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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2005



COMMISSION FILE NUMBER 0-10449



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TVI CORPORATION

(Exact name of registrant as specified in its charter)



|                                                                         |  |                                                
|------------------------------------------------------------------------ |  | -----------------------------------------------
|Maryland (State or other jurisdiction of incorporation or incorporation) |  | 52-1085536 (I.R.S. Employer Identification No.)



7100 Holladay Tyler
Road, Glenn Dale, MD 20769

(Address of principal executive offices, including zip code)



(301) 352-8800

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



Indicate the number of shares outstanding of
each of the issuers classes of common stock, as of the latest practicable date: 29,950,392 shares of Common Stock issued and outstanding as of May 9, 2005.



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TVI CORPORATION



INDEX TO FORM 10-Q



|                                                                                               |  |     
|---------------------------------------------------------------------------------------------- |  | ----
|                                                                                               |  | Page
|PART I  FINANCIAL INFORMATION                                                                 |  |     
|Item 1. Consolidated Financial Statements                                                      |  |     
|Consolidated Statements of Income                                                              |  | 1   
|Consolidated Balance Sheets                                                                    |  | 2   
|Consolidated Statements of Cash Flows                                                          |  | 3   
|Notes to Consolidated Financial Statements                                                     |  | 4   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. |  | 9   
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                             |  | 14  
|Item 4. Controls and Procedures                                                                |  | 14  
|PART II  OTHER INFORMATION                                                                    |  |     
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                            |  | 14  
|Item 6. Exhibits.                                                                              |  | 15  
|SIGNATURES                                                                                     |  | 16  
|EXHIBIT INDEX                                                                                  |  |     



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS.
|------- | ---------------------



TVI CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended March 31, 2005 and 2004

(all data in thousands, except per share data)

(Unaudited)



|                                                    |  |      |        |      |   |       
|--------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                    |  | 2005 |        | 2004
|NET SALES                                           |  | $    | 8,871  |      | $ | 8,593 
|COST OF SALES                                       |  |      | 4,162  |      |   | 4,076 
|                                                    |  |      |        |      |   |       
|GROSS PROFIT                                        |  |      | 4,709  |      |   | 4,517 
|                                                    |  |      |        |      |   |       
|OPERATING EXPENSES                                  |  |      |        |      |   |       
|Selling, general and administrative expenses        |  |      | 2,036  |      |   | 1,707 
|Research and development expenses                   |  |      | 277    |      |   | 223   
|                                                    |  |      |        |      |   |       
|Total operating expenses                            |  |      | 2,313  |      |   | 1,930 
|                                                    |  |      |        |      |   |       
|OPERATING INCOME                                    |  |      | 2,396  |      |   | 2,587 
|INTEREST AND OTHER INCOME, NET                      |  |      | 39     |      |   | 15    
|                                                    |  |      |        |      |   |       
|INCOME BEFORE INCOME TAXES                          |  |      | 2,435  |      |   | 2,602 
|PROVISION FOR INCOME TAXES                          |  |      | 901    |      |   | 1,002 
|                                                    |  |      |        |      |   |       
|NET INCOME                                          |  | $    | 1,534  |      | $ | 1,600 
|                                                    |  |      |        |      |   |       
|EARNINGS PER COMMON SHAREBASIC                     |  | $    | 0.051  |      | $ | 0.056 
|                                                    |  |      |        |      |   |       
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC   |  |      | 29,816 |      |   | 28,408
|                                                    |  |      |        |      |   |       
|EARNINGS PER COMMON SHAREDILUTED                   |  | $    | 0.050  |      | $ | 0.053 
|                                                    |  |      |        |      |   |       
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGDILUTED |  |      | 30,801 |      |   | 30,402
|                                                    |  |      |        |      |   |       



The accompanying notes
are an integral part of these consolidated financial statements.



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TVI CORPORATION

CONSOLIDATED BALANCE SHEETS

At March 31, 2005 and December 31, 2004

(all data in thousands, except per
share data)



|                                                                                                                                       |  |               |        |                  |   |       
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | ---------------- | - | ------
|                                                                                                                                       |  | March 31,2005 |        | December 31,2004
|                                                                                                                                       |  | (Unaudited)   |        |                 
|ASSETS                                                                                                                                 |  |               |        |                  |   |       
|CURRENT ASSETS                                                                                                                         |  |               |        |                  |   |       
|Cash and cash equivalents                                                                                                              |  | $             | 12,305 |                  | $ | 13,054
|Accounts receivable less allowance for doubtful accounts                                                                               |  |               | 6,915  |                  |   | 4,418 
|Inventories                                                                                                                            |  |               | 2,854  |                  |   | 1,829 
|Deferred income taxes                                                                                                                  |  |               | 227    |                  |   | 227   
|Other current assets                                                                                                                   |  |               | 640    |                  |   | 506   
|                                                                                                                                       |  |               |        |                  |   |       
|Total current assets                                                                                                                   |  |               | 22,941 |                  |   | 20,034
|                                                                                                                                       |  |               |        |                  |   |       
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                     |  |               | 2,660  |                  |   | 2,506 
|                                                                                                                                       |  |               |        |                  |   |       
|OTHER ASSETS                                                                                                                           |  |               |        |                  |   |       
|Goodwill                                                                                                                               |  |               | 554    |                  |   | 554   
|Intangible assets, net                                                                                                                 |  |               | 204    |                  |   | 148   
|Other assets                                                                                                                           |  |               | 48     |                  |   | 48    
|                                                                                                                                       |  |               |        |                  |   |       
|Total other assets                                                                                                                     |  |               | 806    |                  |   | 750   
|                                                                                                                                       |  |               |        |                  |   |       
|TOTAL ASSETS                                                                                                                           |  | $             | 26,407 |                  | $ | 23,290
|                                                                                                                                       |  |               |        |                  |   |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                   |  |               |        |                  |   |       
|CURRENT LIABILITIES                                                                                                                    |  |               |        |                  |   |       
|Accounts payabletrade                                                                                                                 |  | $             | 2,160  |                  | $ | 1,073 
|Accrued expenses                                                                                                                       |  |               | 2,273  |                  |   | 1,857 
|                                                                                                                                       |  |               |        |                  |   |       
|Total current liabilities                                                                                                              |  |               | 4,433  |                  |   | 2,930 
|                                                                                                                                       |  |               |        |                  |   |       
|TOTAL LIABILITIES                                                                                                                      |  |               | 4,433  |                  |   | 2,930 
|                                                                                                                                       |  |               |        |                  |   |       
|STOCKHOLDERS EQUITY                                                                                                                   |  |               |        |                  |   |       
|Preferred stock$1 par value; 1,200 shares authorized, -0- issued and outstanding                                                       |  |               | 0      |                  |   | 0     
|Common stock$0.01 par value; 98,800 shares authorized, issued and outstanding 29,943 and 29,771 shares in 2005 and 2004,
respectively. |  |               | 299    |                  |   | 298   
|Additional paid in capital                                                                                                             |  |               | 14,712 |                  |   | 14,633
|Retained earnings                                                                                                                      |  |               | 6,963  |                  |   | 5,429 
|                                                                                                                                       |  |               |        |                  |   |       
|TOTAL STOCKHOLDERS EQUITY                                                                                                             |  |               | 21,974 |                  |   | 20,360
|                                                                                                                                       |  |               |        |                  |   |       
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                             |  | $             | 26,407 |                  | $ | 23,290
|                                                                                                                                       |  |               |        |                  |   |       



The accompanying notes
are an integral part of these consolidated financial statements.



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TVI CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2005 and 2004

(all data in thousands)

(Unaudited)



|                                                                                  |  |      |        |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                  |  | 2005 |        |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |      |        |   |      |   |        |  
|Net Income                                                                        |  | $    | 1,534  |   |      | $ | 1,600  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |        |   |      |   |        |  
|Depreciation and amortization                                                     |  |      | 82     |   |      |   | 52     |  
|Stock-based compensation                                                          |  |      | 49     |   |      |   | 0      |  
|Changes in assets and liabilities:                                                |  |      |        |   |      |   |        |  
|Increase in accounts receivabletrade                                             |  |      | (2,497 | ) |      |   | (1,643 | )
|Increase in inventories                                                           |  |      | (1,025 | ) |      |   | (696   | )
|Increase in other current assets                                                  |  |      | (165   | ) |      |   | (101   | )
|Increase in other assets                                                          |  |      | 0      |   |      |   | (10    | )
|Increase in accounts payable                                                      |  |      | 1,087  |   |      |   | 750    |  
|Increase in accrued expenses                                                      |  |      | 416    |   |      |   | 1,388  |  
|                                                                                  |  |      |        |   |      |   |        |  
|Net cash provided by (used in) provided by operating activities                   |  |      | (519   | ) |      |   | 1,340  |  
|                                                                                  |  |      |        |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |      |        |   |      |   |        |  
|Purchases of intangible assets                                                    |  |      | (63    | ) |      |   | (9     | )
|Purchases of property, plant and equipment                                        |  |      | (229   | ) |      |   | (164   | )
|                                                                                  |  |      |        |   |      |   |        |  
|Net cash used in investing activities                                             |  |      | (292   | ) |      |   | (173   | )
|                                                                                  |  |      |        |   |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |      |        |   |      |   |        |  
|Issuance of common stock                                                          |  |      | 62     |   |      |   | 135    |  
|                                                                                  |  |      |        |   |      |   |        |  
|Net cash provided by financing activities                                         |  |      | 62     |   |      |   | 135    |  
|                                                                                  |  |      |        |   |      |   |        |  
|NET (DECREASE) INCREASE IN CASH                                                   |  |      | (749   | ) |      |   | 1,302  |  
|Cash and cash equivalents at beginning of year                                    |  |      | 13,054 |   |      |   | 7,592  |  
|                                                                                  |  |      |        |   |      |   |        |  
|Cash and cash equivalents at end of interim period                                |  | $    | 12,305 |   |      | $ | 8,894  |  
|                                                                                  |  |      |        |   |      |   |        |  



The accompanying notes
are an integral part of these consolidated financial statements.



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TVI CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Period Ended March 31, 2005

(in thousands, except per share data)



Note 1. BASIS OF PRESENTATION.



The accompanying consolidated financial statements include the activity of TVI Corporation and its consolidated subsidiary (collectively referred to as TVI or
the Company). TVI was incorporated under the laws of Maryland in 1977. In April 2004, TVI acquired substantially all of the assets of CAPA Manufacturing, LLC, a privately-held company. As a consequence, the Company established CAPA
Manufacturing Corp. (CAPA) as its wholly-owned subsidiary. All material inter-company transactions have been eliminated in consolidation.



The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material
adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. This quarterly report and the accompanying financial statements should be read in conjunction with the Companys audited
financial statements and notes thereto presented in its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 (the 2004 Annual Report). Footnotes which would substantially duplicate the disclosures in the
Companys audited financial statements for the year ended December 31, 2004 contained in the 2004 Annual Report have been omitted. The interim financial information contained in this quarterly report is not necessarily indicative of the results
to be expected for any other interim period or for the full year ending December 31, 2005.



Use of Estimates



Our financial
statements and related public information are based on the application of accounting principles generally accepted in the United States (GAAP). GAAP requires the use of estimates; assumptions, judgments and subjective interpretation of
accounting principles that have an impact on the assets, liabilities and expense amounts reported. These estimates and judgments affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. The Company
continually reviews these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in estimates and assumptions used by management could have a significant impact on the Companys financial
results. The Company believes that the following are among its most significant accounting policies. They utilize estimates about the effect of matters that are inherently uncertain and therefore are based on managements judgment.



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Cash and Cash Equivalents



For purposes of financial statement presentation, the Company considers all liquid investments with initial maturities of approximately ninety days or less to be cash
equivalents. The carrying value of the cash equivalents approximates their estimated fair value.



Recent Accounting Pronouncements



In
December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R is a revision
of FASB Statement No. 123, Accounting for Stock-Based Compensation and it supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS 123R establishes standards for
the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the
entitys equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS
123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in Statement 123 as originally issued and Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. SFAS 123R does not address the accounting for employee share ownership plans, which are subject to AICPA Statement
of Position 93-6, Employers Accounting for Employee Stock Ownership Plans.



SFAS 123R requires companies to measure compensation expense for all share-based payments (including employee stock options) at fair value and recognize the expense over the related service period. Additionally, excess tax benefits, as
defined in SFAS 123R, will be recognized as an addition to paid-in capital and will be reclassified from operating cash flows to financing cash flows in the Consolidated Statements of Cash Flows.



As amended by the Securities and Exchange Commission in Release No. 33-8568, SFAS 123R will
be effective beginning in the first quarter of 2006 and we are currently evaluating the effect that implementation will have on the results of our operations and financial position. We have included below, in Note 3. Stock-based
Compensation, information regarding the effect on net income and net income per common share had we applied the fair value expense recognition provisions of the original Statement No. 123. The Company expects the impact of implementing SFAS
123R will be a reduction in earnings per share. However, a number of technical implementation issues must be resolved, including the selection and use of an appropriate valuation model such that the ultimate impact of adopting SFAS 123R is not yet
known.



In December 2004, the FASB issued SFAS No. 153, Exchanges of
Nonmonetary Assetsan amendment of APB Opinion No. 29 (SFAS 153). SFAS 153 eliminates the exception for nonmonetary exchanges of similar productive assets in APB 29 and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A



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nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly
as a result of the exchange. SFAS 153 will be effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company anticipates that adoption of SFAS 153 will not have a material impact on its net income or
financial condition.



In November 2004, the FASB issued SFAS No. 151,
Inventory Costsan amendment of ARB No. 43, Chapter 4 (SFAS 151). SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) be recognized as
current-period charges. In addition, the allocation of fixed production overhead to the costs of conversion is required to be based on the normal capacity of the production facilities. SFAS 151 is effective prospectively for financial statements for
fiscal years beginning after June 15, 2005. The Company is evaluating the impact that SFAS 151 will have on its net income and financial condition and the ultimate impact of adopting this Statement is not yet known.



Note 2. BASIC AND DILUTED EARNINGS PER SHARE.



Basic earnings per share are calculated using the weighted-average number of common shares
outstanding during the period. Diluted earnings per share are calculated using the weighted-average number of common shares plus dilutive potential common shares outstanding during the period. Potential common shares consist of stock options and
convertible preferred stock. As of March 31, 2005, shares attributable to 50,000 outstanding stock options were excluded from the calculation of diluted earnings per share because their effect was antidilutive.



Note 3. STOCK COMPENSATION.



Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(Statement 123), encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the estimated
fair value of the Companys stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company has adopted the disclosure only alternative described in Statement 123, which requires pro forma
disclosures of net income and earnings per share as if the fair value method of accounting has been applied.



The following tables illustrate the effect on net income in the three-month periods ended March 31, 2005 and 2004 as if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based
compensation:



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|                                                                                                                      |  |      |       |   |      |   |       |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                                                                                      |  | 2005 |       |   | 2004 |  
|Net income as reported                                                                                                |  | $    | 1,534 |   |      | $ | 1,600 |  
|Add: Stock-based compensation expense included in net income reported above, net of related tax effects               |  |      | 31    |   |      |   | 0     |  
|Deduct: Stock-based compensation determined under fair value based methods for all awards, net of related tax effects |  |      | (175  | ) |      |   | (123  | )
|                                                                                                                      |  |      |       |   |      |   |       |  
|Proforma net income                                                                                                   |  | $    | 1,390 |   |      | $ | 1,477 |  
|                                                                                                                      |  |      |       |   |      |   |       |  
|Earnings per common share as reported:                                                                                |  |      |       |   |      |   |       |  
|Basic                                                                                                                 |  | $    | 0.051 |   |      | $ | 0.056 |  
|                                                                                                                      |  |      |       |   |      |   |       |  
|Diluted                                                                                                               |  | $    | 0.050 |   |      | $ | 0.053 |  
|                                                                                                                      |  |      |       |   |      |   |       |  
|Proforma earnings per common share                                                                                    |  |      |       |   |      |   |       |  
|Basic                                                                                                                 |  | $    | 0.047 |   |      | $ | 0.052 |  
|                                                                                                                      |  |      |       |   |      |   |       |  
|Diluted                                                                                                               |  | $    | 0.045 |   |      | $ | 0.049 |  
|                                                                                                                      |  |      |       |   |      |   |       |  



Note
4.    INVENTORIES.



Inventories as March 31, 2005 and
December 31, 2004 consist of:



|                 |  |      |       |      |   |      
|---------------- |  | ---- | ----- | ---- | - | -----
|                 |  | 2005 |       | 2004
|Finished goods   |  | $    | 150   |      | $ | 136  
|Work in progress |  |      | 895   |      |   | 207  
|Raw materials    |  |      | 1,623 |      |   | 1,338
|Other            |  |      | 186   |      |   | 148  
|                 |  |      |       |      |   |      
|Total            |  | $    | 2,854 |      | $ | 1,829
|                 |  |      |       |      |   |      



Other inventories consist of field
service, demonstration and other sales support inventory. At March 31, 2005 and December 31, 2004, inventory reserves for excess and obsolete inventories were $726 and $629, respectively.



Note 5.    SIGNIFICANT CUSTOMERS.



Net sales to the Companys largest customer totaled approximately $5,876 and $3,401 for the three-months ended March 31, 2005 and 2004,
respectively. These sales represented 66% and 40% of total net sales for the quarters ended March 31, 2005 and 2004, respectively. For the three-months ended March 31, 2004, net sales to two other customers represented approximately 24% and 18%,
respectively. There were no other customers representing more than 10% of net sales in either year.



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Note 6. INTERNAL REVENUE SERVICE EXAMINATION.



The Internal Revenue Service (IRS) is in the process of conducting an examination of the Companys 2003
federal income tax return. Management believes that any adjustments required as a result of this examination will not have a material impact on the Companys financial statements.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------



CAUTIONARY NOTE REGARDING THE USE OF FORWARD-LOOKING

STATEMENTS CONCERNING OUR BUSINESS:



The following section of this report entitled Managements Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Report contain forward-looking
statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, that are based on managements expectations, estimates, projections and assumptions. These statements may be identified by the use of
forward-looking words or phrases such as should, believes, expects, might result, anticipates, projects, estimates and others. These forward-looking statements
involve risks and uncertainties and are not guarantees of future performance, as actual results could differ materially from our current expectations.



Such risks and uncertainties include achieving order and sales levels to fulfill revenue expectations; expected costs or charges, certain of which may be outside of our
control; the time and costs involved in the research, development, marketing and promotion for our products; the possible cancellation or non-fulfillment of existing orders or distributor commitments for our products; our ability to respond to
product and other changes in the counter-terrorism, military, public safety, and first responder communities, adverse changes in governmental regulations; our ability to maintain and manage our growth; difficulties in integrating the operations,
technologies and products of any businesses we may acquire; general economic and business conditions; and competitive factors in our markets and industry generally. Numerous other factors could cause or contribute to such differences. Readers are
cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date of this report. The Company assumes no obligation to update any such forward-looking statements even if experience or future changes make it
clear that projected results expressed or implied in such statements will not be realized.



The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and Notes thereto contained herein.



Overview



TVI Corporation, located in Glenn Dale, Maryland, is a supplier of rapidly deployable first responder systems for homeland security,
hospitals, police and fire departments, the military and public health agencies. The Company designs, fabricates and markets products and systems both through distributors and directly to end-users and original equipment manufacturers
(OEM). These systems include chemical and biological decontamination systems, hospital surge capacity systems, and infection control systems, all of which utilize the Companys fabric shelter structures as a core product, employing
the Companys proprietary articulating frame. The Company also sells a line of powered air respirator systems and thermal products, which include targets, Identification Friend or Foe (IFF) devices, aircraft beacons, markers and
decoys. In addition, the Company recently established capability for the manufacture of disposable filter canisters for the first responder, military, healthcare and industrial markets.



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Results of Operations for the Three Months Ended March 31, 2005 Compared With 2004 (dollars in thousands, except per
share data)



Net Sales:

Net Sales increased $278, or 3%, to $8,871 for the three-months ending March 31, 2005, from $8,593 in the first quarter of 2004. The net sales increase was primarily
attributable to sales of our CAPA subsidiary totaling approximately $501, while sales from our core shelter and thermal products decreased approximately $224. The decline in our core shelter sales was primarily related to an approximate $1,500
decrease in sales through our international distributors that was not fully offset by an increase in domestic sales.



Gross Profit:

Gross profit increased $192, or 4%, to $4,709 for the
three-months ending March 31, 2005, compared with $4,517 for the first quarter of 2004. Gross margin as a percentage of sales was 53.1% for the 2005 compared with 52.6% for 2004. The increase in the gross margin percentage is primarily related to a
change in product mix.



Selling, General and Administrative:

Selling, General and Administrative (SG&A) expense was $2,036 for the three months ending March 31, 2005, an increase of $329, or 19%, compared with
$1,707 for the first quarter of 2004. The increase primarily reflects increased headcount related to our acquisition of CAPA in 2004 and the addition of the filter canister manufacturing line. The Company also incurred increased SG&A expenses
related to various strategic and marketing initiatives that are intended to produce future business growth.



Research and Development:

Research and development expense (R&D) was $277 for the three-months ended
March 31, 2005, an increase of $54 compared with $223 for the first quarter of 2004. The increase primarily reflects the addition of CAPA and the new filter canister manufacturing line.



Operating Income:

Operating income
decreased by $191, or 7%, to $2,396 for the three-months ending March 31, 2005, from $2,587 for the first quarter 2004. Operating income as a percent of net sales decreased to 27% for the three-months ending March 31, 2005, from 30% for the first
quarter of 2004 due to the aforementioned increases in SG&A and R&D expenses.



Income Tax Expense:

The provision for income taxes decreased $101, or 10%, to $901 for the three-months ending March 31, 2005, from $1,002
for the first quarter 2004. The effective tax rate (EFT) for the 2005 period was 37%, compared with 38.5% for the first quarter 2004. The decrease in the EFT is attributable to the manufacturing exclusion under the American Jobs Creation
Act of 2004 and our extraterritorial deduction.



Net Income:

Net income decreased $66, or 4%, to $1,534 for the first quarter of 2005, compared to $1,600 for



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the same period in 2004, primarily reflecting the increase in operating expenses while sales and gross profits grew at a
lesser rate. Earnings per diluted share were $0.050 for the three-months-ended March 31, 2005, compared with $0.053 for the first quarter of 2004.



Financial Condition, Liquidity and Capital

(dollars in thousands)



Management measures the Companys liquidity on the basis of its
ability to meet short-term and long-term operational funding needs and fund additional investments, including acquisitions. Significant factors affecting the management of liquidity are the amount of current working capital, cash flows from
operating activities, capital expenditures, access to bank lines of credit and the Companys ability to attract long-term capital with satisfactory terms.



Working Capital:

At March 31, 2005, TVIs working capital
totaled $18,508, an increase of $1,404 compared with $17,104 at December 31, 2004. Cash and cash equivalents at March 31, 2005 totaled $12,305, a decrease of 6% from December 31, 2004. During the first quarter of 2005, the Company implemented an
enhanced cash management program in order to achieve higher yields on its free cash flow. Under this program, the Company may invest in U.S. Treasury, corporate commercial paper and other interest-bearing securities with various maturities, some of
which may have maturities of up to six months. At March 31, 2005, all investments under the new program were classified as cash equivalents.



Accounts receivable was $6,915 at March 31, 2005, an increase of 57% from December 31, 2004, as an unusually high proportion of shipments occurred in March 2005. As a
result, days-sales outstanding rose to 70, from 42 as of December 31, 2004. We expect that collections of accounts receivable will improve in the second quarter of 2005.



Cash Flows:

Cash flow used in operating
activities was $519 for the three-months ending March 31, 2005, compared with cash flow provided by operations of $1,340 in the same period a year ago. The decrease in operating cash flows is primarily attributable to lesser collections of accounts
receivable due to an unusually high proportion of shipments in March 2005, as discussed above as well as accelerated disbursements toward corporate tax liabilities, payroll related expenses and recognition of revenue deferred in the same period of
2004. We expect operating cash flows will improve in the second quarter of 2005.



Cash used in investing activities totaled $292 for 2005, comprised of $229 for the purchase of property, plant and equipment, primarily related to the new filter canister manufacturing line, and $63 for the purchase of intangible assets,
primarily capitalized costs pertaining to patents and product certifications.



The Company expects that currently available cash and cash equivalents, combined with the internal cash flow generation, will be sufficient to fund investments in working capital to support increased business and additional capital
expenditures. The Company actively seeks to expand by acquisition as well as through the growth of its present businesses. While a significant acquisition may require additional borrowings, equity financing or both, the Company believes it



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would be able to obtain financing based on its last two years of favorable earnings performance and current financial position.



Known Trends



The majority of our sales continue to be attributable to decontamination systems, and we expect strong demand over the foreseeable future.



In 2004, we entered the rapidly-growing personal protection equipment market
through the acquisition of the CAPA business. We also launched our Infection Control product line, which is expected to enhance the medical communitys ability to deal with naturally emerging infectious agents, as well as biological war agents.
In April 2005, we announced the completion of our state-of-the-art filter canister manufacturing facility, which we expect to add a new consumable-product, recurring-revenue component to the Companys business model. The Company expects to
obtain approval on the canister designs from the National Institute of Occupational Health and Safety in the second quarter of 2005. Once the plant is approved and fully operational, which we expect to occur in the third quarter of 2005, we plan to
manufacture disposable canisters for filtering chemical, biological, radial, and nuclear agents, as well as organic vapor and acid gases. We also plan to develop highly efficient particulate filters for the medical market, and filters that meet the
acute American military standard known as C2 A1. In connection with the initiatives described above for the filter canister manufacturing facility, the Company expects additional capital investments.



The Companys product strategy is to continue to expand each product family by both
internal and external means, and to continue to upgrade and improve the performance of existing product lines, so that end users in all of TVIs major market segments will have access to the latest technology and will continue to upgrade their
current stock with more advanced products. In addition, the Company plans to add related new products, which can also be sold to the first responder and military markets.



We believe that on-going research and development is critical to our strategic product development objectives and overall growth strategies.
Specifically, we believe that in order to meet the changing requirements of our customers in the rapidly emerging military, domestic and international markets, we must continue to fund investments in several development projects in parallel. Our
R&D activities are focused on the improvement and maintenance of our existing products; developing new uses and applications for our existing products; and the development of new products, particularly in the area of thermal marking infra-red,
infection control and powered air purifying respirator technology. Most of our efforts are directed toward the realization of products with near-term revenue potential, but we continue to invest in new R&D initiatives to ensure our continued
competitiveness in the more distant future.



The Companys Provision for
Income Taxes and its tax returns as filed with the Internal Revenue Service (IRS) are subject to managements interpretation of the Internal Revenue Code, as well as applicable state tax codes. The Internal Revenue Service
(IRS) is in the process of conducting an examination of the Companys 2003 federal income tax return. Management believes that any adjustments required as a result of this examination will not have a material impact on the
Companys financial statements.



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Critical Accounting Estimates



Note 1 of the Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the
Companys financial statements.



Our financial statements and related
public financial information are based on the application of accounting principles generally accepted in the United States (GAAP). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting
principles that have an impact on the assets, liabilities, and expense amounts reported. These estimates and judgments affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. The Company continually
reviews these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in estimates and assumptions used by management could have a significant impact on the Companys financial results. The
Company believes that the following are among its most significant accounting policies. They utilize estimates about the effect of matters that are inherently uncertain and therefore are based on managements judgment.



Revenue Recognition:

Revenue is recognized from sales when the risks and rewards of ownership pass to customers, which may either be at the time of shipment, upon delivery or acceptance by the customer, according to the terms of sale.
Sales discounts and allowances are recorded in the period in which the sale is recorded.



Inventory Valuation:

The Company routinely evaluates the carrying value of its inventories to ensure they are
carried at the lower of cost or market value. Such evaluation is based on managements judgment and use of estimates, including sales forecasts, historical usage, planned dispositions of materials, product lines, technological events and
trends. In addition, the evaluation is based on changes in inventory management practices that may influence the timing of exiting products and method of disposing of excess inventory.



Excess inventory is generally identified by comparing historical and future expected inventory usage to actual on-hand quantities. Reserves
are provided for on-hand inventory in excess of pre-defined usage forecasts. Forecast usage is primarily determined by projecting historical (actual) inventory usage levels forward to future periods.



Credit and Collections:

The Company maintains allowances for doubtful accounts receivable in order to reflect the potential uncollectibility of receivables related to purchases of products on open credit. If the financial condition of the
Companys customers were to deteriorate, resulting in their inability to make required payments, the Company may be required to record additional allowances for doubtful accounts.



Contingent Liabilities:

The Company is
subject to proceedings, lawsuits, warranty and other claims or uncertainties related to environmental, legal, product and other matters. The Company routinely assesses the



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likelihood of an adverse judgment or outcome to these matters, as well as the range of potential losses. A determination
of the reserves required, if any, is made after careful analysis. The required reserves may change in the future due to new developments.



|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



The requirements of this Item are not applicable to TVI Corporation for the 2005 reporting period.



|Item 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of the Companys management,
including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the foregoing, the Companys President and Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and procedures were adequate at the reasonable assurance level to ensure that information required to be disclosed by the Company in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms.



There were no changes in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



PART II OTHER INFORMATION



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------



During the quarter ended March 31, 2005, the Company issued 4,000 unregistered shares of its common stock in settlement of a claim alleging certain investment
transactions with TVI Corporation. The Company received no cash consideration for the share issuance and recognized $17,600 in stockholder expense, representing the fair value of the shares at issuance, in conjunction with the transaction. The
shares are restricted securities as to sale pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended.



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|Item 6. | Exhibits.
|------- | ---------



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                      
|              | 
|3.1           |  | Articles of Amendment and Restatement of the Company (incorporated by reference to Exhibits from our Form 10-KSB for Fiscal Year Ended December 31, 2003)                                                                                                                                                                                                                                                                        
|              | 
|3.2           |  | Amended and Restated By-laws of the Company (incorporated by reference to Exhibits from our Form 10-KSB for the fiscal year ended December 31, 2004)                                                                                                                                                                                                                                                                             
|              | 
|4.1           |  | Specimen Common Stock Certificate (incorporated by reference to Exhibits from our Registration Statement on Form S-4, File No. 33-15029)                                                                                                                                                                                                                                                                                         
|              | 
|10.1          |  | Amended and Restated 1998 Incentive Stock Option Plan (incorporated by reference to Exhibits from our Form 10-KSB for the fiscal year ended December 31, 2004)                                                                                                                                                                                                                                                                   
|              | 
|10.2          |  | January 31, 2003 Employment Agreement between TVI Corporation and Richard V. Priddy (incorporated by reference to Exhibits from our Form 10-KSB for the fiscal year ended December 31,
2002)                                                                                                                                                                                                                                     
|              | 
|10.3          |  | Rights Agreement, dated as of December 2, 2003, between TVI Corporation and Securities Transfer Corporation which includes the form of Articles of Supplementary of the Series A Preferred
Stock of TVI Corporation as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated by reference to Exhibits from our Form 8-K dated December 2, 2003)
|              | 
|31.1          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Richard V. Priddy                                                                                                                                                                                                                                                                                                                                      
|              | 
|31.2          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Karin McQuade                                                                                                                                                                                                                                                                                                                                          
|              | 
|32.1          |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Richard V. Priddy                                                                                                                                                                                                                                                                                                                                      
|              | 
|32.2          |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Karin McQuade                                                                                                                                                                                                                                                                                                                                          



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SIGNATURES



In accordance with the requirements
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |  |  |                                                                  
|------------------ |  |  |  | -----------------------------------------------------------------
|                   |  |  |  | TVI CORPORATION (Registrant)                                     
|                   |  | 
|Date: May 13, 2004 |  |  |  | /s/ KARIN McQUADE                                                
|                   |  |  |  | KARIN McQUADE, Vice PresidentFinance and Chief Financial Officer



|                   |  |  |  |                                                         
|------------------ |  |  |  | --------------------------------------------------------
|                   |  | 
|Date: May 13, 2004 |  |  |  | /s/ RICHARD V. PRIDDY                                   
|                   |  |  |  | RICHARD V. PRIDDY, President and Chief Executive Officer





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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                              
|              | 
|3.1           |  | Articles of Amendment and Restatement of the Company (incorporated by reference to Exhibits from our Form 10-KSB for Fiscal Year Ended December 31, 2003)                                                                                                                                                                                                                                                                        
|              | 
|3.2           |  | Amended and Restated By-laws of the Company (incorporated by reference to Exhibits from our Form 10-KSB for the fiscal year ended December 31, 2004)                                                                                                                                                                                                                                                                             
|              | 
|4.1           |  | Specimen Common Stock Certificate (incorporated by reference to Exhibits from our Registration Statement on Form S-4, File No. 33-15029)                                                                                                                                                                                                                                                                                         
|              | 
|10.1          |  | Amended and Restated 1998 Incentive Stock Option Plan (incorporated by reference to Exhibits from our Form 10-KSB for the fiscal year ended December 31, 2004)                                                                                                                                                                                                                                                                   
|              | 
|10.2          |  | January 31, 2003 Employment Agreement between TVI Corporation and Richard V. Priddy (incorporated by reference to Exhibits from our Form 10-KSB for the fiscal year ended December 31,
2002)                                                                                                                                                                                                                                     
|              | 
|10.3          |  | Rights Agreement, dated as of December 2, 2003, between TVI Corporation and Securities Transfer Corporation which includes the form of Articles of Supplementary of the Series A Preferred
Stock of TVI Corporation as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated by reference to Exhibits from our Form 8-K dated December 2, 2003)
|              | 
|31.1          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Richard V. Priddy                                                                                                                                                                                                                                                                                                                                      
|              | 
|31.2          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Karin McQuade                                                                                                                                                                                                                                                                                                                                          
|              | 
|32.1          |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Richard V. Priddy                                                                                                                                                                                                                                                                                                                                      
|              | 
|32.2          |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Karin McQuade