in June 1999. The Company
         has no current borrowings under this line of credit.  While the Company
         believes  that  it  currently  has  sufficient  funds  to  finance  its
         operations  through at least the  remainder of 1998, to the extent that
         such funds are insufficient to fund the Company's activities, including
         the potential major expansion  project discussed above, the Company may
         need to raise additional funds through public or private equity or debt
         financing  from  other  sources.  The  sale  of  additional  equity  or
         convertible  debt may result in  additional  dilution to the  Company's
         stockholders  and such  securities  may  have  rights,  preferences  or
         privileges  senior  to  those  of the  Common  Stock.  There  can be no
         assurance that additional equity or debt financing will be available or
         that if available it can be obtained on terms  favorable to the Company
         or its stockholders.



                            PART II OTHER INFORMATION


         Item 1   Legal Proceedings and Other Matters

         The Company has been named a defendant  in a lawsuit  filed on April 5,
         1996 by one of its  customers in the United States  District  Court for
         the Eastern  District of New York. The lawsuit in federal court alleges
         certain  contractual  violations  by the Company and seeks relief in an
         aggregate  amount in excess of $35 million.  The Company  believes that
         this  lawsuit  is  without  merit  and  intends  to defend  against  it
         vigorously.

         In  addition,  the Company is involved in certain  other legal  actions
         arising in the  ordinary  course of  business.  The  Company  believes,
         however, that none of these other legal actions, either individually or
         in the aggregate,  will have a material adverse effect on the Company's
         business  or  its  consolidated   financial   position  or  results  of
         operations.


         Item 2   Changes in Securities
                           Not applicable


         Item 3   Defaults upon Senior Securities
                           Not applicable



                                       10
<PAGE>

         Item 4   Submission of Matters to a Vote of Stockholders

         The Company's  Annual Meeting of Stockholders  was held on May 20, 1998
         at  the  Company's  headquarters  in  Palo  Alto,  California.  Of  the
         7,618,095  shares  outstanding as of the record date,  7,425,140 shares
         were  present or  represented  by proxy at the meeting.  The  following
         matters were submitted to a vote of security holders.


         (1)  To elect the following to serve as a Director of the Company:

                                              Votes in Favor     Votes Withheld
                                              --------------     --------------

              J. Larry Smart                    6,981,265            443,875
              Bruce J. Alexander                6,988,240            436,900
              Yoshimichi Hase                   7,001,790            423,350
              Thomas G. Hood                    7,001,090            424,050
              Joseph B. Reagan                  6,988,240            436,900
              Walter C. Sedgwick                6,987,240            437,900

         (2) To  ratify  the  selection  of  Price  WaterhouseCooper  LLP as the
             Company's principal independent auditors:

                                               Votes
                                               -----
                 Votes for:                  6,999,709
                 Votes against:                416,750
                 Votes abstaining:               8,681



         Item 5   Other Information
                  Not applicable


         Item 6   Exhibits and Reports on Form 8-K

                (a)   Exhibits - None

                (b)   Reports of Form 8-K - None



                                       11
<PAGE>


                                   SIGNATURES


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


         Dated:  August 12, 1998
         Southwall Technologies Inc.






                                  By:/s/Thomas G. Hood
                                     ------------------------------
                                        Thomas G. Hood
                                        President and
                                        Chief Executive Officer






                                  By:/s/Bill R. Finley
                                     ------------------------------
                                        Bill R. Finley
                                        Vice President and
                                        Chief Financial Officer




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