  The Virtual Telescope for X-ray Observations (VTXO) will use lightweight
Phase Fresnel Lenses (PFLs) in a virtual X-ray telescope with $\sim$1 km focal
length and with $\sim$50 milli-arcsecond angular resolution. VTXO is formed by
using precision formation flying of two SmallSats: a smaller OpticsSat that
houses the PFLs and navigation beacons while a larger DetectorSat contains an
X-ray camera, a precision start tracker, and the propulsion for the formation
flying. The baseline flight dynamics uses a highly elliptical supersynchronous
orbit allow the formation to hold in an inertial frame around the 90,000 km
apogee for 10 hours of the 32.5 hour orbit with nearly a year mission lifetime.
VTXO's fine angular resolution enables measuring the environments close to the
central engines of bright compact X-ray sources. This X-ray imaging capability
allows for the study of the effects of dust scattering near to the central
objects such as Cyg X-3 and GX 5-1, for the search for jet structure near to
the compact object in X-ray novae such as Cyg X-1 and GRS 1915+105, and for the
search for structure in the termination shock of in the Crab pulsar wind
nebula. The VTXO SmallSat and instrument designs, mission parameters, and
science performance are described. VTXO development was supported as one of the
selected 2018 NASA Astrophysics SmallSat Study (AS$^3$) missions.
