U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                FORM 10-KSB

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

        For the fiscal year ended:          Commission file number:
           September 30, 1997                       0-26614
                                               

                                 MVSI, INC.
                (Name of Small Business Issuer in Its Charter)

                Delaware                             54-1707718
     (State or other jurisdiction of               (IRS Employer
      incorporation or organization)             Identification No.)

    8133 Leesburg Pike, Suite 750, Vienna, VA            22182
    (Address of principal executive offices)           (Zip code)

                                (703) 356-5353
              (Company's telephone number, including area code)

       Securities registered under Section 12(b) of the Exchange Act:

         Title of Each Class               Name of Each Exchange
                                           on Which Registered
           Not Applicable                    Not Applicable

   Securities registered pursuant to Section 12(g) of the Exchange Act:

                               Title of Class
                        Common Stock, $.01 Par Value
                             Class A Warrants

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

Check if there is no disclosure of delinquent filers 
in response to Item 405 of Regulation S-B contained in this form, 
and no disclosure will be contained, to the best of the registrant's 
knowledge, in definitive proxy or information statements incorporated 
by reference in Part III of this Form 10-KSB or any amendment to this 
Form 10-KSB. ______

The issuer's revenues for its most recent fiscal year:  $39,885,840. 

The total market value of the voting stock was $100,032,262, 
of which $72,058,557 was held by nonaffiliates of the 
registrant, based upon the closing price of the common stock on 
December 29, 1997, as quoted by the Nasdaq National Market System. 

The number of outstanding shares of the registrant's common stock 
on December 29, 1997 was 16,506,974. 


               DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Post-Effective Amendment Number 2 to Form SB-2 on 
Form S-3 Registration Statement, and related Prospectus, 
Registration File No. 33-89194, declared effective with the 
Securities and Exchange Commission ("Commission") on November 14, 
1997, are incorporated herein by reference into Part III of 
this report.  Portions of the Proxy Statement of the registrant 
to be filed with the Securities and Exchange Commission pursuant 
to Regulation 14A of the Securities Exchange Act of 1934 on or prior 
to January 31, 1998, are incorporated herein by reference into 
Part III of this report. 

      Transitional Small Business Disclosure Format: Yes   No X 

INDEX

Part I                                                  Page
-------                                                 ----

Item 1.   Description of Business.                        3
Item 2.   Description of Properties.                     16
Item 3.   Legal Proceedings.                             17
Item 4.   Submission of Matters to 
             a Vote of Security Holders.                 17

Part II
-------

Item 5.   Market for Common Equity and Related
             Stockholder Matters.                        18
Item 6.   Management's Discussion and Analysis of
             Financial Condition and Results of 
             Operations.                                 18
Item 7.   Financial Statements.                          26
Item 8.   Changes in and Disagreements with
             Accountants on Accounting and
             Financial Disclosure.                       53

Part III
--------
Item 9.   Directors, Executive Officers, 
             Promoters and Control Persons; 
             Compliance with 16(a) of 
             the Exchange Act.                           53
Item 10.  Executive Compensation.                        54

Item 11.  Security Ownership of Certain 
             Beneficial Owners and Management.           54
Item 12.  Certain Relationships and 
             Related Transactions.                       54
Item 13.  Exhibits, List and Reports 
             on Form 8-K.                                54


                                       PART I

Item 1.  Description of Business.

Overview

MVSI, Inc. ("Company"), a Delaware corporation, was incorporated 
in the State of Delaware on April 12, 1994. The principal executive 
offices of the Company are in Vienna, Virginia. 

The Company is a broad-based technology company with five wholly-owned,
operating subsidiaries: Socrates, Inc., a Maryland corporation, 
headquartered in Largo, Maryland; Technet Computer Services, Inc., 
a Virginia corporation, headquartered in Vienna, Virginia. 
JMR Distributors, Inc., a Virginia corporation, headquartered in 
Lorton, Virginia; Expert, Inc., a New York corporation, 
headquartered in Fresh Meadows, New York; and MVS Modular Vision 
Systems, Inc., a Canadian corporation, headquartered in Montreal, 
Quebec, Canada.

The Company's Common Stock, $.01 par value, ("Common Stock") and 
Class A Warrants were quoted on the Nasdaq SmallCap Market from 
August 14, 1995 until May 1, 1997.  Since May 2, 1997, the 
Common Stock and Class A Warrants have been quoted on the Nasdaq 
National Market System under the trading symbols "MVSI" 
and "MVSIW", respectively.  Pursuant to a November 14, 1997 
call for the redemption of the outstanding Class A Warrants and 
Class B Warrants (collectively, the "Warrants"), the Company 
redeemed all of its outstanding Warrants as of 5:00 p.m., 
local New York City time, on Monday, December 15, 1997. 
Each Class A Warrant entitled the holder to purchase one (1)
share of the Common Stock at an exercise price of $4.00 and 
each Class B Warrant entitled the holder to purchase 
one (1) share of Common Stock at an exercise price of $4.20.  
The Class A Warrants were traded on the Nasdaq National Market 
System until 4:00 p.m., local New York City time, on Monday, 
December 15, 1997. The Class B Warrants were not publicly 
traded.  The Company is in the process of desisting its Class 
A Warrants.  See "Subsequent Events" below for additional 
information on the redemption of the Warrants.

Unless the context otherwise indicates, the terms "Company" 
and "MVSI" as used in this Report refer to MVSI, Inc.

COMPANY'S WHOLLY-OWNED OPERATING SUBSIDIARIES

Socrates, Inc. The Company acquired Socrates, Inc., effective 
July 1, 1996.  MVSI exchanged 350,000 shares of its Common 
Stock for all the shares of common stock held by Socrates' sole 
stockholder. The shares of Common Stock issued to acquire 
Socrates were "restricted" securities under Rule 144 of the 
Securities Act of 1933, as amended.  Socrates is engaged 
in the assembly, integration and marketing of proprietary 
and generic computer system products and services; computer 
systems integration, telecommunications integration, 
Internet connectivity, and wide and local area networking; 
and providing training on the use of computer software 
programs to individuals, corporations and the government. 
Socrates' computer product systems and services are marketed 
nationally to major computer distributors, corporate and 
government customers. Socrates was incorporated in 
Maryland in 1989.

In September 1997, Socrates moved to a new 35,000 square foot office, 
manufacturing and warehouse space in Largo, Maryland, a suburb of 
Washington, D.C. This new center will serve as Socrates' principal 
executive offices, primary manufacturing and engineering center, 
corporate training center and primary warehouse facility. 
Socrates has a sales office in West Chester, Pennsylvania 
and Hampton, Virginia.  Socrates has one computer sales 
and service center in Virginia Beach, Virginia, which sells 
to individual and corporate clients.  As of the date of this 
Report, Socrates is preparing to open in December 1997 
or January 1998 two additional computer sales and service 
centers in the Newport News-Virginia Beach, Virginia area.  
One of the Newport News-Virginia Beach, Virginia area 
stores will sell computer hardware and software on a dedicated 
basis to Newport News Shipbuilding, Inc. and its employees, 
and the other computer sales and service center will sell to 
the general public of the Newport News-Virginia Beach, 
Virginia area.

On November 6, 1997, Socrates, Inc. entered into an agreement 
with the Washington Sports & Entertainment, Inc. ("WSE") whereby 
Socrates, Inc. would provide computer hardware, software and 
training services to WSE; the Washington Wizards National 
Basketball Association Professional Basketball Team and Washington 
Capitals National Hockey League Professional Hockey Team, 
which WSE owns; and two major sports and entertainment complexes 
in the greater Washington, D.C. metropolitan area in which WSE 
has an ownership interest: the new MCI Center in Washington, 
D.C. and US Airways Arena in Largo, Maryland. The agreement has 
a three year term and also entitles Socrates, Inc. to advertise 
at the MCI Center and US Airways Arena and in television 
and cable shows and in print publications sponsored or produced 
by WSE or its affiliates.

In September 1997, Socrates initiated an effort to establish 
as a separate business line the training of corporate and 
government employees and information technology professionals 
in the greater Washington, D.C. metropolitan area in the use 
of popular computer programs and network systems.  Socrates 
conducted its first training classes in December 1997.  Socrates intends 
to continue its efforts in Fiscal Year 1998 to expand the scope and 
market of its training business, which expansion could include establishing 
training centers in other metropolitan areas along the East Coast of the 
United States and expanding the program of study to qualify individuals to 
become certified software or network systems engineers or obtain other 
software or network systems certifications.

To take advantage of the rapid growth of the Internet and 
intranets and to provide its customers with complete Internet 
connectivity, Socrates has created a special in-house networking 
group.  The Company anticipates significant growth in Socrates' 
networking group business and computer training business in
fiscal year 1998.  The Company makes no assurances that Socrates 
will be able to successfully penetrate this market or to 
attain the anticipated significant growth.

The Company intends to continue its financial and other 
support of Socrates' expansion of business lines and supporting 
resources as a central part of the Company's strategic goal to 
establish one-stop information technology capabilities for large 
corporate and government customers in fiscal year 1998.

Technet Computer Services, Inc. ("Technet"). The Company acquired 
Technet as a wholly owned subsidiary, effective on July 1, 1997, 
through an exchange of securities.  Technet was incorporated in 
Virginia in 1989. Technet is engaged in the business of providing 
customized software development, including turnkey system 
development and product development, and maintenance services 
to corporate and government customers.

Technet has software development centers in New Jersey and at its 
principal executive offices in Vienna, Virginia.  Technet also 
utilizes the software development center of an affiliated 
company in Madras, India.  Technet was acquired by the exchange of 
400,000 shares of Common Stock for all of the outstanding shares 
of Technet common stock. The shares of Common Stock issued to 
acquire Technet were "restricted securities" under Rule 144 
of the Securities Act of 1933, as amended.

Technet's core competency and expertise lies in systems design and 
development of relational databases, network applications, imaging 
and multimedia applications.  Technet's custom software development 
work centers on developing and maintaining sales, logistics, finance, 
research and other major application areas of information management 
systems. 

Technet has also designed, developed and implemented turnkey systems 
for market research and analysis, consumer relations, help desk, customer 
service and support, and multimedia expert systems for market research 
and presentations.  Technet's product development has been focused 
on pre-packaged, easily customized software solutions for warehouse 
management, order processing, document management, human resource 
management and medical office management. Technet has initiated 
the marketing and enhancement of its capabilities to provide Year 
2000 conversion solutions, which remedies the inability of many computer 
programs and systems to properly recognize the new millenium 
as the Year 2000 and the possible malfunctions resulting from 
that recognition error. Technet intends to aggressively market 
its Year 2000 capabilities in Fiscal Year 1998.  

Technet's principal customers include several major international 
cosmetics and fragrance companies, a major U.S. insurance company, 
an international computer systems manufacturer and a domestic long-distance 
telephone carrier. 
 
Expert, Inc.   The Company acquired privately owned Expert, Inc. ("Expert"),
effective April 1, 1997.  Expert is a contract assembler and marketer of 
proprietary and generic computer system products and services for advanced 
computer systems integration and networking.  

Expert operates from a single 4,000 square foot facility in Fresh Meadows, 
New York. Expert markets its products internationally.  Expert is 
currently planning to move its operations to a new, larger facility in 
order to increase its production and warehouse space and to be 
positioned to exploit any information technologies work resulting from the 
Company's efforts to develop information technologies capabilities 
and businesses among its computer system subsidiaries.

The Company exchanged 300,000 shares of Common Stock for all of the 
outstanding shares of Expert common stock.  The shares of Common Stock 
issued to acquire Expert were "restricted securities" under Rule 144 
of the Securities Act of 1933, as amended.

JMR Distributors, Inc. The Company acquired all of the outstanding 
common stock of JMR Distributors, Inc. in October 1995 in an exchange for 
100,000 shares of Common Stock, which were "restricted securities" 
under Rule 144 of the Securities Act of 1933, as amended. 
JMR Distributors operates out of a single 1,800 square foot facility 
in Lorton, Virginia and is a contract manufacturer and wholesale 
distributor of proprietary and generic memory products for computers, 
plotters, laser printers, process controllers and other computer related 
industry devices; an assembler and seller of custom computer 
workstations and servers. JMR Distributors also sells network 
products and accessories manufactured by Linksys Group. JMR 
Distributor's products are marketed in North America to computer 
resellers and dealers. 

Although memory prices and profit margins have declined 
Dramatically over the past two years, JMR Distributors 
was able to increase its revenue rate compared with fiscal 
year 1996.  This was accomplished by JMR Distributors increasing 
its customer base and emphasizing quality products and 
customer service.

JMR Distributors will move to a larger facility in the first quarter 
of calendar year 1998 to accommodate the expansion of its production 
capabilities for memory modules and custom computer workstations 
and servers.  As of the date of this Report, JMR Distributors has an
agreement in principle to move its operations to an office, production 
and warehouse facility of approximately 18,000 square feet in 
Sterling, Virginia, a suburb of Washington, D.C.

MVS Modular Vision Systems, Inc. ("MVS"), a Canadian 
corporation, was acquired on November 1, 1994 by the Company 
through an exchange of securities. The shares of Common 
Stock issued in the exchange were "restricted securities" 
under Rule 144 of the Securities Act of 1933, as amended.  
MVS designs, develops, manufactures and markets state-of-
the-art, proprietary vision-based robotic and sensor products 
and systems for productivity improvement and quality control
applications in the manufacturing workplace.  MVS is based 
in a single facility of approximately 14,000 square feet in 
Montreal, Quebec, Canada.

The primary component of MVS' products and systems is its 
three-dimensional camera and laser vision inspection technology. 
This technology utilizes specialized cameras, lasers, optics and 
custom-designed high-speed processing hardware and software for 
inspection, measurement and motion control in industrial or 
manufacturing applications. MVS currently markets and 
sells one principal computer chip inspection scanner product 
and system: the MVS LaserVision QFP Lead Scanner (the "QFP Scanner"), 
and also markets and sells one principal sensor product and system: 
the MVS LaserVision Welding Sensor ("MVS Welding System"), which 
is used for weld inspection or ensuring that the welding device 
properly tracks the weld joint or seam. 

The QFP Scanner inspects Quad Flat Pack computer chips and 
during Fiscal Year 1997 was only purchased by a single corporate 
semiconductor manufacturer in Korea.  MVS is seeking other customers 
for the QFP Scanner in the Far East and North America, but
there can be no assurances that MVS will be able to broaden 
its customer base for the QFP Scanner.  Further, MVS believes that
 the product life for the QFP Scanner has peaked and that 
demand for the QFP Scanner will decrease over the next 
12 to 18 months.  

MVS is currently evaluating possible designs for a new 
inspection scanner that is capable of inspecting the new generation
 of computer chips that are being produced by semiconductor 
manufacturers, but there can be no assurances that MVS will attempt
 to, or will be able to, develop such a new inspection scanner, 
or that MVS will be able to successfully market and sell any such 
new generation of inspection scanners. MVS has not to produce a market 
ready version of an inspection scanner capable of inspecting the new 
generation of computer memory chips.  There can be no assurances that
 MVS will develop and sell a new generation of scanners or that any 
new generation of MVS scanners would be competitive with or successful 
in the marketplace.   In light of MVS' reliance on scanner sales to 
customers in Korea and Taiwan, and the possible effects of the current 
financial crisis in the Far East on future purchases of new equipment 
by Far East companies, MVS may be unable, even if it develops and 
sells a new generation of MVS scanners, to successfully establish 
a market for its new scanner in Fiscal Year 1998.  Traditionally, 
MVS has relied on both scanner and welding system sales to support 
its overhead and product development.  The potential loss of any 
scanner sales in Fiscal Year 1998 could have an adverse impact on 
MVS' financial condition and long-term business prospects.  The 
Company is monitoring this situation closely to curtail any 
further impact on MVS' financial performance in fiscal year 
1998.

The Company believes that its MVS LaserVision Welding Sensor is 
in the forefront of adaptive arc welding and gluing technology, 
automating welding machines, guiding robotic devices and improving 
quality and productivity.  MVS' sensors are successfully inspecting
 weld joint geometry, weld and glue beads, as well as guiding the 
welding machines for the manufacturing of a wide variety of parts 
from simple water heating tanks to jet engines and applications
 involving the welding of door and roof components for automobiles.  
The Company offers its sensor products and systems for approximately 
$50,000 and $140,000, each depending on the complexity and 
configuration of the system.

The Company believes that MVS' laser vision products have made 
significant improvements in the production capabilities and quality
 standards of the welding industry.  Some welding intensive
 manufacturing companies have placed repeat orders for MVS
 LaserVision Welding System.  As labor costs have continued 
to rise, and as global competition has required increased 
quality assurance (such as ISO 9000) and levels of productivity, 
 the incentives for manufacturers to adopt machine automation
 into their manufacturing processes have increased.  The welding
 industry is still a very traditional industry and the promotion 
of the MVS LaserVision Welding System requires significant 
customer education.  The financial incentives are, in the
 Company's opinion, motivating manufacturers to seriously 
consider automation, including the retrofit of their existing
 processes with vision control systems like the MVS LaserVision
 Welding System, if they are to remain competitive.

MVS initiated an effort in Fiscal Year 1997 to increase 
sales of its MVS LaserVision Welding Systems to the North 
American and European automobile industry and to their 
robotic and welding suppliers.  The Company believes that
such an effort will require an ongoing marketing and 
sales campaign to result in significant sales to this 
market segment.  In the fourth quarter of Fiscal Year 1997, 
MVS received an order from and delivered to Honda Engineering 
North America, Inc. for a MVS LaserVision post-weld 
inspection system, and MVS entered into an agreement 
with Automated Welding Systems, Inc.(AWS) to purchase a minimum of
$1 million in MVS LaserVision seam tracking systems over the course
of Fiscal Years 1997 and 1998.  AWS produces tailor welded blanks used in 
making car door inner panels, body door openings and 
other automotive components.  While the Company is 
encouraged by these orders in the automobile industry, 
but there can be no assurances that MVS will be able to
 successfully establish a market in the automobile industry
 for the MVS LaserVision Welding System.  

MVS successfully demonstrated an MVS LaserVision Welding
 System for Ford Motor Company in Fiscal Year 1997. The 
purchase order from Ford Motor Company for a MVS LaserVision
 Welding System is still pending.

Markets. The scanner market includes almost all computer 
memory chip manufacturers (e.g. Intel, Motorola,
 National Semiconductor, Hyundai, Samsung, Fujitsu) 
worldwide. As computer chips decrease in size and 
increase in complexity, an ever increasing demand 
is expected for machine vision based products to 
assure effective inspection as well as feedback
to the production equipment. The Company's principal
competitors on the worldwide scanner market are Robotic 
Vision Systems, Inc. ("RVSI"), and View Engineering, Inc. 
("View"), a subsidiary of Graphic Scanning Corporation. RVSI 
and View possess significantly greater resources than MVS and
have a significantly larger share of the worldwide 
market than MVS.  Further, RVSI and View have introduced new 
scanner models, which are designed to inspect the new generation
of computer memory chips, namely computer chips, which use ball
grid arrays of solder balls ("BGA") to connect to the computer
board.  The introduction of BGA-capable inspection scanners in 
the market provides RVSI and View with a significant marketing
advantage over MVS.

MVS LaserVision Welding System is marketed worldwide, but 
principally to corporate customers in North America and Europe.
Since May 1997, MVS has focused its sales effort for the MVS
LaserVision Welding System by relying on direct sales by in-
house salespersons for the North American market and relying 
on local distributors for sales in Europe.

Product Development. MVS is developing a marketable leadframe
inspection scanner for a customer in Hong Kong.  In Fiscal 
Year 1997, MVS identified a new measuring device, which 
appeared capable of providing the speeds and accuracy required
for a marketable leadframe inspection scanner.  As of the date
of this Report, MVS has not produced a market-ready leadframe
inspection scanner or "CMM", but, subject to the approval of
the customer, MVS intends to pursue the development of a 
marketable leadframe inspection scanner in Fiscal Year 1998. 
There are at least a dozen competitors who have launched 
comparable CMM products during 1996 and 1997 into a market 
that is both rapidly expanding and highly competitive.  
MVS has developed a prototype of the portable, hand-held
version of the MVS LaserVision Welding Inspection System. As
of the date of this Report, MVS does not have a market-ready 
version of this product. There can be no assurances 
that MVS will be able to produce a marketable leadframe 
inspection scanner or a portable LaserVision Welding 
Inspection System, or that either of these potential
products would be successful in the marketplace.


Manufacturing

The Company's principal production facilities relate 
to Socrates assembly of computer systems at its Largo,
Maryland facility, MVS' production facilities in Montreal,
Canada and JMR Distributors' assembly facilities at its 
Lorton, Virginia facility.

Since May 1997, MVS has increasingly contracted the production
of its components and assembly of the subsystems of its welding
systems and inspection scanners to a subcontractor in the 
Montreal area.  MVS believes that this subcontractor is capable 
of producing quality components and at a lower cost than MVS' 
in-house production operation.  MVS still assembles and tests 
the vision components of each inspection scanner and welding 
system in its Montreal facility. 

Marketing and Sales

Socrates, Expert, and JMR Distributors rely heavily on an in-
house direct sales force to sell their products.  In the fourth
quarter of Fiscal Year 1997, Socrates commenced an advertising
campaign in the local media for the greater Washington, D.C. 
metropolitan area.   Socrates intends to continue and expand
its use of various forms of print and electronic advertising
in Fiscal Year 1998 to complement its direct sales force.  
Socrates is unsure at this time about the impact of such 
additional advertising, if any, on its sales.

Technet relies heavily on the sales efforts of its key 
personnel to market and sell its services.  MVSI personnel 
started to assist Technet in the direct marketing of its Year
2000 conversion capabilities in the fourth quarter of Fiscal 
Year 1997.  MVSI intends to continue such assistance in Fiscal
Year 1998.

As a result of its limited and focused target market, MVS' 
marketing efforts rely heavily on direct sales methods by in-
house salespersons and distributors. The relatively high dollar
value of each lead scanner unit sold, combined with the
technically complex nature of the system, results in an 
in-depth and complex purchase decision process for the product. 
It also requires that sales representatives be trained extensively 
and have a thorough industry knowledge before they can become 
effective.  As a result, the selling cycle for MVS' products 
and systems is generally between six to nine months from initial
customer contact. A lengthy purchase process is often the 
case in the purchase of the initial unit of a particular 
product or system sold by MVS. Subsequent purchases require 
less time and may result in multiple orders.  MVS uses live
demonstrations of its products at prospective customers' 
facilities or at MVS' Montreal facilities as part of its 
sales effort.


Industry Segment Information and Major Customers

For purposes of segment reporting for the year ended 
September 30, 1997, management considers the Company to 
operate in three industry segments: the computer product
integration and distribution industry, the software development
industry and the machine vision industry.  For the year ended 
September 30, 1996, management considered the Company to operate
in only two industry segments, the machine vision industry and
the computer product integration and distribution business.

For the year ended September 30, 1997, the Company had one 
customer, which accounted for approximately 21% of its total
revenue. For the year ended September 30, 1996, the Company
had one customer, which accounted for approximately 10 percent
of its total revenue.   In addition, approximately, 15% and 19%
of the Company's sales in fiscal years 1997 and 1996, respectively,
were to customers outside North America.  A substantial portion 
of the Company's sales outside North America were to customers in
Asia, principally Korea.  The financial crisis currently being
experienced in this region has had and may have in the future a 
negative impact on the Company's ability to obtain orders from
customers in this region.  However, this impact cannot be 
estimated at this time. 
 
The Company believes that none of its business segments is dependent
upon a single customer or a few customers, the loss of which 
would have a material adverse effect on the Company's results 
of operations.

Financial information relating to the Company's industry segments and 
a breakdown of the Company's sales by geographic region are 
detailed in Note K in the accompanying consolidated 
financial statements and are incorporated herein. 


Sources of Supply and Backlog

The raw materials and components used in the development and 
manufacture of MVS' products and systems are generally available
from domestic suppliers at competitive prices; fabrication of 
certain major components is subcontracted for on an as-needed 
basis. In 1997, MVS entered into an agreement with a third 
party contract manufacturer whereby the third party will 
manufacture certain products for the Company.  The same 
company had previously manufactured certain sub-components
for MVS.  MVS has not experienced any significant difficulty
in obtaining adequate supplies and equipment to perform under
its purchase orders and agreements. 

MVS also purchases certain computer components, used in their
products and systems, from both Socrates and JMR Distributors.
Furthermore, Socrates purchases certain memory modules used 
in its computer systems directly from JMR Distributors and 
Expert.  

All materials and components used by Socrates, Expert and JMR 
Distributors are available from numerous sources of supply.  
The Company does not foresee any shortage of these materials.

For the year ended September 30, 1997, the Company's backlog 
was approximately $1 million. The Company's computer integration
and distribution businesses have historically operated with limited
backlog as products are typically shipped shortly after orders are
received. The Company does not believe that its backlog at any 
specific time is necessarily indicative of its future business. 


Customer Service and Support

The Company warrants certain products and systems for 12 months
and provides technical personnel on-site, if required, during
the warranty period. The Company, however, endeavors to complete
warranty service repairs at its own facilities in order to minimize
costs.  To date, warranty costs, which are accrued by the Company 
at the time of sale, have not been material.


Patent, Trademark, Copyright and Proprietary Rights

Neither Socrates, Expert, JMR Distributors nor Technet has 
Filed any patents or possesses any technologies or other intellectual
property which they believe require or qualify for patent protection.


MVS is a non-exclusive worldwide licensee of the patented welding 
sensor technology owned by the National Research Council of Canada
("NRC"). The welding sensor is patented (16 claims) in Canada and
the U.S. (U.S. Patent No. 4,859,829, August 22, 1989) and patents
are pending in Japan and Western Europe. MVS entered into the
license agreement with NRC in June 1987 and the agreement expires
upon the expiration of the patent in August 2006. The license 
agreement requires a minimum annual royalty payment to NRC of 
$20,000 per year and three percent of sales of products 
incorporating the patent. 

On April 11, 1995, the Company was issued a patent (U.S. Patent 
No. 5,406,372) for its lead inspection system for inspecting 
parameters of leads on quad flat-pack (QFP) computer chip 
packages.

U.S. and international patents are pending for the 17 claims
on the robotic guidance technology applicable to the articulated
arm robot invented by a research team at the University of 
Waterloo. The exclusive worldwide licensee of the technology
is Manufacturing Research Corporation of Ontario ("MRCO") 
and the Company is the worldwide sub-licensee of the technology.
The Company entered into the sub-license agreement with MRCO 
in February 1994 and the agreement expires in February 2004. 
The sub-license agreement requires a minimum annual royalty 
of $20,000 per year and five percent of sales of products 
incorporating the technology, plus a two percent royalty on 
any sales under OEM (original equipment manufacturer) contracts. 

As a general policy, MVS does not patent its vision processing 
technology as a result of the fast evolution of the relevant 
electronic circuitry.  Properly packaged with software kernel,
imaging routines and user manuals, these processors are a product. 
MVS may decide, at a later stage, to market these high performance 
processors to the general machine vision market. In this case, 
some of the key technology may be patented. The rejection by 
regulatory authorities of MVS' proposed patents, trademark and
copyright applications may have a material adverse impact on 
MVS' business. 

Except as may be required by the filing of patent, trademark and
copyright applications, the Company will attempt to keep all 
other proprietary information secret and to take such actions 
as may be necessary to insure that the results of its development
activities are not disclosed and are protected under the common
law concerning trade secrets. Such steps will include the 
execution of nondisclosure agreements by key Company personnel
and may also include the imposition of restrictive agreements 
on purchasers of the Company's products and systems. There is 
no assurance that the execution of such agreements will be 
effective to protect the Company, that the Company will be able
to enforce the provisions of such nondisclosure agreements or
that technology and other information acquired by the Company
pursuant to its development activities will be deemed to 
constitute trade secrets by any court of competent jurisdiction.


Competition

The Company believes that there are other companies, many of 
which are substantially larger and have substantially greater 
assets and resources than the Company, engaged in the development
of technology, products and services and which may be highly 
competitive with those of the Company, within each industry the
Company competes in. Almost all of the companies with which 
the Company intends to compete are substantially larger and have
substantially greater resources than the Company. It is also 
likely that other competitors will emerge in the future. Since
the Company will compete with companies that have greater market
recognition and broader capabilities than the Company, there 
can be no assurance that the Company or its operating subsidiaries will 
be able to successfully compete in the marketplace or will be able to achieve 
success in any of the business endeavors described herein.


Employees

At the year ended September 30, 1997, the Company employed 
approximately 120 persons, all of whom were full-time employees.
Of these full-time employees, approximately 25 were engaged in 
management, administration and finance, 55 in development, production 
and manufacturing and 40 in marketing, training and sales.

The Company believes that its future success will depend in large 
part upon its continued ability to recruit and retain highly 
qualified technical personnel. Competition for highly qualified
technical personnel is significant, particularly in the geographic 
areas in which the Company's operations are located. The Company
has never experienced a work stoppage and none of its employees
is represented by a labor organization. Management of the Company
considers its relationship with its employees to be good.


Forward-Looking and Cautionary Statements

The Company and its representatives may from time to time make 
written or oral forward-looking statements, including statements
contained in the Company's filings with the Securities and 
Exchange Commission and in its reports to stockholders.  In
connection with the "safe harbor" provisions Company of the 
Private Securities Litigation Reform Act of 1995, the Company 
is hereby identifying important factors that could cause actual
results to differ materially from those contained in any forward-
looking statement made by or on behalf of the Company; any such 
statement is qualified by reference to the following cautionary
statements.

The Company's operating results could be affected by a number of 
factors.  They include the availability and cost of components, 
an unexpected inability to manage expenses relative to sales growth, 
and an inability to anticipate downward price pressures by customers
using our products and services. Also, there is the potential 
problem of competing with companies having significantly greater 
financial, technical, and market resources than the Company. The Company's 
business lines are subject to a variety of additional risks that could
materially adversely affect quarterly and annual operating results, including
market acceptance of new or existing products, services or technologies.

A significant percentage of the Company's sales to major customers 
historically have occurred in the last month of a quarter.  
Changes in purchasing patterns by one or more of the Company's
major customers, and the inability of the Company to anticipate
in advance the mix of customer orders and its ability to ship 
the necessary quantities of product near the end of a fiscal 
quarter, could result in material fluctuations in quarterly 
operating results.

The Company participates in competitive industries marked by
changing technology, which could result in volatility of the
Company's common stock price.  Additionally, any shortfall in
revenue or earnings from the levels expected by securities 
analysts could have an immediate and significant effect on the
trading price of the Company's common stock in any given period. 
Moreover, it is possible the Company may not learn of such shortfalls 
until late in the fiscal quarter, which could result in an even more
immediate and adverse effect on the trading price of the Company's
stock.


Subsequent Events

Redemption of Outstanding Class A and Class B Warrants.  By notice 
of redemption, dated November 14, 1997, the Company called all of 
its outstanding Class A Warrants and Class B Warrants for redemption
for cash at 5:00 p.m., local time, on Monday, December 15, 1997 
(the "Redemption Date'), at a redemption price of $.05 per Class 
A Warrant and $.05 per Class B Warrant (the "Redemption Price"). 
After 5:00 p.m., local New York City time, on the Redemption Date,
the only right of any holders of a Class A Warrant or Class B Warrant
who did not timely exercise, or, in the case of the Class A Warrant
holder, timely trade the warrant, was to receive the Redemption Price
for each warrant properly tendered to American Stock Transfer & 
Trust Company, the Warrant Agent for the warrants.

The following table summarizes the results of the exercise of
warrants and the redemption of warrants pursuant to the Company's 
call for the redemption of all outstanding warrants for $.05 
cash per warrant.  The following information was provided to
the Company by its Warrant Agent.
 
         WARRANTS AVAILABLE               WARRANTS        PROCEEDS
            FOR EXERCISE                 EXERCISED       TO COMPANY


5,125,000 Class A Warrants               5,086,928      $20,347,712
1,000,000 Class B Warrants               1,000,000        4,200,000
                                                        -----------
Gross Proceeds to Company:                              $24,547,712
Less Company open market repurchases
   and exercise 683,654 Class A Warrants               ($ 4,333,437)  
                                                        -----------
Net Proceeds to Company from exercise of
   Class A and Class B Warrants                         $20,214,275 (1)


(1)  Net proceeds does not reflect $2,011,427 spent by the 
     Company to purchase 306,800 shares of Common Stock in open 
     market repurchases during the warrant redemption period and 
     pursuant to the Company's previously announced stock repurchase
     program.  If this expenditure was reflected above, Net 
     Proceeds to the Company would be $18,202,848.

The Company intends to use the net proceeds from the exercise 
of the warrants for general working capital purposes, including 
funding software support and development; marketing 
and sales efforts;  the acquisition of capital equipment; 
stock repurchases; and possible future acquisitions, strategic 
alliances and internal expansion, including the growth 
of management and employee payroll.

Status of Underwriters' Purchase Option. Pursuant to the
Company's initial public offering in August 1995, the 
lead underwriter, Stratton Oakmont, Inc. of Lake Success,
 New York (the "IPO Underwriter"), was issued an Underwriters'
 Purchase Option to purchase 180,000 of the Company's 
Units, each Unit consisting of two (2) shares of Common 
Stock and two Class A Warrants, which Units have not 
been exercised as of the date of this Prospectus. 

The IPO Underwriter was expelled from the securities 
industry by the National Association of Securities 
Dealers, Inc. ("NASD") on December 5, 1996.  On or 
about January 24, 1997, the IPO Underwriter sought 
protection from creditors by filing a petition under 
Chapter XI of the U.S. Bankruptcy Code (Case Number 97-40501)
(the "Bankruptcy Case") in the United States Bankruptcy Court
for the Southern District of New York (Manhattan Division) 
(the "Bankruptcy Court").  Subsequent to the filing of the 
petition, the Bankruptcy Court approved a motion by the 
Securities Investor Protection Corporation to appoint a 
Trustee for the IPO Underwriter in the Bankruptcy Case to
liquidate certain of the IPO Underwriters' assets under 
the Securities Investor Protection Act of 1970 and U.S. 
Bankruptcy.

As a result of the aforementioned and pending bankruptcy
proceedings involving the IPO Underwriter, and the assertion
of third party ownership claims to the Underwriters' Purchase
Option, the Company is uncertain about the current ownership
of the Underwriters' Purchase Option and believes that the U.S.
Bankruptcy Code prevents the redemption of the Class A Warrants
underlying the Underwriters' Purchase Option at this time.  
Therefore, the Company is uncertain as of the date of this Report
when and if it would be able to redeem the Class A Warrants 
underlying the Underwriters' Purchase Option. On November 11, 
1997, the Company sent a letter to the Trustee for the Bankruptcy 
Case, to notify the Trustee of the existence of the Underwriters'
Purchase Option.  In December 1997, the Trustee sent the Company 
a written request for surrender of the original Underwriters' Purchase 
Option and related documents to the Trustee.  The Company intends to 
comply with the Trustee's request. Once the legal ownership is 
determined, the owner could decide to exercise the Underwriters'
Purchase Option by paying the Company $11.55 per Unit, 
aggregating $2,079,000 plus an additional $4.00 per share of 
Common Stock that would be issued in lieu of the 360,000 Class 
A Warrants underlying the Underwriters' Purchase Option, which
entitlement to purchase would remain effective 
until August 14, 2000. 


Item 2.  Description of Properties.

The Company leases approximately 1,600 square feet for its
principal executive offices located in Vienna, Virginia.
Base rental for the office space is approximately $2,600 
per month.

MVS leases approximately 14,000 square feet for its MVS Canadian
development and manufacturing facilities located in Montreal,
Quebec, Canada, under a lease, which extends through May 1999.
MVS operates at approximately 60 percent of capacity.  Base 
rental for the premises is approximately $5,000 per month.  
The lease requires the Company to pay certain property taxes
and certain operating expenses.

JMR Distributors leases approximately 1,800 square feet for 
its distribution facilities located in Lorton, Virginia.
Base rental for the premises is approximately $1,200 per 
month.

Socrates leases approximately 35,000 square feet of space
for its computer integration, distribution and training 
facilities located in Largo, Maryland.  Base rent for the 
space is approximately $11,600 per month.  The lease agreement,
which expires in 2002, includes rent escalations and requires
Socrates to pay certain operating expenses.  In addition, 
Socrates also leases approximately 8,000 square feet in the
aggregate of space for its facilities in Gaithersburg, 
Maryland; West Chester, Pennsylvania; and Newport News, 
Virginia under leases that expire in 1998 and 1999.  
Base rent for these facilities is approximately $7,500 
per month in the aggregate and requires the Company to 
pay certain operating expenses.

Expert leases approximately 4,000 square feet of space 
for its computer integration and distribution facilities
located in Fresh Meadows, New York.  Base rent for the 
space is approximately $2,400 per month.  The lease agreement,
which expires in May 1999, includes rent escalations and
requires the Company to pay certain operating expenses. 

Technet leases approximately 1,400 square feet of space 
for its software development business, located at 8133 Leesburg
Pike, Vienna, Virginia 22182, in space adjacent to the 
Company's headquarters office space.  Base rent for the
space is approximately $1,600 per month.  The lease
agreement, which expires in August 1998, includes rent
escalations and requires Technet to pay certain operating 
expenses.  Technet also leases approximately 2,000 square
feet of space in Iselin, New Jersey, with a base rent of 
$3,000, which lease expires in April 1998.

The Company believes that its current and anticipated facilities
are suitable and adequate for its operations.


Item 3.  Legal Proceedings.

In the ordinary course of conducting business, the Company
is subject, from time to time, to certain legal proceedings
concerning the Company's business.  Management does not
believe that any current legal proceedings will have a
material impact on the Company's business or its financial
statements.


Item 4.  Submission of Matters to a Vote of Security Holders.

None. 


Item 5.  Market for Common Equity and Related Stockholder Matters.


The Common Stock and Class A Warrants were traded on the Nasdaq 
SmallCap Market System from August 14, 1995 until May 1, 1997,
under the symbols "MVSI" and "MVSIW", respectively.  Since May 2,
1997, the Company's Common Stock has traded on the Nasdaq National
Market System under the symbol "MVSI" and ceased to be traded on the
Nasdaq SmallCap Market.   The Class A Warrants were traded on the
Nasdaq National Market System under the symbol "MVSIW" until 4:00
p.m., local New York City time, on December 15, 1997 (See "Subsequent
Events" above for information about the redemption of the Class A 
Warrants).  On December 29, 1997, the closing price of the Common 
Stock was $ 6.06 per share.  There are approximately 3,000 shareholders
of the Company's Common Stock, as last reported.  The following table 
sets forth the range of high and low trading prices for the Common 
Stock, as reported by The Nasdaq Stock Market, for the fiscal periods
indicated through December 29, 1997.

                                         High         Low

Fiscal Year 1996
   First fiscal quarter                  $8.38       $3.88
   Second fiscal quarter                 $7.38       $4.00
   Third fiscal quarter                  $9.75       $6.88
   Fourth fiscal quarter                $15.63       $8.00
Fiscal year 1997
   First fiscal quarter                 $10.88       $2.75
   Second fiscal quarter                 $6.06       $2.75
   Third fiscal quarter                  $6.13       $2.66
   Fourth fiscal quarter                 $7.69       $4.06
Fiscal year 1998
   First fiscal quarter, 
   through December 29, 1997             $9.06       $5.00


Holders of the Company's Common Stock are entitled to dividends when, 
as and if declared by the Board of Directors out of funds legally 
available therefor.  The Company does not anticipate the 
declaration or payment of any dividends in the foreseeable future.
The Company intends to retain earnings, if any, to finance the 
development and expansion of its business.  Future dividend 
policy will be subject to the discretion of the Board of Directors
and will be contingent upon future earnings, if any, the Company's
financial condition, capital requirements, general business
conditions and other factors.  Therefore, there can be no assurance
that any dividends of any kind will ever be paid by the Company.


Item 6.  Management's Discussion and Analysis of Financial 
         Condition and Results of Operations.

The following discussion and analysis of the Company's historical results
of operations and of its liquidity and capital resources should be 
read in conjunction with the Company's consolidated financial statements
and accompanying notes.

Moreover, this Management's Discussion and Analysis of Financial 
Condition and Results of Operations contains forward-looking 
statements concerning the Company's business and operations.   
Such statements involve risks and uncertainties that could 
cause actual results to differ due to a variety of risk factors
set forth herein and from time to time in the Company's filings
with the Securities and Exchange Commission.

Overview

Fiscal year 1997 was a year of significant achievement for 
MVSI, Inc.   The Company was faced with substantial challenges, 
both operationally and in the investment community, during 
1997, and despite a fourth quarter financial downturn, 
emerged a financially stronger company.  As a result of the 
Company's recently completed warrant redemption program, the
Company received net proceeds of approximately $20.2 million
in cash placing the Company in a strong financial position 
entering 1998.

Fiscal year 1997 was also marked by the successful completion of
the Company's move of its securities from the Nasdaq SmallCap 
Market to the Nasdaq National Market, the acquisitions of Expert,
Inc. and Technet Computer Services, Inc., and the opening of
Socrates' new 35,000 square foot state-of-the-art information 
technology center.  

The Company also initiated efforts in the fourth quarter of fiscal
year 1997 to build a coordinated information technologies 
capability to capitalize on the expertise of each company and
to better serve the Company's existing and prospective 
corporate and government customers.  Additionally, the Company
began implementing a strategic plan aimed at returning the 
Company's Canadian operations to profitability, to include 
reducing indirect staff levels, outsourcing certain manufacturing
operations and redirecting sales and marketing efforts toward
more profitable product lines.  As a result of these actions,
substantial investments were made in the Company's expansion,
diversification and upgrading of its products and personnel to 
solidly position the Company for its next stage of growth.

The Company's diversification and expansion has also presented 
substantial opportunities in software development and application,
to include Year 2000 conversion, training programs in 
information technology and new applications for the Company's
proprietary laser vision systems technology. The Company enters
1998 with the resources necessary to leverage these opportunities
and carry out its business plan, although no assurances can be 
given as to the Company achieving such success.


Results of Operations

    Year ended September 30, 1997 Compared to Year ended
       September 30, 1996

The Company reported an increase in sales of $23,898,204 or 149% 
to $39,885,840 for the year ended September 30, 1997 as compared 
to the same period in fiscal 1996.  The increase in sales is 
attributable to the Company's current year acquisitions of Expert 
(computer integration and distribution) and Technet (software 
development), as well as the inclusion of a full year of sales 
for Socrates, which was acquired in the fourth quarter of fiscal 
1996. Despite the increase in sales, the Company was impacted in
the fourth quarter of Fiscal Year 1997 by the lack of MVS machine
vision scanner sales and the temporary reduction in sales and 
increase in expenses due to Socrates' move to its new 35,000 
square foot facility in Largo, Maryland.

The gross margins of the Company decreased to 16% from 22%, for 
the year ended September 30, 1997, principally as a result of 
relatively lower gross profit margins in the Company's computer integration
and distribution businesses.  These lower profit margins have also been
impacted by the continued decline in worldwide memory chip prices over
the past two years.  Additionally, the gross margins for the Company's laser
machine vision business have declined approximately 15% from the previous
year as a result of a rises in product component costs, market price
pressures and product mix.

For the year ended September 30, 1997, selling expenses increased
by $1,186,700 (139%) to $2,040,277, primarily as a result of 
additional sales staff hired at MVS and the Company's current
year acquisitions of Expert (computer integration and 
distribution) and Technet (software development), as well
as the inclusion of a full year of selling expenses for 
Socrates, which was acquired in the fourth quarter of 
fiscal 1996.  Administrative expenses increased $938,816 
(37%) to $3,471,153 for the fiscal year 1997, as a result 
of increased salary expenses associated with the Company's
year acquisitions, as well as an increase in the Company's
overall level of operations. 

Research and development expenditures, shown net of Canadian 
tax credits, increased by $466,432 to $582,608 for the year 
ended September 30, 1997, primarily due to the Company's 
increased efforts in developing new and improved products 
and a reduction in the amount of software development 
expenditures eligible to be capitalized subsequent to the
Company achieving technological feasibility on certain 
software development efforts. Management began amortizing
certain capitalized software costs in fiscal 1997 upon 
release of certain of the associated products.  Depreciation
and amortization expenses for the year ended September 30,
1997, increased by $579,449 to $777,263 as a direct result
of an increase in depreciable assets from the Company's 
acquisitions of Expert and Socrates and the resulting goodwill
amortization recorded subsequent to the acquisitions.  
For acquisitions completed to date, future annual goodwill
amortization will be approximately $610,000.

Interest income, net of interest expense and financing charges,
decreased by $190,309 from $422,839 to $232,530 for the year
ended September 30, 1997.  The decrease is primarily
attributable to a reduction in interest income due to a
decreasing balance in the Company's short-term U.S. Treasury
mutual fund investments coupled with a related increase in
margin loan interest. Both periods reflect interest on line
of credit borrowings, and shareholder loans.

The Company has net operating loss carryforwards and research
expenditure available to offset future taxable income generated 
in Canada totaling approximately $8,000,000 at September 30, 1997, 
expiring in 2010 and investment tax credits of $1,350,000 
available as a direct offset to taxes payable in the future.  
In addition, the Company has net operating loss carryforwards 
available to offset U.S. taxable income of approximately
$600,000 at September 30, 1997, expiring in 2011.  Future use of
these net operating loss carryforwards was not affected by the
Company's acquisitions during fiscal years 1996 and 1997.
However, in the event a change in control occurs in the future,
use of all or a portion of the U.S. carryforwards could be 
affected.  The Company does not believe that the December 1997 
warrant redemption will materially affect the ability to use 
U.S. carryforwards in the future.

As of September 30, 1997, the Company has recorded net deferred
tax assets totaling approximately $1,655,000 consisting of $889,000
relating to tax benefits derived from the Company's operations 
based in Canada and $766,000 relating to tax benefit derived 
from the Company's operation in the United States. Recoverability
of this asset is dependent upon the Company generated future taxable
income in both Canada and the United States.  Critical to recovering
the Canadian portion of the deferred tax benefits is the successful
implementation of a plan aimed at returning the Canadian operations
to profitability.  Key elements of this plan center on reducing 
indirect staff levels, successfully outsourcing certain manufacturing
operations, and redirect sales and marketing efforts toward more 
profitable product lines.  In the event this plan is unsuccessful
in generating future taxable income, a write down of this asset 
may be necessary. The Company will review the valuation allowance 
quarterly to determine the future realizability of these deferred 
tax assets.

The Company's fourth quarter 1997 operations reflect certain 
adjustments to revise prior estimates associated with cost of
sales of the Company's computer integration and distribution
businesses of approximately $200,000, and to revise the provision
for income taxes estimated for each interim period, the result
being an increase in income tax expense by approximately $300,000.
In addition, the Company recorded changes of approximately 
$300,000 to adjust inventories of its machine business to
net realizable value.  The effect of these items was to reduce 
net income for the fourth quarter by $800,000 or $.07 per share.

Net income for the year ended September 30, 1997 was $109,546 or 
$0.01 per share, as compared to net income of $1,012,764 or $0.11 
per share (primary EPS) and $0.09 per share (fully diluted EPS) 
for the year ended September 30, 1996.


     Year ended September 30, 1996 Compared to Year ended
        September 30, 1995

The Company reported an increase in sales of $13,649,839 or 
584% to $15,987,636 for the year ended September 30, 1996 
as compared to the same period in fiscal 1995.  The increase 
in sales is attributable to the Company's two acquisitions 
(JMR Distributors and Socrates) in the computer distribution
and reselling business, as well as an almost doubling of 
revenue of the Company's laser machine vision products and 
systems.

The gross margin of the Company decreased to 22% for the year 
ended September 30, 1996, principally as a result of relatively
lower gross profit margins in the Company's computer distribution 
and reselling businesses.  These lower profit margins have also 
been impacted by a decrease in excess of 75% in worldwide memory
chip prices since September 30, 1995.


For the year ended September 30, 1996, selling expenses increased
by $367,582 (76%) to $853,577, primarily as a result of additional
sales staff hired at MVS and the Company's acquisitions of JMR 
and Socrates.  Administrative expenses increased $1,417,042 
(127%) to $2,532,337 for the fiscal year 1996, as a result of
increased salary expenses associated with employment agreements 
for three officers which became effective February 1, 1995, as 
well as an increase in the Company's overall level of operations
and the acquisitions of JMR and Socrates.

Research and development expenditures, shown net of Canadian tax 
credits, decreased by $1,069,876 to $116,176 for the year ended 
September 30, 1996, primarily due to the Company's products 
maturing necessitating less research and development.  In addition, 
subsequent to the Company achieving technological feasibility on 
several software development efforts late in fiscal 1995, the 
Company began capitalizing labor costs associated with these efforts.  
Management expects to begin amortizing such costs in fiscal 1997 
upon release of the associated products.  Depreciation and 
amortization expenses for the year ended September 30, 1996, 
increased by $176,976 to $197,814 as a direct result of an 
increase in depreciable assets from the Company's acquisitions 
of JMR and Socrates and the resulting goodwill amortization 
recorded subsequent to the acquisitions.

Interest income and expense and financing charges decreased 
by $3,927,001 from $3,504,162 for the year ended September 30, 
1996.  The decrease is primarily attributable to a reduction of
$3,500,000 in interest expense from the previous fiscal year
relating to the issuance of bridge units as additional 
consideration for a $500,000 bridge loan originating in
June 1995.  Additionally, the 1996 year includes interest
income (net of margin loan interest) resulting from the
Company investing the proceeds from its initial public 
offering in August 1995.  Both periods reflect interest 
on line of credit borrowings.

As of September 30, 1995, the Company had established a 100% 
valuation allowance against the tax benefits related to these
carryforwards due to the realizability of the tax benefits
being uncertain. During fiscal year 1996, management reevaluated
the valuation allowance resulting in the recording of a 
deferred tax asset (benefit) of $786,430. Additionally, in
connection with the acquisition of Socrates, Inc., a $372,000 
deferred tax asset (benefit) was recorded as a reduction of 
goodwill. Factors considered by the Company in this reevaluation
included the Company's year-to-date earnings, exclusive of
non-recurring expenses and adjustments, as well as anticipated 
future earnings based on increased product demand, primarily 
attributable to the awarding of significant new contracts and
orders which will be completed in fiscal year 1997.  After 
recording the deferred tax asset (benefit), the Company continues
to carry a valuation allowance approximating 67% of the deferred
tax assets.  
 
The Company's fourth quarter 1996 operations were negatively 
impacted by charges incurred in restructuring the Company's 
Canadian operations.  Management determined the organizational 
restructuring to be necessary in order for the Company to further
strengthen its position in the worldwide market of laser-based
machine vision products, and to ensure continued profitability
in the future.  The restructuring included the hiring of a new
management team in operations, finance and sales and marketing,
and the implementation of a revised business plan.  Management's
objective is to improve product quality, expand product lines,
increase sales and marketing efforts and revise existing cost
structures.  The Company believes these efforts will further
enhance the Company's state-of-the-art proprietary laser
technology and allow the Company to better capitalize on
the rapidly growing machine vision market.  The impact of
the changes incurred, in addition to certain fourth-quarter
adjustments made to establish an accounts receivable reserve
and write-off non-recoverable travel and installation costs,
can be seen in the accompanying statement of operations as an
increase in operating expenses and a sizable reduction in
sales growth during the quarter.  The effect of these items
was to reduce net income for the fourth quarter by approximately
$650,000 ($0.05 per share).


Net income for the year ended September 30, 1996 was $1,012,764
or $0.11 per share (primary EPS) and $0.09 per share (fully 
diluted EPS), as compared to a net loss of $(5,481,453) or
$(1.10) per share for the year ended September 30, 1995.


Capital Resources, Liquidity and Backlog

As of September 30, 1997, the Company had working capital of 
$7,657,175 compared to $9,562,778 as of September 30, 1996.  
The Company's fiscal year 1996 (JMR Distributors and Socrates)
and 1997 (Expert and Technet) acquisitions and future expansion
of the Company's laser vision business, including continual 
software development, require sufficient working capital to 
finance increases in inventory and accounts receivable comparable
to or greater than the increase experienced in the year ended 
September 30, 1997 (see Consolidated Statements of Cash Flows).  
With the enhanced liquidity of the Company as a result of the 
December 1997 Warrant Redemption, which netted the Company
approximately $20,200,000 in cash, the Company believes that
existing cash and cash equivalents on hand and investments 
will be sufficient to meet the Company's working capital and 
other financing requirements for the foreseeable future (See 
"Subsequent Events - Redemption of Outstanding Class A and 
Class B Warrants" above).  The Company has no significant 
long-term debt outstanding as of September 30, 1997.


The Company increased its bank line of credit with a Canadian
bank, from $365,000 to $1,450,000 for support of its Canadian
operations temporary cash flow requirements, with interest
payable monthly at the prime rate plus .75% (prime was 5.50%
on September 30, 1997).  At September 30, 1997 and 1996, 
borrowings outstanding on the line of credit amounted to
$1,169,183 and $275,735, respectively.  Borrowings under 
the line are subject maintaining a borrowing base consisting 
of a qualifying portion of accounts receivable, investment 
tax credits and inventories. The line of credit is collateralized
by all present and future accounts receivable, Canadian tax
credits receivable and inventory and is guaranteed by MVSI,Inc.

The Company also maintains a credit agreement with a local
finance company for inventory financing for one of its 
subsidiaries.  The agreement provides the Company with the
ability to pay certain inventory balances (purchases) in 
scheduled interest-free installments.  Borrowings outstanding
under the agreement, at September 30, 1997 and 1996, amounted
to $208,082 and $824,238, respectively.  The agreement is
subject to annual renewal and is collateralized by all present
and future accounts receivable and inventory of the Company's
subsidiary and is guaranteed by MVSI,Inc.

Through September 30, 1995, the Company had borrowed $667,000
from a principal stockholder/officer (Edward Ratkovich) to
enable the Company to meet its on-going cash flow requirements.
These loans bear interest at 9% and are due on demand.  
During fiscal year 1996, the Company repaid $524,000 on the
loans to the stockholder from operating cash flow to 
partially repay these loans.  No repayments were made
during fiscal year 1997.  Total loans and accrued interest
outstanding at September 30, 1997 and 1996, total $239,089 
and $222,395, respectively.

Additionally, two other officers loaned subsidiaries, for which 
they are employed, amounts on an interest bearing, demand basis 
prior to being acquired by the Company.  At September 30, 1997,
the balance on these loans, including interest, was $50,000 and
$448,119, respectively.

In October 1996, the Company filed a Post-Effective Amendment 
Number 1 to the Company's Form SB-2 on Form S-3 Registration 
Statement.  The Post-Effective Amendment related to the 
continuing resale and conversion of the Company's Class A 
Warrants previously issued in connection with the Company's 
initial public offering.  The Class A Warrants became exercisable
on the effective date of the Post-Effective Amendment Number 1
filing.  Additionally, the Company filed a Post-Effective Amendment
Number 2 to the Form SB-2 on Form S-3 Registration Statement in
November 1997 to update the Company's original initial public
offering (IPO) Prospectus.  

In February 1997, the Company converted a $1.25 million note with
e-Net, Inc. to 250,000 shares of e-Net, Inc. common stock.
The 250,000 shares of e-Net common stock owned by MVSI 
(classified as marketable securities in the accompanying 
balance sheet) were registered as part of e-Net's initial 
public offering (IPO) and are restricted from sale for a 
12-month period from the date of e-Net's IPO (April 1997) but 
may be released for sale during the 12-month period with the 
consent of the Underwriter.

During the year ended September 30, 1997, the Company
repurchased 179,500 shares of outstanding MVSI common
stock (reflected as Treasury Stock in the accompanying
balance sheet) in open market and block transactions. 
The Company intends to continue to buy back additional
MVSI securities in open market or block transactions in
compliance with U.S. Securities and Exchange Commission
regulations.

At September 30, 1997, the Company's backlog was approximately
$1 million.  The Company does not believe that its backlog at
any specific time is necessarily indicative of its future 
business.


Impact of Inflation and Foreign Currency Exchange Rates

The Company does not believe that inflation has had a material
adverse effect on sales or income during the past several
years. Increases in supplies or other operating costs may
adversely affect the Company's operations; however, the 
Company believes it may increase prices of its products and
systems to offset increases in costs of goods sold or other
operating costs. 

A portion of the Company's operations through its Canadian 
subsidiary is transacted in Canadian dollars. The Company, 
however, reports its financial position, results of operations
and cash flows in U.S. dollars.  As a result, the Company 
believes that its exposure to foreign currency fluctuations
or deterioration is limited. 


Seasonality

Based on its experience to date, the Company believes that its 
future operating results may be subject to quarterly variations 
based on a variety of factors, including seasonal changes in the 
weather, especially in its Canadian operations. Such effects may 
not be apparent in the Company's operating results during a period 
of expansion. However, the Company can make no assurances that 
its business can be significantly expanded under any circumstances. 


Year 2000

Certain of the financial information systems used at the Company's 
subsidiaries are currently not Year 2000 compliant.  The Company 
expects to address these issues in 1998 as part of a Company-wide
management information system implementation.  Management believes 
the Company's operations do not pose complex systems needs and its 
financial information system requirements can be satisfied with 
"off-the-shelf" software which will not require significant 
customization.  The costs related to the system implementation
have not yet been quantified but are not believed to be significant.
In addition, with the recent acquisition of Technet Computer Services,
Inc., which possesses significant experience in helping its customers
deal with Year 2000 issues, management believes any Year 2000 issues 
can be effectively and efficiently dealt with.


Item 7: Financial Statements

MVSI, Inc., and Subsidiaries


Contents




Report of Independent Certified Public Accountants            20


Consolidated Financial Statements
Consolidated Balance Sheets                                   21
Consolidated Statements of Earnings                           22
Consolidated Statements of Stockholders' Equity               23
Consolidated Statements of Cash Flows                         24
Notes to Consolidated Financial Statements                    25-39




Report of Independent Certified Public Accountants

Board of Directors
MVSI, Inc., and Subsidiaries

We have audited the accompanying consolidated balance sheets of 
MVSI, Inc. and Subsidiaries as of September 30, 1997 and 1996,
and the related consolidated statements of earnings, 
stockholders' equity and cash flows for the years then ended.

These financial statements are the responsibility of the
Company's management.  Our responsibility is to express 
an opinion on these financial statements based on our 
audits.

We conducted our audits in accordance with generally 
accepted auditing standards.  Those standards require that    
we plan and perform the audit to obtain reasonable assurance 
about whether the financial statements are free of
material misstatement.  An audit includes examining, 
on a test basis, evidence supporting the amounts and 
disclosures in the financial Statements.  An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred 
to above present fairly, in all material respects, the financial 
position of MVSI, Inc. and Subsidiaries as of September 30, 
1997 and 1996, and the results of their operations and their 
cash flows for the years then ended, in conformity with generally
accepted accounting principles.


Vienna, Virginia
December 30, 1997


MVSI, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30,                                  1997            1996
                                           ----------      ----------
Assets
-------------------------------------
Current Assets
Cash and cash equivalents                  $1,704,724     $   313,890
Investments                                 2,833,931       5,881,202
Accounts receivable, 
  net of allowance for doubtful 
    accounts                                6,399,507       4,555,259
Note receivable                                    -          500,000
Inventory                                   3,619,030       2,612,539
Tax credits and income tax receivable         306,283         405,717
Prepaid expenses                              219,382         348,302
                                            ---------      ----------
Total Current Assets                       15,082,857      14,616,909

Property and Equipment, net                   984,290         383,518
Capitalized Software Costs                  1,723,138       1,164,182
Goodwill                                    5,641,582       2,735,638
Investment in Joint Venture                   262,413               -
Deferred Tax Assets                         1,655,471       1,158,430
Other Assets                                  141,082         101,692
                                            ---------       ---------         
                                          $25,490,833     $20,160,369
                                          ===========     ===========

Liabilities and Stockholders' Equity
-------------------------------------
Current Liabilities
Line of credit and financing arrangement  $ 1,397,943      $1,099,973
Accounts payable and accrued liabilities    5,290,531       3,731,763
Shareholder loans and interest                737,208         222,395
                                          -----------      ----------   
Total Current Liabilities                   7,425,682       5,054,131

Stockholders' Equity
Common stock, $.01 par value, 
50,000,000 shares authorized,
11,590,000 and 10,740,000 shares 
issued and outstanding, respectively          115,900         107,400
Stock subscription receivable                (150,000)       (150,000)
Additional paid-in capital                 24,599,441      20,577,566
Treasury stock, at cost, 179,500 
  and 0 shares respectively                  (572,660)              -  
Accumulated deficit                        (5,366,056)     (5,475,602)
Unrealized loss on investments 
   available for sale                        (205,182)        (59,786)
Cumulative translation adjustment            (356,292)        106,660
                                           ----------      ----------
Total Stockholders' Equity                 18,065,151      15,106,238
                                           ----------      ----------
                                          $25,490,833     $20,160,369
                                          ===========     ===========

The accompanying notes are an integral part of these statements.

MVSI, Inc. and Subsidiaries
Consolidated Statements of Earnings

Years ended September 30,                     1997            1996

Sales                                     $39,885,840      $15,987,636
Cost of Sales                              33,377,150       12,484,237
                                          -----------      -----------
Gross Profit                                6,508,690        3,503,399

Expenses
 Selling and Marketing                      2,040,277          853,577
 Administrative                             3,471,153        2,532,337
 Research and development, 
   net of tax credits                         582,608          116,176
 Depreciation and amortization                777,263          197,814
                                           ----------        ---------
                                            6,871,301        3,699,904

Loss from Operations                         (362,611)        (196,505)

Interest Income                               510,978           40,345
Interest and Financing Charges               (278,448)          (7,506)
Equity in earnings of joint venture            49,847                -
                                            ---------        ---------
Earnings (Loss) Before Income Taxes           (80,234)         226,334

Income Tax (Benefit) Provision 
 Current                                       82,649                - 
 Deferred                                    (272,429)        (786,430)
                                            ---------        ---------         
                                             (189,780)        (786,430)
                                            ---------        ---------
Net Earnings                                 $109,546       $1,012,764
                                            =========       ========== 

Earnings per Share                           $    .01       $     0.09
                                            =========       ==========

The accompanying notes are an integral part of these statements


MVSI, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)

                                      Common Stock            Stock 
                                   Shares      Amount      Subscription
                                                            Receivable
                                 ----------   ---------   -------------

Balance, October 1, 1995         10,140,000   $101,400      $(150,000)
Acquisition JMR
  Distributors                      100,000      1,000              -  
Acquisition Socrates, Inc.          350,000      3,500              -
Net Earnings                              -          -              -
Warrant Purchase                          -          -              -
Private Placement
  Transactions                      150,000      1,500              - 
Change in Cumulative 
  Translation  Adjustment                 -          -              -
Unrealized Gain (Loss) from
    Investments                           -          -              -       

Balance, September 30,1996       10,740,000    107,400       (150,000)

Acquisition - Expert, Inc.          300,000      3,000              -
Acquisition - Technet 
    Computer Services, Inc.         400,000      4,000              -
Net Earnings                              -          -              - 
Warrant Conversion                   15,000        150              -
Issuance of Common Stock            135,000      1,350              -
Purchase of Treasury Stock                -          -              -
Change in Cumulative 
     Transition Adjustment                -          -              -
Unrealized Gain (Loss) from 
     Investments                          -          -              -
                                 ----------   --------     ----------
Balance, September 30, 1997      11,590,000   $115,900      $(150,000)
                                 ==========   ========     ==========
 
(continued)
                                   Additional          Accumulated 
                                Paid In Capital         (Deficit)
                                ---------------        -----------

Balance, October 1,1995          17,085,475            (6,488,366)
Acquisition JMR 
  Distributors                      508,161                     -
Acquisition Socrates,
   Inc.                           2,385,250                     -
Net Earnings                              -             1,012,764
Warrant Purchase                        180                     -
Private Placement
   Transactions                     598,500                     - 
Change in Cumulative 
    Translation  Adjustment               -                     -
Unrealized Gain (Loss) from
    Investments                           -                     -

Balance, September 30,1996       20,577,566          $ (5,475,602)

Acquisition - Expert, Inc.        1,064,475                     -
Acquisition - Technet 
    Computer Services, Inc.       2,376,000                     -
Net Earnings                              -               109,546
Warrant Conversion                   59,850                     -
Issuance of Common Stock            521,550                     -
Purchase of Treasury Stock                -                     - 
Change in Cumulative 
     Transition Adjustment                -                     -
Unrealized Gain (Loss) from 
     Investments                          -                     -   

Balance, September 30,1997       24,599,441           $(5,366,056)


(continued)
                                                          Unrealized
                               Treasury Stock           Gain (Loss) on
                              Shares     Amount          Investments
                             -------------------        --------------

Balance, October 1, 1995          -           -                    -
Acquisition JMR
  Distributors                    -           -                    -
Acquisition Socrates,Inc.         -           -                    -
Net Earnings                      -           -                    -
Warrant Purchase                  -           -                    -
Private Placement
   Transactions                   -           -                    -
Change in Cumulative 
   Translation Adjustment         -           -                    -
Unrealized Gain (Loss) from
    Investments                   -           -              (59,786)

Balance, September 30,1996        -      $    -             $(59,786)

Acquisition - Expert, Inc.        -           -                    -
Acquisition - Technet 
    Computer Services, Inc.       -           -                    -
Net Earnings                      -           -                    -
Warrant Conversion                -           -                    -
Issuance of Common Stock          -           -                    -
Purchase of Treasury 
    Stock                  (179,500)   (572,660)                   -
Change in Cumulative 
     Transition Adjustment        -           -                    -
Unrealized Gain (Loss)from
     Investments                  -           -             (145,396)
                           --------   ----------            ---------
Balance, September 30,
      1997                 (179,500)   (572,660)            (205,182)
                           ========   ==========            =========

(continued)
                                     Cumulative               
                                    Translation
                                     Adjustment               TOTAL

Balance, October 1, 1995                 56,301           10,604,810
         
Acquisition JMR
  Distributors                                -              509,161
Acquisition Socrates, Inc.                    -            2,388,750
Net Earnings                                  -            1,012,764
Warrant Purchase                              -                  180
Private Placement
   Transactions                               -              600,000
Change in Cumulative 
    Translation Adjustment               50,359               50,359
Unrealized Gain (Loss) from
    Investments                               -              (59,786)
                                        
Balance, September 30, 1996           $ 106,660          $15,106,238

Acquisition - Expert, Inc.                    -            1,067,475
Acquisition - Technet 
    Computer Services, Inc.                   -            2,380,000
Net Earnings                                  -              109,546
Warrant Conversion                            -               60,000
Issuance of Common Stock                      -              522,900
Purchase of Treasury Stock                    -             (572,660)
Change in Cumulative 
     Transition Adjustment             (462,952)            (462,952)
Unrealized Gain (Loss) from 
     Investments                              -             (145,396)
                                      ---------            ---------  
Balance, September 30, 1997           $(356,292)         $18,065,151
                                      =========          ===========

MVSI, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years ended September 30,                                1997     1996

Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
Net income                                            $109,546  $1,012,764

Adjustments to reconcile net income to net 
   cash from operating activities
Deferred income taxes                                 (272,429)   (786,430)
Depreciation and amortization                          777,263     197,814
(Gain) loss on foreign exchange                              -     (50,359)
Unrealized (Gain) loss on investments                  145,396)     59,786
Equity in earnings of joint venture                    (49,847)          -
Changes in operating assets and liabilities, 
   net of effects of acquisitions
  (Increase) in accounts receivable                   (487,807) (1,112,781)
  (Increase) in inventory                              (95,703) (1,526,431)
   Decrease (increase) in tax credits and 
    income taxes receivable                            369,004     (95,952)
   Decrease (increase) in prepaid expenses              84,355    (115,414)
   Increase in other assets                            (17,528)    (16,964)
  (Decrease) in advance deposits                       131,666    (150,854)
  (Decrease) in accounts payable and 
    accrued liabilities                             (1,106,514)   (894,482)
                                                    -----------   --------- 
Net Cash (Used in) Operating Activities               (703,390) (3,479,303)
                                                    ----------   ---------
Cash Flows from Investing Activities
       Investment purchases                           (989,626)          -
Proceeds from sales and Borrowings 
     on margin against investments                   4,536,897   2,120,102
Property, plant and equipment purchases              (605,976)    (223,857)
Capitalized software costs                           (548,987)    (892,687)
Loan to acquired company and other                   (300,000)           - 
Investment in joint venture                          (216,396)           -
                                                    ---------    ----------
Net Cash Provided by Investing Activities           2,175,912      703,558
                                                    ---------    ----------  
Cash Flows from Financing Activities
   Net (decrease) increase in line of credit          317,053      609,374
   Proceeds from shareholder loans                     78,996            -
   Payment of shareholder loans                             -     (497,269)
   Payment of debt                                          -      (19,725)
Proceeds from issuance of common stock                522,900      600,000
Proceeds from exercise of warrant  s                   60,000          180
Purchase of treasury stock                           (572,660)           -
                                                    ---------    ---------
Net Cash Provided by Financing Activities             406,289      692,560
                                                    ---------    ---------

Effect of Exchange Rate Changes on Cash             (487,977)       54,039
                                                    ---------    ---------

Net Increase (Decrease) in Cash                    1,390,834    (2,029,146)
Cash at Beginning of Year                            313,890     2,343,036
                                                   ---------     ---------
Cash at End of Year                               $1,704,724      $313,890
                                                   ---------     ---------
Supplemental Disclosures:
Income Taxes Paid                                 $   85,434        --
Interest Paid                                        261,754       $80,220


MVSI, Inc., and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1997 and 1996

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Nature of Operations

The accompanying consolidated financial statements include the 
accounts of MVSI, Inc. (a Delaware corporation), and its five 
wholly owned subsidiaries, The Company has five wholly-
owned, operating subsidiaries: Socrates, Inc., a Maryland 
corporation, integrates, installs, supports, and provides 
training on high-end computer and communication equipment 
and is headquartered in Largo, Maryland. Technet Computer 
Services, Inc., a Virginia corporation, provides commercial 
software systems, customized software development, and software 
maintenance services to corporate and government customers and 
is headquartered in Vienna, Virginia. JMR Distributors, Inc., 
a Virginia corporation, specializes in the purchase and sale of 
computer memory chips and network equipment and is headquartered
in Lorton, Virginia. Expert, Inc., a New York corporation, 
assembles and markets proprietary and generic computer system 
products and services for advanced integration and networking 
projects and is headquartered in Fresh Meadows, New York. MVS 
Modular Vision Systems, Inc., a Canadian corporation, is engaged 
in the design and manufacture of proprietary machine vision products 
and systems and is headquartered in Montreal, (collectively 
referred to as the "Company").  Significant intercompany accounts 
and transactions have been eliminated in consolidation.

Revenue Recognition

Sales are recognized upon shipment of a finished product when 
title to the product transfers to the customer.  Typical terms
of sale do not provide the customer with the right of return
except for defective products, which are covered either by 
the Company's warranty or by the warranty of the original 
equipment manufacturer in instances where the Company acts
as a distributor.  Revenue from services is generally recognized
as the services are rendered using contractual billing rates.  
Revenue billed in advance of customer acceptance is deferred 
until such time as acceptance occurs.  Amounts received from
customers prior to shipment are recorded as deposit 
liabilities.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market 
accounts.

Investments in Marketable Securities

Investments consist of shares of a short-term U.S. treasury mutual
fund, net of margin loans of $1,152,879, which bear interest at 
5.26% and the Company's investment in common stock of e-Net, Inc.,
which is accounted for using the cost method.  The market value 
of the short term U.S. treasury mutual fund and the Company's 
investment in the common stock of e-Net, Inc. at September 30,
1997, was $1,615,181 and $1,218,750, respectively.  In accordance
with Statement of Financial Accounting Standards No. 115, the 
Company has classified these investments as available for sale,
and recorded the investments at market value at September 30, 
1997 and 1996 and unrealized gains and losses are reported as 
an element of stockholders' equity.   The unrealized loss from 
investments available for sale for the year ended September 30, 
1997 and 1996 was $205,182 and $59,786. During the year ended 
September 30, 1997, the Company sold shares in the mutual fund, 
which generated aggregate proceeds of approximately $4,500,000. 
 

MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1997 and 1996

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

nvestment in Trivision Joint Venture

MVS is a party to a joint venture with a distributor 
of high technology products in South Korea.  The joint
venture was formed in 1997 to perform final assembly 
of MVS products for distribution, along with third party 
manufacturer products, to customers in South Korea and 
other Asian markets.  Each party to the joint venture has 
a 50% interest in profits and losses of the venture.  The 
Company accounts for its joint venture interest using the 
equity method wherein its investment balance at September 30,
1997 of $262,413 includes its initial investment plus
its share of the joint venture profits. 

Accounts Receivable

Accounts receivable are stated at the unpaid balances, less
allowance on collectible accounts.  Management periodically reviews
its outstanding accounts receivable to assess collectibility
of balances based on past experience and evaluation of 
current adverse situations which may affect collectibility 
of receivables.  As of September 30, 1997 and 1996, management
has established an allowance for doubtful accounts of 
approximately $71,000 and $140,000.  

Inventory Valuation

Inventory is valued at the lower of cost and market.  
Cost is determined on a first-in, first-out (FIFO) basis. 
Management evaluates obsolete and slow-moving inventory at 
each reporting date and either excludes such inventory 
from the valuation or provides for a necessary reserve 
to record inventory at lower of cost or market.

Property and Equipment

Property and equipment are carried at cost, net of an allowance
for accumulated depreciation and amortization.  Depreciation 
is computed on equipment and furniture, principally using the 
double-declining balance method over estimated lives ranging 
from five to seven years.  Demonstration and research equipment 
is depreciated on a straight-line basis over a four-year period.
Leasehold improvements are amortized on a straight-line basis 
over the shorter of the lease term or estimated useful lives of
the related assets.


MVSI, Inc., and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996


NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

Capitalized Software Costs

Beginning in fiscal year 1995, certain software development 
costs not reimbursed by the Canadian government have been 
capitalized.  Software development costs incurred subsequent
to achievement of technological feasibility, and not 
reimbursed by the Canadian government, were not material 
in previous years.  Technological feasibility occurs when 
the Company has completed all planning and testing activities 
necessary to establish that the product can be produced to 
meet its design specifications including functions, features
and technological performance requirements.  Amortization
expense related to Canadian operations for the year ended
September 30, 1997 was $209,213.  Amortization expense 
related to computer software acquired in the Technet acquisition
(Note B) was $33,750 for the year ended September 30, 1997. 
The Company's policy is to amortize capitalized software 
costs by the greater of (a) the ratio the current gross revenue
for a product bear to the total current and anticipated future
gross revenue for that product or (b) the straight-line method
over the remaining economic life of the product including the 
period being reported on.  It is reasonably possible that those
estimates of anticipated future gross revenue, the remaining 
estimated economic life of the product, or both will be reduced
significantly in the near term.  As a result, the carrying 
amount of the capitalized software costs may be reduced 
materially in the near term.

Goodwill

Goodwill represents the excess of cost over the fair value of 
net assets acquired in business combinations accounted for as 
purchases.  Goodwill is being amortized on the straight-line 
method over ten years.  Amortization expense charged to operations
for the fiscal years 1997 and 1996 was $382,511 and $107,889, 
respectively.  No goodwill existed prior to fiscal year 1996.  
Management regularly reviews the carrying value of goodwill 
against anticipated cash flows of each business in order to 
evaluate realizability.

Research and Development Costs

Research and development costs are expensed as incurred.  The
Company, however, is eligible to receive tax credits for 
certain research and development costs incurred from both 
the Canadian federal government and the Province of Quebec.
Tax credits received or due from the Canadian federal 
government for research and development costs incurred can
be realized only as an offset to future taxes payable from
income generated in Canada.  These tax credits can be carried
forward up to ten years from the date generated.

Tax credits received or due from the Province of Quebec for 
research and development costs incurred have been offset 
against current research and development expenditures and 
are included as a receivable in the accompanying balance 
sheet, as such amounts are currently refundable in cash in
the year following the year in which they are incurred.

Equipment used in research and development activities 
which has alternative future uses is capitalized and depreciated.


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

Income Taxes

Deferred taxes are recognized, subject to a valuation allowance, 
for temporary differences in the timing of recognition of certain 
income and expenses using the liability method.

Earnings Per Share

Earnings per share (EPS), both primary and fully diluted, 
are computed, using the modified treasury stock method, and 
are based on the weighted average number of shares actually
outstanding plus the shares that would be outstanding assuming
conversion, at the beginning of the year, of the Company's 
Class A and Class B warrants, and the exercise of the Company's
outstanding stock options, both of which are considered to be 
common stock equivalents. 


The number of shares that would be issued from the assumed
exercise of the warrants and options has been reduced by the
number of shares that could have been purchased from the proceeds,
at the average market price (primary EPS) of the Company's stock for
the years ended September 30, 1997 and 1996, and at the closing
market price (fully diluted EPS) for the years ended September 
30, 1997 and 1996, subject to a 20% limitation.  Once the proceeds
have been applied to purchase common stock up to 20% of the 
outstanding common stock, the balance of the proceeds are 
assumed to be invested in government securities.  Accordingly, 
net earnings (for both primary and fully diluted EPS) is adjusted
for interest revenue, net of tax, from the assumed purchase of 
government securities with the excess proceeds. 

As of September 30, 1997, the Company's common stock equivalents
are anti-dilutive.  Accordingly, primary and fully diluted earnings
per share are not presented and only the basic earnings per share 
computation is disclosed.  The weighted average number of common 
shares outstanding used in the basic EPS, computed without regard
to common stock equivalents, was 10,799,832. 

As of September 30, 1996, the Company's common stock equivalents 
were dilutive and accordingly were included in the primary [.11] and 
fully diluted [.09] earnings per share computations.  The weighted 
average number of common and common equivalent shares used 
in the primary and fully diluted EPS computations was 14,728,603
for the year ended September 30, 1996.


Using Estimates in Preparing Financial Statements

In preparing financial statements in conformity with
generally accepted accounting principles, management is 
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the
financial statements and revenue and expenses during the
reporting period.  Actual results could differ from those 
estimates.


Reclassifications

Certain prior year amounts have been reclassified to
conform to the current year presentation.


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate the value:

The carrying amount approximates fair value for cash and cash
equivalents, accounts receivable, notes receivable, accounts
payable, line of credit and other accrued liabilities.  The
fair value of notes payable to stockholders is not determinable
because prevailing market rates are not applicable to related
party transactions.

Investment securities classified as current assets are based on
quoted market price.


Translation of Foreign Currency and Concentration of Credit Risk

A portion of the Company's operations is transacted in Canadian
dollars.  The balance sheet of Canadian operations is translated
into U.S. dollars at the year-end rate of exchange, and all 
statement of operations items are translated at the weighted 
average exchange rates for the year.  The resulting translation 
adjustments are made directly to a separate component of 
stockholders' equity.

The Company's customers are not concentrated in any specific 
geographic region.  As a matter of policy, the Company requires
its larger customers to furnish letters of credit (and in some
instances, advance deposits) to minimize credit risk to the
Company after shipment of the products.  For other customers,
the Company reviews a customer's credit history before extending
credit.


Stock Options

The company accounts for the value of stock options granted in
accordance with Accounting Principles Board Opinion 25 (APB 25),
whereby if stock options exercise prices are set at fair market
value or above at the date of grant, no compensation expense is
recognized at that date.

The Financial Accounting Standards Board recently issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting
for Stock-Based Compensation," effective for fiscal years that
begin after December 15, 1996.  The new standard encourages all
entities to adopt a fair value based method of accounting for
all employee stock option plans.  Under this method, compensation
cost is measured at the grant date based on the value of the stock
option award and is recognized over the service period, which is
usually the vesting period.  


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued
Stock Options-Continued

Optionally, a company may continue to use the intrinsic value 
method, as described by APB 25, that measures compensation costs
only to the extent that the option price is lower than the quoted 
market price of the stock at the date of the award. In fiscal year
1997, the Company will continue the application of Opinion 25,
but will comply with the pro forma disclosures of net income, 
and earnings per share, as if the fair value based method of 
accounting defined in SFAS 123 had been applied.


NOTE B-ACQUISITIONS

The Company acquired all the outstanding stock of Expert, 
Inc. (Expert), effective April 1, 1997. The Company exchanged
300,000 restricted shares of common stock valued at $1,070,000
for all outstanding shares of Expert.  The acquisition of Expert
was accounted for as a purchase. The cost exceeded the fair value
of net assets and liabilities resulting in goodwill of approximately
$995,000.  Goodwill will be amortized using an estimated life of
ten years. The results of operations of Expert are included in 
the accompanying financial statements since the date of acquisition.

The Company acquired Technet Computer Services, Inc. (Technet),
effective July 1, 1997.  The Company exchanged 400,000 restricted
shares of common stock valued at $2,380,000 for all the outstanding 
shares of Technet.  The acquisition of Technet was accounted for 
as a purchase.  The cost exceeded the fair value of net tangible
assets and liabilities acquired resulting in $270,000 and 
$2,300,000 being allocated to computer software and goodwill,
respectively.  The value allocated to computer software and 
goodwill will be amortized using estimated lives of two and 
ten years.  The results of operations of Technet are included 
in the accompanying financial statements since the date of 
acquisition.

Following is a pro forma consolidated income statement for
the years ended September 30, 1997 and 1996, reflecting the
acquisitions as if they were consummated on October 1, 1995,
accounted for as a purchase business combination.  The pro
forma information is not necessarily indicative of the financial
position which would have resulted had the acquisitions 
occurred on October 1, 1995.  The pro forma information 
should be read in conjunction with these historical 
financial statements.


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE B-ACQUISITIONS-Continued

Pro forma Consolidated Statement of Operations (Unaudited)
Year ended September 30, 1997
                                            Pro Forma
                            Historical     Adjustments    Pro forma


Sales                        $39,885,840  $13,250,788  $53,136,628
Cost of sales                33,377,150    11,750,759   45,127,909

Gross profit                    6,508,690    1,500,029   8,008,719

Operating expenses              6,871,301    2,079,852   8,951,153

Loss from operations              (2,611)   (579,823)     (942,434)
Interest and financing charge   (282,377)     ---         (282,377)
Income (loss) before taxes       (80,234)   (579,823)     (660,057)
Income tax (benefit)            (189,780)      4,504      (185,276)

Net income (loss)               $ 109,546   (584,327)    $(474,781)

Net income (loss) per share     $     .01              $      (.04)

The Pro forma adjustments reflect the operations of each company 
acquired, adjusted for goodwill amortization.  These operations 
include aggregate non-recurring bonus payments in the amount of 
$1,100,000, payable by the acquired companies to certain stockholders 
prior to the acquisition by MVSI.


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE B-ACQUISITIONS-Continued
Pro forma Consolidated Statement of Operations (Unaudited)
Year ended September 30, 1996

                                          Pro forma
                            Historical    Adjustments     Pro forma

Sales                     $15,987,636   $22,326,851    $38,314,487
Cost of sales               12,484,237   20,338,133     32,822,370

Gross profit               3,503,399     1,988,718       5,492,117
Operating expenses         3,699,904     1,944,978       5,644,882
Loss from operations        (196,505)       43,740       (152,765)

Interest and financing 
    charges                 (422,839)            -       (422,839)

Income before taxes          226,334                      270,074 
Income tax provision 
       (benefit)            (786,430)        1,742        784,688  

Net income               $ 1,012,764        41,988     $1,054,762    

Net income per share           $ .11                         $.12


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE C-FOURTH QUARTER ADJUSTMENTS

The Company's fourth quarter 1997 operations reflect certain
adjustments to revise prior estimates associated with cost
of sales of the Company's computer integration and distribution
businesses of approximately $200,000, and to revise the provision
for income taxes estimated for each interim period, the result 
being an increase in income tax expense by approximately $300,000.
In addition, the Company recorded changes of approximately $300,000
to adjust inventories of its machine vision business 
to net realizable value.  The effect of these items was to reduce 
net income for  the fourth quarter by $800,000 or $.07 per 
share. 


NOTE D-INVENTORY

Inventory consists of the following at September 30:

                                          1997                1996
                                       ---------           ---------
Raw material                         $ 1,464,965         $  623,415
Work in progress                         407,476            595,224
Finished goods                         1,746,589          1,393,900
                                     -----------         -----------
                                      $3,619,030         $2,612,539
                                     ===========         ==========


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE E-PROPERTY AND EQUIPMENT

Property, plant and equipment consist of the following 
at September 30:

                                          1997                1996
                                      ------------        -----------
Autos and trucks                        $124,384            $52,372
Furniture and office 
     equipment                           863,058            277,834
Manufacturing equipment                   11,027              9,850
Research and development 
   equipment                             319,272            239,012
Purchased software                       152,640             43,270
Leasehold improvements                    81,595             23,340
                                       -----------         ----------
                                       1,551,976            645,678
Less accumulated depreciation           (567,686)          (262,160)
                                       ----------          ----------         
                                        $984,290           $383,518
                                       ==========         ===========

NOTE F-LINES OF CREDIT

The Company maintains a $1,450,000 line of credit with Hong Kong 
Bank of Canada to support the short-term cash needs of the 
Company's Canadian operations.  Borrowings bear interest at 
the bank's prime rate plus .75% (prime was 5.50% at September 
30, 1997).  At September 30, 1997, borrowings outstanding on the 
line of credit amounted to $1,169,183.  Borrowings under the line
are subject to maintaining a borrowing base consisting of 
a qualifying portion of accounts receivable, investment tax 
credits and inventories. The line of credit is collateralized 
by all present and future accounts receivable and inventory
of the Company's Canadian subsidiary.  Under terms of the 
line-of-credit agreement, which is subject to annual review,
the Company must also comply with certain financial 
and reporting covenants. Additionally, the line balance
is guaranteed by MVSI, Inc.  As of September 30, 1997, 
the Company was in compliance with these covenants.

In prior years, the Company maintained a $365,000 line of 
credit with a Canadian bank, which was replaced by 
the above facility to support the short-term cash needs of 
the Company's Canadian operations.  Borrowings bear
interest at the bank's prime rate plus 2% (prime was 5.75%
at September 30, 1996).  The line of credit was 
collateralized by all present and future accounts
receivable and inventory of the Company's Canadian
subsidiary. 


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE F-LINES OF CREDIT-Continued

The Company also maintains a credit agreement with a local 
finance company for inventory financing for one of its 
subsidiaries.  The agreement provides the Company with the
 ability to pay certain inventory balances (purchases)
scheduled, interest-free installments.  Borrowings 
outstanding under the agreement, at September 30, 1997
and 1996, amounted to $208,082 and $824,238, respectively.
The agreement is subject to annual renewal and is 
collateralized by all present and future accounts
receivable and inventory of the Company's subsidiary.  
The Company must also comply with certain financial
and reporting covenants.  As of September 30, 1997, the 
Company was in compliance with these covenants.

A Company subsidiary has available at September 30,
1997 a $100,000 line of credit with Citibank with no 
borrowings outstanding as of September 30, 1997.  The
line of credit is collateralized by certain assets of
the subsidiary and is guaranteed by an officer of 
the subsidiary who is also a stockholder of the Company.
Interest is calculated at the bank's prime rate plus 2%.

NOTE G-ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                          1997           1996
                                      ----------      ----------
Vendor trade payables                 $3,054,734      $1,942,283
Salaries and commissions 
   payable                             1,189,211       1,331,134
Other accrued liabilities 
  and deferred revenue                 1,046,586        457,585
                                      ----------      ---------- 
                                      $5,290,531      $3,731,002
                                      ==========      ==========  

MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE H-INCOME TAXES

The income tax (benefit) provision consists of 
the following at September 30:
                                          1997             1996
                                      -----------      -----------
Current
  United States                         $82,649          $      -
  Foreign                                     -                 -
                                      -----------      -----------     
                                         82,649                 - 

Deferred
  United States                         392,398            77,085
  Foreign                              (369,988)         (183,201)
                                      -----------      -----------
                                         22,410          (106,116)

Decrease in valuation allowance
-deferred tax 

Asset                                  (294,839)         (680,314)
                                      ----------        ----------
Net provision                         $(189,780)        $(786,430)
                                      ----------        ----------

The effective tax rates for the years ended September 30,1997 and 1996,
were (347)% and (217)% respectively. Reconciliations between the U.S.
federal statutory rate and the effective tax rates follow as of
September 30:

                                          1997               1996
                                      -----------        ------------
    Tax at U.S. federal 
        statutory rates               $ (29,627)            76,954

    Increase (decrease) 
       resulting from:
    State tax (benefit)                  90,061                  -
    Foreign income (loss)
      impact of taxation at 
      different rates                    35,805             (4,365)
    Change in valuation allowance
      against deferred tax asset       (294,839)          (680,314)
    Other permanent differences           8,820           (178,705)
                                       ----------       ------------
      Income tax benefit              $(189,780)         $(786,430)
                                       ----------       ------------


Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE H-INCOME TAXES-Continued

The tax effect of temporary differences between the financial 
statement amounts and tax bases of assets and liabilities  
which give rise to a deferred tax asset are as follows at
September 30:


                                         1997             1996
                                     ------------     ----------
Research and development 
       tax credits                     $ 983,880       $766,864
Net operating losses and 
   unclaimed R&D expenses              2,049,752      2,515,060
Accrued compensation                     658,905        232,200
Other                                    (61,386)       (54,017)
Valuation allowance                   (1,975,680)    (2,301,677)
                                     ------------    ------------
Net deferred tax asset                $1,655,471      $1,158,430
                                     ------------    ------------

The Company has net operating and research expenditure loss
carryforwards available to offset future taxable income generated
in Canada totaling approximately $8,000,000 at September 30, 1997,
expiring in 2010 and investment tax credits of $1,350,000 available in
the future. In addition, the Company has net operating loss carryforwards 
available to offset U.S. taxable income of approximately 
$600,000 at September 30, 1997, expiring in 2011.
In the event a change of control occurs in the future,
use of all or a portion of the U.S. carryforwards could be
affected.

As of September 30, 1997, the Company has recorded net 
deferred tax assets totaling approximately $1,655,000 
consisting of $889,000 relating to tax benefits derived 
from the Company's operations based in Canada and $766,000 
relating to tax benefits derived from the Company's operation 
in the United States.  Recoverability of this asset is dependent 
upon the Company generating future taxable income in both Canada 
and the United States.  Critical to recovering the Canadian portion
of the deferred tax benefits is the successful implementation of
a plan aimed at returning the Canadian operations to profitability.
Key elements of this plan center on reducing indirect staff 
levels, successfully outsourcing certain manufacturing operations,
and redirecting sales and marketing efforts toward more 
profitable product lines.  In the event this plan is 
unsuccessful in generating future taxable income, a
write down of this asset may be necessary.


NOTE I-STOCKHOLDERS' EQUITY

Warrants

At September 30, 1997, the Company had outstanding, 5,125,000 
Class A Warrants and 1,000,000 Class B Warrants to purchase
common stock.  The Class A Warrants and Class B Warrants 
are exercisable at $4.00 and $4.20, respectively, and expire
in the year 2000. 

In December 1997, the Company completed a redemption of the
above warrants wherein certain Class A warrant holders
exercised their warrants into 5,086,928 shares of common 
stock and the Class B warrant holder exercised its warrant
into 1,000,000 shares of common stock, resulting in net 
proceeds to the Company of approximately $24.5 million.  
In connection with the redemption, the Company purchased 
and exercised, prior to the deadline, 683,654 warrants for 
approximately $4.3 million in cash, resulting in net proceeds
to the Company of approximately $20.2 million. 


MVSI, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-Continued

September 30, 1997 and 1996

NOTE I - STOCKHOLDERS' EQUITY-Continued

Stock Option Plan

In April 1997, the Company adopted and the stockholders 
ratified the 1997 Stock Option Plan (the "Stock Option Plan"),
under which options to purchase shares of the Company's 
common stock have been granted at exercise prices equal to 
the market price of the stock at the date of grants, 
with the exception of certain stock options granted to
a greater than 10% stockholder with a required exercise
price of 110% of fair market value of the stock at 
the date of grant.

The plan authorizes the Company to grant options to 
eligible persons to purchase up to 1,000,000 shares of 
common stock. Options vest over a two-year period from
the date of grant. The maximum term of the options is
ten years from the grant date. 

The Company applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its
stock option plan.  Accordingly, no compensation expense
has been recognized related to the granting of such options.
Had the Company recognized compensation expense based upon
the fair value of the options at the grant dates consistent
with SFAS 123, the Company's net income and net income per
share would have changed to the pro forma amounts indicated
below:

                                              1997   
                                           ----------
Net Income from
 continuing operations  
    As reported                            $ 109,546
    Pro Forma                              $(126,881)
Earnings Per Share, from
 continuing operations       
    As reported                                $ .01
    Pro Forma                                  $(.01)

The fair value of each option grant is estimated on the date of
the grant using the Black-Scholes options-pricing model with
the following weighted average assumptions used for grants in
1997: expected volatility 74%, risk free interest rate 5.89% 
and expected life of options of 2.6 years.

Following is a summary of transactions:

Outstanding, October 1, 1996                          -

Granted during the year (at prices
ranging from $2.94 to $7.00 per share)          924,000
Canceled during the year                              -
Exercised during the year                             -
                                               ----------
Outstanding, September 30, 1997                 924,000

Eligible, end of year 
for exercise currently (at prices ranging
from $2.94 to $7.00 per share)                        -             


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE I-STOCKHOLDERS' EQUITY-Continued

Weighted average stock option price               $3.87
                                                  -----
Weighted average fair value of options
   granted during the year                        $1.79
                                                  -----

NOTE J-COMMITMENTS AND CONTINGENT LIABILITIES

Leases

The minimum rental payments payable under a long-term
lease for premises, exclusive of certain operating costs
determined annually, and for the lease of equipment at
September 30, 1997, are approximately as follows:


Year ending September 30,
            
            1998                            $489,597
            1999                             432,162
            2000                             334,401
            2001                             214,658
            2002                             195,143
                                            ---------
                                          $1,665,961 

Employment Agreements

The Company has entered into separate employment agreements 
with five of its officers, which are subject to certain 
termination rights by both the Company and the officers.
In addition to salary commitments by the Company, these 
officers are eligible to receive all employee benefits 
which may from time to time be awarded or be made available. 
Certain of these agreements also provide for bonuses to be
computed and paid based upon the performance of the
operations under their management or based upon amounts
determined at the discretion of the Board of Directors.


Legal Matters

In the ordinary course of conducting business, the Company 
is subject, from time to time, to certain legal proceedings
concerning the Company's business.  Management does not 
believe that any current legal proceedings will have a
material impact on the Company's business or its financial
statements.



MVSI, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-Continued

September 30, 1997 and 1996

NOTE J-COMMITMENTS AND CONTINGENT LIABILITIES
Continued

Transactions with Stockholders and Affiliates

The Company has loans payable to three officer/stockholders 
outstanding as of September 30, 1997.  One such loan bears 
interest at 9% and is due on demand and carries a balance, 
including accrued interest at September 30, 1997 of  $239,089. 
Two other officers loaned subsidiaries for which they are 
employed amounts on an interest bearing, demand basis prior
to being acquired by the Company.  At September 30, 1997, 
the balance on these loans, including interest, was $50,000
and $448,119, respectively.

Additionally, one of the Company's subsidiaries made payments of
$87,125 during the period ended September 30, 1997, to an affiliated
development company in India, which is partially owned by the former
owner and current President and CEO of the subsidiary.

Other Transactions

As of September 30, 1997, the Company's Canadian subsidiary has
an outstanding purchase commitment under a Manufacturing and 
Development Agreement entered into with a local machine and
production shop.  The commitment calls for the Subsidiary 
to buy specific quantities of finished goods from the vendor
over a period not to exceed one year, and in turn receive
payments for raw materials previously purchased by the 
vendor from the subsidiary.


NOTE K_SEGMENT INFORMATION

For purposes of segment reporting for the year ended September
30, 1997, management considers the Company to operate in
three industry segments: the machine vision industry and
the computer product integration and distribution industry,
and the software development industry.  For the year ended 
September 30, 1996, the Company operated in two segments, the
machine vision industry and the computer product integration and
distribution industry. 

For the year ended September 30, 1997, the Company had one 
customer which accounted for approximately 21% of its total 
revenue. For the year ended September 30, 1996, the Company 
had one customer which accounted for approximately 10 percent
of its total revenue.  In addition, approximately, 15% and
19% of the Company's sales in fiscal years 1997 and 1996,
respectively, were to customers outside North America.  A
substantial portion of the Company's sales outside North 
America was to customers in Asia, principally Korea.  The
financial crisis currently being experienced in this region
has had and may have in the future a negative impact on the
Company's ability to obtain orders from customers in this 
region.  However, this impact cannot be estimated at 
this time.



MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE K-SEGMENT INFORMATION Continued

Financial information relating to the Company's industry
segments for the years ended September 30, 1997 and 1996,
is as follows:

                                         1997
                        -------------------------------------------------  
                                         Computer
                                        Integration           Software 
                        Machine         and Distribution      Development    
                        Vision Segment   Segment               Segment        
-------------------------------------------------------------------------
Sales to Unaffiliated
Customers                 5,551,142      33,755,491           579,207     
Intersegment sales
Operating profit (loss)    (697,368)      1,493,644           (91,302)
Net income (loss)          (707,159)      1,115,359           (95,953)  
Identifiable assets       7,040,941      12,316,043         2,991,400  


(continued)
                                             1997
                           ---------------------------------------------
                                   General
                                  Corporate           Total
------------------------------------------------------------------------
Sales to Unaffiliated
Customers                               -           39,855,840
Intersegment sales                      -                    -
Operating profit (loss)        (1,067,585)            (362,611)
Net income (loss)                (202,701)             109,546
Identifiable assets             3,142,449           25,490,833



                                              1996  
                          ----------------------------------------------
                                          Computer
                                          Integration    Software
                         Machine        & Distribution    Development
                        Vision Segment    Segment         Segment
------------------------------------------------------------------------       
Sales to Unaffiliated
Customers                  4,566,341      11,421,295           -
Intersegment sales                 -               -           -
Operating profit (loss)      498,648         380,965           -
Net income                   555,094         215,609           -
Identifiable assets        5,670,201       7,439,956           -

(continued)

                                               1996
                          --------------------------------------------
                                   General
                                  Corporate           Total
-----------------------------------------------------------------------
Sales to Unaffiliated
Customers                               -           15,987,636
Intersegment sales                      -                    -
Operating profit (loss)        (1,076,118)            (196,505)
Net income                        242,061            1,012,764
Identifiable assets             7,050,212           20,160,369


The following is a breakdown of the Company's sales by geographic
region for the years ended September 30, 1997 and 1996:


Sales to unaffiliated customers:                 1997                1996

North America, principally United States      $35,189,501        $12,970,563
Far East and Asia                               4,403,433          1,810,054
Other Regions                                     292,906          1,207,019
                                              -----------        -----------
                                              $39,885,840        $15,987,636
                                              -----------        -----------
MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE L_ACCOUNTING STANDARDS

Earnings Per Share

The Financial Accounting Standards Board recently issued
Statement of Financial Accounting Standards No. 128 
(SFAS 128), "Earnings Per Share," effective for periods
ending after December 15, 1997. This Statement 
establishes standards for computing and presenting 
earnings per share (EPS) and applies to entities with 
publicly held common stock or potential common stock. 
This Statement simplifies the standards for computing 
earnings per share previously found in APB Opinion No. 
15, "Earnings per Share," and makes them comparable to 
international EPS standards. It replaces the presentation 
of primary EPS with a presentation of basic EPS. It also 
requires dual presentation of basic and diluted EPS on the 
face of the income statement for all entities with complex 
capital structures and requires a reconciliation of the 
numerator and denominator of the basic EPS computation to 
the numerator and denominator of the diluted EPS computation. 
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects 
the potential dilution that could occur if securities or other 
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that 
then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Opinion 15. This 
Statement requires restatement of all prior-period EPS data 
presented. The Company will comply with the requirements of 
SFAS No. 128 during the first quarter of fiscal year 1998. 
The impact of the adoption of SFAS No. 128 on the financial 
statements of the Company has not yet been determined.


Reporting Comprehensive Income

The Financial Accounting Standards Board recently issued 
Statement of Financial Accounting Standards No. 130 (SFAS 130), 
"Reporting Comprehensive Income," effective for fiscal years
beginning after December 15, 1997. This Statement establishes
standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains, and losses) in a 
full set of general-purpose financial statements. This Statement
requires that all items that are required to be recognized 
under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the
same prominence as other financial statements. SFAS 130 does not
require a specific format for that financial statement but requires
that an enterprise display an amount representing total comprehensive 
income for the period in that financial statement. The Statement requires
that an enterprise classify items of other comprehensive income by their 
nature in a financial statement and display the accumulated balance of 
other comprehensive income separately from retained earnings and 
additional paid-in capital in the equity section of a statement of 
financial position. Reclassification of financial statements for earlier 
periods provided for comparative purposes is required. The Company will 
comply with the disclosure requirements of SFAS 130 in fiscal year 1999.

Disclosures about Segments of an Enterprise and 
Related Information

The Financial Accounting Standards Board recently issued 
Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosures about Segments of an Enterprise and Related
Information," effective for periods beginning after December 15,
1997. This Statement establishes standards for the way that 
public business enterprises report information about operating segments 
in annual financial statements and requires that those enterprises 
report selected information about operating segments in interim 
financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic 
areas, and major customers.


MVSI, Inc. and Subsidiaries
Notes to Consolidated Financial Statements-Continued
September 30, 1997 and 1996

NOTE L-ACCOUNTING STANDARDS Continued

This Statement requires that a public business enterprise report
financial and descriptive information about its reportable operating
segments. Operating segments are components of an enterprise about 
which separate financial information is available that is evaluated 
regularly by the chief operating decision maker in deciding how to 
allocate resources and in assessing performance. Generally, 
financial information is required to be reported on the basis 
that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments. This Statement 
requires that a public business enterprise reports a measure of
segment profit or loss, certain specific revenue and expense 
items, and segment assets. It requires a reconciliation of total
segment revenues, total segment profit or loss, total segment 
assets, and other amounts disclosed for segments to corresponding 
amounts in the enterprise's general-purpose financial statements. 
It requires that all public business enterprises report information 
about the revenues derived from the enterprise's products or services
(or groups of similar products and services), about the countries 
in which the enterprise earns revenues and holds assets, and about
major customers regardless of whether that information is used in
making operating decisions. However, this Statement does not
require an enterprise to report information that is not prepared 
for internal use if reporting it would be impracticable. This 
Statement also requires that a public business enterprise report
descriptive information about the way that the operating 
segments were determined, the products and services provided by 
the operating segments, differences between the measurements
used in reporting segment information and those used in the 
enterprise's general-purpose financial statements, and changes
in the measurement of segment amounts from period to period. 
The Company will comply with the disclosure requirements of SFAS
131 in fiscal year 1998. 


NOTE M - SUBSEQUENT EVENTS

Redemption of Outstanding Class A and Class B Warrants
  
By notice of redemption, dated November 14, 1997, the Company
called all of its outstanding Class A Warrants and Class B 
Warrants for redemption for cash at 5:00 p.m., local time, on
Monday, December 15, 1997 (the "Redemption Date'), at a 
redemption price of $.05 per Class A Warrant and $.05 per
Class B Warrant (the "Redemption Price"). After 5:00 p.m.,
local New York City time, on the Redemption Date, the only
right of any holders of the Class A Warrants or Class B Warrants
who did not either exercise their warrants or, in the case of the
Class A Warrant, trade their warrants to receive the Redemption 
Price for each warrant properly tendered to American Stock Transfer
& Trust Company, the Warrant Agent for the warrants.

The following table summarizes the results of the exercise of
warrants and the redemption of warrants pursuant to the Company's 
call for the redemption of all outstanding warrants for $.05 
cash per warrant.  The following information was provided to
the Company by its Warrant Agent.

           WARRANTS AVAILABLE                 WARRANTS         PROCEEDS
             FOR EXERCISE                     EXERCISED       TO COMPANY

     5,125,000 Class A Warrants               5,086,928       $20,347,712
     1,000,000 Class B Warrants               1,000,000         4,200,000
                                                              ----------- 
Gross Proceeds to Company:                                    $24,547,712
Less Company open market repurchases
   and exercise of 683,654 Class A Warrants                  ($ 4,333,437)  
                                                              -----------
Net Proceeds to Company from exercise of
Class A and Class B Warrants                                  $20,214,275 (1)


(1)  Net proceeds does not reflect $2,011,427 spent by the 
     Company to purchase 306,800 shares of Common Stock in open 
     market repurchases during the warrant redemption period and 
     pursuant to the Company's previously announced stock repurchase
     program.  If  this expenditure was reflected above, Net 
     Proceeds to the Company would be $18,202,848.

The Company intends to use the net proceeds from the exercise 
of the warrants for general working capital purposes, including 
funding software support and development; marketing 
and sales efforts;  the acquisition of capital equipment; 
stock repurchases; and possible future acquisitions, strategic 
alliances and internal expansion, including the growth 
of management and employee payroll.


NOTE N - RESTRUCTURING OF E-NET, INC. TRANSACTION

In August 1996, e-Net, Inc. ("e-Net"), a Delaware corporation,  
entered into a letter of intent with the Company, whereby e-Net 
would have become a wholly-owned subsidiary of the Company. 
Among the principal terms and conditions of the proposed 
acquisition, the Company would have exchanged, on a proposed
tax-free basis, 4,000,000 restricted shares of its common 
stock, for all of e-Net's 8,000,000 shares of common stock. 
In addition, if the acquisition were to be completed, e-Net's 
2,000,000 Class A Warrants and 2,000,000 Class B Warrants 
would have been exercisable into a total of 2,000,000 shares 
of the Company's Common Stock. The newly issued MVSI securities 
in the acquisition could not have been sold for a 24-month 
period ending September 1998. Edward Ratkovich, the Chairman,
Chief Executive Officer and President of the Company was a
director and is a principal stockholder and warrantholder 
of e-Net and Clive Whittenbury, another director of the Company,
is also a director and a stockholder of e-Net. 

e-Net is engaged in the business of developing, marketing 
and supporting open-client server and integrated software 
that enables local, national and international telephone 
communications, information exchange and commerce over the
Internet and private Internet Protocol ("IP")  networks. 

On January 14, 1997, the Company and e-Net entered into a 
Mutual Cooperation Agreement.  Pursuant to the Mutual 
Cooperation Agreement, the Company and e-Net terminated
the proposed acquisition of e-Net by the Company, and 
took the following actions to restructure their business
relationship: (1) e-Net executed and issued to the Company
a Convertible Debenture in the principal amount of $1,275,080.76
and bearing interest at 9% per annum, which Convertible 
Debenture evidenced monies loaned by the Company to e-Net 
up to and as of January 14, 1997; (2) e-Net issued to the 
Company and its subsidiaries a non-transferable, fully-paid, 
perpetual license to use the software components of e-Net's 
Telecom 2000 technology; and (3) e-Net and the Company agreed
to extend to one another and their affiliates the most 
favorable pricing, terms and conditions that are granted
to any customer for the purchase, license and support 
services with regard to any products or services offered
by it or its subsidiaries (excluding pricing, terms and 
conditions offered either the Company or e-Net to the United
States Government. The Company and e-Net have also agreed 
in principal to cooperate as strategic partners in any joint
technology projects that required or would benefit from the 
integration or use of e-Net's technologies into any of the 
Company's products. As of the date of this Report, no material
developments or relationships or benefits have materialized from
the efforts of e-Net and the Company or its subsidiaries to find
a suitable basis for mutual, commercial cooperation.

The terms of the Convertible Debenture provided that the 
Company could, at its option, and at any time prior to 
September 6, 2002, convert all or any portion of the aggregate
amount owing under the Convertible Debenture into shares of 
e-Net Common Stock at a conversion ratio equal to the per-share
offering price in the event of an initial public offering ("IPO") 
of e-Net's Common Stock. As the result of a pending IPO by e-Net,
the Company agreed to convert the Convertible Debenture for 250,000 
shares of e-Net Common Stock in February 1997. On April 8, 1997, 
the Commission declared effective e-Net's initial public offering 
registration statement on Form SB-2 (Registration No. 333-3860),
which registration statement also registered for resale the
250,000 shares of e-Net Common Stock, $.01 par value, 
beneficially owned by the Company.  e-Net's Common Stock,
$.01 par value, commenced trading on the Nasdaq SmallCap 
Market System under the trading symbol of "ETEL". The Company 
has agreed not to sell any of the 250,000 shares of e-Net
Common Stock until the earlier of the date on which the 
lead underwriter for e-Net's initial public offering of e-Net
Common Stock consents to such a sale or April 8, 1998. There 
can be no assurances that the Company will sell any or all 
of the 250,000 shares of e-Net Common Stock or that any such
sale would allow the Company to realize a profit or gain.


PART IV

Item 8.  Changes in and Disagreements with Accountants on 
Accounting and Financial Disclosure.

None. 

Item 9.  Directors, Executive Officers, Promoters and 
Control Persons; Compliance with 16(a) of the Exchange Act.

Item 9 is hereby incorporated by reference to the registrant's
Post-Effective Amendment No. 2 to Form SB-2 on Form S-3
Registration Statement, and related Prospectus, Registration 
File No. 33-89194, declared effective with the Securities and
Exchange Commission ("Commission") on November 14, 1997, and 
the registrant's Proxy Statement to be filed with the Commission
on or prior to January 31, 1998.

Item 10.  Executive Compensation.

Item 10 is hereby incorporated by reference to the Post-Effective 
Amendment No. 2 to Form SB-2 on Form S-3 Registration Statement, 
and related Prospectus, Registration File No. 33-89194, declared
effective with the Securities and Exchange Commission 
("Commission") on November 14, 1997, and the registrant's 
Proxy Statement to be filed with the Commission on or prior 
to January 31, 1998.

Item 11.  Security Ownership of Certain Beneficial Owners and
Management.

Item 11 is hereby incorporated by reference to the Post-Effective
Amendment No. 2 to Form SB-2 on Form S-3 Registration Statement,
and related Prospectus, Registration File No. 33-89194, declared
effective with the Securities and Exchange Commission 
("Commission") on November 14, 1997, and the registrant's 
Proxy Statement to be filed with the Commission on or prior
to January 31, 1998.

Item 12.  Certain Relationships and Related Transactions.

Item 12 is hereby incorporated by reference to the registrant's
Post-Effective Amendment No. 2 to Form SB-2 on Form S-3
Registration Statement, and related Prospectus, Registration 
File No. 33-89194, declared effective with the Securities and
Exchange Commission ("Commission") on November 14, 1997, and 
the registrant's Proxy Statement to be filed with the Commission
on or prior to January 31, 1998.

Item 13.  Exhibits, List and Reports on Form 8-K.

A.  Exhibits. 

The following is a list of exhibits incorporated by 
reference to the registrant's Post-Effective Amendment No.
2 to Form SB-2 on Form S-3 Registration Statement, and
related Prospectus, Registration File No. 33-89194, declared
effective with the Securities and Exchange Commission 
("Commission") on November 14, 1997, and the registrant's
SB-2 Registration Statement, Registration No. 33-89194, as
declared effective by the Commission on August 14, 1995:

1.0
Form of Underwriting Agreement. (incorporated by reference
to Exhibit 1.0 to Amendment No. 5 to Registration Statement
on Form SB-2 (File No. 33-89194), filed with Commission on
July 13, 1995)

1.1
Selected Dealers Agreement. (incorporated by reference to
Exhibit 1.1 to Amendment No. 5 to Registration Statement
on Form SB-2 (File No. 33-89194), filed with Commission
on July 13, 1995)

1.2
Form of Agreement Among Underwriters. (incorporated by 
reference to Exhibit 1.2 to Amendment No. 5 to Registration 
Statement on Form SB-2 (File No. 33-89194), filed with 
Commission on July 13, 1995)

3.0
Certificate of Incorporation, filed April 12, 1994. 
(incorporated by reference to Exhibit 3.0 to Registration 
Statement on Form SB-2 (File No. 33-89194), filed with Commission
on February 9, 1995)

3.1
By-laws, as amended. (incorporated by reference to Exhibit 3.1 to 
Registration Statement on Form SB-2 (File No. 33-89194), 
filed with Commission on February 9, 1995)

4.0
Specimen Copy of Common Stock Certificate
(incorporated by reference to Exhibit 4.0 to Registration Statement 
on Form SB-2 (File No. 33-89194), filed with Commission on February 9, 1995)

4.1
Form of Class A Warrant Certificate. (incorporated by reference 
to Exhibit 4.1 to Registration Statement on Form SB-2 (File No. 33-89194), 
filed with Commission on February 9, 1995)

4.2
Form of Class B Warrant Certificate. (incorporated by reference to 
Exhibit 4.2 to Amendment No. 5 to Registration Statement on 
Form SB-2 (File No. 33-89194), filed with Commission on July 13, 1995)

4.3
Form of Underwriter's Purchase Option. (incorporated by reference 
to Exhibit 4.3 to Amendment No. 5 to Registration Statement on 
Form SB-2 (File No. 33-89194), filed with Commission on July 13, 1995)

4.4
Form of Warrant Agreement (incorporated by reference to Exhibit 4.4 to 
Amendment No. 5 to Registration Statement on Form SB-2 (File No. 33-89194), 
filed with Commission on July 13, 1995)

4.4.1
Amendment #1 to Warrant Agreement, dated November 11, 1997 
(incorporated by reference to Exhibit 4.4 to Post-Effective Amendment 
Number 2 to the Form SB-2 on Form S-3 (File No. 33-89194), filed 
with the Commission on November 14, 1997).

5.0
Opinion of Paul W. Richter, Esq. For Registrant.  (incorporated by 
reference to Exhibit 5.0 to Post-Effective Amendment Number 2 to the
Form SB-2 on Form S-3 (File No. 33-89194), filed with the Commission
on November 14, 1997.

10.0
Stock Purchase Agreement and Plan of Reorganization, dated November
1, 1994. (incorporated by reference to Exhibit 10 to Registration
Statement on Form SB-2 (File No. 33-89194), filed with Commission
on February 9, 1995) 

10.1
Employment Agreement, Edward Ratkovich, Maj. Gen., USAF (ret.) 
(incorporated by reference to Exhibit 10.1 to Registration Statement
on Form SB-2 (File No. 33-89194), filed with Commission on February
9, 1995)

10.2
Employment Agreement, Louis K. Lukanovich. (incorporated by
reference to Exhibit 10.2 to Registration Statement on Form SB-2
(File No. 33-89194), filed with Commission on February 9, 1995)

10.3
Employment Agreement, Bojko D. Vodanovic. (incorporated by reference
to Exhibit 10.3 to Registration Statement on Form SB-2 (File No. 
33-89194), filed with Commission on February 9, 1995) 

10.4
Texas Instruments Incorporated Agreement, dated April 1, 1994.
(incorporated by reference to Exhibit 10.4 to Registration 
Statement on Form SB-2 (File No. 33-89194), filed with Commission 
on February 9, 1995)

10.5
Possehl Hong Kong Precision Machining Ltd. Agreement, dated 
April 28, 1994 (incorporated by reference to Exhibit 10.5 to
Registration Statement on Form SB-2 (File No. 33-89194), 
filed with Commission on February 9, 1995)

10.6
NJC Technical Letter, dated July 21, 1994. (incorporated by 
reference to Exhibit 10.6 to Registration Statement on Form 
SB-2 (File No. 33-89194), filed with Commission on 
February 9, 1995)

10.7
NRC License Agreement, dated September 12, 1986 
(incorporated by reference to Exhibit 10.7 to 
Registration Statement on Form SB-2 (File No. 33-89194),
filed with Commission on February 9, 1995)

10.8
MRCO License Agreement, dated February 25, 1994. 
(incorporated by reference to Exhibit 10.8 to Registration Statement
on Form SB-2 (File No. 33-89194), filed with Commission on February 
9, 1995)

10.9
United States Patent, Number 5,406,372, dated April 11, 1995.
(incorporated by reference to Exhibit 10.9 to Registration
Statement on Form SB-2 (File No. 33-89194), filed with
Commission on February 9, 1995)

10.10
Consent and Waiver, dated June 30, 1995. (incorporated by reference
to Exhibit 10.10 to Amendment No. 5 to Registration Statement on 
Form SB-2 (File No. 33-89194), filed with Commission on July 13,
1997)

21.0
List of Subsidiaries, filed herewith.

23.0
Consent of Independent Auditors Grant Thornton, LLP, dated
December 30, 1997, filed herewith

24.0
Consent of Paul W. Richter, Esq.  (incorporated by reference to
Exhibit 24.0 to Post-Effective Amendment Number 2 to the Form SB-2
on Form S-3 (File No. 33-89194), filed with the Commission on
November 14, 1997).

24.1
Consent of Grant Thornton LLP (incorporated by reference to 
Exhibit 24.1 to Post-Effective Amendment Number 2 to the Form
SB-2 on Form S-3 (File No. 33-89194), filed with the Commission
on November 14, 1997).

25.0
Power of Attorney appointing Paul W. Richter  (incorporated
by reference to Exhibit 25.0 to Post-Effective Amendment
Number 2 to the Form SB-2 on Form S-3 (File No. 33-89194),
filed with the Commission on November 14, 1997).

B.  Reports on Form 8-K. 

The Company filed a Form 8-K with the Commission, dated September 1, 1997.





                                 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


                                                  MVSI, INC.

January 4, 1998
                                        By:    EDWARD RATKOVICH
                                             --------------------
                                               Edward Ratkovich
                                            Chairman of the Board


Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report is signed below by the following
persons on behalf of the registrant and in the capacities and 
on the dates indicated.

Signature              Title                                 Date
---------              -------------------------------       -------------

EDWARD RATKOVICH      Chairman of the Board, President,      January 4, 1998
----------------      Chief Executive Officer
Edward Ratkovich      [Principal Executive Officer]


MARK J. MCKNIGHT      Chief Financial Officer, Controller,   January 4, 1998 
----------------      Assistant Secretary
Mark J. McKnight      [Principal Financial Officer]


JAMES M. EWAN         Director                               January 4, 1998 
----------------
James M. Ewan
 

EDWARD P. ROBERTS     Director                               January 4, 1998
-----------------
Edward P. Roberts


JEFFREY RUBIN         Director                               January 4, 1998
-----------------
Jeffrey Rubin


ABBAS FATHI           Director                               January 4, 1998
-----------------
Abbas Fathi


PAUL W. RICHTER       General Counsel and Secretary          January 4, 1998
-----------------
Paul W. Richter






EXHIBIT 21

MVSI, Inc. and Subsidiaries


SUBSIDIARIES OF THE REGISTRANT

The following lists all subsidiaries of MVSI, Inc. as 
required by Item 601 of Regulation S-B (Section 228.601):


       NAME                                INCORPORATED IN


  Socrates, Inc.                          Maryland, U.S.A.


  Expert, Inc.                            New York, U.S.A.


  Technet Computer Services, Inc.         Virginia, U.S.A.


  JMR Distributors, Inc.                  Virginia, U.S.A.


  MVS Modular Vision Systems, Inc.        Quebec, Canada





EXHIBIT 23

MVSI, INC. AND SUBSIDIARIES


Consent of Independent Certified Public Accountants [LOGO]


We have issued our report dated December 30, 1997, accompanying 
the consolidated financial statements incorporated herein 
by reference or included in the Annual Report of MVSI, Inc., 
on Form 10-KSB for the year ended September 30, 1997. 
We hereby consent to the incorporation by reference of said
reports in the Registration Statement of MVSI, Inc., on
Form S-3 (File No. 33-89194, effective November 14, 1997).



                                       Grant Thornton LLP

Vienna, Virginia
December 30, 1997




                   ARTICLE 5 FINANCIAL DATA SCHEDULE