<PAGE>   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

FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1997    Commission File Number: 0-11309

                               GALILEO CORPORATION
             (Exact name of Registrant as specified in its charter)

DELAWARE                                                 04-2526583
(State of Incorporation)                    (I.R.S. Employer Identification No.)

GALILEO PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566
(Address of Principal Executive Offices)(Zip Code)

Registrant's telephone number, including area code: (508) 347-9191

        Securities registered pursuant to Section 12(b) of the Act: NONE

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                     --------------------------------------
                                (Title of class)

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. [ X ]

As of September 30, 1997, 6,872,205 shares of the Registrant's Common Stock were
outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant on such date was $85.0 million.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of Registrant's proxy statement for the 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III of this report.


                  The Index to Exhibits is located on Page 35.


                                  PAGE 1 OF 37


<PAGE>   2



                                     PART I

Item 1.   BUSINESS


               Galileo Corporation (the "Company" or "Galileo") develops,
          manufactures and markets a variety of fiberoptic and electro-optic
          products which transmit, sense or intensify light or images. The
          Company's core competency in glass sciences and experience in
          fiberoptic and photonic technology are fundamental to developing and
          manufacturing its products. The Company was incorporated in Delaware
          in 1973 as the successor to a business which was founded in 1959.


          PRODUCTS

               The Company operates in a single industry segment and designs and
          produces products for medical, scientific detector and spectroscopy,
          telecommunications, and office product applications.


               MEDICAL PRODUCTS

               The Company's Medical Products include endoscopic imaging and
          women's health-related products. Sales of Medical Products accounted
          for 41%, 18% and 21% of the Company's net sales for fiscal years 1997,
          1996 and 1995, respectively.

               Endoscopic Imaging Devices

               The Company's Medical Products Group designs, develops and
          markets application specific, minimally invasive endoscopic imaging
          products which are valuable in any medical procedure where enhanced
          optical imaging can provide accurate diagnosis, improve surgical
          performance and increase patient comfort via smaller diameter scopes.
          The Company's proprietary micro optics enable physicians to visualize
          patients' anatomy with the resolution and light efficiency of larger,
          more costly, more invasive devices. The Company is currently
          developing and marketing micro invasive, cost effective devices for
          use in virtually every area of the human anatomy.

               To develop application specific devices, the Company engages in
          significant collaborative design with customers to integrate its
          products with customer developed minimally invasive surgical and
          diagnostic tools. Currently, the Company's endoscopes include rigid
          and steerable, flexible devices at various lengths and diameters
          ranging from 0.4 to 5 millimeters.

               In October 1997 the Company received FDA 510(k) approval for a
          family of optical couplers. Optical couplers are transfer devices
          which relay images captured by endoscopes to visual medical monitoring
          and display instrumentation. They are used in virtually every surgical
          or diagnostic procedure using an endoscope. The Company's couplers are
          designed specifically to enhance the optical performance of its own
          endoscopes.

               Women's Health-Related Products

               Through Leisegang Medical, Inc. ("Leisegang"), a wholly-owned
          subsidiary, the Company develops, manufactures and distributes women's
          health-related medical products including colposcopes, ultrasound
          devices, rigid and flexible hysteroscopes, fetal monitors, endoscopes
          and a variety of surgical and diagnostic instruments.


                                        2


<PAGE>   3



               In March 1997 the Company acquired the Sani-Spec(TM) product line
          from C.R. Bard, Inc. The Sani-Spec product line includes Sani-Spec
          single-use vaginal speculums, Sani-Scope(TM) anoscopes, Spec Light(TM)
          speculum lights and Pap Smear Kits used by OB/GYN physicians, clinics
          and hospitals.

               Subsequent to its 1997 fiscal year end, the Company acquired
          Leisegang Feinmechanik-Optik GmbH & Co. KG ("Leisegang GmbH").
          Leisegang GmbH was a privately held manufacturer and distributor of
          colposcopes and accessories and supplied those products to Leisegang.
          These products are sold to OB/GYN physicians' offices and hospitals
          primarily through a worldwide network of sales representatives and
          distributors.


               SCIENTIFIC DETECTOR AND SPECTROSCOPY PRODUCTS

               Sales of Scientific Detector and Spectroscopy Products accounted
          for 37%, 32% and 34% of the Company's net sales for fiscal years 1997,
          1996 and 1995, respectively. The principal products within Scientific
          Detector and Spectroscopy Products include detectors, microchannel
          plates, detector assemblies and systems and spectroscopy products.

               Single Channel Detectors

               Single Channel Detectors are small glass tubes manufactured with
          semiconducting inner surfaces which emit electrons. This emission
          process is repeated many times along the length of the tube in a
          multiplying sequence, whereby one electron entering at one end of the
          tube generates a pulse containing millions of electrons at the other
          end of the tube. This pulse can be measured as it emerges from the
          tube. The primary application of this product is as the detecting
          element in a mass spectrometer. Mass spectrometers identify the atoms
          of unknown elements by determining atomic mass through the measurement
          of velocity or path of movement of subatomic particles. They are used
          in biotechnology and pharmaceutical industries and in drug screening
          applications.

               The Company's Channeltron(R) and Spiraltron(TM) Single Channel
          Detectors have replaced the complex multi-electrode structure of older
          detectors and require only a single two-terminal power supply. The
          simplicity of the Company's Detectors, their mechanical ruggedness and
          their resistance to contamination in service have led to their
          adoption as the preferred detector in mass spectrometers, ultraviolet
          spectrometers and in a growing range of surface-scanning instruments.
          The Company's detectors are used by all major mass spectrometer
          manufacturers, and, in some cases, the Company is the single source.

               Microchannel Plates

               Microchannel Plates ("MCPs") are multichannel electron
          multipliers. The initial manufacturing process of MCPs consists of
          producing a small wafer-thin fused fiberoptic disc. These discs are
          then further processed by etching out the core of each fiber to
          produce hollow channels, the surfaces of which are semiconducting.
          Each channel serves as a microscopic single channel electron
          multiplier, multiplying the electrons that enter the channel in order
          to intensify faint electron images.

               The Company manufactures an improved, long-life MCP with enhanced
          gain stability, resulting in improved brightness and a significantly
          longer life expectancy than other MCPs available in the marketplace.

               Detector Assemblies and Systems

               Detector Assemblies and Systems consist of multichannel electron
          multipliers combined with fiberoptic, mechanical and electronic
          components. These value-added devices are used as ion, X-ray

                                        3

<PAGE>   4

          or particle detectors in scientific instrumentation. The Company
          provides these detector assemblies primarily to the major
          manufacturers of analytical instrumentation and to the research
          community.

               The Company's advanced performance "Time-of-Flight" detectors
          provide rapid identification of electrons by measurement of their
          velocity through a defined area and are utilized in biotechnology and
          pharmaceutical applications, improving the productivity of drug
          screening processes.

               Spectroscopy Products

               Spectroscopy Products provide technically advanced,
          cost-effective solutions for industrial process monitoring through the
          use of on-line spectroscopy systems. Spectroscopy systems identify or
          monitor a material's chemical signature by analyzing the behavior of
          introduced light. The Company's products are used in raw material
          screening, moisture content analysis, octane measurements and process
          monitoring in industries such as chemical, pharmaceutical,
          semiconductor, petrochemical, environmental and food and beverage.

               The Company's IR Link(R) Single and Multi-Channel Systems are a
          family of integrated sensors and accessories used to monitor process
          quality and reduce costs by moving analysis from the laboratory
          directly to the production line. Multi-Channel Systems allow up to
          seven sensing points to be monitored using a single analytical
          instrument. The Company's fixed-mount and hand-held diffuse
          reflectance systems analyze samples of raw materials such as powders,
          slurries and textiles. These portable systems provide immediate
          analysis enabling customers to make timely adjustments to reduce
          costs, improve quality and raise productivity and yields. The
          Company's Lightguides supply illumination to remote areas through the
          use of flexible fiberoptics. Lightguides, when used in tandem or with
          other detectors, are also used as sensors to detect signals, position,
          dimensions, images and many other physical phenomena.


               TELECOMMUNICATION PRODUCTS

               The Company is currently developing optical amplification
          products based on fluoride fiber technology. The Company believes that
          fluoride fiber based optical amplification provides a more
          advantageous platform to maximize the benefits realized from
          telecommunication wavelength division multiplexing than existing
          silica-based amplification. The market for this product includes
          telecommunications as well as high speed data and video transmission.

               The Company has committed significant research and development
          resources to advancing this technology. During fiscal 1997, the
          Company designed, tested, manufactured and delivered several
          prototypes to prospective customers. The Company is actively marketing
          this technology to prospective customers.


               OFFICE PRODUCTS

               Sales of Office Products accounted for 22%, 50% and 45% of the
          Company's net sales for fiscal years 1997, 1996 and 1995,
          respectively. These products are used in a variety of applications to
          improve the reliability and performance of high-volume, high-speed
          copiers and ion deposition printers.

               The Company's highest volume office product is the dicorotron.
          The dicorotron, which utilizes the Company's proprietary glass-coated
          wire technology, generates ions which a copier's photoreceptors use
          during the image transfer process.


                                        4

<PAGE>   5


               In February 1997 the Company received written notification from
          its then largest customer, Xerox Corporation, that Xerox had developed
          internal production capabilities for dicorotron assemblies and would
          no longer purchase these assemblies from the Company. Sales to Xerox
          Corporation accounted for approximately 19%, 48% and 43% of revenues
          for the fiscal years ended 1997, 1996 and 1995, respectively. The
          Company completed final shipments to Xerox during its second fiscal
          quarter.

               The Company currently markets its office products to other
          high-speed copier manufacturers and service providers.

          RESEARCH AND NEW PRODUCT DEVELOPMENT

               The Company's scientists and engineers conduct research and
          development in glass, fiberoptic and electro-optic technologies to
          develop new products and to enhance and expand applications for
          existing products. The Company's expenditures for research and
          development were approximately $4,727,000, $3,220,000, and $3,054,000
          in fiscal years 1997, 1996 and 1995, respectively.

          MARKETING

               The Company markets its products through original equipment
          manufacturers, as well as to end-users. The Company has its own sales
          and marketing personnel, and Leisegang also uses manufacturers'
          representatives.

          CUSTOMERS

               Sales to Xerox Corporation were 19% and 48% of net sales in
          fiscal years 1997 and 1996, respectively. Xerox Corporation no longer
          purchases products from the Company as discussed in "Office Products"
          above. Export sales to foreign customers, principally in Europe and
          Japan, amounted to approximately $5,355,000, $8,716,000 and $7,371,000
          in fiscal years 1997, 1996 and 1995, respectively.

          RAW MATERIALS AND SUPPLIES

               The principal raw materials and supplies used by the Company in
          the manufacture of its products are glass tubing and core bars,
          chemicals for glass manufacture, and purchased parts for assemblies
          and instruments. The Company has not experienced any shortages in the
          past and does not anticipate any future shortages or unavailability of
          these items. Most raw materials are available from alternative
          sources.

          PATENTS

               While the Company possesses many patents which relate to its
          technology, it does not believe that the protection offered by these
          patents is of material importance to the success of its business. The
          Company believes that its success depends primarily on its
          development, manufacturing and marketing skills.

          BACKLOG

               At September 30, 1997 and 1996, the sales backlog was $5,495,000,
          and $7,247,000, respectively. Backlog is scheduled for shipment during
          the following fiscal year.




                                        5

<PAGE>   6


           COMPETITION

               The Company's competitive position depends primarily upon the
          technological development of its products, as well as service, quality
          and price. Some of the Company's competitors are divisions of major
          corporations, which have greater financial resources than the Company.

          EMPLOYEES

               As of September 30, 1997, the Company had 229 full-time
          employees, none of whom is a party to a collective bargaining
          agreement with the Company. Of these employees, 192 were employed at
          the Company's facilities in Sturbridge, Massachusetts and 37 at
          Leisegang, in Boca Raton, Florida. The Company believes that it has
          good relations with its employees.


ITEM 2.   PROPERTIES

               The Company's corporate headquarters and manufacturing facilities
          are located in Sturbridge, Massachusetts, where the Company owns three
          buildings, with a total of 197,000 square feet on a 56 acre tract.

               Leisegang, a wholly-owned subsidiary, is located in Boca Raton,
          Florida, where it leases approximately 10,000 square feet of space
          used for sales, marketing and administration.


ITEM 3.   LEGAL PROCEEDINGS

               There are no material pending legal proceedings to which the
          Company is a party or to which any of its property is subject.


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

               There were no matters submitted to a vote of the Company's
          security holders during the fourth quarter of the 1997 fiscal year.


          EXECUTIVE OFFICERS OF THE REGISTRANT

               The following table indicates the names and ages of all executive
          officers of the Company and the offices held by each:


                Name            Age                Officer
                ----            ---                -------

          William T. Hanley      50      President and Chief Executive Officer
                                         and Director

          Gregory Riedel         39      Vice President, Finance and
                                         Chief Financial Officer

          Josef W. Rokus         55      Vice President, Corporate Development
                                         and Corporate Secretary


                                        6

<PAGE>   7

               Each officer serves for a term extending until the meeting of
          directors following the next annual meeting of shareholders and until
          a successor is elected and qualified or until earlier resignation or
          removal.

               Mr. Hanley joined the Company in 1982 as Vice President of
          Manufacturing, was subsequently appointed Executive Vice President and
          Chief Operating Officer prior to being appointed President, Chief
          Executive Officer and Director in 1984. Prior experience includes
          positions as Manufacturing Manager, Fiber Optics for Times Fiber
          Communications, Inc., a manufacturer of fiberoptic products, and key
          managerial positions with Corning Incorporated. Mr. Hanley holds a
          B.S. degree in Glass Science from Alfred University and an A.S. degree
          from Corning Community College.

               Mr. Riedel joined the Company in 1996 as Vice President, Finance
          and Chief Financial Officer. From 1994 to 1996 he served as Controller
          and, subsequently, as Chief Financial Officer of IPC Information
          Systems, Inc., a manufacturer of communication systems for the
          financial trading industry. From 1989 to 1994, Mr. Riedel was
          Assistant Corporate Controller of Symbol Technologies, Inc., a
          manufacturer of bar code based data capture systems. From 1980 to
          1989, Mr. Riedel was employed by Price Waterhouse, holding positions
          from staff accountant to audit manager. Mr. Riedel holds a B.S. degree
          in Accounting from Fairfield University.

               Mr. Rokus joined the Company as Vice President, Manufacturing in
          1984, was appointed Vice President, Corporate Development in 1986 and
          Vice President, Finance in 1988. He was named Chief Financial Officer
          in 1990 and Corporate Secretary in 1993. In 1996, he was named Vice
          President, Corporate Development. Prior experience includes management
          and controller positions with Corning Incorporated. Mr. Rokus holds an
          M.B.A. in Finance from The Tuck School, Dartmouth College and an M.S.
          and B.S. in Electrical Engineering from the University of Illinois.

                                     PART II

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

          The Company's Common Stock is listed on the Nasdaq National Market
          System under the symbol GAEO. The following table sets forth, for the
          periods indicated, the high and low sale prices for the common stock
          as reported by Nasdaq.
<TABLE>
<CAPTION>

                   FISCAL 1996               LOW            HIGH
                   -----------               ---            ----
                   <S>                    <C>             <C>        
                   1st Quarter            $ 7.125         $11.500
                   2nd Quarter              9.875          17.750
                   3rd Quarter             15.500          31.125
                   4th Quarter             17.250          30.500
                                          
</TABLE>
<TABLE>
<CAPTION>
             
                   FISCAL 1997              LOW             HIGH
                   -----------              ---             ----
                   <S>                    <C>             <C>        
                   1st Quarter            $21.000         $27.750
                   2nd Quarter              6.000          26.500
                   3rd Quarter              4.500           7.750
                   4th Quarter              5.500          15.250
</TABLE>
                                          
 

          The Company had 458 shareholders of record as of September 30, 1997.

          The Company has not paid dividends since 1979. The Company does not
          anticipate paying cash dividends in the foreseeable future but intends
          to retain its earnings for use in its businesses.

                                        7

<PAGE>   8

Item 6.  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                                                   Years ended September 30,

 (Dollars in thousands, except per share data)                   1997           1996        1995          1994           1993
================================================================================================================================   
<S>                                                            <C>            <C>          <C>          <C>            <C>
Net sales                                                      $ 34,117       $42,634      $40,753      $ 35,937       $ 39,470
                                                                                                                       
Operating profit (loss)                                         (11,856)        5,212        1,176        (1,596)       (10,689)
Other income, net                                                   835           404          305           213            426
                                                               ----------------------------------------------------------------
Income (loss) before income taxes, extraordinary
 gain and cumulative effect of a change in
 accounting for postretirement benefits other than
 pensions                                                       (11,021)        5,616        1,481        (1,383)       (10,263)
Provision (benefit) for income taxes                                163            89           82            69           (481)
Extraordinary gain (net of taxes)                                    --           158           --            --             --
Cumulative effect of a change in accounting for
 postretirement benefits other than pensions                         --            --           --            --           (430)
                                                               ----------------------------------------------------------------
Net income (loss)                                              $(11,184)      $ 5,685      $ 1,399      $ (1,452)      $(10,212)
================================================================================================================================    
Net income (loss) per common and common
 equivalent share outstanding:

 Before extraordinary gain and cumulative effect of
  a change in accounting for postretirement
  benefits other than pensions                                 $  (1.63)      $   .80      $   .21      $   (.22)      $  (1.46)

 Extraordinary gain (net of taxes)                                   --           .02           --            --             --

 Cumulative effect of a change in accounting
  for postretirement benefits other than
  pensions                                                           --            --           --            --           (.06)
                                                               ----------------------------------------------------------------
Net income (loss)                                              $  (1.63)      $   .82      $   .21      $   (.22)      $  (1.52)
================================================================================================================================    
Weighted average common and common
  equivalent shares outstanding                                   6,851         6,952        6,778         6,744          6,704
================================================================================================================================   
                                                                                   As of September 30,

                                                                 1997           1996        1995          1994           1993
================================================================================================================================   
 Working capital                                               $ 16,317       $26,462      $20,312      $ 16,856       $ 13,797

 Property, plant and equipment, net                              15,372        19,228       19,891        21,755         24,993

 Total assets                                                    42,727        53,064       48,173        46,519         50,560

 Long-term obligations                                               86           132          716           653            814

 Shareholders' equity                                            36,102        47,028       40,934        39,486         40,938
</TABLE>

Note: Results for years prior to fiscal 1997 have been restated to reflect the
      acquisition in fiscal year 1996 of Leisegang Medical, Inc., on a pooling
      of interests basis.

                                        8

<PAGE>   9


Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

Galileo Corporation (the "Company") develops, manufactures and markets
fiberoptic and electro-optic products which transmit, sense or intensify light
or images. The Company's products are currently sold primarily to original
equipment manufacturers (OEMs) for use in medical, scientific, analytical,
electronic imaging and office product applications. The Company's core
competencies in glass sciences and experience in fiberoptic and photonic
technology are fundamental to developing and manufacturing its products.

On February 11, 1997, the Company received written notification from its then
largest customer, Xerox Corporation ("Xerox"), that Xerox had developed internal
production capabilities for dicorotron assemblies and would no longer purchase
these assemblies from the Company. These assemblies accounted for approximately
$20.4 million, or 48% of the Company's fiscal 1996 revenues. Reduced revenues
from this product materially adversely affected the Company's financial
performance for fiscal 1997 and resulted in a loss for the fiscal year. In
connection with this loss of business, the Company adopted a reorganization plan
and recorded a charge of $6.9 million in the three months ended March 31, 1997.
The charge included a noncash $6.5 million provision for related long-lived
assets, other assets and inventory, and a $0.4 million provision for related
severance and other obligations.

The Company's Medical Products consist of a variety of endoscopes in support of
minimally invasive medical procedures. Scopes are valuable in any medical
procedure where video imaging can provide accurate diagnosis, improve surgical
performance and reduce patient discomfort.

In addition, the fiscal 1996 acquisition of Leisegang, the fiscal 1997
acquisition of the Sani-Spec(TM) product line from C.R. Bard, Inc., and the post
fiscal 1997 acquisition of Leisegang GmbH, more fully discussed below, position
the Company as a supplier of medical instrument equipment, principally to the
obstetric and gynecological markets. The Company believes that its medical
products offer significant future growth opportunities.

Leisegang, headquartered in Boca Raton, FL, was a privately-held distributor and
manufacturer of OB/GYN diagnostic and surgical equipment. Included in its
product line are colposcopes produced by Leisegang GmbH, a related company based
in Berlin, Germany. Subsequent to the fiscal year end, in October 1997 the
Company announced the acquisition of Leisegang GmbH. Leisegang GmbH was a
privately-held manufacturer and worldwide distributor of colposcopes and
accessories and the supplier of colposcopes for Leisegang. These products are
sold to OB/GYN physicians' offices and hospitals through an internal sales
force, sales representatives and distributors.

Leisegang is well known and highly respected in the gynecological equipment
market, estimated to be $200 million annually, and is a leader in sales to
physicians' offices. In addition to colposcopes, its products include biopsy
instruments, ultrasound, video equipment, laser and electro-surgical systems and
accessories, cryosurgery equipment, surgical instruments, rigid and flexible
hysteroscopes, and fetal heart monitors. These acquisitions also provide Galileo
with new distribution channels that enhance the brand name recognition and
market penetration of the Company's medical imaging and sensing products.

On February 28, 1997, the Company acquired the Sani-Spec(TM) product line. This
product line includes a comprehensive suite of women's health-related products
used by OB/GYN physicians, clinics and hospitals including Sani-Spec single-use
vaginal speculums, Sani-Scope(TM) anoscopes, Spec Light(TM) speculum lights and
Pap Smear kits. The product line is marketed through a nationwide network of
approximately 80 dealers and has been a market leader for over 20 years.



                                        9

<PAGE>   10


The Company's Scientific Detector and Spectroscopy Products include detectors
and sensors which are used in various instruments in a wide range of markets
including semiconductor processing, life sciences, food processing, bulk and
specialty chemicals, petroleum refining, biotechnology, failure analysis and
quality and process control.

The Company's Fluorolase(R) fiberoptic-based optical amplifier product is
targeted at applications for telecommunications as well as high speed data and
video transmission. Currently, this product is being tested in these markets,
and the Company believes that the Fluorolase product offers significant future
growth opportunities.

In addition to investing in research and development activities for all of its
products, the Company is exploring other acquisition opportunities to enhance
product offerings to customers.

RESULTS OF OPERATIONS

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996

Sales for fiscal 1997 of $34.1 million decreased $8.5 million, or 20%, from
sales of $42.6 million in fiscal 1996. Reduced revenues resulted primarily from
the loss of the Company's largest customer more fully described in the
"Overview" section above. Sales to this customer were $20.4 million in fiscal
1996 and declined to $6.3 million in fiscal 1997. The Company completed final
shipments to this customer during its second fiscal quarter.

Excluding activity with this customer, sales for fiscal 1997 of $27.8 million
increased 25% from fiscal 1996 revenues of $22.3 million. This increase is
primarily in higher revenues from the Company's medical products.

Gross profit (as a percentage of revenues) of 34% in fiscal 1997 decreased from
44% in fiscal 1996 primarily due to the impact of reduced revenues on
substantially fixed manufacturing-related expenses.

Engineering expenses increased to $5.3 million in fiscal 1997 from $4.0 million
in fiscal 1996 primarily due to increased spending to support the development of
the Company's medical and telecommunications products.

Selling and administrative expenses remained relatively stable from the prior
fiscal year.

As a result of the loss of its then largest customer more fully described in the
"Overview" section above, the Company announced a reorganization plan. In
connection with this plan, the Company recorded a nonrecurring charge of $6.9
million, or $1.01 per share, in the three months ended March 31, 1997. In
addition, in the first quarter of fiscal 1997, the Company recorded a $2.2
million, or $0.32 per share, nonrecurring charge to reduce the value of certain
robotic assembly equipment used in its medical products to its estimated fair
market value. Excluding the impact of these charges, net income for fiscal 1997
was a loss of $2.1 million or $0.30 per share.

Other income principally relates to interest earned on short-term investments of
available cash. For both the current and comparable prior year periods, the
Company's effective tax rate differs from the statutory rate primarily due to
available tax loss carryforwards. The current year provision relates principally
to state and franchise taxes.

Resulting primarily from lower revenues and the aforementioned special charges,
in fiscal 1997 the Company realized a net loss of $11.2 million, or a loss of
$1.63 per share versus net income of $5.7 million, or $0.82 per share in fiscal
1996.



                                       10

<PAGE>   11

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995


Net sales in fiscal year 1996 of $42.6 million increased 5% from sales of $40.8
in fiscal year 1995 with sales volume increasing in three of the Company's four
businesses. Sales of Office Products and Medical Products increased 16% and 4%,
respectively, over the prior fiscal year. Sales of Scientific Detector and
Spectroscopy Products were relatively level with the prior year.

Operating profit for 1996 amounted to $5.2 million versus $1.2 million in fiscal
1995 with a net profit of $5.7 million, or $.82 per share, as compared to $1.4
million, or $.21 per share, in fiscal 1995. Net profit for fiscal year 1996
included an extraordinary gain of $0.2 million, or $.02 per share, from the
receipt and sale of stock resulting from the demutualization of the Company's
health insurance carrier. The Company acquired Leisegang in the fourth quarter
of fiscal 1996, with the acquisition being accounted for on a pooling of
interests basis. Leisegang is now a wholly-owned subsidiary of the Company. All
financial results have been restated to reflect this acquisition.

Profitability improved in fiscal year 1996 versus 1995 as the gross profit
percentage increased from 31% to 44%. This improvement was primarily due to
selective price increases, the elimination of certain product lines with lower
than desired profitability, material cost reductions and increased productivity.

Engineering expenses increased to $4.0 million in fiscal 1996 from $3.6 million
in fiscal 1995 primarily due to increased spending to support the development of
the Company's medical and telecommunications products.

Selling and administrative expenses increased to $9.7 million in fiscal 1996
from $7.8 million in 1995 to support higher operating volumes. In addition,
fiscal 1996 expenses include $0.7 million for costs associated with the
acquisition of Leisegang.

Resulting from higher revenues and improved gross margins, the Company realized
net income of $5.7 million, or $0.82 per share in fiscal 1996 from net income of
$1.4 million, or $0.21 per share in fiscal 1995.

LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION

The Company's working capital at September 30, 1997, of $16.3 million decreased
$10.2 million from the balance at September 30, 1996, of $26.5 million. The
change in working capital was primarily the result of the $5.5 million
acquisition of the Sani-Spec(TM) product line described in more detail in the
"Overview" section above, the Company's loss for the year and capital
expenditures.

Capital expenditures for fiscal 1997 were $3.8 million as compared with $3.1
million for fiscal 1996. Fiscal 1997 capital spending primarily relates to
machinery and equipment to support the manufacturing and development of the
Company's medical and telecommunication products.

The Company considers its working capital position to be adequate to support its
currently planned operations.

IMPORTANT FACTORS REGARDING FUTURE RESULTS

Information provided by the Company, including information contained in this
annual report, or by its spokespersons from time to time may contain
forward-looking statements concerning projected financial performance, market
growth, product development or other aspects of future operations. The Company
cautions investors that its performance and any forward-looking statement are
subject to risks and uncertainties. The following important factors, among
others, may cause the Company's future results to differ materially from those
projected in any forward-looking statement.


                                       11

<PAGE>   12

LOSS OF A SIGNIFICANT CUSTOMER

On February 11, 1997, the Company received written notification from its then
largest customer, Xerox Corporation, that Xerox had developed internal
production capabilities for dicorotron assemblies and would no longer purchase
these assemblies from the Company. These assemblies accounted for approximately
$20.4 million, or 48% of the Company's revenues of $42.6 million for fiscal
1996. Reduced revenues from this product materially adversely affected the
Company's financial performance for fiscal 1997 and resulted in a loss for the
fiscal year. There can be no assurance whether or how quickly the Company will
be able to replace this business.

TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT

The market for the Company's products is characterized by rapidly changing
technology. The Company's future success will continue to depend upon its
ability to enhance its current products and to develop and introduce new
products that keep pace with technological developments and evolving industry
standards, respond to changes in customer requirements and achieve market
acceptance. Any failure by the Company to anticipate or respond adequately to
technological developments and customer requirements, or any significant delays
in product development or introduction, could have a material adverse effect on
the Company's business, financial condition and results of operations. In order
to develop new products successfully, the Company is dependent upon close
relationships with its customers and their willingness to share proprietary
information with the Company. There can be no assurance that the Company's
customers will continue to provide it with timely access to such information or
that the Company will be successful in developing and marketing new products and
services or product and service enhancements in a timely manner and respond
effectively to technological changes or new product announcements by others. In
addition, there can be no assurance that the new products and services or
product and service enhancements, if any, developed by the Company will achieve
market acceptance.

ACHIEVEMENT OF STRATEGIC PLAN

As part of its strategic plan, the Company is seeking to grow through
acquisitions. The Company regularly reviews various acquisition prospects of
business, technologies or products complementary to the Company's business and
periodically engages in discussions regarding such possible acquisitions.
Acquisitions involve numerous risks, including difficulties in the assimilation
of the operations and products of the acquired companies, the ability to manage
effectively geographically remote units, the diversion of management's attention
from other business concerns, risks of entering markets in which the Company has
limited or no direct experience and the potential loss of key employees of the
acquired companies. In addition, acquisitions may result in dilutive issuances
of equity securities, the incurrence of debt, reduction in existing cash
balances, amortization expenses related to goodwill and other intangible assets
and other charges to operations that may materially adversely affect the
Company's business, financial condition and results of operations. Although
management expects to carefully analyze any such opportunity before committing
the Company's resources, there can be no assurance that the Company will be
successful in making acquisitions, that the prices and terms of any acquisitions
will be favorable to the Company, that any completed acquisition will result in
long-term benefits to the Company or that the Company's management will be able
to manage effectively the resulting businesses.



                                       12


<PAGE>   13



COMPETITION

The Company's competitive position depends primarily on the technological
development of its products, as well as on service, quality and price. Some of
the Company's competitors are major corporations, or divisions of major
corporations, which have greater financial, technological and personnel
resources than the Company and may represent significant competition for the
Company. Such companies may succeed in developing technologies and products that
are more effective or less costly than any of those that may be developed by the
Company, and such companies may be more successful than the Company in
developing, manufacturing and marketing products. There can be no assurance that
the Company will be able to compete successfully in the future or that
developments by others will not render the Company's products obsolete or
non-competitive or that the Company's customers will not choose to use competing
technologies or products. Further, the entry of new competitors into the markets
for the Company's products could cause downward pressure on the prices of such
products and a material adverse effect on the Company's business, financial
condition and results of operations.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

Although the Company does not believe that its success is dependent upon the
protection offered by patents, the Company possesses many patents which relate
to its technology. There can be no assurance that the steps taken by the Company
to protect its proprietary technology will be adequate to prevent
misappropriation of its technology by third parties or will be adequate under
the laws of some foreign countries, which may not protect the Company's
proprietary rights to the same extent as do laws of the United States. In
addition, there remains the possibility that others will "reverse engineer" the
Company's products in order to determine their method of operation and introduce
competing products or that others will develop competing technology
independently. Any such adverse circumstances could have a material adverse
effect on the Company's business, financial condition and results of operations.
Further, some of the markets in which the Company competes are characterized by
the existence of a large number of patents and frequent litigation for financial
gain that is based on patents with broad, and often questionable, application.
As the number of its products increases, the markets in which its products are
sold expands, and the functionality of those products grows and overlaps with
products offered by competitors, the Company believes that it may become
increasingly subject to infringement claims. Although the Company does not
believe any of its products or proprietary rights infringe the rights of third
parties, there can be no assurance that infringement claims will not be asserted
against the Company in the future or that any such claims will not require the
Company to enter into royalty arrangements or result in costly litigation.

The Company also relies upon trade secrets, technical know-how and continuing
technological innovation to develop and maintain its competitive position. The
Company typically requires its employees, consultants and advisors to execute
confidentiality and assignment of inventions agreements in connection with their
employment, consulting or advisory relationships with the Company. There can be
no assurance, however, that these agreements will not be breached or that the
Company will have adequate remedies for any breach. Furthermore, there can be no
assurance that competitors will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's proprietary technology, or that the Company can meaningfully
protect its rights in unpatented proprietary technology. Several of the
Company's management and scientific personnel were formerly associated with
competitive companies. In some cases, these individuals are conducting research
in similar areas with which they were involved prior to joining the Company. As
a result, the Company, as well as these individuals, could be subject to claims
of violation of trade secrets and similar claims.

The Company intends to vigorously protect and defend its intellectual property.
Costly and time-consuming litigation brought by the Company may be necessary to
enforce patents issued to the Company, to protect trade secrets or know-how
owned by the Company, or to determine the enforceability, scope and validity of
the proprietary rights of others.



                                       13


<PAGE>   14

POTENTIAL PRODUCT LIABILITY EXPOSURE AND INSURANCE

The Company's products, particularly its Medical Products, may expose the
Company to product liability claims, and there can be no assurance that the
Company will not experience material product liability losses in the future. The
Company currently has product liability insurance coverage for the commercial
sale of its products. However, a successful claim brought against the Company in
excess of available insurance coverage, or a claim or product recall that
results in significant adverse publicity against the Company, may have a
material adverse effect on the Company's business, financial condition and
results of operations.


Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               The Financial Statements and Financial Statement Schedule filed
          as a part of this Form 10-K are listed on the Index to Consolidated
          Financial Statements and Consolidated Financial Statement Schedule on
          page 16.


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

               Not applicable.

                                    PART III


Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

               See the information at the end of Part I of this report and the
          information contained in the Company's Proxy Statement for the 1998
          Annual Meeting of Shareholders (the "Proxy Statement") under the
          captions "Election of Directors" and "Share Ownership," which
          information is incorporated herein by reference.


Item 11.  EXECUTIVE COMPENSATION

               See the information contained in the Proxy Statement under the
          captions "Election of Directors Director Compensation" and "Executive
          Compensation" which information is incorporated herein by reference.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

               See the information contained in the Proxy Statement under the
          heading "Share Ownership," which information is incorporated herein by
          reference.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

               Not applicable.




                                       14


<PAGE>   15

                                     PART IV


Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K


          (a)  DOCUMENTS FILED AS A PART OF THIS FORM 10-K

               1. Financial Statements.

               The Financial Statements filed as a part of this Form 10-K are
               listed on the Index to Consolidated Financial Statements and
               Consolidated Financial Statement Schedule on page 16.

               2.   Financial Statement Schedule.

               The Financial Statement Schedule filed as a part of this Form
               10-K is listed on the Index to Consolidated Financial Statements
               and Consolidated Financial Statement Schedule on page 16

               3.   Exhibits.

               The Exhibits filed as a part of this Form 10-K are listed on the
               Index to Exhibits on page 35

          (b)  The Registrant did not file a Form 8-K during the last quarter of
               the period covered by this Form 10-K.








                                       15

<PAGE>   16

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                  AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
                                   ITEM 14(a)

FINANCIAL STATEMENTS:

 Report of Independent Auditors                                              17
                                                                         
 Consolidated Balance Sheets at September 30, 1997 and 1996                  18
                                                                         
 Consolidated Statements of Operations for the fiscal years ended        
   September 30, 1997, 1996 and 1995                                         19
                                                                         
 Consolidated Statements of Changes in Shareholders' Equity for the      
   fiscal years ended September 30, 1997, 1996 and 1995                      20
                                                                         
 Consolidated Statements of Cash Flows for the fiscal years ended        
   September 30, 1997, 1996 and 1995                                         21
                                                                         
 Notes to Consolidated Financial Statements                                  22
                                                                         
                                                                         
SUPPLEMENTARY INFORMATION:                                               
                                                                         
 Unaudited Quarterly Financial Information                                   32
                                                                         
                                                                         
SCHEDULE:                                                                
                                                                         
                                                                         
 II.   Valuation and qualifying accounts for the fiscal years ended      
       September 30, 1997, 1996 and 1995                                     33
                                                                         
                                                                      
SCHEDULES OMITTED:

 All other schedules are omitted as they are not applicable or the information
is shown in the financial statements or notes thereto.






                                       16


<PAGE>   17


                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors
Galileo Corporation

We have audited the accompanying consolidated balance sheets of Galileo
Corporation as of September 30, 1997 and 1996, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the three years in the period ended September 30, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 Galileo
Corporation at September 30, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, during the
first quarter of fiscal 1997 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of."



Providence, Rhode Island
October 28, 1997                                             ERNST & YOUNG LLP


<PAGE>   18




                                       17


<PAGE>   19


                              GALILEO CORPORATION
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                   September 30,
(Dollars in thousands, except per share data)                             1997                  1996
============================================================================================================
<S>                                                                    <C>                     <C>    
ASSETS
Current assets:
  Cash and cash equivalents                                            $  9,546                $18,652
  Accounts receivable, less allowance of $244 and $184,
     respectively                                                         5,639                  5,710
  Inventories                                                             6,614                  6,218
  Other current assets                                                      187                    598
                                                                 -------------------------------------------
    Total current assets                                                 21,986                 31,178
Property, plant and equipment, net                                       15,372                 19,228
Excess of cost over the fair value of   
   assets acquired, net                                                   3,873                  1,057

  Other assets, net                                                       1,496                  1,601
                                                                 -------------------------------------------
Total assets                                                            $42,727                $53,064
                                                                 ===========================================

LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities:
  Accounts payable and accrued liabilities                              $ 5,669                $ 4,174
  Note Payable                                                               --                    542
                                                                 -------------------------------------------
     Total current liabilities                                            5,669                  4,716
Other liabilities                                                           956                  1,320
Shareholders' equity:
  Common stock, $0.01 par value,  36,000,000
     shares authorized and 6,872,205
     outstanding                                                             69                     68
  Additional paid-in capital                                             42,951                 42,694
 Retained earnings/(Accumulated deficit)                                 (6,918)                 4,266
                                                                 -------------------------------------------
     Total shareholders' equity                                          36,102                 47,028
                                                                 -------------------------------------------
Total liabilities and shareholders' equity                              $42,727                $53,064
                                                                 ===========================================
</TABLE>


See accompanying notes.




                                       18


<PAGE>   20

                               GALILEO CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                        Years ended September 30,

(Dollars in thousands, except per share data)                     1997            1996            1995
===========================================================================================================
<S>                                                            <C>              <C>            <C>    
Net sales                                                      $ 34,117         $42,634        $40,753
Cost of sales                                                    22,363          23,706         28,244
                                                          -------------------------------------------------
Gross profit                                                     11,754          18,928         12,509
Engineering expenses                                              5,282           4,018          3,554
Selling and administrative expenses                               9,230           9,698          7,779
Reduction in the carrying value of certain long-lived               
 assets                                                           2,226              --             --
Reorganization costs                                              6,872              --             --
                                                          -------------------------------------------------
                                                                 23,610          13,716         11,333
                                                          -------------------------------------------------
Operating profit (loss)                                         (11,856)          5,212          1,176
Other income, net                                                   835             404            305
                                                          -------------------------------------------------
Income (loss) before income taxes and
 extraordinary gain                                             (11,021)          5,616          1,481
Provision for income taxes                                          163              89             82
                                                          -------------------------------------------------
Income (loss) before extraordinary gain                         (11,184)          5,527          1,399

Extraordinary gain on receipt and sale of stock, net of
  taxes                                                              --             158             --
                                                          -------------------------------------------------
Net income (loss)                                              $(11,184)        $ 5,685        $ 1,399
                                                          =================================================
Net income (loss) per common and common
 equivalent share outstanding:
 Before extraordinary gain                                     $  (1.63)        $   .80        $   .21
 Effect of extraordinary gain                                        --             .02             --
                                                          -------------------------------------------------
Net income (loss)                                              $  (1.63)        $   .82        $   .21
                                                          =================================================
Weighted average common and common
 equivalent shares outstanding                                    6,851           6,952          6,778
</TABLE>

See accompanying notes.




                                       19



<PAGE>   21



                               GALILEO CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                                                               Retained
                                                                           Additional           Earnings            Total
                                                           Common            Paid-In          (Accumulated       Shareholders'
(Dollars In thousands)                                      Stock            Capital            Deficit)            Equity
==============================================================================================================================
<S>                                                        <C>              <C>                <C>                <C>
Balance, September 30, 1994                                $    68          $ 42,236           $ (2,818)          $ 39,486
                                                                                                                  
Net income                                                      --                --              1,399              1,399

Exercise of stock options                                       --                49                 --                 49

                                                        -----------------------------------------------------------------------
Balance, September 30, 1995                                     68            42,285             (1,419)            40,934

Net income                                                      --                --              5,685              5,685

Exercise of stock options and related tax benefit               --               409                 --                409

                                                        -----------------------------------------------------------------------
Balance, September 30, 1996                                     68            42,694              4,266             47,028

Net loss                                                        --                --            (11,184)           (11,184)

Exercise of stock options and related tax benefit                1               257                 --                258

                                                        =======================================================================
Balance, September 30, 1997                                $    69          $ 42,951           $ (6,918)          $ 36,102
                                                        =======================================================================
</TABLE>

See accompanying notes.





                                       20


<PAGE>   22


                               GALILEO CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                         Years ended September 30,
(Dollars In thousands)                                           1997              1996               1995
================================================================================================================
<S>                                                           <C>                <C>                <C>    
Cash flows from operating activities:
Net income (loss)                                             $(11,184)          $  5,685           $ 1,399
Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
    Depreciation and amortization                                2,942              3,311             3,243
    Reorganization costs                                         6,451                 --                --
    Reduction in carry value of long-lived assets                2,226                 --                --
    Extraordinary gain on receipt and sale of stock                 --               (319)               --
    Other adjustments, net                                         100               (538)              (11)
Increase (decrease) in cash from changes in
  operating assets and liabilities:
    Accounts receivable                                            (29)             1,677            (1,851)
    Inventories                                                 (1,083)               356              (327)
    Accounts payable and accrued liabilities                     1,465             (1,073)              364
    Other changes, net                                            (267)              (157)              217
                                                         -------------------------------------------------------

       Total adjustments                                        11,805              4,333             1,635
                                                         -------------------------------------------------------

    Net cash provided by operating activities                 $    621           $ 10,018           $ 3,034

Cash flows from investing activities:
    Acquisition                                                 (5,500)              --                --
    Capital expenditures                                        (3,828)            (3,069)           (1,239)
    Proceeds from sale of assets                                  --                2,418               127
    Other investing activity, net                                 (115)               403               126
                                                         -------------------------------------------------------

    Net cash used in investing activities                       (9,443)              (248)             (986)

Cash flows from financing activities:
    Payment of notes payable                                      (542)              --                --
    Proceeds from issuance of common stock                         258                409                49
    Other financing activity, net                                 --                 (107)             (183)
                                                         -------------------------------------------------------

    Net cash provided (used) by financing activities              (284)               302              (134)

Net increase (decrease) in cash and cash equivalent             (9,106)            10,072             1,914

Cash and cash equivalents at beginning of year                  18,652              8,580             6,666
                                                         -------------------------------------------------------
Cash and cash equivalents at end of year                      $  9,546           $ 18,652           $ 8,580
                                                         =======================================================
Supplemental cash flow information:
       Interest payments                                      $     --           $     60           $    64
       Income tax payments                                         227                132               129
</TABLE>

See accompanying notes.




                                       21

<PAGE>   23


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  (Dollars in Thousands, Except Per Share Data)

1.   ACCOUNTING POLICIES

     ORGANIZATION - The Company develops, manufactures and markets a variety of
     fiberoptic and electro-optic products which transmit, sense or intensify
     light or images. The Company's core competency in glass sciences is
     fundamental to developing and manufacturing its products. The Company's
     products include medical, scientific, telecommunications and office product
     applications.

     CONSOLIDATION - The consolidated financial statements include the accounts
     of Galileo Corporation and its wholly-owned subsidiaries. Intercompany
     balances and transactions have been eliminated.

     REVENUE RECOGNITION AND CREDIT RISK - The Company records a sale and
     recognizes revenue when title passes to the customer or when services are
     performed in accordance with contracts. The Company extends credit to
     customers based on evaluating financial condition, and collateral is
     generally not required. Credit losses are provided for in the financial
     statements and have historically been within management's expectations.
     Xerox Corporation represented approximately 44% of accounts receivable at
     September 30, 1996.

     Export sales to various foreign customers amounted to approximately $5,355,
     $8,716 and $7,371 in fiscal years 1997, 1996 and 1995, respectively.

     CASH EQUIVALENTS - The Company considers all highly liquid investments with
     a maturity of three months or less at the time of purchase to be cash
     equivalents.

     INVENTORIES - Inventories are valued at the lower of cost (first in, first
     out) or market. Inventory costs include all direct manufacturing costs and
     applied overhead.

     PROPERTY, PLANT AND EQUIPMENT - Depreciation is computed using either the
     straight-line or accelerated methods. Estimated useful lives are as
     follows:
<TABLE>

<S>                                                        <C>        
             Buildings and improvements                    10-30 years
             Machinery, equipment and furniture             3-10 years
</TABLE>

     ENGINEERING EXPENSE - Engineering expense includes research and
     development, engineering support of manufacturing operations relating to
     problem solving and process improvement, the preparation of bids and
     proposals and sales support of customers. The amounts charged for research
     and development were approximately $4,727, $3,220, and $3,054 for fiscal
     years 1997, 1996 and 1995, respectively.

     NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE - Net income per common
     and common equivalent share is computed using the weighted average number
     of common and common equivalent shares outstanding. The exercise of stock
     options has not been assumed for fiscal year 1997 because the effect was
     antidilutive.

     In February 1997 the Financial Accounting Standards Board issued Statement
     No. 128, Earnings per Share, which is required to be adopted on December
     31, 1997. At that time, the Company will be required to change the method
     currently used to compute earnings per share and to restate all prior
     periods. Under the new requirements for calculating primary earnings per
     share, the dilutive effect of stock options will be excluded. Had the
     provisions of Statement No. 128 been used to calculate earnings per share
     for the three years in the period ended September 30, 1997, earnings per
     share would not have differed materially from the reported amounts.


                                       22

<PAGE>   24


     STOCK-BASED COMPENSATION - The Company grants stock options for a fixed
     number of shares of Common Stock to employees and directors with an
     exercise price equal to the fair value of the shares at the date of the
     grant. The Company accounts for stock option grants in accordance with
     Accounting Principle Board Opinion No. 25, "Accounting for Stock issued to
     Employees" and, accordingly, recognizes no compensation expense relating to
     stock options.

     GOODWILL - which is included in other assets, is being amortized on a
     straight-line basis over a period of 30 years.

     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 amounts reported in the financial
     statements and accompanying notes. Actual results may differ from those
     estimates.

     RECLASSIFICATION - Certain reclassifications have been made to the amounts
     in the 1996 and 1995 financial statements for comparative purposes.

2.   ACQUISITIONS

     (a)  Leisegang Feinmechanik-Optik GmbH & Co., KG ("Leisegang GmbH")

          Subsequent to year end, in October 1997 the Company acquired the
          shares of Leisegang GmbH for $2,250 in cash. Leisegang GmbH, was a
          privately held manufacturer and distributor of colposcopes and
          accessories. The acquisition will be accounted for using the purchase
          method of accounting. These diagnostic products are sold to OB/GYN
          physicians' offices and hospitals primarily through a worldwide
          network of sales representatives and distributors.

     (b)  Sani-Spec(TM) Product Line

          In March 1997 the Company acquired the Sani-Spec(TM) product line for
          $5,500 in cash. The Sani-Spec(TM) product line includes a
          comprehensive suite of women's health related products used by OB/GYN
          physicians, clinics and hospitals including Sani-Spec single-use
          vaginal speculums, Sani-Scope(TM) anoscopes, Spec-Light (TM) speculum
          lights and Pap Smear Kits. The acquisition was accounted for using the
          purchase method of accounting. The excess of the cost over the fair
          value of net assets acquired amounted to $3,873 at September 30, 1997.
          Assuming that the acquisition was made as of the beginning of fiscal
          1996, pro forma sales, net loss and net loss per share would have been
          $35,659, a loss of $10,971 and a loss of $1.60, respectively for
          fiscal 1997 and sales, net income and net income per share would have
          been $46,334, $6,197 and $0.89, respectively for fiscal 1996.

     (c)  Leisegang Medical, Inc. ("Leisegang")

          On August 6, 1996, the Company acquired Leisegang by issuing 269,913
          shares of its common stock in exchange for all of the outstanding
          common stock of Leisegang. The acquisition was accounted for as a
          pooling of interests with Leisegang becoming a wholly-owned subsidiary
          of the Company. Accordingly, the Company's consolidated financial
          statements have been restated to include the accounts and operations
          of Leisegang for all periods prior to the merger.





                                       23


<PAGE>   25


          Separate results of operations of the merged entities are presented in
the following table:
<TABLE>
<CAPTION>

                                                Years ended September 30,
                                                1996              1995
                                           ====================================
     Net sales
     <S>                                       <C>                <C>    
        Galileo                                $36,438            $34,043
        Leisegang                                6,196              6,710
                                           ------------------------------------
           Total                                42,634             40,753

     Extraordinary gain (net of taxes)
        Galileo                                    158                 --
        Leisegang                                   --                 --
                                           ------------------------------------
           Total                                   158                 --

     Net income (loss)
        Galileo                                  6,124              1,110
        Leisegang                                  250                289
        Merger and acquisition
          expenses                                (689)                --
                                           ------------------------------------
     Net income (loss)                        $  5,685           $  1,399
                                           ====================================
</TABLE>


          In connection with the acquisition, $689 of acquisition costs and
     expenses were incurred and charged to expenses in the fourth quarter of
     fiscal 1996. The acquisition costs and expenses consisted primarily of
     legal, accounting and broker fees.

3.   NONRECURRING CHARGES

     (a)  Loss of a Major Customer and Related Reorganization

     On February 11, 1997, the Company received written notification from its
     then largest customer, Xerox Corporation, that Xerox had developed internal
     production capabilities for dicorotron assemblies and would no longer
     purchase these assemblies from the Company. On March 12, 1997, the Company
     announced a reorganization plan in response to this lost business. In
     connection with this plan, the Company recorded a nonrecurring charge of
     $6,872, or $1.01 per share, in the three months ended March 31, 1997. The
     charge included a noncash $6,451 provision for the impairment of related
     long-lived assets ($3,946), other assets ($1,238) and inventory ($1,267),
     and a $421 provision for related severance and other obligations.

     Sales to Xerox Corporation amounted to $6,345, $20,350 and $17,674 for the
     fiscal years ended September 30, 1997, 1996, and 1995, respectively. The
     Company completed final shipments to Xerox during the second quarter of
     fiscal 1997.

     (b)  Impairment of Long-Lived Assets

     In the first quarter of fiscal 1997, the Company adopted Statement of
     Financial Accounting Standard No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
     statement requires impairment losses be recognized for long-lived assets,
     when indicators of impairment are present and the fair market values of
     assets are estimated to be less than carrying amounts. The adoption of this
     Standard resulted in a $2,226, or $0.32 per share, nonrecurring, pretax,
     noncash charge which reduced certain robotic assembly equipment for the
     Company's Medical Products Group to its estimated fair market value.



                                       24


<PAGE>   26


4.   INVENTORIES
<TABLE>
<CAPTION>

                                                                  September 30,
                                                          -------------------------------
                                                             1997                 1996
                                                          -----------         -----------

               <S>                                           <C>                  <C>   
               Finished goods                                $2,755               $1,402
               Work-in-progress                                 660                  635
               Raw materials                                  3,199                4,181
                                                          ===========         ===========

                                                             $6,614               $6,218
                                                          ===========         ===========
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                                                  September 30,
                                                          -------------------------------
                                                              1997                1996
                                                          -----------         -----------

               <S>                                          <C>                  <C>   
               Land, buildings and  improvements            $18,616              $16,593
               Machinery, equipment and furniture            24,235               24,918
               Capital projects in process                      324                1,174
                                                          -----------         -----------
                                                             43,175               42,685

                  Less: accumulated depreciation            (27,803)             (23,457)
                                                          ===========         ===========
               Net property, plant and equipment            $15,372              $19,228
                                                          ===========         ===========
</TABLE>


6.   RETIREMENT PLANS

     PENSION PLAN - The Company has a noncontributory pension plan covering
     substantially all employees who joined the Company prior to January 1,
     1995. None of the employees of Leisegang, the Company's wholly-owned
     subsidiary, are eligible to participate in the Pension Plan since Leisegang
     was acquired in fiscal year 1996. The Plan provides pension benefits based
     upon years of service and average compensation during the five years
     preceding retirement. The Company's policy is to fund the maximum amount
     that can be deducted for federal income tax purposes.


     Net pension cost consists of:
<TABLE>
<CAPTION>
                                                                     Years ended September 30,
                                                              1997            1996           1995
                                                          =============================================
         <S>                                                 <C>             <C>           <C>    
         Service cost - benefits earned during the period    $ 235           $254          $   245
         Interest cost on projected benefit obligations        517            490              469
         Actual return on assets                              (674)          (317)          (1,447)
         Net amortization and deferral                         (51)          (404)             854
                                                          ---------------------------------------------
                                                             $  27           $ 23          $   121
                                                          =============================================
</TABLE>

     The assumptions used in calculating pension expense included discount rates
     of 8% and expected long-term rates of return on Plan assets of 9%. In
     addition, the rate of increase in compensation levels was assumed to be 5%
     for 1997, 1996 and 1995.



                                       25






<PAGE>   27


     The following table sets forth the Plan's funded status and the amounts
     recognized in the Company's Consolidated Balance Sheets at September 30,
     1997 and 1996, for the Plan:
<TABLE>
<CAPTION>

                                                                          Years ended September 30,

                                                                            1997                1996
                                                                     =====================================

<S>                                                                        <C>                <C>     
Actuarial present value of benefit obligations:
  Vested benefit obligations                                               $(5,108)           $(4,861)
                                                                     =====================================

  Accumulated benefit obligations                                          $(5,351)           $(5,021)
                                                                     =====================================

Projected benefit obligations for services
  rendered to date                                                         $(6,831)           $(6,531)
Plan assets at fair value                                                    8,707              7,633
                                                                     -------------------------------------
Plan assets in excess of projected benefit
  obligations                                                                1,876              1,102
Unrecognized prior service cost                                                (66)               (71)
Unrecognized net loss                                                         (665)               188
Unrecognized net asset                                                        (388)              (435)
                                                                     -------------------------------------
Prepaid pension costs included in other assets                             $   757            $   784
                                                                     =====================================
</TABLE>


     TAX DEFERRED SAVINGS PLAN - The Company has a tax deferred savings plan
     under Section 401(k) of the Internal Revenue Code under which, subject to
     certain limitations, each eligible employee may contribute up to 15% of
     gross wages per year. The Company matches 50% of the first 6% of employee
     contributions. Company contributions to the Plan were approximately $185,
     $146 and $139 in fiscal years 1997, 1996 and 1995, respectively.

     LEISEGANG PROFIT SHARING PLAN - The Company's wholly-owned subsidiary,
     Leisegang has had a discretionary, noncontributory profit sharing plan
     available to essentially all full-time employees. In August 1996 the Plan
     was terminated and distributions were made to employees according to each
     employee's vested percentage. On August 6, 1996, the effective date of the
     acquisition of Leisegang by the Company, all participants in the profit
     sharing plan became eligible to participate in the Galileo Employee 401(k)
     Plan. Expenses for the Plan were $30 and $60 in fiscal years 1996 and 1995,
     respectively.

     OTHER RETIREMENT PLANS - In addition to the Company's defined benefit
     pension plan, the Company sponsors a defined benefit postretirement medical
     and life insurance plan. Employees who retire from the Company and who have
     attained age 65 with 15 years of service (10 years of service for employees
     hired before October 1, 1989) and who were hired prior to October 1, 1993,
     are eligible. Employees who retired prior to October 1, 1989, are not
     required to contribute; employees who retired after October 1, 1989,
     contribute a portion of the cost beyond a Company subsidy. The Plan is not
     funded.



                                       26


<PAGE>   28




      The actuarial and recorded liabilities for the Plan were as follows:
<TABLE>
<CAPTION>
                                                                                   Years ended September 30,

                                                                                      1997             1996
                                                                                =================================
 Accumulated postretirement benefit obligation:
<S>                                                                                   <C>             <C> 
  Retirees                                                                            $402            $428
  Fully eligible active plan participants                                               22              21
  Other active plan participants                                                       128             131
                                                                                ---------------------------------
    Accumulated postretirement benefit obligation                                      552             580
  Plan assets at fair value                                                             --              --
                                                                                ---------------------------------
  Unfunded accumulated benefit obligation in excess of plan assets                     552             580
  Unrecognized net gain                                                                113              79
                                                                                ---------------------------------
    Accrued postretirement benefit cost                                               $665            $659
                                                                                =================================

Net periodic postretirement benefit cost in 1997 and 1996 
  includes the following components:

  Service cost                                                                        $  6            $  9
                                                                                        39              44
                                                                                ---------------------------------
    Net periodic postretirement benefit cost                                          $ 45            $ 53
                                                                                =================================
</TABLE>

     For measurement purposes, a 9.0% annual rate of increase in the per capita
     cost of covered health care benefits was assumed for fiscal year 1997. The
     rate was assumed to decrease gradually down to 6.0% for fiscal year 2003
     and remain at that level thereafter. Increasing the assumed health care
     cost trend rate one percentage point in each year would increase the
     accumulated postretirement benefit obligation as of September 30, 1997, by
     $29 (or by 5%) and the aggregate of the service and interest cost
     components of the net periodic postretirement benefit cost for fiscal year
     1997 by $3 (or by 6%).

     The weighted average discount rate used in determining the accumulated
     postretirement benefit obligation was 8%. As the plan is unfunded, no
     assumption was needed as to the long-term rate of return on assets.

7.   LEASE COMMITMENTS

     The cost of computer equipment capitalized under capital lease agreements
     is approximately $180 at both September 30, 1997 and 1996, respectively.
     Associated accumulated amortization as of September 30, 1997 and 1996,
     approximated $125 and $71, respectively.






                                       27


<PAGE>   29


     Future minimum lease payments under capital and operating leases as of
     September 30, 1997, are as follows:
<TABLE>

                  <S>                                                         <C>   
                  1998                                                        $  227
                  1999                                                           232
                  2000                                                           217
                  2001                                                           185
                  2002 & thereafter                                               95
                                                                        -------------
                  Total minimum lease payments                                   956
                   Less amount representing imputed interest                     143
                                                                        -------------
                  Net present value, minimum lease payments                      813
                   Less current portion                                          212
                                                                        -------------
                  Long-term portion of lease obligation                        $ 601
                                                                        =============
</TABLE>

     Total rental expense for all operating leases was approximately $222, $246
     and $243 in fiscal years 1997, 1996 and 1995, respectively.


8.   COMMON STOCK

     EMPLOYEE STOCK OPTION PLAN - Under the Company's 1991 Stock Option Plan,
     which succeeded the 1981 Stock Option Plan, the Plan Administrative
     Committee of the Board of Directors may grant options to purchase common
     stock to officers and key employees of the Company and its subsidiaries.
     The stock options are exercisable at a price not less than the fair market
     value of the common stock on the date of grant. The Plan also provides that
     the Committee may issue stock appreciation rights. The exercise price of
     the stock appreciation rights may not be less than the fair market value of
     the common stock on the date of grant or if issued with a stock option, the
     exercise price of the related option. Stock appreciation rights provide for
     the issuance of common stock, or the payment of cash, or a combination of
     both equal to the difference between the exercise price of the stock
     appreciation right and the fair market value of the common stock on the
     date of exercise.

The following table summarizes stock option plan activity:
<TABLE>
<CAPTION>

                                                                   Weighted Average         Aggregate
                                                   Shares               Price                 Price
                                              ============================================================
<S>                                                <C>                 <C>                   <C>   
Balance, September 30, 1994                        212,000             $  4.88               $1,034
  Granted                                           92,000                7.85                  722
  Exercised                                        (11,000)               4.45                  (49)
  Forfeited                                        (42,000)               4.50                 (189)
                                              -----------------                         ------------------
Balance, September 30, 1995                                               6.02                1,517
  Granted                                          252,000               14.91                1,521
  Exercised                                        102,000                5.52                 (381)
  Forfeited                                        (69,000)              16.17                  (97)
                                                    (6,000)
                                              -----------------                         ------------------
Balance, September 30, 1996                        279,000                9.18                2,561
  Granted                                          267,000                8.17                2,182
  Exercised                                        (33,000)               4.76                 (157)
  Forfeited                                        (45,000)               9.38                 (422)
                                              =================                         ==================
Balance, September 30, 1997                        468,000             $  8.90               $4,164
                                              =================                         ==================
</TABLE>



                                       28


<PAGE>   30

     As of September 30, 1997, 95,750 option shares were available for grant
     under the 1991 Plan. As of September 30, 1997, 112,000 options, with a
     weighted average fair value of $7.55 per share, were exercisable at prices
     ranging from $3.00 to $30.75, aggregating approximately $846 under the 1981
     and 1991 Plans. The remainder of the outstanding options become exercisable
     on various dates through 2001. The weighted average remaining contractual
     life of outstanding options is 8.5 years.

     DIRECTOR STOCK OPTION PLAN - The Company's 1989 Director Stock Option Plan
     was amended in 1996 to increase the number of shares of Common Stock
     available for grants to an aggregate of 200,000 shares and to change the
     grant formula to grant each non-employee director options to purchase 2,500
     shares of common stock on the director's election at each Annual Meeting of
     Shareholders of the Company. Under the Plan, which became the 1996 Director
     Stock Option Plan, options become exercisable one year after grant or
     earlier upon the death or disability of the director and upon a change in
     control of the Company, as defined in the Plan. No option may be exercised
     more than one year after the director's termination as a director for any
     reason. The option exercise price is the fair market value of the common
     stock on the date of grant.


     Under the Director Stock Option Plan, options to purchase 10,000 shares of
     common stock, at a price of $25.75 per share, were granted in fiscal year
     1997, and as of September 30, 1997, 32,500 shares were exercisable at a
     weighted average fair value of $9.08 per share, aggregating approximately
     $295. Options covering 152,500 shares remain available for grant under the
     Plan.

     The Company has elected to continue to follow Accounting Principles Board
     Opinion No. 25, "Accounting for Stock Issued to Employees" and related
     interpretations in accounting for the 1991 Plan and the Director Stock
     Option Plan. Accordingly, no compensation expense has been recognized. Had
     compensation expense for options granted under these Plans after September
     30, 1995, been determined based on the estimated fair value at the grant
     dates for awards under the plan, the Company's pro forma net loss and loss
     per share would have been $11,439 and $1.67 respectively, for fiscal 1997
     and the Company's net income and earnings per share would have been $5,602
     and $0.81, respectively for fiscal 1996. The effects on fiscal 1997 and
     1996 pro forma net income and earnings per share of expensing the estimated
     fair value of stock options are not necessarily representative of the
     effects on reported net income for future years because of the potential
     for issuance of additional stock options in future years.

     The fair value of options granted after September 30, 1995, under these
     Plans was estimated at the date of grant using a Black-Scholes option
     pricing model with the following weighted-average assumptions for fiscal
     1997 and 1996, respectively: risk-free interest rates of 6.0% and 6.45%;
     volatility factors of the expected market price of the Company's common
     stock of 79% and 52%; and a weighted-average expected life of the option of
     5.0 years for both years. The Company did not assume a dividend yield for
     fiscal 1997 or 1996.

     EMPLOYEE STOCK PURCHASE PLAN - On January 1, 1997, the Company amended the
     Employee Stock Purchase Plan (the "Plan"). Under the revised Plan, 100,000
     shares of Company Common Stock was made available for purchase by eligible
     employees. The purchase price per share of Common Stock under the Plan may
     not be less than 85% of the lower of its fair market value at the beginning
     of an offering period or the applicable exercise date payable though
     payroll deductions. Since January 1, 1997, 13,513 shares have been
     purchased at prices ranging from $4.57 to $5.74. At September 30, 1997,
     there were 86,487 shares available for issuance under the Plan.

     Prior to being amended, the Company had a Plan under which it contributed
     up to 37.5% of amounts contributed by participating employees to a combined
     maximum of $1,375 per calendar year. All contributions were made to a trust
     for investment in the Company's common stock. Shares were purchased in the
     open market. The Plan held 21,349 shares, prior to being rolled forward
     into the amended Plan.





                                       29


<PAGE>   31


9.   INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial and
     tax reporting purposes.

          Significant components of the Company's deferred tax liabilities and
          assets as of September 30, 1997 and 1996, respectively, are as
          follows:

<TABLE>
<CAPTION>
                                                            Years ended September 30,
                                                             1997              1996
                                                      ====================================
<S>                                                        <C>              <C>    
Deferred tax liabilities:
  Tax over book depreciation                               $   166          $ 2,448
  Pension cost                                                 302              351
                                                      ------------------------------------
    Total deferred tax liabilities                             468            2,799
                                                      ------------------------------------
Deferred tax assets:
  Inventory adjustments                                        741              202
  Restructuring accruals                                        47                8
  Other accruals                                               765              700
  Net operating loss carryforwards                           4,850            3,303
  General business credits                                   1,366            1,280
                                                      ------------------------------------
    Total deferred tax assets                                7,769            5,493
  Valuation allowance for deferred tax assets               (7,506)          (2,855)
                                                      ------------------------------------
      Net deferred tax assets                                  263            2,638
                                                      ------------------------------------
  Net deferred tax liabilities                             $   205          $   161
                                                      ====================================
</TABLE>


The net change in the total valuation allowance for the fiscal years ended
September 30, 1997 and 1996, amounted to an increase of $4,651 and a decrease of
$2,369, respectively.

Significant components of the provision for income taxes from continuing
operations are as follows:
<TABLE>
<CAPTION>

                                       Years ended September 30,
                                1997             1996              1995
                        =====================================================
<S>                            <C>              <C>                <C>
Current:
  Federal                      $ 48             $ 170              $--
  State                          71                                 82
                        -----------------------------------------------------
                                119               242               82
                        -----------------------------------------------------
Deferred:
  Federal                        44              (116)              --
  State                          --               (37)              --
                        -----------------------------------------------------
                                 44              (153)              --
                        -----------------------------------------------------
  Total                        $163             $  89              $82
                        =====================================================
</TABLE>





                                       30


<PAGE>   32

The reconciliation of the statutory federal income tax rate and the effective
tax rate from continuing operations is as follows:
<TABLE>
<CAPTION>

                                                             Years ended September 30,
                                                      1997                 1996             1995
                                             =======================================================
<S>                                                   <C>                  <C>              <C>  
Income tax per statutory rate                         34.0%                34.0%            34.0%
Utilization of net operating loss                       --                (33.0)            (32.9)
  carryforwards
Loss on which no income tax benefits                                        --               --
  were recognized                                    (34.0)
State income taxes, net of federal 
 income tax benefit                                   (0.7)                 0.8              4.5
                                                      (0.8)                (0.2)              1.3
Other                                        -------------------------------------------------------
                                                      (1.5)%                1.6%             6.9%
                                             =======================================================
</TABLE>


At September 30, 1997, the Company had net operating loss carryforwards of
$12,908 for federal income tax purposes that expire in years 2007 through 2012.








                                       31


<PAGE>   33



                   QUARTERLY FINANCIAL INFORMATION (Unaudited)



(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

FISCAL YEAR 1997                                                DEC. 31          MARCH 3 1         JUNE 30           SEPT. 30
------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>               <C>    
Net sales                                                      $ 9,711           $ 8,721           $ 7,516           $ 8,169

Gross profit                                                     4,275             2,923             2,017             2,539

Reduction in the carrying value of certain long-lived
  assets                                                         2,226                --                --                --

Reorganization costs                                                --             6,872                --                --

Income (loss) before income taxes                               (1,045)           (7,358)           (1,501)           (1,117)

Net income (loss)                                              $(1,166)          $(7,378)          $(1,513)          $(1,127)

Net income (loss) per common and common
   equivalent share                                            $ (0.17)          $ (1.08)          $ (0.22)          $ (0.16)
</TABLE>
<TABLE>
<CAPTION>


FISCAL YEAR 1996                                                DEC. 31          MARCH 31          JUNE 30           SEPT. 30
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>               <C>    
Net sales                                                      $ 9,972           $10,632           $11,152           $10,878

Gross profit                                                     3,867             4,131             5,139             5,791

Income before income taxes                                       1,259               852             1,792             1,713

Extraordinary gain                                                 158                --                --                --

Net income                                                     $ 1,524           $   827           $ 1,759           $ 1,575

Net income per common and common equivalent
  share                                                        $  0.22           $  0.12           $  0.25           $  0.23

</TABLE>


Note: Results have been restated to reflect the acquisition in fiscal year 1996
      of Leisegang Medical, Inc., on a pooling of interests basis.




                                       32

<PAGE>   34


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
     Column A                          Column B         Column C       Column D          Column E         Column F
-----------------------------------------------------------------------------------------------------------------------

                                                         Additions      Additions      Deductions
                                       Balance at        charged to    charged to      written off        Balance at
                                       beginning         cost and         other          against            end of
     Description                       of period         expenses       accounts         reserve            period
-----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>                           <C>                <C>
    September 30, 1995:
    ------------------
     Allowance for
     doubtful accounts                    152                42             --               68                 126


    September 30, 1995:
    ------------------

     Allowance for
     doubtful accounts                    126               198             --              140                 184


    September 30, 1995:
    ------------------

     Allowance for
     doubtful accounts                    184               100             --               40                 244

</TABLE>






                                       33


<PAGE>   35



                                   SIGNATURES


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


Dated:  December 5, 1997             GALILEO CORPORATION

                                     /s/ William T. Hanley
                                     -------------------------------
                                     William T. Hanley, President
                                     and Chief Executive Officer




Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities indicated on December 5, 1997.


                              /s/ William T. Hanley
                              --------------------------------------------------
                              William T. Hanley, President and Chief Executive
                              Officer and Director (Principal Executive Officer)

                              /s/ Gregory Riedel
                              --------------------------------------------------
                              Gregory Riedel, Vice President, Finance
                              (Principal Financial and Accounting Officer)

                              /s/ William T. Burgin
                              --------------------------------------------------
                              William T. Burgin
                              Director

                              /s/ Allen E. Busching
                              --------------------------------------------------
                              Allen E. Busching
                              Director

                              /s/ Kenneth W. Draeger
                              --------------------------------------------------
                              Kenneth W. Draeger
                              Director

                              /s/ Robert D. Happ
                              --------------------------------------------------
                              Robert D. Happ
                              Director





                                       34


<PAGE>   36

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT PAGE


<S>  <C>                                                                                 <C>
3.1  Registrant's Restated Certificate of Incorporation and amendment thereto
     (filed as exhibit 4.1 to the Registrant's registration statement on Form
     S-2, file no. 33-13752, and hereby incorporated herein by reference).

3.2  Registrant's amended and restated By-Laws (filed as exhibit 4.2 to the
     Registrant's registration statement on Form S-2, file no. 33-13752, and
     hereby incorporated herein by reference).

4.1  Specimen Certificate of the Registrant's Common Stock (filed as exhibit 4.1
     to the Registrant's registration statement on Form S-2, file no. 33-13752,
     and hereby incorporated herein by reference).

10.1 Stock option plan adopted October 23, 1991 (filed as an exhibit to the
     Registrant's proxy statement dated December 17, 1991, and hereby
     incorporated herein by reference).

10.2 Director stock option plan adopted November 10, 1995 (filed as an exhibit
     to the Registrant's proxy statement dated December 11, 1995, and hereby
     incorporated by reference).

10.3 Agreement and Plan of Merger dated July 17, 1996, among the Registrant, a
     wholly-owned subsidiary of the Registrant, Leisegang Medical, Inc., and the
     principal shareholders of Leisegang, under which the Registrant acquired
     Leisegang, effective August 6, 1996 (Filed as exhibit 2.1 to the
     Registrant's Form 8-K, file no. 33-13752, and hereby incorporated herein by
     reference).

11   Computation of net income (loss) per common and common equivalent share.            36

23   Consent of Independent Auditors for incorporation by reference in
     previously filed Registration Statements.                                           37

27   Financial Data Schedule.
</TABLE>

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Exhibits 10.1 and 10.2 are management contracts or compensatory plans or
arrangements in which the executive officers or directors of the Company
participate.



                                       35