<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 [FEE REQUIRED]

         FOR THE FISCAL YEAR ENDED MARCH 28, 1997

                                                        OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                          Commission file number 1-6549

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

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

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES  X   NO
                                       ---     ---
                                    
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10- K or any amendment to
this Form 10-K.  X
                ---
  
The aggregate market value of voting stock held by non-affiliates of the
registrant on June 6, 1997 was $43,421,660

4,585,209 shares of Registrant's Common Stock were outstanding on June 6, 1997.

                     The Exhibit Index is located on page 46
                               PAGE 1 OF 51 PAGES



<PAGE>   2



PART I
------

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

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

[ ] X-RAY PRODUCTS

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

The surge in cross border drug smuggling has created a requirement for cargo and
vehicle inspection. With the assistance of the U.S. Department of Defense and
U.S. Customs, the Company has developed the CargoSearch(TM) line of X-ray
inspection equipment. Based on the success of the CargoSearch(TM) prototype at
Otay Mesa, CA, the first commercial installation of CargoSearch(TM) is on line
at Calexico, CA, for U.S. Customs to inspect trucks for hidden drugs on the
Mexican border and six additional installations are expected to be made along
the border over the next 18 months. The CargoSearch(TM) product family includes
fixed site inspection for trucks; mobile equipment to inspect trucks, containers
and cars; and a fixed pallet inspection system. This equipment has further
application for the detection of weapons and explosives for border security and
protection of high risk facilities. In addition, there is an emerging
application for manifest verification for export and import cargoes.

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

The Company's product line currently includes 12 models. These models can be
broadly categorized into 5 groups including: the Model 101 series, the Model 66
series, the EXR(TM)-ZZ(R) Automatic Explosive Detection Systems, the
CargoSearch(TM) family and the BodySearch(TM) Personnel Inspection System. All
of these systems utilize the Company's Z(R) Backscatter technology (aspects of
which are covered by issued and pending U.S. patents),


                                       2

<PAGE>   3



which detects organic materials, such as illegal drugs, plastic explosives and
plastic weapons, even when they are undetected by other competing systems.

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

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

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

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

The first MobileSearch(TM)system was delivered under a $1.8 million contract
with the Defense Advanced Research Project Agency (DARPA). This mobile version
of a CargoSearch(TM)system is a self-contained unit inside a conventional truck
which is deployable within minutes and provides the transport mechanism via a
hydraulic drive. The Company is marketing the MobileSearch(TM)system to agencies
of the U.S. government and to foreign security and customs agencies and has sold
a second system expected to be delivered in the second quarter of fiscal 1998.
The new unit will include both Z(R) Backscatter and transmission X-ray
capabilities.

PalletSearch(TM) was designed for the inspection of pallets for the detection of
contraband, weapons and explosives for high security facilities where high
confidence inspection is a requirement. The first PalletSearch(TM) system was
delivered during fiscal 1997 to an ultra-secure agency of the U.S. government,
and is presently in operation.


                                       3


<PAGE>   4



The BodySearch(TM) Personnel Inspection System offers a fast, safe, and
non-intrusive way to screen individuals for the detection of concealed weapons,
drugs, and illegal contraband. This system is used for drug detection and head
of state security as well as for correctional facility security.

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

The Company's X-ray products are marketed to private and governmental
organizations through a sales force that contacts potential customers. This
sales force includes Company personnel based in the United States and Europe, as
well as agents under contracts to sell in foreign countries who are generally on
a commission basis.

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

The Company is heavily dependent upon sales to agencies of the U.S. Government,
and reductions or delays in procurements of the Company's systems by these
agencies may have a material adverse effect on the Company. During fiscal 1997,
the majority of sales of X-ray products were under (i) direct contracts with the
U.S. Government, and (ii) subcontracts with prime contractors working under
direct contracts with the U.S. Government. The U.S. Customs Service is a major
customer (with sales of more than 40 percent of the Company's consolidated
revenues in fiscal 1997). The loss of this customer would be likely to have a
material adverse effect on the Company taken as a whole. The Company believes
that it has a satisfactory relationship with the U.S. Customs Service.

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


                                       4


<PAGE>   5



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

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

[ ]  RESEARCH AND DEVELOPMENT

The Company conducted approximately $2,278,000 of government sponsored research
primarily focused on technologies for the detection of illicit drugs,
explosives and other security issues in fiscal 1997. This is compared to
$2,750,000 and $2,206,000 of government sponsored research and development in
fiscal 1996 and 1995, respectively. In addition, the Company spent approximately
$1,602,000 of its own funds for research relating to the development of new
products or services during fiscal 1997, compared to $533,000 and $852,000 in
fiscal 1996 and 1995, respectively.

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

[ ]  PERSONNEL

As of March 28, 1997 the Company had 167 employees compared to 150 employees at
the end of the prior year.

[ ]  SALES BACKLOG

The Company's firm sales backlog was $15,584,000 at March 28, 1997 and
$12,198,000 at March 29, 1996.

A majority of the Company's contracts with the U.S. Government contain clauses
permitting the government to terminate the contract for convenience upon certain
terms and conditions, including payment to the Company of an appropriate fee or
profit on work performed. The total of such contracts in the backlog was
$11,220,000 at the end of fiscal year 1997 and $8,254,000 at the end of fiscal
year 1996.

It is estimated that approximately 83% of the 1997 backlog will be filled within
the fiscal year ending March 27, 1998.


                                       5


<PAGE>   6



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

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

<TABLE>
Net Sales and Contract Revenues (Dollars in thousands)

<CAPTION>

Fiscal Year                     1997              1996              1995
                                ----              ----              ----
<S>                            <C>               <C>               <C>   
Domestic                       $23,703           $14,526           $9,175
Export                         $ 4,776           $ 3,289           $3,822

</TABLE>

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

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

The Company's executive offices and its research, manufacturing and warehouse
facilities are now located in 105,600 square feet of space in a 160,000 square
foot single-story, concrete and brick building owned by an unaffiliated real
estate limited partnership. The remaining space in the building is currently
leased by the owner to an unaffiliated manufacturing company. The Company
occupies the space under a long-term lease with a ten year initial term that
commenced March 1, 1995, and one (1) ten year optional extension term. The
Company anticipates adding approximately 10,000 additional square feet
contiguous to its present space in the second quarter of fiscal 1998. The terms
for that space are similar to the terms for the Company's existing space.


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

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

                                       6


<PAGE>   7



in terminating him. The Company also sued Dr. Annis, alleging that he
misappropriated its trade secrets and proprietary technologies. Dr. Annis
alleged that the Company interfered with his and his new company's business
relationships. These matters were finally resolved in June 1997. As a result of
the settlement, the Company's ownership rights in certain technology were
affirmed, the Company gained rights to certain continuing developments made by
Annistech, and the Company agreed to license that technology back to Annistech,
Dr. Annis' company.

In May 1996, Vivid Technologies, Inc., filed a civil action against the
Company, seeking inter alia a declaratory judgment that Vivid had not infringed
                 ---------- 
upon certain of the Company's patents relating to backscatter. On May 12, 1997,
Vivid filed a proposed Amended Complaint narrowing its claim and seeking inter
                                                                         -----  
alia a declaratory judgment that Vivid had not infringed on AS&E United States
----
Patent number 5,253,283, entitled "Inspection Method and Apparatus with Single
Color Pixel Imaging." The Company denies Vivid's assertions, and contends that
Vivid's claims are without merit and that Vivid is not entitled to the relief
sought. No discovery has yet occurred in the case.


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

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




                                       7

<PAGE>   8



PART II
-------

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

<TABLE>

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

<CAPTION>

  Fiscal Year     Quarter Ended                      High               Low
  -----------     -------------                      ----               ---
  <S>             <C>                                <C>                <C>     
  1997            March 28, 1997                     14 7/8             12 1/8
                  December 27, 1996                  16 3/4             9 7/8
                  September 27, 1996                 18 3/4             9 3/8
                  June 28, 1996                      12 1/4             8 3/4

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

</TABLE>

As of June 2, 1997, there were approximately 1,479 holders of record of the
Company's Common Stock.

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


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

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

<CAPTION>

Fiscal year                     1997               1996              1995               1994              1993
                                ----               ----              ----               ----              ----
<S>                          <C>                <C>               <C>                <C>               <C>    
Net sales and
contract revenues            $28,479            $17,815           $12,997            $11,182           $18,949

Net income (loss)              1,925                802             (967)            (3,335)             1,636

Income (loss) per
share                            .40                .18             (.23)              (.83)               .41

Total assets                  15,514             14,295            10,734             10,541            15,479

Stockholders'
investment                    10,150              7,501             5,592              6,294             9,607

Book value per                  
share                           2.21               1.67              1.31               1.52              2.41


</TABLE>


                                       8

<PAGE>   9



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

[ ]      OVERVIEW

Net sales and contract revenues for fiscal 1997 improved by 60% to $28,479,000
versus fiscal 1996 net sales of $17,815,000. The Company earned profits of
$1,925,000 ($.40 per share), an increase of 140% compared to a $802,000 profit
($.18 per share) in the previous year. Backlog at March 28, 1997 was
$15,584,000, a 28% increase over the backlog reported at previous fiscal year
end.

[ ]      1997 COMPARED TO 1996

CHANGES IN FINANCIAL CONDITION - Cash and cash equivalents at year end decreased
by $175,000 to $3,202,000, compared to $3,377,000 in 1996. However, in contrast
with the previous year end, almost no customer deposits were held at the end of
fiscal year 1997 that would serve to offset the reported cash and cash
equivalent position. Accounts receivable increased by $1,323,000 from the prior
year due to the increased shipments made during 1997. Inventories increased by
$422,000 during 1997 to support the growth in X-ray equipment shipments and
backlog. Customer deposits decreased $2,670,000 due to the attainment of
milestones against certain long-term contracts. Current and noncurrent deferred
revenue, in total, increased by $811,000 from the previous year as a result of
advanced payments for extended warranty and service contracts.

RESULTS OF OPERATIONS - Net sales and contract revenues increased by $10,664,000
or 60% during fiscal year 1997. In 1997, security systems and field service
revenues of $26,201,000 increased by $11,136,000 or 74%. Contract research and
engineering revenues of $2,278,000 decreased by $472,000 or 17%.

Cost of sales and contracts in 1997 of $18,423,000 was higher than the previous
year primarily due to increased equipment sales. Cost of sales and contracts
represented 64.7% of revenues during 1997, compared to 66.4% in 1996. This
decline in the cost of sales ratio was due to a larger revenue base over which
to spread fixed costs in 1997.

Selling, general and administrative expenses of $6,494,000 were $1,906,000
higher than the previous year and represented 22.8% of revenues, compared to
25.8% in 1996. The increased spending level was primarily due to expanded sales
and marketing activities, costs associated with the Company's policy of
aggressively defending its intellectual property rights, and the costs
associated with recruiting for the Company's expanded management and staff
requirements. The improvement in the ratio of SG&A expenses to revenues is a
result of the increased sales volume.

Company funded research and development spending increased to $1,602,000 in
1997, a 200% increase compared to the $533,000 in spending in 1996. In
accordance with accounting conventions, development costs in excess of contract
amounts are included in the cost of sales for certain customer funded research
contracts.


                                       9


<PAGE>   10



The Company's net profit of $1,925,000 for fiscal year 1997 represents an
improvement of $1,123,000, or 140%, over net income of $802,000 in the previous
year. The Company was profitable in all quarters, and profits increased in each
quarter during fiscal year 1997.

LIQUIDITY AND CAPITAL RESOURCES - Corporate liquidity and capital resources
improved during fiscal year 1997. Net cash provided by operating activities was
$158,000, compared to $1,966,000 net cash provided by operating activities in
1996. Additionally, during 1997, the Company received $412,000 from the exercise
of stock options. Cash and cash equivalents at March 28, 1997 stood at
$3,202,000, a decrease of $175,000 over the prior year end. Customer deposits
decreased by $2,670,000 compared to 1996, resulting in an improvement in
liquidity despite the Company's slightly lower cash and investments. Working
capital at the end of 1997 increased 45% to $9,856,000 The Company's current
ratio also increased to 3.3 as compared to 2.0 at the end of 1996.

At the end of fiscal 1997, the Company had $2.5 million in approved bank
lines of credit against which there were no borrowings.

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

MANAGEMENT ACTIONS - During fiscal 1997 AS&E achieved several milestones
associated with receipt of new orders, further progress toward the
commercialization of the Company's CargoSearch(TM) family of products, and
continued expansion of the Company's domestic and international customer base.
Examples include the following:

-        In March 1997 the Company received orders totaling $8.5 million from
         U.S. Customs for the installation of four fixed-site CargoSearch(TM)
         systems for truck inspection along the Southwest border, bringing the
         total of such orders to eight. Two systems have been successfully
         installed and are currently operational.

-        The first PalletSearch(TM) system for inspection of high security
         freight and cargo was successfully installed in September 1996 at an
         ultra-secure U.S. agency in Washington, D.C.

-        The Company's first MobileSearch(TM) system, delivered in January 1996,
         has demonstrated its value as an enforcement tool and is now patrolling
         a 500 mile stretch of the Mexican border. In July 1996 the Company
         received a $2.7 million order from the department of Defense Advanced
         Research Projects Agency (DARPA) for a second MobileSearch(TM) system
         with enhanced operating and detection capabilities. Delivery is
         anticipated for the second quarter of fiscal 1998.

-        The Company's core security market has expanded as more government
         agencies, both U.S. and international, have ordered AS&E's Backscatter
         detection systems for protection against sophisticated terrorist
         threats. Orders totaling $6.2 million were received during fiscal 1997
         for X-ray systems to protect the U.S. offices of two


                                       10

<PAGE>   11



         prestigious Federal agencies. International revenues increased 45% to
         $4.8 million in fiscal 1997 from $3.3 million in fiscal 1996.

-        Throughout the fiscal year the Company improved its position in both
         the domestic and international marketplace, adding fourteen new
         government sector and corporate customers to its base.

The Company's improved sales volume, profitability, and liquidity has permitted
increased investments in professional staff, internal technology, and
Company-funded research and development in order to support future business
expansion.

[ ]      1996 COMPARED TO 1995

CHANGES IN FINANCIAL CONDITION - Cash and cash equivalents at year end increased
by $2,508,000 to $3,377,000, compared to $869,000 in 1995. The 1996 increase was
partly due to the receipt of cash advances from customers on certain long-term
contracts. Accounts receivable increased by $1,044,000 from the prior year due
to the increased shipments made during 1996. Unbilled costs and fees decreased
by $725,000 as the result of completion and customer acceptance of certain R&E
contracts. Inventories increased by $605,000 during 1996, to support the growth
in X-ray equipment shipments and backlog. The Company's trade credit position
improved as accounts payable and accrued legal expenses decreased by $370,000 in
1996.

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

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

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

Selling, general and administrative expenses of $4,588,000 were $500,000 higher
than the previous year and represented 25.8% of revenues, compared to 31.5% in
1995. The increased spending level was largely due to expanded sales and
marketing activities. The improvement in the ratio to revenues was expected as a
result of the expanded sales volume and the elimination of nonrecurring
litigation-related and facility move costs included in the previous year's SG&A
spending.


                                       11


<PAGE>   12



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

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

LIQUIDITY AND CAPITAL RESOURCES - Corporate liquidity and capital resources
improved substantially during fiscal year 1996. Net cash provided by operating
activities was $1,966,000, compared to $922,000 net cash used by operating
activities in 1995. Additionally, during 1996, the Company received $950,000
from the issuance of stock and the exercise of stock options. Cash and cash
equivalents at March 29, 1996 stood at $3,377,000, an increase of $2,508,000
over the prior year end. The Company's current ratio remains 2.0, unchanged from
the end of last fiscal year.

The Company's improved liquidity and cash position is due to (1) the return to
profitable operations, (2) controlled growth in accounts receivable and
inventory balances, (3) the negotiation of significant unrestricted cash
advances relating to several large equipment contracts, and (4) a successful
private equity placement in July 1995. Additionally, at year end, the Company
had up to $3 million in approved but unused bank lines of credit.

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

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

         -        financial restructuring and capital building
         -        new sales and contract initiatives

The significant initiatives in each area are discussed below.

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

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


                                       12


<PAGE>   13



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

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

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

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

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

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

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

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

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



                                       13

<PAGE>   14



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

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

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


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

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


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

None.


                                       14


<PAGE>   15



PART III

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

<TABLE>
[ ] DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AS OF JUNE 5, 1997.

<CAPTION>

                                               Positions and Offices of           Date Assumed
Name                                Age        Company Held                       Each Position
----                                ---        ------------                       -------------
DIRECTORS
---------
<S>                                 <C>        <C>                                <C>
Herman Feshbach                     80         Director                           September 1975
                                               Chairman                           July 1993
Al Gladen                           59         Director                           September 1995
Hamilton W. Helmer                  50         Director                           February 1993
Donald J. McCarren                  57         Director                           February 1993
William E. Odom                     64         Director                           September 1996
Ralph S. Sheridan                   47         Director                           January  1994
                                               President & CEO                    September 1993

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

Jeffrey A. Bernfeld                 40         Vice President, General            February 1996
                                               Counsel & Clerk
Peter W. Harris                     43         Vice President, Sales and          February 1994
                                               Marketing
Michael V. Hynes                    46         Vice President, Science &          September 1995
                                               Technology
Alan H. Rutan                       56         Vice President,                    July 1996
                                               Engineering
Lee C. Steele                       48         Vice President, Finance            September 1994
                                               Treasurer & CFO

</TABLE>

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

Dr. Herman Feshbach is an Institute Professor Emeritus at the Massachusetts
Institute of Technology, a position he has held for more than five years, and
has previously served as Chairman of the Physics Department at MIT and Director
of the MIT Center for Theoretical Physics. He is a past President of the
American Physical Society and the American Academy of Arts and Sciences and is
Fellow of both those Organizations and of the American Association for the
Advancement of Sciences. He is on the Board of Governors

                                       15


<PAGE>   16



for Tel Aviv University and the Weizmann Institute of Science, is on the Board
of Editors for Daedalus and Editor of the Annals of Physics, and has served as
Chairman or Member on numerous committees for the Department of Energy, the
National Science Foundation, the National Academy of Sciences, and the American
Physical Society. He was awarded the National Medal of Science by President
Reagan in 1986. Dr. Feshbach received his Ph.D. from MIT.

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

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

Dr. Donald J. McCarren is President of the National Center for Genome Resources,
a non-profit corporation located in Santa Fe, New Mexico, which supports genome
projects and related research by providing resources such as expertise in
bioinformatics. Prior to assuming that position in 1997, Dr. McCarren was
President and Chief Executive Officer of Tacora Corporation, a medical
technology company located in Seattle, Washington. From July 1992 to June 1994,
he was President and Chief Operating Officer of ImmunoGen, Inc., a bio-tech
research and development company located in Cambridge, Massachusetts. Prior to
that, he was President (1990 to 1992) of the Adria Laboratories Division of
Erbamont N.V. in Columbus, Ohio, and Corporate Vice President of Worldwide
Marketing and Business Development (1989 to 1990) and Vice President of Far East
and Australian Operations (1986 to 1989) of Erbamont, N.V. Dr. McCarren holds a
Ph.D. in Developmental Economics.

General William E. Odom is the Director of National Security Studies for the
Hudson Institute in Washington, D.C. and an adjunct Professor in the Department
of Political Science at Yale University. Prior to joining the Hudson Institute
in 1988, General Odom spent 34 years as an officer in the United States Army,
retiring with the rank of Lieutenant General. While on active duty, General Odom
served as Director of the National Security Agency for three years, Assistant
Chief of Staff for Intelligence for the Department of the Army for four years
and Military Assistant to the President's National Security Advisor for four
years. General Odom received his B.S. degree from West Point and Masters and
Ph.D. degrees from Columbia University. General Odom is on the Board of
Directors of Nichols Research Corporation of Huntsville, Alabama, V-ONE
Corporation of Rockville, Maryland, Middlebury College, from which he received
an honorary doctorate, and the Institute for the Study of Diplomacy at
Georgetown University. General Odom is the author of five books and numerous
articles.


                                       16


<PAGE>   17



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

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

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

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

Mr. Alan H. Rutan joined the Company in July 1996 as Vice President of
Engineering. Prior to that time, Mr. Rutan spent 11 years at Raytheon Company,
most recently as Manager of the Air Defense Systems Department, where his work
focused on radar systems engineering and signal processing. Prior to his
Raytheon experience, Mr. Rutan spent seven years at GTE Laboratories as a Senior
Member of the Technical Staff. From 1974 to 1978, Mr. Rutan ran his own
consulting firm, Signal Processing Associates, Inc., which


                                       17

<PAGE>   18



specialized in image processing applications for various government security
organizations. Mr. Rutan received his B.A. in Physics from Harvard University.

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




                                       18



<PAGE>   19



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

[ ] THE FOLLOWING CHART PROVIDES INFORMATION CONCERNING COMPENSATION PAID BY THE
    COMPANY DURING THE YEAR ENDED MARCH 28, 1997 TO THE CHIEF EXECUTIVE OFFICER
    AND EACH OF THE FOUR MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS OF THE
    COMPANY WHOSE AGGREGATE COMPENSATION EXCEEDED $100,000.


<TABLE>
                                               SUMMARY COMPENSATION

<CAPTION>

                                                                                        Long-Term                         
                                                            Annual                       Compen-
                                                         Compensation                     sation
                                                  ------------------------------                                  All
Name and Principal              Fiscal                                                    Option              Other Compen-
Position                         Year             Salary ($)           Bonus ($)        Awards (#)            sation ($)(1)
----------------------------    ------            ----------           ---------        ----------            -------------   
                                                                                            
<S>                             <C>                  <C>               <C>                <C>                     <C>           
Ralph S. Sheridan               1997                 222,213           270,385(3)         225,000                 4,479
President and CEO               1996                 200,000           202,168(3)               0                 2,486       
                                1995                 200,000           111,055(3)               0                 2,198   
                                
                                

Jeffrey A. Bernfeld             1997                 120,408               19,000          16,000                   408
Vice President, General         1996(2)                7,846                 N.A.          24,000                   408    
Counsel                         
                                


Peter W. Harris                 1997                 111,941               45,000          30,000                   403
Vice President,                 1996                 110,000               40,000               0                   403    
Sales / Marketing               1995                 110,000                    0               0                   721
                                
                                

Michael V. Hynes                1997                 116,240                 N.A.               0                 1,240
Vice President, Science         1996(2)               60,153                 N.A.          32,000                 1,240     
and Technology                  
                                


Lee C. Steele                   1997                 120,560               27,000               0                   752
Vice President and              1996                 110,752               27,000               0                 1,344     
CFO                             1995(2)               55,000                    0          50,000                   900 
                                
                                

</TABLE>


(1)      All Other Compensation includes imputed income from taxable life
         insurance and, for Mr. Sheridan, a leased automobile.

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

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





                                       19
<PAGE>   20



Mr. Sheridan has an employment contract with the Company that provides for his
employment as President and Chief Executive Officer, and as a Director, through
September 1999, at an annual salary of $240,000, plus performance bonuses tied
to specific accomplishments. This contract replaces Mr. Sheridan's original
contract with the Company, which expired in September 1996.

Under the contract, Mr. Sheridan is eligible to receive an annual bonus of up to
$230,000 in each contract year, based on his accomplishment of goals established
by the Compensation Committee. Under the previous contract, but not under the
current contract, Mr. Sheridan also received a bonus of up to 10,000 shares of
common stock and an amount calculated to compensate him for the taxes due on the
stock portion of this bonus. In addition, in October 1996 the Company granted
Mr. Sheridan options to purchase 225,000 shares of the Company's Common Stock at
an exercise price of $14.00 per share, the fair market value of the Company's
Common Stock on the date of grant. The options become exercisable at the rate of
75,000 options per year on the first three anniversaries of the grant.

Mr. Sheridan recognized no income upon the issuance of the options. When the
options are exercised, Mr. Sheridan will recognize ordinary income in an amount
equal to the difference between the fair market value of the Common Stock
received upon the exercise of the option and the amount paid for the Common
Stock. At that time, the Company will be allowed a deduction equal to the amount
recognized as ordinary income by Mr. Sheridan. The options provide that to the
extent that exercise of an option would give rise to compensation expense that
the Company reasonably expects will not be deductible for tax purposes in any
given taxable year pursuant to Section 162(m) of the Internal Revenue Code of
1986, as amended, the number of shares as to which the options may be exercised
during that taxable year shall be limited.

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

Mr. Sheridan is entitled to receive the same benefits as other senior executives
of the company, as well as to the use of a car.

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

Mr. Bernfeld has an agreement with the Company which provides for a minimum base
salary of $120,000, adjustable at the discretion of the President, and a bonus
of up to


                                       20

<PAGE>   21



$20,000 subject to the achievement of individual and corporate goals; and 24,000
stock options granted at market price, which vest according to a schedule. The
agreement is for a three year term ending in February, 1999, and grants Mr.
Bernfeld severance payments equal to one year's salary if he is terminated in
connection with a change of the control of the Company as defined in the
agreement. The agreement also provides that if Mr. Bernfeld is terminated for
any reason other than "Cause" as defined in the agreement, he will be entitled
to receive an amount equal to at least six months salary.

Mr. Rutan has an agreement with the Company granting Mr. Rutan severance
payments equal to one year's salary if he is terminated in connection with a
change of control of the Company as defined in the agreement. The agreement also
provides that if Mr. Rutan is terminated for any reason other than "Cause" as
defined in the agreement, he will be entitled to receive an amount equal to at
least six months salary.

Mr. Steele has an agreement with the Company providing for a three year term
ending in September, 1997, subject to termination for "Cause" as defined. The
contract establishes a base salary of $110,000 plus a potential bonus of up to
$30,000 upon the achievement of semiannual individual and corporate goals as
established by the President of the Company in consultation with Mr. Steele. The
agreement grants Mr. Steele severance payments equal to one year's salary if he
is terminated in connection with a change of control of the Company, as defined
in the agreement.

[ ] THE FOLLOWING TABLES PROVIDE INFORMATION CONCERNING THE GRANT OF OPTIONS IN
    FISCAL YEAR 1997 TO EXECUTIVE OFFICERS NAMED IN THE SUMMARY COMPENSATION
    TABLE AND OPTIONS EXERCISED BY THOSE OFFICERS.

<TABLE>



                                       OPTION GRANTS IN THE LAST FISCAL YEAR
                                                                                             
<CAPTION>
                                                    Individual Grants                                         
                                                                                             Potential Realizable             
                              -------------------------------------------------------------  Value at Assumed                 
                                                                                             Annual Rates of Stock            
                                                    % of Total                               Price Appreciation for           
                                                       Options                               Option Term ($)                  
                                                    Granted to                               -------------------------------- 
                                     Options               All      Exercise     Expiration  
                                     Granted         Employees      Price($)           Date          5%/year         10%/year
                              -----------------------------------------------------------------------------------------------

<S>                                  <C>                 <C>          <C>          <C>             <C>              <C>     
Ralph S. Sheridan                    225,000             52.43        14.000       10/24/06        1,082,217        3,282,776
Jeffrey A. Bernfeld                   16,000              3.73        13.125        2/12/07          106,006          293,186
Peter W. Harris                       30,000              6.99         9.875       11/21/06          296,260          647,224
Michael V. Hynes                           0                 0           N/A            N/A              N/A              N/A
Alan H. Rutan                         24,000              5.59        10.000         7/8/06          199,437          434,163
Lee C. Steele                              0                 0           N/A            N/A              N/A              N/A


</TABLE>



                                       21


<PAGE>   22


<TABLE>


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


<CAPTION>

                                                                                    Number of             Value of Unexercised
                                                                          Unexercised Options             In-The-Money Options
                                        Shares                           at Fiscal Year End -             at Fiscal Year End -
                                      Acquired                             March 28, 1997 (#)              March 28, 1997  ($)
                                            on          Value            --------------------             --------------------
                                      Exercise       Realized        Exerc-        Unexerc-          Exerc-         Unexerc-    
                                           (#)            ($)        isable          isable          isable           isable 
                                      ----------------------------------------------------------------------------------------
<S>                                          <C>            <C>       <C>             <C>             <C>               <C>
Ralph S. Sheridan                            0              0         120,000         225,000         975,000                0
Jeffrey A. Bernfeld                          0              0          20,000          20,000          49,500           49,500
Peter W. Harris                              0              0          30,000          30,000         236,250           67,500
Michael V. Hynes                             0              0          16,000          16,000          90,000           90,000
Alan H. Rutan                                0              0           6,000          18,000          12,750           38,250
Lee C. Steele                                0              0          37,500          12,500         250,781           83,594

</TABLE>

[ ]  COMPENSATION OF DIRECTORS

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

Dr. Feshbach, the Company's Chairman, is covered by a nonfunded deferred
compensation plan (adopted in 1976 and amended in 1977, 1980, 1986, 1990 and
1992) that provides for periodic payments beginning at age 65, based on length
of service. During the year, Dr. Feshbach received $4,752 under the Plan. The
Company accrues the current cost of the plan, which amounted to $10,000 in
fiscal 1997.

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

During the fiscal year ended March 28, 1997, the Company's Compensation
Committee consisted of Dr. Herman Feshbach, Dr. Hamilton W. Helmer and Dr.
Donald J. McCarren. No reportable relationship existed with respect to any
member of the Compensation Committee.

Section 16(a) of the Securities Exchange Act of 1934 requires certain persons,
including the Company's Directors and Executive Officers, to file initial
reports of beneficial ownership of the Company's securities and reports of
changes in beneficial ownership with the Securities and Exchange Commission. For
fiscal year 1997, the Company believes that all required reports were filed on
time.


                                       22

<PAGE>   23



[ ] BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

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

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

In line with this approach, the Company entered into a new employment agreement
with its President and Chief Executive Officer, Mr. Ralph S. Sheridan, in 1996
(effective as of September 1996). This Agreement was based, in part, on an
independent consultant's analysis of compensation arrangements for chief
executives of comparable companies, and was also based on a careful review of
the most important goals and objectives for the Company. The Agreement provides
for annual cash compensation of $240,000, plus annual incentive bonuses of up to
$230,000 tied to specific, agreed upon performance criteria. In addition, in
order to provide for long-term incentives, the Company has issued to Mr.
Sheridan nonstatutory stock options to purchase 225,000 shares of Common Stock
which vest ratably over three years.

For the contract year ended in September 1996, which was performed under Mr.
Sheridan's prior contract, the Committee awarded Mr. Sheridan a cash bonus of
$75,000 and 10,000 shares of stock, representing 100% of the potential award
under his contract. This award represents the Committee's determination that Mr.
Sheridan had done an excellent job over the preceding twelve months and had met
all of the goals and objectives jointly established by the Committee and Mr.
Sheridan.

Also in keeping with its performance-based compensation philosophy, in the
spring of 1994, the Company implemented an incentive compensation program for
all executives who report directly to the Office of the President. Under this
new policy, these executives receive a specified portion of their total
compensation (ranging from 10% to 50%) based upon two factors: their completion
of agreed upon goals and objectives, and the performance of the entire Company.

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


                                       23



<PAGE>   24



[ ] STOCK PERFORMANCE CHART

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

<TABLE>
                                 INDEXED RETURNS
                                Years Ended March
























<CAPTION>


                    1992        1993      1994      1995      1996      1997
                    ----        ----      ----      ----      ----      ----
<S>                  <C>      <C>        <C>      <C>       <C>       <C>   
AS&E                 100      140.43     65.96    106.38    168.09    206.38
S&P 500              100      115.19    116.89    135.06    178.28    213.57
S&P Hi-Tech          100      109.88    129.24    163.54    220.80    298.48

</TABLE>


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



                                       24
<PAGE>   25



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

[ ]  THE FOLLOWING CHART SHOWS THE COMPANY COMMON STOCK BENEFICIALLY OWNED BY
     OFFICERS AND DIRECTORS OF THE COMPANY ON JUNE 5, 1997. BASED ON INFORMATION
     AVAILABLE TO IT, THE COMPANY BELIEVES THAT NO OTHER PERSON OR ENTITY OWNED
     5 PERCENT OR MORE OF THE COMPANY'S COMMON STOCK ON THAT DATE.

<TABLE>
<CAPTION>

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

<S>                                              <C>                      <C>
     Jeffrey A. Bernfeld                         20,643                   (2)
     Herman Feshbach                             15,290                   (2)
     Al Gladen                                   44,055                   (2)
     Peter W. Harris                             32,677                   (2) 
     Hamilton W. Helmer                          32,781                   (2)
     Michael V. Hynes                            16,187                   (2)
     Donald J. McCarren                          40,581                   (2)
     William E. Odom                              3,000                   (2)
     Alan H. Rutan                               12,188                   (2)
     Ralph S. Sheridan                          326,743                 6.94
     Lee C. Steele                               45,148                   (2)
     Directors and Officers
       as a Group (11 persons)                  589,293                11.43
</TABLE>
(1)  Includes shares that may be acquired under stock options and warrants
     exercisable within sixty days after the date of this table, as follows: Mr.
     Bernfeld - 20,000; Dr. Feshbach - 3,750; Mr. Gladen - 37,000; Mr. Harris -
     32,500; Dr. Helmer - 27,000; Dr. Hynes - 16,000; Dr. McCarren - 33,000; Mr.
     Odom - 0; Mr. Rutan -12,000; Mr. Sheridan - 120,000; Mr. Steele - 45,000
     and all Directors and Officers as a group - 346,250. All ownership reported
     herein includes sole voting and investment power.

(2)  Amount owned constitutes less than one percent.


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

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

The Board of Directors determined that the loan was necessary and the terms
appropriate. The Company had been seeking short-term financing from several
banks, but conclusion of a conventional line of credit arrangement was delayed
pending resolution of the lawsuit brought by the Company's founder, in which the
Company has now received a favorable jury verdict. In addition, portions of the
Company's working capital had been tied up in


                                       25

<PAGE>   26



slow-paying foreign accounts receivable and as collateral for letters of credit
supporting certain international sales. These factors justified a form of
short-term "bridge loan" while the Company worked on a more permanent financing
alternative.

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

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

Mr. Gladen provides engineering and management services to the Company on a
regular basis. In fiscal year 1997, the compensation paid to Dabster, Inc., a
corporation of which Mr. Gladen is the President, for such services was
$226,350.

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



PART IV
-------

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

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

     The exhibits listed in the Exhibit Index on page 46-47 are filed as part of
     this report, and such Index is incorporated in this Item by reference.

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


                                       26


<PAGE>   27



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

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



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

Report of Independent Public Accountants                                28
Consolidated Balance Sheets - March 28, 1997 and March 29, 1996         29-30
Consolidated Statements of Operations                                   31
      For the Years Ended March 28, 1997 March 29, 1996,
      and March 31, 1995
Consolidated Statements of Stockholders' Investment                     32
      For the Years Ended March 28, 1997 March 29, 1996,
      and March 31, 1995
Consolidated Statements of Cash Flows                                   33
      For the Years Ended March 28, 1997 March 29, 1996,
      and March 31, 1995
Notes to Consolidated Financial Statements - March 28, 1997             34-42


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

Unaudited quarterly consolidated financial data for
      the years ended March 28, 1997, and March 29, 1996                43


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

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

Schedule VIII - Valuation and Qualifying Accounts and Reserves          44



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


                                       27

<PAGE>   28


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


To American Science and Engineering, Inc.:

We have audited the accompanying consolidated balance sheets of American Science
and Engineering, Inc. (a Massachusetts corporation) and subsidiary as of March
28, 1997 and March 29, 1996 and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended March 28, 1997. These consolidated financial statements and
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Science and Engineering, Inc. and subsidiary as of March 28, 1997 and
March 29, 1996, and the results of its operations and its cash flows for
each of the three years in the period ended March 28, 1997.

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







Boston, Massachusetts                          
May 21, 1997



                                       28


<PAGE>   29




AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 28, 1997 AND MARCH 29, 1996

Dollars in thousands

<TABLE>
<CAPTION>

                                                      1997          1996
                                                      ----          ----
<S>                                                 <C>           <C>
ASSETS        

CURRENT ASSETS:

Cash and cash equivalents (Note 2)                  $ 3,202       $ 3,377

Accounts receivable, net of allowances of
$148 in 1997 and $179 in 1996 (Note 1)                5,019         3,875

Unbilled costs and fees, net of allowances of
$462 in 1997 and $97 in 1996 (Note 1)                   981         1,258

Inventories (Note 1)                                  4,736         4,314

Prepaid expenses and other current assets               157           278

Deferred income taxes (Note 5)                           --            10
                                                    -------       -------
TOTAL CURRENT ASSETS                                 14,095        13,112
                                                    -------       -------
DEPOSITS                                                115           257

PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET OF ACCUMULATED DEPRECIATION
OF $8,860 IN 1997 AND $8,507 IN 1996
(Notes 1 and 3)                                       1,304           926
                                                    -------       -------
                                                    $15,514       $14,295
                                                    =======       =======
</TABLE>


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


                                       29

<PAGE>   30



AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
MARCH 28, 1997 AND MARCH 29, 1996

Dollars in thousands
<TABLE>
<CAPTION>


                                                                                 1997         1996
                                                                                 ----         ----
<S>                                                                           <C>          <C>  
LIABILITIES &     CURRENT LIABILITIES:
STOCKHOLDERS'     Current maturities of obligations
INVESTMENT          under capital leases (Note 3)                             $    18      $    16
                  Accounts payable                                              2,253        2,021
                  Accrued salaries and benefits                                   573          496
                  Accrued warranty costs (Note 1)                                 292          178
                  Deferred revenue (Note 1)                                       526          375
                  Customer deposits                                                --        2,670
                  Other current liabilities                                       577          546
                                                                              -------      -------
                  TOTAL CURRENT LIABILITIES                                     4,239        6,302
                                                                              -------      -------

                  NONCURRENT LIABILITIES:
                  Obligations under capital leases, net
                     of current maturities (Note 3)                                42           59
                  Deferred revenue (Note 1)                                       660           --
                  Deferred compensation (Note 10)                                 174          192
                  Deferred rent (Note 1)                                          249          231
                  Deferred income taxes (Note 5)                                   --           10
                                                                              -------      -------
                  TOTAL NONCURRENT LIABILITIES                                  1,125          492
                                                                              -------      -------


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

                  STOCKHOLDERS' INVESTMENT: (Notes 6 and  7)
                  Preferred stock, no par value
                  Authorized - 100,000 shares
                  Issued - None
                  Common stock, $.66-2/3 par value
                  Authorized - 20,000,000 shares
                  Issued 4,585,209 shares in 1997
                  and 4,500,627 shares in 1996                                  3,058        3,001
                  Capital in excess of par value                               15,273       14,556
                  Accumulated deficit                                          (7,365)      (9,290)
                                                                              -------      -------
                                                                               10,966        8,267
                  Note receivable-Officer (Note 8)                               (640)        (640)
                  Less: treasury stock - 62,841 and
                  67,377 shares in 1997 and
                     in 1996, at cost, respectively                              (176)        (126)
                                                                              -------      -------

                  TOTAL STOCKHOLDERS' INVESTMENT                               10,150        7,501
                                                                              -------      -------
                                                                              $15,514      $14,295
                                                                              =======      =======

</TABLE>

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



                                       30




<PAGE>   31



AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 28, 1997, MARCH 29, 1996,
AND MARCH 31, 1995

Dollars in thousands, except per share amounts

<TABLE>
<CAPTION>

                                                1997           1996           1995
                                                ----           ----           ----
<S>                                            <C>            <C>             <C>  
NET SALES AND CONTRACT REVENUES
(Notes 1 and 9)                               $28,479        $17,815        $12,997
Cost of sales and contracts (Note 1)           18,423         11,823          9,076
                                              -------        -------        -------
GROSS PROFIT                                   10,056          5,992          3,921

EXPENSES:
Selling, general and administrative             6,494          4,588          4,088
Research and development (Note 1)               1,602            533            852
                                              -------        -------        -------
TOTAL EXPENSES                                  8,096          5,121          4,940

OPERATING INCOME/(LOSS)                         1,960            871         (1,019)
                                              -------        -------        -------

OTHER INCOME/(EXPENSE):
Interest, net                                     111             52             67
Other, net                                        (68)           (91)           (15)
                                              -------        -------        -------
TOTAL OTHER INCOME (EXPENSE)                       43            (39)            52
                                              -------        -------        -------

INCOME/(LOSS) BEFORE PROVISION FOR
   INCOME TAXES                               $ 2,003        $   832        $  (967)
PROVISION FOR INCOME TAXES (Note 5)                78             30             --
                                              -------        -------        -------

NET INCOME/(LOSS)                             $ 1,925        $   802        $  (967)
                                              =======        =======        =======

Income/(Loss) Per Share - Primary/Fully 
Diluted (Note 1)                              $   .40        $   .18        $  (.23)
                                              =======        =======        =======

Weighted Average Shares - Primary               4,826          4,517          4,257
                                              =======        =======        =======
                        - Fully Diluted         4,837          4,541          4,257
                                              =======        =======        =======

</TABLE>

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


                                       31


<PAGE>   32



AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 28, 1997, MARCH 29, 1996 AND MARCH 31, 1995 
Amounts in thousands, except share amounts

<TABLE>
<CAPTION>


                                                    CAPITAL IN       ACCU-     NOTE
                                                    ----------       -----     ----
                             COMMON STOCK           EXCESS OF      MULATED   RECEIVABLE        TREASURY STOCK
                             ------------           ---------      -------   ----------        --------------
                          SHARES        AMOUNT      PAR VALUE      DEFICIT    OFFICER        SHARES       AMOUNT            TOTAL
                          ------        ------      ---------      -------    -------        ------       ------            -----
<S>                      <C>             <C>         <C>          <C>           <C>          <C>             <C>            <C>  
BALANCE,
APRIL 1, 1994            4,216,475      $2,811      $13,374      $ (9,125)     $(640)        67,377        $ (126)       $  6,294

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

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

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

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

Net income                      --          --           --         1,925         --             --            --           1,925
Exercise of stock
  options (Note 6)          68,723          46          396            --         --          5,464           (69)            373
Issuance of stock           15,859          11          321            --         --        (10,000)           19             351
                         ---------      ------      -------      --------      -----        -------        ------        --------

BALANCE,
MARCH 28, 1997           4,585,209      $3,058      $15,273      $ (7,365)     $(640)        62,841        $ (176)       $ 10,150
                         =========      ======      =======      ========      =====        =======        ======        ========

</TABLE>



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

                                       32


<PAGE>   33




AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 28, 1997, MARCH 29, 1996, AND MARCH 31, 1995

Dollars in thousands
<TABLE>
<CAPTION>

                                                                    1997           1996            1995
                                                                    ----           ----            ----
<S>                                                              <C>            <C>            <C>     
Cash flows from operating activities:
Net income/(loss)                                                $ 1,925        $   802        $  (967)
Adjustments to reconcile net income (loss) to net cash
     provided by (used for) operating activities:
     Depreciation and amortization                                   352            205            219
     Amortization of deferred gain                                    --             --            (68)
     Provisions for contract, inventory, accounts
             receivable and warranty reserves                        795            510            219
     Change in assets and liabilities:
             Accounts receivable                                  (1,322)        (1,244)          (412)
             Unbilled costs and fees                                  (7)           725         (1,075)
             Inventories                                            (422)          (442)           145
             Prepaid expenses, other current assets,
                 and deposits                                        273           (257)           184
             Accounts payable                                        232           (148)         1,669
             Customer deposits                                    (2,670)         2,622           (122)
             Accrued expenses and other
                 current liabilities                                 352         (1,028)          (197)
             Accrued restructuring costs                              --             --           (275)
             Noncurrent liabilities                                  650            221           (242)
                                                                 -------        -------        -------

     TOTAL ADJUSTMENTS                                            (1,767)         1,164             45
                                                                 -------        -------        -------

     NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES            158          1,966           (922)
                                                                 -------        -------        -------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment, net                        (730)          (250)          (693)
                                                                 -------        -------        -------

Cash flows from financing activities:
     Capital lease financing                                          --             --            108
     Proceeds from borrowings (Notes 3 and 11)                        --            650             --
     Repayment of officer note (Note 11)                              --           (650)            --
     Proceeds from exercise of stock options                         412             53             31
     Proceeds from issuance of stock                                  --            897             --
     Principal payments of capital lease obligations                 (15)          (158)          (151)
                                                                 -------        -------        -------
     Cash provided by (used for) financing activities                397            792            (12)
                                                                 -------        -------        -------

Net increase (decrease) in cash and cash equivalents                (175)         2,508         (1,627)
Cash and cash equivalents at beginning of year                     3,377            869          2,496
                                                                 -------        -------        -------
Cash and cash equivalents at end of year                         $ 3,202        $ 3,377        $   869
                                                                 =======        =======        =======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Interest paid                                               $    10        $    79        $    16
     Income taxes paid                                                30             --             --

Non-cash transactions:
     Issuance of stock in lieu of fees                           $   311        $   157        $   234

</TABLE>


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


                                       33

<PAGE>   34




AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 28, 1997


1.  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

PRINCIPLES OF CONSOLIDATION   The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation. 
The Company's fiscal year ends on the Friday closest to March 31. As such, the 
Company's fiscal year ended on March 28, 1997.

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

The components of inventories at March 28, 1997 and March 29, 1996 were as
follows (dollars in thousands):
<TABLE>
<CAPTION>

                                   1997         1996
                                   ----         ----
<S>                               <C>          <C>  
Raw materials and completed
   subassemblies                  $3,106       $3,014
Work-in-process                    1,334        1,300
Finished goods                       296           --
                                  ------       ------
                                  $4,736       $4,314
                                  ======       ======
</TABLE>

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

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

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

Revenues and profits are recorded on other fixed price contracts as shipments
are made. Profit on fixed price contracts is determined by applying the
estimated average profit rate to the contract value of the items shipped.


                                       34

<PAGE>   35



If a loss is anticipated on a contract, provision is made at that time for the
full amount of the estimated loss without reference to the percentage of
completion or to performance milestones.

Under the terms of most of its cost-reimbursement contracts, the Company is not
permitted to bill customers a specified portion of the contract value until
completion. Such retainages (approximately $339,000 in 1997 and $394,000 in
1996) result from both commercial contract retentions and government contract
withholdings for 15% of fees, as well as differences between the actual and
provisional indirect cost billing rates. Retainages are included in the
accompanying consolidated balance sheets as components of unbilled costs and
fees.

Included in accounts receivable and unbilled costs and fees at March 28, 1997
and March 29, 1996 are $3,694,000 and $3,444,000 respectively, from both prime
and subcontracts with the U.S. Government.

DEFERRED REVENUE   The Company recognizes service contract revenues ratably over
the term of the contract. The Company provides a reserve for its estimate of
warranty costs at the time of shipment. Deferred revenue in the accompanying
balance sheets consists primarily of unearned revenue on service contracts.
Substantially all of the deferred revenue included in the accompanying 1997
balance sheet will be recognized within 2 years.

DEFERRED RENT   The Company entered into a lease for its office and
manufacturing facilities. This lease has escalation clauses. Generally accepted
accounting principals require normalization of the rental expense over the
life of the lease, resulting in deferred rent being reflected in the
accompanying 1997 consolidated balance sheet.

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

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

INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARES  The Company currently
calculates earnings per common share under Accounting Principles Board Opinion
(APB) No. 15, "Earnings Per Share."  Income/(loss) per share was computed by
dividing the net income by the weighted average number of shares of common
stock outstanding during each year. Common stock equivalents (stock options and
stock warrants) were considered in the computation of earnings per common and
common equivalent share for 1997 and 1996. Stock options and stock warrants
were not considered in computing the loss per share in 1995, as the effect
would have been antidilutive.

In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share for
entities with publicly held common stock or potential common stock. SFAS No.
128 is effective for periods ending after December 15, 1997 and early adoption
is not permitted. SFAS No. 128 replaces primary earnings per share with "basic
earnings per common 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 year. No dilution for any potentially dilutive
securities is included. In addition, SFAS No. 128 replaces fully diluted
earnings per common share with "diluted earnings per common share." Dilution
for options and warrants under SFAS No. 128 is computed using the average share
price of the Company's common stock for the period, rather than the more
dilutive greater of the average share price or end-of-period share price
required by APB No. 15. Under the provisions of SFAS No. 128, the pro forma
basic and diluted earnings per common share for 1997 would be $.43 and $.40,
respectively. For fiscal years 1996 and 1995 there would have been no material 
change from primary and fully diluted earnings per common share to basic and 
diluted earnings per share under SFAS No. 128.



                                       35


<PAGE>   36




INCOME TAXES   The Company accounts for Income Taxes in accordance with 
SFAS No. 109, "Accounting for Income Taxes." Accordingly, the Company recognizes
deferred income taxes based on the expected future tax consequences of
differences between the financial statement basis and the tax basis of assets
and liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return. The
Company records a valuation allowance against any net deferred tax assets whose
realizability is not more likely than not.

PRESENTATION   Certain amounts in 1996 and 1995 have been reclassified to
conform to the 1997 financial statement presentation.

2.  CASH AND CASH EQUIVALENTS

The Company considers all cash investments with original maturities of 90 days
or less to be cash equivalents. Cash and cash equivalents are carried at cost,
which approximates fair market value at year end 1997 and 1996.

Cash equivalents as of March 28, 1997 consist primarily of U.S. Treasury Bills 
of approximately $1,500,000 with maturities of 30 days or less, and overnight
repurchase agreements with a regional bank in the amount of $1,900,628. The
repurchase agreements are collateralized by investments principally consisting
of U.S. Government Agency securities in the amount of at least 100% of such
obligation.

3.  OPERATING AND CAPITAL LEASE AGREEMENTS

In January 1995, the Company entered into a lease agreement for its new office
and manufacturing facilities in Billerica, Massachusetts. This lease has a term
of 10 years which started March 1, 1995, with an option to extend for 10 
additional years. The remaining security deposit on the lease amounts to
$100,000. Escalation clauses provide for rent increases after the first and
fifth years of the rental term. The Company incurred $501,000, $513,000 and
$1,640,000 of rent expense in 1997, 1996, and 1995 respectively.

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

                                                          
                    
                                Year Ending March
                                -----------------
                    
                            <S>              <C>   
                            1998             $  475
                            1999                475
                            2000                482
                            2001                554
                            2002                554
                            Thereafter        1,617
                                             ------
                                             $4,157
                                             ======
</TABLE>


                                       36

<PAGE>   37

During fiscal 1995 the Company entered into a lease agreement for the purchase
of certain office equipment. This lease is classified as a capital lease under
generally accepted accounting principals and is payable in monthly installments
over a period of 60 months with interest of 11.5%. Future minimum lease payments
are as follows (in thousands):

<TABLE>
<CAPTION>

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

<S>                                        <C> 
1998                                       $ 23
Thereafter                                   48
                                           ----
Total minimum lease payments                 71
Less:  Amounts representing interest        (11)
                                           ----
Present value of net minimum
   lease payments                          $ 60
                                           ====
</TABLE>


4.  LINES OF CREDIT

In August 1996, the Company renewed its domestic line of credit for $2.5 million
with a regional bank. The line of credit is secured by accounts receivable from
ongoing customers as well as inventory. Monthly interest payments on this line
of credit are at the rate of prime plus one-half percent (.5%). There is a
quarter percent (.25%) commitment fee on the unused portion of the line. As of
March 28, 1997, there were no borrowings against the line of credit. The $2.5
million line of credit expires on July 31, 1997, at which time a formal credit
renewal agreement is expected to be in place.

5.  INCOME TAXES

At March 28, 1997, the Company had approximately $6,986,000 of federal net
operating loss carryforwards which can be used, subject to certain limitations,
to offset any future federal taxable income. The carryforwards expire through
the year 2010. The Company also has unused investment tax and other credits of
approximately $213,000 expiring through 2001. The provision for income taxes in
the accompanying statement of income is substantially a current provision and
differs from the provision calculated by applying the statutory federal income
tax rate of 34% to income before provision for income taxes due to the
following:

<TABLE>
<CAPTION>

                                                                    1997               1996
                                                                    ----               ----

<S>                                                               <C>               <C>
Provision for income taxes at statutory rate                      $ 681,000         $ 283,000
Benefit from utilization of net operating loss carryforwards       (681,000)         (283,000)
Other tax liabilities                                                78,000            30,000
                                                                  ---------         ---------
                                                                  $  78,000         $  30,000
                                                                  =========         =========
</TABLE>

At March 28, 1997, the Company had $3,562,000 of short and long-term deferred
tax assets. The Company has recorded a valuation allowance of $3,562,000 against
these amounts due to the uncertainties surrounding the realization of the
Company's net operating loss carryforwards, the realization of which is
dependent upon the future taxable income of the Company.

The tax effect of the primary temporary differences giving rise to the Company's
deferred tax assets and liabilities at March 28, 1997, are as follows (in
thousands):


                                       37


<PAGE>   38

<TABLE>
<CAPTION>



                                                   1997                         1996
                                      --------------------------   ----------------------------
                                    
                                         Current      Long-Term       Current        Long-Term
                                           Asset          Asset         Asset            Asset
                                      (Liability)    (Liability)   (Liability)      (Liability)
<S>                                      <C>             <C>            <C>           <C>    
Reserves for accounts receivable    
   and unbilled costs and fees            $  238         $    --        $ 156         $    --
Inventory related reserves                   239              --          243              --
Depreciation and amortization                 --              26           --            (119)
Accrued warranty costs                       114              --           69              --
Net operating loss carryforwards              --           2,375           --           3,056
Tax credits and other                        333             237          318             155
                                          ------         -------        -----         -------
                                             924           2,638          786           3,092
                                    
Valuation allowance                         (924)         (2,638)        (776)         (3,102)
                                          ------         -------        -----         -------
                                    
Total deferred income taxes               $   --         $    --        $  10         $   (10)
                                          ======         =======        =====         =======
</TABLE>
                                 
The valuation allowance at March 28, 1997 was approximately $316,000 lower than
the valuation allowance at March 29, 1996 primarily due to the usage of net
operating loss carryforwards during the year.

6.  COMMON STOCK

STOCK OPTION PLANS  The Company has various formal stock option plans for
directors, officers, and employees. Options under these plans are granted at
fair market value and generally become exercisable within one to two years of
the grant date and terminate from five to ten years from the date of grant. The
Company has a common stock installment purchase plan under which the Board of
Directors may grant to key personnel the right to purchase shares of the
Company's common stock at fair market value and to pay the purchase price in
twelve equal monthly installments. As of March 28, 1997, no shares have been
reserved or granted under this plan. During the year ended March 28, 1997, the
Company instituted two new common stock purchase plans. The Executive Equity
Incentive Plan allows an executive officer of the Company to buy original issue
Company common stock in any dollar amount up to the gross amount of the annual
bonus granted to the Officer. The Reload Option Plan allows any eligible
employee designated by the Board of Directors to receive new stock options (at
an exercise price equal to the fair market value of the common stock on the
date of sale of the stock) for every share of Company common stock sold or used
to exercise stock options.

PRO FORMA STOCK-BASED COMPENSATION EXPENSE  In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which sets forth a fair-value based method of recognizing
stock-based compensation expense. As permitted by SFAS No. 123, the Company has
elected to continue to apply APB No. 25 to account for its stock-based
compensation plans. Had compensation cost for awards in 1997 and 1996 under the
Company's stock-based compensation plans been determined based on the fair
value at the grant dates consistent with the method set forth under SFAS No.
123, the effect on the Company's net income and earnings per share would have
been as follows: 


                                      38


<PAGE>   39


<TABLE>
<CAPTION>
In thousands except per share amounts                        1997        1996
                                                             ----        ----
<S>                                                         <C>          <C> 
Net income:
   As reported                                              $1,925       $8O2
   Pro forma                                                 1,411        644
Primary/fully diluted earnings per share:
    As reported                                             $  .4O       $.18
    Pro forma                                                  .29        .14

</TABLE>


Because the method prescribed by SFAS No. 123 has not been applied to options
granted prior to April 1, 1995, the resulting pro forma compensation expense may
not be representative of the amount to be expensed in future years. Pro forma
compensation expense for options granted is reflected over the vesting period;
therefore, future pro forma compensation expense may be greater as additional
options are granted.

The fair value of each option granted was estimated on the grant date using the
Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rates of 5.97% to 6.64% and 5.38% to 6.24%
for 1997 and 1996, respectively, expected life of 5 years, expected volatility
of 30%, and an expected dividend yield of 0%.

<TABLE>
STOCK OPTIONS ACTIVITY  A summary of the Company's stock option activity is as
follows:
<CAPTION>

(Shares in thousands)              1997                          1996                            1995
                         -----------------------        ----------------------        --------------------------
                                        Weighted                      Weighted                                       
                                         Average                       Average                          Range of
                         Number of      Exercise        Number of     Exercise        Number of         Exercise
                            Shares         Price           Shares        Price           Shares           Prices  
                            ------         -----           ------        -----           ------           ------  
<S>                     <C>               <C>            <C>           <C>            <C>           <C>        
Options outstanding,
beginning of year         557,404         $ 5.72          506,194       $5.07          290,808       $2.88-$6.56
Options granted           537,610          12.56          204,000        6.79          233,800             $5.56
Options exercised         (68,723)          5.32          (18,868)       4.67           (2,645)      $2.88-$6.56
Options expired           (25,150)          8.06         (133,922)       5.93          (15,769)      $3.50-$6.56
                        ---------                        --------                      -------                     

Options outstanding,
end of year             1,001,141          10.16          557,404        5.72          506,194
                        =========                         =======                      ======= 

Options exercisable       529,241           6.21          412,404        5.16          227,494       $2.88-$6.56
                        =========                         =======                      =======  

Options available
for grant                 681,538                         577,404                      506,194       $2.88-$6.56
                        =========                         =======                      =======  

Weighted average fair
value per share of
options granted during
the year                                    4.24                         2.57

</TABLE>

                                       39







<PAGE>   40

<TABLE>
The following summarizes certain data for options outstanding at March 28, 1997:

<CAPTION>
                                                                               Weighted   
                                                               Weighted         Average
                                                                Average       Remaining
                             Number of            Range of     Exercise     Contractual
                                Shares     Exercise Prices        Price            Life
                                ------     ---------------        -----            ----
                             
<S>                            <C>         <C>                   <C>               <C>   
Options outstanding,
end of year:                   166,034      $2.88 -  $5.38       $ 4.04            7.66  
                               380,707      $5.38 -  $7.88       $ 6.02            8.38
                               198,400      $7.88 - $12.88       $10.19            9.37
                               256,000     $12.88 - $16.25       $13.93            9.60
                             ---------
                             1,001,141                           $10.16            8.83
                             =========

Options Exercisable:           166,034      $2.88 - $ 5.38       $ 4.04        
                               324,707      $5.38 - $ 7.88       $ 5.93       
                                27,200      $7.88 - $12.88       $ 9.78 
                                11,300     $12.88 - $16.25       $13.21    
                             ---------                                                                  
                               529,241                           $ 6.21           
                             =========  
</TABLE>


7.  PRIVATE EQUITY PLACEMENT

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

8.  EMPLOYMENT AGREEMENT AND NOTE RECEIVABLE FROM OFFICER

On January 12, 1994, the Company entered into an Employment Agreement with the
Company's President and Chief Executive Officer. On September 29, 1994, the
stockholders approved the issuance of non-qualified stock options for 80,000
shares (at $4.00 per share) to be exercised to varying extents at various times
through its expiration on December 16, 2003. The excess of the quoted market
price of the stock at the date of the award ($5.50) over the price stipulated by
the Agreement ($4.00) has been recognized by the Company as compensation
expense. This total amount has been amortized on a straight line basis over the
length of a vesting period of three years, through September 1997.

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


                                       40


<PAGE>   41



9.  BUSINESS SEGMENT INFORMATION

Certain financial information by business segment for the fiscal years 1997,
1996, and 1995 is presented below (dollars in thousands):

<TABLE>
<CAPTION>

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

<S>                      <C>           <C>        <C>          <C>            <C>    
1997
   X-ray Products        $11,915       $298       $  108       $28,479        $ 6,411
   Corporate               3,599        432          244            --         (4,451)

   Interest income            --         --           --            --            121
   Interest expense           --         --           --            --            (10)
   Other expense, net         --         --           --            --            (68)
                         -------       ----       ------       -------        -------
                         $15,514       $730       $  352       $28,479        $ 2,003
                         =======       ====       ======       =======        =======

1996
   X-ray Products        $10,081       $163       $   50       $17,815        $ 4,385
   Corporate               4,214         88          155            --         (3,514)

   Interest income            --         --           --            --            131
   Interest expense           --         --           --            --            (79)
   Other expense, net         --         --           --            --            (91)
                         -------       ----       ------       -------        -------
                         $14,295       $251       $  205       $17,815        $   832
                         =======       ====       ======       =======        =======


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

   Corporate               4,156        632          130            --           (290)

   Interest income            --         --           --            --             83
   Interest expense           --         --           --            --            (16)
   Other expense, net         --         --           --            --            (15)
                         -------       ----       ------       -------        -------
                         $10,734       $693       $  219       $12,997        $  (967)
                         =======       ====       ======       =======        =======
</TABLE>


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

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

Approximately 78% in 1997, 69% in 1996, and 55% in 1995 of consolidated revenues
were derived from prime and subcontracts with, or sales to, various United
States federal and state governmental agencies.

Sales to major customers (representing in excess of 10% of consolidated sales)
included X-ray Products segment sales of $11,531,000 and $3,463,000 to two
customers, respectively, in 1997, $2,854,000 to one customer in 1996 and
$2,025,000 to one customer in 1995. 


                                       41


<PAGE>   42

The Company's export sales, which include all sales of products and services
delivered outside of the United States, were $4,776,000 in 1997, $3,289,000 in
1996 and $3,822,000 in 1995.

10.  COMMITMENTS AND CONTINGENCIES

DEFERRED COMPENSATION The Company has an unfunded deferred compensation plan for
certain of its current and former directors which provides for periodic payments
beginning at age 65, the amount of which depends on their length of service. The
Company accrues the estimated current cost, which amounted to $10,000 in 1997,
$21,000 in 1996 and $21,000 in 1995.

LITIGATION In July 1993, the Company terminated the employment of Martin Annis
as Chief Executive Officer and Chairman of the Board, on the basis of
information received indicating that he had been engaging in activities that
were incompatible with his status as an officer and employee of the Company. Dr.
Annis brought suit against the Company and certain Officers and Directors,
alleging wrongful termination, breach of contract and associated torts. The
trial was concluded in April 1995, and the jury found that Dr. Annis's
activities had materially breached his fiduciary duty to the Company, thereby
justifying the Company in terminating him. The Company also sued Dr. Annis,
alleging that he misappropriated its trade secrets and proprietary technologies.
Dr. Annis alleged that the Company interfered with his and his new company's
business relationships. These matters were finally resolved in June 1997. As a
result of the settlement, the Company's ownership rights in certain technology
were affirmed, the Company gained rights to certain continuing developments made
by Annistech, and the Company agreed to license that technology back to
Annistech, Dr. Annis' company.

In May, 1996, Vivid Technologies, Inc., filed a civil action against the
Company, seeking INTER ALIA a declaratory judgment that Vivid had not infringed
upon certain of the Company patents relating to backscatter. On May 12, 1997,
Vivid filed a proposed Amended Complaint narrowing its claim and seeking INTER
ALIA a declaratory judgment that Vivid had not infringed on AS&E United States
Patent number 5,253,283, entitled "Inspection Method and Apparatus with Single
Color Pixel Imaging." The Company denies Vivid's assertions, and contends that
Vivid's claims are without merit and that Vivid is not entitled to the relief
sought. No discovery has yet occurred in the case.

11.  LOANS FROM OFFICERS

In April 1995, the Company received $650,000 in cash from Officers and Directors
as a temporary loan, primarily to support working capital needs. Interest was
paid monthly at the rate of prime plus 2% per annum. In addition, the Company
issued a total of 6,500 shares of its common stock and warrants to purchase
65,000 shares of its common stock at $5.875/share, exercisable through August
1997, proportionately to the lenders. The fair value of these issuances of
$45,500 is included in interest expense in the consolidated statement of
operations. The loan was due and repaid on August 15, 1995.


                                       42



<PAGE>   43



AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA FOR THE YEARS ENDED MARCH 28,
1997 AND MARCH 29, 1996

Dollars in thousands, except per share amounts

<TABLE>
<CAPTION>

                                      1997 BY QUARTER                                 1996 BY QUARTER
                                      ---------------                                 ---------------

                          1st          2nd          3rd          4th          1st          2nd          3rd          4th
                          ---          ---          ---          ---          ---          ---          ---          ---
<S>                     <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>   
Net sales and
contract revenues       $6,699       $6,685       $7,127       $7,968       $3,517       $3,882       $4,717       $5,699

Gross profit             2,091        2,356        2,832        2,777        1,064        1,305        1,420        2,203

Operating income           398          463          515          584           50          215          252          354

Net income              $  406       $  451       $  503       $  565       $   52       $  155       $  252       $  343

Net income per
share                      .09          .09          .10          .12          .01          .04          .05          .07


</TABLE>


                                       43


<PAGE>   44



                                                                   SCHEDULE VIII

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED MARCH 28, 1997, MARCH 29, 1996 AND MARCH 31, 1995


DESCRIPTION - ACCOUNTS RECEIVABLE

Dollars in thousands

<TABLE>
<CAPTION>

                                Charged                           
              Balance at           to            Deductions        Balance  
              Beginning         Costs and          from             at End  
               of Year          Expenses         Reserves          of Year  
               -------          --------         --------          -------
<S>            <C>               <C>              <C>               <C> 
1997            $179              $178             $209              $148

1996            $ 96              $200             $117              $179

1995            $111              $ 25             $ 40              $ 96
</TABLE>




DESCRIPTION - ALLOWANCES FOR UNBILLED COST AND FEES

Dollars in thousands

<TABLE>
<CAPTION>
                                 Charged                           
              Balance at           to            Deductions        Balance  
              Beginning         Costs and          from             at End  
               of Year          Expenses         Reserves          of Year  
               -------          --------         --------          -------
<S>             <C>              <C>               <C>              <C> 
1997            $ 97             $384              $ 19             $462

1996            $ 72             $ 25              $ --             $ 97

1995            $552             $ --              $480             $ 72

</TABLE>


                                       44


<PAGE>   45




                                   SIGNATURES

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

                                       AMERICAN SCIENCE AND ENGINEERING, INC.
DATED: June 1997

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

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

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

                                 President
/s/ Ralph S. Sheridan            and Director (Principal
-----------------------------    Executive Officer)               25 June 1997
Ralph S. Sheridan

                                 Chief Financial Officer,
                                 Treasurer and
                                 Vice President, Finance
/s/ Lee C. Steele                (Principal Financial Officer)    25 June 1997
-----------------------------
Lee C. Steele


                                 Controller                       25 June 1997
/s/ Joseph Moffa                 (Principal Accounting Officer)
-----------------------------
Joseph Moffa


/s/ Herman Feshbach              Chairman of the Board
-----------------------------    of Directors                     25 June 1997
Herman Feshbach 

/s/  Al Gladen                   Director                         25 June 1997
-----------------------------
Al Gladen


/s/ Hamilton W. Helmer           Director                         25 June 1997
-----------------------------
Hamilton W. Helmer


/s/ Donald J. McCarren           Director                         25 June 1997
-----------------------------
Donald J. McCarren


/s/ William E. Odom              Director                         25 June 1997
-----------------------------
William E. Odom




                                       45



<PAGE>   46



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

<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

                                       46



<PAGE>   47

<TABLE>
<CAPTION>


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



<S>            <C>                                                                       <C>
(10)(b)(ix)    1996 Stock Plan For Non-Employee Directors (filed on Exhibit 99
               to the Company's Registration Statement on Form S-8, File No.
               333-09257, filed on 7/31/96, and incorporated herein by
               reference)

(10)(b)(x)     Executive Equity Incentive Plan (filed as Exhibit 99 to the
               Company's Registration Statement on Form S-8, File No. 333-27929,
               filed on May 28, 1997 and incorporated herein by reference)

(10)(b)(xi)    Reload Option Plan, filed herewith..........................................48

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

(10)(c)(ii)    Amendment to Lease of Billerica property, filed herewith.....................49

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

(23)           Consent of Independent Public Accountants....................................51
</TABLE>


                                       47