UNITED STATES
                 SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549
                                  
                              FORM 10-K
(Mark One)

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

For the fiscal year ended     September 30, 1997

                                 or

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

For the transition period from ______ to ______

Commission File Number:  0-28946

                      Vivid Technologies, Inc.
       (Exact name of registrant as specified in its charter)
                                  
             Delaware                        04-3054475
     (State of incorporation)   (I.R.S. Employer Identification No.)

10E Commerce Way, Woburn, Massachusetts        01801
(Address of principal executive offices)     (Zip Code)

                           (781) 938-7800
        (Registrant's telephone number, including area code)

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

        Title of Each Class     Name of Each Exchange on Which Registered
               None                          None

Securities registered pursuant to Section 12(g) of the Act: 
                        Common Stock, $.01 par value

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 to Part  III  of
this Form 10-K or any amendment to this Form 10-K.  [ X ]

The aggregate market value of the Registrant's Common Stock, $.01 par
value,  held  by non-affiliates of the registrant as of November  28,
1997 was $123.5 million based on the price of $15.88 on that date  on
the  Nasdaq  National  Market.  As of December  17,  1997,  9,517,601
shares  of the Registrant's Common Stock, $.01 par value, were issued
and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

(1)  Portions of the Company's Proxy Statement involving the election
     of directors, which is expected to be filed within 120 days after the
     end of the Company's fiscal year, are incorporated by reference in
     Part III (Items 10, 11, 12 and 13) of this Report.



                               Part I
Item 1.  Business

     Information contained in this Report contains forward-looking
statements such as statements of the Company's plans, objectives,
expectations and intentions, that can often be identified by the use
of forward-looking terminology, such as "may," "will," "expect,"
"anticipate," "believe," "plan," "intend," "could," "estimates," "is
being" or "goal" or other variations of these terms or comparable
terminology.  Such statements, which include statements relating to
the anticipated growth of the market for explosives detection
equipment, the Company's ability to develop and market new products
and the Company's ability to enter new markets, and other matters are
subject to risks and uncertainties that could cause actual results to
differ materially from those anticipated.  The cautionary statements
made in this Report should be read as being applicable to all forward-
looking statements wherever they appear in this Report.  The forward-
looking statements contained herein speak only as of the date of this
Report.  Vivid expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any such statement or
reflect any change in Vivid's expectations or any change in events,
conditions or circumstances on which any such statement is based.
Factors that could cause or contribute to such differences include
those discussed in the risk factors set forth in Item 7 below (the
"Risk Factors") as well as those discussed elsewhere herein.

     Vivid Technologies, Inc. ("Vivid" or the "Company") is a leading
developer, manufacturer and marketer of automated inspection systems
that detect explosives in airline checked baggage.  The Company also
offers a system that can be used to screen carry-on baggage and
enhance building security.  The Company's family of advanced
explosives detection systems identify targeted materials by analyzing
the physical characteristics of each item in a bag or parcel,
including the atomic number and mass, using patented composition
analysis techniques and proprietary dual energy X-ray technology.
These systems automatically (without the use of an operator) isolate
and identify targeted materials within a bag or parcel, thereby
preventing a suspect bag or parcel from being loaded into an aircraft
or entering a building until cleared by operator inspection.  The
Company's systems can also be used to identify a wide variety of
other substances, including drugs and currency.

     In 1993, the Company's automated systems were successfully
deployed in airports as part of an integrated multi-level checked
baggage screening approach that is being adopted in many countries
throughout the world.  As of September 30, 1997, the Company had sold
more than 220 systems for installation in airports throughout Europe,
Asia and the United States of which over 180 systems had been shipped
and installed.  Airports at which the Company's systems are deployed
include London Heathrow and London Gatwick, Paris Charles de Gaulle,
Hong Kong's Chek Lap Kok, Malaysia's Kuala Lumpur, Amsterdam, Zurich,
Brussels, Glasgow and Alicante in Spain.

     The Company was incorporated as a Massachusetts corporation in
May 1989 under the name of QDR Security, Inc.  The Company changed
its name to Vivitech, Inc. in June 1989 and was renamed Vivid
Technologies, Inc. in September 1989.  In October 1996, the Company
changed its state of incorporation to Delaware.

Industry Background

     Markets.  There are over 600 commercial airports worldwide
providing scheduled service to more than 2.5 billion passengers per
year.  Of these airports, over 400 are located in the United States,
150 in Europe and 50 in the Asia-Pacific region.  Based upon the
installations of the Company's systems, the Company believes that one
integrated multi-level checked baggage screening system can serve up
to approximately one million passengers per year in mid-size and
large airports.  The capabilities of each integrated multi-level
system at each airport, as well as the number of systems required,
will vary depending upon a variety of factors, including the
explosives detection equipment deployed, the configuration of the
airport's baggage handling systems, the nature of the integration of
the explosives detection equipment with the airport's baggage
handling systems and the profile of the airport's passenger traffic
flow.  Airports deploying advanced explosives detection equipment,
including smaller airports, may choose to implement freestanding
systems in addition to or as an alternative to integrated systems.

     The Company believes that the implementation of effective
checked baggage screening will highlight the ineffectiveness of
conventional X-ray systems to identify explosives in carry-on
baggage.  The United Nations International Civil Aviation
Organization ("ICAO") requires all 184 member states to inspect 100%
of international carry-on baggage for the detection of weapons, and
virtually all airports use conventional X-ray systems for this
purpose.  The Company believes that several thousand of these
conventional X-ray systems are installed in airports throughout the
world, and that these systems are candidates for replacement with
more sophisticated systems.

     Market Evolution and Government Initiatives.  In the 1970s, in
response to hijackings, airports worldwide began to install X-ray
systems to screen carry-on baggage for weapons such as guns and
knives.  When combined with walk-through metal detectors, these
systems substantially reduced the number of airplane hijackings.  The
success of these systems in airports also fostered their adoption for
use by governmental agencies and private companies.  As the threat to
civil aviation evolved in the early 1980's from hijackings to
bombings, many countries required checked baggage on international
flights to be inspected.  Most equipment initially deployed for this
purpose has been conventional X-ray systems.  Although conventional X-
ray systems are effective for the detection of weapons made from
dense materials with defined shapes, such as guns and knives, they
are ineffective in detecting explosive materials that are not as
dense and can be molded into virtually any shape.

     In response to the December 1988 bombing of Pan American Flight
103 over Lockerbie, Scotland, many countries began the installation
of systems that could detect plastic and other explosives in airline
baggage.  Europe, led by the United Kingdom, has been at the
forefront of deploying advanced automated explosives detection
equipment.  The United Kingdom Department of Transport (the "UK DOT")
has required the United Kingdom's commercial airports to deploy
systems for 100% screening of international checked baggage.  The
European Civil Aviation Conference ("ECAC"), an organization of 36
member states, has resolved to implement 100% screening of
international checked baggage.  Several of those countries, including
Belgium, France, Netherlands, Spain and Switzerland, have begun to
implement checked baggage screening approaches similar to that
adopted by the United Kingdom.

     In the Asia/Pacific region, two major new airports in Malaysia
and Hong Kong have purchased integrated systems and plan to commence
operations with 100% checked baggage screening in place.  Other new
airports and terminals in the region, including those in Singapore,
South Korea and Thailand, are being designed to include 100%
screening of international checked baggage using advanced automated
explosives detection systems.  These and other countries in the
region, including Japan, Philippines, Australia and New Zealand, are
also studying the implementation of these systems at existing
airports.

     Following the Pan American Flight 103 bombing, the United States
enacted the Aviation Security Improvement Act of 1990 (the "Aviation
Security Act").  The Aviation Security Act directed the Federal
Aviation Administration (the "FAA") to develop a standard for
explosives detection systems and required airports in the United
States to deploy systems meeting this standard by 1993.  To date, no
system has demonstrated that it meets the FAA standard under
realistic airport operating conditions, including processing baggage
at throughput rates required by airport operators and airlines.  As a
result, the FAA has not required the installation of automated
explosives detection systems, and only a limited number of these
systems have been deployed, primarily on a test basis, in the United
States.  Although ECAC has adopted a standard similar to the FAA
standard as a long-term goal, they have allowed and promoted the
deployment of effective systems even though overall they do not meet
the standards.

     In response to the crash of TWA Flight 800 off Long Island, New
York in July 1996, President Clinton formed the White House
Commission on Aviation Safety and Security, chaired by Vice President
Gore (the "Gore Commission"), to review airline and airport security
and oversee aviation safety.  The Gore Commission released its
initial and final reports in September 1996 and February 1997,
respectively, and in October 1996, the United States enacted the
Federal Aviation Re-Authorization Act of 1996 (the "Re-Authorization
Act") which included an allocation for the purchase of explosives
detection systems and other advanced security equipment by air
carriers and airport authorities.  The Re-Authorization Act requires
that, until such time that the FAA determines that the equipment
certified by the FAA is commercially available and has successfully
completed operational testing, the FAA shall facilitate the
deployment of other commercially available explosives detection
devices which the FAA determines will enhance aviation security.
During 1997, the FAA purchased a variety of state-of-the-art
explosives detection devices from several manufacturers, including
eight systems from the Company.

     Implementation of Checked Baggage Systems.  Effective screening
of checked baggage for explosives and other contraband is a complex
task.  To accomplish this task while meeting the operational
requirements of airports, a screening system must be flexible,
accurate, fast, reliable and cost-effective.  The screening system
must have the ability to effectively identify a wide range of
explosives, including plastic explosives that can be molded into
virtually any shape.  In addition, the system must have an acceptable
false alarm rate, rejecting only a limited percentage of explosive-
free luggage.  The system must also process baggage rapidly and have
limited downtime to avoid delays.  Costs associated with installation
include the cost of modifying the airport's baggage handling system
to accommodate the explosives detection equipment and the cost of
integrating that equipment with the baggage handling system.  A key
component of the cost of operation is the staffing associated with
operating these systems.

     Several advanced explosives detection systems have been
developed to address these requirements, each with its own inherent
advantages and limitations.  These systems include dual energy X-ray,
trace detection and computed tomography ("CT") systems.  Dual energy
X-ray systems measure the X-ray absorption properties of a bag's
contents at two different X-ray energies to determine if any of the
items have the physical characteristics of explosive materials.
Trace detection equipment, known as "sniffers," detects particulate
and chemical traces of explosive materials collected by manually
wiping or vacuuming the bag under inspection.  CT systems use
hundreds of partial X-ray images, referred to as slices, to analyze
the contents of a bag.  The FAA first certified a CT-based system in
December 1994.  However, as recommended by the Gore Commission's
final report and as required by the Re-Authorization Act, this system
must undergo further testing to resolve whether it can operate under
realistic airport operating conditions, including processing baggage
at required throughput rates.

     In 1993, BAA plc ("BAA"), formerly the British Airport Authority
and one of the first airport operators to implement 100% checked
baggage screening using automated explosives detection equipment,
developed a multi-level automated screening approach that integrates
the explosives detection equipment directly into the airport baggage
handling systems.  The multi-level approach, which is being adopted
throughout Europe and the Asia-Pacific region, separates the
screening process into multiple steps, and permits the use of
equipment at each stage that is most suitable for the requirements of
that particular stage.

     Under the multi-level approach, a fully-automated Level 1
explosives detection system is integrated into the existing airport
baggage handling system to screen rapidly all baggage without an
operator in attendance.  Bags rejected by the Level 1 system are
subjected to Level 2 inspection.  Level 2 inspection equipment allows
an operator to review and manipulate images of the contents of the
rejected bags provided by a Level 1 system.  If the operator rejects
the bag, it is forwarded for Level 3 inspection.  Level 3 inspection
is the slowest and most detailed process.  Bags rejected at Level 3
are then opened and inspected by hand in the presence of the
passenger.  Bags not rejected at any inspection level are conveyed by
the baggage handling system for loading into the aircraft.  This
multi-level approach, when implemented with rapid automated
explosives detection equipment, can maintain the processing rates of
existing baggage handling systems.  The multi-level approach also
significantly reduces operating costs by reducing staffing
requirements.

     Level 1 inspection systems, which must inspect all baggage on a
conveyor line, are often required to inspect baggage during peak
periods at the rate of 900 to 1,500 bags per hour (2.4 to 4.0 seconds
per bag) in order to avoid delays in the baggage handling process.
Level 2 inspection systems are often required to process baggage at
the rate of 180 to 360 bags per hour (10 to 20 seconds per bag).
Level 3 systems can be slower to accommodate the greater precision
required for the operator to fully inspect the bag in order to avoid
the undesirable and expensive final inspection process, which
requires the bag to be reunited with the passenger and inspected by
hand.

     As a result of their high throughput rates, dual energy X-ray
explosives detection systems have been deployed in all fully
integrated Level 1 and most Level 2 installations.  Trace Detection,
and to a lesser extent CT scanners, have generally been deployed as
Level 3 systems.  More recently, enhanced versions of dual energy X-
ray explosives detection systems have been deployed as Level 3
systems.  In addition, trace detection, dual energy X-ray and CT
scanners have been deployed as free-standing checked baggage
explosives detection systems.

     Implementation of Carry-on Baggage Systems.  There are currently
no requirements for the use of automated explosives detection systems
to screen carry-on baggage.  However, the presence of explosives in
carry-on baggage poses a serious threat to civil aviation.  A
published industry source estimated that approximately one quarter of
bombs smuggled on board aircraft were hidden in carry-on baggage.  As
the global implementation of hold baggage systems continues,
regulators are shifting their focus to the detection of explosives in
carry-on baggage.  The final report of the Gore Commission
recommended that the FAA begin conducting feasibility studies with
regard to the use of advanced explosives detection equipment for
carry-on baggage systems.  The FAA performed an initial evaluation of
advanced explosives detection equipment for carry-on baggage systems
in May and June 1997.

Products

     The Company develops, manufactures and markets a family of
advanced automated systems that can detect explosives and other
contraband in airline baggage and other parcels.  The first market to
emerge for these systems has been explosives detection for airline
baggage.  The Company's product line includes Level 1 and Level 2
integrated automated explosives detection systems for checked
baggage, freestanding automated explosives detection systems for
Level 3, terminal and baggage hall inspection of checked baggage, and
an automated explosives detection system for carry-on baggage, hand
baggage and parcels.  As of September 30, 1997, the Company had
shipped and installed approximately 180 systems for use in airports
throughout Europe, the Asia-Pacific region and North America.

     Each of the Company's automated checked baggage explosives
detection systems uses a proprietary instrumentation quality power
supply that generates alternating high (150kV) and low (75kV) energy
pulses at film safe levels of exposure.  The power supply is driven
by an X-ray controller that uses both current and source voltage
feedback to maintain a stable, repeatable fan shaped X-ray beam.  As
the X-ray beam passes through the bag and its contents, a portion of
the beam is absorbed (referred to as X-ray absorption or attenuation)
and a portion is scattered.  The beam that passes through the bag
without being absorbed or scattered is referred to as the transmitted
beam and contains information regarding the X-ray absorption
properties of the objects within the bag at each of the two levels of
energy generated by the X-ray tube.  This information can be used to
analyze the atomic number, mass and other physical characteristics of
the objects within the bag.  The transmitted beam also contains
information that can be used to make high quality images of the
contents of a bag.

     The Company's automated checked baggage explosives detection
systems incorporate a high resolution detector array that collects
high quality data from the transmitted X-ray beam consisting of more
than one million pixels of information per bag.  The systems then
employ the Company's patented composition analysis software
algorithms to identify and separate the individual objects within a
bag, including objects between other items or within a container.
These algorithms also analyze the atomic number, mass and other
characteristics of each of those objects to determine whether they
match those of a targeted item, such as explosives or other
contraband.  Additional algorithms detect materials such as lead that
could be used to shield an explosive device from this analysis.

     X-ray absorption analysis techniques are less effective for
detecting certain configurations of explosives which only absorb a
very small fraction of the transmitted beam.  However, these
materials tend to scatter X-rays more than other materials.  The
Company has developed proprietary scatter detection enhancement
("SDE") technology that enhances its systems' ability to detect these
configurations.  The Company's SDE technology, which includes a
combination of additional detector arrays and software, measures and
analyzes the scattered X-ray intensity emitted from baggage in both
the forward and backward direction.  If the scatter levels indicate
the possible presence of a suspect material in a bag, the affected
area is further analyzed to determine if a threat is present.  The
Company has incorporated SDE technology in most of its checked
baggage inspection products, either as an option or a standard
feature, and also offers this technology as an upgrade for existing
systems.

     Both the Company's composition and scatter analysis techniques
result in a computer-generated decision regarding the contents of the
baggage screened.  Any bag that is determined to contain a suspect
object will cause the system to reject the bag.  In the case of an
operator-attended system, such as a Level 2 or Level 3 system, an
image of the rejected bag is presented to an operator for detailed
inspection.  The bag image is presented in high-resolution gray
scale, with the suspect object highlighted in color.  The system can
be programmed to sound an alarm, as well as require the operator to
acknowledge the alarm by pressing a designated button to either
reject or clear the bag.

     The Company has integrated its products into a wide range of
airport baggage handling systems.  These products make use of an
effective control software developed by the Company to facilitate
communication between the explosives detection system and the airport
baggage handling system.  If no suspect object is detected by the
automated system, a "clear" status is sent to the baggage handling
system, allowing the bag to continue directly to the aircraft.  If a
suspect object is detected, a "reject" message is sent to the baggage
handling system, requiring the next level of inspection.  The Company
has gained broad acceptance of its control software by working
closely with many of the major baggage handling systems and control
systems contractors.

     The Company's systems are offered in a variety of configurations
depending on the application or installation requirements.

     Integrated Models.  The Company's first integrated products were
the VIS Level 1 inspection system and the VDS Level 2 inspection
system.  The VIS Level 1 system is used to inspect 100% of the
baggage on a baggage conveyor line.  The system is capable of
automatically inspecting up to 1,500 bags per hour without an
operator.  The VDS Level 2 system is designed to provide an operator
with a high quality image in addition to automatically highlighting
suspicious objects as an aid to the operator to inspect bags rejected
by the automated Level 1 system.  The system also allows the operator
to view the contents of a bag using various imaging modes and
magnifications to determine whether the bag should be cleared or sent
to Level 3 for additional investigation.

     The VIS-W was the Company's first single system alternative to
discrete Level 1 and Level 2 systems.  The VIS-W combines a VIS Level
1 X-ray system ("VIS mainframe") with a single remote Level 2
operator workstation.  The VIS mainframe transmits images of rejected
bags to the Level 2 operator workstation.  Level 2 inspection is then
performed by an operator at a workstation in the same manner as an
operator of a discrete Level 2 VDS system, thereby eliminating the
need for a separate Level 2 explosives detection system to re-scan
all bags rejected at Level 1.

     The VIS-M, introduced in April 1996, further extends the
capability of the workstation concept by allowing several VIS
mainframes to be interconnected ("Matrixed") with multiple Level 2
operator workstations.  During off-peak periods, workstations can be
switched off, thereby significantly reducing staffing requirements
and operating costs.  The efficiency gained by the additional
workstations combined with enhanced baggage control software allows
an operator to review images of the contents of a bag while the bag
continues en route to the aircraft.  This eliminates the need and
associated costs of a secondary conveyor system to hold the bags
while Level 2 inspection is taking place.  These costs can be a
significant portion of the total cost of purchase and installation of
a multi-level integrated explosives detection approach.  The baggage
handling systems in the new airports in Malaysia and Hong Kong have
been designed to capitalize on the VIS-M's Matrixing capability by
interconnecting several of the Company's VIS-M systems with multiple
workstations to achieve 100% checked baggage screening.

     Freestanding Models.  The Company's freestanding checked baggage
explosives detection systems are intended to be installed in an
airport terminal, such as in front of airline check-in counters or in
a baggage handling hall.  The H-1 inspects bags in the upright
position, as they tend to be carried by a passenger.  The VDS series
of systems, which can be used as freestanding systems, inspect
baggage lying flat as they are transported on a conveyor belt.

     In 1996, the Company introduced a modified version of the
operator-attended VDS system to serve as a Level 3 inspection system.
Since less than 1% of the bags reach Level 3, additional time is
available for bag inspection.  This version, the VDS-II, combines the
Company's SDE capability with a high-resolution image to enhance
detection capability.  The system is a low cost alternative to CT
scanners for Level 3 inspection.  It is also faster and less labor
intensive than trace detection systems.  This system can be
integrated into a baggage handling system or used as a freestanding
system in a baggage handling hall or terminal.

     In 1996, the Company also introduced a modified version of the
VDS-II to serve as an inspection system for the inspection of baggage
that exceeds the maximum dimensions that can be accommodated by
standard baggage handling conveyor lines.  The system can be
integrated into a baggage handling system or used as a freestanding
system in a baggage hall or terminal.

     Carry-on Model.  The Company offers its Model APS system to
inspect carry-on baggage, hand baggage and parcels for explosives or
contraband material.  The system is being evaluated by various
governmental agencies.  The Model APS is similar in configuration to
conventional X-ray systems used to screen for concealed weapons
currently installed in airports and government and private
facilities.  While an operator is required to inspect each bag for
weapons, the Model APS automatically alerts the operator to the
presence of suspect explosive materials.  The Model APS incorporates
an advanced proprietary operator interface that allows the operator
to view the contents of a bag using various imaging modes and
magnifications to determine whether the bag should be cleared or
rejected for further inspection.

     The Company developed the APS system with Gilardoni, S.p.A.
("Gilardoni"), a manufacturer of conventional X-ray weapons screening
systems and X-ray based equipment for the medical field.  The system
combines many of the advanced detection algorithms developed by the
Company for its automated checked baggage explosives detection
systems with an X-ray main frame using conventional dual energy X-ray
technology.  The arrangement with Gilardoni greatly reduced the time-
to-market of the Company's APS carry-on baggage inspection system.
In July 1997, the first sale of an APS system was completed to the
Public Intelligence Department in Riyadh, Saudi Arabia.  In November
1997, the Company received an order for seven Model APS systems for
the new Terminal One at JFK International Airport in New York.  This
will be the first terminal in the world to screen all carry-on
baggage for explosives.

Other Products and Applications

     The Company believes that installations of advanced automated
explosives detection systems at airports will accelerate the adoption
of this technology for other security applications, including the
protection of government and private facilities, and the screening of
mail.  The Company is also exploring opportunities with various
governmental authorities and agencies in the United States and
internationally to use its equipment for the detection of illicit
drugs and the illegal export of currency.  Further, the Company
believes that its technology can expand the traditional role of X-ray
technology in process control applications by providing enhanced or
new value-added functions such as material analysis, segregation and
sorting of materials, and quality control.  See "Risk Factors -
Developing Market; Uncertainty of Market Acceptance" and "-
Uncertainty of Product Development."

Products Under Development

     The Company's product development efforts are focused on
developing new products for the explosives and contraband detection
system market and further enhancing the functionality, reliability
and performance of its existing product line.  The Company is
developing an explosives detection system, based upon the Company's
current technology, to meet FAA certification requirements.  This
development effort is being funded in part by a two year $3.4 million
research grant from the FAA awarded in May 1997.  This grant is
subject to termination by the government at any time.  There can be
no assurance that the Company will be able to develop a system that
will meet FAA certification requirements on a timely basis, if at
all, or that if developed, the system will be commercially
successful.  See "Risk Factors - Dependence on Government Regulation"
and " - Uncertainty of Product Development."

Marketing and Sales

     The company sells and markets its products through its direct
sales force as well as independent sales representatives and
distributors in certain foreign countries, including Spain, France,
Hong Kong, Japan and Malaysia.  As of September 30, 1997, the Company
had an 11 person marketing and sales staff.  Two members of this
staff are located in the United Kingdom, one in Switzerland and one
in Kuala Lumpur.  The Company also has a director of business
development for the United States based in New Jersey with a primary
focus on the non-aviation applications for the Company's systems.
The remainder of the marketing and sales staff is headquartered at
the Company's offices in Woburn, Massachusetts.

     In the United States, the Company is working actively with the
FAA, other government agencies, airlines, airport operators and
congressional committees to promote the efficacy and cost-
effectiveness of its products for deployment in United States
airports.  The Company is also working with United States and foreign
governmental agencies to promote its products for non-aviation
applications.  In addition, the Company markets its products through
participation in trade shows, publication of articles and advertising
in trade journals, participation in industry forums and standard
setting organizations, and distribution of sales literature.  The
Company benefits from customer referrals and the use of certain
customer installations as demonstration sites for its systems.  In
fiscal 1995, 1996 and 1997, international sales accounted for
approximately 91%, 95% and 97%, respectively, of the Company's
revenues.  All of these foreign sales were to the United Kingdom,
other European countries and the Asia-Pacific region.  See "Risk
Factors - Reliance on International Sales" and "Note 6 in Notes to
Consolidated Financial Statements."

     The selling process for the Company's products often involves a
team comprised of individuals from sales and marketing, engineering,
operations and senior management.  This team frequently engages in a
multi-level sales effort directed toward a variety of constituents
which may include government regulators, the local airport operator
or authority, systems integrators and airlines.  The Company's sales
effort with certain of its customers has extended over several years.
Potential customers frequently require the Company's products to be
tested against various performance standards and competitive
products.  The Company maintains demonstration units for this purpose
and intends to increase its investment in demonstration units in
order to accelerate the introduction of its products to new
customers.  Delays in anticipated purchase orders by the Company's
customers and potential customers could have a material adverse
effect on the Company's business.  See "Risk Factors - Lengthy Sales
Cycle."

     The Company has entered into an arrangement with Gilardoni for
the manufacture and sale of the Model APS carry-on baggage explosives
detection system.  Under this arrangement, the Company has the
exclusive right to manufacture and sell this system in the United
States, the United Kingdom, certain other European countries and
Mexico.  In addition, the Company has agreed not to sell any
competitive X-ray-based system within its territory unless
manufactured by Gilardoni or the Company.  The Company intends to
pursue strategic alliances, acquisitions and licenses of
complementary technologies to further enhance its growth.  See "Risk
Factors - Management of Growth."

     In fiscal 1995, 1996 and 1997, sales to BAA accounted for
approximately 76%, 79% and 39%, respectively, of the Company's
revenues.  Additionally, in fiscal 1997 Airport Authority Hong Kong
and Toyo Kanetsu K.K., the baggage-handling contractor for Malaysia's
Kuala Lumpur International Airport, accounted for 19% and 27%,
respectively, of the Company's revenues.  See "Risk Factors -
Customer Concentration."

Customer Service and Support

     The Company provides a high level of customer support to assist
in the installation and integration of the Company's products into
its customers' facilities and to assist in maintaining the
reliability of the Company's products once installed.  The Company
offers a number of customer support services, including applications
support, training, system preventative and corrective maintenance,
and upgrades.  The Company generally provides one year parts warranty
and offers primary and back-up service contracts to its customers.
The Company's customer support staff currently includes five support
engineers at its headquarters in Massachusetts, five support
engineers operating out of the Company's offices in the United
Kingdom and two support engineers in the Asia-Pacific region.

Regulation

     The explosives detection systems manufactured and marketed by
the Company for use in airports are subject to regulation by the FAA,
corresponding foreign governmental authorities and ICAO, the United
Nations organization for establishing standard practices for the
aviation industry on a worldwide basis.  Sales of the Company's
explosives detection systems for use in airports have been and will
continue to be dependent upon governmental initiatives to require or
support the screening of baggage with advanced explosives detection
systems.  Substantially all of such systems have been installed at
airports in countries in which the applicable governmental or
regulatory authority overseeing the operations of the airport has
mandated such screening.  Such mandates are influenced by many
factors outside of the control of the Company, including political
and budgetary concerns of governments, airlines and airports.  See
"Risk Factors - Dependence on Government Regulation."

     The FAA currently requires all carry-on baggage and
international checked baggage to be inspected by hand search or with
conventional X-ray equipment.  United States airlines operating at
airports outside of the United States are required to meet FAA
security requirements in addition to the requirements of the local
authorities.  The FAA permits the use of the Company's systems by
United States airlines at foreign airports as an alternative to
conventional X-ray equipment.

     Under the Aviation Security Act, the FAA was required to develop
a standard for explosives detection systems and to certify equipment
that met this standard under realistic airport operating conditions.
The Aviation Security Act also required the deployment of certified
equipment within the United States by 1993.  To date, no system has
demonstrated that it meets the FAA standard under realistic airport
operating conditions.  As a result, the FAA has not required the
installation of automated explosives detection systems, and only a
limited number of these systems have been deployed, primarily on a
test basis, in the United States.  The FAA first certified a CT-based
system in December 1994.  However, as recommended by the Gore
Commission's final report and as required by the Re-Authorization
Act, this system must undergo further testing to resolve whether it
can operate under realistic airport operating conditions, including
processing baggage at required throughput rates.  The Company's
systems do not meet FAA certification standards and there can be no
assurance that any of the Company's systems will ever meet this or
any other United States certification standard.  Although ECAC has
adopted a standard similar to the FAA standard as a long-term goal,
they have allowed and promoted the deployment of effective systems
even though overall they do not meet the standards.

     In response to the crash of TWA Flight 800, President Clinton
formed the Gore Commission to review airline and airport security and
oversee aviation safety.  The Gore Commission released its initial
and final reports in September 1996 and February 1997, respectively,
and in October 1996, the United States enacted the Re-Authorization
Act which included an allocation for the purchase of explosives
detection systems and other advanced security equipment by air
carriers and airport authorities.  The FAA has ordered initial
quantities of the CT-based system, trace detection systems and dual
energy X-ray based systems, including eight systems from the Company.
The deployment of these systems will allow the U.S. airlines, which
are the main users of the equipment, to gain experience with the
various technologies enabling them to determine which systems work
best in busy U.S. airport environments.

     The UK DOT has mandated 100% screening of international checked
baggage in the United Kingdom.  Similarly, the other ECAC member
states have resolved to implement 100% screening of international
checked baggage.  The Company's Level 1, Level 2 and Level 3 systems,
as well as the Company's SDE technology, have been allowed for use by
the UK DOT.  In most other ECAC member states, the Company's systems
either must be tested and approved or procured by governmental
authorities overseeing the operation of airports within the country.
In addition to the United Kingdom, the Company's systems have been
purchased or approved for use in airports in many European countries
including Belgium, France, The Netherlands, Spain and Switzerland.

     Governmental authorities overseeing the construction of new
airports in the Asia-Pacific region are defining requirements for the
use of advanced explosives detection systems to achieve 100%
screening of international checked baggage at those airports.  As a
result, the Company's systems are also being evaluated by the
applicable regulatory authorities in countries in the Asia-Pacific
region for purchases at new airports and have been installed for use
at the new airports being constructed in Malaysia and Hong Kong.
There can be no assurance that the Company's systems will be
purchased for installation in any of the other new airports or
terminals under construction or proposed for construction in that
region.

     ICAO has adopted various recommendations and requirements for
screening of checked and carry-on baggage.  Currently, ICAO requires
the screening of all international carry-on bags and recommends the
screening of international checked baggage.  This requirement and
recommendation relates only to the screening of baggage and does not
require any specific technology to be used.  There can be no
assurance that additional countries will mandate the implementation
of effective explosives screening or airline baggage, or that, if
mandated, the Company's systems will meet the certification or other
requirements of the applicable governmental authority.  Even if the
Company's systems meet the applicable requirements, there can be no
assurance that the Company would be able to market its systems
effectively.

Research and Development

     The Company's research and development efforts are focused on
developing new products for the explosives and contraband detection
system market and further enhancing the functionality, reliability
and performance of its existing product line.  The Company's research
and development personnel also are involved in establishing
protocols, monitoring and interpreting and submitting test data to
the FAA and other domestic and foreign regulatory agencies to obtain
the requisite certifications, clearances and approvals for its
products.  At September 30, 1997, the Company had 34 employees
engaged in research and development and engineering, including 13
employees engaged in software development.  During fiscal 1995, 1996
and 1997, the Company's research and development expenses were
approximately $3.7 million, $3.5 million and $4.4 million,
respectively.  In addition, during each of these years certain of the
Company's research and development expenses related to work performed
under the Company's FAA research and development grants were included
under costs of goods sold.

Intellectual Property

     The Company relies upon trade secrets and patents to protect its
technology.  Due to the rapid technological change that characterizes
the explosives detection system industry, the Company believes that
the improvement of existing technology, reliance upon trade secrets
and unpatented proprietary know-how and the development of new
products are generally as important as patent protection in
establishing and maintaining a competitive advantage.  Nevertheless,
the Company has obtained patents and will continue to make efforts to
obtain patents, when available, in connection with its product
development program.  The Company has obtained three patents and has
pending three patent applications in the United States (two of which
have been allowed but have not yet been issued).  In addition, for
certain foreign countries the Company has pending patent applications
that correspond to the subject matter of certain United States
patents and patent applications.  Two of the Company's United States
patents relate to applications of its dual X-ray technology and the
Company's software algorithms used to implement the Company's
screening analysis techniques.  The Company's third patent relates to
the Company's SDE technology.  These patents have expiration dates
ranging from 2011 to 2015.  There can be no assurance that any of the
Company's unallowed patent applications will be granted, that any
patent or patent application will provide significant protection for
the Company's products or technology, be of commercial benefit to the
Company, or that its validity will not be challenged.  Moreover,
there can be no assurance that foreign intellectual property laws
will protect the Company's intellectual property rights.  In the
absence of significant patent protection, the Company may be
vulnerable to competitors who attempt to copy or use the Company's
products, processes or technology.  See "Risk Factors - Limited
Protection of Intellectual Property Rights; Patent Litigation."

     The Company has an exclusive perpetual license to use certain
patents and technology developed by Hologic, Inc. ("Hologic") for the
development, manufacture and sale of X-ray screening security systems
for explosives, drugs, currency and other contraband (subject to
termination by either party for certain defined defaults).  The
Company also has a nonexclusive license to use this technology for
the development, manufacture and sale of X-ray-based products for
process control applications in the food and beverage industries.
Hologic and the Company have also granted to the other a non-
exclusive, royalty-free license to use any unpatented technology
developed by the other in connection with such party's research and
development activities.  In addition, Hologic and the Company have
the right to obtain from the other an exclusive license, on
commercially reasonable terms to be negotiated, for any patented new
developments.  See "Risk Factors - Limited Protection of Intellectual
Property Rights; Patent Litigation."

     The Company also licenses certain other technologies used in its
products, often on an exclusive or semi-exclusive basis, for a
defined field of use.  These licenses involve eight United States
patents and certain foreign patents relating to X-ray and
complimentary technology.  The United States patents have expiration
dates ranging from 2002 to 2007.  The Company's arrangement with
Gilardoni relating to the Company's Model APS automated explosives
detection system for screening of carry-on baggage contains cross
licenses of intellectual property rights associated with each party's
technology incorporated into the system.  This license expires in
1999, subject to certain early termination and extension options.

     The Company was involved in patent litigation with EG&G
Astrophysics Research Corporation ("EG&G"), in which each party
claimed that the other was infringing certain patents held by the
other.  On November 6, 1996, the Company and EG&G signed a settlement
agreement pursuant to which, among other things, each party agreed
not to sue the other for patent infringement for nonmedical uses of X-
ray technology covered by each other's existing patents or by patent
applications which claim priority from such patents or, for products
existing as of September 12, 1996, covered by patents that may be
issued pursuant to existing patent applications.  As a result, each
party will have broad rights to use the other's existing X-ray
technology for an unlimited period of time.  There can be no
assurance that EG&G will not use the Company's technology in a manner
that would materially and adversely affect the Company's business and
financial condition.

     The Company is also involved in certain patent litigation with
American Science and Engineering, Inc. ("AS&E"), whereby the Company
was seeking a declaratory judgement that it is not infringing any
AS&E patent.  In connection with this litigation, AS&E filed a
counterclaim alleging that the Company is infringing one or more of
eight AS&E patents. In October 1996, the court dismissed AS&E's
infringement counterclaims, but allowed AS&E to raise more specific
infringement counterclaims upon asserting factual support for such
claims.  In December 1996, AS&E filed a motion for leave to file an
amended counterclaim asserting that the Company was violating one
AS&E patent.  The court subsequently dismissed AS&E's motion, but
again allowed AS&E to raise more specific infringement counterclaims
upon AS&E's asserting factual support for such claims.  In February
1997, AS&E filed a further memorandum in support of its motion for
leave to file an amended counterclaim.  In April 1997, the Court
denied AS&E's motion and dismissed its counterclaim without granting
leave to file an amended counterclaim.  See "Risk Factors - Limited
Protection of Intellectual Property Rights; Patent Litigation" and
"Item 3. Legal Proceedings."

Competition

     The markets for the Company's products are highly competitive.
Certain of the Company's competitors have substantially greater
manufacturing, marketing and financial resources than the Company.
Other major corporations have announced their intention to enter the
security screening market.  Competitors may develop superior products
or products of similar quality for sale at the same or lower prices.
Moreover, there can be no assurance that the Company's products will
not be rendered obsolete by new industry standards or changing
technology.  There can be no assurance that the Company will be able
to compete successfully with existing or new competitors.  See "Risk
Factors - Rapid Technological Change."

     While certain of the Company's competitors currently market
automated checked baggage explosives detection products that use dual
energy X-ray technology, the Company believes that it is able to
compete favorably with these products based upon the overall cost
effectiveness of the Company's systems as measured by a combination
of factors including effective automated explosives detection,
throughput, low cost of operation, installation and integration,
price, reliability, and their proven operation in a variety of
airports.

     The Company's systems also compete with systems employing other
technologies including CT scanner technology and trace detection
technology.  A product based upon CT scanner technology currently
detects a wider range of explosives than does the Company's systems.
In 1994, the FAA first certified this CT-based system.  However, as
recommended by the Gore Commission's final report and as required by
the Re-Authorization Act, this system must undergo further testing to
resolve whether it can operate under realistic airport operating
conditions.  This system operates at a significantly lower throughput
rate and significantly higher expense than the Company's systems.  As
a result, there have only been limited permanent installations of CT
systems in airports, typically as either Level 2 or Level 3 systems.
A new CT-based system currently is in development by another company
that is purported to have a higher throughput than the FAA certified
CT system.  Products based upon trace detection technology have
throughput rates lower than those based on dual energy X-ray or CT
technology and generally have been installed as Level 3 systems.

     The Company's new Model APS system, which is intended to detect
explosives in carry-on bags and personal effects at airports and
other installations, has recently been evaluated by various
government agencies.  These systems will compete against conventional
X-ray systems, which are lower in price, as well as advanced
explosives detection systems being adapted by its competitors for
this use.  The Model APS system will compete on the basis of price,
detection capabilities, ease of use, expense of operation and
reliability.

Manufacturing

     The Company's manufacturing operations consist primarily of
assembly, test, burn-in and quality control.  The Company has adopted
stringent quality assurance procedures that include standard design
practices, component selection procedures, vendor control procedures,
and comprehensive reliability testing and analysis.  As a result of
these efforts, the Company has received ISO 9001 certification.  The
Company's manufacturing facility is currently producing approximately
eight of the Company's checked baggage systems per month and has the
capability to accommodate production of over 20 checked baggage
systems per month.  Should market conditions warrant, the Company may
choose to establish overseas manufacturing operations.

     The Company purchases a major portion of the parts and
peripheral components for its products, and manufactures certain
subsystems, such as the high voltage power supply, from raw
materials.  Most parts and materials are readily available from
several supply sources.  During fiscal 1997, the Company entered into
a joint marketing and royalty agreement with Gilardoni for the APS
system.  Currently, the Company is purchasing the mainframe and other
components of the Model APS from Gilardoni.  However, the Company
intends to begin full manufacturing of the Model APS at its U.S.
facility beginning in March 1998.

Backlog

     Backlog for the Company's products as of September 30, 1996 and
1997 totaled approximately $7.5 million and $15 million,
respectively.  Backlog consists of purchase orders for which a
customer has scheduled delivery within the next twelve months.  In
certain circumstances, orders included in backlog may be canceled or
rescheduled by customers without significant penalty.  Backlog as of
any particular date should not be relied upon as indicative of the
Company's revenues for any future period.

Employees

     As of September 30, 1997, the Company had 109 full-time
employees, including 30 in manufacturing operations and quality
assurance, 34 in research, development and engineering, 26 in
marketing, sales and customer support, 15 in finance and
administration and four in data management.  None of the Company's
employees is represented by a union.  The Company considers its
employee relations to be good.

Executive Officers of the Registrant

   The  executive  officers of the Company  and  their  ages  are  as
follows:

Name                    Age               Position
S. David Ellenbogen      59  Chairman of the Board and Chief
                             Executive Officer
                              
Dr. Jay A. Stein         55  Senior Vice President, Technical
                             Director and Director
                              
Stephen A. Reber         45  President and Chief Operating
                             Officer
                              
William J. Frain         31  Chief Financial Officer and
                             Treasurer
                              
James J. Aldo            46  Vice President of Marketing and
                             Sales
                              
Daniel J. Silva          45  Vice President of Operations
                              

  S. David Ellenbogen, a co-founder of the Company, has served as its
Chief Executive Officer and a director since its organization in June
1989  and served as its President from June 1989 until February 1997.
Mr.  Ellenbogen  was  also  a co-founder  of  Hologic,  a  developer,
manufacturer and seller of X-ray and other bone densitometers, served
as  its  President from October 1985 until May 1994, and is currently
its  Chairman  of  the Board and Chief Executive Officer.   Prior  to
founding Hologic, Mr. Ellenbogen served as President, Treasurer and a
director  of Diagnostic Technology, Inc. ("DTI"), which he co-founded
in   1981.   DTI,  which  developed  an  X-ray  product  for  digital
angiography,   was   acquired   in  1982   by   Advanced   Technology
Laboratories,  Inc.  ("ATL"),  a wholly-owned  subsidiary  of  Squibb
Corporation.  Mr.  Ellenbogen was involved in the management  of  the
digital  angiography group of ATL from 1982 to 1985.  Mr.  Ellenbogen
is employed by Hologic and performs part-time management services for
the  Company  pursuant to a management agreement between the  Company
and  Hologic.   See  "Item  13.  Certain  Relationships  and  Related
Transactions."

   Dr.  Jay  A.  Stein, a co-founder of the Company and Hologic,  has
served  as  Senior Vice President, Technical Director and a  director
for  both  companies since their organization.  Dr. Stein  co-founded
DTI  with  Mr.  Ellenbogen  in 1981, served  as  Vice  President  and
Technical  Director of DTI and was Technical Director of the  digital
angiography  group  of its successor, ATL, from 1982  to  1985.   Dr.
Stein received a Ph.D. in Physics from The Massachusetts Institute of
Technology. He is the principal author of fifteen patents  pertaining
to  X-ray  technology.  Dr. Stein is employed by Hologic and performs
part-time  management  services  for  the  Company  pursuant   to   a
management agreement between the Company and Hologic. See  "Item  13.
Certain Relationships and Related Transactions."

   Stephen  A. Reber has served as the Company's President and  Chief
Operating Officer since February 1997. Prior to joining the  Company,
Mr.  Reber  served as President of the MacBeth division of Kollmorgen
Corporation,  a  color instrumentation and process control  producer,
from February 1994 to February 1997. Prior to joining Kollmorgen, Mr.
Reber  served  in various capacities at Perkin-Elmer Corporation,  an
analytical instrument producer, including as General Manager, Process
Instrumentation from 1991 to 1993 and as General Manager, Aftermarket
Products  Instrument Group from 1988 to 1991. Mr. Reber  received  BS
and  MS  degrees  in  chemical  engineering  from  The  Massachusetts
Institute of Technology and an MBA from Harvard Business School.

   William  J.  Frain, a Certified Public Accountant, has  served  as
Chief  Financial Officer and Treasurer since October 1996.  Prior  to
that,  Mr. Frain served as Controller from August 1993 until  October
1996. Prior to joining the Company, Mr. Frain served as an auditor at
Arthur Andersen LLP from September 1988 to August 1993.

   James J. Aldo has served as Vice President of Marketing and  Sales
since  July 1993. Prior to that, Mr. Aldo served as Director of Sales
and  Marketing  since  joining the Company in  July  1989.  Prior  to
joining  the  Company, Mr. Aldo held positions in  marketing,  sales,
engineering  and  field  service management at  AS&E  and  served  as
Eastern  Regional Manager at Tegal, Inc., a subsidiary  of  Motorola,
Inc.,  a  manufacturer  of capital equipment  for  the  semiconductor
industry.

   Daniel  J. Silva has served as Vice President of Operations  since
April 1994. Prior to that, Mr. Silva served as the Company's Director
of Operations from June 1992 to April 1994. Mr. Silva was hired as an
Operations  Manager in June 1991. Prior to joining the  Company,  Mr.
Silva held positions in manufacturing, project management and program
management at AS&E.

Significant Employees

   Certain  key  employees of the Company who are not also  executive
officers or directors are as follows:

     Name          Age         Position
                                   
Kristoph D. Krug    44    Chief Technical Officer
                          
Jeremy M. Attree    38    Director of Operations, Europe

   Kristoph  D.  Krug joined the Company in July 1989  as  a  Project
Engineer,  was  promoted  to  Director of  Research  and  Development
Engineering  in  1992 and became Chief Technical Officer  in  January
1997.  Mr. Krug is the author of two of the Company's patents for  X-
ray screening. Prior to joining the Company, Mr. Krug was Engineering
Manager   at  Teradyne,  Inc.,  a  manufacturer  of  automated   test
equipment.

  Jeremy M. Attree has served as Director of Operations, Europe since
joining  the Company in October 1993. From September 1991 to  October
1993, Mr. Attree served as Marketing Manager for EA Technology Ltd, a
primary  research and development center for the electricity industry
in  the  United Kingdom. Prior to joining EA Technology,  Mr.  Attree
served as Marketing Director and Development Manager for Schlumberger
Industries, Security Division, where he was engaged primarily in  the
development of new products in the airport security field.


Item 2.  Properties

     The Company leases its administrative headquarters and
manufacturing facility located in Woburn, Massachusetts.  The
facility consists of approximately 43,000 square feet, including
21,000 square feet dedicated to the Company's manufacturing
operations.  The Company also leases 3,600 square feet of office and
manufacturing space in San Diego, California for a research and
development facility.  The Company also has two offices in the United
Kingdom, leasing approximately 1,000 square feet of space for sales
and service.  In addition, the Company has sales offices located in
Moudon, Switzerland and New Jersey, USA and a sales and customer
support office in Kuala Lumpur, Malaysia.  The Company believes that
its facilities will be adequate for its needs for the foreseeable
future and that suitable additional space will be available at
commercially reasonable prices as needed.  Should market conditions
warrant, the Company may expand its presence in Europe and the Asia-
Pacific region by establishing a manufacturing operation or expanding
its sales and support offices in one or more of those regions.


Item 3.  Legal Proceedings

     In May 1996, the Company commenced an action in the United
States District Court for the District of Massachusetts against AS&E
seeking a declaration that the Company does not infringe AS&E patents
related to back scattered X-rays.  This followed AS&E's allegations
of infringement to third parties.  No discovery has been taken to
date.  Following a court decision in July 1997 construing the claims
of the AS&E patent, which decision the Company considers favorable,
in September 1997 the Company filed a motion for summary judgment of
non-infringement.  AS&E has not yet filed its papers in opposition to
the Company's motion but is seeking discovery.  If granted, the
Company's motion will resolve all issues remaining in the case in
favor of the Company.  Earlier, in April 1997, the Court dismissed
AS&E's proposed counterclaim seeking to allege patent infringement,
so that the only remaining issue in the case is the Company's request
for declaration of non-infringement of two claims of a single AS&E
patent.


Item 4.  Submission of Matters to a Vote of Security Holders

None.


                               Part II

Item 5.  Market for Registrant's Common Equity and Related
Stockholder Matters

Market Information - The Company's Common Stock is quoted on the
Nasdaq National Market under the symbol "VVID."  The following table
sets forth the quarterly high and low sales prices per share of
Common Stock since the Company's initial public offering on December
11, 1996, as reported by the Nasdaq National Market.

Fiscal Year Ended September 30, 1997    High      Low
First Quarter                           12 3/4    10
Second Quarter                          24 1/2    11 7/8
Third Quarter                           19 3/4    13 1/4
Fourth Quarter                          18 3/8    14 1/4

Number of Holders - As of December 17, 1997, there were approximately
176 holders of record of the Company's Common Stock, including
multiple beneficial holders at depositaries, banks and brokers listed
as a single holder in the street name of each respective depositary,
bank or broker.

Dividend Policy - The Company has never declared or paid cash
dividends on its capital stock and does not plan to pay any cash
dividends in the foreseeable future.  The Company's current policy is
to retain all of its earnings to finance future growth.  The
Company's bank line of credit prohibits the payment of cash dividends
without prior bank approval.

Recent Sales of Unregistered Securities - The following information
is furnished with regard to all securities issued by the Registrant
within fiscal 1997 which were not registered under the Securities
Act.

From October 1, 1996 through April 3, 1997, options to purchase a
total of 130,850 shares of Common Stock granted under the
Registrant's 1989 Combination Stock Option Plan were exercised at
exercise prices ranging from $0.10 to $1.00 per share, at an
aggregate purchase price of $45,825.

The securities issued in such transactions were not registered under
the Securities Act, as amended, in reliance upon the exemptions from
registration set forth in Section 3(b) and 4(2) of the Securities
Act, relating to sales by an issuer not involving any public
offering.  None of the foregoing transactions, either individually or
in the aggregate, involved a public offering.

Use of Proceeds of Initial Public Offering - On December 10, 1996,
the Securities and Exchange Commission declared effective the
Company's Registration Statement on Form S-1, Commission file number
333-14311, relating to the initial public offering of the Company's
Common Stock, $.01 par value.  The offering commenced on December 11,
1996 and all shares covered by the Registration Statement were sold.
The managing underwriters for the offering were Lehman Brothers Inc.,
Cowen & Company and Needham & Company.  The following sets forth
certain information regarding the offering and the Companys'
application of the net proceeds therefrom through September 30, 1997:

                INFORMATION RELATING TO THE OFFERING

          Number of shares registered         2,300,000
          Number of shares sold by 
            the Company                       2,300,000

          Aggregate price of the offering 
          amount registered and sold        $27,600,000
          Offering Expenses:
               Underwriting discounts and 
                 commissions                 $1,932,000
               Finders' fees                         --
               Expenses paid to or for 
                 underwriters                        --
               Other expenses                   $45,000
                    Total expenses           $2,777,000     (1)
          Net offering proceeds             $24,823,000
          -------------------------
            (1)    No such expenses were paid directly
            or indirectly to directors, officers,
            general partners of the Company or their
            associates; to persons owning ten percent
            or more of any class of equity securities
            of the Company, or to affiliates of the
            Company.

                           USE OF PROCEEDS

                Category                         Amount
          Construction of plant, building 
            and facilities                      $22,600
          Purchase and installation of 
          machinery and equipment              $450,000
          Purchase of real estate                    --
          Acquisition of other businesses            --
          Repayment of indebtedness                  --
          Redemption of redeemable preferred 
            stock (1)                        $5,780,650
          Working capital                   $10,919,089
          Temporary investments, net         $6,432,405
               Notes, drafts, bills of 
               exchange or bankers' 
               acceptances which mature 
               not later than one year from 
               the date of issuance
          Long-term investments              $1,218,856
               Investment-grade commercial 
               paper, with an average
               maturity period of 15 months
                    Total investments        $7,651,261
                    Total                   $24,823,000
          -----------------------
            (1)Of this amount, approximately $900,000 was paid to Beta
            Partners Limited Partnership.  Frank Kenny, a director of the
            Company, is a general partner of this partnership.  No other
            proceeds of the offering were paid directly or indirectly to
            directors, officers, general partners of the Company or their
            associates; to persons owning ten percent or more of any class
            of equity securities of the Company; or to affiliates of the
            Company.


Item 6.  Selected Financial Data

The following table contains certain selected consolidated financial
data of the Company and is qualified in its entirety by the more
detailed Consolidated Financial Statements included herein.  This
data should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements appearing
elsewhere herein.
                                        Year ended September 30,
                               1993      1994      1995       1996      1997
                               (Dollars in thousands, except per share data)

Consolidated Statement of Operations Data:
Revenues                    $ 2,854   $13,801   $14,437    $15,578   $31,702
Cost of revenues              1,921     6,762     6,129      6,899    13,203
  Gross margin                  933     7,039     8,308      8,679    18,499

Operating expenses:
  Research and development    1,139     2,296     3,653      3,462     4,390
  Selling and marketing         317       716     1,077      1,395     3,556
  General and administrative    221       916     1,120      1,515     2,929
  Litigation expenses            --       199       309      1,150       427
     Total operating expenses 1,677     4,127     6,159      7,522    11,302

Income (loss) from operations  (744)    2,912     2,149      1,157     7,197
Interest and other income 
  (expense), net               (115)       (2)      (45)         8       862

Income (loss) before 
  income taxes                 (859)    2,910     2,104      1,165     8,059
Provision for income taxes       --       100        90         --     2,193

  Net income (loss)          $ (859)  $ 2,810   $ 2,014    $ 1,165   $ 5,866

Net income (loss) per 
  common and common
  equivalent share          $ (0.15)   $ 0.39    $ 0.28     $ 0.15    $ 0.60

Weighted average number 
  of common and common 
  equivalent shares 
  outstanding                 5,815     7,198     7,275      7,869     9,838


(Dollars in thousands)
                                       September 30,
                               1993      1994      1995       1996      1997

Consolidated Balance Sheet Data:
Working capital              $ (338)  $ 2,054   $ 3,968   $ (1,037) $ 29,297
Total assets                  1,509     6,365     7,740     11,963    37,457
Redeemable preferred stock,
  including current portion   5,781     5,781     5,781      5,781        --
Stockholders' equity 
  (deficit)                  (5,887)   (3,065)   (1,045)       177    31,711


Item 7.  Management's Discussion and Analysis of Financial Condition
and Results of Operations

     The  following  discussion  and  analysis  should  be  read   in
conjunction  with  "Item 1. Business," "Item  6.  Selected  Financial
Data,"  the  Company's  Consolidated Financial Statements  and  Notes
thereto  and  the  information  described  under  the  caption  "Risk
Factors" below.

Overview

   The Company was founded in 1989 to develop, manufacture and market
automated explosives detection systems following the bombing  of  Pan
American   Flight  103  over  Lockerbie,  Scotland.   Following   its
organization,   the   Company  undertook   extensive   research   and
development, introducing its first free standing automated explosives
detection  system,  the  H-1,  in  1991,  and  its  first  integrated
automated  explosives  detection systems for  Level  1  and  Level  2
screening,  the  VIS  and  VDS,  in  1993.   The  Company   commenced
commercial shipments of its VIS and VDS systems in January 1994.   As
of  September  30, 1997, the Company had shipped and  installed  more
than  180 systems for use in airports throughout Europe, and  in  the
Asia/Pacific region.  In 1997 the Company introduced the Model APS, a
freestanding  system to screen carry-on baggage  for  explosives  and
weapons.   The Model APS can also be used in the non-aviation  market
to  screen baggage at public, private and government facilities.  The
first  unit  was  sold  in  June  1997  to  the  Public  Intelligence
Department in Riyadh, Saudi Arabia for the protection of  VIP's.   In
November  1997,  the Company received an order for  seven  Model  APS
systems for the new Terminal One at JFK International Airport in  New
York.   This  will be the first terminal in the world to  screen  all
carry-on baggage for explosives.

   The  Company's  sales  are primarily to owners  and  operators  of
airports,  including foreign governments and regulatory  authorities.
The  Company's revenues are derived primarily from product sales. The
Company  recognizes revenue from product sales upon shipment  to  the
customer,  provided  that no significant Company  obligations  remain
outstanding  and  collection  of the  related  receivable  is  deemed
probable by management.  The Company accrues for anticipated warranty
and  installation costs upon shipment.  The Company's  revenues  also
include government research and development grants and revenues  from
service,  the sale of spare parts and training, which have  comprised
less  than  10%  of revenues in the periods presented.   The  Company
recognizes  revenues  under its development grants  as  services  are
rendered.  In May 1997, the Company received a two-year, $3.5 million
research  and  development grant from the FAA to fund, in  part,  the
development  of  a  cost  effective, high speed  explosive  detection
system, based upon the Company's current proprietary technology, that
is  intended  to  meet FAA certification requirements.   The  Company
commenced work under this grant in the third quarter of fiscal  1997.
The  grant  is subject to termination by the government at any  time.
In  fiscal 1995, 1996, and 1997 the Company recognized $1.4  million,
$0.7  million, and $0.8 million respectively, in development  revenue
from FAA grants.

   The  Company  has an exclusive perpetual license  to  use  certain
patent   rights   and  technology  developed  by  Hologic   for   the
development, manufacture and sale of X-ray screening security systems
for  explosives,  drugs,  currency and other contraband  (subject  to
termination  by  either  party  for certain  defined  defaults).  The
Company  also  has  a nonexclusive license to use these  patents  and
technology  for the development, manufacture and sale of X-ray  based
products  which may be used for process control applications  in  the
food and beverage industries. See "Risk Factors-Limited Protection of
Intellectual  Property  Rights;  Patent  Litigation"  and  "Item  13.
Certain Relationships and Related Transactions."

   The  Company's  cost of revenues includes a royalty  payable  with
respect  to product sales and other revenues derived from the license
with  Hologic.   Under  the terms of this exclusive  agreement,  this
royalty  was  reduced  from 5% to 3% of revenues  derived  from  such
license  in  January 1997 upon the Company reaching  $50  million  in
cumulative  revenues  subject  to the exclusive  license.   Upon  the
Company reaching $200 million of cumulative revenues subject to  this
exclusive  license, the royalty will be eliminated entirely.   As  of
September 30, 1997, the Company had reached approximately $79 million
in cumulative revenues.  See "Item 1. Business-Intellectual Property"
and "Item 13.  Certain Relationships and Related Transactions."

   In  fiscal  1995,  1996  and  1997, sales  to  BAA  accounted  for
approximately   76%,   79%  and  39%,  respectively,   of   revenues.
Additionally,  in fiscal 1997 Airport Authority Hong  Kong  and  Toyo
Kanetsu  K.K.,  the baggage-handling contractor for Malaysia's  Kuala
Lumpur  International  Airport, accounted for  19%  and  27%  of  the
Company's revenues.  The Company expects that its revenues from these
customers  will decrease and will become increasingly dependent  upon
sales  of upgrades, replacement equipment and services.  The  failure
of  the  Company  to obtain orders from customers  other  than  these
customers  would  have  a material adverse effect  on  the  Company's
business   and   financial  condition.   See  "Risk  Factors-Customer
Concentration."

   Substantially all of the Company's revenues have been generated by
sales  to customers outside the United States.  The Company's foreign
sales  have occurred principally in the United Kingdom, other Western
European countries and more recently in the Asia/Pacific region.   In
fiscal 1997, the Company received orders for 26 and 23 systems at the
Kuala  Lumpur  International Airport in Malaysia  and  Chek  Lap  Kok
Airport  in  Hong Kong, respectively, the first two airports  in  the
Asia/Pacific  region  that  are  adopting  the  integrated  automated
explosives detection approach.  The Company shipped all 26 systems to
Kuala  Lumpur in fiscal 1997, and received a repeat order  for  three
systems to be used at Level 3 to be delivered in fiscal 1998.  As  of
September  30, 1997, the Company had shipped 16 of the 23 systems  to
Hong  Kong.  The Company has sales and service offices in the  United
Kingdom  and  Malaysia  to  support  its  European  and  Asia/Pacific
operations, respectively, and has expanded its presence in Europe and
the  Middle East.  The Company expects international sales to  remain
an important component of its business.

The  Company's export sales generally have been denominated in United
States dollars.  However, during fiscal 1997 approximately 25% of the
Company's  revenues  were  denominated in  foreign  currencies.   The
Company  on  occasion  has hedged its foreign  currency  exposure  by
entering  into  forward foreign exchange contracts to  hedge  against
foreign currency fluctuations.  There can be no assurance that  these
hedging  efforts  will be successful.  See "Risk Factors-Reliance  on
International Sales."

Results of Operations

   For  the  periods indicated, the following table  sets  forth  the
percentage  of revenues represented by the respective line  items  in
the Company's consolidated statement of operations:

                                         Year Ended
                                        September 30,
                                   1995    1996    1997
Revenues                            100%    100%    100% 
Cost of revenues                     42      44      42  
  Gross margin                       58      56      58 
Operating expenses:                              
  Research and development           25      22     14 
  Selling and marketing               8       9     11 
  General and administrative          8      10      9 
  Litigation expenses                 2       8      1 
        Total operating expenses     43      49     35 
                                              
Income from operations               15       7     23 
Interest and other income, net       --      --      3 
Income before income taxes           15       7     26 
Provision for income taxes            1      --      7 
  Net income                         14%      7%    19% 
                                                                     
   Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended
September 30, 1996

      Revenues.   Revenues increased by approximately 104%  to  $31.7
million  in  fiscal  1997, from $15.6 million in fiscal  1996.   This
increase  in  revenues primarily was the result  of  an  increase  in
product   sales.   The  increase  in  product  sales  was   primarily
attributable  to the total number of product shipments to  Europe  as
well as the commencement of shipments to Chek Lap Kok Airport in Hong
Kong and shipments to Kuala Lumpur International Airport in Malaysia,
partially  offset  by slightly lower average selling  prices  of  the
Company's  products.   During fiscal 1997, the  Company  shipped  and
installed 76 units compared to 30 units in fiscal 1996.

      Gross  Margin.    Gross margin increased to 58% of revenues  in
fiscal 1997 compared to 56% of revenues in fiscal 1996.  The increase
in  gross  margin  in fiscal 1997 was primarily attributable  to  the
decrease, commencing in January 1997, in royalties due to Hologic for
the  exclusive license of certain patents and technology from  5%  to
3%, as well as decreased costs attributable to improved manufacturing
efficiencies  recognized  during  the  year.   These  decreases  were
partially offset by lower average selling prices.

   During the second half of fiscal 1996, the Company's product sales
consisted primarily of sales of the newly introduced VIS-M and VDS-II
as well as SDE upgrades.  During fiscal 1997, the Company was able to
reduce  certain  component  costs  and  achieve  other  manufacturing
efficiencies   in  the  design  of  the  VIS-M  and   VDS-II,   which
substantially offset lower average selling prices. The  Company  also
had   a  significant  increase  in  sales  of  upgrades,  parts   and
maintenance in fiscal 1997.  During the third quarter of fiscal  1997
the  Company  began recognizing revenue under the  $3.5  million  FAA
research  grant.  This grant did not have a material impact on  gross
margins during fiscal 1997.

      Research  and  Development Expenses.  Research and  development
expenses  increased  by approximately 27% to  $4.4  million  (14%  of
revenues)  in  fiscal  1997 from $3.5 million (22%  of  revenues)  in
fiscal  1996.  The increase in research and development  expenses  in
fiscal  1997  was  primarily  due  to  the  addition  of  engineering
personnel and outside consultants working on the development  of  new
products   and   enhancements   to   existing   products,   including
enhancements to the Model APS system for carry-on baggage and the VIS-
M  (Matrix configuration).  Certain expenses in connection  with  the
development  of  the  Company's  next  generation  system  have  been
included  in  costs of goods sold in connection with the most  recent
FAA  research  and development grant.  As a percentage  of  revenues,
research  and  development expenses declined  in  the  current  year,
reflecting increased revenues in fiscal 1997.

      Selling and Marketing Expenses.  Selling and marketing expenses
increased  approximately 155% to $3.6 million (11%  of  revenues)  in
fiscal  1997 from $1.4 million (9% of revenues) in fiscal  1996.  The
increase  in selling and marketing expenses in fiscal 1997  primarily
was due to additional sales and support personnel, as a result of the
expansion of operations in Europe and the establishment of operations
in  the  Asia/Pacific  region, the payment of  commissions  to  sales
representatives in the Asia/Pacific region, and to a lesser extent an
increase  in advertising, consulting, trade shows and related  travel
costs.   The Company anticipates that it will continue to expand  its
selling  and  marketing  efforts in fiscal 1998  in  anticipation  of
continued growth.

     General and Administrative Expenses.  General and administrative
expenses  increased  approximately  93%  to  $2.9  million   (9%   of
revenues)  in  fiscal  1997 from $1.5 million (10%  of  revenues)  in
fiscal  1996. The increase in general and administrative expenses  in
fiscal  1997  was primarily attributable to an increase in  personnel
and   related  costs  (including  non-recurring  costs   related   to
relocation  fees)  as  well  as  additional  overhead  costs  as  the
headcount  for the Company increased approximately 42%.  The  Company
anticipates  that general and administrative costs will  continue  to
increase in anticipation of continued growth in fiscal 1998.

      Litigation  Expenses.  The Company incurred $427,000  and  $1.2
million of litigation expenses in fiscal 1997 and 1996, respectively,
primarily  in  connection with the Company's patent  litigation  with
EG&G  and to a lesser extent AS&E.  On November 6, 1996, the  Company
entered  into  an  agreement  with  EG&G  to  settle  EG&G's   patent
infringement claim against the Company.  The litigation  expenses  in
fiscal  1997  also include expenses incurred in connection  with  the
Company's  litigation with AS&E.  In May 1996, the Company  commenced
an  action  in the United States District Court for the  District  of
Massachusetts  against AS&E seeking a declaration  that  the  Company
does  not  infringe  AS&E patents related to back  scattered  X-rays.
This  followed  AS&E's allegations of infringement to third  parties.
No  discovery has been taken to date.  Following a court decision  in
July  1997  construing the claims of the AS&E patent, which  decision
the  Company considers favorable, in September 1997 the Company filed
a  motion for summary judgment of non-infringement.  AS&E has not yet
filed its papers in opposition to the Company's motion but is seeking
discovery.  If granted, the Company's motion will resolve all  issues
remaining  in  the case in favor of the Company.  Earlier,  in  April
1997,  the  Court dismissed AS&E's proposed counterclaim  seeking  to
allege  patent infringement, so that the only remaining issue in  the
case is the Company's request for declaration of non-infringement  of
two claims of a single AS&E patent.

     As  a  result of the Company's settlement with EG&G in November,
and  the  recent  court  rulings against AS&E,  the  Company  expects
litigation expenses to decline in fiscal 1998.

      Interest Income.  The Company recognized net interest income of
approximately $813,000 in fiscal 1997 compared to net interest income
of  $8,000 in fiscal 1996.  The increase in fiscal 1997 was primarily
attributable  to  higher  average cash balances  resulting  from  the
receipt of proceeds from the Company's initial public offering.

      Provision for Income Taxes.  The Company's effective  tax  rate
for fiscal 1997 was 27% compared to no provision for income taxes  in
fiscal  1996.   The Company's effective tax rate in fiscal  1997  was
lower  than the statutory tax rates primarily due to the use  of  tax
credits  and  the tax benefits associated with the Company's  foreign
sales corporation.  The provision for income taxes in fiscal 1996 was
a  result of the Company's recognition of a deferred tax asset, which
reflected   management's  determination,  in  accordance   with   the
Financial   Accounting  Standards  Board's  Statement  of   Financial
Accounting  Standards ("SFAS") No. 109, that it was more likely  than
not that this deferred tax asset would be utilized.


  Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended
September 30, 1995

  Revenues.   Revenues increased by approximately 8% to $15.6 million
in  fiscal 1996, from $14.4 million in fiscal 1995. This increase was
the result of an increase in product sales which was partially offset
by  a  decrease  in  revenue associated with the Company's  1995  FAA
development  grant.  The  increase in  product  sales  was  primarily
attributable to an increase in unit sales, which was partially offset
by lower average selling prices.

  Gross Margin.   Gross margin decreased to 56% of revenues in fiscal
1996  compared  to 58% of revenues in fiscal 1995.  The  decrease  in
gross  margin was primarily attributable to the Company's  change  in
product  mix,  lower  average  selling prices,  and  a  reduction  in
revenues  associated  with the Company's 1995 FAA  grant  which  were
partially offset by manufacturing efficiencies.

  During fiscal 1995 and the first half of fiscal 1996, the Company's
product  sales consisted primarily of sales of the VIS-W. During  the
second  half  of  fiscal 1996, product sales  shifted  to  the  newly
introduced VIS-M, VDS-II, and SDE upgrades, each of which has a lower
average selling price than the VIS-W. The Company was able to  reduce
certain  component costs and achieve other manufacturing efficiencies
in  the  design  of the VIS-M and VDS-II, which substantially  offset
these lower selling prices. In addition, the Company's work under its
FAA  grant  was  completed in the third quarter of fiscal  1996.  The
effect  of  this  grant  increased  the  Company's  gross  margin  by
approximately 2% in the first three quarters of fiscal 1996.

   Research  and  Development Expenses.    Research  and  development
expenses  decreased  by  approximately 5% to  $3.5  million  (22%  of
revenues)  in  fiscal  1996 from $3.7 million (25%  of  revenues)  in
fiscal  1995. The decrease was primarily attributable to expenditures
in  fiscal  1995 related to the Company's development  of  its  VIS-M
product,  which was substantially completed by the first  quarter  of
fiscal 1996.

   Selling  and Marketing Expenses.   Selling and marketing  expenses
increased  by  approximately 29% to $1.4 million (9% of revenues)  in
fiscal  1996 from $1.1 million (8% of revenues) in fiscal  1995.  The
increase  was primarily attributable to additional sales and  support
personnel,  and to an increase in advertising, consulting  and  trade
show costs.

   General  and Administrative Expenses.   General and administrative
expenses  increased  by approximately 35% to  $1.5  million  (10%  of
revenues) in fiscal 1996 from $1.1 million (8% of revenues) in fiscal
1995.  The  increase was primarily attributable  to  an  increase  in
personnel and additional overhead costs related to the Company's move
to a new facility in March 1996.

   Litigation Expenses.   The Company incurred $1.2 million and  $0.3
million of litigation expenses in fiscal 1996 and 1995, respectively,
primarily  in  connection with the Company's patent  litigation  with
EG&G. On November 6, 1996, the Company entered into an agreement with
EG&G  to  settle this litigation. The litigation expenses  in  fiscal
1996 also included expenses incurred in connection with the Company's
litigation  with  AS&E.  See  "Risk  Factors-Limited  Protection   of
Intellectual   Property   Rights;  Patent   Litigation,"   "Item   1.
Business-Intellectual Property" and "Item 3.  Legal Proceedings."

   Interest  Income  (Expense), Net.    The  Company  recognized  net
interest income of $8,000 in fiscal 1996 and net interest expense  of
$45,000 in fiscal 1995. The change in interest income (expense),  net
was  primarily  attributable to reduced  average  borrowings  by  the
Company under its bank working capital line of credit.

  Provision for Income Taxes.   The Company recorded no provision for
income taxes in fiscal 1996 compared to an effective tax rate  of  4%
in  fiscal  1995.  The  provision for income  taxes  in  fiscal  1996
reflected the Company's recognition of a deferred tax asset.  If  the
Company  had  not recognized this deferred tax asset,  the  Company's
effective tax rate in fiscal 1996 would have been 16%.


Liquidity and Capital Resources

   Since inception, the Company has funded its operations and capital
expenditures  through internally generated cash flow,  proceeds  from
sales of securities and the availability of a working capital line of
credit. In December 1996 and January 1997, the Company received total
net  proceeds of approximately $24.8 million from the initial  public
offering  of  its  Common Stock, of which $5.8 million  was  used  to
redeem  all of the Company's outstanding shares of Series A Preferred
Stock  and  Series  C  Preferred Stock.  See  "Item  5.   Market  for
Registrant's Common Equity and Related Stockholder Matters" and "Item
13.  Certain Relationships and Related Transactions."

   At  September 30, 1997, the Company had working capital  of  $29.3
million,  including  approximately $18.0 million  in  cash  and  cash
equivalents and short-term investments.  In addition, the Company had
$1.2  million of long-term investments, none of which have maturities
of  less  than  18 months.  The Company also has a $5.0 million  bank
line  of  credit which expires in February 1998.  The Company's  bank
line  of credit bears interest at the bank's prime rate (8.5%  as  of
September  30, 1997).  The line of credit is secured by substantially
all  of the Company's assets and contains certain financial and other
covenants.   At  September  30, 1997,  the  Company  had  no  amounts
outstanding under this line of credit.

   During the fiscal year ended September 30, 1997, the Company's net
cash  used  in  operating activities was approximately $1.9  million.
During  that  period,  net income and depreciation  and  amortization
expenses  totaling  $6.3  million, were  offset  by  a  $5.8  million
increase   in  accounts  receivable,  a  $1.5  million  increase   in
inventories,  a  $1.0  million decrease  in  accrued  expenses.   The
increase  in  inventories  and  accounts  receivable  were  primarily
attributable  to  the  Company's  increased  product  sales.   As  of
November  30,  1997, the Company received payments  of  approximately
$6.4  million against the outstanding receivable balance at September
30, 1997.

  During the fiscal year ended September 30, 1997, the Company's  net
cash  used  in  investing activities was approximately $8.1  million,
primarily  reflecting the net purchase of approximately $7.7  million
of  short-term  investments.  Cash used in investing activities  also
included  capital  expenditures  for  fiscal  1997  of  approximately
$540,000.    While   the  Company  does  not  have  any   significant
commitments for capital expenditures, the Company anticipates that it
will  continue  to  purchase  equipment to  support  its  anticipated
growth.

  During the fiscal year ended September 30, 1997, net cash provided
by financing activities was $19.9 million, primarily attributable to
the receipt of net proceeds of approximately $24.8 million from the
initial public offering of the Company's common stock and
approximately $800,000 of proceeds from the exercise of stock
options.  The Company used approximately $5.8 million of the net
proceeds of the offering to redeem all of its outstanding shares of
mandatorily redeemable non-convertible preferred stock.

   The  Company  does  not  currently have  any  significant  capital
commitments   and  believes  that  existing  sources  of   liquidity,
including  the  net  proceeds of its initial public  offering,  funds
expected to be generated from operations and its line of credit  will
provide  adequate cash to fund the Company's anticipated  operational
and  other  cash  needs  through at least  the  next  twelve  months.
However,  for a brief discussion of the factors that could  adversely
affect  the  Company's financial position and results of  operations,
see "Risk Factors."


Recent Accounting Pronouncements

In  March 1997, the Financial Accounting Standards Board issued  SFAS
No.  128,  "Earnings Per Share," which established new standards  for
calculating  and  presenting earnings per share.   The  Company  will
adopt  this  new  standard in its fiscal 1998  financial  statements,
which  will require the reporting of diluted earnings per  share  and
basic earnings per share, as defined.  SFAS No. 128 is effective  for
periods  ending  after December 15, 1997, and early adoption  is  not
permitted.   When adopted, the statement will require restatement  of
prior  years' earnings per share.  For the years ended September  30,
1995,  1996  and  1997, diluted earnings per share  would  have  been
$0.28, $0.15 and $0.60, respectively.  Basic earnings per share would
have been $1.11, $0.64 and $0.78, respectively, for the same periods.


Risk Factors

     This  Report  contains forward-looking statements  that  involve
risks  and uncertainties, such as statements of the Company's  plans,
objectives,  expectations and intentions.  The cautionary  statements
made in this Report should be read as being applicable to all forward-
looking  statements  wherever  they  appear  in  this  Report.    The
Company's actual results could differ materially from those discussed
herein.   Factors that could cause or contribute to such  differences
include  those discussed below, as well as those discussed  elsewhere
in this Report.

   Customer Concentration.   In fiscal 1995, 1996 and 1997, sales  to
BAA  accounted  for approximately 76%, 79% and 39%, respectively,  of
the   Company's  revenues.   Additionally,  in  fiscal  1997  Airport
Authority  Hong  Kong  and  Toyo Kanetsu K.K.,  the  baggage-handling
contractor   for  Malaysia's  Kuala  Lumpur  International   Airport,
accounted  for 19% and 27%, respectively, of the Company's  revenues.
Each  of  these  customers  is nearing completion  of  deployment  of
checked  baggage  explosives detection systems  at  their  respective
airports.   As  a result, the Company expects that its revenues  from
these  customers will decrease and will become increasingly dependent
upon  sales  of  upgrades, replacement equipment and  services.   The
inability  of the Company to obtain orders from customers other  than
these  would have a material adverse effect on the Company's business
and financial condition.

   Dependence on Government Regulation.   The Company's sales of  its
explosives  detection systems for use in airports has been  and  will
continue to be dependent upon governmental initiatives to require  or
support  the screening of baggage with advanced explosives  detection
systems.   Substantially all of such systems have been  installed  at
airports  in  countries  in  which  the  applicable  governmental  or
regulatory  authority overseeing the operations of  the  airport  has
mandated  such  screening.   Such mandates  are  influenced  by  many
factors  outside  of the control of the Company, including  political
and  budgetary concerns of governments, airlines and airports. In the
United States, the Aviation Security Act of 1990 directed the FAA  to
develop  a  standard  for explosives detection systems  and  required
airports in the United States to deploy systems meeting this standard
by  1993.  The standard adopted by the FAA is more comprehensive than
standards adopted in most other countries.  The FAA first certified a
computed  tomography  ("CT") system in December  1994.   However,  as
recommended by the Gore Commission's final report, issued in February
1997, and as required by the Federal Aviation Re-Authorization Act of
1996  (the "Re-Authorization Act"), this system must undergo  further
testing  to  resolve whether it can operate under  realistic  airport
operating  conditions,  including  processing  baggage  at   required
throughput rates. To date, no system has demonstrated that  it  meets
the FAA standard under realistic airport operating conditions.  As  a
result,  only  a limited number of these systems have been  deployed,
primarily  on  a  test  basis, in the United States.   The  Company's
systems do not meet the FAA certification standard.  There can be  no
assurance  that any of the Company's systems will ever meet  this  or
any  other United States certification standard.  Moreover, there can
be   no   assurance  that  additional  countries  will  mandate   the
implementation of effective explosives screening of airline  baggage,
or   that,   if  mandated,  the  Company's  systems  will  meet   the
certification  or  other requirements of the applicable  governmental
authority.  See "Item 1.  Business-Regulation."

   In  October  1996, the United States enacted the  Re-Authorization
Act,  which  included  an allocation for the purchase  of  explosives
detection  systems  and  other advanced  security  equipment  by  air
carriers and airport authorities.  Utilizing this allocation, the FAA
has   ordered  initial  quantities  of  the  CT-based  system,  trace
detection  systems  and  dual energy X-ray based  systems,  including
eight  systems from the Company.  Deployment of these various systems
is  not  scheduled for completion until mid-1998.  There  can  be  no
assurance  that  the  FAA  will  order additional  systems  from  the
Company.  See "Item 1.  Business-Industry Background."

    Developing  Market;  Uncertainty  of  Market  Acceptance.     The
explosives detection system market is at a relatively early stage  of
development.  Acceptance of explosives detection systems on  a  broad
basis  will  be  dependent  upon  the  acceptance  and  adoption   of
explosives detection systems by airlines and airports throughout  the
world,   the  expansion  of  applications  for  explosives  detection
technology, government initiatives to support the expansion  of  this
market,   the  performance  and  price  of  the  Company's  and   its
competitors'  products,  customer  reaction  to  those  products  and
continued  cost and performance improvements in explosives  detection
technology.  There can be no assurance that the explosives  detection
market will develop further or that the Company will be successful in
marketing  its  products  effectively and  obtaining  broader  market
acceptance  for its products. Failure to do so would have a  material
adverse  effect  on  the Company's business and financial  condition.
Further,  if one of the Company's or a competitor's systems  were  to
fail  to  detect explosives and such failure resulted in  an  airline
bombing,  the ability of the Company to market its products could  be
materially   adversely  affected.  See  "Item  1.   Business-Industry
Background."

  Significant Fluctuations and Unpredictability of Operating Results.
Significant  annual  and  quarterly  fluctuations  in  the  Company's
results of operations may be caused by several factors, including the
overall demand for explosives detection systems, market acceptance of
the  Company's products, the timing of regulatory approvals  for  the
Company's  system and government initiatives to promote  the  use  of
explosives detection systems such as those manufactured and  sold  by
the  Company. Other factors that may cause fluctuations in  operating
results  include  the  timing of the announcement,  introduction  and
delivery of new products and product enhancements by the Company  and
its   competitors,  variations  in  the  Company's  product  mix  and
component  costs, timing of customer orders, adjustments of  delivery
schedules  to  accommodate customers programs,  the  availability  of
materials and labor necessary to produce the Company's products,  the
availability  of components from suppliers, the timing and  level  of
expenditures in anticipation of future sales, and pricing  and  other
competitive  conditions.  Customers may  also  cancel  or  reschedule
shipments   and   production  difficulties  could  delay   shipments.
Relatively  few system sales to relatively few customers  comprise  a
significant  portion  of  the Company's  revenues  in  each  quarter.
Therefore, small variations in the number of systems sold could  have
a  significant  effect on the Company's results  of  operations.  The
Company believes that period to period comparisons of its results  of
operations  are not necessarily meaningful and should not  be  relied
upon as indications of future performance.

   Lengthy Sales Cycle.   As a result of the significant capital  and
other  commitments  required to install and integrate  the  Company's
products  into an airport baggage handling system, foreign regulatory
approval  requirements, and the developing nature of  the  explosives
detection  market, the Company has experienced extended sales  cycles
with its customers. The Company's sales efforts with certain existing
and  potential customers have extended over several years.  Customers
may  initially purchase one or a few units for extensive testing  and
evaluation  before making a decision regarding volume purchases  and,
in  certain  circumstances,  the  Company  may  provide  a  potential
customer  with  a  demonstration  unit  for  regulatory  testing  and
evaluation  free  of  charge. Delays in anticipated  purchase  orders
could  have  a material adverse effect on the Company's business  and
financial  condition. See "Risk Factors-Significant Fluctuations  and
Unpredictability    of    Operating    Results"    and    "Item    1.
Business-Marketing and Sales."

   Reliance on International Sales.   In fiscal 1995, 1996 and  1997,
international  sales accounted for approximately 91%,  95%  and  97%,
respectively,  of  the Company's revenues.  The  Company  anticipates
that  international sales will continue to account for a  significant
percentage   of  the  Company's  revenues.   Risks  associated   with
international   sales  include,  among  other  things,  international
regulatory  requirements and policy changes, political  and  economic
instability,   possible   foreign  currency  controls,   intellectual
property protection, currency exchange rate fluctuations, tariffs  or
other  barriers,  staffing  and  management  of  foreign  operations,
inventory   management,  accounts  receivable  collection   and   the
management of distributors or representatives.  In particular, recent
economic  instability in the Asia/Pacific region may delay or  reduce
airport  capital projects in that region which could have a  material
adverse  effect on the Company's business.  In addition, most foreign
countries  have their own regulatory approval requirements for  sales
of  the  Company's products.  As a result, the Company's introduction
of  new  products into international markets can be costly  and  time
consuming,  and  there can be no assurance that the Company  will  be
able  to obtain the required regulatory approvals on a timely  basis,
if  at all.  Furthermore, the Company's international sales have been
denominated   primarily  in  United  States  dollars.   The   Company
anticipates   that  its  international  sales  may  increasingly   be
denominated  in  foreign  currencies.  The Company  on  occasion  has
hedged its foreign currency exposure by entering into forward foreign
exchange  contracts  to hedge against foreign currency  fluctuations.
There  can  be  no  assurance  that these  hedging  efforts  will  be
successful  or  that other risks associated with international  sales
and  operations  will  not  have a material  adverse  effect  on  the
Company's   business   and  financial  condition.    See   "Item   7.
Management's  Discussion  and Analysis  of  Financial  Condition  and
Results of Operations" and "Item 1.  Business-Marketing and Sales."

   Uncertainty  of Product Development.   The Company's success  will
depend  upon  its  ability to enhance its existing products,  and  to
develop new products to meet regulatory and customer requirements and
to  achieve  market  acceptance. The enhancement and  development  of
these  products  will be subject to all of the risks associated  with
new  product  development, including unanticipated delays,  expenses,
technical  problems or other difficulties that could  result  in  the
abandonment or substantial change in the commercialization  of  these
enhancements  or new products. Given the uncertainties inherent  with
product development and introduction, there can be no assurance  that
the  Company  will be successful in introducing products  or  product
enhancements,   including  products  that  meet   FAA   certification
standards, on a timely basis, if at all, or that the Company will  be
able  to  market successfully these products and product enhancements
once developed.

  Rapid Technological Change.   The market for the Company's products
is  characterized by rapid technological change and evolving industry
requirements.  The  Company believes that  its  future  success  will
depend  in  large  part  upon its ability  to  enhance  its  existing
products   and  to  successfully  develop  new  products  that   meet
regulatory  and  customer  requirements and gain  market  acceptance.
There  can  be no assurance that the Company's products will  not  be
rendered obsolete by new industry standards or changing technology.

   Competition.   The markets for the Company's products  are  highly
competitive.  The Company's systems compete against dual energy X-ray
as  well  as  other competing technologies, including  CT  and  trace
detection.   Certain of the Company's competitors have  substantially
greater  manufacturing, marketing and financial  resources  than  the
Company.    In  addition,  other  major  corporations  have  recently
announced their intention to enter the security screening market  and
currently   have  systems  in  development.   One  of  the  Company's
competitors has developed a product based upon CT scanner  technology
that  was certified by the FAA.  However, as recommended by the  Gore
Commission's  final  report and as required by  the  Re-Authorization
Act,  this system must undergo further testing to resolve whether  it
can  operate  under  realistic  airport  operating  conditions.   The
Company is aware of a new CT-based system currently in development by
another  company  that is purported to have a higher throughput  than
the  FAA  certified CT system.  None of the Company's  products  have
been certified by the FAA.  Competitors may develop superior products
or  products of similar quality for sale at the same or lower prices.
Other  technical  innovations may impair  the  Company's  ability  to
market its products.  There can be no assurance that the Company will
be able to compete successfully with existing or new competitors. See
"Item 1.  Business-Competition."

    Limited  Protection  of  Intellectual  Property  Rights;   Patent
Litigation.    The  Company's  success  depends  significantly   upon
proprietary  technology.  The Company  relies  on  a  combination  of
patent,  copyright,  trademark and trade secret laws,  non-disclosure
agreements  and  other contractual provisions to establish,  maintain
and  protect its proprietary rights, all of which afford only limited
protection.  The Company has obtained three patents and  has  pending
three  patent  applications in the United States (two of  which  have
been allowed but have not yet been issued).  In addition, for certain
foreign  countries  the Company has pending patent applications  that
correspond to the subject matter of certain United States patents and
patent  applications.   There can be no assurance  that  any  of  the
Company's  unallowed patent applications will be  granted,  that  any
patent or patent application will provide significant protection  for
the  Company's products and technology, or that the Company's current
or  future  products, processes or technology will not be  challenged
under   patents   held  by  competitors  or  potential   competitors.
Moreover,  there  can  be  no  assurance  that  foreign  intellectual
property  laws  will  protect  the  Company's  intellectual  property
rights.  In the absence of significant patent protection, the Company
may  be  vulnerable to competitors who attempt to copy the  Company's
products, processes or technology.

   The  Company  has an exclusive perpetual license  to  use  certain
patent   rights   and  technology  developed  by  Hologic   for   the
development, manufacture and sale of X-ray screening security systems
for  explosives,  drugs,  currency and other contraband  (subject  to
termination  by  either  party  for certain  defined  defaults).  The
Company  also  has a nonexclusive license to use this technology  for
the  development,  manufacture and sale of X-ray-based  products  for
process control applications in the food and beverage industries.  If
the  Company  desires to develop products for other applications,  it
must  either  use  alternative technology  or  obtain  an  additional
license  from  Hologic. There can be no assurance  that  the  Company
would  be able to develop or license alternative technology  for  any
additional applications, or that the Company would be able to license
Hologic's technology for these applications on favorable terms, if at
all.  In  addition, there can be no assurance that Hologic  will  not
develop   or  license  its  technology  to  others  for  applications
competitive  with those that may be developed by the Company  outside
of  areas for which the Company has an exclusive license. See   "Item
13.  Certain Relationships and Related Transactions."

    The   Company  was  involved  in  patent  litigation  with   EG&G
Astrophysics  Research  Corporation ("EG&G"),  in  which  each  party
claimed  that the other was infringing certain patents  held  by  the
other.  On November 6, 1996, the Company and EG&G signed a settlement
agreement  pursuant to which, among other things, each  party  agreed
not to sue the other for patent infringement for nonmedical uses of X-
ray  technology covered by each other's existing patents or by patent
applications which claim priority from such patents, or, for products
existing  as  of September 12, 1996, covered by patents that  may  be
issued  pursuant to existing patent applications. As a  result,  each
party  will  have  broad  rights to use the  other's  existing  X-ray
technology  for  an  unlimited period  of  time.   There  can  be  no
assurance that EG&G will not use the Company's technology in a manner
that would materially and adversely affect the Company's business and
financial condition.  See "Item 1.  Business-Intellectual Property."

   In  May 1996, the Company commenced an action in the United States
District Court for the District of Massachusetts against AS&E seeking
a declaration that the Company does not infringe AS&E patents related
to  back  scattered  X-rays.   This followed  AS&E's  allegations  of
infringement to third parties.  No discovery has been taken to  date.
Following a court decision in July 1997 construing the claims of  the
AS&E  patent,  which  decision the Company  considers  favorable,  in
September 1997 the Company filed a motion for summary judgment of non-
infringement.  AS&E has not yet filed its papers in opposition to the
Company's motion but is seeking discovery.  If granted, the Company's
motion will resolve all issues remaining in the case in favor of  the
Company.  Earlier, in April 1997, the Court dismissed AS&E's proposed
counterclaim seeking to allege patent infringement, so that the  only
remaining  issue in the case is the Company's request for declaration
of  non-infringement of two claims of a single AS&E patent.  Although
the  Company does not believe that it is infringing any valid  patent
of  AS&E,  there can be no assurance that AS&E will not  make  a  new
counterclaim   in   which   it  raises  more  specific   infringement
allegations.   Failure of the Company to prevail in  this  litigation
could  have  a material adverse effect on the Company's business  and
financial  condition.  See "Item 1.  Business-Intellectual  Property"
and "Item 3.  Legal Proceedings."

   Management  of  Growth.   The Company has undergone  a  period  of
growth,  and  any  continued expansion may significantly  strain  the
Company's  management,  financial and other resources.   Due  to  the
level  of technical and marketing expertise necessary to support  its
existing  and  new  customers, the Company must  attract  and  retain
highly  qualified and well-trained personnel.  There  are  a  limited
number  of  persons  with  the requisite skills  to  serve  in  these
positions,  and it may become increasingly difficult for the  Company
to   hire   such  personnel.   The  Company's  expansion   may   also
significantly   strain   the  Company's  management,   manufacturing,
financial  and other resources.  There can be no assurance  that  the
Company's  systems,  procedures, and controls  will  be  adequate  to
support the Company's operations or that the Company will be able  to
successfully  integrate its new personnel.   Failure  to  manage  the
Company's growth properly could have a material adverse effect on the
Company's   business   and  financial  condition.    See   "Item   1.
Business-Executive Officers of the Registrant."

   Risks Associated with Possible Acquisitions.   The Company intends
to   pursue  potential  acquisitions  of  businesses,  products   and
technologies that could complement or expand the Company's  business.
There  can be no assurance that the Company will be able to  identify
any  appropriate acquisition candidate. If the Company identifies  an
acquisition  candidate, there can be no assurance  that  the  Company
would  be  able  to  successfully negotiate the  terms  of  any  such
acquisition,  finance  such acquisition or  integrate  such  acquired
business,  products  or  technologies  into  the  Company's  existing
business  and  products.  Furthermore, the negotiation  of  potential
acquisitions as well as the integration of an acquired business could
cause  diversion of management's time and resources, and require  the
Company to use working capital to consummate a potential acquisition.
There  can be no assurance that a given acquisition, whether  or  not
consummated,  would  not  have  a  material  adverse  effect  on  the
Company's business or financial condition. If the Company consummates
one  or more significant acquisitions in which consideration consists
of Common Stock, stockholders of the Company could suffer significant
dilution   of   their   interests   in   the   Company.   See   "Risk
Factors-Management of Growth."

   Potential  for Product Liability Claims.   The Company's  business
involves  the  risk  of  product liability  claims  inherent  to  the
explosives  detection  industry. There are many  factors  beyond  the
control  of  the  Company that could result in  the  failure  of  the
Company's products to detect explosives, such as the reliability of a
customer's operators, the ongoing training of such operators and  the
maintenance of the Company's products by its customers. For these and
other  reasons, there can be no assurance that the Company's products
will detect all explosives concealed in screened bags. The failure to
detect  an explosive could give rise to product liability claims  and
result  in  negative  publicity that could have  a  material  adverse
effect on the Company's business and financial condition. The Company
currently  maintains  aviation product liability  insurance  with  an
aggregate coverage limit of $150 million per year, subject to certain
deductibles  and  exclusions. There can be  no  assurance  that  this
insurance  will  be  sufficient to protect the Company  from  product
liability  claims, or that product liability insurance will  continue
to be available to the Company at a reasonable cost, if at all.

   Concentration of Ownership; Control by Management.  As of December
17,  1997,  the  Company's executive officers,  directors  and  their
affiliates and members of their immediate families beneficially owned
approximately  18%  of  the  outstanding  shares  of  Common   Stock,
excluding shares issuable upon exercise of options and warrants. As a
result, these stockholders, if acting together, will be able to exert
substantial  influence  over actions requiring stockholder  approval,
including  the  election of directors, amendments  to  the  Company's
Restated  Certificate of Incorporation, mergers, sales of  assets  or
other business acquisitions or dispositions.

   Antitakeover  Provisions.   The Company's Restated Certificate  of
Incorporation  contains certain provisions that may  discourage  bids
for  the  Company.  This could limit the price that certain investors
might be willing to pay in the future for shares of the Common Stock.


Item 8.  Financial Statements and Supplementary Data

The consolidated Financial Statements and Supplementary Data of the
Company are listed under Part IV, Item 14, in this Report.


Item 9.  Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

Not applicable.



                              PART III

Item 10.  Directors and Executive Officers of the Registrant

     The information required by this Item 10 is hereby incorporated
by reference to the text appearing under Part I, Item 1 - Business
under the caption "Executive Officers of the Registrant" in this
Report, and by reference to the Company's definitive proxy statement
to be filed by the Company within 120 days after the close of its
fiscal year.


Item 11.  Executive Compensation

     The information required by this Item 11 is hereby incorporated
by reference to the information under the heading "Executive
Compensation" in the Company's definitive proxy statement to be filed
by the Company within 120 days after the close of its fiscal year.


Item 12.  Security Ownership of Certain Beneficial Owners and
Management

     The information required by this Item 12 is hereby incorporated
by reference to the information under the heading "Securities
Beneficially Owned by Directors, Officers and Principal Stockholders"
in the Company's definitive proxy statement to be filed by the
Company within 120 days after the close of its fiscal year.


Item 13.  Certain Relationships and Related Transactions

     The information required by this Item 13 is hereby incorporated
by reference to the information under the heading "Certain
Transactions," if any, in the Company's definitive proxy statement to
be filed by the Company within 120 days after the close of its fiscal
year.


                               PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
Form 8-K

(a)  The following documents are filed as part of this report:

  (1)  Financial Statements
                                                                       Page
     Report of Independent Public Accountants                           F-1
     
     Consolidated Balance Sheets as of September 30, 1996 and 1997      F-2
     
     Consolidated Statements of Operations for the years ended
     September 30, 1995, 1996 and 1997                                  F-3
     
     Consolidated Statements of Stockholders' Equity (Deficit) for
     the years ended September 30, 1995, 1996 and 1997                  F-4
     
     Consolidated Statements of Cash Flows for the years ended
     September 30, 1995, 1996 and 1997                                  F-5
     
     Notes to Consolidated Financial Statements                         F-6
     
  (2)  Financial Statement Schedules
     
     Supplemental schedules are not provided 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.
     
  (3)  Listing of Exhibits


Exhibit                                             Reference
No.
                                                         
2.01       Merger Agreement between the Company        A**
           and the Company's Massachusetts
           predecessor
                                                         
3.01       Restated Certificate of Incorporation       A**
                                                         
3.02       By-laws of the Company                      A**
                                                         
4.01       Specimen Certificate for shares of          A**
           the Company's Common Stock
                                                         
4.02       Description of Capital Stock                A**
           (contained in the Restated
           Certificate of Incorporation of the
           Company, filed as Exhibit 3.01)
                                                         
4.03       Description of Registration Rights          A**
           (contained in Exhibits 10.05, 10.11
           and 10.13)
                                                         
10.01      Contract for the Manufacture, Supply,       A**
           Installation and Commissioning of
           Hold Baggage Screening Equipment
           between the Company and BAA plc.
                                                         
10.02      Distribution and Development                A**
           Agreement between the Company and
           Gilardoni S.p.A.
                                                         
10.02a     Memorandum of Understanding between    Filed herewith
           Gilardoni S.p.A. and the Company
                                                         
10.03      First Amended and Restated Line of          A**
           Credit Loan and Security Agreement
           between the Company and BayBank, N.A.
           and corresponding Note of the Company
           in favor of BayBank, N.A.
                                                         
10.04      Form of Warrant to purchase Common          A**
           Stock issued to certain investors.
                                                         
10.05      Warrant to purchase Common Stock            A**
           issued to Dominion Fund II, L.P.
                                                         
10.06      1989 Combination Stock Option Plan of       A**
           the Company*
                                                         
10.07      1996 Non-Employee Director Stock            A**
           Option Plan of the Company*
                                                         
10.08      1996 Equity Incentive Plan of the           A**
           Company*
                                                         
10.09      Facility lease between the Company          A**
           and Cummings Properties Management,
           Inc.
                                                         
10.10      Form of Indemnification Agreement for       A**
           directors and officers of the Company
                                                         
10.11      Series A and Series B Preferred Stock       A**
           Purchase Agreement
                                                         
10.12      Series C and Series D Preferred Stock       A**
           Purchase Agreement
                                                         
10.13      Conversion Agreement between the            A**
           Company and certain investors
                                                         
10.14      Amended Shareholder Agreement among         A**
           the Company's Massachusetts
           predecessor, S. David Ellenbogen, Jay
           A. Stein and certain investors
                                                         
10.15      Management Services Agreement between       A**
           the Company and Hologic, Inc.
                                                         
10.16      License and Technology Agreement            A**
           between Company and Hologic, Inc.,
           together with First Amendment to such
           License and Technology Agreement
                                                         
10.17      Description of Bonus Plan                   A**
                                                         
10.18      Demand Line of Credit Loan and         Filed herewith
           Security Agreement between the
           Company and BankBoston, N.A. and
           corresponding Note of the Company in
           favor of BankBoston, N.A.
                                                         
11.01      Statement re:  Computation of Per      Filed herewith
           Share Earnings
                                                         
21.01      Subsidiaries of the Company                 A**
                                                         
23.01      Consent of Arthur Andersen LLP         Filed herewith
                                                         
27.01      Financial Data Schedule                Filed herewith
____________________
     
A    Incorporated   by   reference  to  the  Company's   registration
     statement on Form S-1 (Registration No. 333-14311).  The  number
     set   forth  herein  is  the  number  of  the  Exhibit  in  said
     registration statement.

*    Management contract or compensatory plan or arrangement.

**   In accordance with Rule 12b-32 under the Securities Exchange Act
     of  1934,  as  amended,  reference  is  made  to  the  documents
     previously  filed  with the Securities and Exchange  Commission,
     which documents are hereby incorporated by reference.

(b)  REPORTS ON FORM 8-K

     The Company did not file any current reports on Form 8-K during
     the quarter ended September 30, 1997.

                             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.

                              VIVID TECHNOLOGIES, INC.

Dated:  December 29, 1997     By:  /s/ Stephen A. Reber
                                   Stephen A. Reber
                                   President


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

Signature                Title                    Date

/s/ S. David Ellenbogen  Director and Chief       December 29, 1997
S. David Ellenbogen      Executive Officer


/s/ William J. Frain     Chief Financial Officer  December 29, 1997
William J. Frain         and Treasurer


/s/ Jay A. Stein         Director                 December 29, 1997
Jay A. Stein


                         Director                
L. Paul Bremer III


                         Director
Frank Kenny


/s/ Glenn P. Muir        Director                 December 29, 1997
Glenn P. Muir


/s/ Gerald Segel         Director                 December 29, 1997
Gerald Segel



             Report of Independent Public Accountants
                                 
                                 
                                 
To Vivid Technologies, Inc.:

We  have  audited the accompanying consolidated balance  sheets  of
Vivid  Technologies, Inc. (a Delaware corporation) and subsidiaries
as  of  September  30, 1996 and 1997, and the related  consolidated
statements of operations, stockholders' equity (deficit)  and  cash
flows for each of the three years in the period ended September 30,
1997.  These  financial  statements are the responsibility  of  the
Company's management.  Our responsibility is to express an  opinion
on these financial statements 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  financial
position  of  Vivid  Technologies,  Inc.  and  subsidiaries  as  of
September  30,  1996 and 1997, and the results of their  operations
and  their  cash flows for each of the three years  in  the  period
ended  September  30, 1997, in conformity with  generally  accepted
accounting principles.




                                   ARTHUR ANDERSEN LLP

Boston, Massachusetts
October 27, 1997
             
             
             VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 
                    Consolidated Balance Sheets
                                 
                                 
                                 
                                                  September 30,
                                                1996           1997
Assets                                                    
Current Assets:                                           
Cash and cash equivalents                 $1,661,724    $11,571,630
Short-term investments                            --      6,432,405
Accounts receivable                        3,720,478      9,493,519
Inventories                                4,741,658      6,195,096
Deferred tax asset                           181,000        606,790
Other current assets                         444,902        742,729
                                                          
Total current assets                      10,749,762     35,042,169
                                                          
Property and Equipment, at cost:                          
Machinery and equipment                    1,681,659      2,166,867
Equipment under capital leases               198,580        198,580
Leasehold improvements                       143,776        165,995
Furniture and fixtures                        58,855         84,462
                                           2,082,870      2,615,904
Less-Accumulated depreciation 
  and amortization                         1,097,717      1,531,709
                                             985,153      1,084,195
                                                          
Other Assets, net                            228,077      1,330,233
                                                          
                                         $11,962,992    $37,456,597
                                                          
Liabilities and Stockholders' Equity                      
                                                          
Current Liabilities:                                      
Obligation under capital leases          $    36,888   $      4,366
Accounts payable                           1,493,874      1,566,831
Accrued expenses                           3,432,914      2,418,431
Currently redeemable Series A 
  preferred stock                          2,343,750             --
Currently redeemable Series C 
  preferred stock                          3,436,900             --
Customer deposits                          1,042,085      1,755,788
                                                          
Total current liabilities                 11,786,411      5,745,416
                                                          
Commitments and Contingencies 
    (Notes 9 and 11)            
                                                          
Stockholders' Equity:                                     
Preferred stock, $.01 par value-                          
Authorized-1,000,000 shares                               
Issued and outstanding-None                       --             --
Convertible preferred stock, $.01 par value-              
Series B-                                                 
Authorized-250,000 shares in 1996                         
Issued and outstanding-250,000 shares in 1996;     
none in 1997                                   2,500             --
Series D-                                                 
Authorized-254,585 shares in 1996                         
Issued and outstanding-254,585 shares in 1996;     
none in 1997                                   2,546             --
Common stock, $.01 par value-                             
Authorized-30,000,000 shares                              
Issued and outstanding-1,740,520 shares in    
1996; 9,496,684 shares in 1997                17,405         94,967
Capital in excess of par value               594,279     26,190,785
Retained earnings (deficit)                 (440,149)     5,425,429
                                                          
Total stockholders' equity                   176,581     31,711,181
                                                          
                                         $11,962,992    $37,456,597
                                 
                                 
 The accompanying notes are an integral part of these consolidated
                       financial statements.
             
             
             VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 
               Consolidated Statements of Operations
                                 
                                 
                                 
                                             Year Ended September 30,
                                           1995          1996          1997
                                                          
Revenues                            $14,437,220   $15,578,326   $31,702,188

Cost of Revenues (includes                       
approximately $929,000, $775,000 and  
$988,000, respectively, of royalties  
to and purchases from Hologic; see
Note 7)                               6,128,986     6,899,433    13,202,925
                                                          
    Gross margin                      8,308,234     8,678,893    18,499,263
                                             
Operating Expenses (includes                              
approximately $530,000, $325,000 and
$112,000, respectively, of
management service expenses from
Hologic; see Note 7):
Research and development              3,653,041     3,461,555     4,390,446
Selling and marketing                 1,077,235     1,394,880     3,556,006
General and administrative            1,120,292     1,515,420     2,928,658
Litigation expenses                     308,482     1,149,889       427,000

    Total operating expenses          6,159,050     7,521,744    11,302,110
                                                
Income from Operations                2,149,184     1,157,149     7,197,153

Interest Income                          53,378        60,616       814,966
                                                          
Interest Expense                        (98,487)      (53,001)       (2,040)
                                                          
Other Income, net                            --            --        48,834
                                                          
    Income before income taxes        2,104,075     1,164,764     8,058,913
                                                
Provision for Income Taxes               90,000            --     2,193,335
                                                          
    Net income                       $2,014,075    $1,164,764    $5,865,578
                                              
Net Income per Common and Common               
Equivalent Share                        $   .28       $   .15       $   .60
                                                          
Weighted Average Number of Common           
and Common Equivalent Shares
Outstanding                           7,275,138     7,868,853     9,838,300


 The accompanying notes are an integral part of these consolidated
                       financial statements.
                    
                    
                    VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE>                                        
            Consolidated Statements of Stockholders' Equity (Deficit)
                                        
<CAPTION>                                        
                            Series B               Series D      
                           Convertible            Convertible   
                         Preferred Stock        Preferred Stock      Common Stock           Capital in     Retained
                       Number     $.01        Number     $.01        Number     $.01       Excess of Par   Earnings
                       of Shares  Par Value   of Shares  Par Value   of Shares  Par Value      Value       (Deficit)        Total

<S>                      <C>        <C>         <C>        <C>       <C>         <C>          <C>       <C>           <C>
Balance, 
September 30, 1994       250,000    $ 2,500     254,585    $ 2,546   1,647,600   $ 16,476     $532,238  $(3,618,988)  $(3,065,228)
  Exercise of stock         
  options                     --         --          --         --      26,750        267        6,308           --         6,575
  Net income                  --         --          --         --          --         --           --    2,014,075     2,014,075
                                                                                      
Balance, 
September 30, 1995       250,000      2,500     254,585      2,546   1,674,350     16,743      538,546   (1,604,913)   (1,044,578)
  Issuance of common        
   stock for services         --         --          --         --      15,000        150       44,850           --        45,000
  Exercise of stock         
   options                    --         --          --         --      51,170        512       10,883           --        11,395
  Net income                  --         --          --         --          --         --           --    1,164,764     1,164,764
                                                                                      
Balance, 
September 30, 1996       250,000      2,500     254,585      2,546   1,740,520     17,405      594,279     (440,149)      176,581
  Exercise of stock         
   options, including        
   tax benefit of            
   $659,194                   --         --          --         --     333,800      3,338      809,231           --       812,569
  Exercise of stock         
   purchase warrants          --         --          --         --      76,514        765       32,195           --        32,960
  Conversion of        
   preferred stock             
   into common stock    (250,000)    (2,500)   (254,585)    (2,546)  5,045,850     50,459      (45,413)          --            --
   Sale of common            
    stock, net of            
    issuance costs of
    approximately
    $2,777,000                --         --          --         --   2,300,000     23,000   24,800,493           --    24,823,493
   Net income                 --         --          --         --          --         --           --    5,865,578     5,865,578
                                                                                      
Balance,                            
September 30, 1997            --    $    --          --    $    --   9,496,684   $ 94,967  $26,190,785  $ 5,425,429   $31,711,181
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                   statements.
             
             
             VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 
               Consolidated Statements of Cash Flows
                                 
                                 
                                 
                                               Year Ended September 30,
                                           1995          1996          1997
                                                              
Cash Flows from Operating Activities:
Net income                           $2,014,075    $1,164,764    $5,865,578
Adjustments to reconcile net income                       
to net cash provided by (used in)
operating activities-
  Depreciation and amortization         276,838       344,894       441,072
  Issuance of common stock for services      --        45,000            --
  Changes in assets and liabilities-                        
    Accounts receivable                (331,765)   (2,552,354)   (5,773,041)
    Inventories                        (241,116)   (1,557,190)   (1,453,438)
    Deferred tax asset                       --      (181,000)     (425,790)
    Other current assets                (23,546)     (387,520)     (297,827)
    Accounts payable                   (504,129)      767,303        72,957
    Accrued expenses                    535,331     1,156,031    (1,014,483)
    Customer deposits                  (677,390)    1,042,085       713,703
                                                              
Net cash provided by (used in)           
operating activities                  1,048,298      (157,987)   (1,871,269)
                                                              
Cash Flows from Investing Activities:
Purchase of property and 
 equipment, net                        (383,670)     (427,053)     (533,034)
Purchases of investments                     --            --   (11,650,261)
Maturity of investments                 500,000            --     3,999,000
Decrease (increase) in other assets       4,063       (37,581)      109,620
                                                          
Net cash provided by (used in)                     
investing activities                    120,393      (464,634)   (8,074,675)
                                                          
Cash Flows from Financing Activities:
Net proceeds from sale of 
 common stock                                --            --    24,823,493
Proceeds from exercise of stock    
 purchase warrants                           --            --        32,960
Redemption of Series A and Series C
 preferred stock                             --            --    (5,780,650)
Proceeds from exercise of stock             
 options (including tax benefit)          6,575        11,395       812,569
Payments on capital lease            
 obligations                                 --      (161,962)      (32,522)
Deferred financing costs                     --      (127,000)           --
                                                          
Net cash provided by (used in)            
financing activities                     6,575       (277,567)   19,855,850
                                                          
Net Increase (Decrease) in Cash and           
Cash Equivalents                     1,175,266       (900,188)    9,909,906
                                                          
Cash and Cash Equivalents, 
beginning of year                    1,386,646      2,561,912     1,661,724
                                                          
Cash and Cash Equivalents,
end of year                         $2,561,912     $1,661,724   $11,571,630
                                                          

Supplemental Disclosure of Cash Flow                      
Information:
Cash paid during the year for-                            
  Interest                          $   98,487     $   53,001   $     2,040
  Income taxes                      $   74,000     $  351,000   $ 1,772,500
                                                          
Supplemental Disclosure of Noncash                        
Investing and Financing Activities:
Assets acquired under capital leases    $   --     $  198,850      $     --
Conversion of Series B and D          
preferred stock into common stock       $   --         $   --   $ 5,045,850
                                 
                                 
 The accompanying notes are an integral part of these consolidated
                       financial statements.
             
             
             
             VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 
            Notes to Consolidated Financial Statements
                                 
                                 
                                 
                                 
(1)  Operations and Significant Accounting Policies
   
   Vivid  Technologies, Inc. (the Company) is a leading  developer,
   manufacturer  and marketer of automated inspection systems  that
   detect plastic and other explosives in airline baggage.
   
   The  accompanying consolidated financial statements reflect  the
   application of the accounting policies as described below.
   
   (a)Principles of Consolidation
   
       The  consolidated financial statements include the  accounts
       of  the  Company  and  its wholly owned subsidiaries,  Vivid
       Technologies  UK  Ltd., Vivid Foreign Sales Corporation  and
       Vivid  Securities  Corporation.  All  material  intercompany
       transactions   and   balances  have   been   eliminated   in
       consolidation.
       
   (b)Revenue Recognition

       The  Company recognizes product revenue upon shipment.   The
       Company's   product   sales   are   not   conditioned   upon
       satisfactory  installation by the Company.  Installation  is
       typically  performed by the customer or a systems integrator
       of  the  airport's  baggage handling system.   However,  the
       Company  has  typically assisted the systems integrator  and
       accrues  for  estimated installation costs, in  addition  to
       estimated warranty costs, at the time of shipment.
       
       During  fiscal  1995, 1996 and 1997, the Company  recognized
       revenue  of approximately $1,355,000, $716,000 and $821,000,
       respectively,  under two separate research  and  development
       grants  from  an  agency of the U.S.  government  to  pursue
       certain   explosives   detection  research.    The   Company
       recognizes  revenue  under  these  grants  as  services  are
       rendered,  provided  that  the government  has  appropriated
       sufficient  funds for the work.  The Company retains  rights
       to all technological discoveries and products resulting from
       these efforts.
       
       Customer  deposits represent amounts received from customers
       in advance of a shipment.
       
   (c)Cash and Cash Equivalents and Investments

       The  Company  considers all highly liquid  investments  with
       original  maturities of three months  or  less  to  be  cash
       equivalents.  Included in cash equivalents at September  30,
       1997  are  funds held in money market accounts, certificates
       of  deposit, municipal bonds and repurchase agreements  with
       overnight  maturities.  Cash equivalents  at  September  30,
       1996   included   repurchase   agreements   with   overnight
       maturities.
       The  Company  accounts for investments  in  accordance  with
       Statement  of Financial Accounting Standards (SFAS)  Opinion
       No.  115,  Accounting for Certain Investments  in  Debt  and
       Equity Securities.  Under this standard, investments that the
       Company  has  the  positive intent and ability  to  hold  to
       maturity  are reported at amortized cost, which approximates
       fair  market  value, and are classified as held-to-maturity.
       The investments that the Company has deemed held-to-maturity
       include   certificates  of  deposit,  municipal  bonds   and
       commercial paper, which total approximately $13,672,000  and
       have   an  average  original  maturity  of  six  months   at
       September  30,  1997.   The Company  did  not  classify  any
       investments  as  held-to-maturity  at  September  30,  1996.
       Investments purchased to be held for indefinite  periods  of
       time  and  not intended at the time of purchase to  be  held
       until  maturity  are  classified as  available-for-sale  and
       reported at fair market value.  Unrealized gains (losses) on
       available-for-sale securities were not material in 1996  and
       1997.  The investments that the Company has deemed available-
       for-sale   include  repurchase  agreements  with   overnight
       maturities  and  money  market funds totaling  approximately
       $1,210,000  and $4,699,000 at September 30, 1996  and  1997,
       respectively.  Investments with maturities of  greater  than
       three months but less than one year are classified as short-
       term  investments.  Investments with maturities  of  greater
       than  one  year  have been classified as long-term.   As  of
       September 30, 1997, the Company had long-term investments of
       approximately $1,219,000 included in other assets, consisting
       of   investment-grade  commercial  paper,  with  an  average
       maturity period of 15 months.

   (d)Concentration of Credit Risk and Significant Customers

       SFAS  No.  105,  Disclosure of Information  About  Financial
       Instruments   with  Off-Balance-Sheet  Risk  and   Financial
       Instruments  with  Concentrations of Credit  Risk,  requires
       disclosure  of any significant off-balance-sheet and  credit
       risk concentrations.  Financial instruments that subject the
       Company  to credit risk consist primarily of cash  and  cash
       equivalents, investments and trade accounts receivable.  The
       Company  places  its investments in financial  institutions.
       The Company has not experienced any material losses on these
       investments  to  date.  The Company has not experienced  any
       material  losses  related  to  receivables  from  individual
       customers or groups of customers in the baggage security and
       inspection industry.
       
       The  Company  has  entered into a forward  foreign  exchange
       contract  to  hedge a receivable denominated  in  a  foreign
       currency.    At   September  30,  1997,  the   Company   had
       approximately  $5,393,000  of  forward  exchange   contracts
       against  specific balances denominated in Hong Kong  dollars
       which  mature through February 2, 1998. The unrealized  gain
       (loss) was not material in 1997.
       
       The Company received greater than 10% of total revenues from
       the following customers during the years ended September 30,
       1995, 1996 and 1997.
       
                                        Percentage of Total Revenues
                                        Customer  Customer  Customer
                                            A         B         C
                                                      
       Year ended September 30, 1995      76%         --        --
                                                      
       Year ended September 30, 1996      79%         --        --
                                                      
       Year  ended September30, 1997      39%        19%       27%
       
       The  Company had accounts receivable balances greater than 10%
       of  total accounts receivable from the following customers  as
       of September 30, 1996 and 1997:
       
                                Percentage of Total Accounts Receivable
                                Customer  Customer  Customer  Customer
                                   A         B         C         D
                                                             
       As of September 30, 1996    94%       --        --        --
       
       As of September 30, 1997     --      61%       12%       15%
       
       Subsequent  to  September  30,  1997,  the  Company   received
       payments  aggregating  approximately  $6,437,000  against  the
       accounts receivable balances due as of that date.

   (e)Disclosure of Fair Value of Financial Instruments

       The  Company's  financial instruments consist mainly  of  cash
       and  cash  equivalents, investments, accounts  receivable  and
       accounts payable.  The carrying amounts of the Company's  cash
       and  cash  equivalents, investments, accounts  receivable  and
       accounts  payable approximate fair value due to the short-term
       nature of these instruments.
   
   (f)  Translation of Foreign Currencies
   
       The   accounts   of  the  Company's  foreign  subsidiary   are
       translated  in  accordance with SFAS No. 52, Foreign  Currency
       Translation.   In  translating the  accounts  of  the  foreign
       subsidiary  into  U.S.  dollars, assets  and  liabilities  are
       translated  at  the  rate of exchange in effect  at  year-end,
       while  stockholders' equity is translated at historical rates.
       Revenue   and  expense  accounts  are  translated  using   the
       weighted  average  exchange rate in effect  during  the  year.
       Foreign  currency  translation  gains  or  losses  for   Vivid
       Technologies   UK  Ltd.  are  included  in  the   accompanying
       consolidated  statements of operations  since  the  functional
       currency for this subsidiary is the U.S. dollar.  The  Company
       had  sales of approximately $8,044,000 denominated in  foreign
       currencies  during  1997.  The Company recognized  a  loss  of
       approximately   $47,000  related  to  such  foreign   currency
       transactions  in 1997 which is included in other  income,  net
       in the accompanying consolidated statements of operations.
   
   (g)Inventories

       Inventories are stated at the lower of cost (first-in,  first-
       out) or market and consist of the following:

                     
                            September 30,
                           1996        1997
                               
    Raw materials    $3,336,696  $3,175,211
    Work-in-process     858,983   1,743,746
    Finished goods      545,979   1,276,139
                               
                     $4,741,658  $6,195,096
                                                                     
       Finished  goods  and  work-in-process inventories  consist  of
       direct materials, labor and overhead.
   
   (h)Depreciation and Amortization

       The  Company  provides for depreciation  and  amortization  by
       charges  to  operations  using  straight-line  and  declining-
       balance  methods,  which allocate the  cost  of  property  and
       equipment over their estimated useful lives, as follows:

                        Assets                          Estimated
                    Classification                      Useful Life
                       
                Machinery and equipment                 5 years
                Equipment under capital leases        Life of lease
                Leasehold improvements                Life of lease
                Furniture and fixtures                  7 years

   (i)Other Assets

       Other  assets  consist  primarily  of  long-term  investments,
       deposits  and patent costs.  Patent costs are being  amortized
       over  10  years using the straight-line method.  At  September
       30,  1996, other assets also included deferred financing costs
       associated  with the Company's initial public  offering.   The
       Company  periodically assesses the realizability of intangible
       assets,  including patent costs, in accordance with  SFAS  No.
       121,  Accounting for Impairment of Long-Lived Assets  and  for
       Long-Lived  Assets  To Be Disposed Of.  The  Company  has  not
       recorded any impairment of its intangible assets to date.
       
   (j)Net Income per Common and Common Equivalent Share
   
       Net  income per common and common equivalent share is computed
       by  dividing  net  income by the weighted  average  number  of
       common  and  common equivalent shares outstanding  during  the
       period,   assuming  the  automatic  conversion  of  all   then
       outstanding  shares  of  convertible  preferred   stock   into
       5,045,850   shares   of  common  stock.    Pursuant   to   the
       requirements  of the Securities and Exchange Commission  Staff
       Accounting  Bulletin  No. 83, common stock  issued  and  stock
       options  granted  during  the period  from  December  1995  to
       December  1996  have  been  included  in  the  calculation  of
       weighted average number of common shares outstanding  for  all
       periods  prior  to December 1996.  Fair market value  for  the
       purpose  of the calculation was assumed to be $13.00.   Common
       stock  equivalents  issued in earlier and  subsequent  periods
       have  been included when the effect would be dilutive.   Fully
       diluted net income per common and common equivalent share  has
       not  been  separately presented, as the amounts would  not  be
       materially  different from net income per  common  and  common
       equivalent share as presented.
       
       In  March  1997,  the  Financial  Accounting  Standards  Board
       (FASB)  issued  SFAS  No.  128,  Earnings  Per  Share,   which
       established  new  standards  for  calculating  and  presenting
       earnings  per share.  The Company will adopt this new standard
       in  its  fiscal 1998 financial statements, which will  require
       the   reporting  of  diluted  earnings  per  share  and  basic
       earnings  per  share, as defined.  SFAS No. 128  is  effective
       for   periods  ending  after  December  15,  1997,  and  early
       adoption  is not permitted.  When adopted, the statement  will
       require  restatement of prior years' earnings per share.   For
       the  years  ended September 30, 1995, 1996 and  1997,  diluted
       earnings  per  share would have been $0.28, $0.15  and  $0.60,
       respectively.   Basic  earnings  per  share  would  have  been
       $1.11, $0.64 and $0.78, respectively, for the same periods.
       
   (k)Management 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.
       
   (l)Research and Development and Software Development Costs

       Research   and   development  costs  have  been   charged   to
       operations  as  incurred.  SFAS No.  86,  Accounting  for  the
       Costs  of  Computer Software To Be Sold, Leased  or  Otherwise
       Marketed,  requires  the capitalization  of  certain  computer
       software   development  costs  incurred  after   technological
       feasibility  is established.  The Company believes  that  once
       technological  feasibility  of a  software  product  has  been
       established,  the  additional development  costs  incurred  to
       bring  the product to a commercially acceptable level are  not
       significant.

(2)  Income Taxes

   The  Company  accounts  for  income  taxes  under  SFAS  No.  109,
   Accounting  for  Income  Taxes,  the  objective  of  which  is  to
   recognize the amount of current and deferred income taxes  at  the
   date  of  the  financial statements as a result of all differences
   in  the  tax  basis  and financial statement  carrying  amount  of
   assets and liabilities as measured by enacted tax laws.

   The  approximate  income  tax effect of  each  type  of  temporary
   difference and carryforward is as follows:
   
                                 September 30,
                                1996      1997
                                        
Research and development      
credit carryforwards           $69,000   $32,000
Nondeductible accruals          97,000    27,000
Nondeductible reserves         278,000   543,000
Unamortized start-up costs      24,000        --
Other temporary differences     53,000     4,790
Valuation allowance           (340,000)       --

   Net deferred tax asset     $181,000  $606,790
                                                                     
   Under  SFAS No. 109, the Company recognizes a deferred  tax  asset
   for  the  future  benefit  of  its  temporary  differences  if  it
   concludes  that it is more likely than not that the  deferred  tax
   asset  will be realized.  The reduction in the valuation allowance
   from  September  30,  1996  to  September  30,  1997  is  due   to
   management's  belief  that it is more likely  than  not  that  the
   majority of the deferred tax assets will be realized.

   A  reconciliation of the federal statutory rate to  the  Company's
   effective tax rate is as follows:

                                                      September 30,
                                                1995      1996      1997
                                                    
Income tax provision at federal
 statutory rate                                34.0%     34.0%     34.0%
Increase (decrease) in tax resulting from-
State tax provision, net of federal benefit     6.3       8.1       3.2
Foreign sales corporation benefit                --      (7.5)     (5.0)
Foreign net operating losses not benefited       --       4.1        --
Net operating loss carryforwards utilized     (31.2)       --        --
Reduction in valuation allowance                 --     (15.5)     (1.2)
Research and development tax credit utilized   (6.8)    (24.1)     (3.8)
Alternative minimum taxes                       2.0        --        --
Other                                            --       0.9      (0.2)
                                                      
Effective tax rate                              4.3%       --%     27.0%
   
   The  provision  for income taxes in the accompanying  consolidated
   statements of income consists of the following:

                                 September 30,
                         1995        1996        1997
     Federal-                           
       Current       $ 90,000    $179,000  $2,173,335
       Deferred            --    (179,000)   (224,000)
                       90,000          --   1,949,335
     State-                             
       Current             --       2,000     271,000
       Deferred            --      (2,000)    (27,000)
                           --          --     244,000
                                        
                     $ 90,000    $     --  $2,193,335
                                                                     
(3)  Line of Credit

   The  Company has a secured demand line of credit with a  bank  for
   $5,000,000.   Borrowings  under the  line  are  available  through
   February  28,  1998 and bear interest at one of  several  interest
   rates,  including  the bank's prime rate (8.5%  at  September  30,
   1997)  and  a LIBOR index rate.  There were no amounts outstanding
   under  this  line  at September 30, 1996 and 1997.   The  line  of
   credit  is  collateralized  by substantially  all  assets  of  the
   Company.

(4)  Redeemable Preferred Stock

   The   Company   had  previously  authorized  578,065   shares   of
   redeemable  preferred stock, par value $.01 per  share,  of  which
   234,375 shares and 343,690 shares had been designated as Series  A
   and  Series  C  redeemable  preferred  stock,  respectively.    In
   connection  with  the  Company's  initial  public  offering,   the
   Company  redeemed all outstanding shares of Series A and Series  C
   redeemable  preferred  stock for approximately  $5,781,000,  which
   represents a redemption value of $10.00 per share.

(5)  Stockholders' Equity

   (a) Preferred Stock
   
       In  December 1996, the Company's Board of Directors authorized
       the  issuance  of up to 1,000,000 shares of undesignated  $.01
       par  value preferred stock, the rights and privileges of which
       are  to  be  determined by the Company's Board  of  Directors.
       The  Series  A,  B,  C  and D preferred stock  are  no  longer
       authorized.  There are no preferred shares outstanding  as  of
       September 30, 1997.
       
   (b) Common Stock

       In   October   1996,   the  Company  approved   the   Restated
       Certificate  of Incorporation, which includes an  increase  in
       the  authorized  shares  of common stock  to  30,000,000.  The
       Company has reserved the following number of common shares  as
       of September 30, 1997:

                Exercise of stock purchase warrants     323,210
                Exercise of stock options             1,565,680
                                                      1,888,890
       
       In  July  1996,  the Company issued 15,000  shares  of  common
       stock  to  a  customer at no cost in lieu of fees  on  certain
       sales  of  the  Company's  products  for  which  the  customer
       provided   substantial  assistance  through  access   to   the
       customer's  facilities  and liaison activities.   The  Company
       recorded  a  $45,000 charge to selling and marketing  expenses
       for the issuance of these shares during fiscal 1996.
       
   (c)Initial Public Offering

       During  fiscal 1997, the Company completed its initial  public
       offering of 2,300,000 shares of the Company's common stock  at
       $12.00  per  share.   The  Company received  net  proceeds  of
       approximately  $24,823,000 after deducting  the  underwriters'
       commission and issuance costs.  In December 1996, the  Company
       used  approximately $5,781,000 of the net proceeds  to  redeem
       all  of  its  outstanding shares of redeemable  Series  A  and
       Series  C  preferred stock.  In connection  with  the  initial
       public  offering, all of the Company's Series B and  Series  D
       preferred  stock was converted into an aggregate of  5,045,850
       shares of common stock.
       
   (d)Stock Plans

        1989 Combination Stock Option Plan
        
        The  Company's 1989 Combination Stock Option Plan  (the  1989
        Plan)  provides  for  the  grant to key  employees  incentive
        stock  options  to  purchase shares of the  Company's  common
        stock  at  a  price  not  less  than  fair  market  value  as
        determined   by  the  Board  of  Directors,  or  nonqualified
        options  at  a  price  specified by the Board  of  Directors.
        Under the 1989 Plan, the Company has reserved shares for  the
        granting  of  options to purchase up to 1,250,000  shares  of
        the Company's common stock.
       
        The 1996 Equity Incentive Plan
        
        In  October  1996,  the  Company  approved  the  1996  Equity
        Incentive  Plan  (the  Equity Plan)  for  which  the  Company
        reserved  shares for the granting of options or other  equity
        awards  to  purchase up to 750,000 shares  of  the  Company's
        common stock.
        
        The 1996 Nonemployee Director Stock Option Plan
        
        In  October  1996, the Company approved the 1996  Nonemployee
        Director Stock Option Plan (the Director Plan) for which  the
        Company  has reserved shares for the granting of  options  to
        purchase up to 125,000 shares of the Company's common stock.
        
        As   of  September  30,  1997,  there  were  676,980  options
        available  for future grants under all plans.  A  summary  of
        stock option activity under all plans is as follows:

                                                                 Weighted
                                                                 Average
                                                    Price per    Exercise
                                          Shares      Share      Price
                                                           
       Outstanding, September 30, 1994    712,250   $.10-1.00     $ .39
        Granted                           119,250      1.00        1.00
        Exercised                         (26,750)   .10- .50       .25
        Terminated                        (47,330)   .50-1.00       .81
       Outstanding, September 30, 1995    757,420    .10-1.00       .46
        Granted                           157,750   1.00-3.00      2.22
        Exercised                         (51,170)   .10-1.00       .85
        Terminated                         (7,100)   .50-1.00       .87
       Outstanding, September 30, 1996    856,900    .10-3.00       .78
        Granted                           386,050   9.50-17.00    14.27
        Exercised                        (333,800)   .10-3.00       .46
        Terminated                        (20,450)   .50-3.00      1.15
       
       Outstanding, September 30, 1997    888,700   $.10-$17.00   $6.75

       Exercisable, September 30, 1997    264,540   $.10-$9.50    $ .65

        The  range  of  exercise prices for options  outstanding  and
        options exercisable at September 30, 1997 are as follows:

<TABLE>
<CAPTION>
                  Weighted Average      Options Outstanding         Options Exercisable
   Range of     Remaining Contractual           Weighted Average            Weighted Average
Exercise Price    Life (in years)      Number   Exercise Price    Number    Exercise Price
<S>                   <C>              <C>          <C>           <C>         <C>
 $0.10 - $1.00        5.4              418,850      $ 0.57        248,000     $ 0.42
 $3.00 - $9.50        8.9              108,300      $ 4.47         16,540     $ 4.08
$10.75 - $15.50       9.4              131,300      $11.68             --         --
$15.88 - $17.00       9.5              230,250      $16.25             --         --
         Total        7.47             888,700      $ 6.75        264,540     $ 0.65
</TABLE>

       The  Company  accounts for its stock-based compensation  plans
       under  Accounting Principles Board Opinion No. 25,  Accounting
       for  Stock  Issued to Employees.  In October  1995,  the  FASB
       issued  SFAS No. 123, Accounting for Stock-Based Compensation,
       which established a fair-value-based method of accounting  for
       stock-based  compensation plans.  The Company has adopted  the
       disclosure-only alternative under SFAS No. 123 which  requires
       disclosure  of  the  pro  forma  effects  on  net  income  and
       earnings  per  share as if SFAS No. 123 had been  adopted,  as
       well as certain other information.

       The  Company  has computed the pro forma disclosures  required
       under  SFAS No. 123 for all stock options and warrants granted
       to  employees of the Company in fiscal 1996 and 1997 using the
       Black  Scholes  option pricing model prescribed  by  SFAS  No.
       123.   The assumptions used to calculate the SFAS No. 123  pro
       forma  disclosure  and  the weighted average  information  for
       1996 and 1997 are as follows:

                                   Year Ended
                                 September 30,
                                 1996      1997
                                         
   Risk-free interest rate       6.04      6.01
   Expected dividend yield         --        --
   Expected lives (in years)     4.7       4.9
   Expected volatility           53%       52%
   Weighted-average grant date  
    fair value of options
    granted during the year     $1.10     $7.16

       The  pro forma effect of applying SFAS No. 123 for all options
       and  warrants granted to employees of the Company in 1996  and
       1997 would be as follows:

                                       Year Ended
                                      September 30,
                                     1996        1997
                                         
   Net income as reported      $1,164,764  $5,865,578
   
   Pro forma net income        $1,125,371  $5,104,357
                                         
   Net income per common and
   common equivalent share,
   as reported                      $0.15       $0.60
                                         
   Pro forma net income per
   common and common
   equivalent share                 $0.14       $0.52

       The  resulting  pro  forma compensation  expense  may  not  be
       representative  of the amount to be expected in  future  years
       as  the  pro  forma expense may vary based on  the  number  of
       options  granted.  The Black-Scholes option pricing model  was
       developed  for  use  in estimating the fair  value  of  traded
       options  that  have  no  vesting restrictions  and  are  fully
       transferable. In addition, options pricing models require  the
       input  of  highly  subjective assumptions, including  expected
       stock  price volatility.  Because the Company's employee stock
       options  have  characteristics  significantly  different  from
       those  of traded options and because changes in the subjective
       input   assumptions  can  materially  affect  the  fair  value
       estimate, in management's opinion, the existing models do  not
       necessarily  provide  a reliable single measure  of  the  fair
       value of its employee stock options.

   (e)  Series B and D Convertible Preferred Stock
   
       The  Company  had  previously  authorized  504,585  shares  of
       convertible  preferred stock, par value  $.01  per  share,  of
       which  250,000  shares and 254,585 shares had been  designated
       as   Series  B  and  Series  D  convertible  preferred  stock,
       respectively. In connection with the Company's initial  public
       offering,  all  shares  of Series B and Series  D  convertible
       preferred  stock  were converted into an  aggregate  5,045,850
       shares of common stock.
   
   (f)Stock Purchase Warrants

       In  conjunction  with  a $400,000 promissory  note  issued  in
       fiscal  1992  and repaid in fiscal 1993, the  Company  sold  a
       warrant,  at nominal value, to purchase 42,667 shares  of  the
       Company's  common stock at $1.50 per share.  The  warrant  was
       to  expire in December 2001.  This stock purchase warrant  was
       exercised  during fiscal 1997, resulting in a net issuance  of
       39,789 shares of common stock.

       In  conjunction with the issuance of certain convertible notes
       issued  in  fiscal 1993, the Company sold, at  nominal  value,
       warrants  to  purchase 361,002 shares of the Company's  common
       stock  for  $1.50 per share.  The warrants expire in  December
       2001.   During fiscal 1997, warrants to purchase 37,792 shares
       were  exercised resulting in the net issuance of 36,725 shares
       of common stock.

(6)  Geographical Sales Data

   Export  sales as a percentage of the Company's total revenues  are
   as follows:

                                        September 30,
                                1995      1996      1997
                                  
                      Europe    90.6%     95.0%     51.5%
                      Asia        --       0.3      45.7
                      Other       --       0.1       0.2
                                 
                      Total     90.6%     95.4%     97.4%
                                                                     
   Substantially  all  of the Company's assets  are  located  in  the
   United States.

(7)  Related Party Transactions

   (a)Management Services Agreement

       The Company has an agreement with Hologic, Inc. (Hologic),  an
       affiliated   company,  whereby  Hologic  provides  management,
       administrative  and  support  services.   In   addition,   the
       Company   subleased  its  facilities  from  Hologic  under   a
       sublease  agreement, which was terminated  in  February  1996,
       for   approximately  $15,000  per  month.   The  Company  paid
       Hologic  for all direct costs incurred, as well as  a  portion
       of  Hologic's overhead costs, as defined, representing  a  pro
       rata  portion of costs attributable to the Company.   Expenses
       charged   to   operations   under   these   agreements    were
       approximately $530,000, $325,000 and $112,000 in fiscal  1995,
       1996  and 1997, respectively.  The Company also made purchases
       of  approximately $210,000 from Hologic in fiscal  1995.   The
       Company  had  no  purchases  from Hologic  in  1996  or  1997.
       Approximately  $34,000 and $20,000 had not  been  paid  as  of
       September   30,  1996  and  1997,  respectively,   under   the
       management services agreement.
       
   (b)License and Technology Agreement

       The  Company has an agreement with Hologic whereby the Company
       has  a  perpetual,  exclusive, worldwide  license  to  utilize
       certain  of  Hologic's technology and patents for the  purpose
       of  developing the Company's X-ray screening security  systems
       for  explosives,  drugs, currency and  other  contraband  (the
       Exclusive  License).   In  September 1996,  this  license  was
       amended  to  grant  the  Company  a  nonexclusive  license  to
       utilize  these patents and technology for certain new  product
       development   for   other   applications   (the   Nonexclusive
       License).   Royalty  payments to Hologic under  the  Exclusive
       License  are  5%  of revenues, as defined, on  the  first  $50
       million  in sales; thereafter, payments are 3% on revenues  up
       to  $200  million,  with  no  royalty  payments  on  aggregate
       revenues in excess of $200 million.  During 1997, the  Company
       reduced  its  royalty  payments  to  3%  under  the  Exclusive
       License  upon achievement of cumulative revenues in excess  of
       $50  million.  Royalty payments under the Nonexclusive License
       are  3%  on sales up to $200 million, with no royalty payments
       on   aggregate  revenues  in  excess  of  $200  million.   The
       agreement  terminates by mutual agreement of the  two  parties
       or  upon  certain other defined circumstances.  During  fiscal
       1995,  1996,  and 1997, the Company incurred royalty  expenses
       under   the   Exclusive  License  of  approximately  $719,000,
       $775,000  and  $988,000, respectively, of which  approximately
       $624,000  and  $753,000 had not been paid as of September  30,
       1996  and  1997, respectively.  To date, the Company  has  not
       incurred any royalty expenses under the Nonexclusive License.

(8)  Profit-Sharing 401(k) Plan

   The   Company   has  a  qualified  profit-sharing  plan   covering
   substantially  all of its employees.  Contributions  to  the  plan
   are  at  the discretion of the Company's Board of Directors.   The
   Company  has  recorded approximately $65,000, $65,000 and  $74,000
   as  a  provision  for the profit-sharing contribution  for  fiscal
   1995, 1996 and 1997, respectively.

(9)  Commitments and Contingencies

   (a)Operating Leases

       In  March  1996, the Company moved into a new  facility.   The
       Company  is  renting  the facility under  an  operating  lease
       which  expires in February 2001.  The Company's future minimum
       lease payments under all operating leases as of September  30,
       1997 are approximately as follows:

                        Year             Amount
                    
                        1998            $  389,000
                        1999               389,000
                        2000               389,000
                        2001               162,000
                    
                                        $1,329,000
                                                                     
       Rent   expense  charged  to  operations  for  the  year  ended
       September  30, 1995 and the first five months of  fiscal  1996
       was   approximately  $15,000  per  month  as  a  part  of  the
       management  services  agreement with  Hologic.   Rent  expense
       charged  to  operations  since  the  Company  moved  operating
       facilities  through  September 30, 1996 and  for  fiscal  1997
       were approximately $227,000 and $438,000, respectively.

   (b)Capital Leases

       The  Company  leases  certain equipment under  capital  leases
       which expire through June 1999.

   (c)Patent Infringement Claims

       In  October  1994,  EG&G  filed a  patent  infringement  claim
       against  the Company in the United States District  Court  for
       the  District of Massachusetts, alleging that certain  of  the
       Company's  products  infringed a patent held  by  EG&G.   EG&G
       sought  damages and expenses from the Company  and  sought  to
       enjoin  the  Company  from  selling  products  that  allegedly
       infringed  the  EG&G patent.  In December  1994,  the  Company
       filed  an  answer  denying any infringement and  counterclaims
       seeking  to invalidate the EG&G patent and alleging that  EG&G
       infringed three patents owned or licensed by the Company.   On
       November  6,  1996,  the  Company  and  EG&G  entered  into  a
       settlement  agreement  relating to this  litigation.   Amounts
       incurred  related to the claim, including the settlement,  are
       included   in   litigation  expenses   in   the   accompanying
       statements of operations.
       
       In  May  1996, the Company commenced an action in  the  United
       States  District  Court  for  the  District  of  Massachusetts
       against  AS&E seeking a declaration that the Company does  not
       infringe AS&E patents related to back scattered X-rays.   This
       followed  AS&E's allegations of infringement to third parties.
       No  discovery  has  been  taken to date.   Following  a  court
       decision  in  July  1997 construing the  claims  of  the  AS&E
       patent,  which  decision the Company considers  favorable,  in
       September  1997  the  Company  filed  a  motion  for   summary
       judgment  of  non-infringement.  AS&E has not  yet  filed  its
       papers  in  opposition to the Company's motion but is  seeking
       discovery.  If granted, the Company's motion will resolve  all
       issues  remaining  in  the  case  in  favor  of  the  Company.
       Earlier,  in  April 1997, the Court dismissed AS&E's  proposed
       counterclaim  seeking to allege patent infringement,  so  that
       the  only remaining issue in the case is the Company's request
       for  declaration of non-infringement of two claims of a single
       AS&E patent.

   (d)Patent License Agreement

       During  fiscal 1996, the Company entered into a patent license
       agreement  for  the  exclusive license of  certain  explosives
       detection  technology.  Under this agreement, the  Company  is
       required to pay aggregate royalties of up to $1,000,000  based
       on  net  sales, as defined.  During fiscal 1996 and 1997,  the
       Company    incurred   approximately   $28,000   and   $97,000,
       respectively, of royalty expense related to this agreement.
   
   (e)Joint Development and Royalty Agreement

       During   fiscal  1997,  the  Company  entered  into  a   joint
       development  and  royalty agreement  for  the  development  of
       certain  explosives detection technology.  Under the terms  of
       the  agreement, the Company is required to pay  a  royalty  of
       $3,000  per unit sold of the developed product for  the  first
       167  units.   No royalty expenses were incurred for  the  year
       ended September 30, 1997.

(10) Accrued Expenses

   Accrued  expenses in the accompanying consolidated balance  sheets
   consist of the following:

                                          September 30,
                                        1996         1997
                                  
   Payroll and payroll-related      $513,967     $601,959
   Accrued warranty                  773,000      798,000
   Accrued royalties                 651,424      789,684
   Accrued legal                   1,291,877       75,954
   Other                             202,646      152,834
                                  
                                  $3,432,914   $2,418,431

(11) Subsequent Event

   Subsequent  to  year-end, the Company entered  into  an  exclusive
   technology  license agreement.  Under the agreement,  the  Company
   paid  $1,250,000  for the exclusive right to manufacture,  use  or
   sell  the  licensed  technology for a three-year  period,  with  a
   nonexclusive  right for the remainder of the life of the  patents.
   The  Company  will have the option to extend the exclusive  rights
   beyond  three years.  Upon the ultimate commercialization  of  the
   technology, the Company will also be required to pay royalties  on
   sales  of  products  incorporating  the  licensed  technology,  as
   defined.