UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549

                                  FORM 10-QSB

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

                  For the quarterly period ended June 30, 1998

                                       OR

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

            For the transition period from __________ to __________


                       Commission file number: 000-28520


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

                                 n-Vision, Inc.
             (Exact name of registrant as specified in its charter)

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



<TABLE>
<S><C>
                     Delaware                                   54-1741313
  (State or other jurisdiction of incorporation or     (I.R.S. Employer Identification No.)
                  organization)
</TABLE>


                           7680 Old Springhouse Road
                         Madison Building, First Floor
                             McLean, Virginia 22102
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (703) 506-8808


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes (X) No ( )

         The number of outstanding shares of the registrant's Common Stock, par
value $.01 per share, was 5,293,673 on June 30, 1998.


                                       1


<PAGE>



                                  FORM 10-QSB
                                     INDEX

                                                                         PAGE
                                                                       --------
PART I              FINANCIAL INFORMATION

           Item 1.  Financial Statements

                    Balance Sheets as of June 30, 1998
                    and December 31, 1997                 ................  3

                    Statements of  Operations for the
                    three months and six months ended
                    June 30, 1998 and June 30, 1997       ................  4

                    Statements of Cash Flows For the six
                    months ended June 30, 1998 and June
                    30, 1997.                             ................  5

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

           Item 2.  Management's Discussion and
                    Analysis of Financial Condition and
                    Results of Operations                 ................  8


PART II             OTHER INFORMATION

           Item 6   Reports and Exhibits on Form 8-K.     ................ 12

                    SIGNATURES                            ................ 13

Exhibit    27       Financial Data Schedule               ................ 14


                                       2


<PAGE>


PART I   FINANCIAL INFORMATION

Item 1   Financial Statements

                                 n-VISION, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 June 30       December 31
                                                                  1998             1997
                                                              -------------   -------------
                                                               (Unaudited)      (Audited)
<S><C>
                                     ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                    $   427,493     $   876,805
  Investments                                                    1,248,438       1,246,875
  Accounts Receivable
    Trade                                                          721,528         252,270
    Other                                                           51,783          15,335
  Inventories                                                      704,499         843,868
  Prepaid Expenses                                                  76,896          83,227
                                                               -----------     -----------
                              Total Current Assets               3,230,637       3,318,380

PROPERTY AND EQUIPMENT                                             480,145         604,617
  (Net of Accumulated Depreciation)

OTHER ASSETS                                                        20,497          27,193

                                                               -----------     -----------
                                                               $ 3,731,279     $ 3,950,190
                                                               ===========     ===========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
  Current Maturities-Long Term Note Due ATS                    $   120,000     $   120,000
  Current Portion of Capital Lease Obligation                       15,071          24,599
  Accounts Payable                                                 111,436         302,484
  Accrued Salaries and Benefits                                     72,504         115,198
  Deferred Revenue and Warranty Reserve                            125,683          72,665
                                                               -----------     -----------
                            Total Current Liabilities              444,694         634,946

NON-CURRENT LIABILITIES
  Note Payable-ATS                                                 300,000         360,000
  Capital Lease Obligation (Net of current portion)                      -           2,497

STOCKHOLDER'S EQUITY
  Common Stock ($.01 Par, 5,293,673 Shares Outstanding)             52,937          52,937
  Paid in Capital                                               10,442,007      10,442,007
  Unrealized Loss on Investments                                    (1,562)         (3,125)
  Accumulated Deficit                                           (7,506,797)     (7,539,072)
                                                               -----------     -----------
                            Total Stockholder's Equity           2,986,585       2,952,747
                                                               -----------     -----------
                                                               $ 3,731,279     $ 3,950,190
                                                               ===========     ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       3


<PAGE>


                                 n-VISION, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                            Three months ended                        Six months ended
                                                 June 30                                   June 30
                                       -----------------------------           ------------------------------
                                           1998            1997                     1998             1997
                                       ------------    ------------            --------------    ------------
                                               (unaudited)                               (unaudited)
<S><C>
Sales                                  $  870,027      $  623,297              $1,969,899         $1,252,168
Cost of Sales                             422,633         363,613                 997,509            697,999
                                       ----------      ----------              ----------         ----------
     Gross Margin                         447,394         259,684                 972,390            554,169

Operating Expenses
     General and Administrative           222,699         327,013                 518,993            642,604
     Product Development                   95,683         103,139                 181,640            197,157
     Marketing and Sales                  122,948         136,677                 263,225            256,532
                                       ----------      ----------              ----------         ----------
Income (Loss) from operations               6,064        (307,145)                  8,532           (542,124)

Non-Operating Income
     (Expense)
Interest Income                            21,104          40,334                  45,286             96,449
Interest Expense                          (10,236)        (13,393)                (20,672)           (26,960)
                                       ----------      ----------              ----------         ----------
Income (Loss) before income                16,932        (280,204)                 33,146           (472,635)
taxes

     Income Tax Provision                       -               -                       -                  -
                                       ----------      ----------              ----------         ----------
Net Income (Loss)                      $   16,932      $ (280,204)             $   33,146         $ (472,635)
                                       ==========      ==========              ==========         ==========

Weighted average shares                 5,293,673       5,293,673               5,293,673          5,303,150
outstanding - Basic
                                       ==========      ==========              ==========         ==========

Income (Loss) per Share - Basic        $      .01      $     (.05)             $      .01         $     (.09)
                                       ==========      ==========              ==========         ==========


Weighted average shares                 5,375,795       5,293,673               5,376,168          5,303,150
outstanding - Diluted
                                       ==========      ==========              ==========         ==========

Income (Loss) per Share - Diluted      $      .01      $     (.05)             $      .01         $     (.09)
                                       ==========      ==========              ==========         ==========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       4


<PAGE>


                                 n-VISION, INC.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                             Six months ended
                                                                                  June 30
                                                                     ----------------------------------
                                                                          1998              1997
                                                                     --------------    ----------------
                                                                      (Unaudited)        (Unaudited)
<S><C>
Cash Flows from operating activities
  Net Income (Loss)                                                      33,146             (472,635)
  Adjustments to reconcile Net Income (Loss) to net cash used
    in operating activities
     Depreciation and amortization                                       127,531              72,335
     Loss on Disposal of Fixed Assets                                      1,404              19,946
   Changes in assets and liabilities
     (Increase) Decrease in accounts receivable                         (469,258)           (435,422)
     (Increase) Decrease in inventories                                  156,183               6,438
     (Increase) Decrease in prepaid expenses                               6,331             (33,315)
     (Increase) Decrease in Other Receivable                             (36,448)            (48,252)
     (Decrease) Increase in accounts payable                            (191,048)             21,463
     (Decrease) Increase in accrued salaries and benefits                (42,694)             25,688
     (Decrease) Increase in Deferred Revenue and Warranty
       Reserve                                                            53,018             (58,777)
                                                                       ---------         -----------
       Total Adjustments                                                (394,981)           (429,896)
                                                                       ---------         -----------
       Net  cash used in operating activities                           (361,835)           (902,531)

Cash flows from investing activities
  Purchase of property and equipment                                     (15,452)           (231,406)
  Proceeds from sell of fixed assets                                           -               9,243
                                                                       ---------         -----------
       Net cash used in investing activities                             (15,452)           (222,163)

Cash flows from financing activities
  Payments on Long term Note - ATS                                       (60,000)            (60,000)
  Receipt of Subscriptions Receivable                                          -               4,048
  Payments of Capital Lease Obligations                                  (12,025)            (10,536)
                                                                       ---------         -----------
       Net cash used in financing activities                             (72,025)            (66,488)

                                                                       ---------         -----------
                                Net Increase (Decrease) in Cash        $(449,312)         (1,191,182)
                                                                       =========         ===========

                                            Ending Cash Balance          427,493           1,231,657
                                         Beginning Cash Balance          876,805           2,422,839
                                                                       ---------         -----------
                                                                       $(449,312)         (1,191,182)
                                                                       =========         ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       5


<PAGE>


                                 n-VISION, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)



Note A            Interim Financial Statements

         The condensed financial statements for the three month and six month
periods ended June 30, 1998 and June 30, 1997 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim period. The condensed financial
statements should be read in conjunction with the audited financial statements
and notes thereto, together with management's discussion and analysis of
financial condition and results of operations, contained in the Company's Annual
Report to Shareholders for the year ended December 31, 1997. The results of
operations for the six months ended June 30, 1998 are not necessarily indicative
of the results for the entire fiscal year ending December 31, 1998.

         In preparing financial statements in conformity with generally accepted
accounting principals management is required to make estimates and assumptions
that affect the reported amounts of 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.


Note B            Earnings per share

         In 1997 the Financial Accounting Standards Board issued Financial
Accounting Standards No. 128 - "Earnings per Share." Statement 128 replaces the
presentation of primary and fully diluted earnings per share ("EPS") pursuant to
Accounting Principals Board Opinion No. 15 with the presentation of basic and
diluted EPS. Basic EPS excludes dilution and is computed by dividing net income
available to common shareholders by the weighted number of shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common shares were exercised or converted
into common shares and then shared in the earnings of the Company. Options are
accounted for in accordance with APB 25, whereby if options are priced at fair
market value or above at the date of the grant, no compensation expense is
recognized.

         The following table sets forth the reconciliation between basic and
diluted EPS.




<TABLE>
<CAPTION>
Three Months Ended June 30,                                           1998               1997
------------------------------------------------------------------------------------------------
<S><C>
Numerator
  Net Income available for common shareholders - Basic                16,932           (280,204)
    Income Adjustments                                                     -                  -
                                                                ------------        -----------
   Net Income available for common shareholders - Diluted             16,932           (280,204)

Denominator
  Denominator for Basic EPS-weighted average shares                5,293,673          5,293,673
  Effect for Dilutive Securities
    Employee Stock Options                                            82,122                  -
                                                                -------------       -----------
  Denominator for diluted EPS                                      5,375,795          5,293,673
------------------------------------------------------------------------------------------------
</TABLE>


                                       6


<PAGE>

<TABLE>
Six Months Ended June 30,                                             1998               1997
------------------------------------------------------------------------------------------------
<S><C>
Numerator
  Net Income available for common shareholders - Basic                33,146           (472,635)
    Income Adjustments                                                     -                  -
                                                                ------------        -----------
  Net Income available for common shareholders - Diluted              33,146           (472,635)

Denominator
  Denominator for Basic EPS-weighted average shares                5,293,673          5,303,150
  Effect for Dilutive Securities
    Employee Stock Options                                            82,495                  -
                                                                -------------       -----------
  Denominator for diluted EPS                                      5,376,168          5,303,150
------------------------------------------------------------------------------------------------
</TABLE>

                                       7


<PAGE>



Item  2           MANAGEMENT'S DISCUSSION AND ANALYSIS
            OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This Management Discussion and Analysis contains a number of forward-looking
statements within the meaning of The Private Securities Litigation Reform Act of
1995 (the "Act"). In particular, when used in the discussion, conditional
expressions are intended to identify forward-looking statements within the
meaning of the Act and are subject to the safe harbor created by the Act. Such
statements are subject to certain risks and uncertainties and actual results
could differ materially from those expressed in any of the forward-looking
statements. Such risks and uncertainties include, but are not limited to, market
conditions, the availability of components for, delays in the start of and
production of the next generation of immersive displays, general acceptance of
the Company's products and technologies, competitive factors, the ability to
successfully complete additional financing and other risks discussed in any of
the Company's SEC reports and filings.

General

n-Vision, Inc. ("Company"), a Delaware corporation, designs, develops,
manufactures, and markets state of the art 3D immersive displays for use in
advanced visualization applications, products, and systems for a variety of
commercial, industrial, and military applications. The Company's products and
systems are marketed worldwide, but principally to customers in North America,
Europe, and the Pacific Rim. The Company's customers include Boeing, The
Catholic University of America, Daimler Benz, Fuji Heavy Industries, Hughes
Training, Iowa State University, Lockheed Martin, Lucent Technologies, NASA,
Raytheon, The Walt Disney Company, U.S. Air Force, U.S. Navy, Volkswagen, and
Volvo among others.



Results of Operations

Quarter Ended June 30, 1998 Compared to the Quarter Ended June 30, 1997
For the quarter ended June 30, 1998, the Company reported revenue of $870,027, a
40% increase compared to the same period ended June 30, 1997 where the Company
reported revenue of $623,297. The increase was attributable primarily to an
increased demand for the Company's off-the-shelf display systems as well as the
continued delivery of systems pursuant to a $1.25 million contract to a
subsidiary of The Walt Disney Company. This contract is expected to have little
impact on revenue in the last two quarters of 1998. As of the date of this
report, the Company had a backlog of delivered and undelivered systems totaling
approximately $470,000.

The Company's gross margin on sales increased to 51% in the second quarter of
1998 from 42% during the same period in 1997. The increase is attributable to
the product mix shift during the second quarter to favor higher margin units.
The Company can make no assurances that the product mix will continue to favor
high margin systems in the future.

General and administrative cost decreased to $222,699 for the three months ended
June 30, 1998 from $327,013 during the same three-month period during 1997. The
decrease is attributable to a number of factors. During 1997, the Company
experienced a substantial increase in one-time general and administrative costs
due to the need to upgrade its infrastructure to support the anticipated growth
of the Company. During the latest three-month period, the Company was able to
decrease these costs as the upgrades were substantially complete. Additionally,
the upgrade in management information systems has enabled the Company to
maintain or cut costs in other areas because of more effective cost management.
The Company, however, can make no assurances that it can maintain or decrease
costs in the future if the


                                       8


<PAGE>


Company continues its growth. A third factor that contributed to the decrease in
general and administrative costs were savings in salaries to the executive
management of the Company. These savings were achieved through attrition and
voluntary salary reductions and should continue to contribute to the performance
of the Company through the remainder of 1998.

Product Development costs decreased marginally to $95,683 during the second
quarter of 1998 when compared to $103,139 during the second quarter of 1997. The
decrease is due primarily to fewer new products in the development pipeline
during 1998 when compared to 1997. The Company can make no assurances that it
can continue to hold product development costs level as new technologies emerge
that could help the Company continue to expand its product line of 3D immersive
displays and thus allow the Company to penetrate new markets.

Similarly, marketing and sales costs decreased to $122,948 during the
three-month period ended June 30, 1998 when compared to $136,677 during the same
three-month period in 1997. The decrease was attributable primarily to fewer new
product launches during the second quarter of 1998 when compared to the second
quarter of 1997. The Company anticipates marketing and sales costs to increase
during the remainder of 1998 with the unveiling of the Datavisor LCD. The
Datavisor LCD is a product positioned at the "below $10,000" segment of the
professional HMD market and could have appeal to a broader market than any of
the Company's previous products. The advertising and promotion costs of this
product could be substantial in the third and fourth quarters of 1998.

For the quarter ended June 30, 1998 the Company reported income from operations
of $6,064 compared to a loss from operations of ($307,145) for the same period
in 1997. The increase is primarily attributable to strong revenue growth,
improving margins, and reductions in the operating costs of the Company
resulting in the second consecutive quarter of profitability in 1998. The
Company can make no assurances that it can maintain revenue growth, gross
margins, or the current cost structure of the Company given the competitive
industry in which the Company operates. During the three months ended June 30,
1998 the Company maintained a positive net interest margin of $10,868 compared
to a positive net interest margin of $26,941 for the same period in 1997. The
decease in net interest margin is the result of fewer interest earning deposits
on hand during the period. For the quarter ended June 30, 1998 the Company
reported Net Income of $16,932 compared to a net loss of ($280,204) for the same
period in 1997.


Six Months Ended June 30, 1998 Compared to the Six Months Ended June 30, 1997
For the six months ended June 30, 1998, the Company reported revenue of
$1,969,899, a 57% increase compared to the same period ended June 30, 1997 where
the Company reported revenue of $1,252,168. The increase was attributable
primarily to an increased demand for the Company's off-the-shelf display systems
as well as the delivery of systems pursuant to a $1.25 million contract to a
subsidiary of The Walt Disney Company. This contract is expected to have little
impact on revenue in the last six months of 1998. The Company's gross margin on
sales increased to 49% in the first six months of 1998 from 44% during the same
period in 1997. The increase is attributable to the product mix shift during the
second quarter to favor higher margin units. The Company can make no assurances
that the product mix will continue to favor high margin systems in the future.

General and administrative cost decreased to $518,993 for the six months ended
June 30, 1998 from $642,604 during the same six-month period during 1997. The
decrease is attributable to a number of factors. During 1997, the Company
experienced a substantial increase in one-time general and administrative costs
due to the need to upgrade its infrastructure to support the anticipated growth
of the Company. During the latest three-month period, the Company was able to
decrease these costs as the upgrades were substantially complete. Additionally,
the upgrade in management information systems has enabled the Company to
maintain or cut costs in other areas because of more effective cost management.
The Company, however, can make no assurances that it can maintain or decrease
costs in the future if the Company continues its growth. A third factor that
contributed to the decrease in general and administrative costs were savings in
salaries to the executive management of the Company. These savings were achieved


                                       9


<PAGE>


through attrition and voluntary salary reductions during the second quarter and
should continue to contribute to the performance of the Company through the
remainder of 1998.

Product Development costs decreased marginally to $181,640 during the first six
months of 1998 when compared to $197,157 during the first six months of 1997.
The decrease is due primarily to fewer new products in the development pipeline
during 1998 when compared to 1997. The Company can make no assurances that it
can continue to hold product development costs level as new technologies emerge
that could help the Company continue to expand its product line of 3D immersive
displays and thus allow the Company to penetrate new markets.

Marketing and sales costs increased to $263,225 during the six-month period
ended June 30, 1998 when compared to $256,532 during the same six-month period
in 1997. The increase is primarily attributable to costs incurred during the
first half of the period from products which were introduced in the last six
month of 1997. The Company anticipates marketing and sales costs to increase
during the remainder of 1998 with the unveiling of the Datavisor LCD. The
Datavisor LCD is a product positioned at the "below $10,000" segment of the
professional HMD market and could have appeal to a broader market than any of
the Company's previous products. The advertising and promotion costs of this
product could be substantial in the third and fourth quarters of 1998.

For the six months ended June 30, 1998 the Company reported income from
operations of $8,532 compared to a loss from operations of ($542,124) for the
same period in 1997. The increase is primarily attributable to strong revenue
growth, improving margins, and reductions in the operating costs of the Company
resulting in the second consecutive quarter of profitability in 1998. The
Company can make no assurances that it can maintain revenue growth, gross
margins, or the current cost structure of the Company given the competitive
industry in which the Company operates. During the six months ended June 30,
1998 the Company maintained a positive net interest margin of $24,614 compared
to a positive net interest margin of $69,489 for the same period in 1997. The
decease in net interest margin is the result of fewer interest earning deposits
on hand during the period. For the six months ended June 30, 1998 the Company
reported Net Income of $33,146 compared to a net loss of ($472,635) for the same
period in 1997.


Liquidity and Capital Resources
Working capital totaled $2,785,943 as of June 30, 1998 compared to a working
capital balance of $3,436,741 as of June 30, 1997. The decrease is primarily
attributable to operating losses sustained during 1997. The Company believes
that the current level of working capital is sufficient to meet its needs
through the end of the current year. Cash used for operations in the first six
months of 1998 was primarily due to an increase in accounts receivable due to
the large increase in credit sales which the company expects to collect in the
third quarter of the year.

Longer-term cash requirements, other than normal operating expenses, are
anticipated for the development of new products, financing of growth, and the
possible acquisitions of related businesses and technologies. The Company
believes that its current level of capital resources is sufficient to satisfy
the anticipated cash requirements through the end of 1998. Additionally, the
Company has 1,380,000 class A warrants outstanding with an exercise price of
$5.50 per share. The warrants may be exercised, at the option of the holder,
until their expiration date of May 28, 2001. The warrants are also subject to
conversion at the Company's election if the price of the Company's common stock
equals or exceeds $9.00 per share for 20 consecutive days within a period of 30
days. The Company, however, can make no assurances that investors would elect to
exercise the warrants or that the conversion price can be reached since the
current trading price has ranged from $.75 to $1.50.


Income Taxes
The Company is organized as a C corporation and pays income taxes based upon
accrual based taxable income adjusted for differences in the timing of reporting
certain expenses for tax and financial statement


                                       10


<PAGE>


purposes. The Company's income taxes payable if any, that may arise in the
future may be offset by credits available for certain research and development
expenditures incurred.

As of December 31, 1997, the Company had a net operating loss carryforward
available to offset future taxable income generated through 2010 of
approximately $2,638,000. The deferred tax asset associated with these benefits
has been fully reserved in the Company's financial statements because of the
uncertainty surrounding future profitability. In the event of a change in
control of the Company, use of such a carryforward could be reduced.


Impact of Inflation and the Asian Financial Crisis
The Company believes that inflation has not had a material adverse effect on
sales or costs. Additionally, the Company believes that the financial crises in
Asia will not have adverse effects on its operating results during 1998. During
1997, less than 10% of the Company's revenue was derived from products sold to
customers in Asia.


Year 2000 Issues
The Company's information systems are based on platforms and applications that
Management believes are fully Year 2000 compliant. As a result, management
believes the Company does not face significant Year 2000 issues.


Seasonality
Based on its limited experience to date, the Company believes that its future
operating results will not be subject to seasonal changes. Such effects, should
they occur, might become 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.


                                       11


<PAGE>


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

Item 6.  Exhibits and Reports on Form 8-K

No reports on Form 8-K were filed during the quarter June 30, 1998.




                                       12



<PAGE>



Signatures

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

Dated:   August 7, 1998


                                n-VISION, INC.
                                (Registrant)




                                /S/ Harry S. Katrivanos
                                _____________________________________________
                                 Harry S. Katrivanos
                                 Chief Financial Officer
                                 (Principal Financial and Accounting Officer)


                                       13