Back to GetFilings.com




1

SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

FOR THE FISCAL YEAR ENDED MARCH 29, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-6549

AMERICAN SCIENCE AND ENGINEERING, INC.
(Exact name of registrant as specified in its charter)

MASSACHUSETTS 04-2240991
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

829 MIDDLESEX TURNPIKE, BILLERICA, MASSACHUSETTS 01821
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (508) 262-8700

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

Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock ($.66 2/3 par value) American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
-----

The aggregate market value of voting stock held by non-affiliates of the
registrant on May 30, 1996 was $44,794,737.

4,504,022 shares of Registrant's Common Stock were outstanding on May 30, 1996.

The Exhibit Index is located on page 45
PAGE 1 OF 47 PAGES




2



PART I
- ------

ITEM 1. BUSINESS
- ------- --------

American Science and Engineering, Inc., a Massachusetts corporation formed in
1958 (together with its subsidiary, the "Company"), develops, produces, markets,
sells and provides research and engineering services with respect to, X-ray
inspection systems.

[SQUARE BULLET] X-RAY PRODUCTS

The Company provides a full line of X-ray detection and imaging products used
primarily for the detection of illegal drugs and terrorist explosives. This
equipment is purchased by sophisticated government and commercial clients who
place a premium on the detection of organic material in complex backgrounds. The
company utilizes proprietary transmission and backscatter X-ray detection to
provide differentiation of bombs, drugs and contraband in camouflaged
environments. The range of application includes aviation security, executive
security, protection of high risk governmental offices, mail and parcel
screening, correctional facility security, military security, border control and
special event security (e.g. Olympics, UN 50th anniversary and World Cup
Soccer). The Company's market is driven by domestic and global trends toward
increasing use of terrorism for political purposes and the continued global
proliferation of drug smuggling.

The surge in cross border drug smuggling has created a requirement for cargo and
vehicle inspection. With the assistance of the U.S. Department of Defense and
U.S. Customs, the Company has developed the CargoSearch[Trademark] line of X-ray
inspection equipment. Based on the success of the CargoSearch[Trademark]
prototype at Otay Mesa, CA, the first commercial installations of
CargoSearch[Trademark] are underway for U.S. Customs to inspect trucks for
hidden drugs on the Mexican border. The CargoSearch[Trademark] product family
includes fixed site inspection for trucks; mobile equipment to inspect trucks,
containers and cars; and a fixed pallet inspection system. This equipment has
further application for the detection of weapons and explosives for border
security and protection of high risk facilities. In addition, there is an
emerging application for manifest verification for export and import cargoes.

The Company offers high performance X-ray inspection systems at prices that have
generally been higher than those of competing, less capable systems. However, in
recent years, the Company has brought to the marketplace several new products
that are priced significantly less than competing systems. Across the entire
range of its X-ray inspection systems, the Company has focused on selling
products with unique features that create strong product differentiation and
competitive advantage.

The Company's product line currently includes 12 models. These models can be
broadly categorized into 5 groups including: the Model 101 series, the Model 66
series, the EXR[Trademark]- ZZ[Registered Trademark] Automatic Explosive
Detection Systems, the CargoSearch[Trademark] family and the
BodySearch[Trademark] Personnel Inspection System. All of these systems utilize
the Company's Z[Registered Trademark] Backscatter technology (covered by
issued and pending U.S. patents), which detects organic materials, such as
illegal drugs, plastic explosives and plastic weapons, even when they are
undetected by other competing systems.





2
3


The Micro-Dose[Registered Trademark] Model 101 Series consists of 6 product
lines. The mobile Model 101VAN[Trademark] is a sophisticated, vehicle mounted
inspection system designed and built to the rigorous specifications of the U.S.
Customs Service. The Model 101ZZ[Registered Trademark] Trailer is a field
deployable system for extended on site security details. The Models
101Z[Registered Trademark], 101ZZ[Registered Trademark], 101GT[Trademark], and
101XL[Trademark] are moveable (but not mobile), conveyor based systems allowing
rapid inspection of high volumes of luggage and other packages.

The Model 66[Registered Trademark] product line handles small packages using the
patented Z[Registered Trademark] Backscatter technology. During the year, this
technology was validated by a study conducted by several government agencies
involving the Model 66[Registered Trademark] and competitive systems in which
the Model 66[Registered Trademark] was determined to have superior detection
capability for terrorist devices hidden in complex backgrounds. This test
resulted in increased order demand from both government and commercial clients,
including a number of Fortune 100 companies.

The EXR[Trademark] Automatic Explosives Detection System is a new second
generation backscatter inspection system, designed to identify automatically
all target threats. This system was developed with funding from the Federal
Aviation Admininstration. This system is currently undergoing test and further
enhancement. The target market is aviation luggage scanning.

The CargoSearch[Trademark] family of products includes the
CargoSearch[Trademark] system, the MobileSearch[Trademark] system, and the
PalletSearch[Trademark] system. The CargoSearch[Trademark] system is a
non-intrusive inspection technology for the X-ray scanning of trucks, cars,
cargo containers, pallets, and air cargo using the Company's unique and
patented Z[Registered Trademark] Backscatter technology. The fixed
CargoSearch[Trademark] system sells for a turnkey price substantially lower
than competing systems. The first CargoSearch[Trademark] system has been
operating at the U.S. Customs facility in Otay Mesa, California, the busiest
truck border crossing in the United States. U. S. Customs has ordered three
additional CargoSearch[Trademark] systems to be installed along the border with
Mexico.

The first MobileSearch[Trademark] System was delivered under a $1.8 million
contract with the Defense Advanced Research Project Agency (DARPA). This mobile
version of a CargoSearch[Trademark] system is a self-contained unit inside a
conventional truck which is deployable within minutes and provides the transport
mechanism via a hydraulic drive. The Company is marketing the
MobileSearch[Trademark] System to agencies of the U.S. Government and to foreign
security and customs agencies.

PalletSearch[Trademark] was designed for the inspection of pallets for the
detection of contraband, weapons and explosives for high security facilities
where high confidence inspection is a requirement.

The BodySearch[Trademark] Personnel Inspection System offers a fast, safe, and
non-intrusive way to screen individuals for the detection of concealed weapons,
drugs, and illegal contraband. During the year, systems were placed in several
foreign government applications for both drug detection and head of state
security.

The Company has a number of U.S. and foreign issued patents and pending patent
applications with respect to its X-ray products. Each U.S. patent issued prior
to June 1995




3
4


has a duration of the longer of seventeen years from the date of issue or twenty
years from the date of application; U.S. and virtually all foreign patents
issued after May 1995 will have a duration of twenty years from the date of
application. The Company relies on certain proprietary technology and know-how,
as well as certain of these patents, to establish and maintain its competitive
position. The Company believes that its patents, proprietary technology and
know-how provide substantial protection for the Company's competitive position.

The Company's X-ray products are marketed to private and Governmental
organizations through a sales force that contacts potential customers. This
sales force includes Company personnel, as well as agents under contracts to
sell in foreign countries who are generally on a commission basis. The Company
augmented its internal sales staff in 1996 with its first representative
employed overseas.

Most Micro-Dose[Registered Trademark] Systems are built for existing orders,
and the Company maintains an inventory of common parts and sub-assemblies for
the systems in order to meet expected customer delivery requirements.

The Company is heavily dependent upon sales to agencies of the U.S. Government,
and reductions or delays in procurements of the Company's systems by these
agencies may have a material adverse effect on the Company. During fiscal 1996,
the majority of sales of X-ray products were under (i) direct contracts with the
U.S. Government, and (ii) subcontracts with prime contractors working under
direct contracts with the U.S. Government. The U.S. Customs Service is a major
customer (with sales of more than 16 percent of the Company's consolidated
revenues). The loss of this customer would be likely to have a material adverse
effect on the Company taken as a whole. The Company believes that it has a
satisfactory relationship with the U.S. Customs Service.

The Company has many competitors in the X-ray product market, including several
large and well established manufacturers of security X-ray equipment with
financial and other resources greater than those of the Company. Certain X-ray
security system customers select such systems based largely on price. Other
customers, notably the U.S. Government and users in countries with high levels
of concern over security, tend to select systems based largely on performance
and detection capability. The Company's systems offer premium performance and
have in the past, with the exception of CargoSearch[Trademark], generally been
priced higher than many competing systems. The Company believes that its
patented and proprietary technology give it a strong competitive position in
the sale of security systems to customers concerned with performance and
detection. The Company also believes that its strategy of concentrating on
products with unique features and/or competitive pricing will give it a strong
position to increase its sales of X-ray systems.

The Company has not experienced during the last year, and does not currently
anticipate, any hardware delivery delays due to raw material shortages. Most
procured material is from U.S. sources. However, the Company is dependent on
certain overseas sole source providers of important components. No rare or
exotic materials are utilized.

All X-ray products of the Company comply with all applicable U.S. Government
regulatory standards.




4
5


The Company's control systems business is not being actively pursued and is no
longer material to the Company's operations or profitability. The Company will
continue to service existing customers (primarily one customer) as necessary.


[SQUARE BULLET] RESEARCH AND DEVELOPMENT

The Company conducted approximately $2,750,000 of government sponsored research
primarily focused on technologies for the detection of illicit drugs,
explosives, and other security issues. This is compared to $2,206,000 and
$2,158,692 in fiscal 1995 and 1994, respectively. The Company also continued to
invest in the future by spending approximately $533,000 for research relating to
the development of new products or services during fiscal 1996, compared to
$852,000 and $1,436,000 in fiscal 1995 and 1994, respectively.

A significant amount of the Company's research and development work is obtained
via contracts or subcontracts that typically provide for reimbursement of
allowable costs plus a fixed fee. The Company's contracts in these areas are
obtained by submitting research and development proposals to various
organizations, sometimes in response to requests for such proposals. The span of
contract research includes projects from advances in design for X-ray systems
and image analysis, to integrated system development for niche security
inspection problems.


[SQUARE BULLET] PERSONNEL

As of March 29, 1996 the Company had 150 employees compared to 114 employees at
the end of the prior year.


[SQUARE BULLET] SALES BACKLOG

The Company's firm sales backlog was $12,198,000 at March 29, 1996 and
$2,710,000 at March 31, 1995.

A majority of the Company's contracts with the U.S. Government contain clauses
permitting the government to terminate the contract for convenience upon certain
terms and conditions, including payment to the Company of an appropriate fee or
profit on work performed. The total of such contracts in the backlog was
$8,254,000 at the end of fiscal year 1996 and $2,570,000 at the end of fiscal
1995.

It is estimated that approximately 88% of the 1996 backlog will be filled within
the fiscal year ending March 31, 1997.







5
6


[SQUARE BULLET] FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES


All export sales are made in U.S. dollars, and many non-U.S. Government export
sales are either secured by irrevocable letters of credit or paid in advance.
Export sales are believed by the Company to have been at least as profitable as
similar domestic sales. Substantially all of the Company's assets are maintained
in the United States. The Company has not encountered, and does not anticipate
encountering, risks attendant to export sales that are greater than risks
attendant to domestic sales. The following chart provides information about the
breakdown between domestic and export sales for the indicated fiscal years.

Net Sales and Contract Revenues (Dollars in thousands)



Fiscal Year 1996 1995 1994
---- ---- ----


Domestic $14,526 $9,175 $7,992
Export $ 3,289 $3,822 $3,190




ITEM 2. PROPERTIES
- ------- ----------

In March of 1995, the Company took advantage of substantial cost savings
opportunities presented by a soft market for R&D space in the Greater Boston
area and moved its operations to Billerica, Massachusetts, approximately 20
miles outside of Boston. The move has provided the Company with more efficient
manufacturing and laboratory space and is expected to save the Company
approximately $1,100,000 per year in future occupancy costs as compared to the
previous lease while providing room for future growth.

The Company's executive offices and its research, manufacturing and warehouse
facilities are now located in 105,600 square feet of space in a 160,000 square
foot single-story, concrete and brick building owned by an unaffiliated real
estate limited partnership. The remaining space in the building is currently
leased by the owner to an unaffiliated manufacturing company. The Company
occupies the space under a long-term lease with a ten year initial term that
commenced March 1, 1995, and one (1) ten year optional extension term. This
space is adequate for the Company's current needs and the Company does not
anticipate the need for additional space over the next 12 months.

ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------

In July 1993, the Company terminated the employment of Martin Annis as Chief
Executive Officer and Chairman of the Board, on the basis of information
received indicating that he had been engaging in activities that were
incompatible with his status as an officer and employee of the Company. Dr.
Annis brought suit against the Company and certain Officers and Directors,
alleging wrongful termination, breach of contract and associated torts. The
trial was concluded in April 1995, and the jury found that Dr. Annis's
activities had materially breached his fiduciary duty to the Company, thereby
justifying the Company in terminating him. Dr. Annis is appealing that decision
and the Company and Dr.




6
7


Annis are involved in continuing litigation. The Company is vigorously pursuing
claims that it has brought against Dr. Annis, alleging that he has
misappropriated its trade secrets and proprietary technologies. Dr. Annis has
alleged that the Company interfered with his and his new company's business
relationships. The Company does not believe that its exposure to Dr. Annis from
these claims is material. A trial of these issues is scheduled for June 1996.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------

No matter was submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year covered by this report.

PART II
- -------

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------- ----------------------------------------------------------------------


The Company's Common Stock is listed on the American Stock Exchange (ticker
symbol ASE). The market price range for the Common Stock for the last two fiscal
years follows:


Fiscal Year Quarter Ended High Low
- ----------- ------------- ---- ---


1996 March 29, 1996 10 7 1/2
December 29, 1995 7 7/8 6 1/4
September 29, 1995 7 5/16 5 11/16
June 30, 1995 8 1/8 5 3/4

1995 March 31, 1995 6 7/8 5 5/8
December 30, 1994 6 7/8 4 3/4
September 30, 1994 6 3/8 3 1/8
June 30, 1994 4 1/8 2 7/8



As of May 30, 1996, there were approximately 1,575 holders of record of the
Company's Common Stock.

No cash dividends have been declared in the two most recent fiscal years and the
Board of Directors does not contemplate paying any dividends in the immediate
future.






7
8



ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------


(Dollars in thousands, except per share amounts)


Fiscal year 1996 1995 1994 1993 1992
---- ---- ---- ---- ----


Net sales and
contract revenues $17,815 $12,997 $11,182 $18,949 $17,520

Net income (loss) 802 (967) (3,335) 1,636 (395)

Income (loss) per
share .18 (.23) (.83) .41 (.10)

Total assets 14,295 10,734 10,541 15,479 12,289

Stockholders'
investment 7,501 5,592 6,294 9,607 7,902

Book value per share 1.67 1.31 1.52 2.41 1.99




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------


[SQUARE BULLET] OVERVIEW

The turnaround program begun in September 1993 produced substantially improved
results during the fiscal year ended March 29, 1996. Net sales and contract
revenues improved by 37.1% versus 1995. The Company earned profits of $802,000,
compared to a $967,000 loss in the previous year.

The market responded favorably to the Company's new product offerings, leading
to significant improvements in X-ray equipment orders, shipments, and year end
backlog.

The corporate liquidity shortages of the previous two years have been relieved
through the combination of a private equity placement, access to new bank
borrowings, and unrestricted cash advances from customers on future contract
deliveries.

[SQUARE BULLET] 1996 COMPARED TO 1995

CHANGES IN FINANCIAL CONDITION - Cash and temporary investments at year end
increased by $2,508,000 to $3,377,000, compared to $869,000 in 1995. The 1996
increase was partly due to the receipt of cash advances from customers on
certain long-term contracts. Accounts receivable increased by $1,044,000 from
the prior year due to the increased shipments made during 1996. Unbilled costs
and fees decreased by $725,000 as the result of completion and customer
acceptance of certain R&E contracts. Inventories increased by $605,000 during
1996, to support the growth in X-ray equipment shipments




8
9


and backlog. The Company's trade credit position improved as accounts payable
and accrued legal expenses decreased by $370,000 in 1996.

The Company's return to profitable operations, together with its improved cash
resources and continued access to outside bank financing, have relieved the
chronic cash shortages which existed during the previous two years.

RESULTS OF OPERATIONS - Net sales and contract revenues increased by $4,818,000
or 37.1% during fiscal year 1996. In 1996, security systems and field service
revenues of $15,065,000 increased by $4,274,000 or 39.6%. Contract research and
engineering revenues of $2,750,000 increased by $544,000 or 24.7%.

Cost of sales and contracts in 1996 of $11,823,000 was higher than the previous
year due to increased equipment sales and contract research activity. Cost of
sales and contracts represented 66.4% of revenues during 1996, compared to 69.8%
in 1995. This decline in the cost of sales ratio was due to (1) a greater
proportion of equipment shipments in the revenue mix which carry a higher gross
margin compared to contract research, (2) a larger revenue base over which to
spread fixed costs in 1996, and (3) economies associated with the new facility
relocation in March of 1995.

Selling, general, and administrative expenses of $4,387,000 were $321,000 higher
than the previous year and represented 24.6% of revenues, compared to 31.3% in
1995. The increased spending level was largely due to expanded sales and
marketing activities. The improvement in the ratio to revenues was expected as a
result of the expanded sales volume and the elimination of nonrecurring
litigation-related and facility move costs included in the previous year's SG&A
spending.

Company funded research and development spending declined to $533,000 in 1996,
compared to $852,000 in 1995. In accordance with accounting conventions,
development costs in excess of contract amounts are included in the cost of
sales for certain customer funded research contracts.

The Company's net profit of $802,000 for fiscal year 1996 represents an
improvement of $1,769,000 over the loss of $967,000 in the previous year. The
Company was profitable in all quarters, and profits increased in each quarter
during fiscal year 1996.

LIQUIDITY AND CAPITAL RESOURCES - Corporate liquidity and capital resources
improved substantially during fiscal year 1996. Net cash provided by operating
activities was $1,809,000, compared to $1,156,000 net cash used by operating
activities in 1995. Additionally, during 1996, the Company received $1,107,000
from the issuance of stock and the exercise of stock options. Cash and temporary
investments at March 29, 1996 stood at $3,377,000, an increase of $2,508,000
over the prior year end. The Company's current ratio remains 2.0, unchanged
from the end of last fiscal year.

The Company's improved liquidity and cash position is due to (1) the return to
profitable operations, (2) controlled growth in accounts receivable and
inventory balances, (3) the negotiation of significant unrestricted cash
advances relating to several large equipment




9
10


contracts, and (4) a successful private equity placement in July 1995.
Additionally, at year end, the Company had up to $3 million in approved but
unused bank lines of credit.

Given the improved cash position and access to unused borrowing capacity,
management believes that sufficient capital resources are in place to support
the Company's operations over the next several quarters.

MANAGEMENT ACTIONS - 1996 was a year in which a sound financial structure was
established which permitted a return to profitable revenue growth. The actions
taken fall into two primary categories:

[BULLET] financial restructuring and capital building

[BULLET] new sales and contract initiatives

The significant initiatives in each area are discussed below.

FINANCIAL RESTRUCTURING AND CAPITAL BUILDING - The fiscal year began, in April
1995, with the successful resolution of litigation brought by the Company's
former president and founder, thereby removing a major financial uncertainty
that had inhibited the Company's ability to attract outside financing. During
the course of the year, financing initiatives totaling over $5.5 million were
completed:

[BULLET] In April 1995, certain Officers and Directors extended a 4-month,
$650,000 bridge loan to the Company, permitting it to continue
efforts to arrange more permanent financing.

[BULLET] In June 1995, the Company obtained a $1,000,000 line of credit from
a regional bank, guaranteed by the U.S. Export-Import Bank, for
purposes of financing growth in export sales.

[BULLET] In July 1995, the Company arranged a private placement of equity,
producing $856,250 in net proceeds.

[BULLET] In January 1996, two lines of credit totaling $3 million were
arranged with a regional bank for purposes of financing growth in
domestic equipment sales and anticipated short lead time orders.

NEW SALES AND CONTRACT INITIATIVES - During the previous two years, management
laid the groundwork that was to be the basis for rebuilding the Company's
revenues and profitability. Numerous initiatives were undertaken in the areas of
new product commercialization, advanced technology development, and expansion of
the customer base. During 1996, these efforts produced tangible results.
Examples include the following:

[BULLET] During the first quarter, the Company signed a multi-year contract
to supply the Model 101XL[Trademark] and Model 101 Van X-ray
inspection systems to the U.S. Customs Service. During 1996, in
excess of $1 million of the Company's revenue was attributable to
this agreement.





10
11


[BULLET] In January 1996, the Company's first MobileSearch[Trademark] system
was shipped -- a field mobile inspection system that allows for fast
deployment and surprise searches of cargo and vehicles for drugs,
contraband, and explosives.

[BULLET] During the year, a development contract for the first
PalletSearch[Trademark] system was awarded by an ultra-secure
Government Agency, which will extend the Company's capability to the
inspection of complex cargoes by individual pallets.
PalletSearch[Trademark] is expected to be installed and fully
operational during the summer of 1996.

[BULLET] During the second quarter, the Company's first EXR[Trademark]
(Enhanced X-ray) system was shipped to the Federal Aviation
Administration. The EXR[Trademark] system represents the Company's
next generation of explosives detection capability and provides for
both automatic and operator assisted bomb detection in airport
luggage.

[BULLET] During the second quarter, the Company received three large and
highly prestigious equipment orders: three Model 101ZZ[Registered
Trademark] Trailers for the detection of explosives at the 1996
Olympics in Atlanta; twenty-one Z[Registered Trademark] Backscatter
X-ray systems for installation in Washington, DC; and sixteen Model
101Z[Registered Trademark] systems to be installed in the offices
of the Federal Emergency Management Agency throughout the country.

[BULLET] Throughout the year, the Company improved its position in the
non-governmental sector, adding eighteen new private, corporate
customers to its base.

[BULLET] During the fourth quarter, the Company was awarded contracts for
three CargoSearch[Trademark] installations for the U.S. Customs
Service on the Southwest border with Mexico. These contracts, valued
in excess of $7 million, are significant milestones in the Company's
multi-year program to develop commercially viable truck, vehicle,
and cargo inspection systems.

Management believes that the successful marketing and product development
results produced during 1996 are evidence that the turnaround program begun in
fiscal year 1994 is working.

[SQUARE BULLET] 1995 COMPARED TO 1994

CHANGES IN FINANCIAL CONDITION - Cash and temporary investments declined from
the prior year end by $1,627,000, although the quarterly rate of decline slowed
during the first three quarters and cash increased in the fourth quarter of
1995. The 1995 decline compares to a $2,206,000 decline in cash and temporary
investments during 1994. Accounts receivable balances increased by $412,000
from the prior year, and unbilled costs and fees increased by $1,075,000, due
to increased equipment sales and research contract activity. In particular, the
increase in unbilled receivables at year end is attributable to (1) certain
fixed price R&E contracts which were largely complete but billable only upon
final




11
12


customer acceptance, and (2) shipment of X-ray systems to certain foreign
customers for which final billing was contractually tied to system acceptance.

The growth in receivables, unbilled costs and fees and encumbered cash, together
with the loss from operations, produced an acute cash shortage throughout fiscal
year 1995 which is expected to continue into the second quarter of fiscal year
1996. Management's plans to alleviate this cash shortage are discussed in
"Management Actions," below.

RESULTS OF OPERATIONS - Net sales and contract revenues increased by $1,815,000
or 16.2% during fiscal year 1995, compared to fiscal year 1994. In 1995,
security systems and field service revenues of $10,148,000 increased by
$1,977,000 or 24%, and contract research and engineering revenues of $2,206,000
decreased by $125,000 or 5.4%.

Cost of sales and contracts of $9,076,000 was higher than the previous year due
primarily to increased sales and contract research activity. Cost of sales and
contracts represented 69.8% of revenues during fiscal year 1995, compared to
74.6% in 1994.

Selling, general, and administrative expenses of $4,066,000 were $122,000 lower
than the previous year and represented 31.3% of sales, compared to 37.5% in
1994. Included in 1995 SG&A spending was approximately $364,000 in
litigation related and facility move costs that are not expected to recur in
1996. The overall decline in SG&A spending was expected as a result of cost
reduction initiatives taken in the first quarter.

Company funded research and development costs declined significantly in 1995 to
$852,000 compared to $1,436,000 in 1994. This planned reduction in
Company funded R&D spending resulted from completing the BodySearch[Trademark]
and Model 66[Trademark] new product programs during late 1994 and early 1995
and the reallocation of engineering resources to government funded research
contracts.

No additional restructuring charges were provided in 1995, and the $642,000
nonrecurring restructuring charge in 1994 was adequate to cover the one time
costs of personnel reductions and professional services to implement the
restructuring plan.

The net loss for the year of $967,000 was lower by $2,368,000, compared to 1994.
The 1995 loss occurred primarily during the first and fourth fiscal quarters
when sales and contract revenues were insufficient to cover the Company's
persistently high fixed cost structure caused, in part, by high facility lease
and occupancy costs. As discussed below, future occupancy costs will be
substantially lower as a result of the Company's relocation in late fiscal year
1995.

LIQUIDITY AND CAPITAL RESOURCES - The Company's net loss for the year, the
resulting negative cash flow from operations, the growth in current asset
accounts, and the lack of access to outside financing have combined to keep
corporate liquidity and capital resources at marginal levels throughout the
year. Net cash used for operating activities during 1995 was $1,156,000,
compared to $1,962,000 net cash used in fiscal 1994. Cash used for operations
during each fiscal quarter in 1995 showed a generally improving trend, with
$933,000 cash used in the first quarter, $579,000 used in the second quarter,
$146,000 used in the third quarter, and $502,000 net cash generated in the
fourth quarter.




12
13


Cash and temporary investments at March 31, 1995 were $869,000, down by
$1,627,000 from the prior year end. The principal uses of cash were to cover
operating losses, nonrecurring legal and facility move costs, growth in
unbilled costs and fees, and cash disbursed for expenses accrued in previous
periods.

Trade accounts payable and accrued legal expense increased by $1,669,000, which
provided a source of funds.

The Company's current ratio remains reasonably strong at 2.0, compared to 2.5 at
the end of last fiscal year. While customer accounts receivable have increased
modestly since year end 1994, the continuing need for standby letters of credit
and facility related security deposits have placed severe pressure on the
Company's unrestricted cash resources.

Management believes the Company's unrestricted cash balances at the end of
fiscal year 1995 are marginal relative to its needs. Year end backlog of
equipment orders remained low, but anticipated revenues and cash flow from
operations are expected to improve steadily during fiscal year 1996. The
improved revenue outlook and reduced occupancy and legal costs during 1996
should reverse the negative cash flows experienced during 1995. Nonetheless,
management believes that outside capital will be required for the Company to
establish a sound financial footing and to take advantage of near term growth
opportunities. A more detailed discussion of management's current and future
action plans follows.

MANAGEMENT ACTIONS - 1995 was a year of consolidation, restructuring, and
rebuilding for the Company. Many initiatives were undertaken with the overriding
objective being to reestablish a sound financial foundation upon which
profitable revenue growth can be built. During 1995 and continuing into early
fiscal year 1996, actions were taken in many areas, including:

[BULLET] overhead and operational expense reductions
[BULLET] settlement of litigation that represented a significant uncertainty
[BULLET] management recruitment and human resource initiatives
[BULLET] commercial introduction of new products
[BULLET] development of new technology
[BULLET] securing of new customers
[BULLET] strengthening of the Company's commitment to customer service
[BULLET] identification of outside capital resources and opportunities for
enhanced cash flow

The collective impact of these actions was only partially evident during 1995,
and Management believes that future results will more fully reflect the
anticipated effects of the actions recently taken.

OVERHEAD EXPENSE REDUCTIONS - During the first quarter of fiscal year 1995,
significant cuts in personnel and outside consulting expenses were implemented,
eliminating approximately $200,000 in costs per quarter relative to the original
1995 budget. Excluding extraordinary legal and moving expenses of $364,000 that
were charged in 1995, total SG&A spending declined by $486,000 in 1995, compared
to 1994. Additionally, the Company relocated to




13
14



a new facility in early March, 1995. The resulting savings in occupancy costs
are budgeted to be approximately $1,300,000 in 1996.

SETTLEMENT OF LITIGATION - During the fourth quarter of fiscal 1995, the Company
resolved the legal dispute with the owner of its former Cambridge, Massachusetts
facility and was released from all claims other than the current deferred rent
agreement. In April 1995, the Company won a jury verdict in the litigation
brought by its former president and founder, effectively eliminating significant
uncertainties to the Company.

MANAGEMENT RECRUITMENT AND HUMAN RESOURCES - The management team was
strengthened during 1995 through the addition of a Chief Financial Officer as
well as key talent in financial planning, manufacturing, and international
sales.

NEW PRODUCT COMMERCIALIZATION - During the second quarter, the Company's
CargoSearch[Trademark] facility at Otay Mesa, California was successfully
commissioned and turned over to the U.S. Customs Service as a fully functioning
system. CargoSearch[Trademark] continues to operate as designed and has led to
numerous seizures of drugs and other contraband hidden in vehicles attempting to
enter the U.S. from Mexico. The U.S. Customs Service and other international
customs agencies have expressed interest in purchasing numerous
CargoSearch[Trademark] systems over the next several years. The Company's
prototype BodySearch[Trademark] systems have undergone long-term evaluations by
several foreign customs and law enforcement agencies. The Model 66[Trademark]
MailSearch[Trademark]/ LobbySearch[Trademark] systems began to show commercial
success during 1995, with the first volume sales to law enforcement agencies as
well as both government and corporate security services.

ADVANCED TECHNOLOGY DEVELOPMENT - The Company was awarded approximately $3.2
million in major new research and engineering contracts during 1995. These
programs will help maintain the Company's leadership position in the practical
application of advanced X-ray inspection systems. The 1995 contract awards
included the development of a mobile work site housing the Company's
top of the line Model 101ZZ[Registered Trademark] inspection system, a mobile
version of CargoSearch[Trademark], an advanced automatic explosives detection
system for the FAA, and a prototype of the next generation detection system
using forward scatter technology.

ADDITION OF NEW CUSTOMERS - The Company undertook a significant effort during
1995 to broaden its domestic customer base, reestablish sales to former
customers, and expand its foreign sales coverage. New or reestablished domestic
customers during 1995 included the U.S. Postal Inspection Service, the Federal
Aviation Administration, and several private companies or commercial security
firms. Significantly expanded foreign customer relationships included H.M.
Customs and Excise (U.K.), the Taiwan Customs Agency, the Australian Customs
Service, and the Egyptian Office of the President.

COMMITMENT TO CUSTOMER SERVICE - Starting in late fiscal year 1994 and
continuing into 1995, the Company placed considerable emphasis on upgrading its
field service function and improving the quality and responsiveness of service
to the installed customer base. Programs offering extended warranty,
preventative maintenance, and equipment upgrade packages have been well received
by existing customers. As a result of this new emphasis, field service revenues
were $2,287,000 in 1995, an increase of $681,000 (42%) compared to 1994.





14
15


FISCAL OPERATIONS - The rebuilding that took place during fiscal year 1995
occurred within the context of extremely tight cash resources and no access to
outside financing. Management implemented aggressive cash management measures,
including seeking advances from customers with large dollar and/or long lead
time contracts and cleaning up of unbilled costs and retainages on completed
government contracts. This latter effort produced $251,000 of cash receipts
during 1995 and an additional $165,000 of estimated receipts during the first
quarter of 1996. Despite these and other cash conservation measures, the
Company's cash shortage is severe and will remain so until revenues rebound as
anticipated during 1996.

In response to the chronic cash shortage, on April 13, 1995, certain Officers
and a Director agreed to loan the Company $650,000 for a 4-month period, during
which it is anticipated the Company will be able to arrange more permanent
outside financing. In this regard, some progress is being made. On June 27,
1995, the Company closed on a $1,000,000 line of credit from a regional bank and
guaranteed by the U.S. Export Import Bank. This loan will be used to finance the
receivables and inventory associated with growth in export sales.

Management believes additional outside financing will be required to overcome
the Company's chronic cash shortage until such time as adequate revenue levels
are attained to achieve cash self-sufficiency sometime during fiscal year 1996.
Sales growth and the solicitation of outside capital resources are management's
primary short term imperatives.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------

The financial statements and supplementary financial information listed in the
Index to Consolidated Financial Statements and Schedules on page 27 are filed as
part of this Annual Report on Form 10-K and are incorporated into this Item by
reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.





15
16


PART III
- --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- -------- -----------------------------------------------

[SQUARE BULLET] DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AS OF MAY 30,
1996.


Positions and Offices Date Assumed
Name Age of Company Held Each Position
- ---- --- --------------- -------------

DIRECTORS
- ---------

Herman Feshbach 79 Director September 1975
Chairman July 1993

Al Gladen 58 Director September 1995
Hamilton W. Helmer 49 Director February 1993
Donald J. McCarren 55 Director February 1993
Ralph S. Sheridan 46 Director January 1994
President & CEO September 1993

EXECUTIVE OFFICERS (Who are not also Directors)
- ------------------

Jeffrey A. Bernfeld 39 Vice President, General February 1996
Counsel & Clerk
Peter W. Harris 42 Vice President, Sales February 1994
and Marketing
Michael V. Hynes 45 Vice President, Science September 1995
Technology
Lee C. Steele 46 Vice President, Finance October 1994
Treasurer & CFO

All Directors and Executive Officers hold office until the next annual meeting
of Stockholders and until their successors are duly elected and qualified. No
family relationship exists between any of the listed Directors and Executive
Officers.

Dr. Herman Feshbach is an Institute Professor Emeritus at the Massachusetts
Institute of Technology, a position he has held for more than five years, and
has previously served as Chairman of the Physics Department at MIT and Director
of the MIT Center for Theoretical Physics. He is a past President of the
American Physical Society and the American Academy of Arts and Sciences and is
Fellow of both those Organizations and of the American Association for the
Advancement of Sciences. He is on the Board of Governors for Tel Aviv University
and the Weizmann Institute of Science, is on the Board of Editors for Daedalus
and Editor of the Annals of Physics, and has served as Chairman or Member on
numerous committees for the Department of Energy, the National Science
Foundation, the




16
17


National Academy of Sciences, and the American Physical Society. He was awarded
the National Medal of Science by President Reagan in 1986. Dr. Feshbach received
his Ph.D from MIT.

Mr. Al Gladen is President of Dabster, Inc., a technology consulting firm
specializing in engineering and technology management assistance, with offices
in Kent, Washington. Mr. Gladen's consulting activities have included strategic
technology planning, new product development, project management and acquisition
review. Mr. Gladen has acted as a technology and engineering consultant to the
Company since 1993, and it is expected that he will continue to provide such
assistance on a part-time basis. Mr. Gladen holds four U.S. patents and is a
director of four other privately held corporations.

Mr. Hamilton W. Helmer has, for the last 14 years, been Managing Partner of
Helmer & Associates, a strategic consulting firm located in Los Altos,
California. Prior to that, Mr. Helmer worked for Bain & Co. Mr. Helmer holds a
Ph.D in Economics from Yale University.

Mr. Donald J. McCarren is President and Chief Executive Officer of Tacora
Corporation, a medical technology company located in Seattle, Washington. From
July 1992 to June 1994, he was President and Chief Operating Officer of
ImmunoGen, Inc., a bio-tech research and development company located in
Cambridge, Massachusetts. Prior to that, he was President (1990 to 1992) of the
Adria Laboratories Division of Erbamont N.V. in Columbus, Ohio, and Corporate
Vice President of Worldwide Marketing and Business Development (1989 to 1990)
and Vice President of Far East and Australian Operations (1986 to 1989) of
Erbamont, N.V. Mr. McCarren holds a Ph.D. in Developmental Economics.

Mr. Ralph S. Sheridan was elected President and Chief Executive Officer of the
Company in September 1993, and in January of 1994, he was elected a Director.
Prior to joining the Company, Mr. Sheridan ran his own consulting and investment
firm, Value Management Corporation, in Waltham, Massachusetts. Prior to that,
Mr. Sheridan was President and CEO (1988-1989) and Vice President of Marketing
and Operations (1987-1988) of HEC Energy Corp., in Boston, Massachusetts. Mr.
Sheridan held the position of Vice President of Operations for the Engineered
Systems and Controls Group (1984-1986) and Vice President of Corporate Business
Development (1981-1984) at Combustion Engineering, Inc. in Stamford,
Connecticut. Mr. Sheridan holds a B.S. in Chemistry and an M.B.A., both from
Ohio State University.

Mr. Jeffrey A. Bernfeld joined AS&E as Vice President General Counsel and Clerk
in February 1996. Prior to that time, he was Vice President and General Counsel
of Spire Corporation in Bedford, Massachusetts for three and one-half years; a
founder and Managing Director of Global Solutions, Inc. in Wellesley,
Massachusetts for one year; Vice President and General Counsel of The Mediplex
Group in Wellesley, Massachusetts for two years; and a partner at Goldstein &
Manello in Boston, Massachusetts, where he began his career as an Associate in
1981. Mr. Bernfeld received his B.A. from Brandeis University and his J.D. from
New York University School of Law. Mr. Bernfeld is a director of Summit
Technology, Inc. of Waltham, Massachusetts.





17
18


Mr. Peter W. Harris joined the Company in February 1994 as Vice President, Sales
and Marketing. Prior to joining the Company, Mr. Harris was Manager of External
Affairs for Stone & Webster, an architectural engineering firm in Boston,
Massachusetts, where he held a number of positions beginning in 1988. During his
time at Stone & Webster, Mr. Harris concentrated on Federal government and
international sales. Mr. Harris, a graduate of the U.S. Naval Academy, holds the
rank of Captain in the U.S. Naval Reserve and commanded several units during his
twelve years of active duty and seven years in the Naval Reserve. In addition,
Mr. Harris holds a Master's degree in National Security Studies from Georgetown
University.

Dr. Michael V. Hynes joined AS&E as Vice President and Chief Technical Officer
in September 1995. Prior to joining AS&E, Dr. Hynes had been at Los Alamos
National Laboratory for fifteen years, where he held a number of positions
including Industrial Fellow, Program Manager and Project Leader. Dr. Hynes
earned three degrees from the Massachusetts Institute of Technology: a B.S. in
Physics; an M.S. in Management and a Ph.D in Physics. Dr. Hynes has authored
more than fifty articles in the peer-reviewed literature and has won numerous
awards and honors including Weizmann and Sloan Fellowships from MIT, an
Oppenheimer Fellowship from Los Alamos Scientific Laboratory and a
Distinguished Performance Award from Los Alamos National Laboratory.

Mr. Lee C. Steele joined the Company in September 1994 as its Vice President of
Finance and Chief Financial Officer. From 1991 until he joined the Company, Mr.
Steele was a principal of Asset Management Corporation, a Waltham, Massachusetts
consulting firm specializing in the analysis and resolution of complex financial
and operational challenges for small and medium size businesses. Until 1991,
Mr. Steele was a Partner at Deloitte & Touche, specializing in profit planning,
corporate finance and troubled company situations. He holds an M.B.A. from
Harvard Business School and an engineering degree from Case Western Reserve
University.




18
19



ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------

[SQUARE BULLET] THE FOLLOWING CHART PROVIDES INFORMATION CONCERNING COMPENSATION
PAID BY THE COMPANY DURING THE YEAR ENDED MARCH 29, 1996 TO THE CHIEF EXECUTIVE
OFFICER AND EACH OF THE FOUR MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS OF THE
COMPANY WHOSE AGGREGATE COMPENSATION EXCEEDED $100,000.

SUMMARY COMPENSATION



Long-Term
Annual Compen-
Compensation sation
All
Name and Principal Fiscal Option OtherCompen-
Position Year Salary($) Bonus ($) Awards(#) sation($)(1)
- ------------------ ------ --------- --------- --------- -----------


Ralph S. Sheridan 1996 200,000 202,168(3) 0 2,486
President and CEO 1995 200,000 111,055(3) 0 2,198
1994(2) 104,038 0 120,000 163


Peter W. Harris 1996 110,000 40,000 0 403
Vice President, 1995 110,000 0 0 721
Sales / Marketing 1994(2) 18,615 0 30,000 0


Lee C. Steele 1996 110,752 27,000 0 1,344
Vice President 1995(2) 55,000 0 50,000 900
and CFO




(1) All Other Compensation includes imputed income from taxable life insurance.

(2) The indicated years were years of partial employment with the Company for
each named executive.

(3) Mr. Sheridan's bonus is paid in respect of "contract years" ending
September 30th in each year and includes cash, stock and payments made to
him to alleviate the tax impact of his stock bonus.



Mr. Sheridan has an employment contract with the Company that provides for his
employment as President and Chief Executive Officer, and as a Director, through
September 1996, at an annual salary of $200,000, plus performance bonuses tied
to specific accomplishments.

Under the contract, Mr. Sheridan is eligible to receive an annual bonus of up
to $75,000 and 10,000 shares of Common Stock in each contract year, based on
his accomplishment of goals established by the Compensation Committee. Mr.
Sheridan also receives an amount calculated to compensate him for the taxes
due on the stock portion of this bonus. In addition, in 1994 the Company
granted Mr. Sheridan options to purchase 120,000




19
20


shares of the Company's Common Stock at $4.00 per share, the fair market value
of the Company's Common Stock on the date of grant.

Of the 120,000 options, an option to purchase 40,000 shares became fully
exercisable on September 15, 1994. The option to purchase the remaining 80,000
shares was approved by the stockholders at the 1994 Annual Meeting of
Stockholders and becomes exercisable for up to: (i) 50% of the shares covered
thereby at any time after September 15, 1995, (ii) 75% of the shares covered
thereby at any time after September 14, 1996, and (iii) subject to Mr. Sheridan
agreeing prior to September 14, 1996 to remain employed by the Company for an
additional year from that date, 100% of the shares covered thereby at any time
after September 14, 1996. The vesting schedule is accelerated upon the
occurrence of certain events.

Mr. Sheridan recognized no income upon the issuance of the options. The Company
is recognizing as compensation expense the difference between the market value
of the 80,000 option shares at date of grant ($4.00) and date of shareholder
ratification ($5.50). This expense is being amortized over the 3-year vesting
period of the options. When the options are exercised, Mr. Sheridan will
recognize ordinary income in an amount equal to the difference between the fair
market value of the Common Stock received upon the exercise of the option and
the amount paid for the Common Stock. At that time, the Company will be allowed
a deduction equal to the amount recognized as ordinary income by Mr. Sheridan,
less any deductions previously taken. The options provide that to the extent
that exercise of an option would give rise to compensation expense that the
Company reasonably expects will not be deductible for tax purposes in any given
taxable year pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended, the number of shares as to which the options may be exercised during
that taxable year shall be limited.

Under the Employment Agreement, Mr. Sheridan purchased 160,000 treasury shares
of the Company's Common Stock payable by promissory note. The note is due on the
earlier of September 15, 2003 or the termination of Mr. Sheridan's employment.
The Company has agreed to reimburse Mr. Sheridan for the interest payable under
the note in most circumstances.

Under the Employment Agreement, Mr. Sheridan is entitled to receive the same
benefits as other senior executives of the company, as well as to the use of a
car (which Mr. Sheridan declined until April 1996).

In the event that Mr. Sheridan's employment with the Company is terminated
without Cause, or by him for Good Reason (as defined in the Employment
Agreement), he will receive twelve month's pay and any previously earned
bonuses. In the event that Mr. Sheridan's employment with the Company is
terminated for Cause, or by him other than for Good Reason (as defined in the
Employment Agreement), or by his death or disability, he will not be entitled to
receive any salary beyond the date of termination, and he will only be entitled
to receive previously earned bonuses if the termination is caused by death or
disability.

Mr. Steele has an agreement with the Company providing for a three year term,
subject to termination for cause as defined. The contract establishes a base
salary of $110,000 plus a potential bonus of up to $30,000 upon the achievement
of semiannual individual and




20
21


corporate goals as established by the President of the Company in consultation
with Mr. Steele. The Agreement grants Mr. Steele severance payments equal to one
year's salary if he is terminated in connection with a change of control of the
Company, as defined in the Agreement.



[SQUARE BULLET] THE FOLLOWING TABLES PROVIDE INFORMATION CONCERNING THE GRANT OF
OPTIONS IN FISCAL YEAR 1996 TO EXECUTIVE OFFICERS NAMED IN THE SUMMARY
COMPENSATION TABLE AND OPTIONS EXERCISED BY THOSE OFFICERS.


OPTION GRANTS IN THE LAST FISCAL YEAR







Individual Grants Potential Realizable
---------------------------------------- Value at Assumed
Annual Rates of Stock
% of Total Price Appreciation for
Options Option Term ($)
Granted to --------------------
Options All Exercise Expiration
Granted Employees Price ($) Date 5%/year 10%/year
---------------------------------------------------------------


Ralph S. Sheridan 0 0 N/A N/A N/A N/A
Jeffrey A. Bernfeld 24,000 11.8 8.06 2/28/06 386,000 615,000
Peter W. Harris 0 0 N/A N/A N/A N/A
Michael V. Hynes 32,000 15.7 6.50 9/15/05 515,000 820,000
Lee C. Steele 0 0 N/A N/A N/A N/A






AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES



Number of Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year End - at Fiscal Year End -
Shares March 29, 1996(#) March 29, 1996($)
Acquired ----------------- --------------------
on Value
Exercise Realized Exerc- Unexerc- Exerc- Unexerc-
(#) ($) isable isable isable isable
---------------------------------------------------------------


Ralph S. Sheridan 0 0 80,000 40,000 470,000 235,000
Jeffrey A. Bernfeld 0 0 6,000 18,000 10,920 32,760
Peter W. Harris 0 0 20,000 10,000 112,500 86,250
Michael V. Hynes 0 0 8,000 24,000 27,000 81,000
Lee C. Steele 0 0 25,000 25,000 109,375 109,375







21
22


[SQUARE BULLET] COMPENSATION OF DIRECTORS

Directors who are also employees of the Company do not receive additional
compensation as Directors. Subject to approval by the Company's Stockholders at
the 1996 Annual Meeting of Stockholders, Non-Employee Directors (other than the
Chairman) will receive annual compensation of 2,000 shares of Company Common
Stock (2,055 shares in the 1996 Fiscal Year) issuable on January 10th in each
year, and options to purchase 7,000 shares of Common Stock at the closing price
on the date of the Annual Meeting in each year. The Chairman receives 2,500
shares of Common Stock on January 10th in each year and continues to receive
deferred compensation under a now discontinued plan described below. No meeting
fees or other fees are payable to any Director.

Dr. Feshbach, the Company's Chairman, is covered by a nonfunded deferred
compensation plan (adopted in 1976 and amended in 1977, 1980, 1986, 1990 and
1992) that provides for periodic payments beginning at age 65, based on length
of service. During the year, Dr. Feshbach received $4,752 under the Plan. The
Company accrues the current cost of the plan, which amounted to $20,529 in
fiscal 1996.

[SQUARE BULLET] COMPENSATION COMMITTEE INTERLOCKS, INSIDER PARTICIPATION AND
SECTION 16 REPORTING

During the fiscal year ended March 29, 1996, the Company's Compensation
Committee consisted of Dr. Herman Feshbach, Mr. Hamilton W. Helmer and Mr.
Donald J. McCarren. No reportable relationship existed with respect to any
member of the Compensation Committee.

Section 16(a) of the Securities Exchange Act of 1934 requires certain persons,
including the Company's Directors and Executive Officers, to file initial
reports of beneficial ownership of the Company's securities and reports of
changes in beneficial ownership with the Securities and Exchange Commission.
For fiscal year 1996, the following reports were filed late: Herman Feshbach
filed one late report covering one transaction; Al Gladen filed two late
reports covering three transactions; Peter Harris filed one late report
covering one transaction; Hamilton Helmer filed one late report covering two
transactions; Donald McCarren filed one late report covering three
transactions; and Lee Steele filed one late report covering two transactions.

[SQUARE BULLET] BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (consisting of the three
outside Directors whose names appear below this Report) has sole responsibility
for compensation issues relating to the Chief Executive Officer. Compensation
practices and policies for the other executive officers are set by the Chief
Executive Officer with the advice of the Compensation Committee.

The Compensation Committee has formulated an approach to all executive
compensation that emphasizes the establishment of goals and objectives for each
executive and for the Company as a whole and ties a substantial portion of
executive compensation to the performance of the executive and the Company with
respect to these goals and objectives. Base compensation for executive officers
(and many other Company employees) is established on the basis of an analysis of
salaries received by comparable employees of high-tech and manufacturing
companies in the Greater Boston area, company financial results and prospects,
and individual contributions relative to the job description and past
performance of each officer.

In line with this approach, the Company entered into an Employment Agreement
with its new President and Chief Executive Officer, Mr. Ralph S. Sheridan, in
December 1993 (effective as of September 1993). This Agreement was based, in
part, on an independent consultant's analysis of compensation arrangements for
chief executives of comparable companies, and was also based on a careful review
of the most important goals and




22
23


objectives for the Company. The Agreement provides for cash compensation of
$200,000, plus annual incentive bonuses of up to $75,000 and 10,000 shares of
Company stock, tied to specific, agreed upon performance criteria. In addition,
in order to provide for long-term incentives, under the Agreement the Company
has issued Mr. Sheridan nonstatutory stock options to purchase 120,000 shares of
Common Stock, and Mr. Sheridan has purchased 160,000 shares of the Company's
Treasury Stock.

For the contract year ended in September 1995, the Committee awarded Mr.
Sheridan a cash bonus of $63,750 and 8,500 shares of stock, representing 85% of
the potential award under his contract. This award represents the Committee's
determination that Mr. Sheridan had done an excellent job over the preceding
twelve months and had met most but not all of the goals and objectives jointly
established by the Committee and Mr. Sheridan.

Also in keeping with its performance-based compensation philosophy, in the
spring of 1994, the Company implemented an incentive compensation program for
all executives who report directly to the Office of the President. Under this
new policy, these executives receive a specified portion of their total
compensation (ranging from 10% to 27%) based upon two factors: their completion
of agreed upon goals and objectives, and the performance of the entire company.

Report Submitted By: Dr. Herman Feshbach, Mr. Hamilton W. Helmer and Mr. Donald
J. McCarren.






23
24


[SQUARE BULLET] STOCK PERFORMANCE CHART

The following chart graphs the performance of the cumulative total return to
shareholders (stock price appreciation plus dividends) during the previous five
years in comparison to the returns of the Standard & Poor's 500 Composite Stock
Price Index and the Standard & Poor's 500 High-Tech Composite Stock Price Index.


INDEXED RETURNS
Years Ending March

1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
AS&E 100 85.45 120.00 56.36 90.91 143.64
S&P 500 100 111.04 127.95 129.84 150.05 198.22
S&P Hi-Tech 100 102.33 112.44 132.25 167.36 225.95

Note: Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year (and
reinvestment of dividends) in the Company's Common Stock, Standard &
Poor's 500 Composite Stock Price Index and the Standard & Poor's 500
High-Tech Composite Stock Price Index.


24
25


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- ---------------------------------------------------------------


[SQUARE BULLET] THE FOLLOWING CHART SHOWS THE COMPANY COMMON STOCK BENEFICIALLY
OWNED BY OFFICERS AND DIRECTORS OF THE COMPANY ON MAY 30, 1996. BASED ON
INFORMATION AVAILABLE TO IT, THE COMPANY BELIEVES THAT NO OTHER PERSON OR ENTITY
OWNED 5 PER CENT OR MORE OF THE COMPANY'S COMMON STOCK ON THAT DATE.


Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
- ---------------- ----------------------- --------


Jeffrey A. Bernfeld 6,000 (2)
Herman Feshbach 12,790 (2)
Al Gladen 35,055
Peter W. Harris 22,250 (2)
Hamilton W. Helmer 23,781 (2)
Michael V. Hynes 8,000 (2)
Donald J. McCarren 31,581 (2)
Ralph S. Sheridan 276,500 6.01
Lee C. Steele 33,250 (2)
Directors and Officers
as a Group (9 persons) 449,207 9.47

- ----------

(1) Includes shares that may be acquired under stock options and
warrants exercisable within sixty days after the date of this table, as
follows: Mr. Bernfeld - 6,000; Dr. Feshbach - 3,750; Mr. Gladen - 30,000;
Mr. Harris - 22,000; Mr. Helmer - 20,000; Mr. McCarren - 26,000; Mr.
Sheridan - 100,000; Mr. Steele - 32,500; and all Directors and Officers as
a group - 240,250. All ownership reported herein includes sole voting
and investment power.

(2) Amount owned constitutes less than one percent.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- -----------------------------------------------

In April, 1995 a group that included three of the Company's Officers and one
Company Director made a loan to the Company in the total amount of $650,000. The
proceeds of the loan were used for general working capital purposes. The loan
was paid off in full on a timely basis.

The Board of Directors determined that the loan was necessary and the terms
appropriate. The Company had been seeking short-term financing from several
banks, but conclusion of a conventional line of credit arrangement was delayed
pending resolution of the lawsuit brought by the Company's founder, in which the
Company has now received a favorable jury verdict. In addition, portions of the
Company's working capital had been tied up in slow-paying foreign accounts
receivable and as collateral for letters of credit supporting certain
international sales. These factors justified a form of short-term "bridge loan"
while the Company worked on a more permanent financing alternative.





25
26


The loan terminated on August 15, 1995, and bore interest at the prime rate plus
two percent. As additional consideration, the Company issued a total of 6,500
shares of its Common Stock and warrants to purchase 65,000 shares of its Common
Stock proportionally to the lenders. The warrant exercise price is the lowest
trading price of the stock on the American Stock Exchange during the term of the
loan. The Company has agreed to register these shares. The Company granted a
security interest in all of its assets to the lending group during the pendency
of the loan.

Ralph S. Sheridan, the Company's President and CEO, provided $200,000 of the
loan funds. Al Gladen, who subsequently became a Director of, and remains a
Consultant to the Company, provided $300,000. Lee C. Steele, the Company's Vice
President of Finance and CFO, provided $75,000. Donald J. McCarren, a Director
of the Company, provided $50,000. Peter W. Harris, the Company's Vice President
of Sales and Marketing, provided $25,000.

Mr. Gladen provides engineering and management services to the Company on a
regular basis. In fiscal year 1996, the compensation paid to Dabster, Inc., a
corporation of which Mr. Gladen is the President, for such services was
$168,800.

All other information called for by this Item appears in Items 10 and 11 of this
Annual Report on Form 10-K, and is incorporated herein by reference.

PART IV
- -------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------

(a) The financial statements and schedules listed in the Index to Consolidated
Financial Statements and Schedules on page 27 are filed as part of this
report, and such Index is incorporated in this Item by reference.

The exhibits listed in the Exhibit Index on page 45-46 are filed as part
of this report, and such Index is incorporated in this Item by reference.

(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
fourth quarter of the fiscal year covered by this report.




26
27


AMERICAN SCIENCE AND ENGINEERING, INC., AND SUBSIDIARY
- ------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
AND SCHEDULE
- ------------


(Submitted in answer to Item 8 and Item 14
of Form 10-K, Securities and Exchange Commission)

CONSOLIDATED FINANCIAL STATEMENTS PAGE
- --------------------------------- ----

Report of Independent Public Accountants 28

Consolidated Balance Sheets - March 29, 1996 and March 31, 1995 29-30
Consolidated Statements of Operations 31
For the Years Ended March 29, 1996 March 31, 1995,
and April 1, 1994
Consolidated Statements of Stockholders' Investment 32
For the Years Ended March 29, 1996, March 31, 1995, and
April 1, 1994
Consolidated Statements of Cash Flows 33
For the Years Ended March 29, 1996, March 31, 1995, and
April 1, 1994
Notes to Consolidated Financial Statements - March 29, 1996 34-41


CONSOLIDATED SUPPLEMENTARY FINANCIAL INFORMATION
- ------------------------------------------------

Unaudited quarterly consolidated financial data for
the years ended March 29, 1996, and March 31, 1995 42


(Separate Financial Statements of the Company have been omitted since the net
assets of its wholly owned subsidiary are not so restricted with respect to
payment of loans, advances and cash dividends to the Company as to require such
disclosure.)

FINANCIAL STATEMENT SCHEDULE
- ----------------------------

Schedule VIII - Valuation and Qualifying Accounts and Reserves 43





Other schedules have been omitted because of the absence of conditions under
which they are required or because the required information is given in the
financial statements or notes thereto.




27
28


ARTHUR ANDERSEN LLP

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------


To American Science and Engineering, Inc.:

We have audited the accompanying consolidated balance sheets of American Science
and Engineering, Inc. (a Massachusetts corporation) and subsidiary as of March
29, 1996 and March 31, 1995 and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended March 29, 1996. These consolidated financial statements and
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Science and Engineering, Inc. and subsidiary as of March 29, 1996 and
March 31, 1995, and the results of their operations and their cash flows for
each of the three years in the period ended March 29, 1996.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to consolidated financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

Boston, Massachusetts /s/ Arthur Andersen LLP
June 5, 1996



28
29


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


CONSOLIDATED BALANCE SHEETS
MARCH 29, 1996 AND MARCH 31, 1995

Dollars in thousands


1996 1995
---- ----


ASSETS CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 3,377 $ 869
Accounts receivable, net of allowances of
$179 in 1996 and $96 in 1995 (Note 1) 3,875 2,831
Unbilled costs and fees, net of allowances of
$97 in 1996 and $72 in 1995 (Note 1) 1,258 1,983
Inventories (Note 1) 4,314 3,709
Prepaid expenses and other current assets 278 53
Deferred income taxes (Note 5) 10 28
-------- --------
TOTAL CURRENT ASSETS 13,112 9,473
-------- --------
DEPOSITS 257 207
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
NET OF ACCUMULATED DEPRECIATION OF $8,507 IN
1996 AND $8,336 IN 1995 (Notes 1 and 3) 926 1,054
-------- --------

$ 14,295 $ 10,734
======== ========



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




29
30


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


CONSOLIDATED BALANCE SHEETS (CONTINUED)
MARCH 29, 1996 AND MARCH 31, 1995

Dollars in thousands


1996 1995
---- ----


LIABILITIES & Current liabilities:
STOCKHOLDERS' Current maturities of obligations
INVESTMENT under capital leases (Note 3) $ 16 $ 160
Accounts payable 2,021 2,169
Accrued legal 128 350
Accrued salaries and benefits 496 557
Accrued warranty costs (Note 1) 178 152
Accrued commissions 160 184
Deferred revenue (Note 1) 375 194
Accrued rent -- 570
Customer deposits 2,670 48
Other current liabilities 258 473
-------- --------
TOTAL CURRENT LIABILITIES 6,302 4,857
-------- --------

NONCURRENT LIABILITIES:
Obligations under capital leases, net
of current maturities (Note 3) 59 73
Deferred compensation (Note 10) 192 184
Deferred rent (Note 1) 231 --
Deferred income taxes (Note 5) 10 28
-------- --------
TOTAL NONCURRENT LIABILITIES 492 285
-------- --------


COMMITMENTS AND CONTINGENCIES (Notes 3, 4, 10 and 11)

STOCKHOLDERS' INVESTMENT: (Notes 6 and 7)
Preferred stock, no par value
Authorized - 100,000 shares
Issued - None
Common stock, $.66-2/3 par value
Authorized - 8,000,000 shares
Issued 4,500,627 shares in 1996
and 4,257,120 shares in 1995 3,001 2,838
Capital in excess of par value 14,556 13,612
Accumulated deficit (9,290) (10,092)
-------- --------
8,267 6,358
Note receivable-Officer (Note 8) (640) (640)
Less: treasury stock -
67,377 shares in 1996 and
in 1995, at cost (126) (126)
-------- --------

TOTAL STOCKHOLDERS' INVESTMENT 7,501 5,592
-------- --------
$ 14,295 $ 10,734
======== ========



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







30
31


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 29, 1996, MARCH 31, 1995,
AND APRIL 1, 1994

Dollars in thousands, except per share amounts



1996 1995 1994
---- ---- ----

NET SALES AND CONTRACT REVENUES
(Notes 1 and 9) $17,815 $12,997 $ 11,182
Cost of sales and contracts (Note 1) 11,823 9,076 8,342
------- ------- --------
GROSS PROFIT 5,992 3,921 2,840

EXPENSES:
Selling, general and administrative 4,387 4,066 4,188
Research and development (Note1) 533 852 1,436
Restructuring costs -- -- 642
------- ------- --------
TOTAL EXPENSES 4,920 4,918 6,266

OPERATING INCOME/(LOSS) 1,072 (997) (3,426)
------- ------- --------

OTHER INCOME/(EXPENSE):
Interest, net 52 67 157
Other, net (292) (37) (66)
------- ------- --------
TOTAL OTHER INCOME (EXPENSE) (240) 30 91
------- ------- --------

INCOME/(LOSS) BEFORE PROVISION FOR
INCOME TAXES $ 832 $ (967) $ (3,335)
PROVISION FOR INCOME TAXES (Note 5) 30 -- --
------- ------- --------

NET INCOME/(LOSS) $ 802 $ (967) $ (3,335)
======= ======= ========

INCOME/(LOSS) PER SHARE (NOTE 1) $ .18 $ (.23) $ (.83)
======= ======= ========

Weighted Average Shares 4,541 4,257 4,014
======= ======= ========



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








31
32


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 29, 1996, MARCH 31, 1995 AND APRIL 1, 1994

Amounts in thousands, except share amounts



CAPITAL IN ACCU- NOTE
---------- ----- ----
COMMON STOCK EXCESS OF MULATED RECEIVABLE TREASURY STOCK
------------ --------- ------- ---------- --------------
SHARES AMOUNT PAR VALUE DEFICIT OFFICER SHARES AMOUNT TOTAL
------ ------ --------- ------- ------- ------ ------ -----


BALANCE,
MARCH 31, 1993 4,210,740 $ 2,807 $ 13,016 $ (5,790) $ -- 227,377 $ (426) $ 9,607

Issuance of treasury
stock to Officer (Note 8) -- -- 340 -- (640) 160,000 300 --
Net Income/(loss) -- -- -- (3,335) -- -- -- (3,335)
Exercise of stock
options (Note 6) 5,735 4 18 -- -- -- -- 22
--------- ------- -------- -------- -------- --------- ------ -------

BALANCE,
APRIL 1, 1994 4,216,475 2,811 13,374 (9,125) (640) 67,377 (126) 6,294

Net income/(loss) -- -- -- (967) -- -- -- (967)
Exercise of stock
options (Note 6) 2,645 2 29 -- -- -- -- 31
Issuance of stock 38,000 25 209 -- -- -- -- 234
--------- ------- -------- -------- -------- --------- ------ -------

BALANCE,
MARCH 31, 1995 4,257,120 2,838 13,612 (10,092) (640) 67,377 (126) 5,592

Net income/(loss) -- -- -- 802 -- -- -- 802
Exercise of stock
options (Note 6) 18,868 13 40 -- -- -- -- 53
Issuance of stock
(Note 7) 224,639 150 904 -- -- -- -- 1,054
--------- ------- -------- -------- -------- --------- ------ -------

BALANCE,
MARCH 29, 1996 4,500,627 $ 3,001 $ 14,556 $ (9,290) $ (640) 67,377 $ (126) $ 7,501
========= ======= ======== ======== ======== ========= ====== =======




THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.




32
33


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 29, 1996, MARCH 31, 1995, AND APRIL 1, 1994

Dollars in thousands



1996 1995 1994
---- ---- ----


Cash flows from operating activities:
Net income/(loss) $ 802 $ (967) $(3,335)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 205 219 278
Amortization of deferred gain -- (68) (68)
Provisions for contract, inventory, accounts
receivable and warranty reserves 510 219 (201)
Change in assets and liabilities:
Accounts receivable (1,244) (412) 2,440
Unbilled costs and fees 725 (1,075) 515
Inventories (442) 145 (1)
Prepaid expenses, other current
assets and deferred income taxes (257) 184 46
Accounts payable (148) 1,669 (586)
Customer deposits 2,622 (122) (270)
Accrued expenses and other
current liabilities (1,185) (431) (298)
Accrued restructuring costs -- (275) (367)
Noncurrent liabilities 221 (242) (115)
-------- ------- -------

TOTAL ADJUSTMENTS 1,007 (189) 1,373
-------- ------- -------

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 1,809 (1,156) (1,962)
-------- ------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (250) (693) (144)
-------- ------- -------

Cash used for investing activities (250) (693) (144)
-------- ------- -------

Cash flows from financing activities:
Proceeds from borrowings and capital lease
financings (Notes 3 and 11) 650 108 30
Repayment of officer note (Note 11) (650) -- --
Proceeds from exercise of stock options 53 31 22
Proceeds from issuance of stock 1,054 234 --
Principal payments of capital lease obligations (158) (151) (152)
-------- ------- -------
Cash provided by (used for) financing activities 949 222 (100)
-------- ------- -------

Net increase (decrease) in cash and cash equivalents 2,508 (1,627) (2,206)
Cash and cash equivalents at beginning of year 869 2,496 4,702
-------- ------- -------
Cash and cash equivalents at end of year $ 3,377 $ 869 $ 2,496
======== ======= =======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 79 $ 16 $ 28
Income taxes paid -- -- 62





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





33
34


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 1996


1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

American Science and Engineering, Inc., is engaged in the development and
manufacture of sophisticated X-ray inspection systems for critical detection and
security screening solutions for sale primarily to U.S. and foreign government
agencies.

USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation. As
policy, the Company's fiscal year ends on the Friday closest to March 31st. As
such, the Company's fiscal year ended on March 29, 1996.

INVENTORIES Inventories are stated at the lower of cost, computed on a first-in,
first-out basis, or market and generally include material, labor and factory
overhead.


The components of inventories at March 29, 1996, and March 31, 1995, were as
follows (dollars in thousands):



1996 1995
---- ----


Raw materials and completed subassemblies $ 3,014 $2,485
Work-in-process 1,300 1,224
------- ------
$ 4,314 $3,709
======= ======



PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS The Company provides for
depreciation and amortization of its fixed assets, principally equipment, using
straight-line and accelerated methods over estimated useful lives of 3-10 years.
Expenditures for normal maintenance and repairs are charged to expense as
incurred. Significant additions, renewals or betterments which extend the useful
lives of the assets are capitalized. The cost and accumulated depreciation
applicable to equipment and leasehold improvements sold or otherwise disposed
of, are removed from the accounts, and any resulting gain or loss is included in
the consolidated statements of operations.

LONG LIVED ASSETS For the fiscal year beginning March 30, 1996, the Company is
required to adopt Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets to be Disposed of". SFAS
No. 121 addresses accounting and reporting requirements for long-lived assets
based on their fair market values. The Company believes there will be no impact
on its financial condition and results of operations as a result of adopting
SFAS No. 121.

WARRANTY COSTS The Company provides currently for future warranty and
installation costs on units sold covering the estimated replacement and
installation costs related to parts and labor.

METHODS OF RECORDING PROFITS ON CONTRACTS Revenues and profits are generally
recorded on cost reimbursement and long-term fixed-price contracts as costs are
incurred using the percentage-of-completion method. Percentages of completion
are determined by relating the actual cost of work performed to date for each
contract to its estimated final cost.




34
35


Revenues and profits are recorded on other fixed price contracts as shipments
are made or as performance milestones are achieved. Profit on fixed price
contracts is determined by applying the estimated average profit rate to the
contract value of the items shipped or of the performance milestones achieved.
If a loss is anticipated on a contract, provision is made at that time for the
full amount of the estimated loss without reference to the percentage of
completion or to performance milestones.

Under the terms of most of its cost-reimbursement contracts, the Company is not
permitted to bill customers a specified portion of the contract value until
completion. Such retainages (approximately $394,000 in 1996 and $473,000 in
1995) result from both commercial contract retentions and government contract
withholdings for 15% of fees, as well as differences between the actual and
provisional indirect cost billing rates. Retainages are included in the
accompanying consolidated balance sheets as components of unbilled costs and
fees.

Included in accounts receivable and unbilled costs and fees at March 29, 1996,
and March 31, 1995, are $3,444,000 and $1,738,000 respectively, from both prime
and subcontracts with the U.S. Government.

DEFERRED REVENUE The Company recognizes service contract revenues ratably over
the term of the contract. The Company provides a reserve for its estimate of
warranty costs at the time of shipment. Deferred revenue in the accompanying
balance sheets consists primarily of unearned revenue on service contracts.
Substantially all of the deferred revenue included in the accompanying 1996
balance sheet will be recognized within 2 years.

DEFERRED RENT The Company entered into a lease for its office and manufacturing
facilities. This lease has escalation clauses which require normalization of the
rental expense over the life of the lease resulting in deferred rent being
reflected in the accompanying 1996 balance sheet.

RESEARCH AND DEVELOPMENT Research and development costs are expensed as
incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist
primarily of cash and cash equivalents, accounts receivable and accounts
payable. The carrying amounts of the Company's cash and cash equivalents,
accounts receivable and accounts payable approximate fair value due to their
short-term nature.

FOREIGN CURRENCY CONTRACTS In order to minimize exposure to foreign currency
fluctuations, the Company has entered into forward foreign currency contracts
to hedge commitments, denominated in foreign currencies, with vendors. The
contracts are accounted for as hedges in accordance with SFAS No. 52, "Foreign
Currency Translations". Under this Statement, the contracts qualify as hedges
of firm commitments and therefore the contracts are excluded from the balance
sheet and statement of operations. Any gain or loss on the foreign currency
contracts will be offset by a corresponding loss or gain on the commitment with
the vendor at the time of purchase. As of March 29, 1996, the Company had
approximately $42,000 in forward currency contracts which will mature at
various times through April 1996.

INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARES Income/(loss) per common
share in 1996 was computed by dividing the net income by the weighted average
number of shares of Common Stock outstanding during each year. Common stock
equivalents (stock options and stock warrants) were considered in the
computation of earnings per common and common equivalent share for 1996. Stock
options and stock warrants were not considered in computing the loss per share
in 1995 and 1994 as the effect would have been antidilutive. The primary
weighted average shares for 1996, 1995, and 1994 were 4,517,000, 4,257,120, and
4,014,000, respectively. The number of fully diluted shares




35
36


used in the per share computations were 4,541,000 in 1996, 4,257,120 in 1995 and
4,014,000 in 1994. Fully diluted earnings per share is equal to primary earnings
per share.

INCOME TAXES In accordance with SFAS No. 109, "Accounting for Income Taxes",
the Company recognizes deferred income taxes based on the expected future tax
consequences of differences between the financial statement basis and the tax
basis of assets and liabilities, calculated using enacted tax rates in effect
for the year in which the differences are expected to be reflected in the tax
return. The Company records a valuation allowance against any deferred tax
assets whose realizability is uncertain.

PRESENTATION Certain amounts in 1995 and 1994 have been reclassified to conform
to the 1996 financial statement presentation.

2. CASH AND CASH EQUIVALENTS

The Company considers all cash investments with original maturities of 90 days
or less to be cash equivalents. Cash and cash equivalents are carried at cost,
which approximates fair market value at year end 1996 and 1995.

Cash and cash equivalents as of March 29, 1996, consist primarily of U.S.
Treasury Bills of approximately $2,000,000 with maturities of 30 days or less,
and overnight repurchase agreements with a regional bank. The repurchase
agreements are collateralized by investments principally consisting of U.S.
Government Agency securities in the amount of at least 100% of such obligation.


3. OPERATING AND CAPITAL LEASE AGREEMENTS

In January 1995, the Company entered into a lease agreement for its new office
and manufacturing facilities in Billerica, Massachusetts. This lease has a term
of 10 years starting March 1, 1995, with an option to extend for 10 additional
years. As part of the lease agreement, the Company agreed to a security deposit
of $250,000. Escalation clauses provide for rent increases after the first and
fifth years of the rental term. The Company incurred $513,000, $1,640,000 and
$1,679,000 of rent expense in 1996, 1995, and 1994 respectively.


Future minimum rental payments under the lease, excluding real estate taxes,
insurance and operating costs paid by the Company required over the initial term
of the lease are as follows (in thousands):



Year Ending March
-----------------

1997 $ 475
1998 475
1999 475
2000 475
2001 554
Thereafter 2,170
------
$4,624
======






36
37


During fiscal 1995 the Company entered into a lease agreement for the purchase
of certain office equipment. Borrowings under this agreement are payable in
monthly installments over a period of 60 months with interest of 11.5%. Future
minimum lease payments are as follows (in thousands):


Year Ending March
-----------------

1997 $ 23
Thereafter 69
-----
Total minimum lease payments 92
Less: Amounts representing interest (17)
-----
Present value of net minimum
lease payments $ 75
=====




4. LINES OF CREDIT

In June 1995, the Company entered into a $1 million line of credit with a
regional bank which is guaranteed by the U.S. Export-Import (ExIm) Bank. The
agreement requires monthly interest payments at the rate of prime plus 1 1/2%
per annum and is secured by the Company's export related accounts receivable and
work-in-process inventory accumulated for foreign orders.

In January 1996, the Company entered into a domestic line of credit for $1.5
million with the above mentioned regional bank. This line of credit is secured
by accounts receivable from ongoing U.S. customers and requires monthly interest
payments at the rate of prime plus 1%. Also in January 1996, an additional $1.5
million borrowing facility was established to finance certain short lead time
orders the Company anticipates receiving during fiscal 1997 and requires monthly
interest payments at the rate of prime plus 1 1/2% per annum. As of March 29,
1996, there were no borrowings against any of the lines of credit.

The above mentioned lines of credit expired on April 30, 1996. The lines of
credit to support both domestic and short lead time orders were subsequently
renewed by the bank through July 31, 1996, at which time a formal credit renewal
agreement is expected to be in place.


5. INCOME TAXES


At March 29, 1996, the Company had approximately $8,989,000 of federal net
operating loss carryforwards which can be used, subject to certain limitations,
to offset any future federal taxable income. The carryforwards expire beginning
in the year 1998 through the year 2010. The Company also has unused investment
tax and other credits of approximately $235,000 expiring from 1997 through 2001.
The provision for income taxes in the accompanying statement of income is
substantially a current provision and differs from the provision calculated by
applying the statutory federal income tax rate of 34% to income before
provision for income taxes due to the following:



1996
----

Provision for income taxes at statutory rate $ 283,000
Benefit from net operating loss carryforward (283,000)
Other tax liabilities 30,000
---------
$ 30,000
=========



At March 29, 1996, the Company had $3,997,000 of short and long-term deferred
tax assets and $119,000 of long-term deferred tax liabilities. The Company has
recorded a valuation allowance of $3,878,000 against these amounts due to the
uncertainties surrounding the realization of the Company's net operating loss
carryforwards, the realization of which is limited to the future income of the
Company.




37
38




The tax effect of the primary temporary differences giving rise to the Company's
deferred tax assets and liabilities at March 29, 1996, are as follows (in
thousands):


1996 1996
----------------------- -----------------------
Current Long-Term Current Long-Term
Asset Asset Asset Asset
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------

Reserves for accounts receivable
and unbilled costs and fees $ 108 $ -- $ 119 $ --
Inventory related reserves 243 -- 316 --
Depreciation and amortization -- (119) -- (163)
Accrued contract costs 48 -- 20 --
Accrued warranty costs 69 -- 66 --
Net operating loss carryforwards -- 3,056 -- 3,329
Tax credits and other 318 155 247 176
------ ------ ------ ------
786 3,092 768 3,341

Valuation allowance (776) (3,102) (740) (3,369)
------ ------ ------ ------

Total deferred income taxes $ 10 $ (10) $ 28 $ (28)
====== ====== ====== ======



The valuation allowance at March 29, 1996, was approximately $231,000 lower than
the valuation allowance at March 31, 1995, primarily due to the usage of net
operating loss carryforwards during the year.


6. COMMON STOCK

STOCK OPTIONS As of March 29, 1996, 557,404 shares of the Company's common stock
were reserved for possible distribution to directors, officers, and employees
under various formal stock option plans and other arrangements as approved by
the shareholders. Options under the plans are granted at fair market value and
generally become exercisable within one to two years of the grant date and
terminate from five to ten years from the date of grant. For the fiscal year
beginning March 30, 1996, the Company is required to adopt SFAS No. 123
"Accounting for Stock-Based Compensation". SFAS 123 requires employee stock
based compensation to be either recorded or disclosed at its fair value. The
Company will continue to account for employee stock based compensation under
Accounting Principles Board Opinion No. 25, and will not adopt the new
accounting provision under SFAS 123 and will include the additional required
disclosures in the 1997 consolidated financial statements.





38
39

Stock option activity is summarized as follows for the years ended March 29,
1996, March 31, 1995, and April 1, 1994:


1996 1995 1994
---- ---- ----

Options outstanding, beginning of year 506,194 290,808 384,496
Options granted 204,000 233,800 40,000
Options exercised (18,868) (2,645) (5,735)
Options expired (133,922) (15,769) (127,953)
-------- ------- -------
OPTIONS OUTSTANDING, END OF YEAR 557,404 506,194 290,808
======== ======= =======
OPTIONS EXERCISABLE, MARCH 29, 1996 412,404
========






PRICE RANGE OF OPTIONS: 4/1/95 - 3/29/96


Options granted $5.75 - $8.88
Options exercised $2.88 - $5.44
Options expired $2.88 - $6.56
Options outstanding $2.88 - $8.88




The Company has a Common Stock installment purchase plan under which the Board
of Directors may grant to key personnel the right to purchase shares of the
Company's common stock at fair market value and to pay the purchase price in
twelve equal annual installments. As of March 29, 1996, no shares have been
reserved for or granted under this plan.

7. PRIVATE EQUITY PLACEMENT

During fiscal 1996 the Company, in a private placement, sold 203,044 shares of
common stock to a foreign investor for total consideration of $937,500. The
Company received net proceeds of $856,250. The Company utilized the services of
a financial services firm. As compensation, the financial services firm
received a fee of $81,250 as well as stock purchase warrants allowing the firm
to purchase up to 29,167 shares of the Company's stock at $6.25 per share. No
expense was recognized related to the issued warrants as the exercise price of
the warrants approximated fair value on the date of grant.

8. EMPLOYMENT AGREEMENT AND NOTE RECEIVABLE FROM OFFICER

On January 12, 1994, the Company entered into an Employment Agreement with the
Company's President and Chief Executive Officer. On September 29, 1994, the
stockholders approved the issuance of non-qualified stock options for 80,000
shares (at $4.00 per share) to be exercised to varying extents at various times
through its expiration on December 16, 2003. The excess of the quoted market
price of the stock at the date of the award ($5.50) over the price stipulated by
the Agreement ($4.00) has been recognized by the Company as compensation
expense. This total amount is being amortized on a straight line basis over the
length of a vesting period of three years, through September 1996.

In addition, the Company's Chief Executive Officer has purchased 160,000 shares
of common stock at a price of $4.00 per share financed under a note agreement
for $640,000 from the Company. This note accrues interest at a rate of 6.26% and
will be payable on or before September 15, 2003 or 90 days after termination, as
defined.




39
40


9. BUSINESS SEGMENT INFORMATION


Certain financial information by business segment for the fiscal years 1996,
1995, and 1994 is presented below (dollars in thousands):



Depreciation Income/
Total Capital and (Loss)
Business Segment Assets Expenditures Amortization Revenues Before Tax
- ---------------- ------ ------------ ------------ -------- ----------


1996
X-ray Products $ 10,081 $ 163 $ 50 $ 17,815 $ 4,385

Corporate 4,214 88 155 -- (3,313)

Interest income -- -- -- -- 131
Interest expense -- -- -- -- (79)
Other expense, net -- -- -- -- (292)
-------- ----- ----- -------- -------
$ 14,295 $ 251 $ 205 $ 17,815 $ 832
======== ===== ===== ======== =======

1995
X-ray Products $ 6,122 $ 61 $ 20 $ 12,355 $(1,029)
Control Systems 456 -- 69 642 300
-------- ----- ----- -------- -------
6,578 61 89 12,997 (729)

Corporate 4,156 632 130 -- (269)

Interest income -- -- -- -- 83
Interest expense -- -- -- -- (16)
Other expense, net -- -- -- -- (36)
-------- ----- ----- -------- -------
$ 10,734 $ 693 $ 219 $ 12,997 $ (967)
======== ===== ===== ======== =======

1994
X-ray Products $ 6,673 $ 30 $ 79 $ 10,590 $(2,889)
Control Systems 335 -- 70 592 115
Restructuring costs -- -- -- -- (642)
-------- ----- ----- -------- -------
7,008 30 149 11,182 (3,426)

Corporate 3,533 114 129 -- --

Interest income -- -- -- -- 185
Interest expense -- -- -- -- (28)
Other expense, net -- -- -- -- (66)
-------- ----- ----- -------- -------
$ 10,541 $ 144 $ 278 $ 11,182 $(3,335)
======== ===== ===== ======== =======






Corporate assets consist primarily of cash and cash equivalents, prepaid
expenses and fixed assets.

During fiscal 1996, due to the insignificant contribution to revenue and
earnings by the Control Systems business segment, this segment was combined with
the X-ray Products Business segment. The level of contribution to revenues and
earnings by the Control Systems business segment is expected to be insignificant
in the future.

Approximately 69% in 1996, 55% in 1995, and 41% in 1994 of consolidated revenues
were derived from prime and subcontracts with, or sales to, various United
States federal and state governmental agencies.





40
41


Sales to major customers (representing in excess of 10% of consolidated sales)
included X-ray Products segment sales of $2,854,000 to one customer in 1996,
$2,025,000 to one customer in 1995 and $2,326,000 to one customer in 1994. These
sales include sales to prime contractors of the U.S. Government and sales
directly to the U.S. Government.

The Company's export sales, which include all sales of products and services
delivered outside of the United States, were $3,289,000 in 1996, $3,822,000 in
1995 and $3,190,000 in 1994.


10. COMMITMENTS AND CONTINGENCIES

DEFERRED COMPENSATION The Company has an unfunded deferred compensation plan for
certain of its current and former directors which provides for periodic payments
beginning at age 65, the amount of which depends on their length of service. The
Company accrues the estimated current cost, which amounted to $21,000 in 1996,
$21,000 in 1995 and $46,000 in 1994.

LITIGATION In July 1993, the Company terminated the employment of Martin Annis
as Chief Executive Officer and Chairman of the Board, on the basis of
information received indicating that he had been engaging in activities that
were incompatible with his status as an officer and employee of the Company. Dr.
Annis brought suit against the Company and certain Officers and Directors,
alleging wrongful termination, breach of contract and associated torts. The
trial was concluded in April 1995, and the jury found that Dr. Annis' activities
had materially breached his fiduciary duty to the Company, thereby justifying
the Company in terminating him. However, Dr. Annis is appealing that decision
and the Company and Dr. Annis are involved in continuing litigation. The Company
is vigorously pursuing claims that it has brought against Dr. Annis, alleging
that he has misappropriated its trade secrets and proprietary technologies. Dr.
Annis has alleged that the Company interfered with his and his new company's
business relationships. After consultation with counsel, the Company does not
believe that its exposure from these claims is material. A trial of these
issues is scheduled for June 1996.


11. LOANS FROM OFFICERS

In April 1995, the Company received $650,000 in cash from Officers and Directors
as a temporary loan, primarily to support working capital needs. Interest was
paid monthly at the rate of prime plus 2% per annum. In addition, the Company
issued a total of 6,500 shares of its common stock and warrants to purchase
65,000 shares of its common stock, proportionately to the lenders. The fair
value of these issuances of $45,500 is included in interest expense in the
consolidated statement of operations. The loan was due and repaid on August 15,
1995.



41



42


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA FOR THE YEARS ENDED MARCH 29,
1996 AND MARCH 31, 1995

Dollars in thousands, except per share amounts


1996 BY QUARTER 1995 BY QUARTER
--------------- ---------------

1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
--- --- --- --- --- --- --- ---
Net sales and
contract revenues $3,517 $3,882 $4,717 $5,699 $2,523 $3,397 $4,020 $3,057

Gross profit 1,064 1,305 1,420 2,203 957 825 1,335 804

Operating (loss)
income 50 215 277 530 (445) (12) 42 (582)

Net income/(loss) $ 52 $ 155 $ 252 $ 343 $ (463) $ (1) $ 61 $ (564)

Net (loss) income
per share .01 .04 .05 .07 (.11) (0) .01 (.13)





42
43



SCHEDULE VIII


AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY


VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED MARCH 29, 1996, MARCH 31, 1995 AND APRIL 1, 1994



DESCRIPTION - ACCOUNTS RECEIVABLE

Dollars in thousands


Balance at Charged to Deductions Balance
Beginning Costs and from at End
of Year Expenses Reserves of Year
------- -------- -------- -------


1996 $ 96 $ 200 $ 117 $ 179

1995 $ 111 $ 25 $ 40 $ 96

1994 $ 111 $ -- $ -- $ 111





DESCRIPTION - ALLOWANCES FOR UNBILLED COST AND FEES

Dollars in thousands


Balance at Charged to Deductions Balance
Beginning Costs and from at End
of Year Expenses Reserves of Year
------- -------- -------- -------


1996 $ 72 $ 25 $ -- $ 97

1995 $ 552 $ -- $ (480) $ 72

1994 $ 590 $ -- $ (38) $ 552






43
44



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.


AMERICAN SCIENCE AND ENGINEERING, INC.

DATED: 26 June 1996

By /s/ Ralph S. Sheridan
----------------------------------
Ralph S. Sheridan, President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated:

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


/s/ Ralph S. Sheridan President
- ------------------------ and Director (Principal
Ralph S. Sheridan Executive Officer) 26 June 1996





/s/ Lee C. Steele Chief Financial Officer, 26 June, 1996
- ------------------------ Treasurer and
Lee C. Steele Vice President, Finance
(Principal Financial Officer)


/s/ Joseph Moffa Controller
- ------------------------ (Principal Accounting Officer) 26 June 1996
Joseph Moffa


/s/ Herman Feshbach Chairman of the Board
- ------------------------ of Directors 26 June 1996
Herman Feshbach


/s/ Al Gladen Director 26 June 1996
- ------------------------
Al Gladen


/s/ Hamilton W. Helmer Director 26 June 1996
- ------------------------
Hamilton W. Helmer


/s/ Donald J. McCarren Director 26 June 1996
- ------------------------
Donald J. McCarren










44
45

EXHIBIT INDEX
-------------



Exhibit Description of Exhibit (and Statement Page Number
Number of Incorporation by Reference, If Applicable) (If Filed)
- ------ --------------------------------------------- ----------


(3)(a) Restated Articles of Organization of Company (filed as an exhibit
to Company's Annual Report on Form 10-K for the year ended
September 30, 1967, and incorporated herein by reference)

(3)(b) Articles of Amendment to Restated Articles of Organization of
Company (filed as Exhibit 2(a)(ii)(B) to Company's Registration
Statement on Form S-7, No. 2- 56452, filed May 25, 1976, and
incorporated herein by reference)

(3)(c) Articles of Amendment to Restated Articles of Organization of
Company (filed as Exhibit 12 to Company's Annual Report on Form
10-K for the year ended March 31, 1976, and incorporated herein
by reference)

(3)(d) By-laws of Company, as amended (filed as Exhibit 2(a)(iii) to
Company's Registration Statement on Form S-7, No. 2-56452, filed
May 25, 1976, and incorporated herein by reference)

(10)(a)(ii) Deferred Compensation Plan for Herman Feshbach (filed as
Exhibit 20 to the Company's Annual Report on Form 10-K for the
year ended March 31, 1976, and incorporated herein by
reference)

(10)(a)(iv) Amendment to Deferred Compensation Plans for Ismael Escobar
and Herman Feshbach (filed as Exhibit 7 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1980, and incorporated herein by reference)

(10)(a)(v) Deferred Compensation Plan for Marie Spaulding (filed as Exhibit
(10)(a)(v) to the Company's Annual Report on Form 10-K for the year
ended March 31, 1988, and incorporated herein by reference)

(10)(b)(i) 1981 Incentive Stock Option Plan (filed as Exhibit (10)(b)(i) to the
Company's Annual Report on Form 10-K for the year ended March 31,
1988, and incorporated herein by reference)

(10)(b)(iii) 1984 Incentive Stock Option Plan (filed as Exhibit (10)-3 to
the Company's Annual Report on Form 10-K for the year ended
March 31, 1985, and incorporated herein by reference)

(10)(b)(iv) Amendment 1 to 1981 Incentive Stock Option Plan (filed as
Exhibit (10)(b)(iv) to the Company's Annual Report on Form
10-K for the year ended March 31, 1988, and incorporated
herein by reference)

(10)(b)(v) Amendment 1 to 1984 Incentive Stock Option Plan (filed as Exhibit
(10)(b)(v) to the Company's Annual Report on Form 10-K for the year
ended March 31, 1988, and incorporated herein by reference)

(10)(b)(vi) 1987 General Stock Option Plan (filed as an exhibit to the
Company's current report on Form 8-K for the month of October,
1987, and incorporated herein by reference)

(10)(b)(vii) Employment Agreement between the Company and Ralph S. Sheridan
(filed as exhibit 10(b)(v) to the Company's Annual Report on
Form 10-K for the year ended April 1, 1994 and incorporated herein
by reference)

(10)(b)(viii) Loan and Security Agreement between the Company and Alfred Gladen
as Agent (with forms of Promissory Note and Stock Purchase Warrants)
(filed) as Exhibit 10(b)(vi) to the Company's Annual Report on Form
10-K for the year ended March 31, 1995 and incorporated herein by
reference)




45
46



Exhibit Description of Exhibit (and Statement Page Number
Number of Incorporation by Reference, If Applicable) (If Filed)
- ------ --------------------------------------------- ----------


(10)(c) Lease of Billerica property (filed as Exhibit 10(c) to the Company's
Annual Report on Form 10-K for the year ended March 31, 1995 and
incorporated herein by reference)


(22) Identification of Company's subsidiary, AS&E Radiography, Inc.,
incorporated in Massachusetts (filed as Exhibit (22) to Company's
Annual Report on Form 10-K for the year ended March 31, 1988, and
incorporated herein by reference)

(23) Consent of Independent Public Accountants 47







46