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. Comment: 6 pages, 7 figures, corrected version, Proceedings Volume 11444, Space Telescopes and Instrumentation 2020: Ultraviolet to Gamma Ray; 114447V (2020). arXiv admin note: text overlap with arXiv:2006.12174
