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FORM 10Q
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2001

OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 1-6549

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American Science and Engineering, Inc.(Exact name of Registrant as specified in its charter)

Massachusetts

04-2240991(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)829 Middlesex Turnpike
Billerica, Massachusetts

01821(Address of principal executive offices)

(Zip Code)


(978) 262-8700(Registrant's telephone number, including area code)

(Former
name, former address and former fiscal year, if changed since last report)

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

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date

Class of Common Stock

Outstanding at September 30, 2001$.662/3 par value

5,044,338


Page 1 of 11 Pages
The Exhibit Index is Located at Page 11

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AMERICAN SCIENCE AND ENGINEERING, INC.        PART IFINANCIAL INFORMATION        CONDENSED CONSOLIDATED BALANCE SHEETS        (Unaudited)

Dollars in thousands

|       |                                                                                                                         | September 30, 2001 |        | March 31, 2001
|------ | ----------------------------------------------------------------------------------------------------------------------- | ------------------ | ------ | --------------
|Assets |                                                                                                                         |                    |        |               
|       | Current assets:                                                                                                         |                    |        |               
|       | Cash and cash equivalents                                                                                               |                    | $      | 5,570         
|       | Accounts receivable, net of allowances of $117 at September 30, 2001 and $134 at March 31, 2001                         |                    |        | 8,481         
|       | Unbilled costs and fees, net of allowances of $437 at September 30, 2001 and March 31, 2001                             |                    |        | 4,131         
|       | Inventories                                                                                                             |                    |        | 13,547        
|       | Deferred income taxes                                                                                                   |                    |        | 2,475         
|       | Prepaid expenses and other current assets                                                                               |                    |        | 676           
|       |                                                                                                                         |                    |        |               
|       | Total current assets                                                                                                    |                    |        | 34,880        
|       |                                                                                                                         |                    |        |               
|       | Non-current assets:                                                                                                     |                    |        |               
|       | Non-current deferred income taxes                                                                                       |                    |        | 823           
|       | Other assets                                                                                                            |                    |        | 171           
|       | Patents and other intangibles, net of accumulated amortization of $312 at September 30, 2001 and $265 at March 31, 2001 |                    |        | 153           
|       | Property and equipment, net of accumulated depreciation of $14,212 at September 30, 2001 and $13,071 at March 31, 2001  |                    |        | 5,085         
|       |                                                                                                                         |                    |        |               
|       |                                                                                                                         | $                  | 41,112 |               
|       |                                                                                                                         |                    |        |               

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

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AMERICAN SCIENCE AND ENGINEERING, INC.        CONDENSED CONSOLIDATED BALANCE SHEETS        (Unaudited)        (CONTINUED)

Dollars in thousands

|                                       |                                                                                                                                                     | September 30, 2001 |        | March 31, 2001 |  
|-------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------ | -------------- | -
|Liabilities & Stockholders' Investment |                                                                                                                                                     |                    |        |                |  
|                                       | Current liabilities:                                                                                                                                |                    |        |                |  
|                                       | Line of credit                                                                                                                                      |                    | $      | 7,519          |  
|                                       | Accounts payable                                                                                                                                    |                    |        | 4,967          |  
|                                       | Accrued salaries and benefits                                                                                                                       |                    |        | 1,498          |  
|                                       | Accrued warranty costs                                                                                                                              |                    |        | 291            |  
|                                       | Deferred revenue                                                                                                                                    |                    |        | 766            |  
|                                       | Customer deposits                                                                                                                                   |                    |        | 2,181          |  
|                                       | Accrued income taxes                                                                                                                                |                    |        | 16             |  
|                                       | Other current liabilities                                                                                                                           |                    |        | 702            |  
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       | Total current liabilities                                                                                                                           |                    |        | 17,940         |  
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       | Non-current liabilities:                                                                                                                            |                    |        |                |  
|                                       | Deferred revenue                                                                                                                                    |                    |        | 706            |  
|                                       | Deferred compensation                                                                                                                               |                    |        | 95             |  
|                                       | Deferred rent                                                                                                                                       |                    |        | 249            |  
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       | Total non-current liabilities                                                                                                                       |                    |        | 1,050          |  
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       | Stockholders' investment:                                                                                                                           |                    |        |                |  
|                                       | Preferred stock, no par value
Authorized  100,000 shares
Issued  none                                                                             |                    |        |                |  
|                                       | Common stock, $.662/3 par value
Authorized  20,000,000 shares
Issued 5,044,338 shares at September 30, 2001 and 5,012,752 shares at March 31, 2001 |                    |        | 3,363          |  
|                                       | Capital in excess of par value                                                                                                                      |                    |        | 18,637         |  
|                                       | Retained earnings                                                                                                                                   |                    |        | 762            |  
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       |                                                                                                                                                     |                    | 22,762 |                |  
|                                       | Note receivable  officer                                                                                                                           |                    |        | (640           | )
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       | Total stockholders' investment                                                                                                                      |                    |        | 21,122         |  
|                                       |                                                                                                                                                     |                    |        |                |  
|                                       |                                                                                                                                                     | $                  | 41,112 |                | $
|                                       |                                                                                                                                                     |                    |        |                |  

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

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AMERICAN SCIENCE AND ENGINEERING, INC.        PART IFINANCIAL INFORMATION        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (Unaudited)

Dollars and shares in thousands, except per share amounts

|                                                               |                                              | For the Three Months Ended |        | For the Six Months Ended |  
|-------------------------------------------------------------- | -------------------------------------------- | -------------------------- | ------ | ------------------------ | -
|
|Net sales and contract revenues                                |                                              | $                          | 15,434 |                          | $
|Cost of sales and contracts                                    |                                              |                            | 12,050 |                          |  
|                                                               |                                              |                            |        |                          |  
|Gross profit                                                   |                                              |                            | 3,384  |                          |  
|Expenses:                                                      |                                              |                            |        |                          |  
|                                                               | Selling, general and administrative expenses |                            |        | 2,905                    |  
|                                                               | Research and development                     |                            |        | 1,597                    |  
|                                                               |                                              |                            |        |                          |  
|                                                               | Total expenses                               |                            |        | 4,502                    |  
|                                                               |                                              |                            |        |                          |  
|Operating income (loss)                                        |                                              |                            | (1,118 | )                        |  
|                                                               |                                              |                            |        |                          |  
|Other expense:                                                 |                                              |                            |        |                          |  
|                                                               | Interest, net                                |                            |        | (121                     | )
|                                                               | Other, net                                   |                            |        | (46                      | )
|                                                               |                                              |                            |        |                          |  
|                                                               | Total other expense                          |                            |        | (167                     | )
|                                                               |                                              |                            |        |                          |  
|Income (loss) before provision for (benefit from) income taxes |                                              |                            | (1,285 | )                        |  
|Provision for (benefit from) income taxes                      |                                              |                            | (488   | )                        |  
|                                                               |                                              |                            |        |                          |  
|Net income (loss)                                              |                                              | $                          | (797   | )                        | $
|                                                               |                                              |                            |        |                          |  
|Income (loss) per shareBasic                                  |                                              | $                          | (0.16  | )                        | $
|                                                               |                                              |                            |        |                          |  
|                                                               |                                              |                            |        |                          |  
|                                                               |                                              |                            |        |                          |  
|Weighted average sharesBasic                                  |                                              |                            | 5,030  |                          |  
|                                                               |                                              |                            |        |                          |  
|                                                               |                                              |                            |        |                          |  
|                                                               |                                              |                            |        |                          |  

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

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AMERICAN SCIENCE AND ENGINEERING, INC.        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (Unaudited)

Dollars in thousands

|                                                                                         |                                                                               | For the Six Months Ended                       |      
|---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---------------------------------------------- | -----
|
|Cash flows from operating activities:                                                    |                                                                               |                                                |      
|Net income (loss)                                                                        |                                                                               | $                                              | (698 
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                                               |                                                |      
|                                                                                         | Depreciation and amortization                                                 |                                                |      
|                                                                                         | Provisions for contract, inventory, accounts receivable and warranty reserves |                                                |      
|                                                                                         | Changes in assets and liabilities:                                            |                                                |      
|                                                                                         |                                                                               | Accounts receivable                            |      
|                                                                                         |                                                                               | Unbilled costs and fees                        |      
|                                                                                         |                                                                               | Inventories                                    |      
|                                                                                         |                                                                               | Prepaid expenses, deposits and other assets    |      
|                                                                                         |                                                                               | Accounts payable                               |      
|                                                                                         |                                                                               | Accrued income taxes                           |      
|                                                                                         |                                                                               | Customer deposits                              |      
|                                                                                         |                                                                               | Deferred revenue                               |      
|                                                                                         |                                                                               | Accrued expenses and other current liabilities |      
|                                                                                         |                                                                               | Non-current liabilities                        |      
|                                                                                         |                                                                               |                                                |      
|                                                                                         | Total adjustments                                                             |                                                |      
|                                                                                         |                                                                               |                                                |      
|Net cash provided by operating activities                                                |                                                                               |                                                | 3,239
|                                                                                         |                                                                               |                                                |      
|Cash flows from investing activities:                                                    |                                                                               |                                                |      
|                                                                                         | Purchase of property and equipment                                            |                                                |      
|                                                                                         |                                                                               |                                                |      
|Net cash used by investing activities                                                    |                                                                               |                                                | (378 
|                                                                                         |                                                                               |                                                |      
|Cash flows from financing activities:                                                    |                                                                               |                                                |      
|                                                                                         | Borrowing (repayments) under line of credit                                   |                                                |      
|                                                                                         | Proceeds from exercise of stock options                                       |                                                |      
|                                                                                         | Principal payments of capital lease obligations                               |                                                |      
|                                                                                         |                                                                               |                                                |      
|Net cash provided by (used for) financing activities                                     |                                                                               |                                                | 1,503
|                                                                                         |                                                                               |                                                |      
|Net increase in cash and cash equivalents                                                |                                                                               |                                                | 4,364
|Cash and cash equivalents at beginning of period                                         |                                                                               |                                                | 1,206
|                                                                                         |                                                                               |                                                |      
|Cash and cash equivalents at end of period                                               |                                                                               | $                                              | 5,570
|                                                                                         |                                                                               |                                                |      
|Supplemental disclosures of cash flow information:                                       |                                                                               |                                                |      
|                                                                                         | Interest paid                                                                 |                                                | $    
|                                                                                         | Income taxes paid                                                             |                                                | $    
|Non-cash transactions:                                                                   |                                                                               |                                                |      
|                                                                                         | Issuance of stock in lieu of fees                                             |                                                | $    

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

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AMERICAN SCIENCE AND ENGINEERING, INC.        PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements included herein have been prepared by American Science and Engineering, Inc. (the Company) pursuant to the rules and regulations of the
Securities and Exchange Commission, and the annual condensed consolidated financial statements are subject to year end audit by independent public accountants. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The
Company believes, however, that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form 10-K.

The
condensed consolidated financial statements, in the opinion of management, include all adjustments necessary to present fairly the Company's financial position and the results of
operations. These results are not necessarily indicative of the results to be expected for the entire year.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.  Nature of Operations and Significant Accounting Policies

American Science and Engineering, Inc., is engaged in the development and manufacture of sophisticated x-ray inspection systems for critical
detection and security screening solutions for sale primarily to U.S. and foreign government agencies. The Company has only one reporting segment, x-ray screening products.

The
significant accounting policies followed by the Company and its subsidiary in preparing its consolidated financial statements are set forth in Note 1 to the consolidated
financial statements included in its Form 10-K for the year ended March 31, 2001. The Company has made no changes to these policies during this quarter.

2.  Inventories

Inventories consisted of:

|(Dollars in thousands)                     |  | September 30, 2001 |        | March 31, 2001
|------------------------------------------ |  | ------------------ | ------ | --------------
|Raw materials and completed sub-assemblies |  | $                  | 7,513  |               
|Work in process                            |  |                    | 5,808  |               
|Finished goods                             |  |                    | 226    |               
|                                           |  |                    |        |               
|Total                                      |  | $                  | 13,547 |               
|                                           |  |                    |        |               

3.  Income per Common and Common Equivalent Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share includes the dilutive impact of options and warrants using the average share price of the Company's common stock for the period. For the quarter and six months ended
September 30, 2001, common stock

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equivalents of 100,000 and 67,000, respectively, are excluded from diluted earnings per share as their effect is anti-dilutive.

|                                     |  | Three Months Ended |       | Six Months Ended
|------------------------------------ |  | ------------------ | ----- | ----------------
|
|Basic                                |  |                    |       |                 
|Net income (loss)                    |  | $                  | (797  | )               
|                                     |  |                    |       |                 
|Weighted average shares              |  |                    | 5,030 |                 
|                                     |  |                    |       |                 
|Basic earnings (loss) per share      |  | $                  | (0.16 | )               
|                                     |  |                    |       |                 
|Diluted                              |  |                    |       |                 
|Net income (loss)                    |  | $                  | (797  | )               
|                                     |  |                    |       |                 
|Weighted average shares              |  |                    | 5,030 |                 
|                                     |  |                    |       |                 
|Effect of stock options              |  |                    |      |                 
|                                     |  |                    |       |                 
|Weighted average shares, as adjusted |  |                    | 5,030 |                 
|                                     |  |                    |       |                 
|Diluted earnings (loss) per share    |  | $                  | (0.16 | )               
|                                     |  |                    |       |                 

4.  Income Taxes

At March 31, 2001, the Company had approximately $708,000 of unused investment tax and other credits, which expire through 2018.

5.  Borrowings

On November 30, 2000, the Company signed two new credit agreements with HSBC Bank USA ("HSBC"). The first agreement is for a $10 million domestic
revolving credit facility to support the Company's routine working capital and standby letter of credit needs. The second is a $30 million export credit and security agreement, guaranteed by
the Export-Import Bank of the United States ("Ex-Im"), to support the Company's overseas contract, trade finance and working capital needs. The credit facility bears an interest rate of
the HSBC Bank USA prime rate or LIBOR plus 2.0% at the Company's option.

At
September 30, 2001, $7.5 million in borrowings were outstanding and $11.2 million in letters of credit were in effect against this credit facility. The
Company's credit facility restricts the payment of dividends, except in shares of the Company's stock, without consent of the bank. The credit facility requires the Company to meet certain financial
covenants. As of September 30, 2001, the Company was not in compliance with one of these financial covenants, but has obtained a waiver from the bank for this non-compliance.

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AMERICAN SCIENCE AND ENGINEERING, INC.

ITEM 2MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

In the second quarter of fiscal 2002 net sales and contract revenues were $15,434,000, a 6% decrease from the comparable period a year ago and a 19% decrease
from the previous quarter. The Company had a net loss of $797,000 in the current quarter, compared to a net profit of $153,000 in the corresponding period a year ago and a net profit of $99,000 in the
previous quarter.

Results of Operations

Net sales and contract revenues in the second quarter decreased by $1,032,000 (6%) in comparison to the corresponding period a year ago and decreased by
$3,593,000 (19%) compared to the first quarter of fiscal 2002. This decrease in revenues from the previous quarter is due to reduced product sales and lower service contract revenues during the
quarter.

For
the second quarter, costs of sales and contracts decreased to $12,050,000 from $12,413,000 in the corresponding period a year ago. Costs of sales and contracts represented 78% of
revenues versus 75% for the corresponding period last year and 76% for the first quarter of fiscal year 2002. The costs of sales as a percentage of revenue in the current quarter increased from the
corresponding period last year due to the lower field service revenues and reduced manufacturing capacity utilization due to the lower product sales volume.

Selling,
general and administrative expenses of $2,905,000 for the second quarter were higher by 19% compared to the corresponding period last year and higher by 9% compared to the
first quarter of fiscal 2002. As a percent of sales, selling, general and administrative expenses were 19% of revenues in the current quarter compared to 15% of revenues for the corresponding period a
year ago and 14% for the first quarter of fiscal year 2002. This increase was due primarily to increased legal costs associated with ongoing litigation (see Item 1Legal Proceedings).

Company-funded
research and development expenses of $1,597,000 for the second quarter increased by $442,000 (38%) compared to the corresponding period last year and remained constant
with costs incurred in the first quarter of fiscal year 2002. The current quarter's results are a result of efforts on internal research and development projects and are consistent with plan.

The
Company incurred a net loss of $797,000 during the second quarter of fiscal 2002. A tax benefit of $488,000 has been recorded in the second quarter against pre-tax
losses incurred. The Company had net income of $153,000 in the second quarter of fiscal 2001 and net income of $99,000 in the first quarter of fiscal
2002.This net loss can be attributed to the lower revenues and increased selling, general and administrative costs.

Liquidity and Capital Resources

Cash and cash equivalents increased by $4,364,000 to $5,570,000 at September 30, 2001 compared to $1,206,000 at March 31, 2001. This increase in
cash and cash equivalents was primarily due to decreases in accounts receivable and unbilled costs and fees and additional borrowings against the line of credit partially offset by a decrease in
accounts payable and accrued expenses. Working capital increased by $189,000 (1%) since March 31, 2001, increasing from $16,751,000 to $16,940,000 at the end of the second quarter.

On
November 30, 2000, the Company signed two new credit agreements with HSBC Bank USA ("HSBC"). The first agreement is for a $10 million domestic revolving credit
facility to support the Company's routine working capital and standby letter of credit needs. The second is a $30 million

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export credit and security agreement, guaranteed by the Export-Import Bank of the United States ("Ex-Im"), to support the Company's overseas contract, trade finance and working capital
needs. The credit facility bears an interest rate of the HSBC Bank USA prime rate or LIBOR plus 2.0% at the Company's option.

At
September 30, 2001, $7.5 million in borrowings were outstanding and $11.2 million in letters of credit were in effect against this credit facility. The
Company's credit facility restricts the payment of dividends, except in shares of the Company's stock, without consent of the bank. The credit facility requires the Company to meet certain financial
covenants. As of September 30, 2001, the Company was not in compliance with one of these financial covenants, but has obtained a waiver from the bank for this non-compliance.

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Part IIOther Information

Item 1Legal Proceedings

The United States Court of Appeals for the Federal Circuit in Washington, D.C., in a decision issued December 29, 1999, ruled that American
Science & Engineering, may pursue a patent infringement claim against Vivid Technologies which produces x-ray detection devices used in baggage scanning equipment.

The
Appeals Court overturned a 1998 decision in Vivid's favor by the Massachusetts Federal District. The lawsuit filed in May 1996, concerns whether Vivid's x-ray
detection devices infringed on AS&E's patent. The District Court had ruled that AS&E could not assert a claim that Vivid's devices infringed on AS&E's patent. The Appeals Court also reversed the
district court's finding on summary judgment that Vivid did not infringe on AS&E's patent, as well as the district court's denial of AS&E's request for discovery to oppose Vivid's summary judgment
motion. Discovery is now proceeding.

In
September 1998, the Company filed suit against EG&G Astrophysics Research Corp. ("EG&G") in U.S. District Court in Boston, Massachusetts alleging that EG&G is infringing on
at least two patents owned by the Company and that EG&G has misappropriated certain trade secrets of the Company. In February 1999, the Company filed a related action in the same court against
the U.S. Customs Service ("Customs") alleging that Customs had either misappropriated the Company's trade secrets or facilitated their misappropriation by EG&G and that Customs had improperly entered
into a contract with EG&G for the acquisition of a product functionally equivalent to MobileSearch x-ray inspection system. In May 1999, the Court held a hearing
on the Company's motion for a preliminary injunction against both Customs and EG&G prohibiting further performance of the contested contract and preventing EG&G from utilizing the Company's trade
secrets. In August 1999, the Court issued a ruling denying the request for the preliminary injunction. In December 1999, EG&G filed a Motion for Summary Judgment that EG&G did not
misappropriate the Company's trade secrets and in March 2000 EG&G filed a Motion for Summary Judgment that EG&G did not infringe the Company's patents. In February 2001, the Court denied
EG&G's motion for Summary Judgment. The Company is continuing to pursue its claims against EG&G, but has filed a motion to dismiss the suit against U.S. Customs Service.

In
a related matter, EG&G had filed a request with the U.S. Patent and Trademark Office for re-examination of the two patents that currently are at issue in the patent
infringement action described above. The Company filed oppositions to the re-examination requests and was advised by the U.S. Patent and Trademark Office that the Company's MobileSearch
x-ray inspection patent was upheld in all material respects. The Company has now also been advised by the U.S. Patent and Trademark Office that the Company's patent on its Z®
Backscatter x-ray inspection technology has been upheld in all material respects.

In
February 2000, Heimann Systems GmBH filed a civil action in U.S. District Court in Boston, Massachusetts against the Company alleging that the Company infringed a Heimann
patent relating to a mobile vehicle and x-ray examining device. The Company denies Heimann's assertions and believes that Heimann's claims are without merit. The case is currently
scheduled for trial commencing December 3, 2001. The Company does not expect the outcome of this litigation to have a material impact to its financial position or results of operations.

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Item 6Exhibits and Reports on Form 8-K



The
information required by Exhibit Item 11 (Statement re: Computation of Income per Common and Common Equivalent Share) may be found in Footnote No. 3 on Page 7.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.

|                        |  | AMERICAN SCIENCE AND ENGINEERING, INC.(Registrant)                      
|----------------------- |  | ------------------------------------------------------------------------
|Date: November 14, 2001 |  | Andrew R. Morrison Vice President, Chief Financial Officer and Treasurer

Safe Harbor Statement

The foregoing 10-Q contains statements concerning the Company's financial performance and business operations which may be
considered "forward-looking" under applicable securities laws.

The Company wishes to caution readers of this Form 10-Q that actual results might differ materially from those
projected in any forward-looking statements.

Factors which might cause actual results to differ materially from those projected in the forward-looking statements contained herein
include the following: Significant reductions or delays in procurements of the Company's systems by the United States Government; disruption in the supply of any sole-source component
incorporated into the Company's products (of which there are several); litigation seeking to restrict the use of intellectual property used by the Company; potential product liability claims against
the Company; global political trends and events which affect public perception of the threat presented by drugs, explosives and other contraband; the ability of governments and private organizations
to fund purchases of the Company's products to address such threats; and the potential insufficiency of Company resources, including human resources, capital, plant and equipment and management
systems, to accommodate any future growth. These and certain other factors which might cause actual results to differ materially from those projected are
more fully set forth under the caption "Forward-Looking Information and Factors Affecting Future Performance" in the Company's Registration Statement on Form 10-K.

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